Customs Union

Published Dec 26, 2022

Definition of Customs Union

A customs union is an agreement between two or more countries to eliminate tariffs and other trade barriers between them. That means goods and services can move freely between the countries without any additional taxes or restrictions. In addition, the countries also agree to impose the same external tariffs on imports from other countries.

Example

To illustrate this, let’s look at the European Union (EU). The EU is a customs union that consists of 28 member states. That means goods and services can move freely between these countries without additional taxes or restrictions. Furthermore, the EU also imposes the same external tariffs on imports from other countries. This means that all member states have to pay the same taxes on imports from outside the EU.

Why Customs Union Matters

Customs unions are important for international trade and economic development. They reduce the cost of trading between countries, leading to increased trade and economic growth. In addition, they also reduce the cost of imports from outside the union, which leads to lower prices for consumers. Finally, customs unions also help to promote peace and stability between countries, as they reduce the potential for conflict over trade issues.