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Trade Liberalization and Intra-Industry Specialization: The Australian Experience

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  • Jayant Menon

Abstract

Much of the growth in trade among the industrialised countries, and more recently among countries in the Asia-Pacific region, has taken the form of intra-industry trade (IIT). Australia has historically had one of the lowest shares of IIT among OECD countries. This paper examines how Australia's IIT has changed in the 1980s in response to the process of trade liberalisation and completion of the CER pact with New Zealand. Towards this end, IIT indexes are estimated for Australia's multilateral and trans-Tasman trade for 1981 and 1991 for 132 industries using data at the 3 and 4-digit level of the SITC. The results point to a sharp increase in the share of IIT for both multilateral and trans-Tasman trade. We also find that the industries that had undergone the largest reductions in protection levels had also increased their shares of IIT quite considerably. These findings suggest that the short to medium run adjustment costs associated with trade liberalisation are likely to be lower than expected as a result of increased intra-industry specialisation. If IIT continues to grow in response to the on-going process of internationalisation of the Australian economy, then Australia's prospects for expanding its share in world trade, and particularly in the Asia-Pacific region, are likely to be significantly boosted.

Suggested Citation

  • Jayant Menon, 1994. "Trade Liberalization and Intra-Industry Specialization: The Australian Experience," Centre of Policy Studies/IMPACT Centre Working Papers g-107, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-107
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    References listed on IDEAS

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    1. Alan Bollard, 1986. "The Economic Relations Agreement Between Australia and New Zealand: A Tentative Appraisal," Journal of Common Market Studies, Wiley Blackwell, vol. 25(2), pages 89-107, December.
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    4. Jayant Menon & Peter B. Dixon, 1994. "How Important is Intra-Industry Trade in Australia's Rapid Trade Growth?," Centre of Policy Studies/IMPACT Centre Working Papers g-110, Victoria University, Centre of Policy Studies/IMPACT Centre.
    5. Antonio Aquino, 1978. "Intra-industry trade and inter-industry specialization as concurrent sources of International Trade in manufactures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(2), pages 275-296, June.
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    15. Jayant Menon & Peter Dixon, 1996. "How important is intra-industry trade in trade growth?," Open Economies Review, Springer, vol. 7(2), pages 161-175, April.
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    Cited by:

    1. Jayanthakumaran, K. & Pahlavani, M., 2006. "Australia and New Zealand CER agreement and breakpoints in bilateral trade: an application of the Wald-type test," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
    2. Jayanthakumaran, Kankesu, 2004. "An Empirical Assessment of the Impact of Intra-Industry Trade on Employment: Australia 1989/90-2000/01," Economics Working Papers wp04-11, School of Economics, University of Wollongong, NSW, Australia.

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    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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