A Static Analysis of The Customs Union Issue

A Static Analysis of the Customs Union Issue

IF309 EU: Economic & Financial Aspects


Preferential trading agreements (PTA’s) are one of the biggest issues facing world trade, they involve groups of countries charging high trade tariffs to the rest of the world while lower on no trade tariffs are charged to the countries within the preferential trading agreement. The European Union and NAFTA (North American Free Trade Association) are examples of these, while the countries within the agreements benefit, the ones outside do not which puts a serious block on some developing countries growth.

I will be making use of economic theory to examine this. For ease of explanation and due to space limitations, I will only be looking at the static economy, it is static in the sense that it is restricted by its assumptions as they appear unrealistic, but analysis of this type does make conceptual understanding far easier. Before we begin, I feel that it is important for me to distinguis...