Index Of Intra Industry Trade Economics Essay

Published: 2021-06-28 16:50:04
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1.introduction
Since entering the 21st century, the bilaterally economic and commercial cooperation of Sino-US has shown a trend of rapid growth. China and the United States have become each other's most important trading partners. According to the statistics of China customs, China has became the second largest trading partner of the United States since 2006.In recent years, China follows the strategy of comparative advantage based on the low labor cost, which boosts the foreign trade of china during a certain period. The total volume of Sino-US trade has grown from $ 33 billion in 1992 to 2011 of $ 446.6 billion. However, as the process of the globalization accelerates, the structure of industrial chains upgrades and the trend of free mobility of resources enhances,the disadvantages of this strategy emerges. Especially when the world is confronted with various kinds of conflicts of free trade and serious financial crisis, china, as a member of the big family, is now focusing on how to make full use of the original advantage in order to transform it into the real competitive advantage. Many issues about world trade are worth considering in the following several years.
It can be predicted in the next few years that with the transformation of the structure of foreign trade in China, the trade scale will reach a higher level. However, the trend of trade imbalances becomes increasingly evident. Nowadays more and more people attach great importance to the trade relationship between China and USA. Is there significant complementarities between the Sino-US trade? Will there be a great impact on Sino-US trade with the adjustment of Chinese industry structure? This paper attempts to make an empirical analysis of these issues.
In this paper, except the research of the overall Sino-US trade complementary, I also choose industrial complementarity between the two countries to analyze the problem from the perspective of agricultural products. China and the United States are the major agricultural producing countries in the world, the two countries are important agricultural trade partners to each other. China is the fourth-largest overseas market for U.S. agricultural products, the United States is also an important export market as well as the main source of imports for agricultural products from China. Agricultural trade is one of the most sensitive and the most controversial issues in Sino-US trade relations. Therefore, in the current world especially under the background of economic recession and the rise of trade protectionism, it is really necessary to carry out research on the Sino-US agricultural trade complementarity. This would have practical significance to promote the health of the economic and trade relations between the two countries, enhance the complementarity of the Sino-US agricultural trade development and recover the world economy.
Scholars are becoming more and more concerned about the trade relations between the countries. Most of these studies use RCA(revealed comparative advantage) index, Trade Complementarity Index and Trade Competitiveness. Like Yu Jinping, he used the RCA index and Complementarity Index to analyze the trade complementarities and comparative advantages between China and East Asian countries. Yang Xiyan used RCA Index and building degree of trade to analyze the Trade Complementarity of the Sino-Russian trade. On the study of the relationship between China and USA, Cham Boming (2004) believes that the Complementarity of the Sino-US is greater than the Competitiveness, but the friction of Sino-US trade has existed for a long time, the price advantage of Chinese labor does not transform to competitive advantage. China should upgrade the export structure to avoid the friction. But there exists many limitations on the study of the trade relationship between china and UAS. (1)Most of the literature focus on the study of the overall trade relationship and ignore the relationship between different industries and the Intra-industry trade. (2) Mostly they describe the phenomenon of trade but lack of empirical analysis. Therefore, this paper would discuss the complementarity between the two countries based on the analysis of the characteristics of Sino-US trade and comparative advantage.
The paper would be divided into four chapters. In the first chapter, I will introduce the source of the data and the research methods. In the next chapter, I will make an empirical analysis through five different indices which include the theory of comparative advantage, the index of intra-industry trade, trade combined degree index, export similarity index and trade complementarity index. In the forth chapter, I choose agriculture as a specific industry to study the issue of complementarity between China and USA end on the Chapter 5 with conclusion and some policy proposals.
Chapter 1
Data resource and research method
1. data resource:
This article uses data from the United Nations Commodity Trade Statistics Database, China Customs Statistics Yearbook and Food and Agriculture Organization of the United Nations.
Taking into account the large difference in statistics between china and USA, in this paper I will choose the data from USA as the standard.
Standard International Trade Classification (SITC) is currently at revision four, which was promulgated in 2006. It is divided into 10 parts which from SITC0-SITC9.
According to the latest standard, SITC0-SITC4 are considered to be primary products and resource-intensive products and SITC5-SITC9 are considered to be industrial products.
2.research method:
1.Theory of comparative advantage
If we compare the labor productivity or capital productivity in the same industry of each country, we can find out the existence of absolute advantage in that industry. However, under the free trade environment, the main reason for production division between different countries lies not in absolute advantage but in comparative advantage. The country can make full use of labor and capital resources based on their own comparative advantages. A country’s comparative advantage is determined by its consumption demand and technical feature. It is helpful to study the reason for the change of export structure by analyzing the comparative advantage of different factor-intensive products. This paper will use RCA index to test the comparative advantage between china and USA. In 1981, American scholars Balassa put forward a ladder comparative advantage theory. The RCA index first appeared in people’s vision. In his theory, the comparative advantage of country i in industry a can be expressed by the ratio of industry a’s share of exports in country i and industry a’s share of exports in world market. Then I use a mathematical formula to show clearly.
RCAia=(Xia/Xwa)/(Xi/Xw)
In the formula, the RCAia is the specific value of RCA index of industry a in country i, the Xia is the exports of industry a in country i, Xwa is the total exports of industry a in world market, Xi is the total exports of country i in world market and Xw is the total exports in world market. This index reflects the comparative advantage by comparing exports of an industry in a country with the world average level of exports and excludes the impact of the national total exports’ fluctuations as well as the fluctuations of the world's total exports which makes it more reliable. In the latest 30 years, most researchers use RCA index to study the International competitiveness. In general, if the value of RCAia <1 then we say the industry a in country i is at a relative disadvantage. However if the RCAia >1 then it means the industry a in country i is at a comparative advantage. In addition, when RCAia >1, the larger the absolute value of RCA is, the larger the comparative advantage is.
2.index of intra-industry trade
Intra-industry trade, also known as Horizontal Trade or two-way trade. It is usually applied to international trade, where the same type of goods or services are both imported and exported. We delimit the same type here according to the Standard International Trade Classification (SITC) which has at least 3 same digits in SITC.
Currently, we regard Grubel-Lloyd Index (GL) as the most authoritative method to measure the level of intra-industry trade. the formula is as follows: Bi = 1 - (Xi-Mi) / (Xi + Mi), where Bi denotes the intra-industry trade index of industry i in a country, Xi is the industry's export value, Mi is the import value of that industry. According to data in 1978, in industrialized countries, the average GL index was 52.8% and it was only 43.04% in the newly industrialized countries. How about the non-emerging industrialized countries? The data was 25.87%. It is obvious that the GL index is associated with the level of economic development and along with the development of economics, the intra-industry trade will become more and more important in world trade market.
We can better understand the intra-industry trade from another available aspect. There are three types of intra-industry trade.
Trade in homogeneous goods.
Trade in horizontally differentiated Goods.
Trade in vertically differentiated Goods.
We mainly focus on type 2 and type 3. Type 2 means the country exports and imports the same quality of goods in same industry according to the heterogeneous of the product. If we consider the added value and technical level, we find the significant differences between the products not only is the quality factor, and that the product brand, design, quality, performance, service and other factors. Type 3 tells that the country exports and imports the different quality of goods in same industry. There exists obviously differences in technical level and added value between the products. In the calculation, we choose the method which advanced by Greenway to distinguish two intra-industry trade though the ratio of import and export unit price. Such as follows:
Horizontal intra-industry trade:
1-α ≤UVx/UVm ≤ 1+α
Vertical intra-industry trade:
UVx/UVm < 1-α or UVx/UVm> 1+α
UVx refers to the unit value of exports of one country, UVm refers to the unit value of imports of one country and αis a coefficient which marks 0.25.
3.Trade combined degree index(TCD)
The trade combined degree theory was put forward by Economist A. J . Brown in 1947 and after the replenishing of Kiyoshi Kojima, the theory was used in the study of world trade.
The formula is following:
TCDab = (Xab/ Xa) / (Mb/Mw)
In the formula, TCDab represent the trade combined degree with country a to country b, X represent the exports, M represent the imports, Xab/ Xa represent the ratio between the exports from country a to country b and the total exports of country a and Mb/Mw represent the ratio between the imports from country b to country a and the total imports of country b. The basis of the index is 1, when it is higher than 1 it means the trade relationship between two countries is close and when it is lower than 1, it means the relationship is not well.
4. Export similarity index(SI)
A measure of export similarity between two countries, introduced by Finger and Kreinin (1979). With Xi(c,m) = the share of commodity i in country (or region) c's exports to market m, similarity between exports of countries a and b to market m is S(ab,m) = {Σi min [Xi(a,m),Xi(b,m)]}100 = 100{1−[Σi|Xi(a,m)−Xi(b,m)|]/2}.
The value of the index change in the range of 0 to 100. If the distribution of the goods export from countries a and b to the market is completely identical then the value of the index is equal to 100. If the distribution of the goods export from countries a and b to the market is totally different then the value of the index is equal to 0.If the value of the index increase continuously, it indicate a fierce competition between two countries in third market. Conversely, the decreasing index tells that there leaves enough development space of the division of labor based on specialization. Trade between the two countries are complementary.
5. Trade Complementarity Index(TCI)
The theory is advanced by Japanese scholars Kiyoshi Kojima and improved by Peter Drysdale in 1967. The algebraic formula is:
Ckij =RCAkxi*RCAkmj
In the formula, Ckij denote the trade complementarity index of product k between countries i and j, RCAkxi denote the comparative advantage of product k in country i using exports as a index, RCAkmj denote the comparative disadvantage of product k in country j by using imports as index. The detailed formula is following:
RCAkxi =(Xki/Xi)/(Xkw/Xw )
RCAkmj=(Mkj/Mj)/(Xkw/Xw )
In the formulas, Xki and Xkw respectively denote the export of product k in country i and world, Xi and Xw represent the total exports of country i and world. Mkj is the import of product k in country j and Mj is the total imports of country j. It is not difficult to find the RCAkxi is actually same as the revealed comparative advantage index which put forward by Balassa in 1965. The larger the RCAkxi indicates more and more obvious advantages of country i on product k. Moreover, the larger RCAkmj denotes the growing imports proportion of country j on product k which means the country is at a disadvantage position on product k. If country i shows a distinct comparative advantage on product k, country j must be at a distinct comparative disadvantage position on product k. The complementarity here is refer to the relationship between country i's export and country j's import on product k and it can be measured by calculating the value of Ckij. When Ckij >1, it means the complementarity is large between two countries and it becomes larger and larger with the increasing of the Ckij. When Ckij <1, it indicates the complementarity between two countries is not strong and it become weaker and weaker with the decreasing of the Ckij.
chapter 2
the analysis of Sino-US bilateral trade comparative advantage
1. a profile of Sino-US bilateral trade
According to the United Nations Commodity Trade Statistics Database and China Customs Statistics Yearbook, i drew six diagrams from table 1 to table 6. We can get some informations from table 1:
In the 9 major categories of merchandise in this statistics, china’s exports from USA are mainly focus on STIC6, STIC7 and STIC8. The ratio of these three types of goods accounted for 93.5% of total trade. Especially the STIC7, it is the most important commodity between Sino-US Bilateral trade, accounting for 49.78% of total trade. It can be seen that China's trade pattern is not diversified and it still mainly concentrated on the product which has higher degree of labor-intensive as well as a high degree of processing.
(2) China’s imports from USA are mainly focus on STIC2, STIC5 and STIC7. Its share accounted for 26.42%,15.45% and 34.47%. Overall. They are mainly primary products and capital-intensive products.
(3)It is not difficult to find from the table that the STIC2(Crude materials, inedible, except fuels),STIC3(Mineral fuels, lubricants and related materials) and STIC5(Chemicals and related products, n.e.s.) are net-imports goods. Nevertheless, the ratio of exports are much higher than the ratio of imports in STIC6 and STIC8. It indicates that China has a comparative advantage in labor-intensive industries but in capital and technology-intensive industries, China showed the shortcoming of lack of competitiveness. The STIC7(Machinery and transport equipment) is both the main export goods and the main import goods for both countries. In the field of Machinery and transport equipment production, it has three significant characteristics. Firstly, it has a clear-cut division of labor. Secondly, it is composed by many links in the processing chain and finally, the relationship between different industries is very close. As a whole, there exists many differences between china and USA in the structure of exports and it lay the foundation for sustained, coordinated development of the bilateral trade.
Table 1: The import and export trade between china and USA in 2011
STIC
Commodity composition
total imports/dollar
ratio of imports/%
total exports/dollar
ratio of exports/%
0~4
Primary products
40911884986
33.22
8873806654
2.73
0
Food and live animals
5563257649
4.51
6040090530
1.85
1
Beverages and tobacco
191777046
0.15
36690952
0.01
2
Crude materials, inedible, except fuels
32530308437
26.42
1654540561
0.50
3
Mineral fuels, lubricants and related materials
2308268133
1.87
1067388486
0.32
4
Animal and vegetable oils, fats and waxes
318273721
0.25
75096125
0.02
5~9
Industrial Products
82212124900
66.77
3.16137E+11
97.26
5
Chemicals and related products, n.e.s.
19023415232
15.45
13149030780
4.04
6
Manufactured goods classified chiefly by material
7077260785
5.74
40553726513
12.47
7
Machinery and transport equipment
42442811473
34.47
1.6182E+11
49.78
8
Miscellaneous manufactured articles
9652022807
7.83
1.00447E+11
30.90
9
Commodities and transactions not classified elsewhere in the SITC
4016614603
3.26
167905659
0.051
Table 2: The import and export trade between china and USA in 2006
STIC
Commodity composition
total imports/dollar
ratio of imports/%
total exports/dollar
ratio of exports/%
0~4
Primary products
21 426 726 731
31.73
1 940 269 918
0. 75
0
Food and live animals
1 420 296 358
2.10
332 325 297
0. 13
1
Beverages and tobacco
82 666 784
0. 12
28 024 593
0.01
2
Crude materials, inedible, except fuels
11 395 875 424
16. 88
116 841 830
0. 04
3
Mineral fuels, lubricants and related materials
8 501 687 875
12. 59
1 445 421 775
0. 56
4
Animal and vegetable oils, fats and waxes
26 200 290
0. 04
17 656 423
0. 01
5~9
Industrial Products
46 101 565 980
68. 27
257 804 612 044
99. 25
5
Chemicals and related products, n.e.s.
8 501 687 875
12. 59
5 782 132 967
2. 23
6
Manufactured goods classified chiefly by material
3 774 266 745
5. 59
30 684 577 347
11. 81
7
Machinery and transport equipment
28 434 755 623
42. 11
101 266 247 954
38. 99
8
Miscellaneous manufactured articles
5 336 541 291
7. 90
60 035 826 888
23. 11
9
Commodities and transactions not classified elsewhere in the SITC
54 314 446
0. 08
60 035 826 888
23. 11
2.measurement of RCA index between china and USA
Tables 2 and 3, respectively, given the estimation results of RCA index between two countries from 2000 to 2006, it tells that the bilateral trade has the following characteristics:
1. In the field of primary products, china and USA each has different competitive power. By comparing the RCA index, china has comparative advantage in STIC3 and is in a relative disadvantage position in STIC2. While in the field of labor-intensive product, china is in a leading position. The comparative advantage of goods in STIC 8 are the most outstanding which have the highest RCA index. The RCA index of the goods in STIC7 are also higher than 1 which reflect the optimization of the trade structure in china. we can find the RCA index in STIC 6 is increasing from 2000 to 2006. For the United States, it has much higher RCA index than china in the field of capital-intensive product especially in chemical industry and non-classified product. The phenomenon is because of the sustained investment of American government. The good in STIC7 is not only the main export product but also the important import product in United States.
2. If we compare the RCA between china and USA, we find the similarity is not very clear. From the results of statistics, china's comparative advantage show a variety of features. On one hand, the exports which has higher RCA index are all related to labor or resource-intensive industry, like Textile and Garment industry. On another hand, the competitive power of some capital and technology-intensive industry is developing and showing a dynamic transfer in comparative advantage which is consistent with the dynamic comparative advantage hypothesis. Balassa's hypothesis indicates that the high-speed development of one country's economics will improve the factor endowment and produce the change in the export structure and comparative advantage. United States is in the top position in the field of capital and technology-intensive industry and its competitive power does not decrease with the aggravate of trade deficit.
3. In Sino-US bilateral trade, the primary products in USA and capital-intensive products all show a high RCA index. This seems to be a paradox in the theory of international trade, however if you analysis it carefully you will find it is because of the limitation in factor-intensive classification. Despite the same product may be belong to different factor-intensive industry in different countries. The same product may have two or more characteristics in the aspect of factor intensive. Like rice, it is belong to both capital-intensive and land-intensive product in United States but only fall into the labor-intensive product in China.
4. From the point of view of the RCA(revealed comparative advantage correlation) between China and the United States, the relevant statistical results tell the positioning of China's comparative advantage in global trade patterns and the correlation between China's current comparative advantage and American comparative advantage. It provide the intuitive awareness for predicting the trend of China's comparative advantage.
Table 4 shows the correlation coefficient of the Sino-US comparative advantage.
I draw the curve diagram according to the comparative advantage correlation coefficient from 2000~2006. The curve reflect the change of the comparative advantage index correlation dynamically and intuitively.
The following conclusions can be drawn from Table 4 and Figure 1:
In general, the correlation of comparative advantage between China and USA is not outstanding but is positive and show a rising trend. The indistinctive correlation indicates the large difference in export advantage and export structure between China and USA. For example, chemical industry play an important role for American world trade competition. Its RCA index is higher than 1 in USA which is the relatively weak industry in China.
I draw the conclusion Based on the above analysis that there exists complementary between Sino-US trade. The bilateral trade is established on the basis of mutual benefit.
Chapter 3
analysis of Sino-US intra-industry trade index
At present, the views about complementary are all stressed the vertical complementary(intra-industry complementary) but the trade complementary should include both Inter-industry complementary and intra-industry complementary. The research on intra-industry is becoming a very important part of the study on world trade.
Table 5 give the intra-industry trade index between China and USA from 2000~2006 which classified by sev.1. The result tells the following features of Sino-US trade:
(1) The product which has higher Sino-US intra-industry index are mainly focus on Food and live animals, Beverages and tobacco, Animal and vegetable oils, fats and waxes, Chemicals and related products, n.e.s, and Commodities and transactions not classified elsewhere in the SITC. The product which has lower intra-industry index are from Crude materials, inedible, except fuels, classified chiefly by material and Miscellaneous manufactured articles.
In the nine product categories, Crude materials, inedible, except fuels(STIC2), Mineral fuels, lubricants and related materials(STIC3), classified chiefly by material(STIC6), Machinery and transport equipment(STIC7) and Miscellaneous manufactured articles(STIC8) these five product categories are mainly belong to inter-industry trade.
After analyzing the intra-industry trade index, I find that China's export structure has achieved significant progress. But there exists some controversy that china's capital-intensive product shows a high level of internal bidirectional flow and it seems to be contrary to the comparative advantage theory.
Looking into the reason of it, the foreign company,
especially the exclusively foreign-owned enterprise possess the vast majority of the export of the new high-tech product. Also,China takes the pattern of processing trade as the principal thing in export, meanwhile in import the pattern of general trade is given priority to.
The production and manufacturer of general trade are mainly accomplished at home,and the additional value of the export commodities is much greater.
Different from the general trade,the characteristics of the processing trade are chiefly manifested in the three-processing and one compensation. Among the characteristics of it,the most notable of it is the lower appreciation rate. In addition, in this pattern, the products are directly sold to the international market. Only limited  production and processing procedures are completed at home, and the technology content is relatively low.
The USA put restrictive surveillances on the high-tech products,which are produced by the domestic enterprises and then exported to China . As a result,the amounts of this kind of commodities have dramatically declined.
(2).The pattern of trade of major commodities between China and the United States in 2004 can be used to further confirm the above point of view.
From table 6, it tells that the pattern of trade between China and USA is still inter-industry trade and the comparative advantage theory is made full used in bilateral trade. There is a big difference in the resource endowments, technical level, economy structure, industry structure and consumption ability between China and USA. Through calculating the ratio of export price and import price, I find that the unit price ratio of export and import in most of the goods are lower than 1. It can be concluded that the main form of Industrial Division between China and USA is vertical industrial division. USA exports the goods with high quality and high technology and China imports the goods with low quality and low technology.
Chapter 4
1.analysis of Sino-US trade combined degree index
According to the export and import data of China, USA and World from 2000 to 2007, I calculate the trade combined degree index using formula (1) and draw the chart of the trade combined degree index between China and USA. The result is show in table 1 and graph 1 is the chart of the trade combined degree index between China and USA.
From the table 1 and graph 1, I find the trade combined degree index of China to America is different from the trade combined degree index of America to China. The former is larger than the latter. The trade combined degree index of China to America basically maintained at 1 or more but the trade combined degree index of America to China is always below 1. This is because of the very developed service sector in America and the service sector is not included in this statistics.
Graph 1 indicates:
In general, the trade combined degree index between China and America is relatively stable. The trade combined degree index of China to America is in the tendency of unceasing rising from 2001 to 2006. It is because of China's join in WTO which makes the trade route more smooth and increases the export of China to America. While, with the development of China's foreign trade, the trade friction is unceasing increasing in recent years. Such as the anti-dumping and law against unfair competition decrease the trade combined degree index of China to America in 2007. Moreover, the trade combined degree index of America to China is in the tendency of obviously declining from 2001 to 2007. It is also caused by Chin's join in WTO which cut down the tariffs, enhance the import and make the trade combined degree decrease.
According to the analysis of the method 3 in first chapter, when TCD value is less than 1 it indicates that the trade relationship between the two countries is loose. When TCD value is greater than 1, it indicates the close trade ties between the two countries. The greater the TCD value shows that the greater the closeness between the two countries in trade. Therefore, we can determine China's export trade are closely linked to U.S and U.S's export trade looks to be loosely linked to China.
2.analysis of Sino-US export similarity index
Product similarity is used to measure the same degree of export products between the two countries, this case will use the formula (2) to calculate the index of the similarity of Sino-US products. Greater the Sino-US export product similarity index is, stronger the complementary of Sino-US trade is, whereas the weaker. In this paper, the part of the calculation and analysis will be carried out according to the SITC Rev.1 AG2 (aggregate level 2) classification criteria.
I try to analysis the export similarity between China and USA in depth. In this case, I use the STIC Rev.1 AG2 (aggregate level 2) classification of the statistics to calculate and analysis the Sino-US export similarity index. The results is shown in Table 2 and Figure 2.
By comparing with the first part of the analysis, I find that the Sino-US export similarity index calculated according to the SITC Rev.1 AG2 (aggregate level 2) classification criteria is much smaller than the result calculated through SITC Rev.3 AG1 (aggregate level 1) classification criteria. The numerical calculations are hovering at around 50. Between 2001 and 2007, the similarity index show a stable trend. In 2001, the value was in the top position at 51.77 and fell into the lowest at 55.08 in 2007.
Over time, China's economic development,gradual transformation of the economic structure and mature production technology are the main reasons for the rise of China-US export similarity gradually. But from 2001 to 2007, the export similarity of China and the United States show a steady trend which indicate the development of China's sustainable economic model has encountered a bottleneck. There still exist a lot of difficulties to be solved, like the rising of labor costs, the limitation on low value-added products, insufficient technology investment. Overall, we can clearly judge that the China-US export similarity is not high from the analysis of SITC Rev.1 AG2 (aggregate level 2) classification criteria. In other words, these data illustrate the strong complementarity of Sino-US trade.
Chapter 4
quantitative analysis of the agricultural(STIC0) trade
1. Agri-Trade combined degree index between China and USA
In this case, I use the trade combined degree index(TCD) as my research method. According to the data from the United Nations Commodity Trade Statistics Database, China Customs Statistics Yearbook and Food and Agriculture Organization of the United Nations. I analyze and calculate the agri-trade combined degree index between China and USA from 2001 to 2007 using two different aspects. One aspect is the agri-product export from China to USA and another aspect is the agri-product export from USA to China.
The result is table 1 and graph 1 as following:
Table 1: Agri-Trade combined degree index between China and USA
Graph 1:
1.In general, the agri-trade combined degree index between China and USA shows a gradual upward trend. The agri-trade combined degree of China to USA increased from 0.33 in 2001 to 0.54 in 2007 and the agri-trade combined degree of USA to China raised from 1.74 in 2001 to 2.28 in 2007. The result tells that the foreign trade dependence is increasing between China and USA on agri-product and the degree of relationship of the agri-trade
combined degree between two countries become more and more close after China join the WTO(World Trade Organization) in 2001.
2. The foreign trade dependence of USA to China on agri-product is outclass than that of China to USA. From table 1, it tells the agri-trade combined degree of USA to China is always larger than 1and it was higher than 2 since 2003. Especially in 2003 and 2004, the degree was above 3. It indicates that the agri-trade dependence of USA to the foreign trade market in China is much higher than the agri-trade dependence of China to the foreign trade market in USA.
2. Export similarity index between China and USA on agri-product
In this case, I choose export similarity index(SI) as my research method. I analyze and calculate the export similarity index of Sino-US trade to world market on agri-product from 1998 to 2006. The result is displayed in graph 2.
In this case, letter a denotes country China, letter b denotes country USA, letter n denotes the world market, letter k denotes 16 kinds of agri-products included Wheat, rice, corn, cotton, soybeans, vegetables, fruits, sugar, tea, pork, beef, chicken, honey, cocoons and wool and letter X denotes the exports. The result tells:
1. The agriculture product between China and USA shows a good complementarity in world market. The export similarity index of Sino-US trade to world market on agri-product from 2001 to 2006 is not high and it is nearly stable between 21 and 30. It indicates that the level of the division of labor based on specialization is very high in two countries and the industry complementarity on agri-product is also good.
2.The export structure changes a lot between China and USA on agri-product after China join the WTO since 2001. Before China's joining in WTO, the trade competition on agri-product is being aggravated but since 2001, the complementarity on agri-product shows an escalating trend in screw type. The outcome research shows the export similarity index of Sino-US rose from 25.14 in 1998 to 29.81 in 2002. The results indicate the export structure between two countries is similar on agriculture industry and the competition is very fierce in world market before China's join in World Trade Organization. While, it is easy to find the export similarity index between two countries decrease from 29.64 in 2002 to 21.93 in 2006. In general, it shows a downward trend though some fluctuation between 2002 and 2006. This indicates the export structure between two countries become gradually different and the direct competition is much weakened after China's join in World Trade Organization. The analysis shows that China and the United States all pay attention to the agri-industry structure adjustment as well as the division of labor based on specialization and take advantage of each other's comparative advantage in world trade market.
3. Trade Complementarity Index on agri-product between China and USA
In this case, I choose Trade Complementarity Index(TCI) as my research method. According to the data from Food and Agriculture Organization of the United Nations, I analyze and calculate the agri-trade combined degree index between China and USA from 2001 to 2006 using two different aspects. One aspect, I consider China as export country and the United States as import country and on another aspect I consider the United States as export country and China as import country. The results include the analysis and calculation of the Trade Complementarity Index on agri-product between two countries from 1997 to 2006. It is show in graph 3 and graph 4. In this case, if I choose China as the export country, I use the formula (3) to calculate the Trade Complementarity Index. In the formula, letter i denote country China and letter j denote USA. If I choose USA as the export country, the formula is following:
Ckji =RCAkxj*RCAkmi
From the result of the research, it is not difficult to find:
1.The trade complementarity on agri-product between two countries is very strong. From the aspect of considering USA as export country, the good which has complementarity index higher than 1 includes soybeans, cotton, corn, chicken and wool. In 2006, the index are respectively 41.70, 33.08, 6.15, 2.02 and 1.19. From the aspect of considering China as export country, the good which has complementarity index higher than 1 includes cocoons, honey, vegetables and fruits. In 2006, the index are respectively 13.99, 9.80, 4.87 and 1.95.
2.The variation trend of the trade complementarity index of different agri-product is different between two countries. During 1997~2006, the agri-products which have an upward trend complementarity index are: soybean(rising from 20.43 in 1997 to 41.70 in 2006), cotton(rising from 3.19 in 1999 to 33.08 in 2006), vegetables(rising from 3.64 in 1997 to 4.87 in 2006 ), wool(rising from 0.05 in 1997 to 1.29 in 2006) and fruits(rising from 1.28 in 1997 to 1.95 in 2006). The agri-product which have a downtrend complementarity index are: honey(decreasing from 15.43 in 1997 to 9.80 in 2006), corn(decreasing from 9.08 in 1997 to 6.15 in 2006), chicken(decreasing from 3.45 in 1999 to 2.02 in 2006) and broad bean(decreasing from 32.77 in 2001 to 13.99 in 2006).
3.The agri-products which have high complementarity export from USA to China are mostly belong to land and capital-intensive product while the agri-products with high complementarity export from China to USA are labor-intensive product. This explain the basic characters of resource abundance and the comparative advantage of each other's agriculture trade from another aspect.

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