INTRA INDUSTRY TRADE IN

USA,GERMANY,FRANCE AND
INDIA

-GROUP 4
ELECTRICAL MACHINERY

 Electric machine is a general term for machines using electromagnetic

forces, such as electric motors, electric generators, and others.
SIGNIFICANCE OF INTRA INDUSTRY
TRADE EXIST
 According to traditional trade models, it is the differences between countries that give way f
or beneficial trade.
 To a large extent intra-industry trade arises from the facts that products are differentiated and
the production of any particular product requires some fixed costs.
 FOR EXAMPLE, the more sport utility vehicles Ford makes, the lower the unit cost; the more
Mercedes-Benz convertibles produced, the lower the unit cost.
 Some elements of comparative advantage may be involved; for example, Germany may have
a comparative advantage in producing high-quality cars.
 Intra-industry trade constitutes more than 60 percent of European trade and about 20 percent of
Japanese trade.
 Japan has less intraindustry trade because its factor endowment is significantly different from
those of other advanced countries; another reason is Japan does not experience much border
trade.
 Japan imports more raw materials than do most other developed countries. With more raw
materials, there are fewer differentiated manufactured products and less intra-industry trade.
CURRENT POLICIES BY TRUMP
GOVERNEMENT TO BLOCK SUCH EXPORTS
FROM OTHER COUNTRIES

 The president has placed tariffs on billions of dollars' worth of goods from around
the world, in particular China.
Trump wants to cut this trade deficit and using tariffs to do that
 BEFORE PROTECTIONALIST POLICIES : the average Most Favored Nation tariff on U.S. products
was only 1.66 percent. Some of the WTO members with the highest average tariffs for
products in this category were Pakistan (14.43 %), Brazil (14.07 %), Argentina (14.81 %), and
Zimbabwe (13 %). In short, charging a 35 percent import tariffs to other WTO members was
exception, not the rule. Imposing higher tariffs was, in fact, common only in developing and
poor countries.
 AFTER PROTECTIONALIST POLICIES : On September 17, 2018 President Trump
formerly announced additional tariffs that were effective starting September 24, 2018, and
initially there were in the amount of 10 %. Starting January 1, 2019, the level of the additional
tariffs increased to 25 %. The $200 billion imports from China targeted included 5,745 full or
partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports
announced on July 10, 2018. Included among the products removed from the original
proposed list were certain consumer electronics products such as smart watches and
Bluetooth devices etc.
Product Differentiation

 The product differentiation in key features and minor details is an

important strategy firms use to defend their price and prevent other firms
from supplying the same good to the same consumers.
 Vertical differentiation
Vertical differentiation occurs according to the objective quality of good
from the highest to the lowest.
 Horizontal differentiation
When products are different according to features that can't be ordered in
an objective way.
Product Differentiation

 Consumers preference for variety leads to demand for horizontally

differentiated products of similar quality from both domestic producers
and foreign producers which ultimately results in intra-industry trade.
 Heterogeneity in consumer preferences allows firms to differentiate their
products such that each firm faces a separate downward sloping
demand curve.
 Product differentiation induces a fixed production cost associated with
product innovation and which makes mark-up pricing a necessity for non-
negative profit.
Product Fragmentation

 Fragmentation of production describes the distribution of the production

process across different countries.
 As a result of the fragmentation of production, traded products
increasingly contain parts and components from more than one country,
as does the associated value added. This leads to the fast growth of
intermediate inputs in international trade, in terms of both goods and
services.
 Fragmentation has grown rapidly in industries such as electronics,
machinery, and textiles and apparel, in which multinational companies
play a key role
6 – Digit HS Codes

 All import and export codes used by the United States are based on the
Harmonized System (HS) of the Harmonized Tariff Schedule (HTS)
developed by the World Customs Organization (WCO).
 The HS assigns specific six-digit codes for varying classifications of products
and commodities.
 The first two digits (HS-2) identify the chapter the goods, next two digits (HS-
4) identify groupings within that chapter, further next two digits (HS-6) are
even more specific classification.
 The HS code for electrical machinery is “85”. To conduct our study we
have chosen top 10 “4 digit” HS Codes and one “6 Digit” HS code in each
of them.
HS Code Product Description

Electrical machinery and equipment and parts thereof; sound recorders and reproducers; television image
85 and sound recorders and reproducers, parts and accessories of such articles
8501Electric motors and generators (excluding generating sets)
850140Electric motors; AC motors, single-phase
8502Electric generating sets and rotary converters
850240Electric rotary converters

Electric motors and generators; parts suitable for use solely or principally with the machines of heading no. 8501

HS code
8503 or 8502

Electric motors and generators; parts suitable for use solely or principally with the machines of heading no. 8501
850300 or 8502
8504Electric transformers, static converters (e.g. rectifiers) and inductors

Table
850410Discharge lamps or tubes; ballasts therefor

Electro-magnets; permanent magnets, intended permanent magnets; electro-magnetic, permanent magnet

8505 chucks, clamps, similar; electromagnetic couplings, clutches, brakes; electro-magnetic lifting heads
850520Magnets; electro-magnetic couplings, clutches and brakes
8506Cells and batteries; primary
850650Cells and batteries; primary, lithium

8507Electric accumulators, including separators therefor; whether or not rectangular (including square)
850790Electric accumulators; parts n.e.c. in heading no. 8507
8508Vacuum cleaners
850870Parts of vacuum cleaners

Electro-mechanical domestic appliances; with self-contained electric motor, other than vacuum cleaners of
8509 heading 85.08.

8510Shavers, hair clippers and hair removing appliances, with self-contained electric motor
 GL Index for 6 – Digit Codes

850140- Electric motors; AC 850240 - Electric rotary converters

motors, single-phase 1.00
0.90
0.35
0.80
0.34
0.70
0.33
0.60
0.32 0.50
0.31 0.40
0.30 0.30
0.29 0.20

0.28 0.10

2010 2011 2012 2013 2014 2015 2016 2017 0.00

2010 2011 2012 2013 2014 2015 2016 2017
 850300 - Electric motors and generators;
parts suitable for use solely or principally
with the machines of heading no. 8501 or
850410 - Discharge lamps or tubes;
8502
ballasts therefor
0.64
0.70
0.63
0.60
0.62
0.61 0.50

0.60 0.40
0.59
0.30
0.58
0.20
0.57
0.56 0.10

0.55 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017
 850520 - Magnets; electro-magnetic 850650 - Cells and batteries; primary,
couplings, clutches and brakes lithium
1.20 0.98
0.96
1.00
0.94
0.92
0.80
0.90
0.60 0.88
0.86
0.40
0.84
0.82
0.20
0.80
0.00 0.78
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017
 850790 - Electric accumulators; parts
n.e.c. in heading no. 8507 850870 - Parts of vacuum cleaners
1.20
0.90
0.80 1.00
0.70
0.60 0.80
0.50
0.60
0.40
0.30
0.40
0.20
0.10 0.20
0.00
2010 2011 2012 2013 2014 2015 2016 2017 0.00
2010 2011 2012 2013 2014 2015 2016 2017
 85(Electrical Machinery)
GL Index 0-0.25 0.25-0.5 0.5-0.75 0.75-1 0.74

0.72

2010 0 13 13 10 0.70

0.68

2017 2 11 16 7 0.66

0.64

0.62

0.60
2010 2011 2012 2013 2014 2015 2016 2017

Percentage Change = -9.589%

 Few products which have seen relatively higher INCREASE in GL Index are

8502 Electric Generating Sets and Rotary 850240 Electric Rotary Converters
Converters 1.00
1.20 0.90
0.80
1.00
0.70
0.80 0.60
0.50
0.60
0.40
0.40 0.30
0.20
0.20
0.10
0.00 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017

2010 X= 3606030934 M= 2291199062 2010 X= 23297658 M= 8077220

2017 X= 1263024920 M= 1379527810 2017 X= 16421687 M= 27151562
% change in GL Index= 23.019% % change in GL Index= 46.392%
 851410 Furnaces and Oven (laboratory)
Resistance Heated
1.2
2010 X= 238576282 M= 56416458
1 2017 X= 174894251 M= 143250528
0.8 % change in GL Index= 135.438%
0.6

0.4

0.2

0
2010 2011 2012 2013 2014 2015 2016 2017
  Few products which have seen relatively higher DECREASE in GL Index are
8508 Vacuum Cleaners 852110 Video Recording Apparatus
0.40 1.2

0.35
1
0.30
0.8
0.25

0.20 0.6

0.15
0.4
0.10
0.2
0.05

0.00 0
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017

2010 X= 421535724 M= 1802588666 2010 X= 61274671 M= 13427578

2017 X= 279800146 M= 2689877395 2017 X= 63989568 M= 4430215
% change in GL Index= -50.28% % change in GL Index= -49.284%
 8523 Smart card, Media Recording
Devices, Discs, Tapes
1.2
2010 X= 4907015131 M= 4352973732
1 2017 X= 4175683843 M= 11274937221
0.8 % change in GL Index= -39.413%
0.6

0.4

0.2

0
2010 2011 2012 2013 2014 2015 2016 2017
 Few products whose GL index do not have much variation
8507 Electric Accumulators 8509 Electro Mechanical Domestic
0.90 Appliances
0.80 0.60

0.70
0.50
0.60
0.40
0.50

0.40 0.30

0.30
0.20
0.20
0.10
0.10

0.00 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017

2010 X= 1798966757 M= 3380961557 2010 X= 420495560 M= 651809889

2017 X= 3084477548 M= 6982948804 2017 X= 1404010430 M= 1883787475
% change in GL Index= -11.44% % change in GL Index= 11.538%
 8510 Shavers, Hair Clippers and Hair
Removing Devices
0.60

0.50 2010 X= 157549509 M= 197429787

0.40 2017 X= 541918579 M= 629735032
0.30
% change in GL Index= 5.967%
0.20

0.10

0.00
2010 2011 2012 2013 2014 2015 2016 2017