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Theory of Customs Unions

In: The Theory and Measurement of International Economic Integration

Author

Listed:
  • Ali M. El-Agraa

    (Leeds University
    Fukuoka University)

Abstract

Before the theory of second-best was developed (Meade, 1955a; Lipsey and Lancaster, 1956–7), it used to be the accepted tradition that customs union (CU) formation should be encouraged. The rationale for this was that since free trade maximised world welfare and since CU formation was a move towards free trade, CUs increased welfare even though they did not maximise it. This rationale certainly lies behind GATT article XXIV (see Appendix to Chapter 1) which permits the formation of CUs and free trade areas (FTAs) as the special exceptions to the principle of non-discrimination, provided the intra-area dismantling of tariffs applies to a substantial part of the partners’ trade.

Suggested Citation

  • Ali M. El-Agraa, 1989. "Theory of Customs Unions," Palgrave Macmillan Books, in: The Theory and Measurement of International Economic Integration, chapter 2, pages 19-47, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-10203-7_2
    DOI: 10.1007/978-1-349-10203-7_2
    as

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