Trade Creation and Trade Diversion
Trade Creation and Trade Diversion are two fundamental concepts in the field of international business and economics, often associated with regional trade agreements like customs unions and free trade agreements. These concepts were first introduced by economist Jacob Viner in the 1950s to assess the impact of such agreements on global trade patterns.
1. Trade Creation:
Trade creation occurs when a regional trade agreement (RTA) leads to an increase in the overall volume of trade among member countries. This happens when member nations replace more expensive imports from non-member countries with cheaper imports from fellow members. The key factors driving trade creation include the elimination of tariffs and other trade barriers within the
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