ran & China: A New Perspective Intra Industry Trade between

The Purpose of this study is reviewing the Intra Industry Trade between Iran and China by using Trade Type Approach. To avoid the geographic and sectoral bias, we consider the bilateral Trade and we concentrate on quality and commodity differentiation. Our findings show that the share of Intra Industry Trade between Iran and China is very low. In fact, a large part of our trade belongs to vertical (and horizental) Intra Industry Trade. This means that we have a low competetive power in final products, whereas we have a high competetive power in raw materials, and low quality products. Our investigations indicate that Iran’s situation can be improved by ameliorating the quality of exproted products. This study shows that a high unemployment rates belongs to sectors in which the Intra Industry Trade is weak. Thus, one of our main finding requires changes in free trade strategy, so that by increasing the quality of Iranian products, Iran could have a significant share in Intra Industry Trade with China and a progress in industrial employment.