Types of Economic Agreements by Don1234 All credit for this article is goes to Don1234, in below article, if you dont

understand what is tariff and non-tariff barriers then read the article on WTO. Trade agreements are broadly classified in to five types. Spectrum of Formal Regional Trading Arrangements (see the image below)

Preferential Trade Agreements (PTAs)

regional agreement in which members of the PTA impose a preferential tariff or lower customs duty on the products originating from the member countries.

Free Trade Agreements (FTAs)

FTA is a special case of PTA where all tariff and non-tariff barriers are abolished and free access is allowed to the products of member countries. In both PTA and FTA, each member is free to maintain different most-favoured-nation (MFN) barriers on non-members. Rules of Origin between the members of FTA is agreed to ensure that genuine products of the FTA partners alone are given duty-free access (World Bank 2005).

Customs Unions (CUs)

A Customs Union moves beyond a free trade area by establishing a common external tariff on all trade between, members and non-members. Customs Unions typically contain mechanisms to redistribute tariff revenue among members.

Common Markets (CMs)

A Common Market deepens a customs union by providing free flow of factors of production such as labour and capital in addition to the flow of outputs.

Economic Unions (EUs)

In an Economic and Monetary Union, members share a common currency and macroeconomic policies (Example European Union). There is only a very shallow integration between PTAs, FTAs and Custom Union whereas a deep integration exists between Common Markets and Economic Unions Over a period of time there has been an explosive growth in regional and preferential trading system in the form of Regional Trade Agreements and Preferential/ Free Trade Agreements (PTA / FTA). India is also involved in a number of RTAs andFTAs.India is currently involved in 19 free trade negotiations.