common market


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Common market

An agreement between two or more countries that permits the free movement of capital and labor as well as goods and services.

Common Market

1. A market with the free movement of goods, services, labor, and capital between two or more places. For example, even though Texas and Oklahoma are different places with different governments and regulations, the two have a common market because workers do not need permission to move between them, and one may transfer money between them without incurring any tariffs or fees. See also: Free trade.

2. An informal term for the European Economic Community.

Common Market

common market

see TRADE INTEGRATION.

common market

a form of TRADE INTEGRATION between a number of countries in which members eliminate all trade barriers (TARIFFS, etc.) amongst themselves on goods and services and establish a uniform set of barriers against trade with the rest of the world, in particular, a common external tariff (see CUSTOMS UNION). In addition, a common market provides for the free movement of labour and capital across national boundaries. The aim of a common market is to secure the benefits of international SPECIALIZATION, thereby improving members’ real living standards.

The short- and medium-term impact of the formation of a common market is mainly felt through an increase in trade between member countries. TRADE CREATION is typically associated with a reallocation of resources within the market favouring least-cost supply locations and a reduction in prices resulting from the elimination of tariffs and lower production costs. (See GAINS FROM TRADE.)

In addition, a common market can be expected to promote longer-term (dynamic) changes conducive to economic efficiency through:

  1. COMPETITION. The removal of tariffs, etc., can be expected to widen the area of effective competition; high-cost producers are eliminated, while efficient and progressive suppliers are able to exploit new market opportunities;
  2. ECONOMIES OF SCALE. A larger ‘home’ market enables firms to take advantage of economies of large-scale production and distribution, thereby lowering supply costs and enhancing COMPARATIVE ADVANTAGE;
  3. TECHNOLOGICAL PROGRESSIVENESS. Wider market opportunities and exposure to greater competition can be expected to encourage firms to invest and innovate new techniques and products;
  4. INVESTMENT and ECONOMIC GROWTH.

Finally, the virtuous circle of rising income per head, growing trade, increased productive efficiency and investment may be expected to combine to produce higher growth rates and real standards of living.

The EUROPEAN UNION is one example of a common market. See ANDEAN PACT.

References in periodicals archive ?
Recently, Mid-South Common Market forged manufacturing into the strongest sector of the region's economy.
Among other things, the common market placed emphasis on numerous fundamental principles, namely an unrestricted access for:
I notice that when we had a referendum on joining the Common Market and the result was in favour, there was no criticism of it being 'the device of demagogues and dictators'.
Commenting on the meeting, Younis Haji Al Khouri, Undersecretary of MoF, said: "The Gulf Common Market plays a vital role in establishing sustainable and balanced development for the UAE.
The six Gulf neighbors entered into a GCC Customs Union in 2003 and introduced the GCC Common Market in 2008 as part of the region's planned economic integration.
"This requires the activation of the Arab free trade area, the Arab common market and the GCC," said regional office director Fouad Yassin.
The decision, taken by the Cabinet recently, aims at accelerating the process of economic integration in line with the GCC Common Market goals, said the Gulf News report.
MANAMA: Opportunities provided by the GCC common market will be highlighted at a seminar on Sunday.
In his message, Mottaki had called for continuation of talks on signing an agreement to establish a common market between Iran and GCC member states.
EU Agriculture Commissioner Mariann Fischer Boel opened a two-day seminar in Brussels on 3 October on simplification of the Common Agricultural Policy by firing a broadside at two important existing CAP mechanisms: quotas and common market organisations.
1975: In Britain's first referendum, a large majority voted to stay in the Common Market -more than 17 million.
A more feasible solution, most analysts say, is to link the region's top five trade pacts--NAFTA, Mercosur, the Andean Pact, the Central American Common Market and Caricom.

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