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Luxembourg is a member of:
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The European Union protects its agricultural producers from import competition by the use of tariff rates that vary directly with world prices.
Trade creation tends to more than offset trade diversion for a home country forming a customs union with partner countries wfen: (1) the tariff rate in the home country is high prior to the formation of the customs union; (2) there are a large number of countries forming the customs union.
If Chile and Mexico form a free-trade agreement, the welfare of the two countries will necessarily increase.
If Chile and Mexico abolish all tariffs on each other's products while maintaining their own tariffs against other countries, these two countreis have formed a customs union.
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