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All countries in the contemporary world do not follow a uniform discriminatory trade strategy several forms of economic integration have come into existence for example removal of trade barriers (particularly tariffs) among certain countries and discrimination alongside others. The most vital forms of such international economic integration are:

 

· free tide areas,

· customs unions and

· General markets.

A free trade region refers to the group of countries which have abolished all tariff barriers between themselves but every individual country is free to preserve any level of tariff against other countries.

A customer union is an agreement among members of a set of nations to abolish all custom duties (tariffs) levied in trade amongst them at the similar time establishing general tariffs agent imports from the non member countries. It is thus as well referred to as the exterior tariff. A distinguished difference among a customs union and a free trade area is that in the former there is a general structure of custom duties adopted by all the member countries while trading with non member countries, in the latter case though the members follow different discriminatory individual tariff schedules next to non member countries.

Additional a customs union may be either restricted or it may be complete. A limited customs union may occupy only one commodity or a few commodities at the most while a total union consists of the abolition of all restrictions on the movement goods and factors of production in addition to the adoption of usually integrated fiscal and monetary policies such a complete union is recognized as an economic union.

Economists have though focused their attention on the institution of customs union, the analysis of which is supposed to be without difficulty extendible to the case of free trade regions and common markets. Subsequent the tradition we too will take up here only the customs union in its common form so as to provide ourselves with an logical framework which can be used in dealing with any detailed case.

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