Knowra Customs union Customs union A customs union is an arrangement in which members remove tariffs on trade with one another and apply a common external tariff to goods from nonmembers.
Common external tariff : A shared tariff rate or schedule that members of a customs union apply to imports from nonmembers. It prevents members from undercutting one another’s external trade barriers.
Free trade area : A trade arrangement that removes tariffs among members while allowing each member to set its own tariffs on nonmembers. Unlike a customs union, it has no common external tariff and relies on rules of origin.
European Union Customs Union : The customs union in which EU members apply common customs rules and a common external tariff to goods from outside the union. It is a prominent example of a customs union embedded in wider political and economic integration.
Trade policy : Government measures and agreements that influence international trade, including tariffs, quotas, and trade negotiations. Members pool part of their trade policy by setting external tariffs together.
Rules of origin : Criteria used to determine the country in which a product was made or substantially transformed. A customs union generally removes the need to prove origin for goods already admitted from outside.
Common market : An integrated market that permits free movement of goods, services, capital, and labor among participating economies. It adds cross-border factor mobility to customs-union integration.
Southern African Customs Union : A customs union comprising Botswana, Eswatini, Lesotho, Namibia, and South Africa. Its shared external tariff and revenue-sharing arrangements illustrate a regional union outside Europe.
Tariff : A tax imposed on imported or exported goods, usually collected at a customs border. The union removes tariffs internally while retaining a common tariff on many outside goods.
Trade diversion : A shift in imports from a lower-cost nonmember supplier to a higher-cost member supplier because of trade preferences. The common tariff can redirect purchases toward member producers even when they are less efficient.
Economic union : An integration arrangement combining a common market with coordination or unification of major economic policies. It extends beyond a customs union by coordinating policies such as taxation or monetary affairs.
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