Customs Union

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The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Customs Union


an association of states organized to coordinate tariff policy. Among capitalist countries, customs unions are created by bilateral or multilateral agreements that regulate tariffs in order to encourage the sale of goods produced by member countries and to discriminate against outside countries. As a rule, member states do away with tariff barriers within the union and create a common customs territory with a standard external customs duty. Contemporary customs unions pursue a policy of collective monopolistic protectionism. Although they sometimes moderate this policy, the customs unions of imperialist powers often employ “nontariff’ barriers, for example, stricter customs formalities, health and quarantine requirements, and marking regulations and increased import duties and fees.

Customs unions were first organized in the 19th century. One of the first was the union established in 1865 by France and Monaco. In 1924 a customs union was formed by Switzerland and the principality of Liechtenstein. Customs unions of highly developed countries have been established by the General Agreement on Tariffs and Trade (1947) and the treaty of the European Economic Community (Common Market, 1957), which provided for the elimination of all trade restrictions between member countries and the introduction of an overall customs tariff in external trade. The convention forming the European Free Trade Association (EFTA, 1960) provided for the abolition of customs duties and quantitative trade restrictions between member countries and the retention of customs tariffs in external trade. However, members of the Common Market and the EFTA still use various customs regulations and have not standardized duties for external trade. In 1959 customs unions were established by the West African countries of the Ivory Coast, Dahomey (present-day Benin), Upper Volta, Niger, Mauritania, Mali, and Senegal and the Central African countries of the People’s Republic of the Congo, Gabon, the Central African Republic (the present-day Central African Empire), and Chad.

Socialist countries do not have customs unions. The USSR concluded agreements on cooperation and mutual assistance in tariff policy with Hungary in 1958 and Poland in 1960. In 1962 member countries of the Council for Mutual Economic Assistance (COMECON) signed a multilateral agreement on mutual assistance and cooperation in tariff policy that standardized documentation, freight registration, and transportation and postal regulations. In 1965 the customs offices of Bulgaria, Czechoslovakia, the German Democratic Republic, Hungary, Poland, and the USSR signed an agreement on the simplification and standardization of customs registration of freight for fairs and exhibitions and freight shipped by motor vehicle. Such agreements facilitate transportation, prevent violations of customs legislation, and help strengthen the world socialist market.


The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
Table 5 summarising the welfare effects of free trade, tariff equilibria and customs union reveals that free trade as world equilibrium may not be attainable.
The examples show the importance of country size, factor endowments and initial tariff rates of non-union and union countries as the determinants of the welfare effects of customs union. When countries forming the union import at the start the same good there is initially no trade among them.
(1976) An Elementary Proposition Concerning the Formation of Customs Union. Journal of International Economics 6: 95-98.
In conclusion, the welfare of a small, quota-imposing country will always increase after it joins a customs union because the trade diversion effect of a customs union never takes place.
1 Country U's offer curve OU should be steeper than line OE[prime], which measures the domestic price ratio in country A before the customs union. Otherwise, country A will not import good Y from country U after the customs union.
2 The welfare of country A will decrease after the customs union if country U's offer curve OU intersects OA at a point lying between E[prime] and F (the intersection point between OA and I).
3 It is assumed that both before and after the customs union, the government of country A raises the import quota revenue by selling import quota licenses through competitive auctions.
The price of good X in country A after the non-preferential tariff reduction is [P'.sub.3] (= [P'.sub.2], which country A reaches under the customs union).
As in the customs union, country A gains [P'.sub.2][P'.sub.1]ab (measuring the net changes in consumers and producers' surpluses).
Since [P.sub.3][P'.sub.3]bi (the tariff revenue under the non-preferential tariff reduction) can be greater than, less than or equal to gfbh (the tariff revenue under the customs union), joining the customs union and making the non-preferential tariff reduction can not be ranked from a welfare standpoint.
In contrast to this, for a small country case, the tariff revenue under the non-preferential tariff reduction is always greater than the tariff revenue under the customs union. The tariff revenue under the customs union is always zero because the home country only imports from the member country after the customs union.