Adjustment to the European single market: inferences from intra‐industry trade patterns

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Abstract
In the run-up to the 1992 single-market deadline, there were concerns that inter-industry adjustment pressures among EU member countries would increase. Such expectations were due partly to a perceived reversal of the post-Second World War growth in intra-industry trade (IIT). Finds that average IIT levels continued to rise during the implementation of the single market. It is argued that the concept of marginal IIT(MIIT) is of greater relevance to adjustment than “static” IIT. Some evidence is shown to support this proposition, and a comprehensive set of intra-EU MIIT indices is calculated for the 1980s. Since average MIIT levels in the 1988-92 period were higher than in the early 1980s, this analysis also supports the conclusion that, on average, adjustment to the single market was no more disruptive than that experienced during earlier stages of European integration. It also appears that the forces for inter-industry adjustment are stronger in traditional, declining industries, whereas the expansion of relatively advanced industries tends to be more evenly shared by the EU member countries.