题目内容
In the short run, Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale effect more than offset the competition effect.
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Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.
If a customs union includes the low-cost supplier of the world, there would be no adverse trade-diversion effwct that would counteract the positive trade-creation effect.
The potential for trade diversion is smaller when a custom union's external tariff is lower rather than higher.
If a customs union included all of the countries in the world, there could exist only trade creation, not trade diversion.
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