Question

Explain the welfare implications of EU customs union and the Eu single market. Compare and contrast where possible

Answer 1

• Customs union is formed when a group of countries gather together for free trade between them and impose a common tariff to countries outside the zone.The idea is to make a single market and this wont allow the passage of goods and people.
  • Advantages:
    • This will allow the free trade among the countries.
    • This will eliminate checking at the boundaries.
    • It will lead to economic integration and will lead to formation of single market.
  • Disadvantages:
    • A country cant put forward a tariff on their own because ,it should be accepted by everyone.This will weaken the economic and national relationship.
    • A country can't give particular tariff to an industry,i.e,if an industry is declining ,the government can't raise the tariff on importing goods from that industry,in order to support them.
• EU Single market is dream of the European government.It aims to break down the barriers of trading by allowing free movement of goods,services,capital and labour.
  • Advantages:
    • This will help to create free trade.
    • The production cost is less.
    • There is a transfer of skills across the single market.
  • Disadvantages:
    • There is decrease in wages,as migrants increase,there will be an decrease in local wages
    • Trade rules may support some industries,when compared to some others.This may weaken the relationship.
• A custom union is a type of free trade.In this,there is no tariff imposed on goods that are exchanged between the countries that take part.But,when compared to single market,it imposes 10% tariff on goods that are exchanged.Customs union does not allow the passage of goods and labour,but this restriction is not applicable to Single market