Why is the trade union likely to be welfare enhancing

Reference no: EM131917652

Problem

Suppose country A is considering forming a customs union with country B. Country A produces only manufactured goods and imports all its raw materials and agricultural products. Country B produces only raw materials and agricultural products and imports all its manufactured goods. Remembering the concepts of trade creation and trade diversion, is this union likely to be welfare enhancing? Why or why not?

Reference no: EM131917652

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