A common external

tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...

(CET) must be introduced when a group of countries forms a

customs union A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.GATTArticle 24 s. 8 (a) Customs unions are established through trade pacts where the participant countries set u ...

. The same customs duties,

import quota An import quota is a type of trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. An import embargo or import ban is essentially a zero-level import quota. Quotas, ...

s, preferences or other

non-tariff barriers to trade Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through measures other than the imposition of tariffs. Such barriers are subject to controversy and ...

apply to all goods entering the area, regardless of which country within the area they are entering. It is designed to end

re-exportation Re-exportation, also called entrepot trade, is a form of international trade in which a country exports goods which it previously imported without altering them. One such example could be when one member of a free trade agreement charges lower t ...

; but it may also inhibit imports from countries outside the

and thereby diminish

consumer choice The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their pr ...

and support

protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations ...

of industries based within the customs union. The common external tariff is a mild form of economic union but may lead to further types of

economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and Non-tariff barriers to trade, non-tariff restrictions on trade. The trade-stimulation effects intended by ...

. In addition to having the same customs duties, the countries may have other common trade policies, such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country, within the area, they are entering. The main goal of the Custom Unions is to limit external influence, liberalize intra-regional trade, promote economic development and diversification in industrialization in the Community. Examples of a common external tariff are those of the

Mercosur The Southern Common Market (commonly known by abbreviation ''Mercosur'' in Spanish and ''Mercosul'' in Portuguese) is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full me ...

countries (

Brazil Brazil, officially the Federative Republic of Brazil, is the largest country in South America. It is the world's List of countries and dependencies by area, fifth-largest country by area and the List of countries and dependencies by population ...

Argentina Argentina, officially the Argentine Republic, is a country in the southern half of South America. It covers an area of , making it the List of South American countries by area, second-largest country in South America after Brazil, the fourt ...

Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...

Paraguay Paraguay, officially the Republic of Paraguay, is a landlocked country in South America. It is bordered by Argentina to the Argentina–Paraguay border, south and southwest, Brazil to the Brazil–Paraguay border, east and northeast, and Boli ...

and

Uruguay Uruguay, officially the Oriental Republic of Uruguay, is a country in South America. It shares borders with Argentina to its west and southwest and Brazil to its north and northeast, while bordering the Río de la Plata to the south and the A ...

), the Economic Community of West African States, the Common Customs Tariff of the Eurasian Economic Community customs union and the

European Union Customs Union The European Union Customs Union (EUCU), formally known as the Community Customs Union, is a customs union which consists of all the member states of the European Union (EU), Monaco, and the British Overseas Territory of Akrotiri and Dheke ...

Economic Community of West African States (ECOWAS)

The structure of the CET is related to the internalization of terms-of-trade effects in the Common External Tariff which has the following Structure as adopted by the

ECOWAS The Economic Community of West African States (ECOWAS; also known as CEDEAO in French and Portuguese) is a regional political and economic union of twelve countries of West Africa. Collectively, the present and former members comprise an area ...

Council of Ministers Council of Ministers is a traditional name given to the supreme Executive (government), executive organ in some governments. It is usually equivalent to the term Cabinet (government), cabinet. The term Council of State is a similar name that also m ...

at its 70th ordinary session in June 2013 is as follows The goods declared to Customs in the Community, must generally be classified according to the CET. Imported and exported goods must be declared stating under type they fall. This determines which rate of customs duty applies and how the goods are treated for statistical purposes.

Benefits of the CET

* Increasing the Intra-regional trade: guarantying the availability of more goods to be traded regionally. * Prevention of trade diversion * The CET would provide durability in trade: traders would be able to make plans with the confidence that the tariff is constant. Policies affecting import tariffs can no longer be changed arbitrarily. This will ensure the attraction of more foreign direct investments. * The enlargement of domestic market resulting a rise on turnover: this will lead the region to become a single market for imported goods. * Increase in

economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of Productivity, output produced per unit of cost (production cost). A decrease in ...

resulting in the enlargement of internal industries. * Increased production and productivity: with a large market to satisfy, production opportunities would increase. * Casting down smuggling: smuggling is often encouraged by the difference in tariffs, but when a region applies a common tariff, this will remove the necessity of buying smuggled products in regions which previously had high tariffs of the same goods.

Costs of regional integration

* Having a single market ensures a competitive environment for both consumers and markets which make monopolies existence hard. Among the consequences of these unique markets is that ineffective companies market share will decrease and it may have to close down. * Some sectors of the national economy may undergo of negative impact due to an increase on international competitiveness, which the main reason is the transition to single markets, specially companies that used to benefit of national market protection may have a hard time to deal against their more efficient peers. Eventually, if the enterprise go wrong on organizing their methods, it will fail.

References

{{DEFAULTSORT:Common External Tariff Customs unions Protectionism

Economic Community of West African States (ECOWAS)

Benefits of the CET

Costs of regional integration

See also

References