Intra-industry trade (IIT) is defined as the two-way exchange of goods within the same statistical industry group. The trade patterns observed in the post World War-II period among European nations could not be explained within the framework of traditional trade theories based on comparative advantage. Verdoon (1960) finds that trade patterns among the European nations are of intra-industry rather than inter-industry in nature since trade takes place mainly within the same industries. Since then IIT remains a prevalent feature in international trade. It consists of about one-fourth of total international trade1 and its share in international trade is secularly rising by about 4 to 5 percent per year. Supervisor:- Dr. Zafar Mahmood