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 ?
"I think when you have a situation where a town centre is performing poorly, a small impact in terms of trade diversion could actually have a significant effect on a town centre.
"European-related trade, where we are most exposed, had strong volume growth in the first half, around 5 percent, in part because of trade diversion resulting from the U.S.-China trade tensions."
He can try to deal with trade diversion by expanding the trade war to include more countries (good morning, Vietnam!).
In Japan, on the other hand, the opportunities for trade diversion are less drastic as relative costs are more expensive and their exporting sector is more devoted to higher value-added goods.
With this trade diversion likely to migrate to higher-cost platforms around the world, American consumers will be hit with the functional equivalent of a tax hike.
But trade stats showed that the largest trend has been towards trade diversion. That is how many third countries gained by becoming new suppliers to feed the target markets of the U.S and China.
One is a provision that causes trade diversion to Turkey's detriment.
Mason notes that the country can benefit from trade diversion as some investments meant for China can be diverted to the Philippines.
While virtually any negative preferential trade agreement would probably have some benefits for third parties, those benefits are likely to be particularly large in the case of a US-China "agreement." Trade diversion has often been regarded as a theoretical construct with little real-world significance, because most of the economies engaged in preferential trade agreements already had rather low tariffs.
In the view of experts on South Asia at the South Asia Economic Policy Network, under the office of World Bank's regional Chief Economist, South Asia could even benefit from the current trade dispute between the US and China through trade diversion.
While the ambassador attributed a part of the import surge to a siege-induced trade diversion from the United Arab Emirates, he said there was a lot of room for Indian businesses to grow in Qatar.
The ministry had also acknowledged that trade diversion could positively impact the Malaysian market as an alternative investment destination.