The derogation from the customs union was intended in part to take account of the creation of the European Economic Community (EC) in 1958. The EC, originally made up of six European countries, is now known as the European Union (EU) and has 27 European countries. The EU has gone beyond simply removing barriers to trade between Member States and creating a customs union. It has moved towards greater economic integration by becoming a common market – a regulation that removes barriers to mobility from factors of production such as capital and labour between participating countries. As a common market, the EU also coordinates and harmonizes each country`s tax, industrial and agricultural policies. In addition, many EU Member States have created a single currency area by replacing their national currencies with the euro. However, these advantages must be offset by a disadvantage: by excluding some countries, these agreements can transfer the composition of trade from low-cost countries that are not parties to the agreement to high-cost countries that are. Second, the multilateral removal of trade barriers can reduce political opposition to free trade in each of the countries concerned. This is because groups that otherwise oppose or are indifferent to trade policy reforms could join the free trade campaign if they see the trade agreement as export opportunities to other countries.
Therefore, free trade agreements between countries or regions are a useful strategy for liberalizing world trade. For many countries, unilateral reforms are the only effective way to reduce barriers to internal trade. However, multilateral and bilateral approaches – removing trade barriers in coordination with other countries – have two advantages over unilateral approaches. First, the economic benefits of international trade will be strengthened and strengthened if many countries or regions agree to remove trade barriers. By expanding markets, concerted trade liberalization enhances competition and specialization between countries, increasing efficiency and consumer incomes. While free trade is generally beneficial, removing a trade barrier to a given asset harms shareholders and workers in the domestic industry that produces that good.