In theory, the World Trade Organization rules should ensure that a fre

QUESTION

In theory, the World Trade Organization rules should ensure that a free trade agreement results in trade diversion.

Indicate whether the statement is true or false.

ANSWER

FALSE
In theory, the World Trade Organization rules should ensure that a free trade agreement does not result in trade diversion. These rules allow free trade areas to be formed only if the members set tariffs that are not higher or more restrictive to outsiders than the ones previously in effect.