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 a free trade agreement between two countries leads to a shift in trade patterns away from more efficient and lower-cost producers who were previously trading with them, and towards more expensive and less efficient producers who are now favored by the agreement. In this case, Canadian imports from India, which may have been more cost-effective, are being replaced by imports from China, which may not be as cost-effective.

Suppose Canada Entered into a Free- Trade Arrangement with China