Implementing a regional freetrade agreement may have an
Effect in which, due to reduced tariffs, a nation in the agreement
Begins to import a product it had previously produced itself.This
Effect is called:
A)trade creation.
B)trade diversion.
C)reciprocal trade agreements.
D)the employment effect of FTAs.

Question

Implementing a regional free­trade agreement may have an
Effect in which, due to reduced tariffs, a nation in the agreement
Begins to import a product it had previously produced itself.This
Effect is called:
A)trade creation.
B)trade diversion.
C)reciprocal trade agreements.
D)the employment effect of FTAs.

Quizplus · Accepted Answer

Trade creation refers to the situation where the implementation of a free trade agreement results in increased trade between the member countries, leading to increased efficiency and economic growth. This may lead to a situation where a nation starts importing a product it previously produced because it can now be sourced more efficiently and cheaply from another member country. Trade diversion, on the other hand, refers to the situation where the implementation of a free trade agreement results in a shift in trade patterns away from more efficient producers outside the agreement, towards less efficient producers within the agreement. Reciprocal trade agreements refer to trade agreements where each member country agrees to provide the other with a reciprocal level of market access. The employment effect of FTAs refers to the impact of free trade agreements on employment levels, which can vary depending on the specific agreement and its provisions.

Implementing a Regional Free­trade Agreement May Have an

Implementing a Regional Freetrade Agreement May Have an