The trade relationship with China can be analyzed from both perspectives of inter- and intra-industry exchange, and major differences are available. In this order of ideas, China is characterized by low income and a scarcity of natural resources. Ergo, their trading operations are dominated by the theory of the comparative advantage, and the necessity to supply the population with complementary products. As a result then, most of China's trading operations occur at inter-industry levels. The East-Asian country possessed a comparative advantage in terms of food and beverages, crude materials or manufactured goods, but a disadvantage relative to beverages and tobacco or machines and transport equipments. The table below reveals the relative comparative advantages (RCA) of the two parties in 1998:
Source: Yao and Liu, 2003, p.186
The intra-industry trade operations of the European Union with other countries registered increases generally due to higher living standards and increasing customer demands. As a result, industries became more specialized and the trade of goods grew. The growth rate for EU - China intra-industry trade operations is however reduced. This can be explained by the large distances between the parties' geographical positions, the language and cultural barriers, but also by the discrepant development in terms of economic performances - including the levels of income: in 2008, China's GDP per capita was of $6,100, whereas the gross domestic product per individual in the European Union was of $33,800 (Central Intelligence Agency, 2009) - registered by China and the European Union.
The table below reveals the intra-industry trade ratio between the East-Asian country and the European Union, by world commodity:
Source: Yao and Liu, 2003, p.184
When analyzing the individual relationship between China and single countries, EU members, the results indicate fluctuating relationships. In this order of ideas, whereas some European countries do trade limitedly with China, others engage in massive inter- and intra-industry trading with the East-Asian country. Throughout the 1990s for instance, "the Netherlands, Italy and the UK were not able to increase their exports to China in line with the shares of world exports; Germany, France, Finland and Sweden, however, increased their bilateral trade with China to a greater extent than their shares in world exports" (Yao and Liu, 2003, p.187).
5. Enlargement of the European Union and Intra-Industry Trade
The previous sections of the paper revealed that, as the European Union expanded, the occurrence and importance of intra-industry trade operations also increased. Otherwise put, there exists a direct relationship between the developments undergone by the Union and the modifications registered by intra-industry trade operations. Given this relationship then, it could be said that the current strategy of enlarging the EU could also strive to increase the intra-industry trade. However, one must be aware, that even if this possibility exists, it is highly improbable that it constituted a major determinant in the decision made by the European Union officials for the expansions of the community.
Here are some reasons that could determine one to believe that the territorial enlargement of the European Union is, amongst other things, based on a desire to increase intra-industry trade operations:
new members would mean more liberalized markets and a better flow of products and services within the European Community the circulation of resources (commodities, technology, human resource and capitals) could also be improved, leading consequently to significant developments in the respective fields and organizations the developments made available through the access to the resources of the new member states would increase the specialization opportunities, generating...
The developments in the international context have led to the emergence of new processes and concepts. Two of the most relevant ones are inter- and intra-industry trade. In the most simplistic terms, inter-industry trade refers to the exchange of different goods among different industries. On the other hand, intra-industry trade refers to the exchange of similar and competitive products between similar industries across the globe.
Intra-industry trade is based on product differentiation, the creation of scale economies and the compulsory existence of free trade. Intra-industry trade is also believed to support the technological development of nations. Inter-industry trade is based on the theory of comparative advantages. The common element is that both models are built upon specialization, but this generates different outcomes: inter-industry specialization leads to increases in real incomes, whereas intra-industry specialization leads to grater diversity in purchasing goods.
Relative to the Heckscher-Ohlin model, this cannot be used to explain intra-industry trade simply because it does not recognize the true importance of industry features and their ability to generate trade on their own.
The inter- and intra-industry models of trade have been implemented for years within the European Community and their importance grew with the territorial expansion of the Union. Both internal imports and internal exports increased dramatically throughout the past decades. The main characteristics of inter- and intra-industry trade operations within the European Union is that inter-industry is generally conducted among less developed countries and has the purpose of generating complementary products which help the population support themselves. On the other hand, intra-industry trades occur between more developed member states and satisfy a purpose of specification and diversification, with the scope of retrieving a superior quality of the products purchased. Both types of operations play a vital role towards the future economic integration of all member states, and those to still join the Union in the future.
Another powerful player in the global economic context is China, but unlike what one might expect, its trade relationships with the European Union are rather reduced. This is best explained by the fact that the parties are separated by geographic, economic and cultural barriers. Due to its resource limitations (including both capital and natural resources), China engages predominantly in inter-industry trade operations. The tendency is not however valid for all European countries, as some have managed to develop sustainable trade operations with China, whilst others have failed.
During the past years, more countries in Europe were able to adhere to the Union. The reasons for this are numerous and multifaceted, but one of them could be constituted from a desire to increase the intra-industry trade operations.
Forstner, H., Balance, R.H., 1990, Competing in a Global Economy: An Empirical Study on Specialization and Trade in Manufactures, Routledge, ISBN 0044456190
Fosu, a.K., Nsouli, S.M., Varoudakis, a., 2001, Policies to Promote Competitiveness in Manufacturing in Sub-Saharan Africa: Develop Centre Seminars with the IMF and the AERC, OECD Publishing, ISBN 9264187057
Freinkman, L.M., Polyakov, E., Revenco, C., Trade Performance and Regional Integration of the CIS Countries, World Bank Publications, ISBN 0821358960
Grimwade, N., 2000, International Trade: New Patters of Trade, Production and Investment, 2nd Edition, Routledge, ISBN 0415156262
Hunt, E.K., 2002, History of Economic Thought: A Critical Perspective, M.E. Sharpe, ISBN 0765606070
Jovanovic, M.N., 1992, International Economic Integration, Routledge, ISBN 0415038197
Kahler, B., 1998, EC 515, Retrieved at http://www.localsports.de/IIT.docon January 27, 2009
Kendall, J.D., Park, D., Donghyum, P., 1999, East Asian Economic Issues, World Scientific, ISBN 9810237561
Kierzkowski, H., Arndt, S.W., 2001, Fragmentation: New Production Patterns in the World Economy, Oxford University Press, ISBN 019924331X
Meyer, F.V., 1978, International Trade Policy, Taylor and Francis, ISBN 0856641731
Nagel, S.S., 2003, Policymaking and Prosperity: A Multinational Anthology, Lexington Books, ISBN 0739104608
Organization for Economic Cooperation and Development, Economic Analysis and Statistics Division, 1999, OECD Science, Technology and Industry Scoreboard 1999: Benchmarking Knowledge-Based Economies, OECD Publishing, ISBN 926417107X
Winiecki, J., 2008, Competitiveness in New Europe: Papers from the…
International Trade in Services in BRIC Countries International trade in services plays a key role in the economic development of a country. Trade in services has grown at a much faster pace than the trade in good for the past three decades. This paper analyzes International trade in services in context of Brazil, Russia, India and China (BRIC countries). The paper discusses in detail how these countries have made drastic changes
International trade has high importance in the economic growth of the country. Even it is not only in benefit of the country's economy but there are number of benefits for the global organization and the overall world's economy as well. Without international trade, it was never possible to reach the success level at which the world is right now. An international trade is the major source of revenue for the country
International Trade Theories International trade may be classified as the trade of capital, goods, and services across international boundaries or areas. In many nations, such trade signifies a substantial share of the country's gross domestic product (GDP). While international trade continues to be present throughout a lot of significant research for trade history (see Silk Road, Amber Road), the fact remains that the over societal, economic and political importance for international
International Trade for Rodamia International trade is the exchange that takes place between one country and another. It involves movement of goods, capital and services across the borders and contributes immensely to a country's gross domestic product. It is through International trade that countries have been able to consume a variety of commodities and services that are not produced within their territories in exchange for goods and services that are cheaply
International Trade and Finance Speech: Good afternoon ladies and gentlemen, I would like to share with you on the current state of the U.S. macro-economy, highlighting the internal and external factors that affect it. Macroeconomic analysis seeks to forecast economic conditions by monitoring and gauging the behavior of several broad areas including gross domestic product (GDP) - which is simply national output, the rate of unemployment, and the state of currency
International Trade To a point, there is no compelling reason under theories of international trade for IT companies to locate their production in Silicon Valley. Many major Valley firms have long since offshored their production, such Apple, Intel, Cisco and more. There is a strong case, however, under the theories of international trade, for IT firms to locate their intellectual hubs in the Silicon Valley. When the factors for building a