What is the Economic Union?

The Economic Union is an agreement between two or more sovereign nations to coordinate business policies. The procedure for a formal economic union usually includes several phases of growing cooperation between nations. Member States in these different stages normally share land boundaries, although there are many exceptions. Economic trade unions increase trade efficiency by removing trade barriers and cooperation on monetary policy.

The first phase of this process includes the conclusion of free trade agreements (FTA). FTA includes the removal of import tariffs or taxes between Member States to support internal trade. Products coming outside the free trade zone must be identified as such because each Member State may have different customs policies for foreign goods. Without this process of identifying foreign goods, they usually enter the country of free trade on the country with the lowest import tariffs. In addition to consent to identify these foreign products, FTAS place several restrictions onEconomic matters of Member States.

Foreign source monitoring can be a costly procedure for FTA members because it requires a large amount of documentation. This problem can remedy the determination of the common external tariff policy among Member States. This is called the Customs Union and is another phase full of economic integration. Customs trade unions increase trade efficiency, but result in less freedom for Member States to create their own foreign trade policies. Because foreign trade is closely related to foreign policy, customs trade unions are usually formed only among nations with shared objectives of foreign policy.

Further increasing business efficiency requires the elimination of all obstacles to the movement of financial capital and work across borders between Member States. This phase of the process towards the Economic Union gearly requires a significant level of close cooperation between governments. KVA, for exampleLification and certificate of workers must be harmonized before the cross -border commuting is feasible. Increasing economic interdependence at this level often requires governments to coordinate fiscal and monetary policy.

Formal Economic Union may be determined by creating multinational financial institutions such as central banks and other bodies to regulate trade. At this point, a common currency may be adopted to increase efficiency and eliminate uncertainty associated with exchange rates. Member States will often coordinate regional development and transport policy to further harmonize trade and growth. The biggest modern example of the economic union is the euro area, which was officially created by eleven European nations 1 January 1999.