Use recent EuroStat data to examine the extent and the pattern of intra-industry trade within the Eurozone trading area. What are the implications of your analysis for trade creation within this trading zone?(Note: you need to use relevant data to calculate various IIT indices).

 

With the format of IIT, I will analyse the index of IIT within Eurozone trading area to examine the extent and pattern of Intra-industry trade. I will start with total amount firstly. According to theformat: T=1-X-M/(X+M) and the Euro data, I can get the following results.

2004: T_total= 1- 1145.7-1080.6/(1145.7+1080.6) = 1- 65.1/2226.3 = 0.97

2005: T_total= 1-1235.4-1228.4/(1235.4+1228.4) = 1- 7.0/2463.8 = 0.997

2006: T_total= 1- 1381.3-1400.4/(1381.3+1400.4) = 1-19.1/2781.7 = 0.993

2007: T_total= 1- 1502.0-1490.3/(1502.0+1490.3) = 1-11.7/2992.3 =0.996

2008: T_total= 1- 1560.6-1611.9/(1560.6+1611.9) = 1-51.2/3172.5 =0.983

2009: T_total= 1- 1276.4-1256.1/(1276.4+1256.1) = 1-20.3/2532.5 =0.992

Primary products:

2004: T_p= 1- 118.7-279.0/(118.7+279.0) = 1-160.3/397.7 =0.597

2005: T_p= 1- 139.8-366.8/(139.8+366.8) = 1-227.0/506.6 =0.552

2006: T_p= 1- 167.0-440.2/(167.0+440.2) = 1-273.2/607.2 =0.55

2007: T_p= 1- 188.4-451.3/(188.4+451.3) = 1-262.9/639.7 =0.589

2008: T_p= 1- 214.9-561.0/(214.9+561.0) = 1-346.1/775.9 =0.554

2009: T_p= 1- 174.5-387.1/(174.5+387.1) = 1-212.6/561.6 =0.621

Food & Drink:

2004: T_F= 1- 67.5-62.7/(67.5+62.7) = 1-4.9/130.2 =0.597

2005: T_F= 1- 73.7-68.3/(73.7+68.3) = 1-5.4/142 =0.552

2006: T_F= 1- 82.6-73.9/(82.6+73.9) = 1-8.7/156.5 =0.55

2007: T_F= 1- 91.9-83.3/(91.9+83.3) = 1-8.6/175.2 =0.589

2008: T_F= 1- 100.4-89.9/(100.4+89.9) = 1-10.5/190.3 =0.554

2009: T_F= 1- 92.2-84.6/(92.2+84.6) = 1-7.6/176.8 =0.621

Raw materials

2004: T_R= 1- 22.4-48.5/(67.5+62.7) = 1-26.1/130.2 =0.597

2005: T_R= 1- 25.4-53.1/(25.4+53.1) = 1-27.7/78.5 =0.647

2006: T_R= 1- 30.4-64.2/(30.4+64.2) = 1-33.8/94.6 =0.643

2007: T_R= 1- 32.7-71.0/(32.7+71.0) = 1-38.3/103.7 =0.631

2008: T_R= 1- 34.3-75.4/(34.3+75.4) = 1-41.1/109.7 =0.625

2009: T_R= 1- 28.9-50.0/(28.9+50.0) = 1-21.1/78.9 =0.733

Energy:

2004: T_E= 1- 28.7-167.8/(28.7+167.8) = 1-139.1/196.5 =0.292

2005: T_E= 1- 40.7-245.4/(40.7+245.4) = 1-204.7/286.1 =0.285

2006: T_E= 1- 54.0-302.1/(54.0+302.1) = 1-248.1/356.1 =0.303

2007: T_E= 1- 63.8-297.0/(63.8+297.0) = 1-233.2/360.8 =0.354

2008: T_E= 1- 80.2-395.7/(80.2+395.7) = 1-315.5/475.9 =0.337

2009: T_E= 1- 53.4-252.4/(53.4+252.4) = 1-199.0/305.8 =0.349

Manufactured goods:

2004: T_M= 1- 998.6-771.4/(998.6+771.4) = 1-227.2/1770 =0.872

2005: T_M= 1- 1065.7-843.3/(1065.7+843.3) = 1-222.4/1909 =0.883

2006: T_M= 1- 1181.8-942.5/(1181.8+942.5) = 1-239.4/2124.3 =0.887

2007: T_M= 1- 1281.1-1019.7/(1281.1+1019.7) = 1-261.4/2300.8 =0.886

2008: T_M= 1- 1302.4-1022.9/(1302.4+1022.9) = 1-279.5/2325.3 =0.88

2009: T_M= 1- 1063.7-840.9/(1063.7+840.9) = 1-222.8/1904.6 =0.883

Chemicals:

2004: T_C= 1- 174.9-107.7/(174.9+107.7) = 1-67.3/282.6 =0.872

2005: T_C= 1- 189.4-118.7/(189.4+118.7) = 1-70.7/308.1 =0.883

2006: T_C= 1- 211.6-132.4/(211.6+132.4) = 1-79.2/344 =0.887

2007: T_C= 1- 231.3-145.0/(231.3+145.0) = 1-86.3/376.3 =0.886

2008: T_C= 1- 236.6-150.2/(236.6+150.2) = 1-86.3/386.8 =0.88

2009: T_C= 1- 223.2-135.8/(223.2+135.8) = 1-87.4/359 =0.883

Machinery & vehicles

2004: T_Ma= 1- 523.5-388.5/(523.5+388.7) = 1-135.0/912.2 =0.852

2005: T_Ma= 1- 557.1-423.2/(557.1+423.2) = 1-133.8/989.3 =0.865

2006: T_Ma= 1- 609.6-457.5/(609.6+457.5) = 1-152.2/1067.1 =0.857

2007: T_Ma= 1- 662.3-481.3/(662.3+481.3) = 1-181.0/1143.6 =0.842

2008: T_Ma= 1- 673.7-482.7/(673.7+482.7) = 1-191.1/1156.4 =0.835

2009: T_Ma= 1- 523.8-396.6/(523.8+396.6) = 1-127.2/920.4 =0.862

Other manuf’d goods:

2004: T_O= 1- 300.1-275.2/(300.1+275.2) = 1-24.9/575.3 =0.957

2005: T_O= 1- 319.1-301.3/(319.1+301.3) = 1-17.9/620.4 =0.971

2006: T_O= 1- 360.6-352.6/(360.6+352.6) = 1-8.0/713.2 =0.989

2007: T_O= 1- 387.5-393.5/(387.5+393.5) = 1-6.0/781 =0.992

2008: T_O= 1- 392.1-390.0/(392.1+390.0) = 1-2.1/782.1 =0.997

2009: T_O= 1- 316.7-308.5/(316.7+308.5) = 1-8.2/625.2 =0.987

Products n.e.s:

2004: T_Pro= 1- 28.4-30.2/(28.4+30.2) = 1-1.8/575.3 =0.957

2005: T_Pro= 1- 29.9-18.3/(29.9+18.3) = 1-11.7/989.3 =0.982

2006: T_Pro= 1- 32.5-17.7/(32.5+17.7) = 1-14.8/1067.1 =0.993

2007: T_Pro= 1- 32.5-19.3/(32.5+19.3) = 1-13.2/1143.6 =0.995

2008: T_Pro= 1- 43.4-28.0/(43.4+28.0) = 1-15.3/1156.4 =0.998

2009: T_Pro= 1- 38.2-28.2/(38.2+28.2) = 1-10.1/920.4 =0.991

 

From the results, we can conclude that, the total index of IIT within Eurozone trading areas has experienced a slight increase and then went upstream. Also, the level of intra-industry trade underwent economic boom and downturn from 2004 to 2009. The exports and imports of Eurozone trading area mainly focus on manufactured goods while the IIT is still below the total index. However, the intra-industry trade of manufactured is still stay at the high level. Machinery and vehicles accounted for 41% and other manufactured goods represented 25% of total exports in 2009 whereas the imports are 31.6% and 24.6% respectively (Eurostat, 2010). The relative high level of index of manufacturing industry reflected the competitive advantage in Eurozone trading area. The other manufactured goods and product n.e.s have a relatively higher level of Eurozone trading area rather than any others. Energy is the one, which has the lowest level of Eurozone trading that has the characteristic of inter-industry trading model. There is a considerable deficit in the trade of primary products which the intra-industry trade is not very obvious. The intra-industry trade of food and drink and raw materials are also unclear to identify. The trade in food and drink seems existing a tiny surplus while the raw materials seems running a deficit like energy products.