Nations can pursue five different levels of regional integration, with each one incorporating the properties of the preceding one.
A free trade area removes all barriers to trade between members with each nation determining its own barriers against nonmembers. Members may also establish a process for resolving trade disputes.
A customs union adds the requirement that all members set a common trade policy against nonmembers. Members may also negotiate as a group with organizations like the World Trade Organization.
A common market adds the free movement of labor and capital and sets a common trade policy against nonmembers.
An economic union requires members to harmonize their tax, monetary, and fiscal policies, create a common currency, and concede some sovereignty to the larger organization.
A political union requires members to coordinate their economic and political policies against nonmembers, with a few exceptions.