Regional Arrangements 335
discrepancy between the customs duty revenue col-
lected by a member state and that member’s share of
the customs pool. In these circumstances, an increase
in liabilities in the form of an other accounts payable
(3308) is recorded for the collecting government at
the time that such a claim can be established, with
the corresponding increase in fi nancial assets in the
form of currency and deposits (3202) for the collect-
ing government. Th e diff erences between the cus-
toms revenue collected by each of the customs union
members and the total of each member’s share of the
customs pool should sum to zero across the customs
union, as the customs revenue collected by the cus-
toms union equals the revenue to be shared among
member governments.
Member governments have collective
rights to levy the duty, but only one
member collects and distributes the duties
A5.18 If member governments have collective
rights to levy the duty, the tax revenue is attributed to
the member governments according to the underly-
ing economic activity that gives rise to the customs
duties. If one of the member governments collects all
the customs revenue, the recording is as described in
paragraphs A5.16–A5.17. In this case, however, only
the collecting government will record an increase in
liabilities in the form of other accounts payable (3308),
as all other economies will have claims in the form
of other accounts receivable (3208) on the collecting
economy for their share of the customs revenue.
Economic Unions
Introduction.
A5.19 For statistical purposes, an economic union
is a union to which two or more economies belong.
Economic unions are established by means of an in-
tergovernmental legal agreement among sovereign
countries or jurisdictions with the intention of fos-
tering greater economic integration. In an economic
union, some of the legal and economic character-
istics associated with a national economic territory
are shared among the diff erent countries or jurisdic-
tions. Th ese elements include: (i) the free movement
of goods and services within the economic union and
a common tax regime for imports from nonmember
economies (free trade zone); (ii) the free movement
of fi nancial resources within the economic union;
and (iii) the free movement of (individual and legal)
persons within the economic union.^7 Also, in an
economic union, specifi c regional organizations are
created to support the functioning of the economic
union. Some form of cooperation and coordination
in fi scal and monetary policy usually exists within an
economic union.
A5.20 Th is type of regional arrangement represents
greater cooperation than in a customs union agree-
ment (which may have been a fi rst step) because the
members agree to harmonize a signifi cant part of the
conditions in which economic activity is undertaken
over the whole union territory. Th e main example is the
European Union (EU). Th e EU takes the form of com-
mon legislation in some areas, most notably in compe-
tition or product norms. Harmonization of taxes is also
being envisaged in some areas. Th e aim of such unions
is to unify markets by enlarging their size, improving
effi ciency, and developing specialization. Economic
unions usually achieve a large, if not total, freedom of
circulation for goods, services, capital, and individuals
by removing the obstacles to such movements.
A5.21 Economic unions may also cover common
policies in other fi elds. Th ese may take a range of
forms, from simple coordinated policy measures to a
strongly harmonized framework and even to a cen-
tralized, direct management by supranational bodies
having an autonomous budget and strict policy rules.
A5.22 An economic union requires specifi c enti-
ties endowed with the authority to manage an auton-
omous budget. Th ese entities may have more or less
autonomy to perform their tasks, in accordance with
the institutional arrangements agreed between the
members of the union.
A5.23 Th ere may be signifi cant grants payable and
receivable between member states of an economic
union to support certain economic activities or to
develop the region. Nevertheless, the size of com-
mon budgets observed in existing economic unions is
much smaller than member states’ budgets. Th e fl ows
involved are a small portion of total revenue and ex-
pense of the individual member states.^8 All require-
ments related to fi scal policy are generally seen as(^7) As noted in paragraph 2.11, an economy and, by extension, an
economic union can include physical or legal (special) zones to
which, to some extent, separate laws are applied.
(^8) In the European Union, the common budget amounted to about
1 percent of GDP of the union at the time of draft ing this Manual.