Customs Union

Customs Union, association formed when two or more sovereign states agree to eliminate or reduce trade barriers among themselves and to adopt a common trade policy towards outsiders. Customs unions are designed to lower costs of imported goods and to enlarge markets. They stimulate commerce and industry within the union by allotting to each member a specialized economic structure in which each country may concentrate on those products that are easiest to produce in terms of its resources and, when possible, may import other essential products from the member countries at minimal expense.

Several important customs unions are in operation today, including the European Union (EU). The EU has established a common external tariff among member nations and eliminated internal tariffs.