Intra-industry Trade: Analysis Based On Brands Economics

lntra-industry trade is a special phenomenon observed from the trade flows after World War It, which is countries with similar factor endowment, especially between developed countries, simultaneously importing and exporting slightly different commodities. And this kind of phenomenon triggered off a great deal theory and empirical research, traditional and new trade theory two angles included. However, the existing intra-industry trade theory neglects the important role played by brands in the economy and trade activities at all. The idea of 'brands trade' raised by this paper can not only provide a new explanation for intra-industry trade from the point view of brands, but also can shed light on the survival and development of the brands from China under the pressures of Economic Globalization and the appreciation of RMB.This paper is organized as follows: part I is the introduction, which introduced the problem that this paper can solve, and the theory and practical meaning of this research. Part II is a review of the theory and empirical research on intra-industry trade, including traditional and new trade theories two angles. In the autarky economy, Part III sets up the models of the selections by consumers under the space of existing brands and brands' reputations equilibrium. Based on the firm's reputations model raised by Falvey (1987) and new products' characteristics model raised by Lancaster (1979, 1980) , brands is defined by quality and non-quality attributes. In the model of the selection by consumers under the space of existing brands, a consumer's utility is decided by his/her income, his/her preferred non-quality attribute, the available quality and non-quality attributes of the existing brands and their price etc. What's more, we concluded that the consumers' income would influence their selections. In the model of brands' reputations equilibrium, under the hypothesis that consumers know nothing about the two attributes of any brand prior to purchase, we reached a conclusion that a brand with reputations can earn brand's reputations premium by its reputations. However, the premium would not be too high, cause any brand was faced the competitions from new entry brands. In this part, we also discussed the reciprocal influence between a brand's existing reputations and its new varieties, when scope economy and technology's advance are taken into accounts. In Part IV, we set up the model of brands trade in the open economy. Brands trade is defined as brands providing its commodities or service beyond its home country, including trade and foreign investment two kinds of economic activities. In this part, we discuss the causes of brands trade, brands' reputations construction beyond home country and the welfare effects of this trade. Part V is about the enlightenments of the idea of brands trade. A series of data analyses suggest that from the point view of brands trade, there is a big deficit of China's brands trade, although there is a big surplus of China's foreign trade, which mainly comes from the trade of processing and assembling. In fact, foreign brands engendered serious adverse impacts on the China's brands in many industries. In the ends, some suggestions are raised up to counter the pressures from the appreciation of RMB, the rise of per capita income and the ending of WTO transitional period etc. A conclusion follows.