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"Depending on how broad or narrow the product categories are, a country can 
be shown to engage in various fractions of intra-industry and 
inter-industry trade. Hence some economists view intra-industry trade as a 
statistical artifact." - Andrea Maneschi, 
 
Hi, even if statistical classification could be refined, the definition of 
intra-industry trade would seem to mix-up competition with trade. Thus if 
Japan and USA both produce automobiles, both try to sell the product to the 
market (which includes Japan and USA here), and consumers in both countries 
may buy from whatever supplier they like. The problem may lie less with 
definition of ' industry' than with the meaning of the term 'trade'. I am 
afraid that the Ricardian conception of 'trade' is mixed up with joint 
allocation, as it predicts bi-lateral monopoly through specialization. If 
somebody owned both Japan and the USA, then would it make sense to allocate 
specialized production so that Japan would produce those automobiles that 
would have comparative cost advantage compared to the other category of 
automobiles. But if Japan and USA are independent entrepreneurs, they have 
no reason to worry about comparative cost. They would abide by Adam Smith's 
dictum of absolute cost advantage, namely, compete instead of granting 
mutual or bi-lateral monopoly. As a general rule, the major trading 
partners of industrialized nations are other industrialized nations. That 
is, intra-industray trade may reflect Smithian competition rather than 
Ricardian trade. 
 
Mohammad Gani 
 
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