Trade diversion is the mirror of trade creation. It describes sourcing that shifts away from a lower-cost supplier outside the bloc to a higher-cost supplier inside it, purely because the outsider still pays the tariff and the partner does not. Real resources are used less efficiently even though the importer’s landed price falls, because the tariff revenue that used to be collected becomes a transfer to the partner’s producer. Creation and diversion almost always occur together in the same agreement, so no agreement is simply good or bad on this test. Deciding which dominates requires measurement of actual trade flows, not reasoning from the definitions.
Why this entry carries no source list. This is an analytical concept from economics, not an instrument any body administers. There is no authority to cite because none is needed: the idea is used to reason about trade, not applied by a customs officer to a consignment. Where numbers are involved they come from statistical compilations whose conventions differ, so figures from two sources are not automatically comparable.