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Chapter 32: Q.31-11 (page 730)

How could multilateral trade agreements established for all nations through the World Trade Organization help to prevent both trade diversion and trade deflection that can occur under regional trade agreements, thereby promoting more overall international trade?

Short Answer

Expert verified

Hence the above result, they promoting more overall international trade

Step by step solution

01

Information

The World Economic Organization (WTO) was founded to promote worldwide trade cooperation.

02

Explanation

Trade diversion and deflection can be prevented if multilateral trade agreements ensure that all nations, members and non-members of regional blocs, are treated equally. In other words, tariff and quota regulations should be consistent across all countries to prevent further profits for some.

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Most popular questions from this chapter

Based on your answers to Problem 32-4, which nation has a comparative advantage in producing digital TVs? Which nation has a comparative advantage in producing bottles of wine?

Some critics of the North American Free Trade Agreement (NAFTA) suggest that firms outside NAFTA nations sometimes shift unassembled inputs to Mexico, assemble the inputs into final goods there, and then export the final product to the United States in order to take advantage of Mexican trade preferences. What term describes what these critics are claiming is occurring with regard to U.S.-Mexican trade as a result of NAFTA? Explain your reasoning.

Critics of the North American Free Trade Agreement (NAFTA) suggest that much of the increase in exports from Mexico to the United States now involves goods that Mexico otherwise would have exported to other nations. Mexican firms choose to export the goods to the United States, the critics argue, solely because the items receive preferential treatment under NAFTA tariff rules. What term describes what these critics are claiming is occurring with regard to U.S.-Mexican trade as a result of NAFTA? Explain your reasoning.

Consider Figure 32-3. What is the effect on U.S. textile consumers' total expenditures of the imposition of the quota that generates a movement from point E1 to point E2?

Why do you think that increased specialization in specific agricultural products has accompanied growth in African exports of those products?
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