A trade union is an agreement between two or more neighboring countries and aims to remove trade barriers between them and set uniform tariffs with non-member countries. It is one of the second stages of regional economic integration.

What to Understand from a Trader Union or Customs Union?

  1. Trade Area

Traders Union certainly have a free trade area or so-called free trade area. The goal is to eliminate trade barriers between member countries even though each member has a different tariff policy regarding external tariffs with the country.

The Customs Union can eliminate trade barriers because it adds a uniform policy on trade with existing countries, namely non-member countries. There is also a common market which is the Customs Union plus the removal of barriers to entry and exit.

Must be out of this is a factor of production among member countries and the economic union which is a common market plus a common economic policy among member countries. There is also a monetary union which is an economic union plus a single currency

As for there are several examples of this one trader, one of which is the benelux which consists of the Netherlands and Belgium and Luxembourg. There is also the South African money market and the South African Customs Union and the West African Economic and Monetary Union.

  1. Features in it

Of course, the Customs Union has a feature, namely to remove barriers to exports and imports of state goods and services and to adopt a uniform set of policies and external tariffs for trade. We will quickly know that this Sarekat is similar to a free trade area.

Despite that, both of them are different in terms of trade policies with countries that are not members. Under the Customs Union, of course, member countries have similar policies regarding trade with non-members or non-member countries.

There is another side because this free trade does not have a uniform policy regarding trade with non-members. This is because each of them still has the right to determine their own policies properly and easily.

When exporting goods to the Netherlands, of course, Indonesian exporters will pay the same duties when exporting to Belgium. An example is that they only ship to their subsidiary in the Netherlands while the subsidiary then sells them back to Belgium.

In this case, the subsidiary certainly cannot be separated from tariffs, therefore indirectly Indonesian exporters will only pay the tariff once. Customs Union is a much stronger form of cooperation when compared to free trade because it is better.

It is also the second stage in regional integration before the market is shared because under a common market not only goods and services flow freely among members. However, there are factors of production such as labor and capital under it

The main purpose of this union is to increase trade in goods and services between member countries. Also to remove trade barriers and reduce administrative and financial burdens borne by businesses in member countries.