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Revealed Comparative Advantage, Intra‐industry Trade and the US Manufacturing Trade Deficit with China

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  • Guobing Shen
  • Anthony Yanxiang Gu

Abstract

This paper uses 4‐digit SITC data to identify groups of manufactured goods exported from China to the USA that have strong or rising comparative advantages. We find that most of the trades are inter‐industry, with only a small portion being vertical intra‐industry trades (IIT). Our results confirm that Sino‐US trade is complementary. We construct an imbalanced index of IIT, and identify the goods groups that aggravate and reduce the US trade deficit with China. We suggest an approach for calculating a dynamic IIT index that might mitigate the aggregation bias of the existing methodologies. Our improved index reveals that the dynamic imbalances of US‐Chinese IIT in manufactured goods are worse than their static IIT imbalances, which means that it would be difficult to correct the deficit of US trade with China in the following couple of years. Adjusting and improving the structures of industries and products is China's major task for sustainable trade growth.

Suggested Citation

  • Guobing Shen & Anthony Yanxiang Gu, 2007. "Revealed Comparative Advantage, Intra‐industry Trade and the US Manufacturing Trade Deficit with China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(6), pages 87-103, November.
    • Handle: RePEc:bla:chinae:v:15:y:2007:i:6:p:87-103
    DOI: 10.1111/j.1749-124X.2007.00094.x
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    References listed on IDEAS

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    1. David Greenaway & Robert Hine & Chris Milner & Robert Elliott, 1994. "Adjustment and the measurement of marginal intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(2), pages 418-427, June.
    2. Marius Brülhart, 1994. "Marginal Intra-Industry Trade: Measurement and Relevance," Economics Technical Papers 942, Trinity College Dublin, Department of Economics.
    3. Luca DE BENEDICTIS & Massimo TAMBERI, 2002. "A note on the Balassa Index of Revealed Comparative Advantage," Working Papers 158, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Clive Hamilton & Paul Kniest, 1991. "Trade liberalisation, structural adjustment and intra-industry trade: A note," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(2), pages 356-367, June.
    5. Greenaway, David & Milner, Chris R, 1983. "On the Measurement of Intra-Industry Trade," Economic Journal, Royal Economic Society, vol. 93(372), pages 900-908, December.
    6. Michael Thorpe & Zhaoyang Zhang, 2005. "Study of the Measurement and Determinants of Intra‐industry Trade in East Asia," Asian Economic Journal, East Asian Economic Association, vol. 19(2), pages 231-247, June.
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    Cited by:

    1. Sawyer, William C. & Sprinkle, Richard L. & Tochkov, Kiril, 2010. "Patterns and determinants of intra-industry trade in Asia," Journal of Asian Economics, Elsevier, vol. 21(5), pages 485-493, October.

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