Economic Integration: Customs Union, Common Market, and Single Market ___________________________________________________________________________________________________ πŸ”Ή What is Economic Integration? Economic integration = process where countries reduce or eliminate barriers to trade and cooperation. πŸ‘‰ Goal: * increase trade * improve efficiency * strengthen economies ___________________________________________________________________________________________________ πŸ”Ή Stages of Economic Integration Economic integration develops in levels (from weaker to stronger): 1. Free Trade Area 2. Customs Union 3. Common Market 4. Single (Internal) Market 5. Economic & Monetary Union ___________________________________________________________________________________________________ πŸ”Ή Customs Union Definition A customs union is: * free trade between member states * common external tariff towards non-members Key features * No tariffs inside the union * Same tariffs for imports from outside * Common trade policy Example * EU since 1968 Advantages * simplifies trade * prevents β€œtrade deflection” ___________________________________________________________________________________________________ πŸ”Ή Common Market Definition A common market includes: * everything from a customs union + free movement of factors of production The β€œ4 freedoms” * free movement of goods * free movement of services * free movement of capital * free movement of labour (workers) Key idea πŸ‘‰ Not just goods move freely, but also people, money, and services. ___________________________________________________________________________________________________ πŸ”Ή 5. Single (Internal) Market Definition The single market is a more advanced version of a common market. πŸ‘‰ Focus: * removing non-tariff barriers * harmonizing rules and standards Key features * mutual recognition of standards * harmonization of laws * deeper economic integration Legal basis * EU Single Market (completed in 1993) * based on free movement + regulatory integration ___________________________________________________________________________________________________ πŸ”Ή Difference: Common Market vs Single Market Feature Common Market Single Market Free movement βœ… βœ… Removal of tariffs βœ… βœ… Removal of non-tariff barriers ❌ (limited) βœ… Harmonized rules ❌ βœ… Integration level medium high ___________________________________________________________________________________________________ πŸ”Ή Why Integration Matters Benefits * larger markets * economies of scale * more competition * higher efficiency Risks * loss of national control * unequal benefits between countries * adjustment costs ___________________________________________________________________________________________________ πŸ”Ή EU as Example The EU represents: * Customs Union (since 1968) * Single Market (since 1993) * moving toward deeper integration ___________________________________________________________________________________________________ πŸ”Ή Simple Summary * Customs Union = free trade + common external tariff * Common Market = + free movement of factors * Single Market = + removal of all barriers + harmonization ___________________________________________________________________________________________________ πŸ“š References 1. Baldwin, R., & Wyplosz, C. (2019) – The Economics of European Integration 2. Krugman, P., Obstfeld, M., & Melitz, M. (2018) – International Economics 3. European Commission – The Single Market 4. Treaty on the Functioning of the EU (TFEU) – Articles 26–66 5. Pelkmans, J. (2006) – European Integration: Methods and Economic Analysis