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Evolving Pattern of Intra-industry Trade Specialization of the New Member States of the EU: The Case of the Automotive Industry

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Five Years of an Enlarged EU

Abstract

The paper investigates the development of intra-industry trade of the new Member States with major partners between 2000 and 2007. Intra-industry trade is separated into horizontal and vertical components on the basis of differences in unit values. We have found that although inter-industry trade still accounts for almost 50% of the trade of the countries that joined the EU in 2004, its share has been declining to the benefit of intra-industry trade (except for Malta). Intra-industry trade accelerated in the post-accession period and in 2007 Slovenia and the Czech Republic recorded the highest shares. Intra-industry trade of the new Member States has been dominated by the vertical component, usually low-quality goods. However, in almost all new Member States, the share of high-quality vertical intra-industry trade, as well as the horizontal component increased. Thus, the pattern of trade specialization in the new Member States has improved. Growing shares of intra-industry trade, particularly the horizontal component, reflect increasing similarities between new and old Member States and a favourable convergence process between the two groups of countries. In the automotive sector, intra-industry trade is generally larger than in total trade, meaning deeper specialization. This phenomenon can be largely attributed to the high volume of foreign direct investment in the sector.

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Notes

  1. 1.

    The average exports of the EU-10 countries in the period 2000–2003 developed at 15.2% per year while in the after-accession period (2004–2007) at 19.4%. The respective average rates of growth of exports from the EU-15 amounted to 5.7 and 7.8%, respectively.

  2. 2.

    The Grubel-Lloyd index is useful for comparisons across products and over time, but it can overstate the size of IIT trade and can mask different levels of IIT within a given group of products. (see: European Competitiveness Report 2004. Commission Staff Working Document SEC(2004) 1397. European Commission. Brussels. 2004, p. 91).

  3. 3.

    Austria, the Netherlands, Germany, Italy and Sweden.

  4. 4.

    Taking into account that FDI flows towards the new Member States are dominated by financial services, the FDI impact on trade is lower than it might result from the size of total FDI flows. In this study we take into account only FDI in manufacturing sector.

  5. 5.

    Automotive goods are relatively important also in industrial trade of Estonia, Lithuania and Latvia but the share of FDI in automotive sectors is here relatively low.

  6. 6.

    In the first half of 2008, around 94% of cars produced in Poland were exported. At the same time, almost all cars sold on the Polish market were of foreign origin, a big part of them being used cars (about 40% in 2002–2003).

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Acknowledgments

The author wishes to thank Prof. Elżbieta Czarny for helpful comments. Data has been compiled by Łukasz Ambroziak and Maciej Sewerski, who produced the tables and figures.

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Authors and Affiliations

  1. Jean Monnet Chair of European Integration, Warsaw School of Economics, Warsaw, Poland

    Elżbieta Kawecka-Wyrzykowska

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  1. Elżbieta Kawecka-Wyrzykowska
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Correspondence to Elżbieta Kawecka-Wyrzykowska .

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  1. , ECFIN.E.2 - BU1 -1/10, European Commission, Brussels, 1049, Belgium

    Filip Keereman

  2. , ECFIN.A - BU-1 03/209, European Commission, Brussels, 1049, Belgium

    Istvan Szekely

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Kawecka-Wyrzykowska, E. (2010). Evolving Pattern of Intra-industry Trade Specialization of the New Member States of the EU: The Case of the Automotive Industry. In: Keereman, F., Szekely, I. (eds) Five Years of an Enlarged EU. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-12516-4_2

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  • DOI: https://doi.org/10.1007/978-3-642-12516-4_2

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