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Sorry Strawman but I think you misunderstand the trade diversion/trade creation issue. Imagine Australia has tariff of 15 per cent on machine tools and imports all such tools from Asia - which can produce such tools more cheaply than the US. Then, the government strikes a free-trade deal with the US. US manufacturers now find that it is profitable to sell tools on the Australian market, as there costs are only 14 per cent higher than the Asians. This allows them to price just under the prices that the Asians charge in Australia and take all the market. The result? Effectively no change to the price of machine tools in Australia, but a loss of the tariff revenue that the government used to collect, which now goes to the Americans. Thus we have a net loss to Australia from trade diversion. Therefore your choice argument does not work here - because the choice is between machine tools and machine tools, and it is distorted by the different tariff rates applying depending purely on the source of the tools. Likewise your argument that the country doesn't lose revenue, only the government, is also wrong. The tariff revenue that the Australian government used to get now goes to the Americans. Unless you think money obtained by the government has a zero value to Australians, then Australia is clearly worse off.
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