________ is said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries in favor of member countries ?
Correct answer: B. trade diversion
- A. trade creation
- B. trade diversion
- C. trade exclusion
- D. trade distortion
Explanation
Trade diversion is the shift from a lower-cost nonmember supplier to a higher-cost member supplier because internal barriers are removed within the regional group. It can reduce trade with countries outside the group.
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