Custom Union:

A customs union occurs when a group of countries agree to eliminate tariffs between themselves and set a common external tariff on imports from the rest of the world. The European Union represents such an arrangement. A customs union avoids the problem of developing complicated rules of origin, but introduces the problem of policy coordination. With a customs union, all member countries must be able to agree on tariff rates across many different import industries. A customs union involves trading goods between countries without any customs duties and tariffs, the application of a common external tariff on imports from third countries and the application of common trade policies. It is an organization of autonomous countries where trade between member states is free of restrictions, but where a tariff or other restriction is placed on products entering the customs union from non-member states. Examples include the Caribbean Community (CARICOM), the Central American Common Market, and the Economic Community of Central African States. The Customs Union between Turkey and the EU, which has been operational since the beginning of 1996, presents a unique example in the sense that Turkey is the first and only country that enters into such integration without being a member of the Union. Another striking feature of the customs union is that it has gone well beyond the classical definition of a customs union, as a step identified by the prevailing integration theory. To be specific, the Customs Union between Turkey and the EU not only involves the abolition of all customs duties and charges, prohibition of all quantitative restrictions between the parties and implementation of a common customs tariff to the outside world: it also requires Turkey to harmonize its commercial and competition policies, including intellectual property laws, with those of the Union, and extends most of the EU's trade and competition rules to the Turkish economy.