Trade agreement by which a group of countries charges a common set of tariff s to the rest of the world while allowing free trade among themselves.
It is a partial form of economic integration, intermediate between free-trade zones, which allow mutual free trade but lack a common tariff system, and common markets, which both utilize common tariffs and allow free movement of resources including capital and labour between members. Well-known customs unions include the Zollverein, a 19th-century organization formed by several German states under Prussian leadership, and the European Union , which passed through a customs-union stage on the path to fuller economic integration. See also European Community; General Agreement on Tariffs and Trade ; North American Free Trade Agreement ; World Trade Organization .