The Silent Success of Customs Unions

60 Pages Posted: 13 Jul 2016

See all articles by Hinnerk Gnutzmann

Hinnerk Gnutzmann

Leibniz Universität Hannover - Faculty of Economics and Management

Arevik Gnutzmann-Mkrtchyan

European University Institute - Economics Department (ECO); Leibniz Universität Hannover - Faculty of Economics and Management

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Date Written: June 16, 2016

Abstract

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

Gnutzmann, Hinnerk and Gnutzmann-Mkrtchyan, Arevik and Gnutzmann-Mkrtchyan, Arevik, The Silent Success of Customs Unions (June 16, 2016). Available at SSRN: https://ssrn.com/abstract=2809067 or http://dx.doi.org/10.2139/ssrn.2809067

Hinnerk Gnutzmann (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

HOME PAGE: http://www.gnutzmann.info

Arevik Gnutzmann-Mkrtchyan

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

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