IS INTRA-INDUSTRY TRADE IN REALITY TWO-WAY TRADE?

With a view toward thoroughly understanding the character of the foreign trade. if is necessary to make a well-defined delimitation between the concepts of intra- and inter-industry trade. The share of intra-industry trade is smaller by a bilateral estimation than by a multilateral estimation. Correspondingly. the share of intra-industry trade is smaller by a regional estimation in relation to a national estimation. Furthermore. there is not any reason to adjust the Grubel and Lloyd index for a trade imbalance. If foreign trade is related to that part of a product category which includes foreign trade in quality varieties between countries with identical factor endowments, the intra-industry trade becomes much more substantial. Therefore, intra-industry trade makes up a far smaller share of total foreign trade than normally assumed, and the Heckscher-Ohlin model is still the essential incentive in the explanation of foreign trade.