Common external tariff
A common external tariff (CET) is a uniform duty levied by all member states of a customs union on imports originating from non-member countries, ensuring that goods entering the union face identical external barriers regardless of the point of entry.[1] This mechanism eliminates internal tariff disparities that could otherwise distort trade flows within the union while presenting a cohesive protective front against external competition.[2] Essential to customs unions—which extend beyond free trade areas by prohibiting members from negotiating independent external trade policies—the CET harmonizes import quotas, preferences, and duties to prevent trade deflection, where low-tariff members might serve as backdoors for non-union goods.[3] Prominent examples include the European Union's Common Customs Tariff, which applies across its external borders and has evolved since the 1960s as part of the bloc's integration, initially involving a 20% reduction in aligned national rates during the early European Economic Community phase.[4][5] While enabling revenue generation and domestic industry protection, the CET can induce trade diversion—shifting imports from more efficient global suppliers to less efficient union-preferred sources due to the uniform barrier—potentially raising consumer costs and complicating global supply chains.[6][1] Other implementations, such as the Economic Community of West African States (ECOWAS) CET, illustrate its application in developing regions to foster regional cohesion amid varying national economic structures.[3]Conceptual Foundations
Definition and Core Mechanism
A common external tariff (CET) constitutes a unified schedule of duties levied by member countries of a customs union on imports from third countries outside the union, ensuring identical protection levels across the bloc. This tariff replaces disparate national tariffs, applying the same rates to specified goods regardless of the port of entry within the union.[4][7] The core mechanism of the CET operates within the framework of a customs union, where internal trade barriers are eliminated among members, but external trade policy is harmonized to avert trade deflection. Without a CET, importers could route goods through the member state with the lowest pre-union tariff, exploiting duty-free intra-union movement to access higher-protection markets, thereby eroding intended safeguards and distorting competition. By mandating uniform external duties, the CET channels imports through the economically optimal entry points—typically those with lowest transport costs—while preserving the union's collective bargaining power in trade negotiations and revenue pooling for common administration.[8][7][9] Implementation involves negotiating tariff bands or rates, often derived from averages of members' prior schedules or optimized for revenue and protection goals, with provisions for sensitive sectors via exceptions or phased adjustments. This structure fosters intra-union trade liberalization without external vulnerability, as evidenced in unions like the Gulf Cooperation Council, where the CET includes common procedures and a single collection point to enforce compliance. Empirical models indicate that CET design influences welfare outcomes, with uniform rates minimizing dispersion to enhance efficiency, though heterogeneity in member import demands can complicate consensus.[10][11]Theoretical Underpinnings and Economic Rationale
The theoretical foundations of the common external tariff (CET) within customs unions trace primarily to Jacob Viner's seminal 1950 analysis in The Customs Union Issue, which introduced the concepts of trade creation and trade diversion as mechanisms evaluating the welfare effects of preferential trade arrangements.[12] Trade creation occurs when intra-union tariff elimination shifts production and consumption from higher-cost domestic suppliers to lower-cost partners, generating efficiency gains through specialization according to comparative advantage.[13] Conversely, trade diversion arises when the CET induces a shift from more efficient non-member exporters (facing no or lower global tariffs) to less efficient member suppliers protected by the common barrier, potentially imposing net welfare losses unless offset by creation effects or terms-of-trade improvements.[14] Viner's framework emphasized that customs unions deviate from nondiscriminatory free trade principles, rendering their desirability conditional on empirical specifics rather than theoretical optimality, with diversion risks heightened if the CET exceeds members' prior average tariffs.[15] The economic rationale for adopting a CET centers on preserving the customs union's internal free trade integrity by eliminating trade deflection, whereby imports from non-members would otherwise enter via the member with the lowest pre-union tariff and circulate freely to higher-tariff partners, undermining protection and revenue collection.[9] Uniform external tariffs simplify border administration, obviating the need for complex rules of origin required in free trade areas, and enable collective bargaining leverage in multilateral negotiations, as a bloc's unified tariff schedule amplifies market power against external suppliers.[16] Proponents argue this structure fosters dynamic benefits, such as economies of scale from enlarged markets and induced investment in union-wide industries, provided the CET is calibrated—often as a revenue-neutral average of members' existing rates—to minimize distortion while safeguarding infant sectors or fiscal needs in developing contexts.[17] However, critics within the Vinerian tradition caution that CETs can entrench inefficiencies if set politically rather than optimally, diverting resources from global efficiency and complicating unilateral liberalization paths.[18] Empirical assessments remain contingent on union design, with net gains probable only where creation dominates diversion, as evidenced in post-1950 extensions incorporating general equilibrium effects.[19]ECOWAS Implementation
Historical Development
The Economic Community of West African States (ECOWAS), established by treaty on May 28, 1975, envisioned economic integration including a customs union with a common external tariff (CET) as a foundational element for regional trade liberalization.[20] The original treaty protocol on a free trade area, signed in 1979, set an indicative timeline for customs union establishment within 10 years from January 1, 1990, though progress stalled due to divergent national tariff regimes and limited intra-regional trade.[21] The revised ECOWAS Treaty of 1993 reinforced commitments to a customs union, prompting harmonization efforts, particularly aligning with the West African Economic and Monetary Union (WAEMU), which adopted its own CET in 2000 featuring four tariff bands.[22] Negotiations accelerated in the late 1990s and early 2000s, with heads of state fast-tracking the CET framework in 1999–2000, but implementation faced delays from member state resistance, especially Nigeria's protectionist policies on key sectors like rice and cement.[23] After over a decade of consultations, ECOWAS heads of state adopted the CET on October 25, 2013, at a summit in Dakar, Senegal, establishing a five-band structure (0%, 5%, 10%, 20%, and a temporary 35% for sensitive products) based on the Harmonized System nomenclature, with 85 tariff lines at 0% for essentials.[3] [24] The CET entered into force on January 1, 2015, marking the formal launch of the ECOWAS customs union, though full compliance varied, with Nigeria initiating application on that date amid domestic adjustments.[25] [20] Subsequent revisions addressed evolving needs; in April 2022, ECOWAS updated the CET to a 2022–2026 version, incorporating World Customs Organization amendments while retaining core bands to enhance enforcement and reduce smuggling incentives.[26] This evolution reflected ongoing efforts to balance revenue protection—tariffs averaging 12–15% regionally—with integration goals, despite persistent non-tariff barriers.[24]Tariff Bands and Structure
The ECOWAS Common External Tariff (CET) is organized into five ad valorem duty bands, uniformly applied to imports from third countries and classified using a 10-digit tariff nomenclature based on the Harmonized System (HS) 2012 revision.[3] This structure, adopted by ECOWAS heads of state on 25 October 2013, covers approximately 5,899 tariff lines across member states, with an average applied rate of 12.3%.[3][27] The bands differentiate goods by economic role, prioritizing low or zero duties on essentials and inputs while imposing higher rates on finished and sensitive products to support revenue, industrialization, and protection of local sectors.[28]| Band | Rate | Description | Tariff Lines |
|---|---|---|---|
| 0 | 0% | Essential social goods (e.g., basic foodstuffs and pharmaceuticals vital for public welfare) | 85 |
| 1 | 5% | Primary necessity goods, raw materials, and capital goods (to enable low-cost access for production and infrastructure) | 2,146 |
| 2 | 10% | Intermediate goods and inputs (supporting value-added manufacturing without excessive protection) | 1,373 |
| 3 | 20% | Final consumer and finished goods (to shield domestic markets from import competition) | 2,165 |
| 4 | 35% | Specific sensitive goods for economic development (primarily agricultural products competing with local nascent industries, comprising a limited set to avoid broad distortion) | 130 |