Question

1. What is intraindustry trade how is it measured, and how does it differ from interindustry trade? Are the gains from trade similar?

2. What are the theoretical justifications for targeting the development of specific industries?

Answer 1

1.

Intra-Industry trade way trade inside industries
A measure of the intra-enterprise exchange that takes place between countries is the Grubel-Lloyd (GL) index.

E.G. If a nation only exports or imports good X (e.G. Sugar) then the GL index for that sector is equal to 0. On the other hand, if a country imports precisely as so much of fine X because it exports, then its GL score for sector can be 1.

Intra-industry trade and stages of development
Developed economies and swiftly industrialising constructing economies (e.G. Hong Kong, China; Singapore; Malaysia and Thailand) tend to have interaction in additional intra-industry exchange

useful resource-wealthy establishing economies and less Developed international locations are likely to have relatively little intra-industry trade

Economies equivalent to Malaysia and Thailand have extra intra-enterprise exchange with different setting up nations within the identical neighborhood

Japan has more intra-enterprise trade with constructing economies it's web importer of commodities and additionally it is geographically almost a number of emerging "industrialized" nations reminiscent of South Korea. There is more and more severe competitors between jap and South Korean manufacturing conglomerate businesses

A most important development theme in latest years has been for nations to construct a deeper stage of complexity into their economic climate.

Intra-industry trade for constructing international locations

We notice that bad international locations, even supposing equivalent in terms of sales, alternate much much less with each different in comparison with wealthy international locations

countries where total labour and capital productiveness is low have curb wages and produce less differentiated goods and offerings

Many of those international locations are heavily reliant on a small number of products this offers rise to main product dependency.

Intra industry trade is the trade that occurs between goods of the same industry. Take an example of automobiles.

The exchange between the United States and Japan that happens specifically for automobiles can be called as Intra industry trade.

On the other hand, inter industry trade is the trade among different industries which takes place.

The gains from both are different in the sense that one allows for similar product exchange and therefore the knowledge among participating people is shared and similar therefore chances of an unfair trade happening is relatively low.

On the other hand in an Inter Industry trade the participating nations or people are often unaware of the other industry and vice versa. This allows them to focus on the product which they can manufacture in abundance and exchange it for other products or services.

In my view, trade rather allows for higher efficient industries to take place in the long run. Historical data has clearly indicated that when there was a system in which countries did not engage in active trade, technological advancements were relatively poor.

Even if we considered an economy which produced only a specific product, the trade would make it possible to share its knowledge with others and therefore increase efficiency.

I do not think that trade in any way hampers efficiency in industry. It rather has shown over a period of time that rising demand and capital availability among companies leads to more efficient Industries in the long run.

The only thing that prevents efficient industry rather is a protectionist approach towards industries and discouraging trade. This can primarily be seen in countries like India which followed such a strategy earlier post-independence till the 1990's when it was on the verge of being bankrupt.

Post then, once trade rules were relaxed it has produced more efficient industries than many others which yet follow a protectionist approach.

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