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FREE TRADE AGREEMENT AND MARGINAL INTRA INDUSTRY

TRADE: THE CASE OF TURKEY AND ISRAEL Sevilay Kucuksakarya, Anadolu University, Department of Economics

Eskisehir, Turkey, email: [email protected]

Abstract

Recent developments in intra industry trade (IIT) literature center on the relationships between IIT and adjustment

costs which vary with changes in trade pattern. This study investigates the marginal intra industry trade (MIIT)

between Turkey and Israel at the SITC 3 digit level, over the period of 1990 and 2012. It also tries to reveal the effect

of Free Trade Agreement (FTA) between two countries on the changes of MIIT over time by using Brülhart’s (1994)

A, B, C and Menon and Dixon’s (1997) UMCIT indices and to put out the adjustment costs in the manufacturing

industry in Turkey. The results show that, FTA has little impact on the MIIT structure of trade.

Keywords: Free Trade Agreement, Marginal Intra Industry Trade

Introduction

FTA negotiations between Turkey and Israel

began in 1992 and concluded on 14 March

1996, then was signed in Tel-Aviv and

entered into force on 1 May 1997.

Considering the FTAs which Israel has

signed with U.S., EU and EFTA, Turkey not

only has gained the access to Israel’s market

but also has obtained entry into these other

markets with this Agreement. By the FTA

signed between the two countries, new

customs duties or charges having equivalent

effect on imports will not be placed and is

currently being implemented will not be

increased on foreign trade, after the entry

into force of the Agreement.

To interpret the impact of Agreement's on

foreign trade exchange, we need to compare

the dates which the signed of FTA's entry

into force in 1997 and 1996 between Turkey

and Israel. Data comparison shows that

imports raised by 21%, exports increased by

54% and volume of trade rose by 40%. In

the year after the agreement imports, exports

and volume of trade increased by 21%, 21%

and 22% respectively. At the end of the third

year of the agreement, imports rose by 5% in

addition to exports and volume of trade

which increased by 22% and 16%.. When

looking at the trade figures of the year 2010,

the increase can be seen in imports of 27%,

in exports of 36% and in the volume of trade

32%, between the two countries.

The trade volume between the two countries

is maintaining a steadily increase from the

date the Agreement enters into force by until

today. For the first time in 2010 surpassed $

2 billion and reached $ 3.5 billion from 1.3

billion dollars in 2001. As in 2011, 15 % of

exports boosted and imports increased by

51% which exceeded 2 billion dollars. On

the contrary of this, in 2012, the location of

this rise felt. Due to 3% rate of decrease in

exports and 43% rate of increase in imports,

volume of trade between the two countries

declined over 1 billion dollars in foreign

trade.

Sevilay Kucuksakarya, Int.J.Eco. Res., 2014, v5i2, 65-79 ISSN: 2229-6158

IJER | MAR - APR 2014 Available [email protected]

65

mailto:[email protected]

Graph1. Foreign Trade between Turkey and Israel

Resource: Rebuplic of Turkey Ministiry of Economy

The primarily exports commodities from

Turkey to Israel are iron and steel,

automotive, petroleum and petroleum goods,

electrical machinery, chemicals, building

materials, clothing and metal goods, while

the plastics, chemicals and agricultural

goods are Israel’s exports to Turkey as

goods. (www.economy.gov.tr)

The main items of Turkey and Israel

economic relations are bilateral trade,

defense industry projects, contracting

services, tourism and mutual investments.

The two countries have complementary

economic structure; therefore current

increases the potential for foreign trade.

Despite large increases in recent years of the

volume of trade between the two countries, it

lags behind because of that potential still

cannot be used literally today. In 2010,

Turkey ranks as third among countries where

it operates by Israel’s businessmen after U.S.

and Britain (www.mfa.gov.tr).

In the world economy Turkey and Israel are

the two fastest regional economies which

survived the global economic crisis. Both

countries have reached a natural commercial

rate as a result of the continuing effects of

the crisis in EU and U.S which are also the

largest trading partners of them. The volume

of trade between Turkey and Israel has

exceeded 3.4 billion in 2008, 4.4 billion

dollars in 2011 and 4 billion dollars again in

2012.



66

In literature it is confirmed that there is a

secular increase in the share of intra-industry

flows in trade among developing countries’

economies as well as developed ones by the

studies of Grubel and Lloyd (1975),

Greenaway and Milner (1986), Greenaway

and Hine (1991) and OECD (1994)

(Brülhart, 2002). Recent developments in

intra-industry trade (IIT) especially revolve

around the relationships between adjustment

costs related with trade pattern’s change and

IIT. In global economy, it is reasonable to

assume that trade liberalization among open

economies should have an effect on trade

pattern and so on IIT.

In this study, it is aimed to analyze the

marginal IIT which is a dynamic measure of

IIT between Turkey and Israel over the

period from 1990 to 2012 which comprises

Turkey’s liberalization with Israel by FTA.

The rest of study is set as follows; Section 2

gives a short literature review related to

marginal IIT. Then Section 3 provides basic

information on measurements of MIIT and

Section 4 discusses the results. Next, Section

5 as the concluding section of study presents

a brief summary of findings.

Literature Review

IIT concept emerged in the late 1960s and

has a major impact in the creation of in both

theoretical and empirical analysis of

international trade and foreign trade policy

(Brülhart, 1994: 602; Grubel, 1967: 375).

Towards the end of 1970 the concept of IIT

has attempted to explain through theoretical

models (Torstensson, 1999: 14). According

to Grubel and Lloyd (1971, 1975), the

concept of IIT is value of export which

coincides with value of the exactly the same

industry's imports’ in a certain level of

aggregation (Grubel and Lloyd, 1971: 249,

1975: 20).

Caves (1981) couldn’t find any significant

relationship between IIT and trade

liberalization by testing natural and artificial

barriers (i.e. non-trade barriers -NTB’s ) to

IIT in his study, whereas Balassa and

Bauwens (1987) find strong empirical

support for a positive correlation between

them. They found that trade liberalization

due to customs unions stimulates IIT. In

contrary, Hamilton and Kniest (1991)

reached the result that there is no support

for the encouragement of trade

liberalization to IIT.

Studies on whether Turkey’s trade structure

is inter-industry or IIT are not still enough in

IIT literature. Havrylyshn and Civan (1985)

tried to measure and determine the direction

of changes in the structure of IIT in their

study. They calculated the share of Turkey's

IIT in 1978 as 7.9% (Havrylyshn and Civan,



67

1985: 260-261). The first crucial study

which measured IIT for selected years of the

1973 and 1991 period by comparative

analysis between other countries and Turkey

belongs to Schüler (1995). The author

calculated the share of IIT between Spain

and Turkey emerged in trade for the related

period as 50% and 20% respectively.

More recently Lohrmann (2002) both

measured vertical and horizontal IIT and

also examined how trade liberalization

affects on employment changes in

Hungarian food industry between the years

1992 and 2002. Kosekahyaoglu (2002) and

Simsek (2008) reached important empirical

results in their researches by analyzing the

structure of IIT of Turkey based on both

static and dynamic indices. Kosekahyaoglu

implied in his study that the values of share

of Turkey’s IIT received the highest among

countries such as Greece, Spain and

Portugal. Also, according to author’s

findings, structural adjustment costs are low

in these countries.

Grubel and Lloyd’s indices carry static

property and are insufficient to show the

change in time. Although, changes over time

can be observed by calculating index for

separately different periods, it is not possible

to analyze trade flows and the reasons of

changes in specialization by this period

comparison method (Murshed, 2001:103).

Dynamic measures of IIT may be more

informative than static measures to analyze

these situations. Thus, as the marginal intra-

industry trade (MIIT) measured Grubel-

Lloyd indices should not be used (Brülhart,

1994:602). MIIT indices are used to

calculate that how much part of the value of

changes in total trade is realized as IIT; in

other words, it measures the degree of IIT in

trade.

Data and Methodology

The main source of the data is the United

Nations COMTRADE database. SITC 3

digit classified import and export data

measured in $US for the period of 1990 and

2012. Brülhart (1994) suggests three kind of

measures in the idea of Grubel and Lloyd

(1971). Brülhart’s A index is, in fact, a direct

generalization of the Grubel Lloyd index. It

is expressed as:

1

t t n t t n

t t n t t n

X X M MMIIT A

X X M M



68

This index can also be briefly expressed as

follows:

1X M

AX M

where Xt and Mt have the meaning of

exports and imports of a particular industry,

while n is the number of years, and ∆ shows the

change in trade flows between two years.

The A index takes values between 0 and 1

like Grubel-Lloyd Index. Taking the value of

index 0 means that MIIT in a particular

industry carries entirely feature as inter-

industry trade, and the value of 1 reveals

MIIT has the distinction of trade which

indicates completely IIT feature (Brülhart and

Elliott, 1998: 232).

The A index gives available results for

multi-country studies, however, it provides

quite limited feature for single-country

studies, because of not containing any

information about the distribution of losses

and gains among countries or sectors, caused

by trade. For this reason Brülhart B index

was developed. The B index is useful to

examine issues related to sectorial trade

performance as it offers information on the

distribution of trade induced gains and losses

among sectors or countries (Brülhart and

Hine, 1999).

Index is expressed as follows:

X MB

X M

where 1B A .

The index takes values between -1 and 1. B

index includes information about specific

sector performance thus it has two-

dimensional character. Firstly, if B is equal

to 0, then MIIT is entirely of the intra-

industry type, but for values of -1 and 1,

MIIT has completely of the inter industry

type feature. And if B=1, then 0X and

0M . As B= -1 it is opposite (Brülhart,

1994: 606).

In addition to these indeces, Brülhart

proposed an alternative index similar to

GHME index which developed by

Greenaway et al. (1994). This index shows

absolute value of MIIT's conflicting changes

in trade flows. And it is formulated as

follows:

C X M X M

To compare the size of only trade flows

between different countries and industries, A

index will be the most significant tool

(Brülhart, 1994: 609). According to Erlat

and Erlat (2003), it is more appropriate to

measure the size of the required adjustments



69

after trade liberalization by C index.

However if X and M take different signs

then C index will be equal to zero and it will

not enable to get information related to the

size of adjustment between intra-industries

(Erlat and Erlat, 2003: 8).

Hamilton and Kniest (1991), Greenaway et

al. (1994) and Brülhart (1994) asserted

adjustment costs which associated with trade

liberalization will depend on the

measurement of IIT. Adjustment costs will

be higher if trade expansion is mainly due to

the variety of IIT, and will be lower if it is

based on the expansion of inter-industry

trade.

According to Menon and Dixon (1997), the

problem of C index occurred from the lack

of amount of trade exchange which is

required to inter-industry factor movements.

Menon and Dixon (1997) proposed a new

index that eliminates this problem and also

measures the changes which are not matched

in trade by following index (Menon and

Dixon, 1997:166 ):

UMCIT X M

Here UMCIT shows inter-industry trade.

The difference between the C and UMCIT

indices is that C index shows absolute size of

MIIT whereas UMCIT shows the absolute

size of marginal inter-industry trade. Unlike

the index C, UMCIT can be scaled by

weighted and can be aggregated (Menon and

Dixon, 1997:166).

Empirical Results

The manufacturing industry has an important

role in Turkey’s exports and imports. After

Turkey’s export-oriented policies and

economic liberalization in the late 1980s,

share of manufacturing industry in total

exports has continuously boosted. Turkey’s

trade pattern with Israel changed after the

assignment of FTA. Tables show analyzes

based on MIIT in manufacturing industry of

Turkey which calculated for three periods in

order to determine the impact of trade

liberalization on adjustment costs and

changes in trade patterns.



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Table 1. MIIT indices between Turkey and Israel with sector of “Chemicals and related products, n.e.s.”

A* B* C* UMCIT A* B* C* UMCIT A* B* C* UMCIT

511 … … … … 0,00 -1,00 311058,00 152018688,00 0,00 -1,00 171484,00 156325024,00

512 … … … … 0,92 -0,08 3250390,00 286539,00 … … … …

513 0,11 -0,89 236442,00 1881396,00 0,19 -0,81 4165560,00 17859844,00 0,19 -0,81 4358064,00 18820064,00

514 0,00 1,00 0,00 1132018,00 0,00 -1,00 0,00 1235659,00 0,00 -1,00 0,00 435583,00

515 … … … … … … … … … … … …

516 … … … … 0,00 1,00 0,00 659410,00 … … … …

522 … … … … 0,00 1,00 0,00 9042256,00 … … … …

523 0,94 -0,06 6045696,00 394450,00 0,00 -1,00 0,00 7257151,00 0,09 -0,91 959698,00 9604485,00

524 … … … … 0,19 -0,81 218800,00 946634,00 … … … …

525 … … … … … … … … … … … …

531 … … … … 0,00 1,00 0,00 1080073,00 … … … …

532 … … … … … … … … … … … …

533 0,48 0,52 737912,00 785371,00 0,47 -0,53 14629118,00 16604041,00 0,52 -0,48 17228864,00 15776496,00

541 … … … … 0,53 -0,47 1125882,00 1003574,00 … … … …

542 0,21 0,79 175510,00 644637,00 0,09 -0,91 3676666,00 36094984,00 0,10 -0,90 4136324,00 36133176,00

551 0,16 -0,84 5304,00 27551,00 0,84 -0,16 412176,00 78530,00 0,68 -0,32 426252,00 201100,00

553 0,13 0,87 1588238,00 10361141,00 0,15 0,85 1789912,00 10281094,00

554 0,00 1,00 0,00 546650,00 0,35 0,65 14086082,00 26317076,00 0,35 0,65 14531326,00 27134160,00

562 … … … … … … … … … … … …

571 … … … … 0,02 -0,98 856552,00 55131672,00 … … … …

572 … … … … … … … … … … … …

573 0,01 -0,99 5744,00 866791,00 … … … … … … … …

574 … … … … 0,08 0,92 609090,00 7377481,00 … … … …

575 0,07 -0,93 834662,00 11536580,00 0,17 -0,83 26196514,00 126525360,00 0,17 -0,83 27151546,00 133144032,00

579 … … … … … … … … … … … …

581 0,00 1,00 0,00 102564,00 0,29 0,71 1833600,00 4382355,00 0,26 0,74 1599738,00 4479017,00

582 0,14 -0,86 301746,00 1896252,00 0,37 0,63 13074784,00 22434334,00 0,51 0,49 20165174,00 19050016,00

583 0,00 1,00 0,00 308618,00

591 0,09 -0,91 178824,00 1721902,00 0,00 1,00 0,00 962077,00 0,57 -0,43 1741100,00 1303725,00

592 … … … … 0,26 -0,74 1845134,00 5341739,00 … … … …

593 … … … … … … … … … … … …

597 … … … … 0,90 0,10 997056,00 106712,00 … … … …

598 0,00 -1,00 0,00 762293,00 0,42 -0,58 7591412,00 10646522,00 0,42 -0,58 8166496,00 11147146,00

Code1990-1995 1996-2012 1990-2012

511 Hydrocarbons and derivatives n.e.s., 512 Alcohols, 513

Carboxylic acids and deriatives, 514 Nitrogen-function

compounds, 515 Organo-inorg., heterocyclic comp., 516

Other organic chemicals, 522 Inorganic chemical elements,

523 Metallic/peroxysalts, of inorg. Acids, 524 Inorg.

chemicals; comp. of prec. Metals, 525 Radio-active

materials, 531 Synth. organic col.matter; colour lakes, 532

Dyeing and tanning extracts etc., 533 Pigments, paints,

varnishes etc.,541 Medicinal and pharm. Products,542

Medicaments, incl. veterinary med.,551Essential oils,

perfume/flavourings, 553 Perfumery, cosmetics/toilet prep.,

554 Soap, cleansing/polishing ma

terials, 562 Fertilizers, other than of 272, 571 Polyethylene,

in primary forms, 572 Polystyrene, in primary forms, 573

PVC etc. in primary forms, 574 Polyacet./-carbon. etc., prim.

Forms, 575 Other plastics, in primary forms, 579 Waste,

scrap etc. of plastics, 581 Tubes, pipes and hoses of plastics,

582 Plates, sheets, etc., of plastics, 583 Monofilament, rods,

etc., of plastics, 591 Disinfectants, pesticides etc., 592

Starches, wheat gluten, glues, 593 Explosives & pyrotechnic

products, 597 Lubricants, anti-freezer etc., 598 Misc.

chemical products n.e.s.

To determine the causes of change in IIT

between Turkey and Israel, Table 1 gives the

calculated MIIT values for the commodities

and products in sector of “Chemicals and

related products, n.e.s”. According to the

results of the calculations for MIIT indices



71

between Turkey and Israel, it is seen that the

marginal intra industry is more intense, rather

than MIIT. Industries which have the highest

MIIT values among period of 1996-2012 that

includes the FTA are 512 Alcohols, phenols

etc.; derivatives, and 597 Lubricants, anti-

freezer etc. Referring to the period between

1990 and 2012, 533 Pigments, paints,

varnishes etc 551 Essential oils,

perfume/flavourings, 582 Plates, sheets, etc.,

of plastics, 591 Disinfectants, pesticides etc.

industries have the highest MIIT values. In

the same period it can be seen that in

industries such as 511 Hydrocarbons and

derivatives n.e.s., 514 Nitrogen-function

compounds, 523 Metallic/peroxysalts, of

inorganics 542 Medicaments, incl. veterinary

med., Brülhart A index is equal to 0 and

Brülhart B index takes values close to ±1. As

a result of this condition, structure of trade

occurred in such industries as marginal inter

industry structure and high adjustments costs

have emerged.



72

Table 2. MIIT indices between Turkey and Israel with sector of “Manufactured goods classified chiefly by

material”


611 … … … … … … … … 0,00 1,00 3968,00 1003433,00

612 … … … … … … … … … … … …

613 … … … … … … … … … … … …

621 0,71 -0,29 28002,00 11383,00 0,25 0,75 765204,00 2257636,00 0,28 0,72 847428,00 2132405,00

625 0,00 1,00 0,00 8675901,00 … … … …

629 0,00 1,00 0,00 42417,00 0,26 0,74 569438,00 1624762,00 0,25 0,75 552390,00 1686544,00

633 … … … … … … … … … … … …

634 … … … … … … … … … … … …

635 … … … … … … … … … … … …

641 … … … … 0,81 -0,19 60903688,00 14312768,00 … … … …

642 0,20 0,80 44792,00 184652,00 0,06 0,94 2667248,00 43201208,00 0,06 0,94 2835630,00 43888404,00

651 0,00 1,00 0,00 14181634,00 0,00 -1,00 0,00 20340264,00 0,69 -0,31 15298850,00 6885932,00

652 … … … … 0,00 1,00 0,00 1451263,00

653 0,16 0,84 851998,00 4573049,00 0,98 0,02 12977046,00 324867,00 0,66 0,34 13616418,00 7133892,00

654 … … … … 0,67 0,33 119090,00 58362,00 … … … …

655 … … … … 0,05 0,95 946818,00 16439425,00 … … … …

656 0,00 -1,00 0,00 87156,00 0,00 1,00 0,00 2674861,00 0,01 0,99 19352,00 2651758,00

657 0,00 1,00 0,00 4395868,00 0,91 -0,09 39190224,00 4010044,00 0,94 -0,06 41561672,00 2859904,00

659 … … … … 0,01 0,99 187266,00 30065052,00 … … … …

661 … … … … 0,00 1,00 0,00 48093344,00 … … … …

662 0,05 0,95 89630,00 1594506,00 … … … … 0,00 1,00 0,00 59638332,00

663 0,00 1,00 0,00 319034,00 0,00 1,00 0,00 3867989,00 0,00 1,00 0,00 4539709,00

664 0,99 -0,01 1624680,00 14308,00 0,71 0,29 17859230,00 7122403,00 0,80 0,20 23277728,00 5781098,00

665 0,62 0,38 1251514,00 750971,00 … … … … 0,01 0,99 88220,00 12421367,00

666 … … … … … … … … … … … …

667 … … … … … … … … … … … …

671 … … … … … … … … … … … …

672 … … … … … … … … … … … …

673 … … … … … … … … … … … …

674 … … … … 0,00 1,00 28814,00 21148060,00 … … … …

675 … … … … … … … … … … … …

676 … … … … 0,00 1,00 155100,00 358407456,00 … … … …

677 … … … … … … … … … … … …

678 … … … … … … … … … … … …

679 0,00 1,00 3926,00 1908402,00 0,10 0,90 2483870,00 21369768,00 0,10 0,90 2531384,00 22478666,00

681 … … … … … … … …

682 … … … … 0,06 0,94 1182434,00 19985948,00 … … … …

683 … … … … … … … …

684 … … … … 0,16 0,84 1588380,00 8245994,00 … … … …

685 … … … … … … … …

686 … … … … 0,58 -0,42 16534,00 11907,00 … … … …

687 … … … … … … … … … … … …

689 … … … … … … … … … … … …

691 … … … … 0,08 0,92 623232,00 7201974,00 … … … …

692 0,07 0,93 4910,00 66323,00 0,03 0,97 540700,00 18465712,00 0,03 0,97 563884,00 19073838,00

693 … … … … 0,01 0,99 93412,00 7884693,00 … … … …

694 … … … … 0,22 0,78 938926,00 3344850,00 0,20 0,80 936902,00 3662237,00

695 0,00 1,00 0,00 165654,00 0,09 -0,91 2133312,00 21019092,00 0,10 -0,90 2365038,00 21512700,00

696 0,40 -0,60 24900,00 37404,00 0,19 -0,81 213110,00 918803,00 0,24 -0,76 275790,00 885780,00

697 … … … … … … … … … … … …

699 0,22 0,78 293304,00 1031272,00 0,16 0,84 2096012,00 11031107,00 0,17 0,83 2630150,00 12663690,00

Code1990-1995 1996-2012 1990-2012

611 Leather, 612 Manuf. of leather or compos. Leather, 613

Furskins, tanned or dressed, 621 Materials of rubber, 625

Rubber tyres, inner tubes for wheels, 629 Articles of rubber

n.e.s, 633 Cork manufactures, 634 Veneers, plywood,



73

particle boards, 635 Wood manufactures n.e.s., 641 Paper

and paperboard, 642 Articles of paper or paperboard, 651

Textile yarn, 652 Cotton fabrics, woven, 653 Woven fabrics

of man-made textile mat., 654 Other textile fabrics, woven,

655 Knitted or crocheted fabrics, 656 Tulles, lace,

trimmings etc., 657 Special yarns and fabrics, 658 Made-up

articles of textile mat. n.e.s., 659 Floor coverings etc., 661

Lime, cement, constr. materials n.e.s., 662 Clay and

refractory constr. Materials, 663 Mineral manufactures

n.e.s., 664 Glass, 665 Glassware, 666 Pottery, 667 Pearls,

precious/semi-precious stones, 671 Pig iron, spiegeleisen

etc.; ferro-alloys, 672 Iron/steel ingots; semi-finished prod,

673 Flat-rolled prod. of iron/non-alloy steel, 674 Flat-rolled

prod. of iron or steel, plated, 675 Flat-rolled products of

alloy steel, 676 Iron and steel bars, incl. sheet piling, 677

Rails and tracks etc., of iron or steel, 678 Wire of iron or

steel, 679 Pipes, fittings etc. of iron or steel, 681 Silver,

platinum and platinum metals, 682 Copper, 683 Nickel, 684

Aluminium, 685 Lead, 686 Zinc, 687 Tin, 689 Base metals

employed in metallurgy, 691 Structures of iron, steel or

aluminium, 692 Metal containers for storage/transport, 693

Wire products and fencing grills, 694 Nails, screws, nuts,

bolts etc., 695 Hand or machine tools, 696 Cutlery, 697

Household equipment of base metal, 699 Manufactures of

base metal n.e.s.

In “Manufactured goods classified chiefly by

material” sectors which take place in Table

2, the number of industries which calculated

MIIT has increased since the entry into force

of the Agreement for the development of

trade relations after 1996. Primarily

industries which have the highest MIIT

values between the period of 1996-2012 are

651 Textile yarn,, 653 Woven fabrics of

man-made textile mat, 657 Special yarns and

fabrics, and 664 Glass.

When we look at all kind of calculated

indices, it can be seen trade between Israel

and Turkey in “Manufactured goods

classified chiefly by material” industries also

have the same marginal inter industry trade

structure with “Chemicals and related

products, n.e.s” industries. Industries whose

Brülhart A indices are equal to 0 and

Brülhart B indices take values close to ±1, in

other words which have the high adjustment

costs are 611, 642, 656, 662, 663, 679, 692,

and 695.

Table 3 demonstrates the MIIT values of

“Machinery and transport equipment”

industries. According to table with codes

713, 733, 741, 744 and 775 industries take

value zero for Brülhart A index and values

close to ±1 for Brülhart B index. Therefore

trade occurred industries in these have

highest adjustment costs and structure of

marginal inter industry trade. Besides this,

after the period which free trade agreement

enters into force in 1996 between Turkey

and Israel, it is obvious that the number of

trade occurred industries and the calculated

values of MIIT in these industries have both

increased in the same period.

728 Other mach. for particular industries,

735 Parts etc. for machines in 731/733, 743

Pumps, air compressors and fans etc, 747

Taps, cocks, valves etc, 748 Transm. shafts,

other speed changers, 749 Non-electric parts



74

etc. of mach. n.e.s, 751 Office machines 752

Computers and units thereof, 772 Electrical

apparatus, 778 Electrical machinery and app.

n.e.s. industries have high MIIT values in

1990-2012 period’s trade between two

countries.

Table 3. MIIT indices between Turkey and Israel with sector of “Machinery and transport equipment”


711 … … … … … … … … … … … …

712 … … … … … … … … … … … …

713 0,97 -0,03 225972,00 8006,00 0,00 1,00 0,00 1314437,00 0,10 0,90 150714,00 1335877,00

714 … … … … … … … … … … … …

716 … … … … 0,21 -0,79 9665686,00 36194844,00 … … … …

718 … … … … 0,00 1,00 0,00 405509,00 … … … …

721 … … … … 0,37 -0,63 3410098,00 5691061,00 … … … …

722 … … … … … … … … … … … …

723 … … … … … … … … … … … …

724 0,00 1,00 0,00 1110609,00 … … … …

725 0,00 1,00 0,00 76893,00 … … … … … … … …

726 … … … … 0,05 -0,95 18686,00 367124,00 … … … …

727 … … … … 0,00 1,00 0,00 4079068,00 … … … …

728 0,80 0,20 1781116,00 449013,00 0,83 -0,17 5976710,00 1256240,00 0,91 -0,09 8657258,00 831055,00

731 0,00 1,00 0,00 198242,00 0,23 0,77 537032,00 1792331,00 0,17 0,83 448164,00 2123789,00

733 0,00 1,00 0,00 371811,00 0,05 0,95 135672,00 2767197,00 0,04 0,96 149344,00 3321560,00

735 0,00 1,00 0,00 84452,00 0,88 0,12 1649914,00 225407,00 0,84 0,16 1688316,00 328664,00

737 0,39 0,61 11560,00 17869,00 0,12 0,88 149896,00 1148815,00 0,12 0,88 157606,00 1208954,00

741 0,13 -0,87 270880,00 1737756,00 0,00 1,00 0,00 18146600,00 0,06 0,94 756482,00 11253164,00

742 0,36 0,64 335132,00 603029,00 … … … …

743 0,45 0,55 385310,00 463364,00 0,39 0,61 2093102,00 3211668,00 0,48 0,52 3000246,00 3282786,00

744 … … … … 0,00 1,00 0,00 2336163,00 1,00 0,00 3120970,00

745 … … … … 0,12 -0,88 3035914,00 21850996,00 … … … …

746 … … … … 0,03 0,97 14216,00 407983,00 … … … …

747 0,62 0,38 652856,00 398963,00 0,79 0,21 7797348,00 2052079,00 0,78 0,22 8874498,00 2475516,00

748 0,22 -0,78 82156,00 290741,00 0,40 0,60 1400668,00 2067443,00 0,65 0,35 2802482,00 1527610,00

749 0,12 0,88 14096,00 103256,00 0,78 0,22 2028126,00 566822,00 0,77 0,23 2047778,00 610506,00

751 … … … … 0,00 -1,00 0,00 5408590,00 … … … …

752 … … … … 0,03 -0,97 98768,00 3439825,00 … … … …

759 … … … … … … … … … … … …

761 … … … … 0,00 -1,00 0,00 5441668,00 … … … …

762 … … … … … … … … … … … …

763 … … … … 0,00 -1,00 0,00 217246,00 … … … …

764 … … … … 0,08 -0,92 497270,00 5914598,00 … … … …

771 … … … … 0,25 0,75 1164278,00 3453076,00 … … … …

772 0,79 0,21 659734,00 178371,00 0,70 0,30 6900560,00 2965991,00 0,72 0,28 7621422,00 2936170,00

773 … … … … 0,02 0,98 2129038,00 129273248,00 … … … …

774 … … … … 0,00 1,00 0,00 362474,00 … … … …

775 … … … … 0,00 1,00 191394,00 85641872,00 0,00 1,00 198886,00 88164120,00

776 … … … … 0,17 -0,83 652718,00 3280949,00

778 0,14 -0,86 168208,00 1043141,00 0,54 -0,46 16768642,00 14052397,00 0,50 -0,50 16884950,00 16823088,00

781 … … … … … … … … … … … …

782 … … … … … … … … … … … …

783 … … … … … … … …

784 … … … … 0,01 0,99 58296,00 11120246,00 … … … …

785 … … … … 0,00 1,00 0,00 228783,00 … … … …

786 … … … … 0,46 0,54 923602,00 1086383,00 … … … …

791 … … … … … … … … … … … …

792 … … … … … … … … … … … …

793 … … … … … … … … … … … …

Code1990-1995 1996-2012 1990-2012



75

711 Steam or super-heated water boilers etc., 712 Steam

turbines and parts n.e.s. 713 Intern.-comb. piston engines

and parts, 714 Engines and motors, non-electric 716

Rotating electric plant and parts, 718 Power generators;

parts n.e.s. 721 Agricultural machinery and parts, 722

Tractors 723 Civil engineering/contractors equipm,. 724

Textile and leather machinery 725 Paper manufacturing

machinery, 726 Printing and bookbinding machinery 727

Food-processing machines, 728 Other mach. for particular

industries 731 Mach.-tools working by removing mat., 733

Machine-tools for working metal 735 Parts etc. for

machines in 731/733, 737 Metalworking machinery n.e.s.

741 Heating/cooling equipm.; parts n.e.s., 742 Pumps for

liquids; liquid elevators 743 Pumps, air compressors and

fans etc., 744 Mechanical handling equipment 745 Other

non-electrical machinery, 746 Ball or roller bearings 747

Taps, cocks, valves etc., 748 Transm. shafts, other speed

changers 749 Non-electric parts etc. of mach. n.e.s., 751

Office machines 752 Computers and units thereof, 759

Parts for office mach. and computers 761 TVs, video

monitors/projectors, 762 Radio-broadcast receivers 763

Sound rec. and reproducers, VCRs, 764 TelIITm.

equipment and parts n.e.s. 771 Electric power machinery

and parts, 772 Electrical apparatus 773 Equipm. for

distributing electr. n.e.s., 774 Electro-diagnostic,

radiological app. 775 Household equipm. electr. & non-

electr, 776 Electronic equipment and parts 778 Electrical

machinery and app. n.e.s., 781 Motor cars, not for public-

transport 782 Lorries, vans and special-purpose cars, 783

Road motor vehicles, n.e.s. 784 Parts etc. for motor

vehicles, 785 Motorcycles, cycles; invalid carriages 786

Trailers/semi-trailers; non-mech.vehicles, 791 Railway and

tramway vehicles 792 Aircraft and associated equipment,

793 Ships, boats and floating structures

Table 4. MIIT indices between Turkey and Israel with sector of “Miscellaneous manufactured articles”


811 … … … … … … … … … … … …

812 … … … … … … … … … … … …

813 … … … … 0,00 1,00 0,00 2932797,00 … … … …

821 0,00 1,00 0,00 440388,00 0,02 0,98 434194,00 20636360,00 0,01 0,99 126794,00 23018876,00

831 … … … … 0,96 0,04 715438,00 29688,00 … … … …

841 … … … … … … … … … … … …

842 … … … … 0,00 1,00 41332,00 60403544,00 … … … …

843 … … … … … … … … … … … …

844 … … … … … … … … … … … …

845 0,65 0,35 297150,00 162073,00 0,00 1,00 0,00 25846172,00 0,01 0,99 294020,00 26476046,00

846 0,00 1,00 0,00 158895,00 0,04 0,96 237608,00 5111997,00 0,02 0,98 114680,00 5372424,00

848 … … … … 0,00 1,00 0,00 518510,00 … … … …

851 … … … … 0,00 1,00 0,00 6106802,00 … … … …

871 … … … … 0,00 -1,00 1210,00 23789208,00 … … … …

872 0,00 1,00 0,00 1423067,00 0,18 -0,82 1827744,00 8505671,00 0,22 -0,78 1861396,00 6534560,00

873 0,00 1,00 0,00 1779524,00

874 0,09 -0,91 117924,00 1200267,00 0,11 -0,89 951516,00 7613383,00 0,09 -0,91 1034164,00 10000875,00

881 … … … … … … … … … … … …

882 … … … … … … … … … … … …

883 … … … … … … … … … … … …

884 … … … … 0,15 -0,85 240024,00 1341533,00 0,14 -0,86 239448,00 1475935,00

885 0,00 -1,00 0,00 8807,00 0,09 0,91 22382,00 229356,00 0,07 0,93 18664,00 231654,00

891 … … … … … … … … … … … …

892 0,48 -0,52 11382,00 12491,00 0,36 0,64 425446,00 754961,00 0,48 0,52 611450,00 666086,00

893 0,83 0,17 1260846,00 262359,00 0,16 0,84 9889264,00 50515276,00 0,19 0,81 11967402,00 50350916,00

894 0,00 1,00 0,00 147116,00 0,20 0,80 321326,00 1299004,00 0,23 0,77 405296,00 1357322,00

895 0,17 -0,83 48482,00 231655,00 0,06 -0,94 9414,00 139495,00 0,00 -1,00 0,00 223635,00

896 … … … … … … … … … … … …

897 … … … … 0,00 1,00 0,00 50667020,00 0,00 1,00 227762,00 50855936,00

898 0,00 -1,00 0,00 182054,00 0,00 -1,00 0,00 740620,00 0,00 -1,00 0,00 1283686,00

899 0,42 -0,58 272916,00 378474,00 0,60 -0,40 3896176,00 2576194,00 0,72 -0,28 5335296,00 2097010,00

Code1990-1995 1996-2012 1990-2012



76

811 Prefabricated buildings 812 Sanitary, plumbing/heating

fixtures 813 Lighting fixtures and fittings, n.e.s. 821

Furniture and parts thereof 831 Trunks, handbags, wallets

etc. 841 Men's wear of woven fabrics 842 Women's wear of

woven fabrics 843 Men's wear, knitted or crocheted 844

Women's wear, knitted or crocheted 845 Apparel, n.e.s.;

babies' clothing 846 Accessories, of textile fabrics n.e.s.

848 Accessories, non-textile; headgear 851 Footwear 871

Optical instruments n.e.s. 872 Medical instruments n.e.s.

873 Meters and counters n.e.s. 874 Measuring/checking

instrum. n.e.s. 881 Photographic equipment n.e.s. 882

Photo/cinematographic supplies 883 Cinematograph films,

developed 884 Optical goods n.e.s. 885 Watches and clocks

891 Arms and ammunition 892 Printed matter 893 Articles

of plastics n.e.s. 894 Baby prams, toys, sporting goods 895

Office and stationery supplies n.e.s. 896 Artwork, coll.

pieces and antiques 897 Jewellery, gold/silversmiths' wares

898 Instruments; rIITrds, tapes etc. 899 Misc. manufactured

articles n.e.s.

The results associated with “Miscellaneous

manufactured articles” industries are shown

in Table 4. It is observed from the table that

FTA between two countries has little impact

on MIIT values in emerged structure of

trade. 821, 845, 846, 874, 885, 895, 897 and

898 coded industries have high adjustment

costs due to A and B indices. 892 Printed

matter and 899 Misc. manufactured articles

n.e.s industries have the highest MIIT values

between related periods.

Conclusion

This study focuses on the measurement of

Turkey’s marginal intra-industry trade with

Israel in dynamic sense by the use of

Brülhart’s A, B, and C indices, in addition to

Menon and Dixon’s UMCIT index. All

calculations are based on SITC Rev.3, 3

digit sectors data for the period of 1990-

2012. It is possible to summarize the

findings as follows. The MIIT indices results

demonstrate that in 5 coded “Chemicals and

related products, n.e.s." industries have the

structure of trade as marginal inter industry,

in other words these have high adjustment

costs. In 6 coded “Manufactured goods

classified chiefly by material” sector, the

number of industries which have a structure

of MIIT are increased after the entry into

force of the Free Trade Agreement between

two countries in 1996. According to

calculations, in 7 coded “Machinery and

transport equipment” industries have the

highest adjustment costs and structure of

marginal inter industry trade. Besides this,

after the period which Free Trade Agreement

enters into force in 1996, it is obvious that

the number of trade occurred industries and

the calculated values of MIIT in these

industries have both increased in the same

period. The results associated with

“Miscellaneous manufactured articles”

industries shows that Free Trade Agreement

between two countries has little impact on

MIIT values in emerged structure of trade.

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