How Governments Enact Trade Policy: Globally, Regionally, and Nationally

Self-Check Questions

What is the difference between a free trade association, a common market, and an economic union?


A free trade association offers free trade between its members, but each country can determine its own trade policy outside the association. A common market requires a common external trade policy in addition to free trade within the group. An economic union is a common market with coordinated fiscal and monetary policy.

Why would countries promote protectionist laws, while also negotiate for freer trade internationally?


International agreements can serve as a political counterweight to domestic special interests, thereby preventing stronger protectionist measures.

What might account for the dramatic increase in international trade over the past 50 years?


Reductions in tariffs, quotas, and other trade barriers, improved transportation, and communication media have made people more aware of what is available in the rest of the world.