Common external tariff choice in core customs unions

Abstract

This paper investigates how customs union members select the common external tariff (CET) to levy on imports from nonmembers. A perfectly competitive, pure exchange, general-equilibrium model of world trade is simulated. Contrary to most previous work, countries have the freedom to share authority over CET choice and to select from a variety of possible coalition forms. The results confirm that when customs unions are observed in the core, members may wish to share responsibility for CET choice in a variety of ways. Generally, however, the member country that is relatively well-endowed or has relatively elastic consumer preferences tends to take the lead in CET choice. © 2009 Blackwell Publishing Ltd.