Question

The following Table shows the top twelve product categories of bilateral trade between the US and Canada for the year 2010. In view of this table answer the questions that follows.

Merchandise Trade between US and Canada: Year 2010

US Exports to Canada	Value ($billions)	US Imports from Canada	Value ($billions)
Motor Vehicles	$20.6	Oil & Gas	$63.9
Motor Vehicle parts	$19.3	Motor Vehicles	$36.5
Agricultural Construction Machinery	$7.3	Petroleum/Coal Products	$15.0
Iron/Steel/Ferroalloy	$6.7	Motor Vehicle Parts	$11.9
Basic Chemicals	$6.1	Nonferrous Metal	$10.3
Petroleum /Coal Products	$5.7	Pulp/Paper/Paperboard	$8.0
Resin/Synthetic Rubber/Artificial Fiber	$5.7	Basic Chemicals	$7.5
Plastic Products	$4.9	Aerospace Products & Parts	$6.3
Oil & Gas	$4.6	Aluminum	$6.0
Engines/Turbines/Power Transmission Equipment	$4.4	Iron/Steel/Ferroalloy	$5.4
Aerospace Products	$4.4	Pesticides/Fertilizers/Agricultural Chemicals	$4.4
Pharmaceutical Medicines	$4.0	Plastic Products	$4.1

2a) Based on the table above, what was the value of total trade between the US and Canada in 2010? Show your calculations.

2b) What percentage of the total trade described above in the table was intra-industry trade? Show the industries you think were engaged in intra-industry trade and show your calculations.

2c) What percentage of the total trade wasinter-industry trade? Identify the industries that were engaged in inter-industry trade and show your calculations.

2d) Calculate Inter-industry Trade Index for each of the industries you identified in question (2b). Show your calculations in detail.

2e) Which industry had the highest intra-industry index? Also indicate if the balance of overall

US trade was positive or negative in 2010; Explain how you know and show calculation.

Answer 1

[a] Total trade for USA [with canada] = Total export + total import

= 93.7+179.3 =$ 273billion

Thus, USA is net imported of goods and services worth $85.6billion from canada.

US Exports to Canada	Value ($billions)	US Imports from Canada	Value ($billions)
Motor Vehicles	$20.60	Oil & Gas	$63.90
Motor Vehicle parts	$19.30	Motor Vehicles	$36.50
Agricultural Construction Machinery	$7.30	Petroleum/Coal Products	$15.00
Iron/Steel/Ferroalloy	$6.70	Motor Vehicle Parts	$11.90
Basic Chemicals	$6.10	Nonferrous Metal	$10.30
Petroleum /Coal Products	$5.70	Pulp/Paper/Paperboard	$8.00
Resin/Synthetic Rubber/Artificial Fiber	$5.70	Basic Chemicals	$7.50
Plastic Products	$4.90	Aerospace Products & Parts	$6.30
Oil & Gas	$4.60	Aluminum	$6.00
Engines/Turbines/Power Transmission Equipment	$4.40	Iron/Steel/Ferroalloy	$5.40
Aerospace Products	$4.40	Pesticides/Fertilizers/Agricultural Chemicals	$4.40
Pharmaceutical Medicines	$4.00	Plastic Products	$4.10
Total export	93.7	Total import	179.3

[b]

Intra trade industry are here those industries that are having products of same industry but in different countries

Here intra industry are :

1. Motor vehicles
2. Motor vehicle parts
3. Iron/Steel/Ferroalloy
4. Basic chemicals
5. Petroleum/coal products
6. Plastic products
7. Oil & Gas
8. Aerospace products

Intra Trade industry	Export	Import	NET
1. Motor vehicles	$20.60	$36.50	($15.90)
2. Motor vehicle parts	$19.30	$11.90	$7.40
3. Iron/Steel/Ferroalloy	$6.70	$5.40	$1.30
4. Basic chemicals	$6.10	$7.50	($1.40)
5. Petroleum/coal products	$5.70	$15.00	($9.30)
6. Plastic products	$4.90	$4.10	$0.80
7. Oil & Gas	$4.60	$63.90	($59.30)
8. Aerospace products	$4.40	$6.30	($1.90)
Total	72.3	150.6	($78.30)

Total intra trade = 72.3 +150.6 = $222.9 billion

Thus total intra industry trade to total trade = [222.9 / 273]*100 = 81.648%

[c] Assumed here as data is absent whether intra trade industry are only intra trade or they behave as inter trade to.

So, it is assumed that industries left apart from intra trade industries are categorized as inter state industry.

Inter trade industry	Export	Import	Net
Agricultural Construction Machinery	$7.30		$7.30
Resin/Synthetic Rubber/Artificial Fiber	$5.70		$5.70
Engines/Turbines/Power Transmission Equipment	$4.40		$4.40
Pharmaceutical Medicines	$4.00		$4.00
Nonferrous Metal		$10.30	($10.30)
Pulp/Paper/Paperboard		$8.00	($8.00)
Aluminum		$6.00	($6.00)
Pesticides/Fertilizers/Agricultural Chemicals		$4.40	($4.40)
Total	21.4	$28.70	($7.30)

So, the industires left apart from intra trade industry are inter trade insduatry.

Total inter trade industry = Total trade - total intra trade = 273 - [222.9] = $ 50.1 billion.

Thus percentage =[ 50.1 / 273]*100 = 18.352%

[d] Inter trade index = (1-[Net inter trade]/ [Total inter trade])(total inter trade / total trade)

=(1-[-7.30 / 50.1])(50.1/273) = 1.1457*0.1835 = 0.210