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The Silent Success of Customs Unions

Arevik Gnutzmann-Mkrtchyan

No ECO2016/02, Economics Working Papers from European University Institute

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 (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-int
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