What is a key tariff-related characteristic of a customs union?

What is a key tariff-related characteristic of a customs union?

• A. Increases internal tariffs to protect each member state
• B. Eliminates internal tariffs and adopts a common external tariff
• C. Maintains separate external tariffs with harmonized internal rules
• D. Imposes quotas instead of tariffs among member states

Answer: (B)

In a customs union, members agree to remove tariffs among themselves and apply a single, uniform tariff to goods coming from outside the group. This combination—no internal tariffs and a common external tariff—is the defining tariff arrangement of a customs union. The option describing eliminating internal tariffs and adopting a common external tariff matches this setup exactly, which is why it’s correct. The other ideas don’t fit: raising internal tariffs opposes the idea of free movement within the union; maintaining separate external tariffs contradicts having a common external tariff; and relying on quotas rather than tariffs is a different type of trade instrument altogether.

In a customs union, members agree to remove tariffs among themselves and apply a single, uniform tariff to goods coming from outside the group. This combination—no internal tariffs and a common external tariff—is the defining tariff arrangement of a customs union. The option describing eliminating internal tariffs and adopting a common external tariff matches this setup exactly, which is why it’s correct.

The other ideas don’t fit: raising internal tariffs opposes the idea of free movement within the union; maintaining separate external tariffs contradicts having a common external tariff; and relying on quotas rather than tariffs is a different type of trade instrument altogether.