Suppose that tomatoes from Mexico face a 20 percent tariff in the United States and a 25 percent tariff in Canada. If the United States and Canada maintain free trade between each other, the these two countries belong to a ?
Correct answer: A. free-trade area
- A. free-trade area
- B. customs union
- C. common market
- D. monetary union
Explanation
A free-trade area removes trade barriers among members while allowing each member to set its own tariffs against nonmembers. The different Mexican tariffs in the United States and Canada show that they do not have a common external tariff.
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