Research On Sino-U.S. Intra-product Trade

Intra-product trade has greatly increased over the last few decades, generally grown faster than total world trade in manufacturing. The rationales, patterns, and effects of intra-product trade are one of most discussed subjects in international trade theory. The extent of intra-product trade in Sino-U.S. commodity trade has also risen. It is necessary to examine the extent, determinants, trade gains, distribution of income, and implications of Sino-U.S. intra-product trade, which is both theoretically and practically valuable for Sino-U.S. trade development and for China to derive greater gains from trade.Theoretically, the paper examines the causes and effects of intra-product trade in standard trade models, including the Ricardian Model, the Heckscher-Ohlin Model, and considers the role of economies of scale. It also analyzes the relationship between intra-product trade and FDI. Empirically, the paper sets up two indexes to measure the extent of intra-product trade, uses input-output tables to calculate the extent of intra-product trade in Sino-U.S. bilateral trade, both in export and import. Then by econometric approach, it finds out the main determinants and examines the effects on income distribution of Sino-U.S. intra-product trade and advances policy suggestions accordingly.Theoretical analysis indicates that comparative advantage and economies of scale are basic rationales of intra-product trade, and its relationship with FDI is complementary. Empirical study indicates that the development of extent of Sino-U.S. intra-product trade in export and import is in great imbalance. The inward FDI from the United States, FDI from the East Asia, and China's WTO entry are the main factors influence the development of extent of Sino-U.S. intra-product trade. As the extent of Sino-U.S. intra-product trade rose, the gap of real wage level between Chinese and American manufacturing workers has been reduced. Generally, the intra-product specialization and trade between China and the United States are still in the primary stage, and China derives less trade gain in Sino-U.S. intra-product trade compared to its trade partner.