Customs Union Research Articles

Evaluating accession decisions in customs unions: a dynamic machine learning approach

Previous work in the literature on regional economic integration has proposed the use of machine learning algorithms to evaluate the composition of customs unions, specifically, to estimate the degree to which customs unions match “natural markets” arising from trade flow data or appear to be driven by other factors such as political considerations. This paper expands upon the static approaches used in previous studies to develop a dynamic framework that allows to evaluate not only the composition of customs unions at a given point in time, but also changes in the composition over time resulting from accessions of new member states. We then apply the dynamic algorithm to evaluate the evolution of the global landscape of customs unions using data on bilateral trade flows of 200 countries from 1958 to 2018. A key finding is that there is considerable variation across different accession rounds of the European Union as to the extent to which these are aligned with the structure of “natural markets,” with some accession rounds following more strongly a commercial logic than others. Similar results are also found for other customs unions in the world, complementing the insights obtained from static analyses.

Сравнительный анализ интеграционных инициатив и проектов России и Китая в Центральной Азии

Based on the analysis, the author concludes that after the collapse of the USSR, Moscow made numerous attempts to create an integrated political and economic union in the post-Soviet space. However, in the first decade of the 21st century, none of these efforts was realized in reality, and the formation of the EAEU is seen as a step towards more effective economic growth and success compared to other post-Soviet initiatives. The path from the Customs Union to the Common Economic Space and from there to the Common Market appears not only logical but also realistic. In terms of military-political cooperation, it is recognized that there is no alternative to the CSTO in the post-Soviet space. It is the only structure that shapes the security architecture in its area of responsibility and ensures the security and stability of member countries against external and internal challenges and threats in the modern world. On the other hand, Beijing has made significant progress in its diplomatic contacts with the Central Asian states by establishing two major institutional pillars – the SCO and the global initiative BRI. These two instruments have become the fundamental basis that has improved China's foreign policy and external economic positioning in the Central Asian direction.

Asymmetric Free Trade Agreements and Misalignment of Incentives: Lessons From the European Union–Turkey Customs Union

AbstractUnder the European Union (EU)–Turkey customs union, the EU can negotiate free trade agreements (FTAs) with third countries without Turkey's involvement. Simultaneously, Turkey is required to apply the same external tariffs and standards and negotiate its own FTAs in line with the EU. This leads to asymmetries and misalignment of incentives in Turkey's trade relationships. This study utilizes the peculiar nature of this arrangement to explore the asymmetric FTAs and their effects on Turkey and the Union. We find no effect of asymmetric FTAs on Turkish trade. This finding can be explained partially by evidence that Turkish compliance with EU tariffs is low for asymmetric FTAs. This is especially the case for the goods category in which Turkey specializes, and the divergence extends to at least 10 years after the EU signs an asymmetric FTA. As customs unions require that external trade policy be symmetric across all members for them to function optimally, this divergence in tariffs between Turkey and the EU needs to be addressed by removing the misalignment of incentives.

Preferential trade agreements as insurance

We investigate preferential trade agreement (PTA) formation when risk averse countries face demand uncertainty and, hence, have an insurance motive for pursuing trade integration. In this environment, when deciding which type of PTA − if any − they wish to form, countries seek to maximise their net welfare; that is, their expected utility less a risk premium. The desire for insurance influences, not just whether a particular PTA forms, but also the preferred depth of integration. We analyze the insurance implications of free trade agreements (FTAs), customs unions (CUs), and countries choosing to stand alone. We further distinguish between shallow CUs and deep CUs; in the former, members maximise the sum of their individual net welfares, while in the latter they maximise the net value of the sum of their individual expected welfares. We show that differences in country risk attitudes and the levels of risk they face, as well as the degree to which these risks are correlated with each other, each, and together, influence the formation and design of TAs. When countries’ demands are uncorrelated, they form a deep CU if their levels of risk aversion are sufficiently different. If, however, their risk attitudes are similar, countries opt for shallower trade integration − either a shallow CU or a FTA − if they face low levels of uncertainty, and choose to stand alone if one country faces a sufficiently high level of uncertainty. When countries’ demands are correlated, they tend to form a deep CU if their demands are strongly negatively correlated, a FTA if their demands are strongly positively correlated and a shallow CU when their demands are weakly correlated. Intuitively, differences in country risk attitudes (i.e., their degree of risk aversion) act as an additional source of comparative advantage. Deeper integration − particularly via a CU − permits less risk averse members to essentially export their relative partiality for risk to more risk averse partners, thereby effectively providing the latter with insurance.

Some Trends in EAEU Cooperation with Latin-Caribbean America

The Eurasian Economic Union (EAEU) is a rapidly developing integration structure. Its main priority in activities is economic development, even more precisely, trade. At the same time, at the beginning of its activities, the main attention of the member states of the association was focused on the development of domestic trade. The creation of a customs union and a single economic space basically solved this problem. The current development of the structure, in accordance with the global trend, was the expansion of trade relations with border, regional and non-regional partners. Thus, there is a process of integration of integrations, i.e. interaction at the level of integration structures and individual states. Since the EAEU’s main activity is the economy, first of all, we are talking about the creation of Free Trade Zones (FTAs).Aim. The purpose of the article is to identify the dynamics and directions of the development of relations between the EAEU and the countries of Latin America and the Caribbean.Tasks. Consider the main trends and stages of interaction between the LACB countries and the EAEU; identify new directions for the development of Eurasian integration.Methods. The use of a systematic approach made it possible to analyze integration processes taking into account various directions. The method of historical and comparative analysis was used to compare the concepts of the development of integration. Situational analysis made it possible to demonstrate the dynamics of the development of Eurasian integration and the formation of interaction with external actors.The sociological approach made it possible to consider as a special variety of international structures with the characteristics of both intergovernmental bodies and organizations.Results. Against the background of the development of economic interaction, new areas of interaction have been identified.Conclusions. In the current third stage of cooperation between the EAEU and the LKA, the element of political communication of the organization’s information function is strengthened, which is a response to the political crisis on the one hand, and on the other, opposition to Western sanctions in terms of attempts to isolate Russia in the world.

Common policies of the European Union

Common policies of the European Union

A decade of Eurasian integration: An ex-post non-parametric assessment of the Eurasian economic union

This paper provides a sound ex-post evaluation of the impact of the Eurasian integration on member countries’ bilateral trade after a decade of implementation. We overcome the main limitations of current empirical analyses on the effects of trade agreements, namely the aggregation of tariff and non-tariff barriers and the likely self-selection bias, by applying a non-parametric method specifically designed to fully exploit time-series cross-sectional data. We thus compare the trade flows of the member countries in the Eurasian agreement with the exporter-importer pairs located in the Eurasian continent, which are most similar in terms of pre-treatment trends and features. Our results confirm the previous literature about the lack of a significant impact of the Eurasian customs union but find more positive net effects of the more recent integration steps. Our results ask for additional efforts to complete the Eurasian integration and let its member countries fully benefit from its hoped-for long-term effects.

Trade Sanctions against Russia and their WTO Consistency: Focusing on Justification under National Security Exceptions

Abstract In the wake of Russia’s 2022 invasion of Ukraine, around 40 countries/economies, including G7 members, responded to impose a wide range of economic, including trade-related, sanctions on Russia. The question immediately arises as to whether such sanctions violate the WTO agreements or are justified under the relevant national security exceptions. After introducing the material facts of the economic sanctions against Russia as well as the development of WTO jurisprudence on national security exceptions – particularly Article XXI(b)(iii) of the GATT –, this article goes on to analyse the WTO consistency of these trade sanctions against Russia, on a country-by-country and a measure-by-measure basis. From the standpoint of the “war or other emergency in international relations” and “its essential security interests” requirements, countries are categorised according to their geographic proximity and relationship (e.g., military alliances, customs unions, etc) to the belligerents, while measures are categorised by their nature and aim from the standpoint of the “necessary to protect” requirement.

Economic Aspects of Australian Federation: Trade Restrictiveness and Welfare Effects in the Colonies and the Commonwealth, 1900–3*

Australian Federation in 1901 entailed the formation of a customs union among its formerly tariff‐autonomous colonies. Although the elimination of tariff barriers to intercolonial/interstate trade would have been welfare‐enhancing, Australia's common external tariff was set considerably higher than the tariffs on external goods imported by the pre‐Federation colonies, implying a welfare reduction. Using a dataset of 3,584 commodity‐ and colony‐disaggregated imports, this paper estimates trade restrictiveness indices and welfare losses for the Australian colonies and Commonwealth. Despite the high external tariff post Federation, the customs union produced a net static welfare gain conservatively estimated to have been 0.17 per cent of GDP.

Foreign trade in tourism services of Portugal

EU members have a common customs union, a single market (in which goods, people and capital move freely), a common trade policy, a common agricultural policy and a common currency (the euro). In addition, the EU has taken steps to develop a common foreign and security policy. The EU currently faces a number of political and economic challenges, including slow growth and persistently high unemployment in many EU countries. Portugal, as a member of the EU, is experiencing a whole range of problems, like other member countries. But due to the peculiarities of the economy, these problems have their own specifics, including those related to the development of the tourism sector and its role in the country’s economy. In the article, the author examines this specificity and draws conclusions about the characteristics of Portugal.

Чеки как предмет контрабанды денежных инструментов

The Russian Federation is a member of the Customs Union, whose activities are aimed at more effective realization of the common benefits and national interests of its members. In the context of this union, conditions are being created between the participants for deepening economic integration, developing cooperation in the monetary and financial sphere, ensuring the free movement of goods, services and capital, increasing the role of national currencies in foreign trade operations and conducting a coordinated monetary policy. Consequently, within the framework of established contractual relations, compliance with the requirements of currency control and currency regulation contributes to the development of effective ways to influence public relations that are developing regarding the movement of capital. At the same time, statistical data confirm the stability of high rates of damage from smuggling of funds and (or) monetary instruments. The reasons for such indicators are seen in the problems that arise when interpreting the distinctive features of the crime in question, primarily the subject. The article is devoted to the consideration of traveler’s checks and checks (bank checks) as an object of smuggling of monetary instruments.

EXPECTING THE SAME RESULTS FROM DISSIMILAR LEGAL TEXTS: AN ASSESSMENT OF ASSOCIATION AGREEMENTS OF TÜRKİYE AND GREECE

In this article, the Association Agreements of Greece, which signed the first association agreement with the European Economic Community (EEC), and then Türkiye, which signed a similar agreement, were compared. It has been argued for a long time that the Athens and Ankara Agreements concluded by the EEC at that time were alike agreements, and that the Ankara Agreement was even “inspired” by the Athens Agreement. This article tries to reveal that although the aims and purposes of these Agreements are similar, they diverge considerably when examined closely both in spirit and wording. It is understood that the protection shown and the political support given to Greece played an important role in the major difference in their functioning and speed. The argument of the article is that the Athens Agreement was prepared from the very beginning by the EEC to bring Greece to full membership as quickly as possible. Indeed, thanks to this agreement, Greece entered the customs union with the EEC in 1968 and became a full member of the Union in 1981. The Ankara Agreement with Türkiye, on the other hand, appears to be a derivative agreement very close to the Athens Agreement at first glance, but it is an agreement with different important clauses and a “deliberately” weakened regulative power. As a result, the Ankara Agreement, which is still in force and forms the legal basis of the relations of Türkiye with the EU, neither at the time it was signed nor today has the proper content to carry Türkiye into full membership. It is not meaningful in this context to expect equal results from legal texts that differ in this way. This paper attempts to prove this assertion.

Protection against unfair competition—African Regional Intellectual Property Organization member states and South Africa

Abstract This article summarizes the current status of protection against unfair competition in 19 Member States of the African Regional Intellectual Property Organization (ARIPO) as well as South Africa. Since several study countries are Member States to at least one Regional Economic Community (RECs) or customs union, which have introduced regional or sub-regional competition regimes to advance regional integration in this area, the relevant RECs and customs unions are also briefly analysed. This is followed by some reflections on the impact of the African Continental Free Trade Area (AfCFTA) and the AfCFTA’s recently adopted Phase II protocols on Intellectual Property Rights and Competition Policy. The article then examines the different approaches adopted in the study countries to fulfil the obligation to ensure effective protection against unfair competition, as stipulated in Article 10bis(1) of the Paris Convention (PC), and investigates how the concept of ‘honest practices in industrial or commercial matters’ (Article 10bis(2) PC) is interpreted and applied. The article also explores how study countries have implemented the examples of prohibited acts of unfair competition contained in Article 10bis(3) PC, and addresses the question whether additional acts fall within the scope of protection against unfair competition in the study countries. The findings here are presented in such a way that observations from several countries are typically clustered together to exemplify general approaches and categories. The article observes that while countries in the region typically provide some form of legal protection to safeguard fair play in the business sector, study countries represent a variety of legal systems (civil law, common law, a combination of civil law and common law and/or religious law). This influences the way of how they address unfair competition.

The Italian-Yugoslav Rivalry for Political-Economic Influence in Albania 1929-1934

The purpose of the study is to analyze in a substantive manner the circumstances in which Albanian-Italian and Albanian-Yugoslav relations have developed and in particular to reflect the causes and consequences of the Italian-Yugoslav rivalry for economic and political dominance in Albania. Although the objective and clear reflection of the Italo-Yugoslav rivalry affects the exact recognition of the specifics and challenges that these countries faced in extending their influence over Albania through the economy during the above-mentioned period. As a result of the essence of these challenges, we are able to create a clearer perspective in the development of more intensive economic and political relations between Albania and the former Kingdom of Yugoslavia, on the one hand, and Italy and the countries of the former Yugoslavia on the other. Though today Italy does not focus on the Albanian area due to the common European market, the countries of the former Kingdom of Yugoslavia continue to have tendencies for dominance in the economy of the Albanian state. The real reflection of the specifics and challenges in the period 1929-1934 and the analogy with the specifics of today, are another essential goal.
 Scientific novelty: it was concluded that the characteristic of the Italian-Yugoslav rivalry in the period 1929-1934 is the dominance of the Kingdom of Yugoslavia in the political and to some extent also the economic life of Albania, in particular in the years 1933-1934, although Italy was much more powerful and more present in political and economic life. But the reason for this favorable position of the Kingdom of Yugoslavia only in this period of time was the crisis in Albanian-Italian relations, as a consequence of the refusal of the Albanian side to renew the Pact of Friendship in 1931 and Italy’s request for customs union with Albania in 1932. The rivalry between these two countries was exacerbated by the geographical proximity of the two countries to Albania, and the small cost of benefits, so their interest was extremely high.
 Conclusions. In 1929-1934, the Kingdom of Yugoslavia and Italy had fierce competition for political and economic dominance in Albania. However, despite the temporary advantage of the first one and its constant efforts, Italy managed to be dominant and challenge its main competitor in Albania: the Kingdom of Yugoslavia. It even managed to remove Albania from Yugoslav influence, turning it in its entirety on its side. In addition to the Kingdom of Yugoslavia’s economic and military powerlessness in comparison to Italy, the Italians throughout the 1920s had invested a great deal of time and resources in establishing the state of Albania, which sought support from some power of the time, such as Italy, in its efforts to attain overall development. The political and economic life of Albania was also dominated by Italy due to its proximity to Albania and the fact that neither Greece nor the Kingdom of Yugoslavia had territorial claims towards Albania, at least not until the mid-1930s.

An Ex-Ante Approach to the Profitability of a Customs Union

This paper proposes analytical and prospective approaches to regional integration in the form of a “customs union”. Based on Jacob Viner’s theory of regional integration, stating that customs unions generate either trade creation or trade diversion effects, we have developed an index that measures the profitability of joining a customs union, from an ex-ante perspective. The derived index aspires to determine whether joining a customs union will produce trade creation or trade diversion effects for a country member. It can then serve as a reliable tool for policymakers who design and implement trade policies.

Dynamic preferential trade agreement formation and the role of political economy

AbstractUsing a dynamic preferential trade agreement (PTA) formation model, we show that political biases in exporting and import‐competing sectors substantially impact the extent of PTA formation. While both exclusion and free riding incentives constrain the expansion to global free trade in a free trade agreement (FTA) game, only the former incentive arises in a customs union (CU) game. When we endogenize the choice between FTAs and CUs, the tension between the flexibility benefit of FTAs and the coordination benefit of CUs reveals that FTAs always serve as PTA building blocks while CUs may serve as PTA building or stumbling blocks.

Comparing and Contrasting ECOWAS and SADC: Successes, Failures, and Challenges.

The overall goal of the African Union in relation to regional integration is the attainment of the Africa Economic Community in which the identified eight regional economic blocs have been tasked to fast-track this aspiration as highlighted in the Abuja Treaty of 1991. This study undertakes a desk review to compare and contrast two regional blocs—ECOWAS and SADC. This is done by looking at the successes, failures and challenges faced by each of the regions. The study found that both ECOWAS and SADC have made indelible progress in ensuring peace and security in their regions and the attainment of some important regional integration landmarks such as the free trade area, free movement of people, and trans-national roads. On the contrary, these RECs have failed to ultimately achieve their integration goals. Both ECOWAS and SADC have failed to implement the customs union and a single regional currency. There are however several challenges faced by these RECs such as multiple membership, lack of political will to implement regional integration programs, and the pursuit of over-ambitious regional integration goals. Therefore, it is recommended that both ECOWAS and SADC undertake comprehensive effort to ensure that realist regional integrations goals are set with the needed political vigor to achieve them. Without which many regional integration programs will continue being stuck and never attained.

Uluslararası Bir Organizasyon Olarak Avrupa Birliği: Yapısı, Örgütlenme Biçimi ve Yönetim Fonksiyonları Bağlamında Bir İnceleme

This study explains the structure, organization style, and administration functions of the European Union (EU) are a confederal union economically and politically. In this regard, the study aims to explain the effects of the European Union's qualifications as creating a substantial balance of power internationally and being a supranational customs union on the EU's political structure and administrative functions. The scope of the study is limited to examining the historical development and institutional structure of the EU and the administration philosophy of the EU and its affiliated institutions. The importance of the study is directly related to the contribution to the literature of examining and scrutinizing the reflections of the EU's economic and political unity in the public policy making processes. As a finding that is deductible from the study, it is sayable that the administration style of the EU is compatible with the globalization policies and even its pioneer. The research questions of the study are what the contributions of the European Union to the globalization process and how EU’s administrative structure is updated according to this process. Within the pro-active structure of the globalization process, the EU has been the carrier of this process psychologically, socially, economically and politically. Therefore, it is sayable that the hypothesis that there is a positive correlation between the establishment and development process of the EU and the globalization process is verifiable in terms of management, organization and working mentality.

COMESA Customs Union Commitments and the Impact on Kenya: Using the Wits-Smart Simulation Model

This research article included quantitative estimations of the likely outcomes of the welfare effects, trade diversion effects, changes in export and import quantities, revenue effects, and trade creation effects resulting from the Common Market for Eastern and Southern Africa Customs Unions Commitments (COMESA CU). Kenya was used as the case study in this research project, which utilized the Software for Market Analysis and Restrictions on Trade (SMART) and Pan-Euro-Mediterranean tools (PEM). The World Integrated Trade Solution (WITS)/SMART software has access to the most recent data on Kenya and uses databases and records of trade-related information, including those maintained by the United Nations Conference on Trade and Development (UNCTAD), the World Trade Organization (WTO), the Common Format for Transient Data Exchange for Power Systems (COMTRADE), and the Transportation Reporting and Accounting Information System (TRAINS). The results of the analyses show that COMESA CU has no indication of trade diversion and had a trade-creation impact of US$310.50 million. Further analysis revealed that the COMESA CU procedure is expected to record losses in the amount of US$327 million. Additionally, a US$56.27 million consumer welfare effect was projected for COMESA CU. Imports increased by 2.8% at COMESA CU, but exports fell. The research recommends that export-boosting actions be taken, including bolstering export processing zones, offering export subsidies, developing supply-side infrastructure, offering trade financing, and enhancing export-supporting institutions. Kenya and other developing countries now have the ability to implement policies that will make sure they benefit the most from the various regional trade agreements, thanks to the findings of this study.

Exports and economic growth: relationships and threshold analysis for the Southern Africa customs union

This study examines the short-run and long-run relationships between exports and economic growth in the Sothern Africa Customs Union (SACU), as well as the corresponding threshold level. The study used panel data covering the period 1980 to 2021 and employed the Autoregressive Distributed Lag (ARDL) Bounds to test for co-integration relationships, and the Generalized Least Squares (GLS) to determine the respective threshold level. Exports positively support economic growth both in the short-run and in the long-run in SACU. There is long-run bidirectional causality between exports and economic growth. The minimum threshold for exports is 59%. That is, exports only start contributing significantly to economic growth when they are above 59% of the Gross Domestic Product (GDP). SACU should put in place economic policies and regulations that are skewed towards the improvement of the competitiveness of its local products on the global market and also strategically consider export-oriented industrialization strategies. Efforts should also be channeled towards the implementation of bilateral and multilateral trade agreements and harnessing the synergic benefits through the adoption of deliberate value chain mechanisms and initiatives.