Trading places: Industrial specialization in the European Union

This article examines the location of manufacturing industries in the European Union. It draws on intra-industry trade measures for 1961-90 and on sectoral employment data by countries and regions. The analysis of employment data suggests that EU industry has become increasingly localized in the 1980s. Increasing-returns industries are strongly concentrated at the economic core of the EU and display low levels of intra-industry trade. High-tech industries are also strongly localized, but show no centre-periphery gradient and no specific pattern of intra-industry trade. The main potential for future specialization appears to remain in sectors sensitive to labour costs, which are still relatively dispersed and have high levels of intra-industry trade. Employment in these industries is shifting towards the EU periphery. 'Neoclassical' determinants of international specialization are thus likely to dominate the ongoing adjustment process in EU manufacturing.