To explain:
The term that describes the situation with regard to U.S.-Mexican trade under NAFTA as described below:
Critics of the North American Free trade Agreement (NAFTA) are of the opinion that most of exports from Mexico to the United States now involves goods that Mexico otherwise would have exported to other countries. Critics argue that Mexican companies prefer exporting their goods to the United States only because they receive preferential treatment under the tariff rules of NAFTA.
Concept introduction:
Trade diversion - Trade diversion is a situation when tariff agreements are such that they cause imports to shift from low-cost countries to higher cost countries.
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