INTRA-INDUSTRY TRADE IN AGRICULTURAL AND FOOD PRODUCTS: THE CASE OF UKRAINE

Abstract

The process of economic transformation in Ukraine is characterized by, among other things, a change in agricultural and food product trading patterns. Ukraine has remained a net exporter of agro-food products, but the total volume and worth, as well as the geographical structure of trade flows, has altered significantly, and further adjustments can be expected to take place in upcoming years. This paper examines Ukrainian agro-food trade, particularly focusing on different aspects of intra-industry trade (IIT), which is usually associated with low adjustment costs. To examine the development of IIT in agro-food products between Ukraine and its trading partners, two approaches are adopted. The Grubel-Lloyd Index is used to calculate the intensity of IIT and thus to determine its relative importance compared to inter-industry trade. IIT values estimated across separate product groups and for selected trading partners differ significantly and exhibit high variability over time, but generally the level of IIT is very low. The results show that the major part of agro-food trade is of the inter-industry type, and thus a product of underlying comparative advantages. Secondly, the paper examines changes in trade flows over time. For this purpose, different measures of marginal intra-industry trade are applied. Marginal IIT appears to be low, therefore, the structure of the change in agro-food trade flows between Ukraine and its trading partners during the analyzed period (1996-2002) is shown to be predominantly inter-industry, which implies potentially high adjustment costs.