Introduction
Hello and welcome. I am your host and today we will be talking about UK trade policy implications from calculating the intra-industry trade (IIT) index. This is an important matter, so ensure you listen in all through. Trading between different stock market indices or IIT is common. Most investors decide whether to purchase or sell based on their prediction of an index’s price (Das and Sen, 2022).
IIT index calculations lead to economies of scale, and a trading policy’s industrial structure can also be revealed with its help (Drelich-Skulska and Bobowski, 2021). The distribution of labor made possible by IIT commerce allows individual workers to grow intellectually, develop their talents, and contribute to the advancement of society.
Discussion
Calculations for intra-industry trade help achieve economies of scale; this becomes an issue when the United Kingdom’s trade policy allows more than one significant producer to help supply the country. Suppose a country like the UK, for instance, produces vehicles but only has one or two large companies producing their cars and no other foreign trade outlets (Ekakkararungroj, Ong and Devadason, 2022). In that case, the potential buyers in that country will have a poor choice regarding the type of cars they would like to acquire.
Division of labor is facilitated by the calculation provided by IIT index trading. Worker collaboration fosters creativity since it allows for the introduction of new ideas from each employee (Wood, Li and Wu, 2021). These fresh ideas can promote growth among the workforce and the country. Worker opportunities expand significantly because of the division of labor (Zapata, Arrazola and de Hevia, 2023).
Since many people are needed to put newly developed ideas into practice, the UK trade stands to gain a great deal from the resulting increase in employment prospects. The division of labor helps to create learning opportunities and provides a favorable environment for those with less competence to learn from those with more (Brkić, Kastratović and Salkica, 2021). In this way, those who are creative and innovative are rewarded by having the opportunity to share their insights with their coworkers, who may benefit from their knowledge and expertise.
In 1971, Herb Grubal and Peter Lloyd presented the Grubel-Lloyd Index technique that measures IIT calculations. Good intra-industrial trade is indicated by an index value of one or close to one. In contrast, unbalanced intra-industrial trade between the two countries is characterized by an index value of zero or close to zero. Gruben Lloyd index values might be anywhere from zero to one.
For instance, a country’s IIT in a particular industry would be equal to zero if it only exported or imported one commodity (Du and Shepotylo, 2022). On the contrary, a Gruben Lloyd score of one or close to it indicates that exports and imports of identical goods between the two countries make up the bulk of their intra-industrial commerce.
UK exports exceed Chinese imports in intra-industrial commerce involving the two countries. Although a score of zero to one represents perfect trading between identical industries in different economies, this practice goes against the principles of IIT (Stone, 2021). The closer to zero the score is, the less intra-industrial marketing there is; the closer to one, the more IIT there is (Gallucci, Dimitrova and Marinov, 2019).
If the UK and China want to keep their IIT index balance stable, the Chinese economy will need to expand its exports. The Grubel-Lloyd Index shows the current score for intra-industrial trade between China and the US is 0.59 (Gallucci, Dimitrova and Marinov, 2019). Since the score is between zero and one, it is neither first-rate nor deplorable.
In the case of the US and the UK, the two countries’ exports and imports have a nearly identical IIT scenario. Their Grubel-Lloyd Index value of 0.96 is close to one, implying that the United States and the United Kingdom have a healthy trade balance regarding importing and exporting similar industrial items (Gallucci, Dimitrova and Marinov, 2019). In this case, the positive rating is neutral for both economies (Şerife Sezer, 2021). These nations can take advantage of the supply-demand cycle and maintain a positive trade balance by trading within their borders.
Conclusion
IIT enables a more equitable distribution of labor, which in turn helps workers expand their horizons, hone their skills, and ultimately help society progress. IIT index calculations facilitate the services and products of the industry being transferred globally to preserve the balance between supplies and economic forces of availability and demand. IIT index calculations for the UK trade policy imply that a country should focus its manufacturing efforts on the goods and services for which it has a comparative advantage.
Thank you.
Reference List
Brkić, S., Kastratović, R. and Salkica, M. (2021) ‘Analysis of intra-industry trade in agri-food products between Bosnia and Herzegovina and the European Union’, South East European Journal of Economics and Business, 16(2), pp. 53-67. Web.
Das, S. and Sen, R. (2022). Trade interdependencies in Covid-19-related essential medical goods. Web.
Drelich-Skulska, B. and Bobowski, S. (2021) ‘Intra-industry trade and implications of the European Union-Japan Economic Partnership Agreement from the perspective of the automotive industry’, Entrepreneurial Business and Economics Review, 9(2), pp. 183-206. Web.
Du, J. and Shepotylo, O. (2022) ‘UK trade in the time of COVID‐19: a review’, The World Economy, 45(5), pp. 1409-1446. Web.
Ekakkararungroj, C., Ong, S. and Devadason, E. (2022) ‘Immigration-trade relationship in ASEAN: what does the evidence show?, Malaysian Journal of Economic Studies, 59(1), pp. 131-151. Web.
Gallucci, T., Dimitrova, V. and Marinov, G. (2019) ‘Interrelation between eco-innovation and intra-industry trade—a proposal for a proxy indicator of sustainability in the EU countries’, Sustainability, 11(23), pp. 6641-6647. Web.
Şerife Sezer, M. A. (2021) ‘An analysis of intra-industry trade with some selected European Union countries in the Turkish manufacturing industry’, Bulgarian Journal of International Economics and Politics, 1(2), pp. 39-51. Web.
Stone, L. (2021) The growth of intra-industry trade: new trade patterns in a changing global economy. Abingdon-on-Thames: Routledge.
Wood, J., Li, Y. and Wu, J. (2021) ‘An analysis of the trends and determinants of intra-industry trade between China and Asia-Pacific economic cooperation member countries’, The Singapore Economic Review, 66(3), pp. 743-766. Web.
Zapata, A., Arrazola, M. and de Hevia, J. (2023) ‘Technological intensity in manufacturing trade between ASEAN and the EU: challenges and opportunities’, Asia Europe Journal, 21(1), pp. 1-20. Web.