key term - Common external tariff

Definition

A common external tariff (CET) is a unified tariff rate imposed by a group of countries on imports from non-member states. This system aims to create a level playing field for trade among member countries by ensuring that all external goods face the same tariff, preventing competitive disadvantages and encouraging trade within the group. The CET plays a crucial role in economic integration and is a key feature of trade agreements such as the European Economic Community, which sought to promote cooperation and reduce trade barriers among member states.

5 Must Know Facts For Your Next Test

1. The common external tariff was established as part of the Treaty of Rome in 1957, which created the European Economic Community.
2. The CET was designed to facilitate the free movement of goods among member countries while maintaining a consistent approach to imports from outside the community.
3. Implementation of the CET helped protect emerging industries within member states by shielding them from foreign competition during their development.
4. As part of the CET, member countries could negotiate collectively with non-member states, enhancing their bargaining power in international trade discussions.
5. Over time, the CET evolved to adapt to changing economic conditions and pressures from global trade agreements, reflecting shifts in policy priorities among member states.

Review Questions

• How did the establishment of a common external tariff influence trade relationships among member countries?
  • The establishment of a common external tariff significantly influenced trade relationships among member countries by promoting intra-community trade while standardizing import duties on goods from non-member states. By ensuring that all member countries applied the same tariff rates on external imports, it minimized competitive disadvantages and fostered an environment of economic cooperation. This unified approach encouraged businesses within member nations to engage in trade with each other more freely, ultimately leading to greater economic integration and collaboration.
• Evaluate the impact of the common external tariff on local industries within member states during its implementation.
  • The implementation of the common external tariff had a profound impact on local industries within member states by providing them with a protective barrier against foreign competition. This protection allowed emerging industries to grow and stabilize before facing international markets. However, while some sectors thrived under this protectionist policy, others argued that it led to complacency, reduced competitiveness over time, and reliance on domestic markets. Consequently, while the CET aimed to promote economic development, it also sparked debates about balancing protectionism with the need for innovation and competitiveness.
• Analyze how changes in global trade dynamics have affected the relevance and application of the common external tariff in contemporary European trade policy.
  • Changes in global trade dynamics have significantly affected the relevance and application of the common external tariff in contemporary European trade policy. As globalization has intensified and new trade agreements emerged, EU member states have had to reassess their CET to remain competitive on the world stage. The rise of preferential trade agreements with non-member countries has prompted discussions about flexibility within the CET framework, challenging its traditional rigidity. Consequently, adapting to these dynamics has required careful negotiation among member states to balance collective interests while also enhancing individual competitiveness in an increasingly interconnected global economy.

Related terms

European Economic Community:

An international organization created in 1957 to foster economic integration among its member states, laying the groundwork for the modern European Union.

Customs Union:

An agreement between two or more countries to eliminate tariffs on goods traded among them while maintaining a common external tariff against non-member countries.

Trade Liberalization: The process of reducing or eliminating barriers to trade, such as tariffs and quotas, to promote free trade between countries.