Economic union

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The economic union is the highest-ranking international trade agreement, since it involves total harmonization between the economic policies of the participating countries. This, with the aim of achieving a situation of convergence and unification.

In terms of integration, an economic union would be the most advanced form or modality, since it results in the creation of common markets between two or more countries and eliminating a large number of barriers.

Said process of economic harmonization facilitates free circulation for companies or families of the member countries in terms of production factors such as capital or labor and, therefore, stimulating imports and exports.

Among the multiple tools available when establishing a firm economic union, we would speak of the unification or integration of fiscal and monetary policies. The member countries give up part of their powers in these matters in exchange for being able to join this association and undertake to comply with the union's guidelines in fields such as economic or political.

In addition to the convergence created between the nations that face a union, it is worth noting another important characteristic of this type of groupings. And it is that not only trade barriers are eliminated between these countries, but at the same time barriers are established (such as tariffs, for example) against third countries in order to stimulate internal trade within the area.

Economic union example

A clear example of this type of multinational convergence is the European Union and its development in recent decades until reaching its current status. In fact, this union has reached such a level of harmonization that it led to the creation of the euro as the single currency for the area.

In addition, the European Central Bank was founded as a supervisory financial and economic organization, and fixed exchange rates were established between countries.

Another example could be that of the United States, which also has these characteristics with the dollar and the Federal Reserve.

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