THE customs union is a kind of economic block who has a free trade area, with a Common External Tariff, called TEC, and in which there can be the free movement of people, in addition to goods and goods. This policy is common among countries that form economic blocs, an example is the countries of the Mercosur — Brazil, Argentina, Paraguay and Uruguay (Mexico is suspended from the bloc).
The customs union has as its central advantage an area of free trade, without the presence of customs barriers and tariffs; and as a disadvantage, it is understood that the participating country must follow the group rules, not being able to take any political action deliberately.
Read too: USMCA - Free Trade Agreement between North American Countries
What is a customs union?
Customs Union consists of an association of countries that share two common characteristics:
- Common External Tariff (TEC): its function is to eliminate competition from non-member countries and to create costs for their imported products. In this way, there is a favoring and incentive to trade among the members of the association.
- Free Comerce: the central idea is that the member countries of the customs union can establish trade in products, goods and merchandise free of taxes and fiscal barriers between them. Thus, there is economic favoring among the countries that make up the union.
Examples of customs union stand out:
- European Union
- Southern Africa Customs Union – SACU
Characteristics of the customs union
A customs union is considered to be economic blocks that present at least two characteristics in their internal policy, first the presence of a Common External Tariff (TEC), which aims to eliminate external competition and automatically favor the buying and selling of products among members. This tariff is intended to increase taxes on products imported by members from other countries that are not part of the union.
The second feature of the block is the free commercial circulation area, whose objective is the same: to promote trade between members and decrease or eliminate any commercial fees, customs barriers or taxes. Such internal policies, adopted by the members of the union, mutually contribute to the economic growth and development of the members.
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Which countries are part of a customs union?
Some countries form this type of economic bloc, but not all blocs are considered perfect, factor related to the absence of the two basic characteristics: having a Common External Tariff and a free area business. The countries that have these characteristics and form a perfect customs union are:
Germany |
Slovenia |
Italy |
Czech Republic |
Austria |
Spain |
Latvia |
Romania |
Belgium |
Estonia |
Lithuania |
Sweden |
Bulgaria |
Finland |
Luxembourg |
South Africa |
Cyprus |
France |
Malta |
Botswana |
Croatia |
Greece |
Netherlands |
Lesotho |
Denmark |
Hungary |
Poland |
Swaziland |
Slovakia |
Ireland |
Portugal |
Namibia |
Free Trade Area and Customs Union
It is noticed that the concept of free trade follows a different logic than customs union when we analyze how they trade with other countries outside the bloc. The applied rates, such as the TEC, do not need to be the same, but they do exist and need to be applied so that there is a trade disincentive to countries outside the bloc, in this way, the intention will be to make the products acquired by commercial transactions with non-members more expensive.
There is also a need to product verification, to see if they follow existing patterns in the free trade zones or areas, such as the export carried out by the carriers and the laws of international trade or the country that is carrying out the purchase.
In the case of customs union, it is seen that the difference lies in the fact that all members agree to apply the same import tax (TEC) from the moment the product enters the border. This factor has as its central purpose strengthen trade between members, making its products cheaper and making imported ones more expensive, making it difficult to buy these at a higher price.
See too: What is the difference between export and import?
Advantages and Disadvantages of the Customs Union
Between the benefits of the customs union, we can mention the most important as being:
- Elimination of customs duties and all trade restrictions between Member States;
- Trade favoring, encouraging member participation;
- Creation of taxes on imported products;
- Common commercial policy, an element that improves the production and circulation of products between Member States.
Between the disadvantages from the country's integration to a customs union, the following stand out:
- Members are “locked in” to the union's internal policy;
- Commercial priority between Member States;
- Difficulty in forming new commercial alliances due to common tariffs.
solved exercises
Question 1 - (Unimontes) After World War II, in addition to the formation of large blocks, several countries became gathered in geopolitical and economic organizations, forming regional economic blocs of diverse types.
(Source: EARTH, L. and RABBIT, M. of A. General Geography and Geography of Brazil: The natural and socioeconomic space. São Paulo: Modern, 2005.)
Considering the economic integration that takes place within the regional blocks, list the columns.
1) Common market
2) Free Trade Zone
3) Customs Union
( ) Circulation of goods with reduced or eliminated customs duties.
( ) Standardization of tariffs for various items related to trade with countries that do not belong to the bloc.
( ) Free commercial and financial movement of persons, goods and services.
Check the correct sequence.
a) 1, 2, 3.
b) 3, 2, 1.
c) 2, 3, 1.
d) 2.1, 3.
Resolution
Alternative C. The circulation of goods with reduced or eliminated customs duties refers to a free trade zone; the standardization of tariffs for various items related to trade with non-bloc countries is a central feature of the customs union; and the free movement of people, goods, capital and services refers to the existence of an economic block, therefore, the correct sequence is: 2, 3 and 1.
Question 2 - When considering the central characteristics of an economic bloc of the customs union, we can see the Mercosur as being an incomplete union. This fact is due to what reason?
a) Does not practice the free movement of services, capital and people.
b) It is made up of countries that have remarkable economic, historical and cultural similarity.
c) It does not require member countries to commit to the maintenance of a democratic regime.
d) It does not have the standardization of a single currency, adopted by all members.
e) It does not have a free trade area between members.
Resolution
Alternative C. Two central characteristics make the existence of a customs union: the existence of a Common External Tariff and free trade. Mercosur does not have a consolidated free trade zone yet.
By Gustavo Henrique Mendonça
Geography teacher
Would you like to reference this text in a school or academic work? Look:
MENDONçA, Gustavo Henrique. "Customs union"; Brazil School. Available in: https://brasilescola.uol.com.br/geografia/uniao-aduaneira.htm. Accessed on June 27, 2021.
