I. Choose the words to complete the article. It may be necessary to change the form of the given words.

GDP, reduce, imposing, maintain, advance, integration, aggregation, predictable, cross-border, stipulate, elimination, punitive or favorable, tool.

I. On the average, the size of EAC countries is around 30 million people in population with a GDP of around US $10 billion. Such economies on their own are too small to attract any major meaningful investment in today’s globalised economy, where mass production is vital to 1) … unit costs.

In 2000, with their total GDP of US$25.553bn (Kenya-$10.357bn;Tanzania-$9.027bn; and Uganda-$6.17bn) and a combined population of around 86 million people, the 3 countries combined compared unfavourably with Vietnam with a total GDP of $31.344bn and a population of 79 million people. Vietnam would have been more attractive to investors since it is one customs territory.

By moving towards the creation of one economic region through the Customs Union, EAC will create a single market of over 90 million people (2002) and a combined 2) … of around US$30 billion. This large economic region can only be meaningful if it is more than a simple 3) … of neighbouring countries. Currently, trade in the region is carried out under different external tariffs; customs regulations, procedures and documentation.

The EAC Customs Union will assist to level the playing field for the region’s producers by 4) … uniform competition policy and law, customs procedures and external tariffs on goods imported from third countries, which should assist the region to 5) … its economic development and poverty reduction agenda.

Further to this, the customs union will promote 6) … investment and serve to attract investment into the region, as the enlarged market with minimal customs clearance formalities, shall be more attractive to investors than the previously small individual national markets. In addition, the Customs Union will offer a more 7) … economic environment for both investors and traders across the region, as regionally administered CET and trade policy will tend to be more stable.

Private sector operators based in the region with cross-border business operations will be able to exploit the comparative and competitive advantages offered by regional business locations, without having to factor in the differences in tariff protection rates, and added business transaction costs arising from customs clearance formalities. The regionally based enterprises will also get better protection, as enforcement of the CET will be at a regional level.

Most importantly, however, is the signaling effect that will arise from the member States agreeing to implement a common trade policy in their relationship with the rest of the world? This is important in view of the developments at global level, where countries are entering into economic partnership as regional groupings.

Adjustment of the national external tariffs to the common external tariff will result into major welfare gains for consumers, if the CET on finished goods will be lowered as a result of such adjustment.

II. Many of the nations that currently compose the European Union formed a customs union in 1958.

The customs union is a form of economic integration involving two or more sovereign states that 8) … that there be free trade between the member states and a common tariff policy on trade with non-member states. The customs union is the third stage in the process of economic 9) … between states, after the creation of a free trade area and prior to the declaration of a common market.

One of the defining features of the customs union is a policy of free trade between member states. Free trade is the economic term for the 10) … of import and export tariffs between states. As David Ricardo outlined in his theory of Competitive Advantage, free trade is generally desirable because it maximizes total economic efficiency by allowing competition to run its natural course. Under free trade, if nation A can produce a product more cheaply than nation B, consumers in nation B can buy the product from nation A without paying an additional tax. Without free trade, the government of nation B might impose a heavy tariff on imports of the product in question, forcing consumers in nation B to purchase nation B's products at a higher price.

A common external tariff is the agreement between the parties of the customs union that stipulates that all member states 11) … the same tariffs, import quotas, non-tariff trade barriers and preferential policies towards non-member states. This prevents the practice of re-exportation within the customs union, which occurs if one member charges lower tariffs to attract foreign imports, and then re-exports those products to other members of the customs union for a profit under the internal free trade policy. The common external tariff is also useful in that it allows the members of the customs union to combine their economic power in enacting 12) … tariffs towards non-member states.

Perhaps the most important advantage to forming a customs union is that it represents an important step in the process of economic integration. In today's globalized economy, economic integration is more important than ever, as advancements in transportation technology have made international trade increasingly viable, and economic interdependency has emerged as a 13) … to facilitate cooperation and conflict resolution. The European Union Customs Union is a prime example; established in 1958 as a feature of the European Economic Community, the EUCU laid the groundwork of international trust and economic cooperation that allowed the creation of today's economic and political union known as the European Union.

II. Using the vocabulary give the gist of the article above. What other benefits of a customs union can you think of?

Date: 2016-01-14; view: 694