Trade that occurs between members of a preferential trading arrangement that replaces what would have been imports from a country outside in the PTA. Associated with welfare reduction for the importing country since it increases the cost of the imported good. Concept due to Viner (1950).
purchasing imports from other than the lowest cost source, as can result from preferential trading arrangements
the shifting of trade away from the low-cost producer toward a higher-cost producer because of a reduction in trade barriers with the country of the higher-cost producer.
A shift in the pattern of origin of a country's imports, resulting from changes in trade policies or practices, which may or may not involve change in the overall volume or composition of the imports involved.
Occurs when a trade reform measure discriminates between different trading partners, and a less efficient (higher cost) source displaces a more efficient (lower cost) one.
trade that is diverted away from outside countries as a result of lowering tariffs between the members of a trading bloc
A shift in the pattern of trade, resulting from changes in trade policies and practices, which does not involve a change in the overall volume or composition of trade. Generally contrasted with trade creation, which occurs when economic activity or trade policy generates an overall increase in trade. Trade diversion may occur when a free trade agreement causes participating countries to import goods from other signatories to the agreement in place of traditional imports from countries outside the agreement.
Trade diversion is an economic term related to international economics in which trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement.