Suppose Canada entered into a free-trade arrangement with China and,as a result,Canadian imports from India were replaced with imports from China.This would be an example of

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Trade diversion occurs when trade is diverted from a more efficient producer outside a free trade area to a less efficient producer within a free trade area. In this case, Canada is importing goods from India, but if it enters into a free trade agreement with China, it may start importing more goods from China instead of India. This would lead to trade diversion as India, a more efficient producer, would lose out on business to China, a less efficient producer.

Suppose Canada Entered into a Free-Trade Arrangement with China And,as