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When asked by the Carnegie Commission to prepare a report on post war Preferential Trading Agreements, Viner (1950) pointed out that they are not free trade. He used the concepts of trade creation and trade diversion to explain his claim. Using appropriate examples, clearly explain the concepts of trade creation and trade diversion. Further, illustrate clearly the appropriate welfare effect on home consumers, partner's country producers, home country producers and rest of the world producers.
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