Final answer:
A customs union and a free-trade area are both regional trading agreements that aim to reduce trade barriers between member countries. In a customs union, member countries adopt a common external trade policy, while in a free-trade area, member countries maintain their own individual trade policies with non-member countries.
Step-by-step explanation:
A customs union and a free-trade area are both regional trading agreements that aim to reduce trade barriers between member countries. However, there are some key differences between them.
In a customs union, member countries agree to remove trade barriers among themselves and adopt a common external trade policy. This means that all member countries apply the same tariffs and trade regulations to countries outside the union. An example of a customs union is the European Union (EU).
On the other hand, in a free-trade area, member countries eliminate trade barriers among themselves but maintain their own individual trade policies with non-member countries. This means that each country can determine its own trade policy outside the area. The North American Free Trade Agreement (NAFTA) is an example of a free-trade area.