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| Author: | Srinivasan, T. N. |
| Title: | The common external tariff of a customs union: Alternative approaches |
| Journal: | Japan and the World Economy
1997 : VOL. 9:4, p. 447-465 |
| Index terms: | INTERNATIONAL TRADE FREE TRADE TARIFFS GATT |
| Language: | eng |
| Abstract: | The most prominent exception to the cardinal `most favoured nation' principle of the General Agreement on Tariffs and Trade (GATT) of 1947 is in its Article XXIV relating to Customs Unions (CUs) and Free Trade Areas (FTAs). In that article, there were two requirements. Neither of the requirement was very operational, because the phrases `general incidence' and `substantially all' being difficult legal concepts to apply. The agreement of 1994 establishing the World Trade Organization (WTO) has made `general incidence' precise by defining it import-weighted average of height of barriers but without offering any rationale for the definition. Now that preferential trading arrangements such as FTAs are proliferating, reform of Article XXIV is of importance. The paper describes alternative approaches to the central question of common external tariffs of a CU. Taking off from the work of Kemp and Wan who showed the existence of a common external tariff of CU that keeps the welfare of non-members unchanged while revising that of the CU as compared to the situation prior to the formation of CU, it characterizes such a tariff structure for two leading benchmark examples as consumption-weighted average of pre-union tariffs and subsidies in the member countries. |
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