What is a customs union?

A customs union is fundamentally an agreement among its member countries to eliminate tariffs and other trade barriers on goods traded among them. It allows for the free movement of goods, facilitating trade and economic cooperation without internal tariffs. Additionally, member countries adopt a common external tariff on imports from non-member countries. This means that while goods are traded freely within the union, imports from outside the union are subject to the same tariff rates, creating a unified trade policy.

This arrangement encourages increased trade among member states, as it creates a larger market for producers within the union and lowers costs for consumers through reduced prices. While the other options suggest various forms of cooperation and integration among nations, they do not accurately define a customs union. A customs union focuses specifically on trade policies rather than on currencies, resource sharing, or military alliances.