Trade between Similar Economies

Countries with similar economies are more likely to trade with one another, especially if they are at a similar development level, have political or security partnerships, or have cultural ties. Why might that be? Consider that qustion as you read this section, and then answer the questions at the end of the section.

Intra-industry Trade between Similar Economies

Learning Objectives

By the end of this section, you will be able to:

  • Identify at least two advantages of intra-industry trading
  • Explain the relationship between economies of scale and intra-industry trade

Absolute and comparative advantages explain a great deal about patterns of global trade. For example, they help to explain the patterns noted at the start of this chapter, like why you may be eating fresh fruit from Chile or Mexico, or why lower productivity regions like Africa and Latin America are able to sell a substantial proportion of their exports to higher productivity regions like the European Union and North America. Comparative advantage, however, at least at first glance, does not seem especially well-suited to explain other common patterns of international trade.


Source: Rice University, https://opentextbc.ca/principlesofeconomics/chapter/33-3-intra-industry-trade-between-similar-economies/
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