The penetration of EC markets by UK manufacturing industry.

Abstract

In this study the impact of UK entry into the European Communities on the pattern of manufactured trade between the UK and the original members of the European Communities - EC(6) - is investigated within the context of a disaggregated analysis of the 102 three-digit SITC commodities which form sections five to eight of the SITC. The analysis is based on two models, the first derived from the traditional theory of customs unions and the second from the theory of intra industry trade. Whilst the post-entry period has been characterised by a substantial increase in the trade in manufactured goods between the UK and the EC(6), the results provide little support for the traditional theory of customs unions. UK entry does not appear to have resulted in an increase in inter industry specialisation based on the pattern of comparative advantage. The study confirms the importance of intra industry trade. Intra industry trade accounted for over 70% of the trade in manufactured goods between the UK and the EC(6) in 1970/71 at the three-digit level of classification. During the post-entry period, over 70% of the increase in trade between the UK and the EC(6) has taken the form of intra, rather than inter, industry trade and this has meant that no change has occurred in their relative importance. The results provide some support for the theory of intra industry trade. The increase in intra industry trade cannot be explained by categorical aggregation. It is positively related to the degree of product differentiation and the height and degree of similarity of UK-EC tariff barriers in the pre-entry period. Finally, the results suggest that changes in both the proportion and the amount of intra industry trade are positively related to the incidence of non-tariff barriers.

Date of Award	1985
Original language	English
Awarding Institution	University of Bath