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Intra-industry trade among developing countries
Journal of Development Economics 18 (1985) 253-271. North-Holland
INTRA-INDUSTRY TRADE A M O N G DEVELOPING COUNTRIES*
Oli HAVRYLYSHYN and Engin CIVAN George Washington University, Washington, DC 20052, USA The World Bank, Washington, DC 20433, USA Received February 1983, final version received January 1984 In this paper, intra-industry trade (IIT) among developing countries is analyzed in two major sections. First, the extent of intra-industry trade of developing countries is described and compared to the liT of industrial countries. Secondly, intra-industry trade among developing countries m general and newly-industrialiTed countries (NICs) in particular is analyzed at product level. The principal conclusions suggests that the trade of individual NICs with other NICs is well below 10 percent of their total exports, much lower than among industrial countries. More surprisingly, the level of IIT is lower among NICs than for NICs with the rest of the world. However, in categories such as capital-intensive products and investment goods, liT is high, although the volume of trade is low.
1. Introduction Recent writings on the potential of trade among developing countries have sometimes noted the possibility of benefit from trade in 'competitive' products among the more advanced developing countries. 1 In particular, it is argued that since these countries are on the whole similar in industrial endowments and hence have comparative advantage in similar products (generally standardized, labor-intensive goods, but perhaps also capital goods), trade among them might involve trade in similar but slightly differentiated products, or what is commonly labelled as 'intra-industry trade' (IIT). It is well known that among industrial countries with similar factor endowments, a large proportion of trade is such two-way trade, rather than trade in clearly distinct 'complementary goods' of different factor intensities) While there has been some debate in the literature as to whether the large amount of IIT among industrial countries is something other than Heckscher-Ohlin trade, or whether it is a statistical artifact, the broad *The research discussed in this paper is part of a research project of the World Bank on the direction of developing countries' trade. The opinions expressed here are those of the authors alone and do not reflect the views of the World Bank or its atfdiated organizations. 1The view is suggested in Amsden (1980), more explicitly stated in Hughes (1980), and is discussed in Havrylyshyn and Wolf (1982). 2Summarized in Glersch (1979), with the most important earlier study being that of Grubel and Lloyd (1975). 0304-3878/85/$3.30 © 1985, Elsewer Science Publishers B.V. (North-Holland)
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O. Havrylyshyn and E. Civan,lntra-industry trade
consensus appears to be that, as Corden (1979) suggests: 3 'less weight should be given to factor proportions theory ... [and] it is desirable that there be developed a rigorous general equilibrium model with economies of scale possibly embodying some dynamic elements and allowing for more than two products'. The statistical fact of a large amount of IIT has indeed led to some recent theorizing on such trade flows, for example, Lancaster (1980) and Krugman (1980), emphasizing economies of scale and product diversity in monopolistic competition. Almost all of the empirical analysis of intra-industry trade has dealt with industrial countries. This paper applies the concept of intra-industry trade to developing countries with two objectives. First, we will describe the extent of intra-industry trade done by developing countries and compare this to industrial countries. Secondly, we look more closely at intra-industry trade among developing countries and in particular among the newly-industrialized countries (NICs). Specifically, the paper will address the following questions: How much intra-industry trading is done by developing countries with the world and how does this compare to IIT levels for industrial countries? Is IIT among developing countries higher than in their total trade? Do the NICs do more intra-industry trade than other developing countries? Is it more with each other? Have the levels of IIT in NICs increased considerably between 1968 and 1978? Is the IIT in trade among NICs more concentrated in certain categories of goods such as labor-intensive goods, intermediate goods, or capital goods? Are the NICs in different regions - - East Asia, Latin America - - different in respect of their IIT? Section 2 of the paper discusses the meaning of the liT concept, reviews briefly the above-mentioned debate, and discusses the methodological aspects of measuring IIT. Section 3 looks at how the level of intra-industry trade in developing countries compares with industrial countries. Section 4 focuses on the trade among the NICs, while section 5 considers what products are most important in the intra-industry trade among NICs. Finally, section 6 summarizes the findings.
2. Theory and methodology 2.1. The meaning of intra-industry trade
In a Heckscher-Ohlin world, [rade between two countries is characterized by a greater capital intensity of exports from the country with a higher relative endowment of capital. This is typically expressed in either a 'factorcontent' version in which the capital intensity of the entire bundle of exports is measured, or in the 'commodity version' in which exports of each goods 3Corden (1979) p. 10.
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255
category are correlated to the capital intensity of each category.4 In such a model, trade flows between two countries are in 'complementary' goods with differing factor intensities, and the bulk of empirical testing since the 'Liontief paradox' findings has been addressed to finding such complementarity. In counterpoint to this view (though not irreconcilably so) some researchers found that a very high proportion of the trade of industrial countries appeared to be trade in similar products, or 'competitive' trade. That is, for a given statistically-measured category of goods (for example, organic chemical, SITC 512) most industrial countries had large flows of both exports and imports. The empirical work of Grubel and Lloyd (1975), though not the first application of the concept of intra-industry trade, is perhaps the most extensive of these and became the focus of discussion about the implications of these results for trade theory. Grubel and Lloyd inferred from the fact of high levels of IIT of industrial countries (50 percent to 60 percent for manufactured goods in 1967) that at best half of trade flows could be explained by the conventional factor-endowments model. The remainder, being two-way trade in similar commodities with presumably similar factor characteristics could not be attributed to differing factor endowments. While some writers expressed doubt that intra-industry trade was in fact trade in commodities with similar factor characteristics [Finger (1975), Lipsey (1976) and Finger and De Roosa (1979) in particular], most trade theorists have agreed that there is some truth in the Grubel and Lloyd contention, and recently several have attempted to develop a theoretical explanation for trade in similar goods: Lancaster (1980), Krugman (1979, 1980), Caves (1980). The dissenting views consist of saying that within a 3-digit SITC category (or 'overlapping trade' as Finger prefers to label it) can still be HeckscherOhlin trade because there is as much if not more variation in factor characteristics within these industry groups as among them. In effect, this suggests the high IIT values may only be a statistical artifact resulting from inadequate disaggregation to capture true industries with unique capitallabor ratios. One may counter this criticism first on a conceptual level. While some IIT would disappear if one defined industries in more disaggregated statistics, some two-way trade in different statistically defined categories may be in goods with the same capital intensity, and in principle therefore nonHeckscher-Ohlin trade. After all, the fundamental point of factor endowment theory pertains neither to arbitrarily defined categories of statisticians, nor to specific end-use characteristics of products, but rather to the factor characteristics of goods. Second, calculations of IIT using more disaggregated data, while they diminish its value, by no means make it small enough to ignore. 4The most recent and thorough theoretical presentation is in Deardorff (1982).
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Thus Gray (1979) finds that disaggregation does not cause the IIT phenomena to disappear, s Finally, one should consider that even as far back as 1967, industrial countries had quite similar factor endowments. It should be no great surprise that a theory explaining trade on the basis of factor endowment differences is not applicable to a large portion of trade among industrial countries. This is not to say the theory of Heckscher-Ohlin is to be ignored, for the critics of IIT are right to some degree. There is a statistical problem, and an overstatement of the extent of such trade. Furthermore, whatever the explanations of IIT, its values are what matter, for IIT is not a theory but an observation. And when such explanations are considered they consist of elements that have either always been a part of the trade theorists' perception - - scale economies, tastes - - or of elements which may add to factor endowment but do not contradict it - - differentiated products, monopolistic competition. Even if the factor endowment theory has become less important in explaining trade among similarly endowed industrial countries, it surely remains important in determining the pattern of trade between developing and industrial countries. As to trade among developing countries, their similar factor endowments should lead one to expect a greater amount of intra-industry trade than in trade with developing countries. However, the overall level of lIT for developing countries may be lower than for industrial ones because production of highly differentiated goods is not very important in such economies, with relatively new industrial sector. Just how much intra-industry trade there is in South-South trade compared to South-North trade is in fact one of the main questions asked by this paper. 2.2. Computation formula and data The data source used in this analysis is the U N trade data classified by the Standard International Trade Classification (SITC) at the 3- and 4-digit levels of aggregation. In this study we have focused our attention on non-fuel manufactured goods only (SITC 5 to 8, excluding 3), and the results are presented for this total or the 1-digit aggregation with 4 groups: Chemical, Basic manufactures, Machinery and transport equipment, and Miscellaneous manufactured goods. The sample consists of 44 developing countries, includ51n the present paper it is also found that liT declines but by no means disappears with dlsaggregation. As shown in the appendix, table A.2, with 3-digit SITC data, the 1978 average for thirteen NICs is 42.0 percent, and with 4-.digit data it is 35.6 percent. Generally, values using 4-digit data arc above three-quarters of those using 3-digit data. Even critics of the IIT concept agree one 'cannot explain away trade overlap .. as the result of failure to systematicallyclassify products' [Finger and De Roosa (1979, p. 223)]. They emphasize rather that no new theory may be needed to explain the phenomenon.
O. Havrylyshyn and E. Civan, lntra-industry trade
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ing 13 Newly Industrialized Countries (NICs), and 18 Industrial Countries (ICs) as defined in table 2. The basic formula used follows that elaborated by Grubel and Lloyd (1975). In a given trade channel, inter-industry trade, or trade in different products is defined as the absolute value of the difference between exports in a product category (X~) and imports in that category (M~), that is, (1)
inter-industry trade = X ~ - M~.
It then follows that intra-industry trade, or trade in' similar products is given by the value of total trade remaining upon subtraction of inter-industry trade, intra-industry trade = (X i + M,) - I X , - Mi[.
(2)
A more useful measure is the normalized index of intra-industry trade
II T~= [(X, + M,) - Ix,- M,I] 10o%, (xi + Mi)
(3)
which is simplified to
IIT= 1-f ]x'- M,]]-100%.
(3')
L(X,+M,)J
If there is no intra-industry trade, one of X, or M~ will be zero, hence [Xi-M~l/(Xi+Mi) will be equal to one and the index IITi will take a value of zero percent. If all trade is intra-industry, X t = M l, hence [Xi-Ml[=O and the index IIT~ will take a value of 100 percent. The basic data for computations are the 3-digit level of SITC; that is, one begins by calculating IITi for each 3-digit commodity category '/'. We discuss below use of more disaggregated data at the 4-digit SITC level. For purposes of presenting data at a more aggregated level than 3-digit (usually 1-digit), some aggregation formula is needed. As is discussed in Grubel and Lloyd (1975) as well as Aquino (1978), a simple mean of 3-digit IIT~ values will generally overestimate the extent of intra-industry trade because it gives equal weight to all 3-digit categories regardless of their importance in trade. Therefore, we employ the weighted formula as in Grubel and Lloyd. The intra-industry trade index for some aggregation 'A', containing 3-digit '/' components from 1 to n, is
(x,+M,)AIIT-i= x
.
x,-M, i= t
y (x, + M,)
JDE--C
" 100%.
(4)
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For each country, formula (Y) was used to compute the IIT value for each 3-digit item, and formula (4) was used to calculate the aggregated values shown in the tables. As Grubel and Lloyd (1975) note, and Aquino (1978) elaborates further, an imbalance of total trade may bias the IIT calculations, hence an adjustment needs to be made. It was found that this formula yielded values very close to those using formula (4), hence only the unadjusted ones are reported here for comparability with other studies. Also for comparability, the IIT values calculated using 4-digit SITC are not reported (but are shown in table A.2 for the NICs). As already stated above, the more disaggregated data yield IIT values that are somewhat lower, but not dramatically so. Note further the fairly consistent relation between 3- and 4-digit results (table A.2) for different countries. Given this paper's focus on trade among developing countries, and among NICs particularly, the IIT formula is applied not only to total trade of a country with all partners (labeled as IIT with world), but also to each country's trade with other developing countries only (IIT with DCs) and in the case of NICs also to trade with other NICs only (IIT with NICs). Finally, the years used are 1968 and 1978.
3. The level of intra-industry trade in developing countries If intra-industry trade is a reflection of similar factor endowments of trading partners, greater diversity of production and hence greater heterogeneity of goods both in consumer demand and in supply, one should expect the value of IIT to be lower for developing countries than for industrial countries. This has been demonstrated in Havrylyshyn and Civan (1984) where in a regression analysis, IIT levels across countries are shown to be strongly correlated to the level of per capita income and the product diversity of an economy. Also one should expect IIT to be higher in trade among developing countries than in total trade of developing countries. Both of these expectations are borne out by the aggregate values shown in table I. liT for industrial countries, 58.9 percent, is far higher than for developing countries as a whole, 22.6 percent, and among the latter the more advanced NICs have a higher value (42.0 percent). It is also certainly true that developing countries do more intra-industry trading with each other than with the less similar industrial countries. This is especially true when one considers the non-NIC developing countries: I1T among them is 21.5 percent, while liT in their total trade with the world is 14.5 percent. However, what does not fit the simple expectations is the nature of intraindustry trade of the NICs: for them IIT is lowest for trade with each other (30.5 percent), that is, IIT is lowest for trade with countries that are most similar, contrary to expectations. Their intra-industry trade with all developing countries is slightly lower than for total trade. If one excludes the three
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Table 1 Intra-industrytrade of industrial and developingcountries (1978, percent)?
Industrial countriesb (ICs) Developingcountries (DCs -- sample of 44) Non-NIC developingcountries Newly-industrializedcountries (NICs)
Total trade
Tradewith DCs only
Trade with NICs only
58.9
--
--
22.6 14.5
26.4 21.5
---
42.0
38.0
30.5
aSource: computations of World Bank, U.N. trade data tapes; definition of country groups is shown in table 2. bIreland is defined as industnal while Spain is defined as a developing NIC, following the groupings used by the World Bank for 1978. However, the IIT values shown are very little affected by including both in the same group, be it IC, DC or NIC.
most industrialized NICs - - Spain, Yugoslavia and Israel, which also are Southern Mediterranean countries with considerable trade ties to Europe - the value in the NICs row of table 1 are, respectively, 38.1 percent, 38.9 percent and 33.7 percent. That is, the difference between IIT with world and IIT with DCs is insignificant but, what remains conclusively is the indication that intra-industry trade of NICs with each other is lower, and not higher than with other countries. The conclusion that IIT is higher among non-NIC developing countries than in their trade with other partners is consistently supported by the individual country estimates (see appendix, table A.1). Of 31 cases, only four show the reverse relation. Three of these (Morocco, Sri Lanka, Tunisia) are among a group of second-generation exporters recently identified as the closest followers of the NICs, ~ while the fourth, Nigeria, has such low values (0.19 and 0.30 percent) that the comparison is insignificant. 4. Intra-imlmtry trade of NICs 4.1. Two-way trade among N I C s and trade policies
Though IIT among the NICs is lower than in their trade with other countries, it is still higher than the liT of non-NICs with developing countries (30.5 percent vs. 21.5 percent). This is not surprising. To the extent IIT is trade in differentiated products, it is more likely to be important for economies that are well along on the industrialization path. eS¢¢ Havl'ylyshynand Alikhani(1982).
"Source" as
in table 1.
14.5
All non-NICs
NICs
42.0
42.3 37~8 21.1 40.8 37.4 61.9 34.9 31.9 32.8 66.9 52.1 34.7 50.7
Argentina Brazil Greece Hong Kong India Israel Korean Rep. Mexico Portugal Singapore Spain Taiwan, China Yugoslavia
13.9 6.6 32.4 10.9 0.2 14.8 10.3 15.0 18.7 4.8 0.8 17.3 14.3 17.3 7.9
Kenya Malawi Malaysia Morocco Nigeria Pakistan Peru Philippines Sehegal Sri Lanka Sudan Thailand Trinidad Ttmisia Turkey
Algeria Cameroon Central African Rep. Chile Colombia Costa Rica Dominican Rep. Egypt El Salvador Ghana Guatemala Guyana Haiti Ivory Coast Jamsica Jordan
1.5 6.1 0.7 10.1 20.0 3?_4 6.9 6.8 33.0 4.3 3?_7 19.6 46.3 13.4 14.4 14.9
Newly industrialized countries
Non-NIC developing countries
Table 2 Intra-industry trade indices by country, 1978 (peroea0."
All ICs
58.9
Australia 25.3 Austria 74.1 Belgium-Lux~ 79~ Canada 66.9 Denmark 67.0 Finland 45A FranQe 80.3 Germany 62.7 Ireland 61.3 Italy 59.0 Japan 26.0 Netherlunds 74~ New Zealand 25.9 Norway 44.4 ~ 68.3 Swit~rland 59.5 U.K. 81.0 U.S.A. 59.4
Industrial countries
!
L
t,d
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261
Those NICs with highest values of intra-industry trade with other NICs do not generally have the highest intra-industry trade with the rest of the world, as is evident from a comparison of the rankings in the first and last columns of table 3. Indeed, the groupings are quite evident. All three Latin American NICs have higher HT with other NICs than in total trade. In contrast, all four East Asian cases have lower IIT with other NICs than in total trade (except Houg Kong in 1968), as do all five Mediterranean countries. This corresponds reasonably well to the common perception grouping inward-looking and outward-looking economies: the Latin American economies tend to be import-substituting, more inward-looking than East Asia and the Mediterranean. India, perceived as very much of an import-substitution case, belies this simple correlation, as its intra-industry trade with NICs is in fact far lower (15.1 percent) than with all countries (37.4 percent). 7 Another complication is that the Mediterranean countries are geographically so close to Europe and so far from other NICs that one Table 3 Intra-industry trade, newly indusmalized countries, 1978 (percent, ranked by level of IIT with NICs)." Trade with NICs
World
Rank by liT with NICs 1978
Country
1978
1968
1978
1968
Rank by IIT with world 1978
1 2 3 4 5 6 7 8 9 10 11 12 13
Brazil Argentina Singapore Mexico Hong Kong Korea Taiwan, China Portugal Spain Israel Yugoslavia India Greece
51.4 48.7 47.1 42.2 34.7 29.4 28.0 28.0 24.6 18 3 16.4 15.1 12.3
34.4 30.5 22.1 25.9 39.0 15.2 15.5 32.4 26.9 7.7 13.5 17.0 13.3
37.8 42.3 66.9 31.9 40.8 34.9 34.7 32.8 51.1 61.9 50.7 37.4 21.1
14.8 21.0 53.0 20.1 35.7 15.1 30.1 36.7 39.1 51.7 68.0 15.6 15.6
8 5 1 12 6 9 10 11 3 2 4 7 13
30.5
22.6
42.0
32.0
Unwelghted average
"Source: as m table 1.
7India's inclusion in the NIC category may be questioned; the ex ante rationale., as discussed m Havrylyshyn and Wolf (1982) is that despite the low industrial share, India's industry bulks quite large in developing country totals. In the values of IIT shown here India is dearly more in the NIC range than in the DC range, which to some extent vindicates its inclusion in the NIC category.
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might expect not only less trading with N I C s but perhaps even less two-way trading in similar products, s It is clear from table 4 that the high Latin American intra-industry trade is quite loca liT~ed within Latin America, m u c h m o r e so than is the case for East Asia. Balassa (1979) attributes this to the regional integration agreements. It is evident that for the three advanced Latin American countries that are included in the N I C s category, intra-industry trade is m u c h higher than for East Asian economies, Also, intra-industry trade a m o n g the three Latin American countries is a b o u t as high as for their trade with all N I C s (45.3 percent vs. 42.4 percent), while for East Asia intra-industry trade a m o n g them is distinctly lower (25.2 percent vs. 44.5 percent). As always in comparisons of Latin American and East Asian trade phenomena, it is not easy to disentangle the influence of trade agreements and trade re~raes, yet the implication is strong that countries with better export performance based it relatively more on S o u t h - N o r t h trade, while economies which did relatively m o r e two-way trading a m o n g themselves did Table 4 Intra-industry trade index, Latin America and East Asia (1978, percent). Intra-industry trade with Latin American NlCs
East Asian NICs
Latin America
Argentina Brazil Mexico Mean
55.5 53.9 56.6 55.3
R
m
East Asia
Hong Kong Korea Singapore Taiwan, China Mean
23.2 23.1 32.4 22.1 25.2
SA final qualification is methodological: IIT will tend to be higher the larger the partner group, because it is more likely that trade in any given SITC category will be less balanced with a single partner than with a large number of partners. This caveat makes it more ditlicalt to conclude that the East Asian and Mediterranean NICs truly do less intra-indnstry trading with other NICs than with the world as a whole. However, it strengthens the conclusion that developing countries do more intra-industry trading with each other than with the rest of the world. As to the contrast between Latin American and other NICs, this caveat is not pertinent since the comparison is of the degree to which IIT-HICs differs from HT-worid. If anything this methodological fact makes more emphatic the observation that Latin American NICs do much more intra-industry trading with other NICs than with the rest of the world.
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not do as well in overall export performance. Note that the level of IIT globally is not very different for East Asian NICs compared to Latin American ones (34.8 percent vs. 37.3 percent, averaged from values in table 3), and that both of these are lower than the comparable value for the more advanced Mediterranean economies (49.3 percent). 4.2. Change in two-way trade among N I C s
Between 1968 and 1978, the NICs generally experienced an increase in the amount of intra-industry trade. For their total trade this went from 32.0 percent to 42.0 percent (see table 3). In comparison, IIT of industrial countries, which was measured by Grubel and Lloyd (1975) in 1967 as 48 percent, increased to 53.5 percent. 9 But not all NICs experienced an increase in the level of intra-industry trade - - Portugal and Yugoslavia saw a decline in IIT with the world, and Hong Kong, Portugal, Spain, India, and Greece did so for IIT with NICs, though only moderately. It is noteworthy that while the East Asian economies had, at the end of the period, generally far lower values of IIT than Latin American ones, they experienced a much more rapid increase in their intra-industry trade with NICs, with the exception of Hong Kong. Excluding Hong Kong, the value of IIT for East Asian NICs doubled from 17.5 percent to 34.8 percent compared to a change for Latin America from 30.3 percent to 47.4 percent. It may very well be that successful export expansion brings in its train an increase in the amount of intra-industry trade. This is of course consistent with the underlying theory that IIT reflects product diversification in an advanced and more sophisticated economy. As an economy develops, its product lines diversify and consequently it engages in more and more intraindustry trade. In the East Asian NICs this appears to have been the sequence. In Latin America the sequence may have been reversed: intraindustry trade among these countries was increased early (in the sixties), probably as a result of trade diversification via Lafta, and industrial development and diversification came only later, l° Perhaps this reversal of the sequence goes some way towards explaining the poorer export performance of these countries. It is one thing to say increased trade in similar or competitive goods (IIT) is a sign of advanced industrialization, and another to suppose one can achieve advanced industrialization by pushing up the amount of trade in similar goods. The question of what types of products are found in the intra-industry trade of the NICs is addressed in the next section.
9This last value ts differentfrom that m table 1 because Grubel and Lloyd'swork covered only 10 countries. t°Data in Willmore's(1979) paper suggest a peaking of IIT for Central Americaabout 197273. See table 1, p. 191 in Wlllmorefor tires, and table 4, p. 192 for cement.
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Table 5 Intra-industry trade by product group, industrial countries and NICs? Industrial countries 1967
Trade among NICs 1968
1978
SITC code
Product group
~
Rank
~
Rank
~
Rank
5 6 7
Chemicals Basic manufactures Machinery and transport equipment Miscellaneous manufactured goods Goods not classified
66 49
1 5
31.7 15.9
2 5
40.8 20.7
1 5
59
2
29.4
4
39.3
3
52 55
4 3
31.2 30.5
1 3
40.3 28.3
2 4
8 9 Weighted mean Simple mean
(n.a.) 56.2
22.6 27.7
30.5 33.9
"Source: Grubel and Lloyd (1975, table 3.2) for industrial countries; as in table 1 for trade among the NICs.
5. Products in intra-indus~ry trade Earlier work on intra-industry trade among industrial countries found, as for example in table 5, that the highest degree of such trade occurred in chemicals, then machinery and transport equipment, miscellaneous manufactures (mostly finished goods) and least in basic manufactures (mostly intermediate goods). The pattern for intra-industry trade among the NICs is broadly similar, except that in 1968 machinery was lower on the list but became by 1978 more important, though still lower than finished goods (SITC 8). More useful categorizations than the SITC 1-digit grouping of table 5 consist of dividing all goods by production characteristics and end-use characteristics. First, a distinction is made between capital-intensive and labor-intensive goods. Second, a mutually exclusive distinction is made between intermediate, investment and consumption goods. The allocation of SITC 3-digit categories into these two groupings is shown in the appendix, table A.3. From table 6 which shows the values of IIT by these groupings and by country, it is first of all clear that labor-intensive goods have a low IIT value. Indeed, when the Mediterranean countries close to the EEC are excluded, IIT in labor-intensive goods is considerably lower than in capital-intensive goods (33.9 percent vs. 46.8 percent). Also investment goods have a much higher intra-industry trade index (39.8 percent) than do intermediate goods (31.0%) or consumption goods (the latter are not shown). This difference for
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Table 6 Intra-industry trade among NICs by type of good, 1978 (percent)." Capital intensive
Labor intensive
Intermediate
Investment goods
40.7 57.2 4.1 40.0 21.8 42.1 38.4 48.7 38.5 67.6 23.2 44.4 14.4
55.7 56.7 18.3 34.0 12.9 16.1 27.6 42.6 29.6 39.3 28.9 24.5 22.2
47.5 50.0 27.7 21.9 9.5 16.4 27.9 38.9 29.8 42.4 36.3 34.2 20.2
56.1 63.6 2.1 38.1 453 42.5 49.5 45.6 24.0 74.2 14.2 50.0 I 1.7
Average 13 NICs
37.0
31.4
31.0
39.8
Average 10 NICs (excl. Greece, Spain, Yugoslavia)
46.8
33.9
31.9
48 9
35.5
64.5
27,4
28.2
Argentina Brazil Greece Hong Kong India Israel Korea Mexico Portugal Singapore Spain Taiwan Yugoslavia
Share of total trade among NICs
"Source" computed from U.N. trade data tapes.
investment goods is even more apparent if one excludes the three Mediterranean countries in which two-way trade of investment goods is lower than of intermediate goods: Greece, Spain and Yugoslavia. Then the values are 48.9 percent vs. 31.9 percent. It is noteworthy that for the other ten countries the pattern is consistent. There is greater intra-industry trade in goods that are capital-intensive in production, compared to those that are laborintensive, and also there is greater intra-industry trade in goods used for investment compared to those used as intermediate inputs, or for consumption. However, it should be emphasized that the much higher IIT index for investment goods and capital-intensive goods does not necessarily mean that there is a large trade in such goods among the NICs. Of all the trade that does occur among the NICs, 35.5 percent is in capital-intensive goods while 64.5 percent is in labor-intensive goods. By end-use categories these shares are 27.4 percent for intermediate goods, 28.2 percent for investment goods and 44.4 percent for consumer goods. In sum, investment goods and capitalintensive goods make up a third or less of trade among the NICs, but trade in these categories has a much greater tendency to be two-way trade or trade in 'similar' products, than is the case for labor intensive goods, or intermediate goods and consumer goods.
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O. Havry|yshyn and E. Cimn, lntra-industry trade
The specific products which have highest levels of IIT in trade among the NICs are organic chemicals, office machines, machinery of various types, primary forms of iron and steel, and for a few countries (Brazil, India, South Korea, Yugoslavia) road vehicles, and ships and boats. On the whole, products with high IIT are more 'sophisticated' goods in some sense of that word. The items that loom largest in the export by NICs - - clothing, footwear, toys and sporting goods, handbags, glassware, tend to have very low levels of IIT among NICs. Only Hong Kong, South Korea and Spain have clothing among the ten products with highest I1T. Textiles yarn and fabrics do appear more frequently however. Indeed, while intermediate goods as a group do not have high IIT (table 6), some specific products do. Thus, among the items that most frequently recur in the list of top ten are chemicals, glass, leather, iron and steel forms, textile yarn, fabrics, in addition to various types of machinery and equipment including vehicles. That is, goods with capital intensive production, and/or investment goods are most important in two-way trade among NICs. However, it is necessary to repeat that while investment goods are items in which the greatest reciprocity in trading occurs (as measured by the degree of overlap on the IIT index), they comprise a relatively small part of total trade among the NICs as already observed. Furthermore, their importance becomes almost paltry in comparison to the total of manufactured goods exports by these countries. It was noted earlier that investment goods exports by NICs were 28 percent of exports to other NICs. Since for these countries total exports to NICs are on average only 6.2 percent of exports to the world, exports of investment goods by NICs to each other are merely 2 percent of their total world exports. For capital-intensive goods this is slightly higher, perhaps 2.5 percent.
6. Summary and conclusions With the exception of Argentina, Israel and Taiwan, the trade of individual NICs with other NICs is well below 10 percent of their total exports. On average, the exports of NICs to other NICs are about 6 percent of their total exports of manufactured goods, very close to what one might expect simply on the basis of market size, as the 13 NICs account for 6-7 percent of the world's GNP. 11 Of the trade that NICs do with each other a sizeable but not major part - - about 31 percent - - is in the form of intra-industry or 'competitive' trade. This is much lower than for trade among industrial countries, but that is not surprising as it has been shown elsewhere that intra-industry trade varies with the degree of development. What is rather 11Calculated from World Bank, World Development Report, 1980.
O. Hat,rylyshyn and E. Civan, lntra-industry trade
267
unexpected is that the level of intra-industry trade is lower for NICs trade with each other than it is for NICs trade with the world. That is, contrary to expectations, the NICs which are similar to each other do less two-way trading with each other than they do with other dissimilar countries. The Latin American countries, which were the members of regional trade groups, are an exception to this. Their intra-industry trade with each other is higher than with the rest of the world, and the trade diversion in the integration schemes probably accounts for this~ But given the costs of trade diversion, the higher intra-industry trade in Latin America may not be beneficial. Where intra-industry among NICs is high, however, is in products that are capital-intensive and products used as investment goods. This is consistent with the expectations noted at the outset of the paper. However, while the degree of intra-industry trade of such goods among NICs is higher than it is for labor-intensive goods or intermediate and consumer goods, the volume of trade is considerably lower. If there is a potential for competitive trade in capital intensive goods and investment goods among the NICs, it has so far not yet been exploited. It is difficult to believe that this is so because producers and policymakers in these countries have been unaware of this and need to be sensitized to active policy stimulating economic cooperation among them. One possible explanation may be that barriers to trade among NICs keep the volume low. The principal barriers that might exist are bias against NIC-NIC trade in transport and commercial-financial costs, or tariff and other domestic protection. The bias argument is not easy to resolve but it is surely less plausible for NIC-NIC trade than for other South-South trade, as all these countries are on well established transport routes, have substantial port and road infrastructure, and had by 1978 a substantial international trading network. Furthermore, empirical evidence for transport bias examined by Langhammer (1982) suggests it does not exist for Brazil. Tariffs, in contrast (or protection broadly speaking) clearly are very high. A recent survey of effective protection studies for 35 developing c o u n t r i e s 12 finds the rates for machinery to be 56-115 percent, and for all industries 66 percent. But even this is not an adequate explanation, unless the protection is discriminatory against developing countries, for in the imports of investment goods by NICs, it is found that only 5 percent come from other NICs, a proportion below that for all manufactures (7 percent). Thus, industrial countries clearly outcompete NICs in sales of machinery to NICs. This should not be a surprise. The global comparative advantage of NICs is probably still largely in labor-intensive consumer goods sold to industrial countries. A lesser degree of comparative advantage exists in selling some labor-intensive, intermediate (and probably differentiated) products to each 12Havrylyshyn and Alikhani (1982b).
268
O. Havr3dyshyn and E. Ciran, lmra-indu~ry trade
other, in the form of intra-industry trade. But so far NICs still have a comparative disadvantage in investment goods and capital-intensive goods, even in each other's markets. All this does not preclude the future possibility of rapid expansion for intra-industry trade of NICs in goods of a slightly more sophisticated nature such as machinery. However, short of a convincing argument that there exist considerable dynamic benefits of the learning-by-doing variety in this trade, one must conclude that such an evolution will come largely on its own and without any ex ante policy to promote its early arrival. This is not to say the 'dynamic benefits' argument cannot be made, ~3 rather that it still lacks a sufficient weight of empirical evidence to be widely accepted. 13Probably one of the best statements is in Westphal (1982). But he is very cautious in his conclu~ons noting only that some benefits of ~c.hnological mastery' have occurred, but that one must also weish the costs of policies promotingdomesticindustries.
O. Havrylyshyn and E. Civan, lntra-imiustry trade
269
Appendix
Table A.1 Intra-industry trade of developing economies (DCs), 1978 (percent). Imra-indus t ry trade index with World
DCs
Algeria Argentina Brazil Cameroon Central African Repubfic Chile Colomb ia Costa Rica D o m i n i c a n Republic Egypt E1 Salvador Ghana Greece Guatemala Guyana Haiti Hong Kong India Israel Ivory Coast Jamaica Jo rd an Ken ya Ko rea Malaya Malay si a Mexico Morocco Nigeria Pak istan Peru Philippines Portugal Senegal Singapore Spain Sri L a n k a Sudan Taiwan Thailand Trinidad Tumsia Turkey Yugoslavia
1.47 42.33 37.84 6.14 0.74 10.09 20.01 32.44 6.90 6.82 33.03 4.30 21.12 32.65 19.57 46.33 40.82 37.41 61.85 13.44 14.39 14.92 13.87 34.91 6.58 32.41 31.91 10.85 0.19 14.78 10.31 15.03 32.78 18.65 66.90 52.13 4.80 0.84 34.74 17.34 14.33 17.26 7.94 50.68
1.49 49.13 43.60 8.79 0.74 15.61 27.90 43.74 10.09 7.65 42.80 5.29 31.94 43.25 34.99 48.68 33.62 22.75 38.30 36.94 23.30 18.39 36.68 26.31 9.14 50.01 38.73 8.73 0.30 28.16 13.62 19.13 42.52 38.97 74.94 35.12 4.02 1.05 25.67 35.32 22.37 12.32 17.23 31.81
Unadjusted mean
22.58
26.38
NICs -
-
48.69 51.43 ---------12.31 ---34.66 15.12 18.27 ----29.37 --42.23 -----28.01 -47.13 24.64 ---28.02 ---16.36 30.5
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O. Havrylyshyn and E. Civan, lntra.industry trade
Table A.2 Intra-industry trade of NICs (3-digit and 4-digit calculations, 1978). Intra-industry trade with NIC8
Singapore Argentina Brazil Mexico Hong Kong Taiwan Korea Spain Portugal Israel Yugoslavia Greece India Average
World
3d
4d
3d
4d
47.1 48.7 51.4 42.2 34.6 28.0 29.4 24.6 28.0 18.3 16.3 12.3 15.1 30.5
38.7 35.7 34.8 34.6 31.9 23.5 21.2 17.0 16.8 16.1 12.1 10.4 9.9 23.3
66.9 42.3 37.8 31.9 40.8 34.7 34.9 52.1 32.8 61.9 50.7 21.1 37.4 42.0
59.6 32.0 27.4 26.9 36.9 28.4 29.0 46.0 24.4 58.0 44.0 18.5 32.1 35.6
Table A.3
Commodity groups.* Commodity group Intermediate goods Labor-intensive
SITC groups
Capital-intensive
5 (excl. 515, 54, 55), 61, 621, 63, 641, 662, 663, 664, 693, 694 661, 691, 692, 698, 812
Capital goods Labor-intensive Capital-intensive
695, 712, 714, 715, 717, 718, 719, 731, 733, 861 711, 722, 723, 726, 729, 732, 734, 735
Consumer durables Labor-intensive Capital-intensive
667; 697, 82, 83, 864, 891, 897 724, 725, 862, 863, 896
Consumer non-durables Labor-intensive Capital-intensive
64, 65, 665, 666, 696, 84, 85, 892, 893, 894, 899 54, 55, 629, 895
~Source: UN Broad Economic Categories.
O. Havrylyshyn and E. Civan, lntra-industry trade
271
References Amsden, Alice H., 1980, The industry characteristics of intra-Third World trade in manufactures, Economic Development and Cultural Change 28, no. 4, 181-219. Aquino, Antonio, 1978, Intra-industry trade and inter-industry specialization as concurrent sources of mternational trade in manufactures, WeltwirtschaftlichesArchiv 114, 275-296. Balassa, Bela, 1979, Intra-mdus~y trade and the integration of developing countries in the world economy, in: Herbert Giersch, ed., On the economics of intra-industry trade: Symposium 1978 (Mohr, Tfibingen) 245-270. Caves, Richard E., 1980, Intra-industry trade and market structure m the industrial countries, Oxford Economic Papers 32, 203-223. Corden, W.M., 1979, Intra-industry trade and factor proportions theory, in: Herbert Giersch, ed., On the economics of intra-industry trade: Symposium 1978 (Mohr, Tfibmgen) 3-12. Deardorlf, Alan V., 1982, The general validity of the Heckscher--Ohlin theorem, The American Econounc Review, 72, 683-694. Finger, J. Michael, 1975, Trade overlap and intra-industry trade, Econormc Inquiry 13(4), 581-589. Finger, J. Michael and Dean A. De Roosa, 1979, Trade overlap, comparative advantage and protection, in: Herbert Giersch, ed., On the economics of intra-industry trade: Symposium 1978 (Mohr, Tfibingen) 213-240. Giersch, Herbert, ed., 1979, On the economics of intra-industry trade: Symposium 1978 (Mohr, Tfibmgen). Gray, H. Peter, 1979, Intra-mdustry trade: The effects of different levels of data aggregation, m: Herbert Giersch, ed., On the economics of intra-industry trade: Symposium 1978 (Mohr, T~ibmgen)87-110. Grubel, Herbert and P.J. Lloyd, 1975, Intra-industry trade (Macmillan, London). Havrylyshyn, Oh and Iradji Allkhani, 1982a, Is there cause for export optimism, Weltwlrtschafthches Archiv 118, 4. Havrylyshyn, Oli and Iradji Allkhani, 1982b, An annotated bibliography of protection in developing countries, Mimeo. (World Bank, Washington, DC). Havrylyshyn, Oli and Engin Civan, 1983, Intra-industry trade and the stage of development, in: P.K.M. Tharakan, ed., Intra-industry trade (North-Holland, Amsterdam). Havrylyshyn, Oh and Martin Wolf, 1983, Principal trends in trade among developing countries, European Econon~c Review, 1-31. Hughes, Helen, 1980, Inter-developing country trade and employment, Paper presented at International Economic Association, Sixth World Congress on Human Resources, Employment and Development (Mexico City) 4-9 Aug. Krugman, Paul R., 1979, Increasmg returns, monopolistic competition and international trade, Journal of International Economics 9, 469-479. Krugman, Paul R., 1980, Scale economies, product differentiation and the pattern of trade, American Economic Review, 950-959. Lancaster, Kelvin, 1980, Intra-mdustry trade under perfect monopolistic competition, Journal of International Economics 10, 151-175. Langhammer, Roll Y., 1982, The importance of 'natural' barriers to trade among developing countries. Some evidence from the transport cost content m Brazilian imports, Kiei Working Papers no 136 Lmder, Staffan Burenstam, 1961, An essay on trade and transformation, Ph.D. dissertation (Handelsh6gskolan, Stockholm). Lipsey, Robert E., 1976, Review of Herbert G. Grubel, P.J. Lloyd, Intra-industry trade, Journal of International Economics 6, 312-314. Westphal, Larry E, f974, The pattern of trade and specialization in the Central American common market, Journal of Economic Studies I, 113-134. Westphal, Larry E., 1982, Fostering technological mastery by means of selective infant-mdustry protection in: Moshe Syrquln and Simon Teitel, eds., Trade, stability technology and equity m Latin America (Acadermc Press, New York). Wilimore, Larry N., 1979, The industrial economics of intra-industry trade and specialization, in: Herbert Giersch, ed., On the economics of intra-industry trade: Symposium 1978 (Mohr, T~ibmgen) 185-205
INTRA-INDUSTRY TRADE A M O N G DEVELOPING COUNTRIES*
Oli HAVRYLYSHYN and Engin CIVAN George Washington University, Washington, DC 20052, USA The World Bank, Washington, DC 20433, USA Received February 1983, final version received January 1984 In this paper, intra-industry trade (IIT) among developing countries is analyzed in two major sections. First, the extent of intra-industry trade of developing countries is described and compared to the liT of industrial countries. Secondly, intra-industry trade among developing countries m general and newly-industrialiTed countries (NICs) in particular is analyzed at product level. The principal conclusions suggests that the trade of individual NICs with other NICs is well below 10 percent of their total exports, much lower than among industrial countries. More surprisingly, the level of IIT is lower among NICs than for NICs with the rest of the world. However, in categories such as capital-intensive products and investment goods, liT is high, although the volume of trade is low.
1. Introduction Recent writings on the potential of trade among developing countries have sometimes noted the possibility of benefit from trade in 'competitive' products among the more advanced developing countries. 1 In particular, it is argued that since these countries are on the whole similar in industrial endowments and hence have comparative advantage in similar products (generally standardized, labor-intensive goods, but perhaps also capital goods), trade among them might involve trade in similar but slightly differentiated products, or what is commonly labelled as 'intra-industry trade' (IIT). It is well known that among industrial countries with similar factor endowments, a large proportion of trade is such two-way trade, rather than trade in clearly distinct 'complementary goods' of different factor intensities) While there has been some debate in the literature as to whether the large amount of IIT among industrial countries is something other than Heckscher-Ohlin trade, or whether it is a statistical artifact, the broad *The research discussed in this paper is part of a research project of the World Bank on the direction of developing countries' trade. The opinions expressed here are those of the authors alone and do not reflect the views of the World Bank or its atfdiated organizations. 1The view is suggested in Amsden (1980), more explicitly stated in Hughes (1980), and is discussed in Havrylyshyn and Wolf (1982). 2Summarized in Glersch (1979), with the most important earlier study being that of Grubel and Lloyd (1975). 0304-3878/85/$3.30 © 1985, Elsewer Science Publishers B.V. (North-Holland)
254
O. Havrylyshyn and E. Civan,lntra-industry trade
consensus appears to be that, as Corden (1979) suggests: 3 'less weight should be given to factor proportions theory ... [and] it is desirable that there be developed a rigorous general equilibrium model with economies of scale possibly embodying some dynamic elements and allowing for more than two products'. The statistical fact of a large amount of IIT has indeed led to some recent theorizing on such trade flows, for example, Lancaster (1980) and Krugman (1980), emphasizing economies of scale and product diversity in monopolistic competition. Almost all of the empirical analysis of intra-industry trade has dealt with industrial countries. This paper applies the concept of intra-industry trade to developing countries with two objectives. First, we will describe the extent of intra-industry trade done by developing countries and compare this to industrial countries. Secondly, we look more closely at intra-industry trade among developing countries and in particular among the newly-industrialized countries (NICs). Specifically, the paper will address the following questions: How much intra-industry trading is done by developing countries with the world and how does this compare to IIT levels for industrial countries? Is IIT among developing countries higher than in their total trade? Do the NICs do more intra-industry trade than other developing countries? Is it more with each other? Have the levels of IIT in NICs increased considerably between 1968 and 1978? Is the IIT in trade among NICs more concentrated in certain categories of goods such as labor-intensive goods, intermediate goods, or capital goods? Are the NICs in different regions - - East Asia, Latin America - - different in respect of their IIT? Section 2 of the paper discusses the meaning of the liT concept, reviews briefly the above-mentioned debate, and discusses the methodological aspects of measuring IIT. Section 3 looks at how the level of intra-industry trade in developing countries compares with industrial countries. Section 4 focuses on the trade among the NICs, while section 5 considers what products are most important in the intra-industry trade among NICs. Finally, section 6 summarizes the findings.
2. Theory and methodology 2.1. The meaning of intra-industry trade
In a Heckscher-Ohlin world, [rade between two countries is characterized by a greater capital intensity of exports from the country with a higher relative endowment of capital. This is typically expressed in either a 'factorcontent' version in which the capital intensity of the entire bundle of exports is measured, or in the 'commodity version' in which exports of each goods 3Corden (1979) p. 10.
O. Havrylyshyn and E. Civan, lntra-industry trade
255
category are correlated to the capital intensity of each category.4 In such a model, trade flows between two countries are in 'complementary' goods with differing factor intensities, and the bulk of empirical testing since the 'Liontief paradox' findings has been addressed to finding such complementarity. In counterpoint to this view (though not irreconcilably so) some researchers found that a very high proportion of the trade of industrial countries appeared to be trade in similar products, or 'competitive' trade. That is, for a given statistically-measured category of goods (for example, organic chemical, SITC 512) most industrial countries had large flows of both exports and imports. The empirical work of Grubel and Lloyd (1975), though not the first application of the concept of intra-industry trade, is perhaps the most extensive of these and became the focus of discussion about the implications of these results for trade theory. Grubel and Lloyd inferred from the fact of high levels of IIT of industrial countries (50 percent to 60 percent for manufactured goods in 1967) that at best half of trade flows could be explained by the conventional factor-endowments model. The remainder, being two-way trade in similar commodities with presumably similar factor characteristics could not be attributed to differing factor endowments. While some writers expressed doubt that intra-industry trade was in fact trade in commodities with similar factor characteristics [Finger (1975), Lipsey (1976) and Finger and De Roosa (1979) in particular], most trade theorists have agreed that there is some truth in the Grubel and Lloyd contention, and recently several have attempted to develop a theoretical explanation for trade in similar goods: Lancaster (1980), Krugman (1979, 1980), Caves (1980). The dissenting views consist of saying that within a 3-digit SITC category (or 'overlapping trade' as Finger prefers to label it) can still be HeckscherOhlin trade because there is as much if not more variation in factor characteristics within these industry groups as among them. In effect, this suggests the high IIT values may only be a statistical artifact resulting from inadequate disaggregation to capture true industries with unique capitallabor ratios. One may counter this criticism first on a conceptual level. While some IIT would disappear if one defined industries in more disaggregated statistics, some two-way trade in different statistically defined categories may be in goods with the same capital intensity, and in principle therefore nonHeckscher-Ohlin trade. After all, the fundamental point of factor endowment theory pertains neither to arbitrarily defined categories of statisticians, nor to specific end-use characteristics of products, but rather to the factor characteristics of goods. Second, calculations of IIT using more disaggregated data, while they diminish its value, by no means make it small enough to ignore. 4The most recent and thorough theoretical presentation is in Deardorff (1982).
256
O. Havrylyshyn and E. Clean, lntra-industry trade
Thus Gray (1979) finds that disaggregation does not cause the IIT phenomena to disappear, s Finally, one should consider that even as far back as 1967, industrial countries had quite similar factor endowments. It should be no great surprise that a theory explaining trade on the basis of factor endowment differences is not applicable to a large portion of trade among industrial countries. This is not to say the theory of Heckscher-Ohlin is to be ignored, for the critics of IIT are right to some degree. There is a statistical problem, and an overstatement of the extent of such trade. Furthermore, whatever the explanations of IIT, its values are what matter, for IIT is not a theory but an observation. And when such explanations are considered they consist of elements that have either always been a part of the trade theorists' perception - - scale economies, tastes - - or of elements which may add to factor endowment but do not contradict it - - differentiated products, monopolistic competition. Even if the factor endowment theory has become less important in explaining trade among similarly endowed industrial countries, it surely remains important in determining the pattern of trade between developing and industrial countries. As to trade among developing countries, their similar factor endowments should lead one to expect a greater amount of intra-industry trade than in trade with developing countries. However, the overall level of lIT for developing countries may be lower than for industrial ones because production of highly differentiated goods is not very important in such economies, with relatively new industrial sector. Just how much intra-industry trade there is in South-South trade compared to South-North trade is in fact one of the main questions asked by this paper. 2.2. Computation formula and data The data source used in this analysis is the U N trade data classified by the Standard International Trade Classification (SITC) at the 3- and 4-digit levels of aggregation. In this study we have focused our attention on non-fuel manufactured goods only (SITC 5 to 8, excluding 3), and the results are presented for this total or the 1-digit aggregation with 4 groups: Chemical, Basic manufactures, Machinery and transport equipment, and Miscellaneous manufactured goods. The sample consists of 44 developing countries, includ51n the present paper it is also found that liT declines but by no means disappears with dlsaggregation. As shown in the appendix, table A.2, with 3-digit SITC data, the 1978 average for thirteen NICs is 42.0 percent, and with 4-.digit data it is 35.6 percent. Generally, values using 4-digit data arc above three-quarters of those using 3-digit data. Even critics of the IIT concept agree one 'cannot explain away trade overlap .. as the result of failure to systematicallyclassify products' [Finger and De Roosa (1979, p. 223)]. They emphasize rather that no new theory may be needed to explain the phenomenon.
O. Havrylyshyn and E. Civan, lntra-industry trade
257
ing 13 Newly Industrialized Countries (NICs), and 18 Industrial Countries (ICs) as defined in table 2. The basic formula used follows that elaborated by Grubel and Lloyd (1975). In a given trade channel, inter-industry trade, or trade in different products is defined as the absolute value of the difference between exports in a product category (X~) and imports in that category (M~), that is, (1)
inter-industry trade = X ~ - M~.
It then follows that intra-industry trade, or trade in' similar products is given by the value of total trade remaining upon subtraction of inter-industry trade, intra-industry trade = (X i + M,) - I X , - Mi[.
(2)
A more useful measure is the normalized index of intra-industry trade
II T~= [(X, + M,) - Ix,- M,I] 10o%, (xi + Mi)
(3)
which is simplified to
IIT= 1-f ]x'- M,]]-100%.
(3')
L(X,+M,)J
If there is no intra-industry trade, one of X, or M~ will be zero, hence [Xi-M~l/(Xi+Mi) will be equal to one and the index IITi will take a value of zero percent. If all trade is intra-industry, X t = M l, hence [Xi-Ml[=O and the index IIT~ will take a value of 100 percent. The basic data for computations are the 3-digit level of SITC; that is, one begins by calculating IITi for each 3-digit commodity category '/'. We discuss below use of more disaggregated data at the 4-digit SITC level. For purposes of presenting data at a more aggregated level than 3-digit (usually 1-digit), some aggregation formula is needed. As is discussed in Grubel and Lloyd (1975) as well as Aquino (1978), a simple mean of 3-digit IIT~ values will generally overestimate the extent of intra-industry trade because it gives equal weight to all 3-digit categories regardless of their importance in trade. Therefore, we employ the weighted formula as in Grubel and Lloyd. The intra-industry trade index for some aggregation 'A', containing 3-digit '/' components from 1 to n, is
(x,+M,)AIIT-i= x
.
x,-M, i= t
y (x, + M,)
JDE--C
" 100%.
(4)
258
O. Hawylyshyn and E. Ctvan, lm~'a-industry trade
For each country, formula (Y) was used to compute the IIT value for each 3-digit item, and formula (4) was used to calculate the aggregated values shown in the tables. As Grubel and Lloyd (1975) note, and Aquino (1978) elaborates further, an imbalance of total trade may bias the IIT calculations, hence an adjustment needs to be made. It was found that this formula yielded values very close to those using formula (4), hence only the unadjusted ones are reported here for comparability with other studies. Also for comparability, the IIT values calculated using 4-digit SITC are not reported (but are shown in table A.2 for the NICs). As already stated above, the more disaggregated data yield IIT values that are somewhat lower, but not dramatically so. Note further the fairly consistent relation between 3- and 4-digit results (table A.2) for different countries. Given this paper's focus on trade among developing countries, and among NICs particularly, the IIT formula is applied not only to total trade of a country with all partners (labeled as IIT with world), but also to each country's trade with other developing countries only (IIT with DCs) and in the case of NICs also to trade with other NICs only (IIT with NICs). Finally, the years used are 1968 and 1978.
3. The level of intra-industry trade in developing countries If intra-industry trade is a reflection of similar factor endowments of trading partners, greater diversity of production and hence greater heterogeneity of goods both in consumer demand and in supply, one should expect the value of IIT to be lower for developing countries than for industrial countries. This has been demonstrated in Havrylyshyn and Civan (1984) where in a regression analysis, IIT levels across countries are shown to be strongly correlated to the level of per capita income and the product diversity of an economy. Also one should expect IIT to be higher in trade among developing countries than in total trade of developing countries. Both of these expectations are borne out by the aggregate values shown in table I. liT for industrial countries, 58.9 percent, is far higher than for developing countries as a whole, 22.6 percent, and among the latter the more advanced NICs have a higher value (42.0 percent). It is also certainly true that developing countries do more intra-industry trading with each other than with the less similar industrial countries. This is especially true when one considers the non-NIC developing countries: I1T among them is 21.5 percent, while liT in their total trade with the world is 14.5 percent. However, what does not fit the simple expectations is the nature of intraindustry trade of the NICs: for them IIT is lowest for trade with each other (30.5 percent), that is, IIT is lowest for trade with countries that are most similar, contrary to expectations. Their intra-industry trade with all developing countries is slightly lower than for total trade. If one excludes the three
O. Havrylyshyn and E. Civan, lmra-industry trade
259
Table 1 Intra-industrytrade of industrial and developingcountries (1978, percent)?
Industrial countriesb (ICs) Developingcountries (DCs -- sample of 44) Non-NIC developingcountries Newly-industrializedcountries (NICs)
Total trade
Tradewith DCs only
Trade with NICs only
58.9
--
--
22.6 14.5
26.4 21.5
---
42.0
38.0
30.5
aSource: computations of World Bank, U.N. trade data tapes; definition of country groups is shown in table 2. bIreland is defined as industnal while Spain is defined as a developing NIC, following the groupings used by the World Bank for 1978. However, the IIT values shown are very little affected by including both in the same group, be it IC, DC or NIC.
most industrialized NICs - - Spain, Yugoslavia and Israel, which also are Southern Mediterranean countries with considerable trade ties to Europe - the value in the NICs row of table 1 are, respectively, 38.1 percent, 38.9 percent and 33.7 percent. That is, the difference between IIT with world and IIT with DCs is insignificant but, what remains conclusively is the indication that intra-industry trade of NICs with each other is lower, and not higher than with other countries. The conclusion that IIT is higher among non-NIC developing countries than in their trade with other partners is consistently supported by the individual country estimates (see appendix, table A.1). Of 31 cases, only four show the reverse relation. Three of these (Morocco, Sri Lanka, Tunisia) are among a group of second-generation exporters recently identified as the closest followers of the NICs, ~ while the fourth, Nigeria, has such low values (0.19 and 0.30 percent) that the comparison is insignificant. 4. Intra-imlmtry trade of NICs 4.1. Two-way trade among N I C s and trade policies
Though IIT among the NICs is lower than in their trade with other countries, it is still higher than the liT of non-NICs with developing countries (30.5 percent vs. 21.5 percent). This is not surprising. To the extent IIT is trade in differentiated products, it is more likely to be important for economies that are well along on the industrialization path. eS¢¢ Havl'ylyshynand Alikhani(1982).
"Source" as
in table 1.
14.5
All non-NICs
NICs
42.0
42.3 37~8 21.1 40.8 37.4 61.9 34.9 31.9 32.8 66.9 52.1 34.7 50.7
Argentina Brazil Greece Hong Kong India Israel Korean Rep. Mexico Portugal Singapore Spain Taiwan, China Yugoslavia
13.9 6.6 32.4 10.9 0.2 14.8 10.3 15.0 18.7 4.8 0.8 17.3 14.3 17.3 7.9
Kenya Malawi Malaysia Morocco Nigeria Pakistan Peru Philippines Sehegal Sri Lanka Sudan Thailand Trinidad Ttmisia Turkey
Algeria Cameroon Central African Rep. Chile Colombia Costa Rica Dominican Rep. Egypt El Salvador Ghana Guatemala Guyana Haiti Ivory Coast Jamsica Jordan
1.5 6.1 0.7 10.1 20.0 3?_4 6.9 6.8 33.0 4.3 3?_7 19.6 46.3 13.4 14.4 14.9
Newly industrialized countries
Non-NIC developing countries
Table 2 Intra-industry trade indices by country, 1978 (peroea0."
All ICs
58.9
Australia 25.3 Austria 74.1 Belgium-Lux~ 79~ Canada 66.9 Denmark 67.0 Finland 45A FranQe 80.3 Germany 62.7 Ireland 61.3 Italy 59.0 Japan 26.0 Netherlunds 74~ New Zealand 25.9 Norway 44.4 ~ 68.3 Swit~rland 59.5 U.K. 81.0 U.S.A. 59.4
Industrial countries
!
L
t,d
O. Havrylyshyn and E. Civan, lntra-industry trade
261
Those NICs with highest values of intra-industry trade with other NICs do not generally have the highest intra-industry trade with the rest of the world, as is evident from a comparison of the rankings in the first and last columns of table 3. Indeed, the groupings are quite evident. All three Latin American NICs have higher HT with other NICs than in total trade. In contrast, all four East Asian cases have lower IIT with other NICs than in total trade (except Houg Kong in 1968), as do all five Mediterranean countries. This corresponds reasonably well to the common perception grouping inward-looking and outward-looking economies: the Latin American economies tend to be import-substituting, more inward-looking than East Asia and the Mediterranean. India, perceived as very much of an import-substitution case, belies this simple correlation, as its intra-industry trade with NICs is in fact far lower (15.1 percent) than with all countries (37.4 percent). 7 Another complication is that the Mediterranean countries are geographically so close to Europe and so far from other NICs that one Table 3 Intra-industry trade, newly indusmalized countries, 1978 (percent, ranked by level of IIT with NICs)." Trade with NICs
World
Rank by liT with NICs 1978
Country
1978
1968
1978
1968
Rank by IIT with world 1978
1 2 3 4 5 6 7 8 9 10 11 12 13
Brazil Argentina Singapore Mexico Hong Kong Korea Taiwan, China Portugal Spain Israel Yugoslavia India Greece
51.4 48.7 47.1 42.2 34.7 29.4 28.0 28.0 24.6 18 3 16.4 15.1 12.3
34.4 30.5 22.1 25.9 39.0 15.2 15.5 32.4 26.9 7.7 13.5 17.0 13.3
37.8 42.3 66.9 31.9 40.8 34.9 34.7 32.8 51.1 61.9 50.7 37.4 21.1
14.8 21.0 53.0 20.1 35.7 15.1 30.1 36.7 39.1 51.7 68.0 15.6 15.6
8 5 1 12 6 9 10 11 3 2 4 7 13
30.5
22.6
42.0
32.0
Unwelghted average
"Source: as m table 1.
7India's inclusion in the NIC category may be questioned; the ex ante rationale., as discussed m Havrylyshyn and Wolf (1982) is that despite the low industrial share, India's industry bulks quite large in developing country totals. In the values of IIT shown here India is dearly more in the NIC range than in the DC range, which to some extent vindicates its inclusion in the NIC category.
262
O. Hatrylyshyn amt E. Citam, lntra-iadustry trade
might expect not only less trading with N I C s but perhaps even less two-way trading in similar products, s It is clear from table 4 that the high Latin American intra-industry trade is quite loca liT~ed within Latin America, m u c h m o r e so than is the case for East Asia. Balassa (1979) attributes this to the regional integration agreements. It is evident that for the three advanced Latin American countries that are included in the N I C s category, intra-industry trade is m u c h higher than for East Asian economies, Also, intra-industry trade a m o n g the three Latin American countries is a b o u t as high as for their trade with all N I C s (45.3 percent vs. 42.4 percent), while for East Asia intra-industry trade a m o n g them is distinctly lower (25.2 percent vs. 44.5 percent). As always in comparisons of Latin American and East Asian trade phenomena, it is not easy to disentangle the influence of trade agreements and trade re~raes, yet the implication is strong that countries with better export performance based it relatively more on S o u t h - N o r t h trade, while economies which did relatively m o r e two-way trading a m o n g themselves did Table 4 Intra-industry trade index, Latin America and East Asia (1978, percent). Intra-industry trade with Latin American NlCs
East Asian NICs
Latin America
Argentina Brazil Mexico Mean
55.5 53.9 56.6 55.3
R
m
East Asia
Hong Kong Korea Singapore Taiwan, China Mean
23.2 23.1 32.4 22.1 25.2
SA final qualification is methodological: IIT will tend to be higher the larger the partner group, because it is more likely that trade in any given SITC category will be less balanced with a single partner than with a large number of partners. This caveat makes it more ditlicalt to conclude that the East Asian and Mediterranean NICs truly do less intra-indnstry trading with other NICs than with the world as a whole. However, it strengthens the conclusion that developing countries do more intra-industry trading with each other than with the rest of the world. As to the contrast between Latin American and other NICs, this caveat is not pertinent since the comparison is of the degree to which IIT-HICs differs from HT-worid. If anything this methodological fact makes more emphatic the observation that Latin American NICs do much more intra-industry trading with other NICs than with the rest of the world.
O. Hwaryly~hynand E. Citron, lntra-industry trade
263
not do as well in overall export performance. Note that the level of IIT globally is not very different for East Asian NICs compared to Latin American ones (34.8 percent vs. 37.3 percent, averaged from values in table 3), and that both of these are lower than the comparable value for the more advanced Mediterranean economies (49.3 percent). 4.2. Change in two-way trade among N I C s
Between 1968 and 1978, the NICs generally experienced an increase in the amount of intra-industry trade. For their total trade this went from 32.0 percent to 42.0 percent (see table 3). In comparison, IIT of industrial countries, which was measured by Grubel and Lloyd (1975) in 1967 as 48 percent, increased to 53.5 percent. 9 But not all NICs experienced an increase in the level of intra-industry trade - - Portugal and Yugoslavia saw a decline in IIT with the world, and Hong Kong, Portugal, Spain, India, and Greece did so for IIT with NICs, though only moderately. It is noteworthy that while the East Asian economies had, at the end of the period, generally far lower values of IIT than Latin American ones, they experienced a much more rapid increase in their intra-industry trade with NICs, with the exception of Hong Kong. Excluding Hong Kong, the value of IIT for East Asian NICs doubled from 17.5 percent to 34.8 percent compared to a change for Latin America from 30.3 percent to 47.4 percent. It may very well be that successful export expansion brings in its train an increase in the amount of intra-industry trade. This is of course consistent with the underlying theory that IIT reflects product diversification in an advanced and more sophisticated economy. As an economy develops, its product lines diversify and consequently it engages in more and more intraindustry trade. In the East Asian NICs this appears to have been the sequence. In Latin America the sequence may have been reversed: intraindustry trade among these countries was increased early (in the sixties), probably as a result of trade diversification via Lafta, and industrial development and diversification came only later, l° Perhaps this reversal of the sequence goes some way towards explaining the poorer export performance of these countries. It is one thing to say increased trade in similar or competitive goods (IIT) is a sign of advanced industrialization, and another to suppose one can achieve advanced industrialization by pushing up the amount of trade in similar goods. The question of what types of products are found in the intra-industry trade of the NICs is addressed in the next section.
9This last value ts differentfrom that m table 1 because Grubel and Lloyd'swork covered only 10 countries. t°Data in Willmore's(1979) paper suggest a peaking of IIT for Central Americaabout 197273. See table 1, p. 191 in Wlllmorefor tires, and table 4, p. 192 for cement.
O. Havrylyshyn and E. Cimn, lntra-industry trade
264
Table 5 Intra-industry trade by product group, industrial countries and NICs? Industrial countries 1967
Trade among NICs 1968
1978
SITC code
Product group
~
Rank
~
Rank
~
Rank
5 6 7
Chemicals Basic manufactures Machinery and transport equipment Miscellaneous manufactured goods Goods not classified
66 49
1 5
31.7 15.9
2 5
40.8 20.7
1 5
59
2
29.4
4
39.3
3
52 55
4 3
31.2 30.5
1 3
40.3 28.3
2 4
8 9 Weighted mean Simple mean
(n.a.) 56.2
22.6 27.7
30.5 33.9
"Source: Grubel and Lloyd (1975, table 3.2) for industrial countries; as in table 1 for trade among the NICs.
5. Products in intra-indus~ry trade Earlier work on intra-industry trade among industrial countries found, as for example in table 5, that the highest degree of such trade occurred in chemicals, then machinery and transport equipment, miscellaneous manufactures (mostly finished goods) and least in basic manufactures (mostly intermediate goods). The pattern for intra-industry trade among the NICs is broadly similar, except that in 1968 machinery was lower on the list but became by 1978 more important, though still lower than finished goods (SITC 8). More useful categorizations than the SITC 1-digit grouping of table 5 consist of dividing all goods by production characteristics and end-use characteristics. First, a distinction is made between capital-intensive and labor-intensive goods. Second, a mutually exclusive distinction is made between intermediate, investment and consumption goods. The allocation of SITC 3-digit categories into these two groupings is shown in the appendix, table A.3. From table 6 which shows the values of IIT by these groupings and by country, it is first of all clear that labor-intensive goods have a low IIT value. Indeed, when the Mediterranean countries close to the EEC are excluded, IIT in labor-intensive goods is considerably lower than in capital-intensive goods (33.9 percent vs. 46.8 percent). Also investment goods have a much higher intra-industry trade index (39.8 percent) than do intermediate goods (31.0%) or consumption goods (the latter are not shown). This difference for
O. Havrylyshyn and E. Civan, lntra-industry trade
265
Table 6 Intra-industry trade among NICs by type of good, 1978 (percent)." Capital intensive
Labor intensive
Intermediate
Investment goods
40.7 57.2 4.1 40.0 21.8 42.1 38.4 48.7 38.5 67.6 23.2 44.4 14.4
55.7 56.7 18.3 34.0 12.9 16.1 27.6 42.6 29.6 39.3 28.9 24.5 22.2
47.5 50.0 27.7 21.9 9.5 16.4 27.9 38.9 29.8 42.4 36.3 34.2 20.2
56.1 63.6 2.1 38.1 453 42.5 49.5 45.6 24.0 74.2 14.2 50.0 I 1.7
Average 13 NICs
37.0
31.4
31.0
39.8
Average 10 NICs (excl. Greece, Spain, Yugoslavia)
46.8
33.9
31.9
48 9
35.5
64.5
27,4
28.2
Argentina Brazil Greece Hong Kong India Israel Korea Mexico Portugal Singapore Spain Taiwan Yugoslavia
Share of total trade among NICs
"Source" computed from U.N. trade data tapes.
investment goods is even more apparent if one excludes the three Mediterranean countries in which two-way trade of investment goods is lower than of intermediate goods: Greece, Spain and Yugoslavia. Then the values are 48.9 percent vs. 31.9 percent. It is noteworthy that for the other ten countries the pattern is consistent. There is greater intra-industry trade in goods that are capital-intensive in production, compared to those that are laborintensive, and also there is greater intra-industry trade in goods used for investment compared to those used as intermediate inputs, or for consumption. However, it should be emphasized that the much higher IIT index for investment goods and capital-intensive goods does not necessarily mean that there is a large trade in such goods among the NICs. Of all the trade that does occur among the NICs, 35.5 percent is in capital-intensive goods while 64.5 percent is in labor-intensive goods. By end-use categories these shares are 27.4 percent for intermediate goods, 28.2 percent for investment goods and 44.4 percent for consumer goods. In sum, investment goods and capitalintensive goods make up a third or less of trade among the NICs, but trade in these categories has a much greater tendency to be two-way trade or trade in 'similar' products, than is the case for labor intensive goods, or intermediate goods and consumer goods.
266
O. Havry|yshyn and E. Cimn, lntra-industry trade
The specific products which have highest levels of IIT in trade among the NICs are organic chemicals, office machines, machinery of various types, primary forms of iron and steel, and for a few countries (Brazil, India, South Korea, Yugoslavia) road vehicles, and ships and boats. On the whole, products with high IIT are more 'sophisticated' goods in some sense of that word. The items that loom largest in the export by NICs - - clothing, footwear, toys and sporting goods, handbags, glassware, tend to have very low levels of IIT among NICs. Only Hong Kong, South Korea and Spain have clothing among the ten products with highest I1T. Textiles yarn and fabrics do appear more frequently however. Indeed, while intermediate goods as a group do not have high IIT (table 6), some specific products do. Thus, among the items that most frequently recur in the list of top ten are chemicals, glass, leather, iron and steel forms, textile yarn, fabrics, in addition to various types of machinery and equipment including vehicles. That is, goods with capital intensive production, and/or investment goods are most important in two-way trade among NICs. However, it is necessary to repeat that while investment goods are items in which the greatest reciprocity in trading occurs (as measured by the degree of overlap on the IIT index), they comprise a relatively small part of total trade among the NICs as already observed. Furthermore, their importance becomes almost paltry in comparison to the total of manufactured goods exports by these countries. It was noted earlier that investment goods exports by NICs were 28 percent of exports to other NICs. Since for these countries total exports to NICs are on average only 6.2 percent of exports to the world, exports of investment goods by NICs to each other are merely 2 percent of their total world exports. For capital-intensive goods this is slightly higher, perhaps 2.5 percent.
6. Summary and conclusions With the exception of Argentina, Israel and Taiwan, the trade of individual NICs with other NICs is well below 10 percent of their total exports. On average, the exports of NICs to other NICs are about 6 percent of their total exports of manufactured goods, very close to what one might expect simply on the basis of market size, as the 13 NICs account for 6-7 percent of the world's GNP. 11 Of the trade that NICs do with each other a sizeable but not major part - - about 31 percent - - is in the form of intra-industry or 'competitive' trade. This is much lower than for trade among industrial countries, but that is not surprising as it has been shown elsewhere that intra-industry trade varies with the degree of development. What is rather 11Calculated from World Bank, World Development Report, 1980.
O. Hat,rylyshyn and E. Civan, lntra-industry trade
267
unexpected is that the level of intra-industry trade is lower for NICs trade with each other than it is for NICs trade with the world. That is, contrary to expectations, the NICs which are similar to each other do less two-way trading with each other than they do with other dissimilar countries. The Latin American countries, which were the members of regional trade groups, are an exception to this. Their intra-industry trade with each other is higher than with the rest of the world, and the trade diversion in the integration schemes probably accounts for this~ But given the costs of trade diversion, the higher intra-industry trade in Latin America may not be beneficial. Where intra-industry among NICs is high, however, is in products that are capital-intensive and products used as investment goods. This is consistent with the expectations noted at the outset of the paper. However, while the degree of intra-industry trade of such goods among NICs is higher than it is for labor-intensive goods or intermediate and consumer goods, the volume of trade is considerably lower. If there is a potential for competitive trade in capital intensive goods and investment goods among the NICs, it has so far not yet been exploited. It is difficult to believe that this is so because producers and policymakers in these countries have been unaware of this and need to be sensitized to active policy stimulating economic cooperation among them. One possible explanation may be that barriers to trade among NICs keep the volume low. The principal barriers that might exist are bias against NIC-NIC trade in transport and commercial-financial costs, or tariff and other domestic protection. The bias argument is not easy to resolve but it is surely less plausible for NIC-NIC trade than for other South-South trade, as all these countries are on well established transport routes, have substantial port and road infrastructure, and had by 1978 a substantial international trading network. Furthermore, empirical evidence for transport bias examined by Langhammer (1982) suggests it does not exist for Brazil. Tariffs, in contrast (or protection broadly speaking) clearly are very high. A recent survey of effective protection studies for 35 developing c o u n t r i e s 12 finds the rates for machinery to be 56-115 percent, and for all industries 66 percent. But even this is not an adequate explanation, unless the protection is discriminatory against developing countries, for in the imports of investment goods by NICs, it is found that only 5 percent come from other NICs, a proportion below that for all manufactures (7 percent). Thus, industrial countries clearly outcompete NICs in sales of machinery to NICs. This should not be a surprise. The global comparative advantage of NICs is probably still largely in labor-intensive consumer goods sold to industrial countries. A lesser degree of comparative advantage exists in selling some labor-intensive, intermediate (and probably differentiated) products to each 12Havrylyshyn and Alikhani (1982b).
268
O. Havr3dyshyn and E. Ciran, lmra-indu~ry trade
other, in the form of intra-industry trade. But so far NICs still have a comparative disadvantage in investment goods and capital-intensive goods, even in each other's markets. All this does not preclude the future possibility of rapid expansion for intra-industry trade of NICs in goods of a slightly more sophisticated nature such as machinery. However, short of a convincing argument that there exist considerable dynamic benefits of the learning-by-doing variety in this trade, one must conclude that such an evolution will come largely on its own and without any ex ante policy to promote its early arrival. This is not to say the 'dynamic benefits' argument cannot be made, ~3 rather that it still lacks a sufficient weight of empirical evidence to be widely accepted. 13Probably one of the best statements is in Westphal (1982). But he is very cautious in his conclu~ons noting only that some benefits of ~c.hnological mastery' have occurred, but that one must also weish the costs of policies promotingdomesticindustries.
O. Havrylyshyn and E. Civan, lntra-imiustry trade
269
Appendix
Table A.1 Intra-industry trade of developing economies (DCs), 1978 (percent). Imra-indus t ry trade index with World
DCs
Algeria Argentina Brazil Cameroon Central African Repubfic Chile Colomb ia Costa Rica D o m i n i c a n Republic Egypt E1 Salvador Ghana Greece Guatemala Guyana Haiti Hong Kong India Israel Ivory Coast Jamaica Jo rd an Ken ya Ko rea Malaya Malay si a Mexico Morocco Nigeria Pak istan Peru Philippines Portugal Senegal Singapore Spain Sri L a n k a Sudan Taiwan Thailand Trinidad Tumsia Turkey Yugoslavia
1.47 42.33 37.84 6.14 0.74 10.09 20.01 32.44 6.90 6.82 33.03 4.30 21.12 32.65 19.57 46.33 40.82 37.41 61.85 13.44 14.39 14.92 13.87 34.91 6.58 32.41 31.91 10.85 0.19 14.78 10.31 15.03 32.78 18.65 66.90 52.13 4.80 0.84 34.74 17.34 14.33 17.26 7.94 50.68
1.49 49.13 43.60 8.79 0.74 15.61 27.90 43.74 10.09 7.65 42.80 5.29 31.94 43.25 34.99 48.68 33.62 22.75 38.30 36.94 23.30 18.39 36.68 26.31 9.14 50.01 38.73 8.73 0.30 28.16 13.62 19.13 42.52 38.97 74.94 35.12 4.02 1.05 25.67 35.32 22.37 12.32 17.23 31.81
Unadjusted mean
22.58
26.38
NICs -
-
48.69 51.43 ---------12.31 ---34.66 15.12 18.27 ----29.37 --42.23 -----28.01 -47.13 24.64 ---28.02 ---16.36 30.5
270
O. Havrylyshyn and E. Civan, lntra.industry trade
Table A.2 Intra-industry trade of NICs (3-digit and 4-digit calculations, 1978). Intra-industry trade with NIC8
Singapore Argentina Brazil Mexico Hong Kong Taiwan Korea Spain Portugal Israel Yugoslavia Greece India Average
World
3d
4d
3d
4d
47.1 48.7 51.4 42.2 34.6 28.0 29.4 24.6 28.0 18.3 16.3 12.3 15.1 30.5
38.7 35.7 34.8 34.6 31.9 23.5 21.2 17.0 16.8 16.1 12.1 10.4 9.9 23.3
66.9 42.3 37.8 31.9 40.8 34.7 34.9 52.1 32.8 61.9 50.7 21.1 37.4 42.0
59.6 32.0 27.4 26.9 36.9 28.4 29.0 46.0 24.4 58.0 44.0 18.5 32.1 35.6
Table A.3
Commodity groups.* Commodity group Intermediate goods Labor-intensive
SITC groups
Capital-intensive
5 (excl. 515, 54, 55), 61, 621, 63, 641, 662, 663, 664, 693, 694 661, 691, 692, 698, 812
Capital goods Labor-intensive Capital-intensive
695, 712, 714, 715, 717, 718, 719, 731, 733, 861 711, 722, 723, 726, 729, 732, 734, 735
Consumer durables Labor-intensive Capital-intensive
667; 697, 82, 83, 864, 891, 897 724, 725, 862, 863, 896
Consumer non-durables Labor-intensive Capital-intensive
64, 65, 665, 666, 696, 84, 85, 892, 893, 894, 899 54, 55, 629, 895
~Source: UN Broad Economic Categories.
O. Havrylyshyn and E. Civan, lntra-industry trade
271
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