Types of Trade agreements

PTA

1. Preferential trade agreements
2. lower customs duty on the products originating from the member countries.

FTA

1. Free Trade Agreements
2. It is a special case of PTA where all tariff and non-tariff barriers are abolished
3. free access is allowed to the products of member countries.
4. Example NAFTA (among Mexico, US and Canada).

Customs Union

1. A Customs Union moves beyond a free trade area by establishing a common external tariff on all trade between, members and non-members.
2. Customs Unions typically contain mechanisms to redistribute tariff revenue among members
3. Example: Mercosur

Common Market

1. free flow labour, capital, and output (goods/services) among the members.
2. Example, SICA (in Central America)

Economic union

1. members share a common currency and macro-economic policies (Example European Union).
2. Example, European Union.