Renunciation of the member states and their right to follow independent policies is the biggest shortcoming of the customs union. The member states of the European Union are situated in different environments and this makes it complicated to effectively run their customs union. When the rejection of these agreements takes place, it mostly prevents these states from following independent policies which are disadvantages to them. Horsley (2010) argues that besides increasing the trade volume amongs them, member states applies higher customs tariffs on the products they buy from the third countries. The political arrangements of these people are also different, whereby other states operate in presidential system while others operate on parliamentary system. This makes it difficult to merge and form one operational government as this may complicate the nature and manner in which things are conventionally practiced.
In less developed countries that have stronger economies, domestic labor forces would have a negative impact that lower wages in those countries. Some customs have disadvantages in that individual countries serve the national interest alone due to their inherent culture. Therefore, emerging such countries may result into culture class leading to possible failure of their designed customs union (Horsley, 2010). In addition, the social lives of member countries are somehow different, leading to varying consumption and production rates. This is likely to influence the volume of trade and the level of tariffs imposed in such goods. Therefore customs unions can effectively succeed in regions with similar social lifestyle as opposed to those with different lifestyle.
Some member countries are landlocked countries and this makes them not to be able to access import from the third world countries, hence this has to done by the neighboring countries on their behalf. Politically, this becomes a disadvantage since such products may end up being sold to the member states duty free leading to the loss of tax that could have helped them. The countries which carry out the importations of the landlocked countries profit from custom duty and they can freely export their imported products to other countries. In countries where energy is the leading export, they are not able to adopt independent policies in the energy trade, which, is known to drive the country’s economic development (Tochitskaya, 2010). Countries also experience varying technological developments and those that are behind in technological advancement may not get the fair share of operating under customs union. Therefore, customs unions cannot be justified on purely economic grounds due to other factors at play.
Horsley, T. (2010). EU law of free movement of goods and customs union. Common Market Law Review, 47(5), 1569-1570. Retrieved from http://search.proquest.com/docview/762998695?accountid=45049
Tochitskaya, I. (2010). The customs union between belarus, kazakhstan and russia: An overview of economic implications for belarus. CASE Network Studies and Analyses, (405), 0_1,1-16. Retrieved from http://search.proquest.com/docview/763161264?accountid=45049