- Bilateral agreements: an agreement between 2 countries, to reduce or eliminate some tariffs. Example: the bilateral agreement between United States and Chile eliminated 90% of tariffs on US exports to Chile and 95% of Chilean exports to the U.S.
- Free trade agreements between 3 or more countries: Example, United States, Mexico and Canada signed an agreement to create the North American Free Trade Agreement (NAFTA). The agreement eliminated more than 50% of tariffs of exports from Mexico to the US and more than 33% of tariffs of exports from the US to Mexico. All tariffs between Canada and Mexico where eliminated, with the exception of some agricultural goods 1).
- Custom unions: commercial barriers are eliminated and external tariffs are unified. An example of a custom union is the Southern Common Market (MERCOSUR). The Mercosur is a custom union between Brazil, Argentina, Venezuela, Uruguay and Paraguay. Some tariffs bewteen the members of the mercosur where eliminated and external tariffs where unified.
- Free economic areas: a custom union, plus the liberalization of production factors and coordination of monetary policy. Example: European Union is an economic union of 28 European countries. There is a free movement of goods, capital, services and people between the European Union. The EU has a common currency, the Euro, and a common monetary policy, managed by the EU central bank.
Discussion