Determinants of Intra-Industry Trade between Vietnam and Countries in TPP

Intra-industry trade (IIT) has played an important role in international trade of Vietnam as a result of rapid growth of the country. This article investigates the level of IIT between Vietnam and 11 trading partners in Trans-Pacific Partnership (TPP) over the period 2000-2014. Although there have been a large number of empirical researches contributed to the determinants of IIT, most of them only pay attention on developed countries where the trade flows are similar due to similar demand structure and production technology. Until now, there is no study on intra-industry trade between Vietnam and countries in TPP that Vietnam recently signed a trade agreement in early 2016. IIT is measured by the Grubel-Lloyd index. The index shows that the extent of intra-industry trade between Vietnam and the trading countries is not high due to the level of economic development and the market size. The determinants of IIT are examined using a panel regression model. In the empirical analysis, the results indicate that Vietnam's intra-industry trade is positively correlated with country size, while it is negatively correlated with income dissimilarity, the trade openness, and geographical distance. This study contributes to the new theoretical trade theory on the evidence of developing country's IIT.