We may identify five main types or forms of regional integration, classifying them by a rising degree of intensity. They are:
· Preferential Trade Agreement (PTA), which is formed with the reduction of custom duties (mainly tariffs) on trade among members relative to those on trade with non-members.
· Free Trade Area (FTA), which involves the elimination of tariffs and quotas on the trade among member countries.
· Customs Union (CU), which goes a step further than the FTA as in addition to free trade within the union, there is a common external tariff (CET) against nonmembers.
· Common Market (CM), which is a CU that allows for the free movement of factors of production among member countries. Thus, it encompasses intra-union free trade, a common external tariff against non-member countries and free movement of factors of production (labour and capital) within the union.
· Economic and Monetary Union (EMU), which is a common market in which there is a single currency and monetary policy, and in which major economic policies (particularly fiscal policy) are coordinated or harmonized. Often, there is a compensation policy, which involves transfer of income to poorer or disadvantaged members of the Union.
African Development Bank Economic Research Working Paper Series Enhancing Africa’s Trade: From Marginalization to an Export-Led Approach to Development Milton A. Iyoha Professor, Department of Economics & Statistics University of Benin, Nigeria Economic Research Working Paper No 77 (August 2005)
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