What is the difference between a free trade agreement and a customs union? Provide examples of each in your answer.
Answer: The goal of an FTA is to abolish all tariffs between member countries. It usually begins modestly by eliminating tariffs on goods that already have low tariffs, and there is usually an implementation period during which all tariffs are eliminated on all products. Moreover, each member country maintains its own external tariffs against non-FTA countries. NAFTA is an example of a free trade agreement. The EU is considered a customs union by the WTO. In addition to eliminating internal tariffs, member countries levy a common external tariff on goods being imported from nonmembers. For example, the EU removed internal tariffs from 1959 to 1967, when it established a common external tariff. Now it negotiates as one region in the WTO rather than as separate countries. Customs unions account for less than 10 percent of the RTAs identified by the WTO.