Question

Three countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement?
A. Political union
B. Customs union
C. Common market
D. Economic union
E. Political union

Answer 1

Answer:

B. Customs union

Explanation:

Custom Union is a trade relationship agreed on by two or more countries in which they decided to remove barriers to free trade, such as removing heavy cost duties, high tariffs, between agreeing nations. It is considered a form of economic Integration.

The main aim of custom unions is to allow free trade between member Sates. It also helps to reduce administrative bottle neck and financial burdens which could be barriers to trading.