Assume that, before it joined the EU, UK consumers had to pay a tariff on imported Fiat cars. The UK's main small car at the time was the Mini. Italy had a comparative advantage in the production of small cars. On joining the EU, the UK car market would have seen

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Trade creation occurs when a country enters a free trade area with another country or countries. In this case, by joining the EU and eliminating tariffs on imported Fiat cars, the UK would have made these cars cheaper for its consumers, encouraging them to buy more Fiats and fewer domestically produced cars like the Mini, assuming Fiat cars were previously more expensive due to tariffs. This process, where more efficient producers within the free trade area replace less efficient domestic production, is known as trade creation.

Assume That, Before It Joined the EU, UK Consumers Had