Trade policy distortions and intra-industry trade in East Asian newly industrialising countries, with special attention to Korea

Abstract

This thesis examines the changing pattern of production and trade specialisation in newly industrialising countries by undertaking a case study of the East Asian newly industrialising countries, and in particular of the Republic of Korea. It highlights the growing importance of intra-industry specialisation In production and trade in manufactures in East Asian newly industrialising countries as they move along the developm nt path towards the economic structu re of industrial countries. In a detailed analysis of the effect of variation in protection on the changing pattern of production and trade specialisation in the Republic of Korea, this thesis shows that a reduction in the variation of a country's levels of protection within its manufacturing industries will lead to an increase in the intra-industry trade in these industries. Moreover with the use of a general equilibrium model of the Korean economy, which takes into account the basic features of the industrial organisation' approach (entailing imperfect competition, economies of scale and product differentiation) it demonstrates how a reduction in the average levels of protection within a country's manufacturing industries will lead to an increase in the intra-industry specialisation in production and trade in these industries.