REGIONAL COOPERATION AND ECONOMIC INTEGRATION
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REGIONAL COOPERATION AND ECONOMIC INTEGRATION

REGIONAL COOPERATION AND ECONOMIC INTEGRATION REGIONAL COOPERATION AND ECONOMIC INTEGRATION

carina.mk
25.12.2014 Views

2.3. Comparative advantages REGIONAL TRADE AGREEMENTS AND REGIONAL COOPERATION The results from the previous parts of the paper show that the period of transition was characterized by a significant increase in the openness and the volume of international trade. The key question in this part of the paper is: does an increase in openness in international trade correspond to positive changes in trade structure A positive change in the trade structure implies a change of comparative advantages towards higher value added sectors and products as well as a higher level of trade specialization. In this part, comparative advantages are analyzed while trade specialization is analyzed in the following part of the paper. The comparison of comparative advantages for selected south-eastern European countries is analysed by the RCA indicator. The empirical results are displayed in table 2. Table 2: The RCA indicator in 2006 Bosnia and Serbia and Sectors Croatia Macedonia Herzegovina Montenegro Machinery -0.36 -0.42 -1.50 -0.99 Base metal 0.36 -0.36 0.84 0.40 Textiles -0.23 -0.17 0.17 -0.20 Foodstuffs -1.45 -0.17 0.05 -0.14 Wood 0.82 0.18 -0.93 -0.27 Mineral -0.40 -0.38 -0.69 -0.94 Miscellaneous manufactured articles 0.62 -0.21 -0.95 -0.43 Vehicles -1.39 -0.78 -2.03 -1.26 Plastics -1.07 -0.42 -2.83 -0.23 Chemical -0.87 -0.70 -2.34 -0.90 Footwear 0.43 -0.01 0.36 0.15 Skins, leather -0.12 0.01 -0.76 -0.87 Pulp of wood, paper -0.95 -0.50 -2.85 -1.00 Stone, plaster, cement -1.74 -0.42 -1.05 -1.08 Animal products -2.06 -0.61 -0.67 -0.88 Precision instruments -1.17 -1.44 -2.40 -1.37 Vegetable products -1.13 -0.57 -0.11 0.70 Natural or cultured pearls 0.51 -0.64 - 0.40 Animal or vegetable fats and oils -0.90 -0.53 - -0.46 Arms and ammunition 1.22 - - 0.20 Source: COMEXT, own calculations. All observed countries, except Croatia, have comparative advantages in base metal and articles of base metal, footwear, natural or cultured pearls, arms and ammunition. Bosnia and Herzegovina is the only one that has comparative advantages in miscellaneous manufactured articles. Unlike Macedonia and Serbia and Montenegro, Bosnia and Herzegovina and Croatia have comparative advantages in trade with wood. Conversely, Macedonia and Serbia and Montenegro have comparative advantages in trade with vegetable 81

PART I: products while Bosnia and Herzegovina and Croatia do not. A common characteristic for all countries is the presence of comparative advantages in low value added sectors. 2.4. Intra-industry trade and trade specialization After comparative advantages were analyzed, the trade patterns concerning the realized economic benefits from international trade are explored. For this purpose horizontal and vertical specialization are analyzed. Horizontal intra-industry trade occurs when similar products are simultaneously exported and imported, mainly due to product differentiation. Vertical intra-industry trade represents the simultaneous export and import of goods within one industry but where the products belong to different stages of production. Empirical research of intra-industry trade began in the mid-1960s. The first results were exposed by Balassa (1965). The most well known work on intra-industry trade was made by Grubel and Lloyd (1975). This research was then followed by what we know today as the theory of intra-industry trade (Dixit and Stiglitz 1977; Krugman 1980, 1981; Lancaster 1980; Helpman 1981). The role and significance of intra-industry trade in the process of globalization and integration of transition economies on international markets is becoming more important than previously. Research in the field of international trade shows that intra-industry trade is the fastest growing segment in the international trade of transition economies (Aturupane, Djankov and Hoekman 1997; Kaminski and Ng, 2001). The key question is what happens with the comparative advantages and utility in international trade. Namely, we can ask does an increase in the integration with international markets and growth in intra-industry trade specialization correspond to changes in comparative advantages towards higher value added sectors The most commonly used indicator for the measuring of the level of specialisation in intraindustry trade is the Grubel-Lloyd index. Empirical results of the calculation of the Grubel- Lloyd index for selected transition south-eastern European countries are shown in table 3. 82

2.3. Comparative advantages<br />

<strong>REGIONAL</strong> TRADE AGREEMENTS <strong>AND</strong> <strong>REGIONAL</strong> <strong>COOPERATION</strong><br />

The results from the previous parts of the paper show that the period of transition was<br />

characterized by a significant increase in the openness and the volume of international trade.<br />

The key question in this part of the paper is: does an increase in openness in international<br />

trade correspond to positive changes in trade structure A positive change in the trade<br />

structure implies a change of comparative advantages towards higher value added sectors<br />

and products as well as a higher level of trade specialization. In this part, comparative<br />

advantages are analyzed while trade specialization is analyzed in the following part of the<br />

paper.<br />

The comparison of comparative advantages for selected south-eastern European countries<br />

is analysed by the RCA indicator. The empirical results are displayed in table 2.<br />

Table 2: The RCA indicator in 2006<br />

Bosnia and<br />

Serbia and<br />

Sectors<br />

Croatia Macedonia<br />

Herzegovina<br />

Montenegro<br />

Machinery -0.36 -0.42 -1.50 -0.99<br />

Base metal 0.36 -0.36 0.84 0.40<br />

Textiles -0.23 -0.17 0.17 -0.20<br />

Foodstuffs -1.45 -0.17 0.05 -0.14<br />

Wood 0.82 0.18 -0.93 -0.27<br />

Mineral -0.40 -0.38 -0.69 -0.94<br />

Miscellaneous manufactured<br />

articles 0.62 -0.21 -0.95 -0.43<br />

Vehicles -1.39 -0.78 -2.03 -1.26<br />

Plastics -1.07 -0.42 -2.83 -0.23<br />

Chemical -0.87 -0.70 -2.34 -0.90<br />

Footwear 0.43 -0.01 0.36 0.15<br />

Skins, leather -0.12 0.01 -0.76 -0.87<br />

Pulp of wood, paper -0.95 -0.50 -2.85 -1.00<br />

Stone, plaster, cement -1.74 -0.42 -1.05 -1.08<br />

Animal products -2.06 -0.61 -0.67 -0.88<br />

Precision instruments -1.17 -1.44 -2.40 -1.37<br />

Vegetable products -1.13 -0.57 -0.11 0.70<br />

Natural or cultured pearls 0.51 -0.64 - 0.40<br />

Animal or vegetable fats and<br />

oils<br />

-0.90 -0.53 - -0.46<br />

Arms and ammunition 1.22 - - 0.20<br />

Source: COMEXT, own calculations.<br />

All observed countries, except Croatia, have comparative advantages in base metal and<br />

articles of base metal, footwear, natural or cultured pearls, arms and ammunition. Bosnia<br />

and Herzegovina is the only one that has comparative advantages in miscellaneous<br />

manufactured articles. Unlike Macedonia and Serbia and Montenegro, Bosnia and<br />

Herzegovina and Croatia have comparative advantages in trade with wood. Conversely,<br />

Macedonia and Serbia and Montenegro have comparative advantages in trade with vegetable<br />

81

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