ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 1 CHAPTER 4.TARIFF BARRIERS AND CUSTOMS UNION TABLE OF CONTENTS 1. INTRODUCTION 2. REMOVAL OF THE INTERNAL PROTECTION 3. LOOPHOLES 4. COMMON EXTERNAL TARIFF

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 2 1. INTRODUCTION ROME TREATY ASKS FOR ECONOMIC UNION LEVEL OF ECONOMIC INTEGRATION WHICH INCLUDES CUSTOMS UNION FTA------CU------CM------EU CEU CUSTOMS UNION ASKS FOR: 1. ELIMINATION OF TARIFFS AND QUOTAS AMONG MEMBER COUNTRIES 2. APPLY COMMON CUSTOMS TARIFFS FOR TRADE WITH NON-MEMBER COUNTRIES

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 3 2. REMOVAL OF THE INTERNAL RESTRICTIONS ARTICLE (3a) OF ROME TREATY OBLIGES THE MEMBER COUNTRIES TO REMOVE THE FOLLOWING PROTECTIVE MEASURES IN TRADE: 1.TARIFFS ON IMPORTS AND EXPORTS FROM MEMBER COUNTRIES. 2.TAXES (IMPOSITIONS) ON TRADE WHICH HAVE THE SAME EFFECT AS TARIFFS i.e. SOCIAL FUNDS, HOUSING FUNDS etc. 3.QUOTAS ON TRADE (QUANTITATIVE RESTRICTIONS ON TRADE) AMONG MEMBER COUNTRIES 4.MEASURES WHICH HAVE THE SAME EFFECT AS QUANTITATIVE RESTRICTIONS

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 4 EXAMPLES ARE GERMANS IMPOSING ALCOHOL RESTRICTION ON FRENCH-LIQUOR BRITISH ASKING FOR SPECIAL BUMPERS ON CARS FOR SAFETY REASONS SUCH TRADE MEASURES, RESTRICTIONS CAN BE MORE EFFECTIVE THAN TARIFFS AND QUOTAS SIX HAD A 12 YEARS OF TRANSITION PERIOD, AND THEY ACHIEVED THE CUSTOMS UNION 18 MONTHS AHEAD OF THE SCHEDULE ANY NEW MEMBER JOINING THE EU IS GIVEN A TRANSITION PERIOD TO ADOPT THE CU 2. REMOVAL OF THE INTERNAL RESTRICTIONS (CONT.)

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 5 3. LOOPHOLES (ESCAPE) MEMBER COUNTRIES ARE ALLOWED TO APPLY PROTECTIONIST POLICIES IN TRADE AMONG THEMSELVES (GET AROUND ARTICLE (3a)) UNDER TWO CONDITIONS: A.BALANCE OF PAYMENT CRISIS. MEMBER COUNTRY CAN APPLY TARIFFS,QUOTAS AND OTHER MEASURES TO PREVENT IMPORTS OF GOODS AND SERVICES FOR A TEMPORARY PERIOD OF TIME. EU DOES NOT LIKE PROTECTIVE MEASURES AND INSTEAD ADVICES THEM: (i) TAKING CREDITS FROM THE EU (ii) DEFLATING DEMAND (iii) MANIPULATING THE EXCHANGE RATES (iv) APPLYING INTEREST RATE POLICY

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 6 B. UNDER CERTAIN CIRCUMSTANCES. THESE ARE: A. PUBLIC MORALITY - BOOKS (SALATAN RUSTI) - FILMS (THE LAST TEMPTATIONS OF JESUS) B. IMPORTS ENDANGERING PEOPLE'S HEALTH - MAD COW DISEASE - SALMONELLA C. DAMAGE TO HISTORIC AND ARTISTIC PLACES 3. LOOPHOLES (ESCAPE) (CONT.)

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 7 4.COMMON EXTERNAL TARIFF (EXTERNAL TRADE POLICY) ARTICLE (3a) REQUIRES MEMBER COUNTRIES MEMBER COUNTRIES TO HAVE COMMON EXTERNAL TARIFF AND COMMON EXTERNAL TRADE POLICY. ART. (3a) + ART. (3b) = CUSTOMS UNION (CU) ACCORDING TO ATR. (3b) NO ONE MEMBER CAN MAKE A BI-LATERAL AGREEMENT WITH A NON- MEMBER COUNTRY. TRADE AGREEMENTS WITH NON-MEMBER COUNTRIES ARE MADE BY THE EU ON BEHALF OF ALL MEMBERS

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 8 MAKING TRADE AGREEMENTS WITH A NON-MEMBER COUNTRY COUNCIL DRAWS THE OUTLINE AND AUTHORIZES THE COMMISSION TO CARRY OUT THE NEGOTIATIONS AND FINALIZE THE AGREEMENT. THEN PROPOSAL IS SENT TO THE COUNCIL. COUNCIL WITH THE APPROVAL OF THE PARLIAMENT (CO-DECISION) MAKES THE TRADE POLICY. EUROPEAN COMMISSION NON-MEMBER COUNTRY COUNCIL OF MINISTERS EUROPEAN PARLIAMENT TRADE POLICY approve discuss negotiate draws outline and authorize finalize consults to

ECON 372 Assoc. Prof. Dr. Hasan Ali Bicak 9 WITH THE IMPLEMENTATION OF THE ART (3a) AND ART. (3b) INTRA-UNION TRADE INCREASED SUBSTANTIALLY: INTRA TRADE FIGURES OF BENELUX AND DENMARK BENELUX COUNTRIES35%71% DENMARK58%60% 70% BeneluxDenmark 0% 10% 20% 30% 40% 50% 60% 80% BeneluxDenmark