The extent and determinants of intra industry trade in the food industry: The case of Zimbabwe and its five SADC trading partners (2000-2012)

Abstract

Theoretical models of intra industry trade (IIT) have explained it using features of developed countries, and to this end many studies have mainly focused on industrialised nations. The turn of the millennium witnessed Zimbabwe reorienting its trade away from traditional partners, particularly the European Union, towards the SADC region. Zimbabwe’s bilateral trade data with its SADC trade partners from UN Comtrade shows evidence of two way exchange of goods within the same product category. This study endeavors to ascertain the extent and determinants of IIT between Zimbabwe and its five SADC trade partners (Botswana, Malawi, Mozambique, South Africa and Zambia) in the food manufacturing industry. The study calculated Grubel- Lloyd Indices for Zimbabwe’s bilateral trade with five of its trade partners and found out that intra industry trade exists between Zimbabwe and its trade partners. However,IIT it is still low. furthermore, the study employed the gravity model to find the significant country specific determinants of IIT. Using panel data for five of Zimbabwe’ s trade partners over the period 2000 to 2012, the study estimated a pooled Ordinary Least Squares model in Stata. From the estimated results, the study found that the product of partners’ GDP, the differences in partners’ GDP, weighted distance, dummy variables for common boarder and common language were significant factors in explaining IIT between Zimbabwe and its SADC partners in manufactured food products.