Concerning the I Containers (2016) article, an export industry in the United States that fits the patterns of geographical concentration driven by external economies of scale in the aerospace industry, which is mainly concentrated in Washington and California states, an example of export industries with geographic concentration supported by external economies of scale in the United States. Most businesses, such as Boeing and their suppliers, have gathered in these areas to take advantage of infrastructures, research institutes and highly knowledgeable labor, and, at the same time, have cost-saving and knowledge spillovers that result from the specialization—a large pool of skilled labor, favorable weather and well-established supply chains.

A similar attribute can be seen in China’s electronic manufacturing sectors, also found in the Pearl River Delta region where shared infrastructure, trained labor population and effective supply chains are the concentration of electronic companies, and their supplier chains are gathered in this location has mainly produced external economies of scale (I Containers 2016).

Turner, J. (2021) argued that even if the United States and China have political differences over trade, both countries need each other regardless of such minimal issues. The aerospace industries, such as Boeing, significantly impact the United States economy because Boeing estimated that China needs over 8700 new aerospace worth $1.47 trillion. The United States generates billions of dollars in export sales and supports millions of jobs. In China, the solar panel export industry fits the pattern of geographical concentration driven by external economies of scale.

This solar panel industry is concentrated in cities where this industry can benefit from well-established supply chains and a large number of skilled workers that promotes speedy growth in the production of solar panel, which accounts for a significant number of percentages of global that some researchers suggested that China exported solar panel worth $18.7 billion in 2020 which is equivalence to almost 70 percent of solar panel of global GDP. These industries substantially impact commerce between the United States and China, where China exports electrical instruments while the United States exports aerospace-related items.

In such a scenario, Turner (2021) stressed that trade between these nations has expanded due to the dimensional concentration of these industries. Moreover, China imports consumer electronic goods and other related materials or parts from the United States and the U.S. imports aerospace parts, equipment and technology from China. Thus, this is not a one-way street but a multiple-way street. Also, in the meantime, external economies of scale can influence commerce between the United States and China in many ways in terms of intra-industry trade because of the sizeable domestic markets in both countries. For example, the two countries have robust auto capability manufacturing industries that promote commerce in automobiles and their auto parts. Also, this leads to the advantage of economies of scale within specific industries that are reflected in the intra-industry trade.

Krugman, Obstfeld and Melitz (2018) argue that “internal economies of scale emphasize that industries’ average cost of production decreases the output they produce and state that perfect competition driving the price of goods down to marginal cost could infer losses.” In such a situation, intra-industry trade can be a phenomenon where countries simultaneously export and import similar products. Suppose that two countries produce the same products, such as cars. The comparative advantage suggests that trade can happen between two countries and will mutually benefit both of them. According to the Bureau of Economics, in 2021, the United States exported $153.8 billion worth of goods to China and imported $536.8 billion of goods from China.

Turner, J. (2021) argued that most trades between the United States and China concentrated on mechanical appliances, sound recorders and TV sets. Thus, the ongoing trade war between the United States and China could not stop, but it has slightly shown a negative impact on aircraft purchases.

Yet, the Chinese aviation market critically depends on Boeing’s bottom line, accounting for a quarter of the United States manufacturing orders of all aircraft. In other words, Krugman (2018) argues that trade between the United States and China has been fueled by the geographic concentration of industries with external economies of scale, such as aerospace in the U.S. and China’s electronics. The intra-industry trade that results from internal economies of scale inside industries has further shaped their economic connection, and in this dynamic of trade between the United States and China, internal and external economies of scale have become more significant.

References

iContainers (2021). How to leverage emerging industrial clusters in the U.S. and China. https://www.icontainers.com/us/2016/09/20/learn-to-leverage-emerging-industrial-clusters-in-the-us-and-china/

Turner, J. (2021). How is the U.S.–China trade war impacting the purchase of aircraft? https://www.airport-technology.com/features/how-the-us-china-trade-war-is-impacting-the-purchase-of-aircraft/?cf-view

Bis.doc.gov. (2022). The U.S. Trade with China. Office of Technology Evaluation. https://www.bis.doc.gov/index.php/country-papers/3268-2022-statistical-analysis-of-u-s-trade-with-china/file

Krugman, P., Obstfeld, M. & Melitz, M. (2018). International trade: theory and policy (11th ed.). Pearson. https://plus.pearson.com/courses/urn:xl-hed:course:7628489/products/JRCHCPFJGO1/pages/a4b2d07a36bc80a9eaa37a8710fffe459a4277358?locale=&key=234327838204371089252023