Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:
A) Trade diversion
B) Trade creation
C) Trade destruction
D) Trade exhaustion

Question

Quizplus · Accepted Answer

Trade diversion occurs when a country begins importing goods from a member of a free-trade area rather than from a more efficient producer outside the area, due to the removal of tariffs within the area.

Suppose That Mexico and Canada Form a Free-Trade Area and Canada