What is the difference between a free trade area and a customs union

What is the difference between a free trade area and a customs union Introduction: Navigating the World of Trade Arrangements Hello everyone, and welcome to this video on the difference between a free trade area and a customs union. In the complex landscape of international trade, various agreements and arrangements shape the flow of goods and services between nations. Two common terms that often arise in this context are 'free trade area' and 'customs union.' While they both involve trade liberalization, they have distinct features and implications. Let's dive in! Defining a Free Trade Area: The Essence of Tariff Reduction A free trade area is a cooperative framework between two or more countries. Its primary objective is to eliminate or significantly reduce trade barriers, particularly tariffs, on goods traded within the area. By doing so, member countries aim to enhance market access, promote economic growth, and foster closer ties. Importantly, each member retains its own external trade policies and can independently negotiate trade agreements with non-member countries. Customs Union: A Step Further in Integration A customs union, on the other hand, goes beyond the tariff reduction aspect. In addition to eliminating internal tariffs, member countries adopt a common external trade policy. This means that they apply a unified set of tariffs and trade regulations to non-member countries. By doing so, customs unions create a 'common market' within the union, ensuring a level playing field for member countries and presenting a unified front in international trade negotiations.