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Difference Between Customs Union And Free Trade Agreement

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On the other hand, the « soft Brexit » is much more like the Norwegian model. The United Kingdom would maintain export access to the domestic market for both goods and services, accept the free movement of people, continue to pay a certain « access tax » and remain bound by the ECJ. This would significantly reduce the impact on the UK economy, particularly during the transition from membership to exit. Without this protection, a company in a country that does not have a trade agreement with the EU could create an outpost in Canada, ship its goods there and then export them to the domestic market. Should the UK decide to withdraw from the EU customs union, tariffs between the UK and EU member states will be reinstated. For example, when a finished vehicle is exported from the UK to an EU Member State, a 10% tariff is applied, and conversely, when a vehicle is exported from an EU Member State to the UK, a 10% tariff is applied, unless the UK changes its rights. Leaving the EU will allow the UK to change its tariffs from that of the EU. However, the UK will likely be bound by tariffs that have been included in EU WTO commitments (so-called concession rates) and, in this case, the UK will be able to slightly reduce the value of tariffs, but it will be difficult to increase it. A single or common market goes much further: in addition to tariffs and quotas, it is trying to remove various other barriers to trade. Unlike a customs union, parties to a free trade area do not have common external tariffs, i.e. they apply different tariffs and other policies towards non-members. This feature allows non-parties to free up outdoor preferences in a free trade area by entering the market at the lowest external rates.

Such a risk requires the introduction of rules for the determination of native products that can benefit from preferences within a free trade area, which is not necessary for the establishment of a customs union. [15] In principle, there is a minimum processing time leading to a « substantial processing » of the products, so they can be considered original products. By the definition of products originating in the PTA, the preferential rules of origin distinguish between domestic and non-origin products: only the former are eligible for preferential tariffs under the free trade area, the latter having to pay the import duties of the MFN. [16] But what is the difference between a free trade area, a single market and a customs union? This could also involve paying money to the EU and accepting ECJ rulings when they relate to trade, and they are unlikely to include agricultural products or fish, since the UK would not be in the common agricultural policy or in the common fisheries policy.