Report Final Ik-2

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Intra-industryTrade

Group 23:

Nikita Pušņakovs

Anete Vabule

Ilgvars Nātans Krauja

Liina Karlson

International Economics

Stockholm School of Economics in Riga

Riga, September 2009



Table of ContentsTable of Contents.................................................................................................................2

Introduction..........................................................................................................................2

Methodology........................................................................................................................2

Background information......................................................................................................4

United Kingdom ..............................................................................................................4

Romania...........................................................................................................................5

Gruber – Lloyd indexes.......................................................................................................6

Analysis................................................................................................................................9

United Kingdom...............................................................................................................9

Romania.........................................................................................................................10

Conclusions........................................................................................................................13

...........................................................................................................................................13

IntroductionGeneral motives of a researcher, who is studying intra-industry trade topic, is to

find out what are the industries, where country imports and exports similar goods. In our

report we will also try to find out such industries, by using as a measurement Grubel-

Lloyd index. Moreover, taking United Kingdom and Romania as countries on which to base our analyses, we will try to find out what causes changes in GL index in these two

different economies. As UK and Romania economies are very different, one having a

traditional EU economy, and second being in a transition period for years already, weexpect that the reasons for changes in GL index for UK and Romania should be different.

MethodologyIn order to answer our research question, we went through several steps and

during each step we used various ways for obtaining information.

In the beginning, we gathered information about the intra-industry trade and itsmeasurements from the study-book ‘International Economics. Trade & Policy’ by

P.Krugman and M.Obstfeld and supplementary articles on intra-industry trade to get a

better insight of what intra-industry trade is about.

Secondly, we gathered data about external trade for both UK and Romania from

the Eurostat database, External Trade section. From the values of imports and exports wecalculated the GL index for each group, at the 2-digit level of desegregation. We also

calculated the average index for each big industry. In addition, we calculated the changesof the index over the time period of 1999-2008.

Thirdly, we narrowed our study to the top three most fluctuating product groups in

each country based on our aggregations from data of Eurostat. Then, we gatheredempirical data for each country to understand the two economies, changes in their trade



in 1999, 2004, 2008 and the trading pattern in general. We used different internet

resources for this purpose.

To draw conclusions, we used articles of Journal of International Economics andEconomic Journal as well as information from the book by Sophia Davidova and

Kenneth J. Thomson ‘Romanian agriculture and transition toward the EU’, together with

various governmental websites.



Background information

United Kingdom

On May 1st 1707 Kingdom of England and Kingdom of Scotland were united

under the name of United Kingdom of Great Britain. Till nowadays it has been

developing as one of the world’s leading economies. During three centuries, UK wentthrough revolutions, depressions, crises and consequences of World Wars, which were

the reasons for economic changes inside the country. In the early 18th century agrarian

period was transformed to industrial, in the 19th century into financial capitalism. The

economy of Great Britain has seen many shocks during the years. After recession, which

occurred between 1991 and 1992, UK economy finally had a period of continuous

economic growth, which lasted for around 16 years. From 1999 to 2008 average imports

to United Kingdom were always greater than exports.

From year 1999 all economic parameters were increasing until 2003, when

imports and exports had a little drop, as well as UK’s GDP. However, the percentage

values started to decrease already from 2000. They recovered in 2003, and were growing

until 2006, when they reached their highest levels, as it was a peak of the economy

development. After that, imports, exports, and GDP of the country started to fall.

Graph 1 UK imports & exports (Eurostat)

In the 21st century, from 2000 to early 2008, UK had consistent growth rates of

between 2% and 3%, while inflation rate was at around 2%. Until November 2008,exchange rate against Euro was on the steady level of 1.45 euro per 1 pound. However

Credit crunch lead pound to depreciate against euro and at the end of the year it was

equal to 1.04 euro.



Romania

Romania is a 22 million people populated republic in South-East Europe. The country

borders with Black Sea, Bulgaria, Hungary, Moldova, Serbia and Ukraine and its natural

resources are petroleum, timber, natural gas, coal, iron ore, salt, arable land, hydropower

(www.cia.gov). Since 2004 Romania is a member state of NATO and since 2007 - a member

state of the European

Union. These two

factors have

contributed to the

development of

Romania as it could

be presented by

annual growth rates

on foreign direct

investments. You can

see how FDI has

grown three times inthe year Romania

joined NATO and how

it continued rising

towards joining the

EU. However,

Romania is a different

type of economy as it

used to be under economical and political control of USSR until 1989. During the past 20 years it

has been in a transition progress.

Graph 2 Annual GDP Growth (current prices) and Romania NetFDI



Gruber – Lloyd indexes

... GLI ROMANIA GLI UNITED KINGDOM

PRODUCT 1999 2004 2008 1999 2004 2008

0

0

LIVE ANIMALS OTHER THAN ANIMALS OFDIVISION 03

0,122692 0,286305 0,686738 0,853721 0,996072 0,9869

0

1 MEAT AND MEAT PREPARATIONS 0,309117 0,210981 0,189675 0,454693 0,316216 0,39619

0

2DAIRY PRODUCTS AND BIRDS' EGGS 0,252905 0,599669 0,209272 0,713463 0,642866 0,552122

0

3

FISH (NOT MARINE MAMMALS), CRUSTACEANS,MOLLUSCS AND AQUATIC INVERTEBRATES, ANDPREPARATIONS THEREOF

0,460115 0,063379 0,059482 0,736697 0,750915 0,628401

0

4CEREALS AND CEREAL PREPARATIONS 0,850272 0,367294 0,883348 0,969522 0,9193 0,83156

0

5VEGETABLES AND FRUIT 0,631906 0,629059 0,260105 0,187251 0,180685 0,174125

0

6SUGARS, SUGAR PREPARATIONS AND HONEY 0,215666 0,316329 0,272782 0,671585 0,590347 0,554019

0

7

COFFEE, TEA, COCOA, SPICES, ANDMANUFACTURES THEREOF

0,064333 0,10465 0,204791 0,646143 0,656409 0,617349

0

8

FEEDING STUFF FOR ANIMALS (NOT INCLUDINGUNMILLED CEREALS)

0,508984 0,364773 0,691199 0,506858 0,537893

0

9

MISCELLANEOUS EDIBLE PRODUCTS ANDPREPARATIONS

0,129363 0,133339 0,269505 0,737053 0,764419 0,629299

1

1BEVERAGES 0,764336 0,743388 0,562646 0,998425 0,957004 0,974927

1

2TOBACCO AND TOBACCO MANUFACTURES 0,017068 0,029091 0,795885 0,557962 0,618162 0,893727

1

9

ADJUSTMENTS (TRADE BROKEN DOWN ATCHAPTER NC LEVEL ONLY)

0,821358

2

1HIDES, SKINS AND FURSKINS, RAW 0,452871 0,711561 0,41131 0,824953 0,562523 0,440359

2

2OIL-SEEDS AND OLEAGINOUS FRUITS 0,206515 0,676699 0,488515 0,454965 0,238143 0,325907

2

3

CRUDE RUBBER (INCLUDING SYNTHETIC ANDRECLAIMED)

0,056212 0,239335 0,042513 0,975787 0,98693 0,886722

2

4

CORK AND WOOD 0,015363 0,077621 0,287217 0,104403 0,151292 0,15757

2

5PULP AND WASTE PAPER 0,489326 0,619188 0,283154 0,190608 0,622392 0,853737

2

6

TEXTILE FIBRES (OTHER THAN WOOL TOPS ANDOTHER COMBED WOOL) AND THEIR WASTES(NOT MANUFACTURED INTO YARN OR FABRIC)

0,242846 0,246196 0,390285 0,993579 0,841148 0,796668

2

7

CRUDE FERTILIZERS, OTHER THAN THOSE OFDIVISION 56, AND CRUDE MINERALS(EXCLUDING COAL, PETROLEUM AND PRECIOUSSTONES)

0,478653 0,394818 0,293375 0,848239 0,897221 0,931916

2

8METALLIFEROUS ORES AND METAL SCRAP 0,959213 0,856977 0,860644 0,535013 0,928137 0,849296

2

9

CRUDE ANIMAL AND VEGETABLE MATERIALS,N.E.S.

0,713551 0,426222 0,417955 0,289541 0,272924 0,381772

3

2COAL, COKE AND BRIQUETTES 0,059964 0,023833 0 0,189233 0,079551 0,083871

3

3

PETROLEUM, PETROLEUM PRODUCTS AND

RELATED MATERIALS0,668107 0,759608 0,698091 0,64989 0,942863 0,957017

3

4GAS, NATURAL AND MANUFACTURED 0,114811 0,14163 0,187105 0,719521 0,644289

3

5ELECTRIC CURRENT 0,782156 0,279081

3

9

CONFIDENTIAL TRADE OF GROUP 39 AND/ORESTIMATIONS

0,958047

4

1ANIMAL OILS AND FATS 0,020587 0,664498 0,770566 0,809135

4

2

FIXED VEGETABLE FATS AND OILS, CRUDE,REFINED OR FRACTIONATED

0,356451 0,777402 0,704242 0,426876 0,330198 0,361729

4 ANIMAL OR VEGETABLE FATS AND OILS, 0,21133 0,286897 0,02681 0,775015 0,680051 0,405656

0,385567



3

PROCESSED; WAXES OF ANIMAL ORVEGETABLE ORIGIN; INEDIBLE MIXTURES ORPREPARATIONS OF ANIMAL OR VEGETABLEFATS OR OILS, N.E.S.

4

9

ADJUSTMENTS (TRADE BROKEN DOWN ATCHAPTER NC LEVEL ONLY)

0,594916

5

1ORGANIC CHEMICALS 0,867993 0,993667 0,565301 0,946672 0,929043 0,977892

5

2 INORGANIC CHEMICALS 0,8295 0,923494 0,85654 0,976868 0,956886 0,967828

5

3DYEING, TANNING AND COLOURING MATERIALS 0,081565 0,122754 0,194246 0,784293 0,799493 0,804565

5

4MEDICINAL AND PHARMACEUTICAL PRODUCTS 0,122267 0,062217 0,163077 0,803803 0,823424 0,790437

5

5

ESSENTIAL OILS AND RESINOIDS AND PERFUMEMATERIALS; TOILET, POLISHING ANDCLEANSING PREPARATIONS

0,276099 0,446642 0,396709 0,845708 0,96799 0,991944

5

6

FERTILIZERS (OTHER THAN THOSE OF GROUP272)

0,210464 0,220261 0,418365 0,601037 0,484037 0,427123

5

7PLASTICS IN PRIMARY FORMS 0,915108 0,83347 0,771414 0,858637 0,865062 0,830854

5

8PLASTICS IN NON-PRIMARY FORMS 0,06564 0,219196 0,239009 0,930013 0,908507 0,927912

5

9CHEMICAL MATERIALS AND PRODUCTS, N.E.S. 0,136807 0,111153 0,140206 0,802409 0,834229 0,897873

6

0

COMPLETE INDUSTRIAL PLANT APPROPRIATETO SECTION 6

6

1

LEATHER, LEATHER MANUFACTURES, N.E.S.,AND DRESSED FURSKINS

0,108358 0,191252 0,252576 0,81159 0,99431 0,905914

6

2RUBBER MANUFACTURES, N.E.S. 0,91336 0,977188 0,873386 0,94077 0,814488 0,738421

6

3

CORK AND WOOD MANUFACTURES (EXCLUDINGFURNITURE)

0,723457 0,754875 0,967056 0,372488 0,300481 0,242325

6

4

PAPER, PAPERBOARD AND ARTICLES OF PAPERPULP, OF PAPER OR OF PAPERBOARD

0,336314 0,424949 0,279468 0,620808 0,568 0,584578

6

5

TEXTILE YARN, FABRICS, MADE-UP ARTICLES,N.E.S., AND RELATED PRODUCTS

0,189113 0,288603 0,450574 0,794148 0,800384 0,768664

6

6

NON-METALLIC MINERAL MANUFACTURES,N.E.S.

0,895515 0,60521 0,274767 0,887624 0,961216 0,914359

6

7IRON AND STEEL 0,604877 0,730474 0,87291 0,999152 0,988156 0,992447

6

8NON-FERROUS METALS 0,567879 0,792566 0,913634 0,835103 0,916171 0,966202

6

9MANUFACTURES OF METALS, N.E.S. 0,796817 0,567294 0,587149 0,953715 0,85551 0,829597

7

0


7

1

POWER-GENERATING MACHINERY ANDEQUIPMENT

0,813004 0,983839 0,93561 0,793439 0,808418 0,884276

7

2

MACHINERY SPECIALIZED FOR PARTICULARINDUSTRIES

0,367843 0,366851 0,403727 0,867465 0,885594 0,862925

7

3METALWORKING MACHINERY 0,96435 0,611527 0,61712 0,991841 0,94551 0,996911

7

4

GENERAL INDUSTRIAL MACHINERY ANDEQUIPMENT, N.E.S., AND MACHINE PARTS, N.E.S.

0,564793 0,767656 0,724556 0,995528 0,965542 0,940637

7

5

OFFICE MACHINES AND AUTOMATIC DATA-

PROCESSING MACHINES

0,567565 0,141913 0,485429 0,898814 0,750917 0,637379

7

6

TELECOMMUNICATIONS AND SOUND-RECORDING AND REPRODUCING APPARATUSAND EQUIPMENT

0,204471 0,665247 0,618783 0,98841 0,727639 0,548638

7

7

ELECTRICAL MACHINERY, APPARATUS ANDAPPLIANCES, N.E.S., AND ELECTRICAL PARTSTHEREOF (INCLUDING NON-ELECTRICALCOUNTERPARTS, N.E.S., OF ELECTRICALHOUSEHOLD-TYPE EQUIPMENT)

0,600111 0,84482 0,970292 0,913642 0,858551 0,824399

7

8

ROAD VEHICLES (INCLUDING AIR-CUSHIONVEHICLES)

0,723562 0,451916 0,613578 0,767087 0,719441 0,791495

7

9OTHER TRANSPORT EQUIPMENT 0,38564 0,685071 0,746301 0,978336 0,984989 0,62779



8

0


8

1

PREFABRICATED BUILDINGS; SANITARY,PLUMBING, HEATING AND LIGHTING FIXTURESAND FITTINGS, N.E.S.

0,825413 0,649525 0,531233 0,72689 0,516809 0,532842

8

2

FURNITURE AND PARTS THEREOF; BEDDING,MATTRESSES, MATTRESS SUPPORTS,CUSHIONS AND SIMILAR STUFFED FURNISHINGS

0,214081 0,316595 0,624973 0,661487 0,393321 0,390114

8

3

TRAVEL GOODS, HANDBAGS AND SIMILAR

CONTAINERS 0,345542 0,306149 0,930499 0,428976 0,389106 0,370258

8

4

ARTICLES OF APPAREL AND CLOTHINGACCESSORIES

0,250097 0,24087 0,473571 0,541037 0,410972 0,401093

8

5FOOTWEAR 0,428619 0,408015 0,594779 0,409861 0,29271 0,363729

8

7

PROFESSIONAL, SCIENTIFIC AND CONTROLLINGINSTRUMENTS AND APPARATUS, N.E.S.

0,182218 0,31384 0,56361 0,90181 0,985202 0,994293

8

8

PHOTOGRAPHIC APPARATUS, EQUIPMENT ANDSUPPLIES AND OPTICAL GOODS, N.E.S.;WATCHES AND CLOCKS

0,257391 0,413256 0,275211 0,878947 0,864177 0,877454

8

9

MISCELLANEOUS MANUFACTURED ARTICLES,N.E.S.

0,381555 0,451745 0,495898 0,920603 0,914052 0,884888

9

1

POSTAL PACKAGES NOT CLASSIFIEDACCORDING TO KIND

0,395759

9

3

SPECIAL TRANSACTIONS AND COMMODITIESNOT CLASSIFIED ACCORDING TO KIND

0,748466 0,548233 0,317831 0,404827

9

4

COMPLETE INDUSTRIAL PLANT NOTELSEWHERE SPECIFIED

9

5CONFIDENTIAL TRADE

9

6

COIN (OTHER THAN GOLD COIN), NOT BEINGLEGAL TENDER

0,507478 0,13783 0,16806

9

7

GOLD, NON-MONETARY (EXCLUDING GOLD,ORES AND CONCENTRATES)

0,751839 0,526365 0,792435

9

9CONFIDENTIAL TRADE 0,970885 0,883894 0,916707 0,858445

Table 1 Gruber Lloyd indexes by SITC groups for Romania and United Kingdom(Eurostat)



Analysis

United Kingdom

The intra-industry trade prevails between the countries that have similar capital-

labour ratios, technologies and skill level. UK has always had one of the most developed

economies, but during 1999 – 2008 the level of development for other countries has alsoincreased – coming closer to UK’s level of development. This is one of the reasons that

induced intra-industry trade. However, the inflow of labour into UK changed its capital-

labour ratio and this had an ‘inter-industry effect’ on overall GL index. Also, the level of

development for other countries was still not as high as for UK. So, in total, the GL index

for UK decreased slightly – by 2 percent.

Further, we looked at the product groups (taking into account 2-digit level of

desegregation) which, however, had quite substantial changes in GL index over the time

period of 1999 – 2008.

Although the biggest fluctuations were in Confidential Trade (SITC 99) and

Postal Packages (SITC 91), also Gold (SITC 97), we assume these product groups to be

irrelevant to our analysis as the reasons for their fluctuations may not be the product

differentiation, economies of scale, factor endowments – ones that effect intra-industry

trade pattern.

The next three product groups that have the biggest changes and are relevant to

our further analysis were Pulp and Waste Paper (SITC 25), Gas, Natural and

Manufactured (SITC 34) and Metalliferous Ores and Metal Scrap (SITC 28).

Taking into account 2-digit level of disaggregation, the group of products which

had the biggest change from year 1999 to 2008 was Pulp and Waste Paper, which is a

subgroup of Crude Materials, Inedible, Except Fuels. It’s GL index grew from 0.19 to0.85.

Pulp and Waste Paper are capital-intensive goods. Also, the pulp and raw material

industry produce different kind of waste paper. This is an empirical evidence to the

theory that when other countries become more similar in terms of technologies, the intra-

industry trade grows.

The second group which had the most meaningful changes was Gas, Natural and

Manufactured, being a subgroup of Mineral, Fuels, Lubricants and Related Materials.

During the 9 year timeline GL index increased from 1999 to 2004 by 0.53, however until

2008 slightly decreased by 0.075. The reason for that may be the fact that during years

1999-2008 exports were higher than imports. But by 2008 imports grew eight times andexports only two times, which means that in 2008 imports started to exceed exports.

Metalliferous Ores and Metal Scrap was the third group which had significant

changes comparing the three years’ data. It is also a subgroup of Crude Materials,

Inedible, Except Fuels. From data we can see that through all nine years imports were

higher than exports, however from 1999 to 2004 exports of Metalliferous Ores and Metal

Scrap increased much more than imports, which made them almost equal and GL index



reached 0.93. Throughout next period until 2008, there was a bigger expand of imports,

which made the difference between exports and import reasonable enough for GL index

to decrease – 0.85, but to stay on the higher level than in 1999, when it was equal to 0.54.

For these two subgroups we cannot say for sure the reasons for changes in GL

index. Therefore, we looked at EU27 trade of these goods – both imports and exports and

both – inside and outside EU27.

PERIOD FLOW/PARTNER EU27_EXTRA EU27_INTRA

1999 IMPORT 26881561 89543015

1999 EXPORT 183561093 944495726

2004 IMPORT 711772781 509914775

2004 EXPORT 203140853 1971006140

2008 IMPORT 5642097414 2991791344

2008 EXPORT 275725650 3827452994Table 2 Gas, natural and Manufactured

PERIOD FLOW/PARTNER EU27_EXTRA EU27_INTRA

1999 IMPORT 47513 101780

1999 EXPORT 1954316 9520297

2004 IMPORT 51955 6260585

2004 EXPORT 592697 48849065

2008 IMPORT 2578151 1949592

2008 EXPORT 62512822 101903967Table 3 Metalliferous Ores and Metal Scrap

From the table of Gas, Natural and Manufactured, imports and exports inside and

outside EU27, we can clearly see that in 2004 and 2008, UK was a transit country for this product. Meaning, the imports from outside EU to UK are substantially larger than

exports from UK to countries outside EU27.

As for the Scrap Metal and its imports and exports inside and outside EU27, the

trade most likely occurred only among the EU27 countries, because this good is not as

significant in terms of amounts necessary in production processes. Due to the fact that

there are several large harbors in UK, scrap metal was simply transported from, say

Northern-Europe country to Southern-Europe country.

Overall, we can conclude that Grubel-Lloyd index doesn’t necessarily show only

the intra-industry trade pattern, but also shows to what extent a country is a transportation

centre of particular product groups.

Romania

The biggest changes in GL index in Romania from 1999 to 2008 happened in the

following industries: Live Animals Other Than Animals of Division 03 (SITC 00);

Tobacco and Tobacco Manufactures (SITC 12); and Travel Goods, Handbags and Similar

Containers (SITC 83).



In the Live Animals industry the GL index grew from 0.12 in 1999 to 0.29 in

2004 and then to 0.69 in 2008. The main reason for this pattern is that to join the EU,

Romania had to reduce its tariffs on agriculture. Agriculture plays a crucial role in

Romanian economy. In the past, it was heavily protected by tariffs. From 1999 to 2008

tariffs were cut significantly. First, it was done because of the overall tendency of

liberalizing trade and cutting the tariffs in the whole world and, secondly, because

Romania had to cut certain tariffs to join the EU. This boosted the trade in the

agricultural sector overall including the intra-industry trade. The same tendency of

increasing IIT could be observed also in other agricultural sectors. For example, the GL

index in Fixed Vegetable Fats and Oils (SITC 42) has increased from 0.36 to 0.70 from

1999 to 2008.

An interesting tendency could be observed in the tobacco industry. The GL index

there in 1999 was only 0.02 and in 2004 only 0.04. However, by 2008 it skyrocketed to

0.8. To analyze the reasons for that, the data was further disaggregated by years (see table

below). GL indices for the years from 2004 to 2008 could be found in the table 1. It could be seen from the table that there was a dramatic increase in the index in 2007. That year

Romania has joined the European Union. Before joining the EU Romania had high tariffs

on agriculture, because it wanted to protect its farmers. The tariff on tobacco in the EU is

close to zero. When Romania joined the EU it had to apply the EU tariffs, so the tariff on

tobacco was highly reduced. Such decrease in the tariff rate could be the main reason for

the increase in the trade that year.

2004 2005 2006 2007 2008

0.04 0.04 0.11 0.74 0.79

Table 4 Tobacco Industry GL index

However, there is one more interesting observation worth mentioning about the tobacco

industry in Romania. It seems that Romania plays an important role in the transport of

tobacco from the countries outside the EU to the EU member states. In Table 5 net

exports for Tobacco and Tobacco Manufactures can be observed. It is remarkable that net

exports for the countries outside the EU are negative, which means that Romania imports

tobacco from outside the EU. However, net exports for the EU countries are positive,

which implies that Romania exports tobacco to the EU. Does this mean that Romanian

smokers prefer the tobacco from outside the EU, while the EU smokers like Romanian

tobacco very much? A more reasonable explanation could be that Romania transfer tobacco manufactures from outside the EU to the EU. After Romania joined the EU and

decreased the tariff on tobacco, it became profitable to use it as a transfer country.

2007 2008

EU27_EXTRA -38,622,441 -43,366,320

EU27_INTRA 22,451,827 132,338,541Table 5 Net Tobacco and Tobacco Manufactures exports EXTRA EU27 and INTRAEU27



Similar patterns could be observed also in other industries, so we could conclude

that Romania plays an important role in transport of goods from outside the EU to the

EU. Its geographical location also implies it, located on the border of the EU and near the

sea, Romania is a perfect gateway for the transfer of goods to the EU.

2006 2007 2008

EU27_EXTRA -20,758,704 -24,195,068 -26,608,264

EU27_INTRA 84,965,744 56,476,543 37,507,152Table 6 Travel goods, handbags and similar containers Net exports EXTRA EU27 andINTRA EU27

The last industry to analyze is Travel Goods, Handbags and Similar Containers.

The GL index has increased from 0.35 in 1999 to 0.93 in 2008. The first reason for this is

that economies of scale are definitely present in this sector, which implies the

development of intra-industry trade. Secondly, goods in this sector could be

differentiated, which is also the reason for the development of IIT. The last reason for the

development of IIT found is similar to the one in tobacco industry. It seems that Romania

transports a lot of Travel Goods as well. The table 6 by showing net exports from outside

the EU and within the EU for three years illustrates this point. It is clearly seen that

Romania is importing goods from outside the EU and exporting them to the EU. This

means that Romania acts as a gateway for the goods to the EU.



ConclusionsIt is absolutely clear that the economies of United Kingdom and Romania are

completely different. While the first one has been involved in the ongoing development

of Western Europe, the second one has been a subject to political changes as well as

economic transformations over the past 30 years. This kind of selection of such countries

might serve in various types of economic research; however, we are interested in

acknowledging the reasons for changes in their trade by using the Gruber-Lloyd index.

As a result, we have learned that GL index grows due to several reasons. The

study of United Kingdom’s Pulp and Waste Paper outlined the idea of growing index

because of trade partners becoming similarly technologically advanced. Also, examining

the SITC groups of Gas, Natural and Manufactured as well as for Scrap Metal proposed

acknowledging of the transit/transportation dimension. In the mean time, our study on

Romania’s GL indexes in Live Animals Other Than Animals of Division 03 (SITC 00) as

well as Tobacco and Tobacco Manufactures (SITC 12) convinces us that Gruber-Lloyd

index is truly a measurement for country’s openness – Romania has been transferring toan increasingly open economy and a full EU member state over the last decade. It was

also done by reforming and presetting tariffs on various kinds of products, including the

mentioned ones (SITC 00 and SITC 12). Finally, similarly to United Kingdom’s

overview, we found another example of transit country’s pattern in Travel Goods,

Handbags and Similar Containers (SITC 83).

Concluding, Gruber-Lloyd index can serve as an indicator for measuring

country’s economic integration and trade pattern changes. As we learned from the two

different economies, the changes might come either from technological advancement,

role in international transit/transportation as well as changing regulations and tariff

policies. Of course, these are not the only causes – as long as exports and imports arechangeable, the GL index is as well. However, in our report we examined the changes

that we found characteristic and meaningful for the two economies – United Kingdom

and Romania.

Report Final Ik-2

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