Allowing the movement of factors of production such as labor and capital across borders is characteristic of the common market stage of regional integration. Here is a summary of relevant stages and their features regarding factor movement:
- Free Trade Area: Member countries eliminate tariffs on goods traded among themselves but maintain independent trade policies with non-members. Movement of labor and capital is not necessarily free at this stage.
- Customs Union: Similar to a free trade area but with a common external tariff on imports from non-members. Factor movement is still restricted.
- Common Market (Single Market): This stage adds the free movement of services, capital, and labor among member countries, removing barriers to factor mobility across borders.
- Economic Union: Combines a customs union with a common market and further integrates economic policies.
- Economic and Monetary Union: Adds a shared currency to the economic union.
- Complete Economic Integration: Represents full harmonization including fiscal policy and political integration.
Thus, the free movement of labor and capital specifically begins at the common market stage of regional integration
