This article investigates the effects of a transfer between two countries participating in a customs union. This analysis yield very paradoxical results and these outcomes differ from the conclusions obtained by the traditional literature which has been developed in a two-country framework or in a multilateral world but with universal free trade. The compensation scheme adopted by the authorities of the customs union may create an overall terms of trade deterioration and induce an impoverishment for both member countries. Thus, transfers may not be an adequate instrument to redistribute the gains of economic integration between the members of a free trade association
