The second way in which free trade areas are seen as public goods is related to the trend towards their “deepening”. The depth of a free trade area refers to the additional types of structural policies it covers. While older trade agreements are considered “flatter” because they cover fewer areas (such as tariffs and quotas), recent agreements deal with a number of other areas, from services to e-commerce to data localization. Since transactions between parties to a free trade area are relatively cheaper than transactions with non-contracting parties, free trade areas are traditionally considered excluded. Now that deep trade agreements will improve regulatory harmonization and increase trade flows with non-parties, thereby reducing the exclusionability of FTA benefits, next-generation free trade areas are taking on essential features of public goods. [14] In a customs union (a more advanced form of free trade area), members also agree to impose a common duty on imports from the outside world. In order for the UK to continue to export duty-free with EU member states, it must conclude a free trade agreement and it is generally assumed that, in such cases, goods to be exported from the UK must comply with the rules of origin. However, the white paper published by the UK government is based on a different approach. Instead of setting the rules of origin, it proposes to conclude a “facilitated customs agreement” with the EU; Goods imported into the UK from outside the EU will be subject to EU or UK customs (if undecided, whichever is higher), depending on the final destination, thus avoiding the problem of circumvention and allowing the free movement of goods between the EU and the UK. In the case of most free trade agreements, tariffs have been set between counterparties, and then the rules of origin to be established to compensate for the removal of these tariffs are discussed. However, the case of Brexit is different.
Whereas there was initially a free movement of goods and the counterparties now propose to restrict this movement of goods; It is therefore understandable that the UK is proposing a system that goes against popular belief, but for the EU it is probably an uncomfortable proposal, as the complexity of the system raises doubts about its feasibility. Figure 1 shows a simplified pattern of customs union. Country A and Country B have formed a customs union. In this case, both country A and country B have reciprocally abolished customs duties and set a single external duty vis-à-vis third countries (in this case, 10%). For example, if the goods in question are a finished vehicle, a 10% duty will be levied at the time the vehicle is imported into country A and no customs duty will be levied if the vehicle is transported from country A to country B. because customs duties have already been levied on the importation of goods into country A. Therefore, no customs office is required for the collection of customs duties between countries A and B, and the free movement of goods between the two countries becomes possible. If several countries forming a customs union were allowed to participate individually in trade negotiations, this would destroy the principle of establishing a common customs tariff vis-à-vis third countries. Thus, in a complete customs union like the EU, the European Commission, not individual countries, becomes a negotiating partner. A free trade area is created when a group of countries comes together and agrees not to impose tariffs or quotas on trade in goods between them.
Until the advent of the North American Free Trade Agreement (NAFTA), analyses of preferential trade agreements began with the adoption of a customs union (CU) with a common external tariff, and the differences between customs unions and free trade agreements (FTAs) were little analyzed. This paper highlights some of the differences between free trade agreements and customs unions and shows that a welfare customs union is always superior to a free trade agreement. Moreover, the political economy of free trade agreements will lead to more resistance to greater multilateral trade liberalization than customs unions. The “Norwegian model” allows Norway to participate in the EU`s internal market through the European Economic Area, which includes respect for all four freedoms (including the free movement of persons). An even more economically integrated regulation is economic union. Economic unions remove internal barriers, adopt common external barriers, allow the free movement of resources (e.B. labour) AND adopt a common economic policy. The best known example of economic union is the European Union (EU). EU members all use the same currency, conduct monetary policy and trade with each other without paying customs duties. Third, such an agreement would involve the imposition of tariffs on exports to the EU, and it is highly unlikely to include free trade in services (neither the Canadian Free Trade Agreement nor the standard WTO framework do this). This is a problem for the UK as it exports far more services to the EU than goods. Customs unions and free trade agreements may be similar, but they are actually more different than is generally accepted.
The distinction between the two could become more important during the Brexit discussion. At the international level, there are two important freely accessible databases developed by international organizations for policy makers and businesses: for example, member countries agree to harmonize product standards in their markets, for example with regard to the alcohol content of alcoholic beverages or the energy efficiency of cars; Otherwise, these could be used by countries to restrict trade. Private barriers to trade could then be created by monopolies or cartels, so that a common competition policy must be agreed in the interests of undertakings in all Member States. An economic union is different from a customs union because in the latter Member States are allowed to transport goods across borders but do not have a common currency. Nor are they allowed to move workers freely across borders. Regional trade agreements are mutual trade agreements between two or more partners (nations). Almost all countries are part of at least one RTA. Under a RTA, countries “pile up” and form an international community that facilitates the flow of goods and services between them. Let`s take a look at some examples of regional trade agreements: However, there are two areas of difficulty here. First, the EU accounts for around 40% of UK exports, but member states are not allowed to start trade negotiations and would probably not respond well to informal exploratory discussions while Article 50 negotiations are ongoing. .