Great Deal! Get Instant $10 FREE in Account on First Order + 10% Cashback on Every Order Order Now

The Economics of European Integration (Winter School 2020) Assignment 1 Explain the difference between trade deflection, trade creation and trade diversion. Which of these concepts are relevant to a...

1 answer below »
The Economics of European Integration (Winter School 2020)
            
Assignment 1
Explain the difference between trade deflection, trade creation and trade diversion. Which of these concepts are relevant to a free trade area and which are relevant to a customs union?
On the diagram from Class 2 (below), how would you indicate the amount of trade that is created and the amount of trade that is diverted by offering preferential treatment to a partner that sells a good for more than the world price, Pw, but less than the (tariff-inclusive) domestic price, Pd?
If you were using the above diagram to analyse the customs union in manufactured goods for the six countries that signed the Treaty of Rome in 1957, where would you draw the Pp line? Explain how your answer determines the relative magnitude of trade creation and trade diversion and estimation of the net welfare effects.
The assignment on one side of a single sheet of paper is due at 2pm on Friday 10th. July - no extensions.
Answered Same Day Jul 08, 2021

Solution

Komalavalli answered on Jul 09 2021
158 Votes
Trade creation:
Let us assume that the domestic producer in the country supplies Q level of output at price level p before trade .By opening up the economy the country can import from foreign nation at cheaper level of price. Before entering the treaty the nation will import Q4 level of manufacturing good at price level Pw which includes the tariff rate imposed by the nation. When nation enter into the treaty of Rome in 1957, the nation it will import Q4 to Q5 level of output from the six nations at Pp price level. The gained in consumer...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here