The Silent Success of Customs Unions
60 Pages Posted: 13 Jul 2016
Date Written: June 16, 2016
While “mega FTAs” and WTO-driven efforts at multilateral liberalisation dominate the agenda, customs unions (CU) are the silent success story of regional integration. Throughout the world, CUs have been superseding earlier FTAs, as new unions were formed or old ones expanded. Due to problems of measurement, this fact appears to have gone largely unnoticed so far. We show that the proliferation of CUs is driven by national social welfare considerations: even allowing for lobbying, CUs lead to higher social welfare than any other bilateral trade agreement. Thus, even the most ambitious mega FTAs eventually turn into “mega CUs”.
Keywords: customs unions, political viability, member welfare
JEL Classification: F120, F130, F140
Suggested Citation: Suggested Citation