Purpose – This paper explains why free trade agreements (FTAs) are more popular than customs unions (CUs) in respect of tariff coordination. Design/methodology – This paper employs an equilibrium theory of trade agreements with tariff coordination. I set up three-country partial equilibrium model with competing exporters. Domestic and exporting firms decide their optimal production under given tariffs and each country levies its tariff under the trade agreements. I found stability of implicit tariff coordination and preference of each country between an FTA and a CU. Findings – I demonstrate that two FTA members can keep their external tariffs higher than separately decided external tariffs by keeping the status-quo. This implicit tariff coordination can benefit each member through trade diversion. In a CU, each member country must have a common optimal external tariff and it must incur costs because each country may seek different external tariffs for their own national welfare. The benefit of implicit coordination in an FTA and the cost of explicit coordination in a CU account for the popularity of the FTA. Originality/value – This paper uses the idea of implicit tariff coordination in trade agreements. In a CU, tariff coordination is explicit and mandatory. All member countries must have a single common external tariff for each good. On the other hand, in an FTA, each country establishes its external tariff with the goal of maximizing its own welfare. However, each country can also coordinate “implicitly�? by keeping the status-quo after establishing an FTA.

中文翻译：

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自由贸易协定和关税同盟中的贸易协调

目的–本文解释了为什么在关税协调方面，自由贸易协定（FTA）比关税同盟（CU）更受欢迎。设计/方法论–本文采用带有关税协调的贸易协议均衡理论。我与竞争的出口商建立了三个国家的部分均衡模型。国内和出口公司根据给定的关税决定其最佳生产，每个国家根据贸易协定征收关税。我发现隐性关税协调的稳定性以及每个国家在FTA和CU之间的偏好。调查结果–我证明了两个自由贸易协定成员可以通过维持现状来保持其对外关税高于单独决定的外部关税。这种隐含的关税协调可以通过贸易转移使每个成员受益。在CU中 每个成员国必须有一个共同的最佳外部关税，并且必须承担成本，因为每个国家可能会为自己的国民福利寻求不同的外部关税。FTA中隐式协调的好处和CU中显式协调的成本说明了FTA的普及。原创性/价值–本文使用贸易协定中隐含关税协调的想法。在CU中，关税协调是明确和强制性的。所有成员国都必须对每种商品使用统一的外部关税。另一方面，在自由贸易协定中，每个国家都建立其外部关税，以实现其自身福利的最大化。但是，每个国家也可以“隐式”协调。建立自由贸易协定后保持现状。