Free Trade Agreements Versus Customs Unions

31 Pages Posted: 30 Aug 2000 Last revised: 25 May 2018

See all articles by Anne O. Krueger

Anne O. Krueger

International Monetary Fund (IMF); Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER)

Date Written: April 1995

Abstract

Until NAFTA, analyses of preferential trading arrangements began by assuming a customs union with a common external tariff, and the differences between customs unions and free trade agreements (FTAs) have been little analyzed. This paper points to some of the differences between FTAs and customs unions, and shows that on welfare grounds a customs union is always Pareto-superior to an FTA. Moreover, the political economy of FTAs will lead to more opposition to further multilateral trade liberalization than will customs unions.

Suggested Citation

Krueger, Anne O., Free Trade Agreements Versus Customs Unions (April 1995). NBER Working Paper No. w5084, Available at SSRN: https://ssrn.com/abstract=225862

Anne O. Krueger (Contact Author)

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