Suppose a Middle Eastern firm moves its final assembly line to Germany and then ships the final products to other members of the EU trading bloc. This is an example of
A)trade diversion.
B)trade deflection.
C)trade restriction.
D)trade detection.

Question

Quizplus · Accepted Answer

This is an example of trade deflection, where a firm from a non-EU country sets up production in a member country to take advantage of lower tariffs and then exports products to other member countries. Trade diversion refers to trade being redirected from a more efficient producer outside the trade bloc to a less efficient producer within the trade bloc. Trade restriction refers to measures taken by a country to limit imports or exports. Trade detection is not a recognized term in international trade.

Suppose a Middle Eastern Firm Moves Its Final Assembly Line