Trade Creation

Summary of Trade Creation

The substitution of lower- cost foreign goods for higher-cost domestic manufactures.

(Main Author: William J. Miller)

Trade Creation and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Trade Creation: International trade flows that are generated in response to formation of a customs union or free trade area as member countries reallocate resources more efficiently, achieving greater economic growth and consequently trading more with the outside world. Formation of such blocs can benefit nonmember countries if trade creation exceeds trade diversion.