SOME CUSTOMS UNION ISSUES
Four questions regarding customs unions not specifically dealt with in previous chapters warrant brief comment. Two concern widespread preconceptions: (1) Would formation of a customs union automatically lead to a better international division of labor? (2) Would formation of customs unions involving only two or three countries be a likely road to the formation of a larger union embracing most of Western Europe? The other two questions arise out of the difficulties encountered in forming a customs union: (1) What would be the merits and effects of partial or imperfect customs unions? (2) How much economic unification is necessary to make a full customs union work? Since a closely argued discussion of these questions would fill many pages, I shall set out conclusions while only sketching the reasoning that supports them.
Compared to mere tariff reduction, formation of a customs union is a radical step. The complete breaking down of barriers to trade between two or more countries looks as if it would certainly lead to a more rational allocation of their resources, a better international division of labor. But the appearance is deceiving; a customs union may have this effect, but it is not certain to. Jacob Viner, whose short, rigorous analysis of the economics of customs unions has clarified basic issues obscured by a sizable literature, summarizes the point this way: "The primary purpose of a customs union, and its major consequence for good or bad, is