Katana VentraIP

Customs union

A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.[1]

Customs unions are established through trade pacts where the participant countries set up common external trade policy (in some cases they use different import quotas). Common competition policy is also helpful to avoid competition deficiency.[2]


Purposes for establishing a customs union normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries. It is the third stage of economic integration.


Every economic union, customs and monetary union and economic and monetary union includes a customs union.

Historical background[edit]

The German Customs Union, the Zollverein, which was established in 1834, and gradually developed and expanded, was a customs union organization that appeared earlier and played a role in promoting German economic development and political unification at that time. Before the establishment of the unified German Empire in the 1870s, there were checkpoints between and within the German states, which hindered the development of industry and commerce. In 1818, Prussia took the lead in abolishing the customs duties in the mainland; it was followed by the establishment of the North German Customs Union in 1826. Two years later, two customs unions were established in the states of South Germany.[3]


In 1834, 18 states joined together to form the German Customs Union with Prussia as the main leader. Thereafter, this alliance was further expanded to all German-speaking regions and became the All-German Customs Union. The contents of the alliance convention included: abolishing internal tariffs, unifying external tariffs, raising import tax rates, and allocating tariff income to all states in the alliance in proportion. In addition, there is a customs union between France and Monaco, which was established in 1865.


A customs union was established by Switzerland and Liechtenstein in 1924, by Belgium, the Netherlands, and Luxembourg in 1948, by the countries of the European Economic Community in 1958, and by the Economic Community of Central African States in 1964. At that time, the European Free Trade Association was different from the European Economic Community Customs Union. Free trade within the former was limited to industrial products, and no uniform tariffs were imposed on countries outside the Union.[4][5]


It was brought into action by the initiative of Prussia and joined by most of the German states. Pre- modern conditions ( 30+ currencies, trade barriers etc.) were viewed as an obstacle as obstacles to o economic exchange and growth by the new commercial classes, who argued for the creation of a unified economic territory allowing the unhindered movement of goods, people and capital.

Main feature[edit]

The main feature of the Customs Union is that the member countries have not only eliminated trade barriers and implemented free trade, but also established a common external tariff. In other words, in addition to agreeing to eliminate each other's trade barriers, members of the Customs Union also adopt common external tariff and trade policies.[6] GATT stipulates that if the customs union is not established immediately, but is gradually completed over a period of time, it should be completed within a reasonable period, which generally does not exceed 10 years.[3]

Reduce tariffs until the tariffs within the union are cancelled. In order to achieve this goal, the alliance often stipulates that the member countries must transition from their current external tariff rates to the unified tariff rates stipulated by the alliance in stages within a certain period of time, until finally canceling tariff.

Formulate a unified foreign trade policy and foreign tariff rates. In terms of foreign affairs, allied members must increase or decrease their original foreign tariff rates within the prescribed time, and eventually establish a common external tariff rate; and gradually unify their foreign trade policies, such as foreign discrimination policies and import quantities.

For goods imported from outside the alliance, common different tariffs are levied, such as preferential tax rates, agreed national tax rates, most-favored nation tax rates, ordinary preferential tax rates, and ordinary tax rates, according to the types of commodities and the provider countries.

Formulate unified protective measures, such as import , health and epidemic prevention standards, etc.[8]

quotas

The exclusive protection measures of the Customs Union mainly include the following:[7]

It avoids the problem that the needs to be supplemented by the principle of origin to maintain the normal flow of commodities. Here, instead of the principle of origin, a common 'foreign barrier' is built. In this sense, the customs union is more exclusive than the free trade zone.[9]

free trade zone

It makes the 'national sovereignty' of the member countries to be transferred to the organization to a greater extent, so that once a country joins a customs union, it loses its right to autonomous tariffs. In reality, the more typical customs union is the European Economic Community established in 1958.

economic integration

2010 (SADC)

Southern African Development Community

2011 (ECCAS)

Economic Community of Central African States

2015 (ACU)[28]

Arab Customs Union

2023 (AEC)

African Economic Community

The McGill University Faculty of Law runs a Regional Trade Agreements Database that contains the text of almost all preferential and regional trade agreements in the world.

ptas.mcgill.ca

Michael T. Florinsky. 1934. The Saar Struggle. New York: The Macmillan Company.

European Customs Information Portal (ECIP)

List of international trade topics

Trade creation

Trade diversion

Open Balkan

Craiovia Group

CEFTA

Agreements Notified to the /WTO and in Force

GATT