A customs union is an economic grouping which has___________

Step 1: Analyze the question The question asks for the defining feature of a customs union, one of the forms of economic integration.

Step 2: The concept Economic integration has stages, each adding more features:

1. Free Trade Area: members remove tariffs among themselves, but each keeps its own tariffs against non-members (e.g., AfCFTA).
2. Customs Union: a free trade area plus a common external tariff against non-members.
3. Common Market: a customs union plus free movement of factors of production (labour and capital).
4. Economic Union: a common market plus a common currency and harmonised economic policies (e.g., the Eurozone/EU).

Step 3: Evaluate the options

• A. Free movement of factors of production: this is a feature of a common market, not a basic customs union.
• B. Common tariffs against non-members: this is the defining feature of a customs union (the common external tariff). ✔
• C. Common currency for trading: this belongs to a monetary or economic union.
• D. Common military defence: this is a political or military alliance (e.g., NATO), not an economic feature.

Step 4: Answer

Tip: Remember the ladder "F-C-C-E": Free trade area → Customs union → Common market → Economic union. Customs union means Common external Tariff. The word "customs" refers to duties or tariffs charged at the border, so look for the answer about tariffs.