Import penetration, export competitiveness, and the pattern of UK intra-industry trade: a note

There long has been extensive interest among academics in the economics of intra-industry trade, and in the UK a more general interest in the concepts, extent, and explanation of the observed increasing import penetration and decreasing export competitiveness. Intra-industry trade, import penetration, and export competitiveness and interrelated. It is shown how the association among these 3 concepts leads to an easy derivation of indexes of intra-industry trade from published data sources. Also examined are the problems associated with the explanation of such trade by cross-section regression analysis. The focus is on the UK economy during the period 1970-1979. The derivation of indexes of intra-industry trade is greatly aided by the use of the available R-ratios of import penetration and export competitiveness. However, through this facility, it is found that intra-industry trade is subject to wild short-term fluctuations. This points to the possibility that such trade might be merely a statistical, not a real, phenomenon.