Old and New Patterns of International Specialization: The shares of inter- and intra-industry transactions in ASEAN-EC trade, 1974–82

Abstract

According to recent analyses of international trade (Aquino 1978; Balassa 1979; Grubel 1967; Grubel-Lloyd 1971, 1975; Under 1961; and Hirsch 1977), an increasing share of world trade has become the exchange of commod ities, of means of production and consumption, which are close substitutes, of each other. This intra-industry trade contradicts the traditional neoclassical trade theory focusing on the ex change of commodities, of means of produc tion and consumption, which serve different purposes. Traditional neoclassical trade theory deals solely with inter-industry trade, that is, with the exchange of primary for secondary commodities and of relatively (physical and human) capital-intensive goods for relatively labour-intensive secondary goods. Contrary to this inter-industry trade, intra-industry transac tions cannot be explained by differences in natural resources, relative factor endowment, or in demand conditions, but rather by product differentiation and price differences based on specialization in know-how, production, and distribution. While inter-industry trade relies on the old international division of labour, on the exchange of raw materials for manufactured products (Ricardo-trade) and of labourfor capital-intensive manufactured products (Heckscher^Ohlin-trade), intra-industry trade offers the opportunity of a new international specialization, the exchange of differentiated products, which are designed to meet equally differentiated requirements of producers and consumers. The share of intra-irdustry trade in total trade seems to be positively, that of inter-industry trade negatively related to the respective countries' per capita income dif ferentials and to differences in production and consumption patterns. The larger the differ ences in per capita income, production and consumption profiles, the larger will be the share of inter-industry as opposed to intra industry specialization. This paper determines, compares, and asses ses commodityand country-specific shares of interand intra-industry trade in total ECand ASEAN-EC trade from 1974 to 1982. The analysis is based on the trade nomenclature and trade statistics of the European Commun ity. National trade statistics were excluded in order to provide a consistent data base. The global, commodityand country-specific shares of interand intra-industry trade in total between EC and ASEAN trade are deter mined according to the definition of Balassa (1966) and Grubel-Lloyd (1971, 1975): Inter industry trade in commodity i of country j is \Xij Afy|, where Xq is countryy's export, Mif country y's import of commodity /, and intra industry trade in commodity i of country y is gross trade (X^ + A//;) minus inter-industry