Intra-Industry Trade, a comparative analysis of the Mexican and the Korean automotive sector

Abstract

The increase of Intra-Industry Trade in the world trade dynamics is opening not only the discussion about its relation with Free Trade Agreements but also its development in non Free Trade Areas and its influence on investment. According to the measurement and analysis of the Intra-Industry Trade within Free Trade areas, the behaviour of IIT with the adoption of a Free Trade Agreement between Mexico and Korea can be predicted as these trading partners have the same level of specialization in the automotive sector. The position of Mexico within NAFTA, and the trade flow in Asia with Korea as one of the main participants, offer a relevant sample of the new trends for trade. Free Trade Agreements have a relevant impact on Intra-Industry Trade specifically on the automotive sector for Mexico and Korea, considering also, that these trading partners have a significant participation in the global production in the sector. Private investment in Mexico is increasing with its levels of IIT principally because of NAFTA, but its relation with other trading partners without the scope of a Free Trade Agreement is leading to re think the advantages of achieving agreements with Asia to boost investment and trade.