International Business: Free Trade Area - Essay Example

Countries with complementary economic structures choose this kind of economic integration. Free trade members lack common external tariff unlike in customs union meaning they have different customs and quotas. Free trade area The frame of reducing barriers to easy exchange so that there is the development of trade as a result of the division of both ur and specialization. Custom UnionCustom Unions are normally characterized by generally imposing a common external tariff on imports from countries that are not members (Sharan).

Another characteristic of a customs union is that there is no free movement of labor among members as well as capital. Customs Union is a mutual agreement among the participating neighboring countries to reduce or eliminate customs duty and remove trade barriers on mutual trade. Participants in Custom Union come up with a common external trade policy. In economic integration, the customs union is the third stage and is normally established through trade pacts. Common MarketCommon Market is formed by counties in the same geographical area to enhance capital among it members and the ditsy free labor movement.

It is aimed at bringing economic integration and a common market to the involved member countries. The custom market is characterized by imposing common external tariffs on imports from non-members. Political UnionIn Political Union, there is a consolidated and larger group of countries that share an internationally acknowledged joint government. Political unions can be established in various ways such as; mixed unions incorporating unions, and federative annexation. It is characterized by having a common currency and no trade barriers for the member countries.

The 9 key provisions of NAFTATo eliminatNAFTATl tariffs between the Canada and United States . Elimination of duties and Phase-out of Canadian trade with Mexico and the U.S. Prevention of third-country intrusion by use of certificates of originTo eliminate drawbacks and customs user fees to eliminate quotas unless grandfathered.To Prohibit product standards as free trade barrierElimination of subsidies and subsidies. To eliminate Mexican tariffs on all United States ExportsTo eliminate discrimination on laws about service providersThe key provisions of NAFTA which would challenge the inclusion of Brazil and Chile is the Prohibition of standards as a free trade barrier, this is because some products from Brazil and Chile may not meet U.S. standards may be denied market access.

Another reason is that including Brazil and Chile may lead to changing standards to accommodate their needs whereas NAFTA does not require the United States to change any of the existing standardsAnother provision that would pose a challenge is the elimination of discrimination on laws about service providers as this may lead to the two countries offering substandard services and therefore compromising the requirements of NAFTA. Types of custom duties in U.S.Ad valorem tariff; this is a tax which is a percentage of a good’s value.