'Trade diversion' in the European Union could be defined as:
A) Encouraging efficient free trade between Spain and the UK
B) The monetary costs of that activity
C) Trade created by the formation of a customs union
D) Trade diverted from a more efficient exporter to a less efficient one through the formation of a free trade agreement

Question

Quizplus · Accepted Answer

Trade diversion occurs when a customs union or free trade agreement causes imports to shift from a more efficient producer outside of the agreement to a less efficient one within the agreement, due to the preferential treatment (like reduced tariffs) given to member countries.

'Trade Diversion' in the European Union Could Be Defined As