Trade creation would occur if Canada and the United States form a free-trade area,and Canadians then import less steel from the United States while importing more steel from Japan.

Question

Quizplus · Accepted Answer

Trade creation occurs when a free trade agreement leads to an increase in trade between member countries. In this scenario, if Canada imports less steel from the United States and more from Japan, it does not create trade between Canada and the United States, but rather displaces it. Therefore, trade creation does not occur.

Trade Creation Would Occur If Canada and the United States