What are customs union and monetary unions and how are they different from one another ? Your answer should reflect practical examples too. 10 marks

A customs union is a form of economic integration where member countries agree to eliminate tariffs and other trade barriers among themselves, while maintaining a common external tariff on imports from non-member countries. This means that member countries can trade with each other freely, without any restrictions or tariffs, but they have a unified approach towards trade with non-member countries.

For example, the European Union (EU) is a customs union. Member countries, such as Germany, France, and Italy, can trade with each other without any barriers or tariffs. However, when it comes to trade with non-EU countries, they apply a common external tariff, which means that goods imported from outside the EU face the same tariff rates regardless of which member country they enter.

On the other hand, a monetary union is a deeper form of economic integration where member countries adopt a common currency and have a unified monetary policy. This means that