Allowing the free movement of factors of production such as labor and capital across borders is a feature of the common market stage of regional (economic) integration.

In standard textbook models of regional integration, the stages generally progress as follows:

  • Preferential trade area
  • Free trade area (removal of tariffs/quotas on member-country goods)
  • Customs union (free trade area + common external tariff)
  • Common market (customs union + free movement of labor and capital)
  • Economic union / economic and monetary union (common market + harmonized economic and often monetary policy)
  • Complete economic integration / political union

The key distinction is that a customs union focuses on goods and a common external tariff, while a common market explicitly adds the free movement of important factors of production like workers and cross‑border investment capital.

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