Trade Diversion
Definition
Trade diversion occurs when tariff agreements cause imports to shift from low cost countries to higher cost countries.
TRADE DIVERSION
A shift in the pattern of origin of a country's imports, resulting from changes in trade policies or practices, which may or may not involve change in the overall volume or composition of the imports involved.
Trade Diversion. A switch in sourcing of imports that results from a country's joining a customs union or free trade area, in favor of bloc partners and at the expense of nonmember trading partners.
trade diversion the shifting of trade away from the low-cost producer toward a higher-cost producer because of a reduction in trade barriers with the country of the higher-cost producer. (18) ...
Trade diversion - A consequence of reduced trade barriers among a set of countries whereby trade with the group replaces trade that used to take place with countries outside the group.
[edit] Trade diversion
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Trade diversion
Trade that occurs between members of a preferential trading arrangement that replaces what would have been imports from a country outside in the PTA.
First, they worry that preferential tariffs will cause trade to flow in inefficient ways, a process known as trade diversion.
The two primary trade effects of a customs union are: (a) trade creation -- the shift from consumption of domestic production toward consumption of member imports and (b) trade diversion -- the shift from trade with non-member countries in favor of ...
Economists have shown that if a country enters such a 'trade-diverting' customs union, the cost of this trade diversion may exceed the benefits of increased trade with the other members of the customs union.
GATT Article XXIV defines the meaning of a customs union in GATT and the application of other GATT provisions to customs unions.
See also: Common External Tariff, European Community, Free Trade Area, Kyoto Convention, Trade Diversion, Welfare, ...
 See also: Tariff, Free trade, Tariffs, GATT, Barriers
  
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