Question

The shifting of trade from countries outside a regional trade bloc to nations within a bloc is known as A. a voluntary import expansion. B. a trade agreement. C. trade deflection. D. trade diversion.

Answer 1

D. trade diversion.

Step-by-step explanation:

Trade diversion -

In this case , the trade is diverted from a more efficient exported to the less efficient exporter, via a customs union or free trade agreement .

The cost of the good reduces , due to lower tariff , in comparison to the trade with the country outside the agreement with lower cost goods but higher tariff .

The trade is created when the formation of the trade agreement between the countries reduces the good's price for more consumers and hence the overall trade increases .