An Example of How Trade Diversion Results in a Suboptimal

Multiple Choice

An example of how trade diversion results in a suboptimal situation is auto parts trade between Mexico and the United States. After NAFTA:

A) Mexico decreased its sales of auto parts to the United States.
B) the United States purchased more auto parts from Mexico because of the elimination of tariffs and reduced purchases from East Asia, which was the lowest-cost producer.
C) the United States brought a complaint against Mexico for low-quality auto parts.
D) the United States purchased fewer auto parts from Mexico because of the elimination of tariffs and increased purchases from East Asia, which was the lowest-cost producer.