If a customs union leads to a large amount of trade creation relative to trade diversion,it may be beneficial to world welfare.

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When trade creation (increase in overall trade due to lower barriers within the customs union) exceeds trade diversion (shift of trade away from non-member countries towards member countries), it suggests that the customs union is promoting more efficient allocation of resources and greater specialization, leading to an increase in world welfare. However, if trade diversion exceeds trade creation, it may harm non-member countries and reduce overall world welfare.

If a Customs Union Leads to a Large Amount of Trade