A. Main types of customs unions and their implications for trade data compilers
1. European Union: custom unions as a single market
10.2. From a tariff union to a single market. The present European Union started in 1968 as a tariff union which abolished all customs duties on trade between its member States. The new export opportunities are credited with giving a boost to the economies of member States. Between 1958 and 1972, intra-European Community trade increased by a factor of nine, leading to market optimism and investment growth in the Community. However, free circulation of goods within the Community was still not a reality. Numerous customs border formalities were in existence. Before 1993, all trucks were still stopped at the internal Community borders for clearance and inspection.
10.3. Single market. The European Union formally became a single market on 1 January 1993, when the physical frontiers and almost all customs checks at the internal borders were removed for the free movement of goods between member States. However, the abolishment of the physical barriers for the free movement of goods (and persons) is only one aspect of the establishment of a single market. Technical barriers, such as different product standards, etc, and barriers related to taxation need to be addressed in order for a single market for goods and services to be established. The single market of the European Union aims to establish and ensure the four basic freedoms: free circulation of goods, persons, services and capital in a frontier-free internal market.
10.4. Need for new data sources. The disappearance of customs records, a comprehensive and very closely controlled source of information, made it necessary to implement new fiscal, statistical and other systems to control or document goods crossing internal borders. This led also to the creation of Intrastat - a specific data-collection system for intra-EU trade statistics.
10.5. Characteristics of Intrastat. From the outset, the main characteristics of the Intrastat system have been:
(a) Direct collection of information from consignees and consignors of goods, who have to send the relevant statistical authority a summary statement of transactions for each month;
(b) A close link with the value added tax (VAT) system relating to intra-EU trade; in particular, the definition of providers of statistical information, the reference period and the value in line with the VAT system allow verification of the completeness of the data collected and the making of adjustments for non-reported trade;
(c) A maximum reduction of the workload of businesses by means of a system of exemption or simplification thresholds.
10.6. Intrastat survey and the link with the VAT system. Intrastat is not the same as a typical business survey in which data from a small fraction of the population of enterprises are collected. It is similar to a system based on administrative data, which collects nearly all relevant observations. Only a minor part of trade (in terms of value) is not collected by Intrastat. Specifically, member States have implemented a threshold system which spares intra-EU traders from having report on their transactions or allows them to provide less detailed information on condition that their total trade value does not exceed a certain amount during the previous or present calendar year. To assure sufficient coverage the exemption threshold is set such that eachMemberState has to guarantee that at least 97 per cent of the total value of amemberState's dispatches and 95 per cent of the total value of its arrivals (which are measured based on VAT declarations) is directly collected. The remaining part is estimated on the basis of values declared for fiscal purposes. The exempted 3-5 per cent in value represents about 70-80 per cent of VAT registered traders in the European Union who trade between the member States.
10.7. About half a million companies inEuropeare obliged to provide information on intra-EU goods transactions. Each month, they have to declare, for statistical purposes, their goods deliveries to and from other member States. The merchandise has to be specified according to a commodity classification that contains about 10,000 codes (Combined Nomenclature), and for each goods item the value and quantity information have to be provided. For all trade operators involved, Intrastat meant a lighter workload compared with that of the previous system (before 1993, based on customs declaration), but the introduction of Intrastat made the statistical reporting burden apparent. Therefore, Intrastat has been subject to significant efforts to decrease the reporting burden for trade operators. A data set (eight data elements) that has been reduced, compared with customs data, is now required for EU purposes; the threshold system was expanded to exempt a larger number of enterprises; the number of nomenclature headings was reduced; and several simplified reporting measures were introduced. In addition, EU and its memberStatesinvested in the development of modern electronic data collection and validation tools which facilitate considerably the reporting required for Intrastat.
10.8. Institutional arrangements and data harmonization. To ensure coordination in terms of content, time and methods, the EU statistics relating to the trading of goods between member States are based on EU legislation. However, according to the principle of subsidiarity, the Intrastat legislation allows member States to choose, to a large extent, their method of implementing Intrastat. The legislation is discussed with countries which have to provide their information to Eurostat according to requirements that are also referred to as the EU or community concept. The legislation also includes additional measures such as regular quality reporting. Compilation and all other relevant issues are regularly discussed by Eurostat andmemberStates. Based on these discussions, Eurostat provides guidance on overall data compilation and specific compilation issues to its member States.
10.9. Community versus national concept. In some instances, the EU concept diverges from the international recommendations. However, many member States simultaneously compile their data according to the so-called national concept which is usually more in line with the international recommendations. The principal differences between the EU concept and national concepts entail: (a) breakdown by partner country: for arrivals, certain member States record the country of origin as the partner country, whereas the member State of consignment appears in the EU statistics relating to the same movements; (b) treatment of goods in transit: some member States do not record goods, which they consider to be “in transit” in their national figures. This involves, first, imports from non-member countries that are cleared in these member States before being dispatched to other member States and, second, goods from other member States that are immediately re-exported to non-member countries. These flows are included in the EU statistics under intra- or extra-EU trade, as appropriate. The phenomenon is sometimes referred to as the “Rotterdam effect”; and (c) general trade: some member States compile extra-EU trade statistics according to the general trade system, while the EU concept is based on special trade (relax definition).
10.10. Challenges of merchandise trade statistics in the European Union. Trade statisticians within the European Union aim to gain additional information from existing data collections without any additional burden on respondents, especially information relevant for the analyses of globalization. This is a challenge, given the policy, designed to minimize at the same time the burden on respondents. A major quality concern of the Intrastat system has been asymmetries in partner reporting. Regarding the compilation of extra-EU trade, a main challenge is the implementation of a modernized customs code which, among other things, would enable the implementation of centralized customs clearance (see below for more details).
2. Customs unions of developing and transitional countries
10.11. Southern African Customs Union (SACU). The members of customs union are Botswana, Lesotho, Namibia, South Africa and Swaziland. The SACU Secretariat is located in Windhoek, Namibia. SACU was established in 1910, making it the world’s oldest customs union. Historically, SACU was administered by South Africa, through the 1910 and 1969 Agreements. The customs union collected duties on local production and customs duties on members’ imports from outside SACU, and the resulting revenue was allocated to member countries in quarterly instalments utilizing a revenue-sharing formula. Negotiations to reform the 1969 Agreement started in 1994, and a new agreement was signed in 2002. The new arrangement was ratified by SACU Heads of State. The economic structure of theUnion links the member States by a single tariff with no customs duties between them. The member States form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the member States for products originating in these countries. There is a common external tariff that applies to non-members of SACU.
10.12. Common Market for Eastern and Southern Africa (COMESA). The objective of the cooperation in trade, customs and monetary affairs is to achieve a fully integrated, internationally competitive and unified single economic space within which goods, services, capital and labour are able to move freely across national frontiers. COMESA has a strong statistical programme in support of these goals. The overall objectives of this programme are to harmonize and improve the production of statistics and to improve capacities at both national and regional levels to undertake trade policy impact assessments, with merchandise trade statistics as one of the focal areas. A main activity of COMESA in respect of trade statistics is the installation and support (including training) of the Eurotrace software, which has been installed in most member States and is instrumental in data harmonization. COMESA also adopted rules and regulations for compilation of international merchandise trade statistics in the COMESA region, which came into force in 2010 and aim at the uniform application of the IMTS concepts and definitions as contained in IMTS 2010.
10.13. Association of Southeast Asian Nations (ASEAN). The member countries of ASEAN agreed to establish an ASEAN Community by 2015. One of the pillars is the ASEAN Economic Community (AEC), which would entail the creation of a single market and production base with a free flow of goods. However, free flow of goods would require not only zero tariffs but the removal of non-tariff barriers as well. Another major component that would support the free flow of goods are trade facilitation measures such as integrating customs procedures, establishing the ASEAN single window, continuously enhancing the Common Effective Preferential Tariffs (CEPT) Rules of Origin including its Operational Certification Procedures, and harmonizing standards and conformance procedures.
10.14. ASEAN harmonization of trade statistics. The above requirements led to activities for the harmonization of trade statistics within ASEAN. An EU-ASEAN Statistical Capacity Building (EASCAB) Programme will implement two pilot projects in 2011 and 2012: on IMTS and Statistics on international trade in services/foreign direct investment statistics. The purpose of the IMTS pilot project is twofold: to help implement a reliable and timely IMTS data transmission, data production and data dissemination process at the ASEAN Secretariat, which can be taken over and continued by ASEANS; and second, to enable the active data handling and processing within the pilot project to help improve the quality of IMTS on the ASEAN level by identifying methodological and other quality-related issues currently still preventing the proper regional harmonization of data. As of October 2011, the technical assistance team had completed the data checking, loading and processing of all 10 countries and produced publications with results of the first and second quarter of 2010. It will finalize the publications of the results for the third and fourth quarter by end of 2011. It has also started processing the Q1 and Q2 2011 data sets. The data comprise figures of the ASEAN member States covering trade within the ASEAN region as well as with the rest of the world. The data has been processed according to the ASEAN Harmonized Tariff Nomenclature (AHTN) commodity classification up to the detail of eight digits to that extent that member States were able to provide such data. The model publication will finally evolve into a quarterly periodical on ASEAN trade statistics, to be published regularly by the ASEAN Secretariat. By 2012, the EASCAB technical assistance team shall hand over the IMTS production process to the ASEANstats (see “EASCAB Quarterly”).
10.15. Customs Union of Belarus, Kazakhstan and the Russian Federation. On 1 July 2011Belarus,Kazakhstan andRussia lifted the customs controls existing between their countries as part of their customs union agreement. This means that information on trade existing between the member countries is no longer available from customs declarations and that additional sources of data have to be used (see box X.3 for details).
10.16. Other customs and economic unions. There are many other regional agreements that aim at the promotion of economic integration and cooperation among its members, frequently with the goal of creating a common market. However, a customs union, which is a critical step towards forming a common market, entails the harmonization of external tariffs and the removal of all tariffs on internal trade. Also, all non-tariff barriers to the free movement of goods would need to be gradually removed. Because of the need to give up parts of national sovereignty, i.e., on tariff matters, trade agreements and product safety, and because of the many consequences and the required work programme, the establishment of new full customs unions is expected to only progress but slowly. Even in cases where countries enter a customs union, it might be the case that customs controls would remain in place for security and other reasons. Given this situation, countries might seek other forms of economic integration such as regional trade agreements relying on customs controls for their enforcement.
 For more information, please see Pascal Fontaine, Europe in 12 Lessons, October 2006, (Luxembourg, European Union, 2010), chap. 6, entitled “The Single Market”. Available from http://europa.eu/ abc/12lessons/index_en.htm.
 It is necessary to make distinction between Intrastat and intra-EU trade statistics. Intrastat refers to a datacollection system covering movements of Union goods between member States if such movements are not declared on the customs declaration. Intra-EU trade statistics merge information from Intrastat declarations, customs declarations and additional sources for specific movements and non-reported trade (estimation).
 The differences are described from a European Union perspective, using EU concepts as reference.
 For more information, see Eurostat, Quality Report on International Trade Statistics, 2010 ed., Eurostat Methodologies and Working Papers (Luxembourg, European Union, 2010).
 See International Trade Merchandise Statistics: Supplement to the Compilers Manual (United Nations Publication, Sales No. E. 08.XVII.9 and corrigendum), para. 6.41.
 For more information on SACU, see http://www.sacu.int/index.php.
 The following 19 countries are members of COMESA: Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. For more information on the goals and activities of COMESA, see http://www.comesa.int/.
 The following 10 countries are members of ASEAN: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. For more information, see http://www.asean.org/about_ ASEAN.html.
 See ASEAN Economic Community Blueprint, (Jakarta, ASEAN Secretariat, 2008) p. 6.
 The ASEAN Framework of Cooperation in Statistics (AFCS) was adopted by the ASEAN heads of statistical offices meeting administrations at a meeting held on 30 December 2010. The overall objective of Framework of Cooperation is to strengthen the organizational framework and statistical capacity of ASEAN towards the establishment of an ASEAN community statistical system (ACSS) by 2015. The mission of the ACSS would be to provide relevant, timely and comparable ASEAN statistics in support of evidence-based policy and decision- making and enhance the statistical capacity of member States and ASEAN Secretariat. In strengthening ASEAN statistics, priority is given, inter alia, to development and harmonization in four areas of regional statistics: national accounts, international merchandise trade (IMT), relevant components of international trade in services (ITS) and foreign direct investment (FDI). See Strategic Plan for the Establishment of the ASEAN Community Statistical System (ACSS) 2011 – 2015.
 Consider, for example, the experience of the Cooperation Council for the Arab States of the Gulf (GCC) (see http://www.gcc-sg.org/eng/index.html): in 2010, six GCC countries agreed to postpone a decision on establishing a single customs union for a few more years. The Arab Customs Union was announced at the League of Arab States 2009 Arab Economic and Social Development Summit in Kuwait; the goal is to achieve a functional customs union by 2015 and an Arab common market by 2020.