ON DISCRIMINATORY vs. NON-PREFERENTIAL TARIFF POLICIES.

This article focuses on the result of a study which argued that customs union is necessarily inferior to an appropriate policy of non-preferential protection. This conclusion the authors maintain, emerges naturally from the separation of the effect of customs union into two exhaustive components, the tariff reduction component and the pure trade diversion component. The objective of this paper is to investigate the relevance of changes in the terms of trade. A Marshallian partial-equilibrium model was employed by the author in order to develop the argument. The author of this article discussed the terms-of-trade effect of the customs union.