customs union

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Customs union

An agreement by two or more countries to erect a common external tariff and to abolish restrictions on trade among members.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Customs Union

A market with the free movement of goods, services, labor, and capital between two or more jurisdictions. For example, even though Texas and Oklahoma are different places with different governments and regulations, the two have a customs union because workers do not need permission to move between them and one may transfer money between them without incurring any tariffs or fees. Most often, however, a customs union refers to a union between two or more countries, not regions within the same country. For example, the European Union is a customs union. See also: Free trade.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

customs union

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

customs union

a form of TRADE INTEGRATION between a number of countries in which members eliminate all trade barriers (TARIFFS, etc.) amongst themselves on goods and services, and establish a uniform set of barriers against trade with the rest of the world, in particular a common external tariff. The aim of a customs union is to secure the benefits of international SPECIALIZATION AND INTERNATIONAL TRADE, thereby improving members’ real living standards. See GAINS FROM TRADE, TRADE CREATION, EUROPEAN UNION, MERCOSUR.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
The effects of the customs union on the country's welfare level relative to its position under tariffs is shown in Table 3.
When countries form a customs union they take the average tariff rate as the tariff rate of the union.
Next, we assume that country 1 holds the tariff rate at its optimal level of 6.2 percent, and that countries 2 and 3 form a customs union by setting the common external tariff rate at its optimal level of 19.2 percent.
Point L is the trading point before the customs union. Country A's import quota is allocated between country U (OZ[prime] of good Y) and country D (ON[prime] of good Y).
Point V will be the trading point after the customs union. Country A will import OV[prime] of good Y.
However, the welfare of country A could increase, decrease, or remain the same after it joins a customs union.(8) Figure III shows the case in which country A's welfare is decreased after it joins the customs union.(9) Before the customs union, country A already imports OZ[prime] of good Y from country U at the terms of trade measured by line OT.
The price of good X in country A is lowered from [P'.sub.1] to [P'.sub.2] after the customs union. At [P'.sub.2], country A imports [P'.sub.2]b of good X.
The welfare effects of joining the customs union are as follows.
Next, assume that country A chooses to make an appropriate non-preferential tariff reduction rather than to join the customs union. This non-preferential tariff reduction would bring the price of good X in country A down from [P'.sub.1] to [P'.sub.2] as the customs union.
The welfare of a tariff-imposing country could increase, decrease, or remain the same after it joins a customs union. However, the welfare of a quota-imposing country will always increase after it joins a customs union.
1 The diversion of initial trade from a lower-cost source to a higher-cost source is the trade diversion effect of a customs union. The creation of new trade between the home country and the partner country is the trade creation effect of a customs union |Chacholiades, op.