The objective of this thesis has been to account for trade theories and their predictions, especially concerning intra-industry trade, trade within one industry. A secondary objective has been to account for European integration the last 50 years or so and describe what this has done to trade in European countries. A third objective, which is closely linked to the previous, has been to describe the development of intra-industry trade the last 40 years in Europe. In previous research, a few predictions about intra-industry trade has emerged. Intra-industry trade is a phenomenon of rich and similar countries. It is also believed to be a phenomenon of larger countries. Research also shows that intra-industry trade is largest in the group of commodities known as intermediate goods (as opposed to primary goods or final goods). A fourth objective has then been to try to test some of the predictions about intra-industry trade.The thesis gives a short introduction to traditional trade models, their predictions and some warranted critique. It is important to understand the traditional models, because they still predict much of the trade we see today, especially between underdeveloped countries. Inter-industry trade, trade between different industries, is still important when it comes to understanding trade patterns. Furthermore, it is also important to understand the limitations of theses theories, and why they cannot explain intra-industry trade. Variations of the traditional models and models of monopolistic competition are also discussed. The main focus here is in which situations intra-industry trade will be predicted. I show that, although several assumptions are relaxed and many extensions made, the predictions of the traditional models is still inter-industry trade. A large part of the thesis is devoted to models of monopolistic competition and increasing returns to scale, specifically the Helpman/Krugman model with one and two sectors, and extensions of these. These models will predict intra-industry trade, but still make room for inter-industry trade.The thesis also contains several theories on how to measure intra-industry trade. To have a measure of intra-industry trade is both useful and interesting in several ways. For instance, different type of trade patterns might have different implications for trade policies. A short account of European integration through the development of the European Union and the common currency, and the consequences for trade, is also given. I use one of Krugman’s models presented in earlier to show how reduced transportation costs might shift production of manufactured goods from rural to central areas. My own empirical data is divided in two, where the first part concentrates on the Grubel-Lloyd index and the second part entails two simple regressions. All data is from COMTRADE and the World Bank, and Stata has been used to manipulate the data throughout. The results in these chapters are in accordance with previous empirical research. We see that intra-industry trade increased from 1970 to 1990, leveling out in the mid 90’s and showing a slight decrease the last 15 years of the study. This pattern is quite stable over all country groups, even though the East European countries have not experienced the rapid growth and decrease as the West European countries have, but has had a more subtle development. This can be related to the somewhat slower development these countries have had contrary to the West European countries, and the timing for when the East European countries entered the European Union. We see that the larger countries exhibit higher share of intra-industry trade than smaller ones, giving support to the hypothesis than country size matters. We see that countries who are large producers of primary goods exhibit a very low share of intra-industry trade, giving support to the hypothesis that intra-industry trade occurs mainly with intermediate goods. We also see that the European countries largest intra-industry trading partners are the European countries themselves, giving support to the hypothesis that intra-industry trade is a phenomenon of similar (and rich) countries.The regressions contains the dependent variable ‘share of intra-industry trade’ (expressed in two different ways) and five independent variables, testing for similarities and differences in GDP, GDP pre capita and distance. In almost all cases, the variables are significant at very high confidence levels and the signs of the variables give support to the hypothesis previously mentioned. According to this data, we must conclude that differences in GDP and GDP per capita gives lower intra-industry trade and that similarities in these two variables give a higher share of intra-industry trade between trading partners. Distance is also a factor, giving lower intra-industry trade the further the countries are apart.