Why do some integrated regions have common external tariffs?

Some integrated regions have common external tariffs to protect domestic industries and maintain uniform trade policies.

Integrated regions, such as the European Union (EU), the Caribbean Community (CARICOM), and the Southern African Customs Union (SACU), often adopt common external tariffs (CET) as part of their trade policy. This is a key feature of a customs union, one of the stages of economic integration. The main purpose of CET is to protect domestic industries from foreign competition and to maintain uniformity in trade policies towards non-member countries.

Common external tariffs are set on goods and services imported from countries outside the integrated region. This means that all member countries of the integrated region apply the same tariff on imports from non-member countries. This is done to ensure that goods do not enter the integrated region through the country with the lowest tariffs, a situation known as trade deflection. By having a CET, member countries can maintain a level playing field for their domestic industries.

Moreover, CETs are used as a tool to promote economic development within the integrated region. By imposing tariffs on imports, member countries can encourage consumers to buy domestically produced goods and services. This can stimulate demand for local products, leading to increased production, job creation, and economic growth.

In addition, CETs can also generate revenue for member countries. The revenue collected from tariffs can be used to fund public services and infrastructure projects, contributing to the overall development of the region.

However, it's important to note that while CETs can offer certain benefits, they can also lead to trade diversion. This occurs when trade is diverted from a more efficient non-member country to a less efficient member country due to the imposition of the CET. This can lead to inefficiencies and higher costs for consumers.

In conclusion, common external tariffs are a key component of the trade policy of integrated regions. They are used to protect domestic industries, maintain uniform trade policies, promote economic development, and generate revenue. However, they can also lead to trade diversion and higher costs for consumers.