Routledge Dictionary of Economics, Second Edition
A group of countries with a COMMON EXTERNAL TARIFF but with free trade amongst themselves and free movement of labour and capital.
The EUROPEAN COMMUNITY is a major example of such an arrangement. Many theories about customs unions are based not only on how free trade based on COMPARATIVE ADVANTAGE is beneficial but also on LOCATION THEORY to understand the changes within the cus toms union, e.g. the movement of capital and population towards GROWTH POLES creating a dynamic effect of a union.
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