ABSTRACT
The economic theory of customs union is of great practical relevance. 1 It has an obvious immediate bearing on the formation of regional blocs of countries, such as the European Common Market, the Free Trade Area, and the India-Pakistan-Ceylon customs union which has sometimes been suggested; this is especially so because, quite irrationally, international convention condemns preferential systems except when the degree of preference is 100 per cent, as it is within national boundaries or in customs unions. It also has a direct bearing on the internal affairs and politics of countries containing economically distinct regions, particularly if these regions correspond with political or other cultural distinctions; in such countries, the question of regional gains or losses from participation in the national economy may be an important, and chronic, source of political discord—witness the problem of the maritime provinces in Canada, the Scottish and Welsh nationalist movements in the United Kingdom, and the position of East Pakistan in Pakistan.
