Intra-Industry Trade Analysis of U.S. State – Canadian Province Pairs: Implications for the Cost of Border Delay

Intra-industry trade (IIT) occurs when trading partners import and export similar products. A high volume of IIT of horizontally differentiated goods implies a deep level of regional integration, stable regional trading patterns, and potentially significant consequences from border delay. In this paper, trade between Washington State and British Columbia, Canada (the Cascade gateway), is compared with trade between Michigan State and Ontario, Canada (the Great Lakes gateway). The Grubel-Lloyd index, which measures IIT, is used to analyze trade in these two corridors. Higher levels of IIT and regional integration within the Great Lakes gateway are shown. The paper argues that cross-border supply chains most exposed to higher cost from increasing border delays are composed of horizontally differentiated manufactured goods having high levels of IIT and relying heavily on truck transportation. These types of goods are more common in the Great Lakes gateway, and this region may therefore experience greater economic impacts from long and unpredictable delays than the Cascade gateway.