Intra Industry Trade Factors

A number of factors can be attributed to the emergence of intra-industry trade such as:

1. Trade in homogenous goods for re-exports. A country may import goods in bulk In order to re-export to other countries. Foreign trade of Hong Kong and Singapore in electronic goods importing from Japan and exporting to Malaysia, Thailand Indonesia, etc is of this type.

The areas between the two cost rations determine the regions of mutually beneficial trade for the countries.

Actual trade will depend on the relative demand factors for the concerned goods in two countries.

2. Agricultural goods are exported in post harvest and imported in harvest seasons by a country.

3. Cross border trade

4. Differentiated products.

Usually intra industry trade takes place in a very large volume between developed nations possessing similar range of development skill levels, and factor endowments especially in manufactures good with a high degree of sophistication and product differentiation whose production function is based on increasing returns ot scale, or decreasing costs.

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