Suppose the North American Free Trade Agreement (NAFTA) results in Canada and Mexico replacing low- cost beef produced in Australia with high- cost beef produced in the United States. This is an example of:

Question

Quizplus · Accepted Answer

Trade diversion occurs when trade shifts from a more efficient exporter to a less efficient one due to the formation of a free trade agreement or customs union. In this case, NAFTA causes Canada and Mexico to import higher-cost beef from the U.S. instead of lower-cost beef from Australia.

Suppose the North American Free Trade Agreement (NAFTA) Results in Canada