Never Too Late to Get Together Again : Turning the Czech and Slovak Customs Union into a Stepping Stone to EU Integration

The Czech and Slovak Customs Union (CSCU), which came into effect in January 1993, differs from regular regional trading arrangements as its goal was to minimize the economic cost of a decline in economic ties between its members rather than to set in motion the mechanism of integration. The creation of the CSCU ensured a smooth and conflict-free break up of Czechoslovakia and resulted in divergence in regulatory regimes of the two republics. This study argues that the process of mutual adjustment triggered by the emergence of national borders is over and that integration within the CSCU, similar in depth and scope to that existing within the European Union (EU), would be a desirable policy objective. By deepening integration, both the Czech and Slovak Republics would be better prepared to handle challenges associated with the EU accession. Such a regulatory realignment would also lower border costs and behind-the-border barriers to trade and result in a more attractive investment environment in both countries. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to study the effects of regional trading arrangements