An Empirical Estimation of the U.S. Intra-Industry Trade with Spain

The trade between the United States and Spain is increasingly characterized by intra-industry trade. This paper aims to explain the extent of vertical and horizontal intra-industry trade ( ) in United State’s foreign trade with Spain. Trade patterns are identifi ed by breaking up total trade into three trade types: one-way trade (i.e. inter-industry trade), two-way trade (i.e. intra-industry trade)in horizontally differentiated products, and two-way trade in vertically differentiated products. This study uses detailed trade data at the 10-digit Harmonized System (HS) industry level and covers a longer and more recent period, 1990 through 2004. One of the main fi ndings is that the observed increase in intra-industry trade between the United States and Spain is almost entirely due to two-way trade in vertical differentiation. Another important fi nding is that the share of vertical intra-industry trade has increased signifi cantly
during this period.