An economic union is one of the different types of trade blocs. It refers to an agreement between countries that allows products, services, and workers to cross borders freely. The union is aimed at eliminating internal trade barriers between the member countries, with the goal of economically benefitting all the member countries.
The union requires the integration of monetary and fiscal policies, so that member countries coordinate policies, taxation, and government spending related to the agreement. They also use a common currency that comes with fixed exchange rates.
Examples of Economic Unions
Here are examples of existing economic unions:
1. European Union (EU)
The European Union is the world’s largest trade bloc. Importing goods and services from more than 100 countries, it is the biggest import market, as well as the biggest exporter in the world. The EU’s common currency is the euro, which is used by its 28 member states: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
The EU countries coordinate their economic policies, laws, and regulations to address economic and financial issues. One of the union’s founding principles is free trade among its members. It is also committed to the liberalization of world trade outside of its borders.
2. CARICOM Single Market and Economy (CSME)
CARICOM Single Market and Economy (CSME) aims to create an economic space for competitive goods and services to establish a foundation for growth and development of the Caribbean community. It is an enlarged market that provides better opportunities to sell products and services, increased competitiveness, and improvement of the lives of people.
3. Central American Common Market
The Central American Common Market is formed by six countries in Central America. They are Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
4. Eurasian Economic Union (EEU)
Also called the Eurasian Union, EAEU or EEU, the Eurasian Economic Union is a political and economic union of states in central and northern Eurasia. The treaty that established the union was signed in 2014 by the leaders of Russia, Belarus, and Kazakhstan. The accession treaty of both Armenia and Kyrgyzstan came into force in the following year.
5. Gulf Cooperation Council (GCC)
Also known as the Cooperation Council for the Arab States of the Gulf, the Gulf Cooperation Council (GCC) consists of all the Arab states of the Persian Gulf, excluding Iraq. The council’s member states include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The GCC was established in 1981.
Economic Union vs. Customs Union
An economic union is different from a customs union since, in the latter, member countries are allowed to move goods across borders, but they do not share a currency. They are also not allowed to move workers across borders freely.
An economic union is the last step in the process of economic integration, after free trade area, customs union, and common market.