Background
A Common External Tariff (CET) is a unified tariff rate adopted by participating countries of a customs union or common market on imports from countries outside the union.
Historical Context
The concept of the Common External Tariff emerges from efforts to streamline and harmonize trade policies among member nations to promote economic integration. One of the most notable implementations is the European Union (EU), which uses a unified external tariff as a cornerstone of its customs union.
Definitions and Concepts
- Common External Tariff (CET): A single tariff rate set collectively by member countries of a customs union, applicable to imports from nations outside the union.
- Customs Union: A type of trade bloc composed of a free trade area with a common external tariff.
- Common Market: A more integrated form of a customs union that besides a common external tariff, allows for the free movement of goods, services, capital, and labor.
Major Analytical Frameworks
Classical Economics
In classical economics, trade barriers like tariffs are generally seen as impediments to the free market. There, a CET might be analyzed in terms of its impact on commodity flow and market equilibrium.
Neoclassical Economics
Neoclassical economics analyzes the CET in terms of comparative advantage and general equilibrium. The focus is often on welfare impacts within and outside the customs union.
Keynesian Economics
Keynesian perspectives might emphasize the role of a CET in protecting nascent industries within the customs union and stabilizing economic cycles.
Marxian Economics
From a Marxian viewpoint, a CET might be analyzed in the context of how it supports or challenges the capital accumulation processes within the union and fosters economic dependencies outside it.
Institutional Economics
This approach considers the role of institutions in establishing, managing, and adapting CETs, including regulatory bodies and negotiation frameworks.
Behavioral Economics
Behavioral aspects focus on how CETs influence the economic behaviors of businesses, consumers, and governments both inside and outside the customs union.
Post-Keynesian Economics
Post-Keynesians may investigate the impacts of a CET on demand management, income distribution, and macroeconomic stability within the customs union.
Austrian Economics
In Austrian economics, the focus might be on individual choices and the unintended consequences of a CET, potentially stressing how it alters natural price signals and market processes.
Development Economics
From this perspective, a CET can be seen in terms of its role in promoting or hindering the economic development of less-developed member countries and trading partners.
Monetarism
Monetarists might analyze the indirect impacts of CETs on inflation and monetary policies within the customs union.
Comparative Analysis
A comparative analysis might explore the effectiveness of different regional CET implementations, such as those in the EU versus the Mercosur or the East African Community.
Case Studies
- European Union (EU): The EU’s Common External Tariff and its implications on intra-EU trade and external trade relations.
- Mercosur: Impact of Mercosur’s CET on trade dynamics within South America.
Suggested Books for Further Studies
- “The Economics of European Integration” by Richard Baldwin and Charles Wyplosz.
- “International Economics: Theory and Policy” by Paul R. Krugman and Maurice Obstfeld.
Related Terms with Definitions
- Tariff: A tax on imports or exports between countries.
- Quota: A limited quantity of a particular product that can be imported or exported.
- Free Trade Agreement (FTA): A pact between two or more nations to reduce barriers to imports and exports among them.
- Import Duty: A tax collected on imports by a (some) country’s customs authorities.
- Trade Bloc: A group of countries that work together to promote trade with one another.
This structured entry should give a comprehensive overview of the term “Common External Tariff,” detailing its meaning, historical roots, and various economic frameworks within which it can be understood.
