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It seems to be well understood that the simultaneous import and export of goods which have different production functions, but which are aggregated into the same industry in classification schemes such as the SITC, is quite consistent with the standard trade theory of the Heckscher‐Ohlin‐Samuelson (HOS) model. For example, Grubel and Lloyd (1975, p.87) admit that two‐way trade in products such as wood and metal furniture, or nylon and wool yarn, which have similar end uses but different input requirements, can be explained readily by the HOS model (1979, p. 88). Gray explicitly distinguishes between “categorical aggregation” which occurs when there is two‐way trade in goods with different production functions and is consistent with the HOS model, and “true intra‐industry trade” which occurs when a country imports and exports “goods with virtually identical production functions”.

This paper proposes to use changes in intra‐industry specialization indicators over the period 1996‐2008 to assess the potential for factor adjustment pressures that may arise in the USA if the proposed USA‐Colombia Trade Promotion Agreement (TPA) is implemented. Results show that there is considerable scope for intra‐industry specialization between Colombia and the USA. The TPA should result in a larger increase in US exports to Colombia than US imports from Colombia, because Colombian exporters face much lower tariffs in the USA market than do US exporters in the Colombian market. Given the tariff asymmetry, scope for intra‐industry specialization, the relatively large size of the US market, and the small number of US industries that are likely to encounter factor adjustment pressures, the USA should ratify the agreement immediately.

Changes in intra‐industry specialization indicators are used to identify US industries that may face factor adjustment pressures as a result of the proposed USA‐Colombia TPA.

There is considerable scope for intra‐industry specialization between Colombia and the USA. Few US industries will be candidates for factor adjustment pressures.

The USA should ratify the TPA.

A new methodology is used to assess potential factor adjustment pressures associated with a TPA.

The purpose of this paper is to examine the relationship between trade integration and intra-regional business cycle synchronization using value-added trade data. Most empirical studies analyzing the relationship between trade integration and business cycle synchronization use gross trade data which suffer from double-counting. Double-counting distorts the empirical results on the estimated relationship between trade integration and business cycle synchronization. This paper explores the relationship using value-added trade data to be free from distortions caused by double-counting.

Gross trade data on exports and imports are decomposed into sub-categories following Koopman et al. (2014). Then, value-added data on exports and imports without double-counted terms are built to measure value-added bilateral trade intensity and value-added intra-industry trade intensity. Using this value-added trade intensities, the author run panel regressions for Europe and East Asian countries to examine how value-added trade intensities are correlated with output co-movements.

The paper finds that for European countries, the positive association between trade and business cycle co-movements is more evidently observed and the role of intra-industry trade increasing the business cycle synchronization is also more clearly revealed by value-added trade data. On the other hand, for East Asian countries, value-added trade data reveal that it is very uncertain whether increased trade contributes to stronger synchronization of business cycles and intra-industry trade is truly the major factor which deepens the business cycle co-movements.

First, the paper examines the relationship only by running static panel regression. There is a need to employ different methodologies such as instrumental variable regression or dynamic panel regression. Second, financial integration and policy coordination within a region are also other relevant factors which influence the intra-regional business cycle synchronization. There is a need to examine the relationship using value-added trade data with the variables measuring the degree of financial integration and policy coordination. Third, value-added trade data used in this paper has limited coverage of East Asian countries. There is also a need to extend the value-added data set to cover more countries and industries.

Most empirical literature studying the relationship between trade integration and business cycle synchronization rely on gross trade data. This paper would be the first attempt to study the relationship using value-added trade data. Duval et al. (2014) also use value-added data, but their value-added data are not supported by a solid accounting framework which decomposes a country’s gross exports into various value-added components by source and additional double-counted terms. Value-added data in this paper computed based on Koopman et al. (2014) are the total domestic value exports that are ultimately consumed abroad via final and intermediate exports. The author believes that value-added data in this paper are most relevant in estimating the relationship between trade integration and business cycle synchronization.

The dominant paradigm of world trade patterns posits two principal features. Trade between North and South arises due to traditional comparative advantage. Trade within the North, largely intra-industry trade, is based on economies of scale and product differentiation. The paradigm specifically denies an important role for endowment differences in determining North–North trade. We demonstrate that trade in factor services among countries of the North is systematically related to endowment differences and large in economic magnitude. Intra-industry trade, rather than being a puzzle for a factor endowments theory, is instead the conduit for a great deal of this factor service trade.

Comprehensive studies examining how Korean e-commerce trade works are currently limited. This study seeks to explore whether Korea’s e-commerce trade is more applicable to traditional trade theory or to modern theories. According to our analysis, the share of intra-industry trade (IIT) in modern trade theory is less than that of general trade for Korean e-commerce. Therefore, trade based on comparative advantage can be more valid in explaining e-commerce trade. From results in analyzing the gravity model, it was found that Korea’s e-commerce exports are higher as IIT with its FTA partners. In contrast, it is found that the lower the proportion of e-commerce trade, the higher chance for the import growth. Lastly, this study looked at what kind of comparative advantage is realized through imports. While Korea has been mostly exporting goods of high quality, its major trading partners import products based on price and selection of goods. In order for Korea’s e-commerce to grow, a more strategic approach is necessary. A strategy of high price based on superior quality is not effective, and as e-commerce has radically reduced sales and marketing costs, so a price reduction needs to be reflected in the price of goods for consumers.

This study investigates the patterns and determinants of Korea’s horizontal intra-industry trade by employing a dynamic panel data analysis. The main findings of the study are as follows. An increase in the market size of both trading partners is associated with a higher level of horizontal intra-industry trade. Dissimilar economic sizes and per capita incomes have a negative effect on trade in horizontally differentiated products. Geographical distance and trade imbalance serve as obstacles to horizontal intra-industry trade. These findings have policy implications for reconsidering the orientation of promoting trade. Inclusive economic growth in the region, taking advantage of neighboring nations and making efforts to reduce trade imbalances between trading economies, can accelerate further trade expansion through horizontal intra-industry trade.

1982 US intra‐industry trade (IIT) for 308 four‐digit manufacturing products is related to industry characteristics in a cross‐section regression study of the sources of two‐way trade. Results indicate the empirical relevance of models which present IIT as the result of international external economies in the production of differentiated producers goods. IIT as a means of satisfying consumers′ tastes for variety does not seem to be important, but oligopoly models of two‐way trade in consumer goods are supported owing to the association with concentration ratios. In contrast to recent studies which concluded that scale economies inhibit IIT in manufactured products, an examination of four different proxies for internal economies reveals that neither IIT nor inter‐industry trade based on comparative advantage is influenced significantly by scale effects, whether measured by size of establishment or by the productivity advantages of large plants.

Adam Smith's dictum that the division of labour is limited by the extent of the market is invoked as an explanation of observed intra‐industry trade. The strongest results from empirical studies of intra‐industry trade (relating it to level of development, time, falling trade barriers, and a manufacturing dummy) are all consistent with this view. Moreover, it makes it unnecessary to argue whether such trade reflects an aggregation problem, or to rely on new theories of international trade based on product differentiation and scale economies (neither of which have performed well in econometric work in this area).