A unified economic zone wherein member countries eliminate tariffs and other trade barriers among themselves. This arrangement also establishes a common external trade policy towards non-member nations. Crucially, it permits the free movement of goods, services, capital, and labor within the zone. An example can be found in the early stages of the European Economic Community, which later evolved into the European Union.
The significance of such integration lies in its potential to foster economic growth. By removing internal obstacles to trade, businesses can access larger markets, leading to increased efficiency and competitiveness. The free movement of factors of production allows for optimal allocation of resources, further boosting economic activity. Historically, these arrangements have proven instrumental in promoting regional stability and cooperation.