..... 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.

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

____ 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.

A	trade creation
B	trade diversion
C	trade exclusion
D	trade distortion

Explanation:

Detailed explanation-1: -Trade creation will mean that consumption shifts from a high-cost producer to a low-cost producer and trade therefore expands. Trade diversion on the other hand means that trade shifts from a lower cost producer outside the union to a higher cost producer inside the union.

Detailed explanation-2: -A free trade area is an agreement among a group of nations to reduce or eliminate trade barriers such as quotas or tariffs.

Detailed explanation-3: -One such agreement is the North American Free Trade Agreement (NAFTA), which went into effect in January 1994. Under the terms of NAFTA, the United States, Canada, and Mexico agreed to phase out all tariffs on merchandise trade and to reduce restrictions on trade in services and foreign investment over a decade.

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