00:02
Why is m -e -r -c -o -s -u -r trade diversion? and what are the impacts of this on firm operations? so m -e -r -c -o -s -u -r is a regional economic arrangement involving developing countries, argentina, brazil, paraguay, and uruguay.
00:33
So with trade diversion, this occurs when regional trade agreements such as m -e -r -c -o -s -u -r -r -s -u -r.
00:40
Can reduce welfare by causing the replacement of effectively produced goods from outside countries, which are not within the regional trade agreement, by inefficiently produced ones from the inside.
01:08
Basically, we're moving from a more efficient supplier outside of a free trade area to a less efficient supplier.
01:20
One of the main points is that reduced internal tariffs intensified intra -regional trade.
01:31
So reducing taxes and tariffs on trade in between the countries involved in the arrangement made us so that the countries involved would rather trade with each other than external countries.
01:55
Specify the impacts on firms from m -e -r, c -o -s -u -r member countries, and firms outside of this arrangement.
02:16
So intra -regionally or within the trade arrangement, this arrangement evolved into a customs union, which is an agreement between two or more countries to remove trade barriers and lower or completely eliminate tariffs.
02:34
The treaty of assangeon, which was signed in 1991, aimed not only to gradually reduce the tariffs between its members until december 31, 1994, when these tariffs were supposed to reach zero and establish a free trade area between these four regions.
03:20
It also sparked the creation of a common.
03:26
External tariff by 1995.
03:30
So this treaty led to the creation of a common external tariff.
03:38
This officially inaugurated a customs union.
03:41
So basically these two, a treaty of assuncian, as well as the common external tariff that would be created by this treaty, made it so there was information of a customs union.
04:21
So basically, there was free trade in between the countries in this region.
04:27
So, of course, they would rather trade with each other than external regions.
04:36
Essentially, this led to liberalization of the region.
04:54
So there was essentially a protectionist strategy...