What is a Customs Union?

An agreement between a group of countries that mutually benefit each of them.

They often get rid of tariffs and then charge the same amount for other states to import goods into the country. A Customs Union often allows free trade which involves promising to get rid of all tariffs, taxes and quotas on goods and services between countries. The Union also sets an external tariff for when countries who are not member states want to trade with them. Setting external tariffs is what distinguishes a customs union from a free trade area.

Member states trading within the union must comply with the trading standards and regulations set to ensure fair practice. However, they sometimes limit the freedom of their individual members to strike their own trade deals.

The European Union is the biggest customs union in the world. Brexit will mean Britain will leave the EU customs union and lose the trade benefits that it brings but enable the UK to make their own deals. The UK government is trying to renegotiate this.  

Key Terms

Free Trade – International trade left to its natural course without tariffs, quotas, or other restrictions.

Free Trade Area – A group of countries between whom any trade tariffs, quotas or other restrictions have been removed (see Free Trade article for a more detailed explanation)

Tariffs – Border taxes. Money charged to sellers wanting to import goods into the country, raises revenue and encourages domestic production.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: