Final answer:
A free trade area allows tariff-free trade among members but permits independent external trade policies, whereas an economic/monetary union also includes a common external trade policy and coordinated fiscal and monetary policies. The European Union is an example of the progression from a free trade area to an economic union, demonstrating deeper integration.
Step-by-step explanation:
Compare and Contrast: Free Trade Area and Economic/Monetary Union
To compare and contrast a free trade area and an economic/monetary union, we can observe both commonalities and differences. A free trade area enables member countries to engage in trade without tariffs or quotas amongst themselves. However, each member country maintains its own policies towards non-member countries. The European Union (EU) started as a free trade area post-World War II but evolved into an economic union.
In contrast, an economic or monetary union, like the EU today, combines free internal trade with a unified external trade policy and coordinated fiscal and monetary policies across member countries. Members adopt a common currency, such as the euro in the EU, and work to eliminate barriers to the movement of goods, labor, and capital. A significant difference is that economic unions require nations to cede more sovereignty, particularly in monetary and fiscal matters, than they would in a mere free trade area.
The European Union serves as a pertinent example of progression from a free trade association to a full economic union, illustrating both the heightened integration and the complexities involved. While the EU allows the free mobility of goods and services, it also engages in policymaking at a supranational level—a level of cooperation and integration not required by a simple free trade area.