Intra Industry Trade

In the era of fifties sixties and seventies trade among the advanced countries grew at a fastest rate and it was in similar but differential manufacturing products.

Intra-industry made implies overlapping trade in a particular commodity. The extents of intra- industry trade Amy be measured thus

IIT₁ = 100 [(X₁ + M₁) – (X – M₁)/(X₁ + M₁)]

where, IIT₁ = intra- industry trade in commodity 

X₁ = value of exports of commodity j

M₁ = value of imports of commodity j

For example, exports of cars equal $15 million and imports of cars $10 million in a country, then intra industry trade in this case is:

IIT₁ = 100 [(15 + 10) – (15 – 10) / (15 + 10)]

= 100 [(25-5)/25] = 100 (21/2)
         
= 80%

This index can be used for comparing across countries of the digress of intra industry trade.

IIT represents a growing share of total trade, especially among the high – income industrialized nations.

Malaysia IIT index: 32%

Thailand: 17%

Pakistan: 15%

India: 37%

Canada : 67%

U.K: 81 % 

Average: LDC: 15%; NIC: 42%

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