Intra-industry Trade Research Articles

Can Structural Indicators of Trade Explain Why EU Candidate Countries Are Integrating Slowly?

ABSTRACT The paper discusses whether “enlargement fatigue,” slowing down the European Union integration process of 6 Candidate Countries (C6), can be explained by the poor economic and trade performance of those economies, especially in trading with the EU. We comprehensively analyzed the merchandise trade of those economies with the EU in 2007–2018 using numerous quantitative techniques and applying a very high level of data disaggregation. First, the value of similarity indicators between the C6’s export and EU import structures and indices of intra-industry trade was calculated. Then we controlled for additional factors: the changes in C6’s exports (imports) to the EU through shares of goods at higher levels of processing, as well as their export (import) specialization. The conclusion is that the weak trade performances of C6 are not the cause of enlargement fatigue, as these economies saw moderate structural improvements in their trade with the EU.

Reconnoitering Elements of Uzbekistan’s Trade Performance in Recent Years: A Gravity Model Approach Adapting Panel Data Estimation

Purpose: The study examines the impact of growing investments and increasing manufacturing activities on the trade performance in case of Uzbekistan. It also tries to explore the influence of being in CIS region and being a former part of Soviet Union on the trade patters with its major partner countries. The theoretical framework: The study takes Gravity Model as a base to formulate estimation equation where Uzbekistan trade is taken as a dependent variable. Panel dataset is prepared and random effects GLS regression is used to estimate the augmented equation. Findings: The study concludes that lately the composition of trade has shifted. It argues that trade is more based on intra-industry than comparative advantage. Yet the economy envisions strengthening its trade flows by boosting investment in fixed capital and strengthening the manufacturing sector. The study shows that manufacturing and investment in fixed capital are potentially increasing its trade performance. However, trade is still concentrated in a few markets. It is concluded that Uzbekistan’s trade differs in time (a positive indication) and within the group of countries significantly (not so good situation). Research Policy Implications: Based on the analysis, it is recommended that the economy find more global markets to realize its comparative advantage and continue the intra-industry trade within the region. Originality/Value: The study gives new insights on the most recent trends in trade patters of Uzbekistan with its major partners as well as also identifies the nature of its strength in terms of realizing comparative advantage or intra-industry trade. Based on the results the trade performance can be further increased by exploring the markets and product categories more categorically.

Mega-Regionalism in Trade from a Sectoral Perspective. The Case of the Automotive Industry in the Regional Comprehensive Economic Partnership

Theoretical background: The Regional Comprehensive Economic Partnership (RCEP) is the largest mega-regional trade agreement ever signed, accounting for more than 30% of the global population, exports, and gross domestic product (GDP). It is also the largest automotive market worldwide, with significant potential both in terms of automotive manufacturing and sales. Purpose of the article: The paper’s main objective is to characterize China-RCEP automotive trade in the years 2012–2021 with reference to key provisions and implications of the aforementioned mega-regional trade agreement for the automotive industry. In the empirical part of the paper, the authors attempt to verify the hypothesis that trade liberalization under RCEP may contribute to the expansion of the regional automotive industry in terms of trade volume, as well as fragmentation of value and supply chains. Research methods: The authors conducted an analysis of intra-industry trade disaggregated into 54 six-digit HS tariff codes using the Grubel–Lloyd and Balassa indexes, accompanied by cross sectional analysis and studies of sectoral reports and literature in the field of mega-regionalism in trade. Main findings: The hypothesis formulated in the introduction of the paper was verified positively –the authors provided an added value to previous empirical studies on RCEP, in the form of a perspective of the automotive industry and in-depth analysis of sectoral trends for the last ten years. The potential for further fragmentation of value and supply chains inside the region was identified, including the possibility of relocation of manufacturing and assembly activities to lower the cost of RCEP Member States to strengthen comparative advantages over extra-regional counterparts (EU, USMCA). The authors pointed at the prospective rising attractiveness of RCEP in automotive manufacturers’ location decisions worldwide, considering both costs, retreat from global-oriented manufacturing and export strategies, investment security, sustainable development, as well as geopolitical trends in respect of newly established tariff and non-tariff barriers.

Trap of Race to the Bottom? Evidence from Pollution Intensive Products Trade in India and China

This article compares China and India, the two biggest emerging market economies in the world, with respect to their trade in pollution-intensive industries and tries to discuss the policy environment supporting such growth. The analysis is carried out for 13 categories of pollution-intensive products based on the Standard International Trade Classification Revision 3 classification. Our analysis reveals significant growth in trade in these products in both countries, with a higher intra-industry trade and a significant correlation with environmental stringency. Between the two, India seems to be enjoying a better comparative advantage. Findings suggest a need for adopting cleaner production processes and a cautious approach towards industrial promotion.

Revealed Comparative Advantage and Intra-Industry Trade in Health Goods: An Analysis of India and ASEAN

Revealed Comparative Advantage and Intra-Industry Trade in Health Goods: An Analysis of India and ASEAN

Growth and Potential of Intra-Industry Trade of India in Agriculture among the BIMSTEC Nations

The unification and development of crawling Asian countries is the burning issue after the declaration of failure of the SAARC (South Asian Association for Regional Cooperation) region. Besides, a small bubble in the ocean of agreements is ‘BIMSTEC’ (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), which has not been flourishing to date due to the lack of interest of a dominating country like India, whose focus is on other successful regional blocs. However, recent studies have shown that though it starts late but contributing significantly towards the trade among BIMSTEC countries. And, second, almost all the countries have shared similar cultures, languages and levels of per-capita income except Myanmar and Thailand, which will favour the trade among the region. Thus, the main focus of the study is to analyse the revealed comparative advantage of countries in BIMSTEC, their trade competitiveness and contribution made to the country’s growth before and after formation by the region. Under the study, it was observed that the intra-industry trades of India in Agriculture among the BIMSTEC nations have shown very less potential for trade in all 24 agriculture chapters. Thus, economies need to reframe the policies as required and identify the potential products in agricultural-related goods that can significantly improve the trade balance of the countries. JEL Codes: F14, F15, F19, F53

Identification of export potential in foreign trade: case of Slovakia in Kazakhstan

For small open economies such as Slovakia, foreign demand is a significant factor in economic growth. Since Slovakia acceded to the European Union, its exports have focused primarily on the EU internal market. Therefore, one of its goals is to diversify the territorial structure of foreign trade. Kazakhstan is the economic engine of Central Asia, which has made significant efforts in recent years to transform its economy. The aim of the case study of the Slovak Republic is to examine its export opportunities to Kazakhstan using selected one-factor indicators of competitiveness based on their mutual foreign trade. The imbalance in Slovakia-Kazakhstan’s foreign trade suggests sizable reserves. The work evaluates their foreign trade relations through indices of trade intensity, complementarity, and intra-industry trade. It identifies the export potential of Slovakia based on the concept of revealed comparative advantages and import significance of Kazakhstan in the examined period. In 2020, The export potential was used only at 2%, the export gap was 95,928 mil. EUR and concerned 56 commodities at the level of HS 4 aggregation. Considering the geographical distance and costs, Slovakia should focus on the export of goods with higher added value.

Gravity Model Approach: An Empirical Application with Implications for BRICS Countries

This article aims to identify the main determinants of annual export flow among BRICS countries through the estimation of panel data from 1992 to 2018. The estimated results suggest that gross domestic product (GDP) and trade openness among other factors can explain export flow among BRICS countries. The most important finding of the study is that the formation of BRICS has exercised a negative and significant impact on bilateral trade among member countries. This study also found that the intra-industry trade dominates the intra-BRICS trade. Finally, the study found that the geographical distance between countries might be a factor for impeding trade among member countries. Thus, this study highlights the importance of increasing economic cooperation among these countries in terms of developing infrastructure, signing of free trade agreement (FTA) and increasing people-to-people contacts. JEL Codes: F00, F15, C23, F13

한국 ICT산업의 대 아세안 질적 무역 경쟁력 연구: 일본과의 비교를 중심으로

Purpose: The purpose of this paper is to analyze changes in the trade competitiveness of the information and communication technology (ICT) industries in Korea and Japan in the ASEAN market through export competitiveness and intra-industry trade analysis.
 Research design, data, and methodology: The Revealed Symmetric Comparative Advantage Index(RSCA) analysis method is used to measure changes in export competitiveness. In addition, intra-industry trade(IIT) is analyzed by dividing it into vertical intra-industry trade(VIIT) and horizontal intra-industry trade(HIIT), and vertical intra-industry trade(VIIT) is analyzed by dividing it into High Quality Vertical Intra-Industry Trade and Low Quality Vertical Intra-Industry.
 Results: As a result of RSCA analysis, it was found that the Korean ICT industry was comparatively inferior in the ASEAN market between 2010 and 2019, and its competitiveness weakened. By item, the competitiveness of communication apparatus was the lowest, followed by information apparatus, broadcasting apparatus, and parts.
 Meanwhile, unlike Korea, Japan’s ICT industry was found to be competitive in comparative advantage. Among them, broadcasting apparatus were found to be the most competitive, followed by parts, information apparatus, and communication apparatus. According to the IIT analysis, Korea and Japan in the ASEAN market between 2010 and 2019. Both countries were found to be actively engaged in intra-industry trade with ASEAN. In the case of Korea, VIIT was found to be more active than HIIT in trade with ASEAN. Among them, VIITL was found to be the most active. In the case of Japan, VIIT was found to be more active than HIIT, and among them, VIITH was found to be the most active. In other words, overall, it was found that the qualitative competitiveness of Korea and Japan in the ASEAN market improved.
 Implications: This study has academic and political implications in that it analyzed the changes in ICT trade competitiveness between Korea and Japan in the ASEAN market. However, there is a limit to the research in that the change in trade competitiveness in terms of imports was not considered.

Assessing comparative advantage in agricultural trade

With the growth of globalization, international cooperation increases the pace of development. Each country has a number of competitive advantages that are formed due to geographic, climatic and economic conditions. As part of the study of agriculture, the author noted that the assessment of the country’s comparative advantage cannot be limited to traditional theories of international trade focused on comparative advantage. Attention should be drawn to theories that emphasize the variability of comparative advantage; development of diff erentiated products should be enhanced, high level of intra-industry trade should be developed.

International trade and technological competition in markets with dynamic increasing returns

We build a simple international trade model to study how the interaction between imperfect market selection and technological learning jointly shapes trade patterns as well as firm and industry dynamics. The model features two countries populated by firms heterogeneous in their productivity and size. Market selection is driven by a finite pairwise Pólya urn process, while a geometric random walk characterizes the idiosyncratic cumulative firm learning process. We show that the model is able to jointly reproduce a wide ensemble of stylized facts concerning intra-industry trade, industry and firm dynamics as well as realistic dynamics of export and productivity leadership at the country level. A series of sensitivity exercises on the degree of trade openness and the tightness of the market selection process allow us to draw interesting policy insights on concentration, volatility and the dynamics of international leadership in both export shares and aggregate productivity.

New Trends in Sino-Japanese Economic Interdependence under RCEP

Despite the constant political friction between China and Japan, the economic and trade exchanges have been closely linked, and the degree of economic interdependence has continued to deepen. With the optimization of China's industrial structure and the enhancement of China's economic strength, the asymmetric Sino-Japanese interdependence is changing in a direction favorable to China, and China is gradually reducing its dependence on Japan's economy. The signing of RCEP marks the FTA relationship between Japan and China for the first time. A wide range of tax reduction commitments have been arranged, and mid-to-high-end intra-industry trade cooperation represented by mechanical and electrical products has been strengthened. RCEP is further facilitating the upgrading of China's industrial and export trade structure, thereby improving asymmetric interdependence. However, due to Japan's vigilance against China's rise and the deterioration of Sino-US relations, Sino-Japanese relations still face more significant uncertainty. Under the RCEP framework, opportunities and challenges coexist in Sino-Japanese relations. The two countries should actively leverage the advantages of economic interdependence to achieve mutual benefit and then promote political mutual trust through economic cooperation.

An Analysis between Foreign Direct Investment and Intra-Industry Trade in Turkey: A VECM Approach

The stylized world of identical technologies between countries, perfect competition and homogeneous products in the markets, and inactivity of production factors/inputs between countries is no longer valid. Knowledge economy, imperfect competition, differentiation, industrial clusters, new economic geography, transportation and transaction costs are among the factors that create the transformation in international trade. However, there is a specific literature that highlights the existence of examples of firms that are competitors or interconnected as parts of a single supply chain in the international economy, and spread of production activities to the world geography as an extension of the global transformation in production processes. In this context, since multinational firms mostly produce differentiated goods and a large part of intra-industry trade (IIT) is based on intra-firm trade of these firms, the linkage between foreign direct investment (FDI) and IIT is important. This connection is also supported by the fact that FDI is among the country-specific determinants of IIT in the literature. For this purpose, in this study, IIT index values for the period 1995-2020 in Turkey are calculated based on the distribution of exports and imports according to BEC classification. And FDI values related to industrial sectors in the same period are taken as basis. The relationship between the series is examined by cointegration analysis and the direction of the relationship is revealed by causality analysis based on vector error correction model (VECM). In the results of the study, it has been determined a one-way causal relationship from FDI to IIT for capital goods; and from IIT (total) to FDI. This is consistent with the result of the existence of a significant and positive relationship between technology intensity and IIT thanks to FDI in the literature.

Technological intensity in manufacturing trade between ASEAN and the EU: challenges and opportunities

This article analyses trade flows EU-ASEAN, focusing on export performance and technological intensity, covering the years 2004–2016. The aim of this paper is to analyse to what extent, a further trade integration between the EU and ASEAN, could generate business opportunities for countries in both trading blocs. This analysis could serve as a basis for designing and implementing effective policies and strategies by policymakers in the face of a deepening EU-ASEAN trade integration. Therefore, a detailed analysis of the degree of complementarity of trade patterns, the weight of intra-industry trade, and the revealed comparative advantages allows us to outline some of those challenges and opportunities. Results suggest that intra-industry trade is moderate, mainly focused on few manufactures, accounting for a low value of total trade flows between the two blocs, and concentrated in a few countries. The Lafay index analysis suggests that the EU and ASEAN are natural partners regarding the technological patterns of the revealed comparative advantages; therefore, a deepening in trade integration between this trading blocs could allow to exploit those comparative advantages.

Determinants of Indonesia’s Intra-Industry Trade of Cosmetic Commodity (HS Code 3304) with Trade Partners Of APEC-4 Countries

Intra-Industrial Trade has increased in recent years followed by the trend of cosmetic commodities starting to dominate there is a diverse diversification of cosmetic commodities, countries that are members of one integration carry out intra-industry trade due to reduced barriers. This study aims to determine the level of integration of Intra-Industrial trade and trading partners in cosmetic commodities, especially those integrating in APEC, whether GDP per capita, exchange rate, and economic distance affect exports and imports between Indonesia and trading partners simultaneously or partially in terms of the level of integration through the IIT Index. Using panel data analysis secondary data from the 2015-2019 time series. Data obtained from databases including UN Comtrade, BI, BPS, World Bank and other databases with keywords Intra-Industry Trade (IIT), determinants, GDP per capita, exchange rates, economic distance, cosmetics. The results of research with the Fixed Effect Model model show that GDP Per Capita, distance and exchange rate have a positive and significant effect on IIT.

Экономическое сотрудничество Индии и Израиля

The article deals with the India–Israel economic relations within 1990–2020s. The authors stress that the Israeli direction is among the priorities in the external economic policy of India at the present time. The authors examine the importance of mutual trade stressing that it is well balanced and its volume has increased more than twice since 1992. A number of indices are calculated to conclude that the mutual trade is characterized by its high intensity. Intra-industry trade is also relatively high as there is high complementarity of India and Israel economy and the trade balance is usually positive for India. As a whole both India and Israel are interested in one another’s market. Countries have been conducting negotiations on creating a free trade zone but due to many obstacles from both parts the agreement is not yet reached. The authors underline that India–Israel investment cooperation has been rather well developing for the latest decade. Israeli investors are more active on Indian market and the average volume of their investments is usually about twice higher than the Indian direct investments to Israeli economy. Nowadays there are more than 300 companies with the participation of Israeli capital registered in India operating mainly in the sphere of medicine, telecommunications, chemical industry, energy, including the use of unconventional energy sources, as well as agriculture. Investments are very diverse in nature: among them there are the organization of manufacturing enterprises, the opening of research centers, the creation of subsidiaries etc. Scientific and technical cooperation is another important direction of India–Israel ties. Thanks to scientific and technical cooperation with Israel, the rapidly developing Indian economy is successfully compensating for the lack of advanced technologies that it needs. In addition to bilateral interaction, the countries also cooperate with each other through the I2U2 Dialogue and two large-scale projects in the field of food security and clean energy are being implemented in India at the present time. At the end of the article the authors underline that there is every reason to sure that economic relations between India and Israel will reach a fundamentally new level in the near future, which will contribute to the further development and modernization of the Indian economy.

Endogenous Horizontal and Vertical Differentiation: Measuring Value Added in Intra-industry Trade

Endogenous Horizontal and Vertical Differentiation: Measuring Value Added in Intra-industry Trade

Colorindo o índice Balassa: uma abordagem hermenêutica para as importações de carne da Romênia

ABSTRACT: Romania has good agricultural resources and declining meat consumption, yet the country’s meat imports are on the rise. This study uses Balassa’s idea to link national trade patterns to worldwide ones and extends it, for the period between 2004 and 2019, to the ratio between prices and to the ratio between variables describing intra-industry trade. For price ratios, this study showed that Romania imported primarily inferior qualities of meat, particularly at the beginning of the study period. Regarding intra-industry trade, the Romanian trend moves in the opposite direction to the worldwide trend. Although, the trade of meat parts compared with whole/ half carcasses is on the rise internationally, it is declining in Romania, probably due to increasing competitiveness of the industry.

Regionalna ekonomska transformacija

Modern economies and their smaller units – regions, regardless of their development level, witness significant inequalities. European regions differ significantly in their economic structure, history, available workforce skills, technological profiles, institutional and managerial capacities, and many other aspects. Most Central and Eastern European Countries (CEECs) are not an exception. Specifically, differences exist between national economies and between NUTS 3 regions within national economies, with some regions lagging behind. The inequality problem is addressed by the EU's Cohesion Policy in the CEECs, keeping in mind that CEECs are less developed than the average of the EU28 (27). Through its Cohesion Policy, the EU is seeking to reduce economic disparities between regions. An important issue is to create region-specific policies to foster regional growth. Therefore, Cohesion Policy instruments should be used in Central and Eastern European countries to tackle regional divergences and assist them in balancing their regional development as they formulate sectoral policies. Many analysts argue that the higher the movement towards a post-industrial (information, service) society, the more outdated the growth, production, and productivity inherited from industrial capitalism will be. Technological innovation has always been a crucial driver of progress, but over the last 50 years, its pace and significance have been growing. Technologically leading regions have long embraced innovation and are forging ahead, whereas lagging regions require a complete transformation of their economic (industrial) structure. Therefore, this paper aims to analyze Cohesion Policy in the CEECs by analyzing the relationship between GDP per capita and spending of EU funds. Moreover, the aim is to investigate the importance of vertical and horizontal industry policy in CEECs. To do that, the paper analyzes the total output growth and inter (intra) industry exchanges of Central and Eastern European countries (CEECs). More specifically, an analysis of the changes in intra-industry trade (two-way trade) is performed, which shows how far bilateral imports and exports match within sectors. The paper reviews current theoretical knowledge and empirical research on the importance of the regional dimension of industrial policy, respecting the paradigm of innovative sustainability. The main methods used in the paper comprise a comparative analysis based on earlier theoretical and empirical studies in the field of regional economic development, as well as an analysis of industrial performance.

How does agricultural intra-industry trade affect climate change: the case of Turkey

How does agricultural intra-industry trade affect climate change: the case of Turkey