IGCSE Development Studies: Specimen Questions with Answers 19 - 20 of 98

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Forms of Free Trade

Question 19 (4 of 7 Based on Passage)

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Differentiate between free trade and custom union

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Explanation

Differentiate between Free Trade and Custom Union
S. No.Free TradeCustom Union
1.The free trade area economic integration is the is the least restrictive among the countries.Members of custom union dismantle barriers to trade in goods and services among themselves.
2.In a free trade area, all the barriers to trade among member countries are removed.A custom union establishes a common trade policy with respect to non-members
3.No external tariffCommon external tariff

Question 20 (5 of 7 Based on Passage)

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Which country is an example of free trade?

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Explanation

Example of Free Trade is NAFTA. A trilateral agreement was signed by Canada, Mexico, and US known as North American Free Trade. It came into force on 1st January, 1988. NAFTA trade bloc is one of the largest trade blocs in the world. The purpose of NAFTA is to:

  • To allow free movement of goods and services in the free trade areas.
  • To increase competition in the free trade areas.
  • Protect the property rights of people and business in each country
  • To resolve problems that rise among countries
  • Encourage cooperation among countries.

NAFTA eliminated all non-tariff barriers to agricultural trade between USA and Mexico. Other Tariffs such as tariffs on qualifying goods were eliminated and some were phased out for long periods of time (5 - 15 years) . Because of this orderly adjustment were able to free trade with Mexico. It also improved working conditions in North America.

Benerfits of Free Trade