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Common market
3 key takeaways
Copy link to section- A common market facilitates the free flow of goods, services, capital, and labor among member countries.
- It requires the elimination of tariffs and trade barriers within the market and the adoption of a common external trade policy.
- Common markets promote economic growth, efficiency, and competitiveness by creating a larger and more integrated market for businesses to operate in.
What is a Common Market?
Copy link to sectionA common market is a form of economic integration that goes beyond a customs union by allowing for the free movement of factors of production, such as labor and capital, in addition to goods and services. Member countries of a common market typically eliminate tariffs, quotas, and other trade barriers among themselves, while also adopting a common external trade policy towards non-member countries. This deeper level of integration aims to create a single unified market where factors of production can move freely and businesses can operate without barriers across national borders.
Importance of a Common Market
Copy link to section- Trade Integration: Promotes trade liberalization and facilitates the flow of goods and services among member countries.
- Economic Growth: Stimulates economic growth and development by creating a larger market and enhancing economies of scale.
- Efficiency: Improves resource allocation and efficiency by allowing factors of production to move to where they are most productive.
- Competitiveness: Enhances the competitiveness of businesses by providing access to a larger customer base and a more diverse range of inputs.
- Regional Cooperation: Fosters cooperation and mutual benefit among member countries, leading to greater political stability and integration.
How a Common Market works
Copy link to sectionA common market operates based on several key principles and mechanisms:
Free Movement of Goods
Copy link to sectionMember countries eliminate tariffs, quotas, and other trade barriers on goods traded among themselves, allowing for the free movement of goods within the market.
Free Movement of Services
Copy link to sectionThe common market allows for the liberalization of trade in services, enabling service providers to operate across borders without discrimination or restrictions.
Free Movement of Capital
Copy link to sectionCapital flows freely across national borders within the common market, allowing for investments, financial transactions, and capital mobility.
Free Movement of Labor
Copy link to sectionWorkers have the right to move freely within the common market to seek employment opportunities, leading to labor mobility and greater flexibility in the labor market.
Common External Trade Policy
Copy link to sectionMember countries adopt a common external trade policy towards non-member countries, including common tariffs, trade agreements, and trade regulations.
Examples of a Common Market
Copy link to section- European Single Market: The European Union’s single market allows for the free movement of goods, services, capital, and labor among its member states.
- Economic Community of West African States (ECOWAS): ECOWAS is a regional organization in West Africa that aims to promote economic integration and cooperation, including the establishment of a common market.
- Southern Common Market (MERCOSUR): MERCOSUR is a common market in South America that includes Argentina, Brazil, Paraguay, and Uruguay, with associate members such as Chile and Bolivia.
Real world application
Copy link to section- European Union: The EU’s single market has facilitated trade and economic growth among its member states, leading to increased prosperity and integration.
- ASEAN Economic Community: The ASEAN Economic Community aims to create a common market among the member states of the Association of Southeast Asian Nations, promoting regional economic integration and development.
- East African Community: The East African Community is working towards establishing a common market among its member states to promote trade, investment, and economic cooperation in East Africa.
More definitions
Sources & references

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