Country X becomes part of an existing customs union made up of countries Y and Z, while Country W stays outside the customs union. X’s original tariff and W’s tariff are both equal to the customs union’s common external tariff. What is likely to happen to trade flows when X joins the customs union?
- Atrade between X and W: unchanged; trade between Y and Z: decrease
- Btrade between X and W: decrease; trade between Y and Z: decrease
- Ctrade between X and W: unchanged; trade between Y and Z: increase
- Dtrade between X and W: decrease; trade between Y and Z: increase