Customs Unions & WTO

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Customs Union

A customs union is a group of countries who agree to remove barriers to trade between the union and enforce common trade barriers to those outside of the union.

Tariffs

There are usually no tariffs or quotas between members of a custom union.
There is usually a common tariff on goods coming from countries outside of the customs union.

Regulations

Quality regulations are usually standardised within a customs union and people outside the union have to meet these regulations.

Different to a free trade area

A customs union is a step up on a free trade area, the key difference being that in a free trade area there are no common external tariffs.

European Union

The European Union is the most famous example of a modern customs union. But there are others including the Southern African Customs Union (which includes Namibia, Botswana and South Africa).

The European Single Market

The European Single Market is a customs union where all internal borders and between country restrictions have been removed.

Features of the European Single Market

The European Single Market has all the features of a customs union in addition to a number of other features:
- Free movement in goods and services. In almost every case, goods sold in one country are available to all other countries.
- Free movement of people. People are able to live and work in different countries in the single market.

Features of the European Single Market (cont.)

Free movement of money between member countries.
Agreed standards and regulations for all goods and services produced in the single market.
Members agree not to set rules or make laws that favour their own domestic firms, products or workers over other countries in the market.

Consequences of EU membership

European Union membership implies membership of the European Single Market and so all the features the market entails. In particular the freedom of movement of goods, services, people and money.
Members also agree to the rules of the customs union including the common external tariffs.
Members must accept laws and rulings from EU institutions including the European Court and Parliament.

Brexit

There were two key battlegrounds in the lead up to the Brexit vote.
- Firstly, the free movement of people – which many believed had led to increased immigration into the UK, higher unemployment and higher costs for the government in supporting immigrants through benefits and government run services including schools.
- Secondly, autonomy over laws – a number of Brits argued in favour of Brexit as it would mean that the UK would no longer have to accept the laws and rulings of the EU parliament and court.

Brexit (cont.)

But lots of NHS workers come from the EU and lots of the goods (like BMW cars) that we purchase are bought tariff-free from EU countries.

World Trade Organisation

The World Trade Organisation (WTO) is where countries meet to try and negotiate a reduction in trade barriers. Lower trade barriers can help to encourage specialisation and increase global output.

GATT of 1947

Many countries came together to form the General Agreement on Tariffs and Trade (GATT) in 1947.

Rounds of negotiation

Since 1947, the negotiations have happened in rounds.
Countries will negotiate one agreement, then come back some time later and negotiate another agreement.

The WTO now

The role of the WTO is still to encourage free trade, to provide a forum to resolve trade disputes, to lower tariff barriers.
The Most Favoured Nation Principle (MFN) says that any tariff reduction offered to one country must be offered to all (against trade discrimination).
The WTO Began with 23 members, and now has 163 members.
But the WTO is under threat from, in particular, the US' more protectionist stance.