Intra-industry trade involves the interchange of identical goods produced in the same industry. It is similar to international trade whereby countries import and export comparable products. Commonly traded products in the Intra-industry trade are automobiles, electronics, and beverages. This article explains how the existence of internal economies of scale results in the rise of intra-industry trade.
Marketing economies of scale have contributed much to the growth of intra-industry trade. It facilitates efficient production of products because there is a wide market available for goods from other industries. Due to this competition between industries producing similar goods, the need for innovation arises.
Intra-industry trade is hastened by the technical economies of scale. Different industries can freely exchange all the factors of production. This ensures that the production procedure is highly efficient. As such, the level of production increases leading to expansion of the intra-industry trade.
The World Trade Organization oversees the implementation of the rules in global trade. It applies particular mechanisms that are meant to boost the level of world trade. The World Trade Organization has incorporated major labor standards in order to protect the rights of workers. Countries violating the policy are subjected to unilateral trade restrictions.
Conflict settlement is very significant in facilitating world trade. New dispute settling mechanisms have been established in developing countries. They help in the enforcement of rules and policies stated in the World Trade Organization agreements. This mechanism is responsible for efficient dispute resolution that persuaded developing nations to support the Uruguay Round declarations.
World Trade Organization established a decision-making mechanism. Decisions and actions implemented in the body involve all the member nations. According to World Trade Report (23), the member governments hold discussions about the policies and rules are made from the outcomes of the negotiations. The organization advocates for law-based as opposed to the power-based mechanism of bargaining. The power-based mechanism is discouraged because it favors the Europe and U.S. thereby hindering Pareto’s advancement.
World Trade Report. Geneva: World Trade Organization, 2003. Print.