Intra-industry Trade

During the two decades 1963–83, the value of total world exports increased by $1653 billion (from $154 billion in 1963 to $1807 billion in 1983). About 60 per cent of the 1983 total was exports of manufactured products. Since about 1963, the newly industrialising countries (NICs) have joined the league of exporters of manufactures, and by 1983 the World Bank’s World Development Report indicates that its category of non-oil developing countries is responsible for 11 per cent of total manufactured exports. However, in spite of this surge by the NICs, trade in manufactures still remains largely the domain of the traditional industrialised countries since they still account for 78 per cent of total exports of manufactures. More important, however, is the fact that in 1983, 53 per cent of this trade was within, as against between, industries: advanced nations tend to export as well as import manufactured products; for example Japan, the UK and the USA all both import and export cars. This phenomenon is referred to as intra-industry trade (IIT) to distinguish it from the inter-industry trade which is the concern of the HOS model. But, as already suggested, although IIT is largely confined to countries with high per capita income, it does figure and is fast becoming of increasing significance in the trade between the less developed countries (LDCs).