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It is generally agreed that completing the common market stage of integration for the European Union contributed to overall welfare losses due to trade diversion exceeding trade creation.
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Government procurement liberalization permits a country to realize cost savings resulting from the trade effect, competition effect, and economies-of-effect.
During the 1980s and 1990s, the United States negotiated free-trade agreements with lsrael, Mexico and Canada.
Forming a free-trade agreement with the United States provided Canadian producers a danger and an opportunity. the danger was that U.S. producers might be more price competitive than Canadian producers; the opportunity was that longer production runs for Canadian producers, made possible by a free-trade agreement, would result in cost reductions due to economies of scale.
Some trade creation was expected to occur as a result of the U.S.-Canada free-trade agreement, since Canadian exports to the United States and U.S. exports to Canada were expected to expand at the expense of imports from Germany and Japan that faced trade restrictions.
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