free trade area (FTA)
An agreement among two or more countries to abolish tariffs on trade
among themselves while each remains free to set its own tariffs against
other countries.
customs union
A group of countries that agree to have free trade among themselves and
a common set of barriers against imports from the rest of the world.
common market
A customs union with the added provision that labour and capital can
move freely among the members.
trade creation
A consequence of reduced trade barriers among a set of countries
whereby trade within the group is increased and trade with the rest of the
world remains roughly constant.
trade diversion
A consequence of reduced trade barriers among a set of countries
whereby trade within the group replaces trade that used to take place
with countries outside the group.