trade diversion


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trade diversion

a redirection of INTERNATIONAL TRADE resulting from the formation of a CUSTOMS UNION or FREE TRADE AREA. A customs union/free trade area involves the removal of trade obstacles such as TARIFFS and QUOTAS on trade between member countries but the erection, or continuance, of trade barriers against nonmember countries. This serves to increase trade between member countries (see TRADE CREATION), but a part of this increase is at the expense of nonmember countries whose imports are now displaced from the customs union/free trade area. Thus, unlike across-the-board tariff cuts, there may be little net benefit to world economic welfare. See also WORLD TRADE ORGANIZATION.
References in periodicals archive ?
6 percent in 2016, as a result of the fiscal consolidation and trade diversion.
The report also mentioned that while Oman is benefiting from trade diversion, due to the trade blockade against Qatar by Gulf neighbors, the windfall would be modest and temporary "and does little to address the more fundamental challenges the economy faces.
According to the report, Oman's economy is benefitting from trade diversion, as exporters use Omani ports for transit to and from Qatar.
Viner was the first who used the term trade creation and trade diversion, he was also the first one who explained that the welfare increased because intra-union trade expanded with the abolition of tariffs on imports from member countries.
If China is excluded, then it will bear the cost of trade diversion from the existing TPP members.
It would even stand to gain if selective protectionism resulted in trade diversion away from established suppliers.
15) This trade replacement could reflect trade diversion or a shift from higher-priced imports to lower-priced imports from the United States.
Road, rail, air and optical fibre links between Kashgar in China and Gwadar port in Pakistan would create pressures and incentives for trade diversion as well as creation.
A state that is excluded from preferential trade arrangements, on the other hand, faces discrimination as a consequence of an FTA's trade diversion effects.
Many of those arguing for a hard Brexit don't appear to know a customs union from a farmers' union, a single market from a cattle market, inter-industry trade from intraindustry trade, trade creation from trade diversion, a tariff barrier from a non-tariff barrier and an integrated supply chain from a daisy chain.
There are two reasons for this difficulty: a) the benefits arise principally (though not wholly) from the net gains from trade, which require an extremely problematic estimation of the gains from trade integration from the UK being in the EU, minus the potential gains from trade diversion to other global countries, and b) the equally difficult problem of estimating the distribution of those net gains across the UK population groups.