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Customs Union

Please give an example of why the formation of a Customs Union cannot be justified on purely economic grounds.

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In a customs union, the countries that form the union lift most restrictions to trade between the member countries. This allows for a freer flow of trade, which essentially increases the economic activity between the member countries. When a customs union forms, the countries that are not part of the customs union must pay tariffs and other fees to trade with the member countries. The main reason why factors other than economic factors need to be taken into consideration for a customs union is because customs unions involve many aspects of each country's ...

Solution Summary

This solution explains exactly why a customs union cannot be justified on purely economic grounds.