Which of the following can be termed as trade diversion?
A) The imposition of tariffs on the import of a good.
B) Subsidizing domestic production to reduce imports and support domestic production.
C) Banning trade in a certain good to protect an infant industry in the country.
D) Creation of a trade bloc results in buying a good from a high-cost member nation rather

Question

Quizplus · Accepted Answer

Trade diversion occurs when a country opts to import goods from a member nation within a trade bloc, despite the fact that these goods could be purchased more cheaply from a non-member nation. This shift is often due to the preferential treatment, such as reduced tariffs, offered within the trade bloc, which makes it economically preferable to import from a member nation even if it is not the lowest-cost producer.

Which of the Following Can Be Termed as Trade Diversion