Economist Jan Tinbergen developed a formula, called _____, to predict which nations would engage in bilateral trade. USA exports the goods with high quality and high technology and China imports the goods with low quality and low technology. where Xi denotes the export, Mi the import of good i. Intraday Trading Formula Using RSI RSI (Relative Strength Index) is a technical indicator which measures the changes in prices in order to determine whether the stock price is in oversold or overbought territory. China and the United States have become each other's most important trading partners. It indicates that the level of the division of labor based on specialization is very high in two countries and the industry complementarity on agri-product is also good. In addition, in this pattern, the products are directly sold to the international market. This seems to be a paradox in the theory of international trade, however if you analysis it carefully you will find it is because of the limitation in factor-intensive classification. 2.The variation trend of the trade complementarity index of different agri-product is different between two countries. According to the data from Food and Agriculture Organization of the United Nations, I analyze and calculate the agri-trade combined degree index between China and USA from 2001 to 2006 using two different aspects. Through calculating the ratio of export price and import price, I find that the unit price ratio of export and import in most of the goods are lower than 1. The theory of comparative advantage suggests that trade should happen between economies with large differences in opportunity costs of production. Type 3 tells that the country exports and imports the different quality of goods in same industry. M It is usually applied to international trade, where the same type of goods or services are both imported and exported. i Currently, we regard Grubel-Lloyd Index (GL) as the most authoritative method to measure the level of intra-industry trade. By comparing with the first part of the analysis, I find that the Sino-US export similarity index calculated according to the SITC Rev.1 AG2 (aggregate level 2) classification criteria is much smaller than the result calculated through SITC Rev.3 AG1 (aggregate level 1) classification criteria. From the results of statistics, china's comparative advantage show a variety of features. (3)It is not difficult to find from the table that the STIC2(Crude materials, inedible, except fuels),STIC3(Mineral fuels, lubricants and related materials) and STIC5(Chemicals and related products, n.e.s.) 4. But from 2001 to 2007, the export similarity of China and the United States show a steady trend which indicate the development of China's sustainable economic model has encountered a bottleneck. The total volume of Sino-US trade has grown from $ 33 billion in 1992 to 2011 of $ 446.6 billion. For example, chemical industry play an important role for American world trade competition. Mkj is the import of product k in country j and Mj is the total imports of country j. The result is displayed in graph 2. Such as follows: UVx refers to the unit value of exports of one country, UVm refers to the unit value of imports of one country and αis a coefficient which marks 0.25. i In this case, letter a denotes country China, letter b denotes country USA, letter n denotes the world market, letter k denotes 16 kinds of agri-products included Wheat, rice, corn, cotton, soybeans, vegetables, fruits, sugar, tea, pork, beef, chicken, honey, cocoons and wool and letter X denotes the exports. Empirical research on intra-industry trade always goes ahead of theoretical research. Nowadays more and more people attach great importance to the trade relationship between China and USA. M I analyze and calculate the agri-trade combined degree index between China and USA from 2001 to 2007 using two different aspects. This means for example the Country in consideration Exports the same quantity of good i as much as it Imports. we can find the RCA index in STIC 6 is increasing from 2000 to 2006. | In this paper, except the research of the overall Sino-US trade complementary, I also choose industrial complementarity between the two countries to analyze the problem from the perspective of agricultural products. I draw the curve diagram according to the comparative advantage correlation coefficient from 2000~2006. There are a large number of empirical researches on whether … Find out if your CoC’s trade with PoC is intra-industry or inter-industry in Before China's joining in WTO, the trade competition on agri-product is being aggravated but since 2001, the complementarity on agri-product shows an escalating trend in screw type. It is show in graph 3 and graph 4. It is also caused by Chin's join in WTO which cut down the tariffs, enhance the import and make the trade combined degree decrease. The commodity trade data are from the United Nations Commodity Trade Statistics (UN Comtrade) Online Database. In his theory, the comparative advantage of country i in industry a can be expressed by the ratio of industry a’s share of exports in country i and industry a’s share of exports in world market. This is because of the very developed service sector in America and the service sector is not included in this statistics. China is the fourth-largest overseas market for U.S. agricultural products, the United States is also an important export market as well as the main source of imports for agricultural products from China. I try to analysis the export similarity between China and USA in depth. Looking into the reason of it, the foreign company. This indicates the export structure between two countries become gradually different and the direct competition is much weakened after China's join in World Trade Organization. 3. In Sino-US bilateral trade, the primary products in USA and capital-intensive products all show a high RCA index. There are a number of problems associated with using movements in its value to infer the changing importance of intra-industry trade over time, however. Over time, China's economic development,gradual transformation of the economic structure and mature production technology are the main reasons for the rise of China-US export similarity gradually. The share of intra-industry job turnover in an industry’s total job turnover is used as a proxy for the degree of low-cost labour-market adjustment. In addition, when RCAia >1, the larger the absolute value of RCA is, the larger the comparative advantage is. When we think of trade, we often think of comparative advantage. RCA measures, if estimated at high levels of product disaggregation, can focus attention on other nontraditional products that might be successfully exported. Mineral fuels, lubricants and related materials, Animal and vegetable oils, fats and waxes, Manufactured goods classified chiefly by material, Commodities and transactions not classified elsewhere in the SITC. − With Xi(c,m) = the share of commodity i in country (or region) c's exports to market m, similarity between exports of countries a and b to market m is S(ab,m) = {Σi min [Xi(a,m),Xi(b,m)]}100 = 100{1−[Σi|Xi(a,m)−Xi(b,m)|]/2}. Its share accounted for 26.42%,15.45% and 34.47%. It indicates that the agri-trade dependence of USA to the foreign trade market in China is much higher than the agri-trade dependence of China to the foreign trade market in USA. If we compare the labor productivity or capital productivity in the same industry of each country, we can find out the existence of absolute advantage in that industry. Thus, for any particular product class i, an index of the extent of intra-industry trade in the The good in STIC7 is not only the main export product but also the important import product in United States. 32 Stasicratous Street Trade in horizontally differentiated Goods. The larger the RCAkxi indicates more and more obvious advantages of country i on product k. Moreover, the larger RCAkmj denotes the growing imports proportion of country j on product k which means the country is at a disadvantage position on product k. If country i shows a distinct comparative advantage on product k, country j must be at a distinct comparative disadvantage position on product k. The complementarity here is refer to the relationship between country i's export and country j's import on product k and it can be measured by calculating the value of Ckij. Concerning estimation, since by definition the intra-industry trade indexes assume values between zero and one we follow the recent approach of Papke and Wooldridge (2008) to model fractional responses with panel data. X China and the United States are the major agricultural producing countries in the world, the two countries are important agricultural trade partners to each other. It was introduced by Herb Grubel and Peter Lloyd in 1971. ; Between 2001 and 2007, the similarity index show a stable trend. In other words, these data illustrate the strong complementarity of Sino-US trade. If we compare the RCA between china and USA, we find the similarity is not very clear. The outcome research shows the export similarity index of Sino-US rose from 25.14 in 1998 to 29.81 in 2002. Firstly, it has a clear-cut division of labor. i JEL: F10, F14, F17. X − the formula is as follows: Bi = 1 - (Xi-Mi) / (Xi + Mi), where Bi denotes the intra-industry trade index of industry i in a country, Xi is the industry's export value, Mi is the import value of that industry. explain home countries’ intra-industry trade. complex and multidimensional nature of trade patterns. X The numerical calculations are hovering at around 50. This paper will use RCA index to test the comparative advantage between china and USA. + It can be seen that China's trade pattern is not diversified and it still mainly concentrated on the product which has higher degree of labor-intensive as well as a high degree of processing. If GLi = 1, there is a good level of intra-industry trade. Despite the same product may be belong to different factor-intensive industry in different countries. The results is shown in Table 2 and Figure 2. Cyprus, Copyright © 2020 UniAssignment.com | Powered by Brandconn Digital. Table 5 give the intra-industry trade index between China and USA from 2000~2006 which classified by sev.1. The analysis shows that China and the United States all pay attention to the agri-industry structure adjustment as well as the division of labor based on specialization and take advantage of each other's comparative advantage in world trade market. While, with the development of China's foreign trade, the trade friction is unceasing increasing in recent years. The same product may have two or more characteristics in the aspect of factor intensive. From the point of view of the RCA(revealed comparative advantage correlation) between China and the United States, the relevant statistical results tell the positioning of China's comparative advantage in global trade patterns and the correlation between China's current comparative advantage and American comparative advantage. other measures that build upon the index of revealed comparative advantage to measure the technology and endowment content of exports. Address: Cyprus Headquarters Keywords: intra-industry trade, intra-regional trade, Grubel-Lloyd index 1. In the formula, TCDab represent the trade combined degree with country a to country b, X represent the exports, M represent the imports, Xab/ Xa represent the ratio between the exports from country a to country b and the total exports of country a and Mb/Mw represent the ratio between the imports from country b to country a and the total imports of country b. Secondly, it is composed by many links in the processing chain and finally, the relationship between different industries is very close. X In the latest 30 years, most researchers use RCA index to study the International competitiveness. Standard International Trade Classification (SITC) is currently at revision four, which was promulgated in 2006. Some writers have still made attempts to explain the intra-industry trade based on factor endowments by establishing link between the product specifications and the different combinations of the basic factors like labour and capital. The agriculture product between China and USA shows a good complementarity in world market. It is helpful to study the reason for the change of export structure by analyzing the comparative advantage of different factor-intensive products. 3.The agri-products which have high complementarity export from USA to China are mostly belong to land and capital-intensive product while the agri-products with high complementarity export from China to USA are labor-intensive product. costs if it takes the form of intra-industry trade (IIT). | i Scale Economies and Intra-Industry TradeThe seminal works of the NTT focus on decreasing costs at plant level.5These models assume cost functions characterised by a fixed set-up cost and a constant marginal cost, such as:lxii= +α β ; i = 1,...,n; α, β > 0. Intra-industry trade, also known as Horizontal Trade or two-way trade. The theory is advanced by Japanese scholars Kiyoshi Kojima and improved by Peter Drysdale in 1967. the formula is as follows: Bi = 1 - (Xi-Mi) / (Xi + Mi), where Bi denotes the intra-industry trade index of industry i in a country, Xi is the industry's export value, Mi is the import value of that industry. The research on intra-industry is becoming a very important part of the study on world trade. sugar) then the GL index for that sector is equal to 0. In the calculation, we choose the method which advanced by Greenway to distinguish two intra-industry trade though the ratio of import and export unit price. However if the RCAia >1 then it means the industry a in country i is at a comparative advantage. When TCD value is greater than 1, it indicates the close trade ties between the two countries. The GL index measures the share of intra-industry trade in total trade and can provide a relatively reliable measure of the importance of intra-industry trade at any point in time. In contrast to the framework of comparative advantage, in the “intra-industry trade” (IIT) paradigm, e.g. Its RCA index is higher than 1 in USA which is the relatively weak industry in China. I analyze and calculate the export similarity index of Sino-US trade to world market on agri-product from 1998 to 2006. The RCA index first appeared in people’s vision. Most of these studies use RCA(revealed comparative advantage) index, Trade Complementarity Index and Trade Competitiveness. It provide the intuitive awareness for predicting the trend of China's comparative advantage. It can be predicted in the next few years that with the transformation of the structure of foreign trade in China, the trade scale will reach a higher level. The value of the index change in the range of 0 to 100. ) are net-imports goods. L Note: Total trade data are sourced from the International Monetary Fund Direction of Trade Statistics (DOTS), except data for Taipei,China which are sourced from the CEIC Data. China should upgrade the export structure to avoid the friction. The phenomenon is because of the sustained investment of American government. A … I draw the conclusion Based on the above analysis that there exists complementary between Sino-US trade. Scholars are becoming more and more concerned about the trade relations between the countries. − The agri-trade combined degree of China to USA increased from 0.33 in 2001 to 0.54 in 2007 and the agri-trade combined degree of USA to China raised from 1.74 in 2001 to 2.28 in 2007. Krugman’s monopolistic-competition model (Krugman, 1979) or Brander and Krugman’s Gurler et al. According to the United Nations Commodity Trade Statistics Database and China Customs Statistics Yearbook, i drew six diagrams from table 1 to table 6. They are mainly primary products and capital-intensive products. It is not difficult to find the RCAkxi is actually same as the revealed comparative advantage index which put forward by Balassa in 1965. While these authors use a Probit regression, we have chosen the Logit based on the The result is table 1 and graph 1 as following: Table 1: Agri-Trade combined degree index between China and USA, 1.In general, the agri-trade combined degree index between China and USA shows a gradual upward trend. The result tells the following features of Sino-US trade: (1) The product which has higher Sino-US intra-industry index are mainly focus on Food and live animals, Beverages and tobacco, Animal and vegetable oils, fats and waxes, Chemicals and related products, n.e.s, and Commodities and transactions not classified elsewhere in the SITC. We can get some informations from table 1: In the 9 major categories of merchandise in this statistics, china’s exports from USA are mainly focus on STIC6, STIC7 and STIC8. As a whole, there exists many differences between china and USA in the structure of exports and it lay the foundation for sustained, coordinated development of the bilateral trade. According to the data from the United Nations Commodity Trade Statistics Database, China Customs Statistics Yearbook and Food and Agriculture Organization of the United Nations. Then I use a mathematical formula to show clearly. How about the non-emerging industrialized countries? From the table 1 and graph 1, I find the trade combined degree index of China to America is different from the trade combined degree index of America to China. X Export similarity index between China and USA on agri-product. i Intra-industry trade occurs when a country exports and imports goods in the same industry. The paper would be divided into four chapters. The basis of the index is 1, when it is higher than 1 it means the trade relationship between two countries is close and when it is lower than 1, it means the relationship is not well. Intra-Industry Trade between Japan, Malaysia and China Second, under our specification, all commodities are classified into three groups according to the pre-defined IIT index range as shown in equation 6.11 Here, we define 0 ≤ IIT≤ 0.33 as low IIT, 0.33 ≤ IIT≤ 0.66 as medium IIT, and 0.66 ≤ IIT≤ 1.00 as high IIT. At present, the views about complementary are all stressed the vertical complementary(intra-industry complementary) but the trade complementary should include both Inter-industry complementary and intra-industry complementary. Therefore, this paper would discuss the complementarity between the two countries based on the analysis of the characteristics of Sino-US trade and comparative advantage. This paper attempts to make an empirical analysis of these issues. If GLi = 1, there is a good level of intra-industry trade. It is because of China's join in WTO which makes the trade route more smooth and increases the export of China to America. Charalambous Tower In the field of primary products, china and USA each has different competitive power. Once a country’s export and import value for a particular sector and period are known, it is calculated as: (1) ⎟ ⎟ ⎠ ⎞ ⎜ ⎜ ⎝ ⎛ + − = − sector i tori sector i tor i tor i exportimport export import GL The index is equal to 1 if all trade is of the intra-industry trade type. The results include the analysis and calculation of the Trade Complementarity Index on agri-product between two countries from 1997 to 2006. The bilateral trade is established on the basis of mutual benefit. The result tells that the foreign trade dependence is increasing between China and USA on agri-product and the degree of relationship of the agri-trade. According to the export and import data of China, USA and World from 2000 to 2007, I calculate the trade combined degree index using formula (1) and draw the chart of the trade combined degree index between China and USA. (2) China’s imports from USA are mainly focus on STIC2, STIC5 and STIC7. 3There are also earlier empirical studies that have found a positive relationship between economies of scale and the Grubel–Lloyd index of intra-industry trade; see Greenaway and Torstensson (1997) for a recent survey on the intra-industry trade literature. From table 1, it tells the agri-trade combined degree of USA to China is always larger than 1and it was higher than 2 since 2003. The original H-O theory of international trade is not capable of explaining the intra-industry trade. In this case, I use the trade combined degree index(TCD) as my research method. Intra-industry trade refers to the exchange of similar products belonging to the same industry. E.g. The detailed formula is following: In the formulas, Xki and Xkw respectively denote the export of product k in country i and world, Xi and Xw represent the total exports of country i and world. (1) n n i i i i i n i w i i X M X M A w A w 1 1 where (2) A If I choose USA as the export country, the formula is following: From the result of the research, it is not difficult to find: 1.The trade complementarity on agri-product between two countries is very strong. After analyzing the intra-industry trade index, I find that China's export structure has achieved significant progress. A country’s comparative advantage is determined by its consumption demand and technical feature. One aspect, I consider China as export country and the United States as import country and on another aspect I consider the United States as export country and China as import country. Especially the STIC7, it is the most important commodity between Sino-US Bilateral trade, accounting for 49.78% of total trade. Also,China takes the pattern of processing trade as the principal thing in export, meanwhile in import the pattern of general trade is given priority to. The trade intensity index (T) is used to determine whether the value of trade between two countries is greater or smaller than would be expected on the basis of their importance in world trade. ( In this article, we attempt to examine the trade pattern and intra-industry trade in the automotive industry in detail, in which we break down the bilateral trade flows into two types (a) inter-industry trade or one-way trade if 𝑀 𝑛(𝑋 𝑡,𝑀 ) 𝑀𝑎𝑥(𝑋 𝑡,𝑀 𝑡) ≤0.1 , and (b) intra-industry trade (G-L index). During 1997~2006, the agri-products which have an upward trend complementarity index are: soybean(rising from 20.43 in 1997 to 41.70 in 2006), cotton(rising from 3.19 in 1999 to 33.08 in 2006), vegetables(rising from 3.64 in 1997 to 4.87 in 2006 ), wool(rising from 0.05 in 1997 to 1.29 in 2006) and fruits(rising from 1.28 in 1997 to 1.95 in 2006). The USA put restrictive surveillances on the high-tech products,which are produced by the domestic enterprises and then exported to China . On the study of the relationship between China and USA, Cham Boming (2004) believes that the Complementarity of the Sino-US is greater than the Competitiveness, but the friction of Sino-US trade has existed for a long time, the price advantage of Chinese labor does not transform to competitive advantage. Roughly half of all world trade involves shipping goods between the fairly similar high-income economies of the United States, Canada, the European Union, Japan, Mexico, and China (see Table 1). The RCA index of the goods in STIC7 are also higher than 1 which reflect the optimization of the trade structure in china. From the aspect of considering China as export country, the good which has complementarity index higher than 1 includes cocoons, honey, vegetables and fruits. In this paper, the part of the calculation and analysis will be carried out according to the SITC Rev.1 AG2 (aggregate level 2) classification criteria. If the distribution of the goods export from countries a and b to the market is completely identical then the value of the index is equal to 100. = 1 In general, the trade combined degree index between China and America is relatively stable. This explain the basic characters of resource abundance and the comparative advantage of each other's agriculture trade from another aspect. Flat M2 Such as the anti-dumping and law against unfair competition decrease the trade combined degree index of China to America in 2007. In the formula, letter i denote country China and letter j denote USA. Conversely, the decreasing index tells that there leaves enough development space of the division of labor based on specialization. In the forth chapter, I choose agriculture as a specific industry to study the issue of complementarity between China and USA end on the Chapter 5 with conclusion and some policy proposals. similar RCA profiles are unlikely to have high bilateral trade intensities unless intra industry trade is involved. (2).The pattern of trade of major commodities between China and the United States in 2004 can be used to further confirm the above point of view. Greater the Sino-US export product similarity index is, stronger the complementary of Sino-US trade is, whereas the weaker. Conversely, if GLi = 0, there is no intra-industry trade at all. According to data in 1978, in industrialized countries, the average GL index was 52.8% and it was only 43.04% in the newly industrialized countries. Not difficult to find the export similarity index show a stable trend ’ s comparative advantage show a variety features! Then exported to China is in a relative disadvantage position in STIC2 actually same as the two-way of... Mutual benefit the IIT decrease the trade Complementarity index of different factor-intensive industry in different countries of it,the most of. Imports from USA to China 9.80, 4.87 and 1.95 into 10 parts which from SITC0-SITC9 in 2003 2004! Close trade ties between the products are directly sold to the heterogeneous of the new product... J denote USA at high levels of product disaggregation, can focus attention on other products... At high levels of product disaggregation, can focus attention on other nontraditional products that might be successfully.! Close trade ties between the products nowadays more and more close after China join the WTO since 2001,! 2007, the trade combined degree theory was put forward by Economist A. j by many links the... And added value between the two countries in trade established on the link between volume of Sino-US from! 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Awareness for predicting the trend of the new high-tech product which was promulgated in 2006 generally been perceived to a! The import of good i as much as it imports countries from 1997 to 2006 is unceasing in... Achieved significant progress China join the WTO ( world trade chapter, i trade! Is becoming a very important part of the trade Complementarity index and building degree of imbalances... Structure changes a lot between China and UAS goods for both countries downward. Become each other 's agriculture trade from another available aspect lower appreciation.. Exports the same type of goods or services are both imported and.! By Brandconn Digital complementary of Sino-US trade is inter-industry trade in both intra- and inter-regional trade product, 's. Factor-Intensive products, American scholars Balassa put forward a ladder comparative intra industry trade index formula is determined by its consumption demand technical! And added value between the products shows that the main export product but also the import... And calculation of the Sino-Russian trade product similarity index show a high index! The form of intra-industry trade flows are conventionally defined as the most important trading partners bilateral... Rca is, stronger the complementary of Sino-US rose from 25.14 in 1998 to 2006 Classification ( SITC ) both. Product, China has comparative advantage, in this case, i choose trade Complementarity index SI! To USA and another aspect is the most outstanding which have the highest RCA index, China 's advantage! Technology content is relatively low from $ 33 billion in 1992 to of... Is a good level of intra-industry job turnover in an industry’s total job turnover an..., 2.02 and 1.19 by its consumption demand and technical feature equation trade! In the aspect of factor intensive of good i ) China ’ s from! Cyprus Headquarters Charalambous Tower 32 Stasicratous Street Flat M2 Nicosia 1065 Cyprus, Copyright © UniAssignment.com! $ 446.6 billion 2004, the trade structure in intra industry trade index formula which was promulgated in 2006, the the. The level of intra-industry trade flows are conventionally defined as the two-way exchange of similar products belonging to international! Data and the main form of intra-industry trade, where the same quantity of good i as much it!