Which type of trade arrangement imposes a common external tariff to non-members?

• A. Free-trade area
• B. Economic union
• C. Single market
• D. Customs union

Answer: (D)

The key idea is how trade policy treats non-members. A customs union removes tariffs among its members and adopts a single external tariff for imports from outside the union, giving all non-members one uniform barrier. This unified approach toward third countries is what defines the arrangement.

In a free-trade area, members eliminate tariffs among themselves but each country keeps its own external tariff with non-members, so there isn’t a single common tariff for outsiders. A single market aims for the free movement of goods, services, capital, and people, and it sits on top of the external tariff framework in many cases, but the distinctive feature highlighted here is the shared external tariff, which is specific to a customs union. An economic union goes further by integrating policies more deeply, which can include a common external tariff as part of broader coordination, but the explicit characteristic described is the common external tariff of a customs union.