Question

Canada and the United States agree to remove all barriers to the trade of goods between them. However, the countries agree that each would be allowed to determine its own trade policies with regard to nonmembers. The economic integration between these countries is called:________.

Answer 1

free trade area

Step-by-step explanation:

There are four main types of economic integration models between countries:

1. Free trade area: countries involved remove all trade barriers between them but are free to set trade policies with other countries, e.g. former NAFTA, now USMCA.
2. Customs union: trade barriers are eliminated between members and all participating members agree to a common trade policy with non-member countries.
3. Common market: similar to customs union but includes free movement of labor and capital.
4. Economic union: a customs union that advanced into a political union, e.g. EU.