Intra-industry trade and ASEAN: The experience of Malaysia, the Philippines and Singapore

Trade in differentiated manufactured goods from the same industry, between developed economies characterized by similar relative factor endowments, has been observed to be an important feature of international trade patterns since the 1960's. While the traditional, factor-proportions model of international trade still retains good explanatory power, it is not able to satisfactorily encompass this phenomenon of intra-industry trade (IIT) A number of new theoretical models have arisen, incorporating notions of (internal) economies of scale and preference diversity, which provide a range of testable propositions that seek to explain the proportion of a country's gross trade which is IIT in nature. Empirical investigation has focused on the trade of developed economies, with a general consensus emerging regarding the significance of a variety of industry and country level characteristics as factors influencing IIT.