A customs union is a trade agreement:
A)in which member countries are free to set their separate tariffs on other countries.
B)in which members agree to set similar tariffs on nonmembers.
C)in which resources are free to move between member countries.
D)in which member countries have common currency.

Question

Quizplus · Accepted Answer

A customs union is a trade agreement in which members agree to set similar tariffs on nonmembers. This means that member countries have a common external tariff (CET) for non-member countries, meaning they can set their own tariffs and trade policies with non-member countries. However, they must agree on a common tariff to charge on goods imported from non-member countries. This is why a customs union is considered to be a higher level of economic integration than a free trade area.

A Customs Union Is a Trade Agreement