Question

What is customs union? How does this union form? Describe some customs union in Asia.

Answer 1

A customs union is a type of free trade agreement (FTA) involving eliminating tariff barriers between members and agreeing a specific (unified) external tariff (CET) on non-members.

Countries which sell in the customs union to other countries need only make one fee (duty) once the goods have crossed the border. No additional tariffs, commodities can move freely once inside the union. Tariff revenue can then be divided among members with the likelihood of keeping a share of the country that collects the duty

Finally, the creation of a customs union can pave the way for closer economic integration and political cooperation, including the creation of a single internal market, monetary union (common market) and fiscal union. Of course, this is something that can create as many new issues as it addresses existing ones.

In free trade zones, most countries agree to drop tariff barriers on each other's goods in the expectation that each can reap at least as much of the export profits as some domestic producers face in losses. The lack of increasing internal tariffs is one of the shortcomings in the free trade zone strategy. Because the countries that vary in the tariff barriers that are posed to the outside world, importers will always choose to have their goods transported via low-tariff countries, even if oil, labor or other costs are greater. Such methods of shipping roundabout are unnecessarily wasteful.

The ASEAN Free Trade Area (AFTA) is an Association of Southeast Asian Nations trade bloc agreement that supports local trade and manufacturing in all ASEAN countries and encourages economic integration with regional and international allies It is one of the world's largest and most important Free Trade Areas (FTA) and, together with its network of dialog partners, has guided some of the world's largest and most important free trade areas (FTA).

AFTA's primary objectives are to: improve the competitive edge of ASEAN as a global production base by eliminating tariffs and non-tariff barriers within ASEAN; and draw more foreign direct investment to ASEAN.