Definitions for "Trade diversion"
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.