Regional Trading Blocs
Regional trading blocs have become common in recent decades. They remove trade borders between neighboring countries to expand local markets and bolster trade by streamlining regulations, tariffs, and economic policies. These blocs can also come in the form of customs unions, which essentially create one shared market between several countries and dictate trade policies between countries in the union and those outside it.
For most CUs among developing economies, the potential
for losses of tariff revenues constitutes an important negotiation issue. These losses may result from the liberalization
of intraunion tariffs, from the adoption of the common
tariff schedule, or from changes in trade patterns. Given
the significance of tariff revenue for most developing
countries, at least two issues need to be addressed when
establishing a customs union: (a) Who has a claim on the
collected customs duties? (b) Where and how should those
duties be collected?