International Trade: Creation and Diversion

Free trade agreements aim to reduce economies of scale and comparative advantages.

Large economies in free trade agreements have less negotiating power than smaller economies.

International trade may lead to an increase in carbon emissions due to the use of transportation to transfer goods.

Custom unions are useful in addressing the problem of re-exports and leveling the competitive playing field.

The Viner Model is based on the idea of absolute advantage, where countries specialize in producing goods in which they have the highest production costs.

In a common market, labor is restricted from moving between member countries.

Economic unions involve the removal of tariffs between member countries, creating a uniform market.

Dumping is a trade practice where a country sells its products at a higher price in another country.

In a monetary union, each country has its own currency.

Trade imbalance can lead to a decrease in external debt and the improvement of the national economy.

Trade creation is a negative outcome of trade agreements, leading to economic inefficiencies and welfare losses for the countries involved.

The Viner Model considers the impact of government policies such as tariffs and quotas on international trade.

In a political union, member countries have full sovereignty.

The United States-Canada Free Trade Agreement (FTA) led to trade creation, favoring more efficient producers in both countries.

Economic integration aims to increase trade barriers and reduce trade between the countries involved in the agreement.

Trade creation is an economic concept that refers to the reduction of trade between countries resulting from the formation of customs union or free trade agreement.

Free trade agreements often have effective mechanisms for resolving disputes.

In a free trade agreement, tariffs between member countries are increased to protect domestic industries.

The environmental impact of international trade is limited to air pollution only.

International trade may lead to the depletion of natural resources in importing countries.

Trade diversion is a positive outcome of trade agreements, leading to increased specialization and welfare for the countries involved.

Customs unions or free trade agreements can lead to increased efficiency and welfare gains for the countries involved.

The formation of a customs union or free trade agreement always leads to trade creation.

Member countries in a free trade agreement maintain their tariffs regarding third countries, including their economic policy.