ABSTRACT
Empirical evidence suggests that a substantial proportion of trade in manufactures in general, and between industrialized countries in particular, is now of a two-way or intra-industry nature. This stimultaneous exchange of similar products has also increased in empirical significance over the post-war period. There is a substantial theoretical literature which provides ‘natural’ explanations for the phenomenon (see Greenaway and Milner, 1986) – explanations in terms of the demand for variety, decreasing costs, and international oligopolistic rivalry, for instance. There is also a substantial amount of empirical validation for these ‘natural’ explanations (Greenaway and Milner, 1984). Nevertheless, some commentators have expressed the belief that the observed phenomenon is to a considerable extent ‘man-made’; induced either by the idiosyncracies of official trade classifications (e.g. Finger 1975; and Pomfret 1979 and 1985) or by the conduct of commercial policy on the process of inter-industry specialization, (e.g. Hufbauer and Chilas 1974; and Tumlir 1979). Given that it has been asserted on several occasions that adjustment to trade expansion is likely to be smoother in a setting of intra- as opposed to inter-industry trade (e.g. Balassa 1966; Aquino 1978), then it is important that the nature and extent of ‘man’s’ influence on specialization patterns and structural adjustment problems is properly understood.
