Background
The Common External Tariff (CET) refers to a unified tariff rate applied by a Customs Union to imports from non-member countries. This trade policy aims to harmonize economic relations and ensure uniform treatment for goods entering any member country from outside the union.
Historical Context
Historically, CETs have been essential in forming Customs Unions, enabling member nations to abolish tariffs, import duties, and other restrictions internally while establishing a mutual policy towards external nations. The European Union (EU), the East African Community (EAC), and Mercosur are notable examples employing CETs effectively.
Definitions and Concepts
The CET is:
- Common Tariff: Single import tariff rate applied by member states on imports from non-member countries.
- Customs Union Mechanism: Ensures that once a product enters any member country, it moves freely within the customs union territory.
Major Analytical Frameworks
Classical Economics
The classical perspective recognizes CETs as a means to protect infant industries within the union, assuming free internal trade boosts overall efficiency and growth.
Neoclassical Economics
Neoclassical analysis focuses on the distortionary effects CETs might have on trade and resource allocation compared to a scenario of free trade, optimizing for global welfare rather than regional.
Keynesian Economic
Keynesian approaches might see CETs as tools for stabilizing economies within the union by protecting jobs and industries, enhancing coordinated economic policies.
Marxian Economics
Marxian views may critique CETs as benefiting capitalist system structures, arguing it reinforces economic disparities between stronger and weaker economies within and outside the union.
Institutional Economics
Institutional economics emphasizes the role of CETs in establishing formal rules and norms, reducing transaction costs and uncertainty in international trade among union members.
Behavioral Economics
Behavioral insights could assess how CET-driven price changes affect consumer preferences and market behaviors within a union.
Post-Keynesian Economics
Post-Keynesian theories might evaluate CETs in the context of economic demand management, regionally balanced growth, and the impacts of such tariffs on employment within the bloc.
Austrian Economics
Austrian approaches would critically view CETs, emphasizing the detrimental effects central planning can impose on individual entrepreneurship and market signals.
Development Economics
Development economists analyze CETs regarding their potential to foster regional development, industrial diversification, and economic stabilization among developing countries part of the union.
Monetarism
Monetarists would focus on how CETs influence price levels and inflation rates internally versus externally, adhering to controlled monetary frameworks within the union.
Comparative Analysis
A comparative analysis could consider how CETs impact trade volumes, economic growth, and internal efficiencies compared to trade areas without a CET, like Free Trade Areas (FTAs) where external tariffs differ.
Case Studies
- EU Common External Tariff: Explores its implementation, challenges, and benefits in unifying an extensive economic territory.
- East African Community CET: Looks at its role in supporting regional integration, protecting nascent industries, and fostering intra-community trade.
- Mercosur: Investigates the impact of CET on member states vis-a-vis relationships with trading partners outside the union.
Suggested Books for Further Studies
- “Economics of Customs and Tariffs” by E.M. Hossein-Hashemi
- “International Economics: Theory and Policy” by Paul R. Krugman, Maurice Obstfeld
- “Trade and Development in Sub-Saharan Africa” by Aphra Mong’ina Maduma
Related Terms with Definitions
- Customs Union: An agreement among several countries to eliminate tariffs among them while establishing the same tariffs on imports from non-member countries.
- Free Trade Area (FTA): A region where a group of countries agrees to reduce or eliminate trade barriers among themselves while maintaining their own policies towards non-member countries.
- Tariff: A tax imposed on imported goods and services aimed at raising state revenue or protecting domestic industries from foreign competition.
