What Is The Main Difference Between A Free Trade Agreement And A Customs Union

The EU also has free trade agreements with many other countries around the world; It is therefore not fundamentally opposed to negotiations with the United Kingdom, but in terms of remaining in the single market or customs union, this would be the ”hard” form of Brexit. This would almost certainly also mean border controls between Ireland and Northern Ireland. Free trade advocates, from MP Daniel Hannan at the Institute of Economic Affairs (IEA), suggest that the best result would be to belong to a European free trade union, but not to a customs union. The last option is the standard position: trade with the EU within the framework of the World Trade Organisation (the ”WTO model”). This is the approach that determines the EU`s trade with non-members with whom it does not have a specific agreement. But there are two areas of difficulty. Firstly, the EU accounts for around 40% of UK exports, but some Member States are not allowed to start trade negotiations and would probably not respond well to informal surveys while Article 50 negotiations are under way. Nevertheless, the UK could opt for an exit from the single market, but remain in the customs union, but that means it could not negotiate free trade agreements with other countries, that is what the EU is doing. Unions and free trade agreements may be similar. The difference between the two is that, in a customs union, participating countries establish a common tariff (a uniform external tariff applied by all Member States) against third countries, whereas this is not the case in a free trade agreement. The result is other differences: (i) within the framework of a customs union, participating countries must conduct trade negotiations as a single unit (usually the EU), while members can negotiate individually under a free trade agreement; (ii) in a customs union, the free movement of goods between Member States is permitted, but not in a free trade agreement; and (iii) within the framework of a customs union, customs between Member States is not necessary, but a free trade agreement requires it and its function can even be strengthened. This regime applies only to trade in goods: attempts to extend the agreement to services and agriculture have stalled. Negotiations can therefore be very long and complicated and the result can still leave many obstacles to trade.

There is a free trade area in Europe and we have contributed to its creation: EFTA, the European Free Trade Association. Norway, Iceland, Switzerland and Liechtenstein are members, but they now have very close relations with the EU; with Switzerland, all are part of the internal market. Services such as banks and education are also a problem in many free trade agreements, as the barrier to trade in services is generally not tariff, but so-called non-tariff barriers, such as different rules, standards and qualifications. There are EU-wide rules that cover a range of industries and products, from food standards to the use of chemicals, working time, health and safety.