A customs union is a grouping of countries with a common external tariff, but with free trade, free movement of labor and capital among themselves.
Customs union theory examines the impact on trade in general following the removal of barriers (such as quotas and tariffs) between the countries and their establishment against other countries.
Dating back to the classical economic concept of free trade expounded by Scottish economist Adam Smith (1723-1790), and English economists David Ricardo (1772-1823) and Robert Torrens (1780-1864), customs union theory has received modern updating by Canadian-born economist Jacob Viner (1892-1970).
The European Union, COMECON and EFTA are modern examples of customs unions.
J Viner, The Customs Union Issue (New York and London,1950)