One of the major aspects of international trading relations during the postwar period has been the development of regional trade groupings, primarily in the form of customs unions. This development naturally aroused the attention of trade theorists. Standard trade theory had only been concerned with the effects of non-discriminatory tariff changes, the type of tariff theory we have studied in Chapters 10, 11 and 12. But customs unions are by definition discriminatory. They mean a lowering of tariffs within the union and an establishing of a joint outer tariff wall. They combine free trade with protectionism.
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