Intra-industry in Australia's trade : patterns and determinants

This thesis examines the patterns and determinants of intra-industry trade in Australia's total and bilateral trade. This investigation is important since there has been an inadequate number of studies , which explore the patterns of intra-industry trade in Australian bilateral trade. Australia's IIT is still ranked as the lowest amongst OECD countries, however, it has recorded the most rapid increase during 1973 - 2000. The number of industries which experienced a higher share of intra-industry relative to inter-industry trade- has expanded. This might have generated from the reduction of the effective rate of protection and the change in direction of Australia's exports to be more Asian oriented which have similar endowments with Australia, which may facilitate economies of scale. In terms of bilateral trade, Australia's IIT tends to be higher (more than 50 per cent) with countries which are nearest and have the most similar tastes, that is New Zealand and an entreport, such as Singapore. The high-income countries such the United Kingdom and the United States, together with South Korea and Indonesia seem to have lower intra-industry trade with Australia. There is a significant difference in the patterns of IIT in Australia's bilateral trade with developed countries and developing countries in manufactured goods. Australia's trade with developed countries which experiences higher share of intra-industry than inter-industry trade only occurs in low-technology manufactured goods, especially SITE 6, while the trade with newly industrialised and developing countries which experience the higher share of intra-industry as opposed to inter-industry trade, occurs in all high and low-technology manufactured goods (SITE 5-8). Econometric evidence suggests that intra-industry trade in Australia's bilateral trade is negatively correlated with the size of economies, the relative difference in per capita income and the share of primary products in Australia's bilateral trade, but positively correlated with the closer economic integration between Australia and its trading partners.