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.

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.

customs union

see TRADE INTEGRATION.

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.
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.
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.
Point L is the trading point before the customs union.
In other words, the trade diversion effect of a customs union never arises.
However, the welfare of country A could increase, decrease, or remain the same after it joins a customs union.
Country A's tariff revenue after the customs union is gfbh.
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.
The welfare of a tariff-imposing country could increase, decrease, or remain the same after it joins 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.