In a production-possibilities/indifference curve diagram, when a (small) country moves From a situation of a uniform ad valorem tariff on all trading partners to a situation of a Trade-diverting customs union with one of its trading partners, the ratio of the domestic Price of the country's export good to the domestic price of the country's import good
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When a country moves from a uniform ad valorem tariff to a trade-diverting customs union with one of its trading partners, it will have a higher domestic price for its export good as a result of reduced competition from other trading partners. At the same time, its domestic price for its import good will remain the same or decrease slightly due to increased competition from the trade partner in the customs union. Therefore, the ratio of the domestic price of the country's export good to the domestic price of the country's import good will increase.

In a Production-Possibilities/indifference Curve Diagram, When a (Small) Country Moves