When products imported from high-cost suppliers within a customs union replace products imports from a low-cost nation that is not a member of the customs union, there exist(s):
Trade diversion (Divert from more expensive total cost to cheaper one)
Please read extra slide “Trade Diversion”.
9. Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves, establish a common tariff on imports from nonmembers, and permit free movement of capital and labor within the organization?
Common market
10. Which organization was founded in 1957 whose objective was to create an economic union among its members?
Treaty of Rome