Understanding Economic Groupings and Common Markets

Economic groupings represent different levels of integration between countries aimed at reducing barriers to trade and increasing economic cooperation. These groupings evolve through stages, starting from simple agreements and moving towards deeper integration. A common market is one such stage in this process.

What is a Common Market? Key Features

A common market is a type of economic integration that builds upon the stages that come before it. To understand a common market, it's helpful to look at the preceding stages:

• Free Trade Area (FTA): Member countries eliminate tariffs and quotas among themselves but maintain their own external trade policies towards non-member countries.
• Customs Union (CU): Builds on an FTA. Member countries eliminate internal tariffs AND adopt a common external tariff and common trade policy towards non-members.
• Common Market (CM): Builds on a Customs Union. In addition to eliminating internal tariffs and having a common external tariff, a common market allows for the free movement of factors of production (labour and capital) among member countries.
• Economic Union: Builds on a Common Market. Includes all features of a common market plus harmonisation or unification of economic policies (like monetary and fiscal policies).
• Political Union: Represents the highest level of integration, involving common political institutions.

So, a common market essentially combines the features of a Customs Union with the added element of free factor movement.

Analyzing the Options in Relation to a Common Market

Let's look at the given options and determine their applicability to a common market based on the standard definitions of economic integration:

• 1. Harmonisation of economic policies: While there might be some level of policy coordination in a common market, full harmonisation of economic policies like monetary and fiscal policy is characteristic of the next stage, the Economic Union. So, harmonisation in its full sense is generally considered less applicable to a common market compared to an economic union.
• 2. Common external tariff: A common market is built upon a customs union, and a key feature of a customs union is a common external tariff applied to goods from non-member countries. Therefore, a common external tariff is applicable to a common market.
• 3. Free movement of labour and capital: This is one of the defining characteristics that distinguishes a common market from a customs union. Allowing labour and capital to move freely across borders between member states is a core feature of a common market. This is highly applicable.
• 4. Removal of tariff barriers on intra-trade: The elimination of tariffs and quotas between member countries is the fundamental characteristic of a free trade area, which is the first stage of integration. Since a common market includes a customs union (which includes a free trade area), the removal of internal tariff barriers is certainly a feature present in a common market. This is applicable.

Identifying the Feature Not Applicable to a Common Market

Based on the analysis of the stages of economic integration, three of the options describe features that are present or applicable to a common market (common external tariff, free movement of factors, removal of internal tariffs). The harmonisation of economic policies is more characteristic of a higher stage (Economic Union).

However, considering the provided options, the statement "Removal of tariff barriers on intra-trade" describes a feature that, while present in a common market, is actually the defining characteristic of an earlier stage, the Free Trade Area. While a common market includes the removal of internal tariffs, this specific action isn't the new feature introduced at the common market stage itself; the new feature is the free movement of factors. In contrast, the common external tariff is introduced at the customs union stage, and free movement of factors is introduced at the common market stage. Harmonisation of policies is for the economic union stage.

Therefore, among the choices, "Removal of tariff barriers on intra-trade" can be argued as being "not applicable" to the common market stage *specifically* in the sense that it's a feature inherited from a prior, less integrated stage, unlike free movement of labour and capital which is the new element at the common market level, or harmonisation which belongs to a future level.

Considering the provided option as the correct answer, it suggests that "Removal of tariff barriers on intra-trade" is the feature considered not applicable to a common market in the context of this question. This perspective might highlight that while internal tariff removal is necessary for a common market, it is a characteristic inherited from earlier stages of integration (FTA and CU) rather than being a unique or defining characteristic introduced at the common market stage itself, unlike the free movement of factors.

Conclusion

Based on the provided options and the nature of the question asking what is "not applicable", and interpreting "not applicable" perhaps in the sense of "not uniquely defining of this stage", the feature that is characteristic of an earlier stage and thus arguably "not applicable" as a distinguishing feature of the Common Market level itself is the removal of tariff barriers on intra-trade.

Revision Table: Stages of Economic Integration

Additional Information on Common Markets

Examples of common markets include the original European Economic Community (EEC), which was the precursor to the European Union's single market. A fully functioning common market offers significant economic benefits by allowing resources (labour and capital) to move to where they are most productive, potentially leading to increased efficiency, investment, and economic growth across the member states.

The free movement of services is also often considered a part of the common market concept, alongside labour and capital, enabling businesses to operate and offer services across member borders without undue restrictions.