Konishi, Hideo, Carsten Kowalczyk, and Tomas Sjostrom. “Free Trade, Customs Unions, and Transfers”. Boston College Working Papers in Economics 568, 2003.
All countries would agree to immediate global free trade if countries were compensated for any terms-of-trade losses with transfers from countries whose terms-of-trade improve, and if customs unions were required to have no effects on non-member countries. Global free trade with transfers is in the core of a Kemp-Wan-Grinols customs union game.