Intra-industry trade
Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Intra-industry trade is when a country exports and imports similar products from the same industry at the same time. Endowment theories such as Heckscher-Ohlin cannot explain it, because both countries often have similar resources. New trade theory explains it through economies of scale and consumers' love of variety.
Example
Germany and Japan both export cars to each other and import cars from each other. Buyers in each country want different models and brands.
Don't confuse with
- Inter-industry trade: swapping goods from different industries, such as England's cloth for Portugal's wine. This kind of trade comes from comparative advantage or factor endowments.
Related concepts
- Absolute advantage
- Comparative advantage
- Gains from trade
- Autarky
- Heckscher-Ohlin theory
- Stolper-Samuelson theorem
- Leontief paradox
- New trade theory
- Gravity model of trade
- Entrepot trade