Intra-industry Trade Study

There has been some new trends of the development of international trade since the sixties in 20th century. International trade of manufactured goods has developed more quickly than that of primary products, international trade between developed countries also has developed more quickly than that between developed and developing countries. In addition, another remarkable characteristic is that intra-industry trade has developed rapidly. It is not in accordance with the traditional trade theory that intra-industry trade has developed quickly not merely between developed countries but also between developed and developing countries, especially in electronic products. In some developing countries, intra-industry trade has developed more quickly than inter-industry trade.Research on intra-industry trade is still one of the frontiers of international trade, and it is also one of the research fields combining industrial organization theory with international trade theory. Empirical analysis on intra-industry trade always goes ahead of theoretical research. There is a large number of empirical analysis on whether intra-industry trade exists trully, how to measure the level of intra-industry trade and the determinants of intra-industry trade, etc. The new trends and transitions of trade patterns make people begin to question on the assumptions of traditional trade theories. Based on Chamberlin's monopolistic competition model, people try to explain the determinants and benefits of intra-industry trade with imperfect competition, economies of scale, product differentation and firm' s competitive strategy.With the globalization of international trade and the development of Chinese economy, international trade by commodities and industrial structure has been improved accordingly. The value of export of electronicproducts are higher than that of textile and apparels. At the same time, the increasement of income per capita and FDI has effectively promoted the development of intra-industry trade of manufactured goods in China. The proportion of intra-industry trade in China has been rising, especially in electric motor, integrated circuit, voltage transformer, electronic print circuit, electronic circuit switch, etc. Moreover, in the bilateral trade between China and industrialized countries such as U.S.A. and Japan, this proportion has been rising constantly. The transition of trade patterns and the change of disparity of unit price of import and export can not only reflect the improvement of industrial structure and foreign trade by commodities, but also reflect the dynamic variation tendency of comparative advantage and the change of position in international division. Thus, people begin to pay more and more attentions to the development of intra-industry trade in China and try to study the trade patterns of intra-industry trade in east Asia, the development of vertical intra-industry trade between Japan and other countries.As the engine of liberalization of trade between China and industrialized countries, intra-industry trade can effectively decrease the cost of adjustment relative to trade liberlization. For China, research on intra-industry trade is helpful with the improvement of international trade by commodities and the realization of dynamic variation of comparative advantage, and can promote the development of cooperation with industrialized countries.In this thesis, author analyse the determinants and benefits of intra-industry trade, the relation between intra-industry trade and international trade policy and the development of intra-industry trade of manufactured goods in China. Compared with the relative research already existing, this thesis tries to carry on exploratory research inseveral following respects: First, using nearly ten thousand data, author mainly focuses on analysing intra-industry trade of manufactured goods in China, and sums up the trade patterns and characteristic of intra-industry trade in China to remedy the defect that study abroad mainly focuses on industrialized countries and few on developing countries. Second, author divides intra-industry trade into intra-industry trade of homogeneous products and intra-industry trade of differentiated products according to the characteristic of products, and tries to analyse the determinants respectively. Third, there is an exploratory research on the relation between intra-industry trade and international trade policy. Fourth, there is a new trend of international division from single vertical specilization^o the mixed one and China is facing the problem how to improve its position in international division rationally. Thus, author make an empirical analysis on intra-industry trade of manufactured goods in China from 1995 to 2003, sums up the rule and characteristic of intra-industry trade in China , and finds that the trade patterns of some manufactured goods have become from vertical intra-industry trade to horizontal intra-industry trade, etc. Fifth, using relative data from 1995 to 2003, author makes an empirical analysis on the characteristic and difference of intra-industry trade between China and different industrialized countries such as U.S.A. and Japan, then find that efficiency-seeking FDI and export-oriented FDI from Japan and U. S. A. has effectively promoted the development of intra-industry trade. The development of intra-industry trade of diversifed intermediate goods can promote the cooperation in economy and trade between China and industrialized countries.This thesis can be divided into the following main parts: firstly, author reviews the empirical analysis and theoretical research on intra-industry trade* On this basis, she analyses several basic butdisputed problems including whether intra-industry trade really exists, the level of aggregation and how to measure the level of intra-industry trade, then explain the resource of data used in empirical analysis in this article.Secondly, on the basis of review on empirical analysis on country-and industry-specific factors of intra-industry trade, author make a theoretical research on the determinants of intra-industry trade including economies of scale, imperfect competition, product differentiation and firm' s competitive strategy, then, analyse the benefits of intra-industry trade and the relation between intra-industry trade and international trade policy.Finally, author makes an empirical analysis on intra-industry trade of manufactured goods in China and finds thatCDwith the improvement of international trade by commodities, the proportion of the manufactured goods have been rising continuously although the traditional labour-intensive products such as textile and apparels, still occupy quite important status in Chinese foreign trade. With the entry of WTO, inter-industry trade of manufactured goods have developed more quickly than intra-industry trade in China, ?in the bilateral trade between China and other countries, the proportion of intra-industry trade between China and Japan is the highest, ?comparing the level of intra-industry trade of different categories, the proportion of intra-industry trade of machinery and transport equipment is the highest. ?although the position in international division has been improved, vertical intra-industry trade(VIIT) is still the basic trade pattern of intra-industry trade in China. China has revealed comparative advantage (RCA) and stronger international competitiveness in export of TV, motor cycles, cycles and textile,. Then, comparing the level of intra-industry trade between China and its principal trade partners in different industrialized stagesincluding U. S. A., Japan and Korea S., and find that(Dintra-industry trade between China and its principal trade partnBrs have developed quickly, however, with the entry of WTO and accordingly decreasing of tariff and non-tariff measures in China, inter-industry trade has developed more quickly than intra-industry trade, ?according to international trade by commodities, the proportion of intra-industry trade in machinery and transport equipment is the largest in the bilateral trade between China and its principal trade partners, which proves the level of division and specialization between China and its principal trade partners in this respect is relatively high. However, in a detailed empirical analysis, author finds that intra-industry trade of skilled labour-intensive products such as motor, electronic circuit switch, electronic.printed circuit, voltage transformer, has developed quickly. That is to say, China still has comparative advantage in the production and export of labour-intensive products, and aboundent labour endowment is helpful to absorb foreign capital. The proportion of intra-industry trade of textile and apparels have droped rapidly. With the cancel of quota for textile products on January 1st, 2005, the favourable trade balance of textile and apparels in China will be expanded continuously, it is expected that the proportion of intra-industry trade of textile products will accordingly decrease further. (3)intra-industry trade between China and Japan and Korea S. has developed quickly, especially in electronic products, because of the rapid expansion of FDI from Japan and the low transportation cost. The level of technique involved in the intra-industry trade between China and U.S.A. is relatively higher. Then, on the basis of analysis on determinants and benefits of intra-industry trade in China, author makes some relative suggetions.