Has US Comparative Advantage Changed? Does This Affect Sustainability?
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Comparative Advantage and Trade Performance: Policy Implications”, OECD Trade Policy Papers, No
Please cite this paper as: Kowalski, P. (2011), “Comparative Advantage and Trade Performance: Policy Implications”, OECD Trade Policy Papers, No. 121, OECD Publishing. http://dx.doi.org/10.1787/5kg3vwb8g0hl-en OECD Trade Policy Papers No. 121 Comparative Advantage and Trade Performance POLICY IMPLICATIONS Przemyslaw Kowalski JEL Classification: F11, F14, F16, F17 OECD TRADE POLICY WORKING PAPERS The OECD Trade Policy Working Paper series is designed to make available to a wide readership selected studies by OECD staff or by outside consultants. This document has been declassified on the responsibility of the Working Party of the Trade Committee under the OECD reference number TAD/TC/WP(2010)38/FINAL. Comments on the series are welcome and should be sent to [email protected]. OECD TRADE POLICY WORKING PAPERS are published on www.oecd.org/trade © OECD 2011 Applications for permission to reproduce or translate all or part of this material should be made to: OECD Publishing, [email protected] or by fax 33 1 45 24 99 30 Abstract COMPARATIVE ADVANTAGE AND TRADE PERFORMANCE: POLICY IMPLICATIONS Przemyslaw Kowalski Trade Policy Analyst, Development Division, OECD This paper builds on recent generalisations of theory and empirics of comparative advantage and establishes the relative importance of different sources of comparative advantage in explaining trade, with particular focus on policy and institutional factors. The broad policy and institutional areas posited as determinants of comparative advantage in this paper include: physical capital, human capital (distinguishing between secondary, tertiary education and average years of schooling), financial development, energy supply, business climate, labour market institutions as well as import tariff policy. -
Comparative Advantage and Trade Policy - Bharat R
INTERNATIONAL ECONOMICS, FINANCE AND TRADE – Vol.I - Comparative Advantage and Trade Policy - Bharat R. Hazari, Pasquale M. Sgro COMPARATIVE ADVANTAGE AND TRADE POLICY Bharat R. Hazari Professor of Economics, School of Economics, Deakin University, Melbourne, Australia Pasquale M. Sgro Professor of Economics, School of Economics, Deakin University, Melbourne, Australia Keywords: absolute advantage, autarky, community indifference curve, comparative advantage, consumer surplus, domestic market failure, dual markets, exports, first-best, factor endowments, free trade, import substitution, infant industry, Heckscher-Ohlin, imports, manufacturers, non-tariff barriers, optimal tariff, pattern of trade, producer surplus, production possibility curve, protection, quotas, Ricardo, second-best, tariffs, technological differences, transformation surface, tariff revenue. Contents 1. Introduction 2. Comparative Advantage 2.1. The Ricardian Theory of Comparative Advantage 2.2. The Heckscher-Ohlin Theory of Comparative Advantage 3. Free Trade 4. Tariff and Non-Tariff Barriers 5. International Trade Policy Glossary Bibliography Biographical Sketches Summary The theory of comparative advantage suggests that voluntary trade between nations takes place because it is mutually beneficial, and that the pattern of trade is determined by differences in comparative advantage. Despite the undeniable gains free trade produces, throughout history countries have applied both tariff and non-tariff barriers to restrict trade. The concepts of consumer and producer surplus are often used to measure both the welfare benefits of free trade and the welfare costs of imposing tariffs. Both economicUNESCO and non-economic reasons have – been EOLSS used justify the restriction of trade. 1. IntroductionSAMPLE CHAPTERS Nations trade with each other because they consider it to be mutually beneficial. The gains occur in at least two ways. -
Preventing Deglobalization: an Economic and Security Argument for Free Trade and Investment in ICT Sponsors
Preventing Deglobalization: An Economic and Security Argument for Free Trade and Investment in ICT Sponsors U.S. CHAMBER OF COMMERCE FOUNDATION U.S. CHAMBER OF COMMERCE CENTER FOR ADVANCED TECHNOLOGY & INNOVATION Contributing Authors The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. Copyright © 2016 by the United States Chamber of Commerce. All rights reserved. No part of this publication may be reproduced or transmitted in any form—print, electronic, or otherwise—without the express written permission of the publisher. Table of Contents Executive Summary ............................................................................................................. 6 Part I: Risks of Balkanizing the ICT Industry Through Law and Regulation ........................................................................................ 11 A. Introduction ................................................................................................. 11 B. China ........................................................................................................... 14 1. Chinese Industrial Policy and the ICT Sector .................................. 14 a) “Informatizing” China’s Economy and Society: Early Efforts ...... 15 b) Bolstering Domestic ICT Capabilities in the 12th Five-Year Period and Beyond ................................................. 16 (1) 12th Five-Year -
Agri-Food Export Competitiveness of the ASEAN Countries
sustainability Article Agri-Food Export Competitiveness of the ASEAN Countries Tamás Mizik * , Ákos Szerletics and Attila Jámbor Department of Agribusiness, Corvinus University of Budapest, F˝ovám tér 8, 1093 Budapest, Hungary; [email protected] (Á.S.); [email protected] (A.J.) * Correspondence: [email protected] Received: 25 October 2020; Accepted: 23 November 2020; Published: 25 November 2020 Abstract: Agri-food trade competitiveness analyses are relatively understudied in the empirical literature with many countries/regions missing. The novelty of this paper to analyze the agri-food export competitiveness patterns of the Association of Southeast Asian Nations (ASEAN), thereby aiming to fill this gap in the literature. Our research questions include which countries and products are competitive in the ASEAN region in agri-food trade; whether raw materials or processed products are more competitive; whether regional or global agri-food trade is more competitive and how persistent competitiveness is in the long run. The paper is based on ASEAN–ASEAN and ASEAN–world agri-food trade flows from 2010 to 2018, thereby global and regional competitiveness patterns have become visible. Results suggest that Myanmar (18.88), Laos (8.21) and the Philippines (5.36) have the highest levels of agri-food trade competitiveness in the world market, while in regional markets, Laos (17.17), Cambodia (15.46) and Myanmar (12.39) were the most competitive. Both raw materials, as well as processed products, are generally competitive, and regional trade, in general, was more competitive than global trade for the majority of the countries. However, results suggest a generally decreasing trend in keeping these competitive positions, which is also supported by the duration tests. -
Comparative Advantage and Specialization TRADE
Comparative Advantage and Specialization TRADE We have learned enough about production that we can now begin our explanation of trade. TRADE - Assumptions Let’s assume there are two products (Food and computers). There are two countries: Europe, South America. TRADE the main question: To be self-sufficient and produce everything we need OR To cooperate with the other country & TRADE TRADE Trade is beneficial if one can only produce food while the other can only produce computer. Trade is good if Europe is better in one while South America is better in the other. – They should SPECIALIZE and trade. SomeSome points points on on South South America’s America's PPF PPC SomeSome points points on on Europe’s Europe's PPF PPC Computers Food Computers Food 200 0 400 0 100 200 200 100 0 400 0 200 TRADE But what happens if one is much better in producing both computers and food? A different example SomeSome points points on on South South America'sAmerica’s PPC PPF SomeSome pointspoints on Europe’sEurope's PPCPPF Computers Food Computers Food 250 0 200 0 125 125 100 50 0 250 0 100 They can still benefit from trade as long as opportunity costs are different. Opportunity Costs What is the opp. cost of 1 food in Europe? Let’s look at the extremes: 100 vs. 200 Opportunity Costs What is the opp. cost of 1 food in Europe? If you pick to produce 100 units of food … you give up producing 200 computers. 100 vs. 200 Opportunity Costs 100 vs. -
Revealed Comparative Advantage: a Study of India and ASEAN Economies
Lal Bahadur Shastri Institute of Management, Delhi LBSIM Working Paper Series LBSIM/WP/2020/18 Revealed Comparative Advantage: A Study of India and ASEAN economies Rashmi Ahuja August,2020 LBSIM Working Papers indicate research in progress by the author(s) and are brought out to elicit ideas, comments, insights and to encourage debate. The views expressed in LBSIM Working Papers are those of the author(s) and do not necessarily represent the views of the LBSIM nor its Board of Governors. WP/August2020/18 LBSIM Working Paper Research Cell Revealed Comparative Advantage: A Study of India and ASEAN economies Rashmi Ahuja Lal Bahadur Shastri Institute of Management Dwarka , Delhi Abstract The trade relations between India and ASEAN economies have gained more attention among academicians and researchers especially after India initiated ‘Look East Policy’ in 1991. It gained even more importance after its upgraded version of ‘Act East policy’ and also the recent withdrawal of India from Regional Comprehensive Economic Partnership (RCEP). This paper aims to explore India’s comparative advantage with that of nine ASEAN economies in different product groups at SITC one-digit level classification for the period 2009-2018. This empirical analysis uses Balassa (1965) measure of Revealed Comparative Advantage (RCA). Our findings suggest that India has maintained stable comparative advantage in two primary product group and two labour-intensive product groups while Indonesia has maintained comparative advantage in highest number of product groups among all ASEAN economies over the considered period of study. Further, we identified that India could leverage its trade potential in two product groups i.e. -
Summary of U.S. Balance of Payments, 1969 by MICHAEL W
Summary of U.S. Balance of Payments, 1969 by MICHAEL W. ICERAN dollar transactions. Changes in bank liabilities are listed with changes in short-term Treasury liabilities under The Balance of Payments Accounts are a double-entry IV.4, to facilitate analysis of the distinction between record of commodity and financial transactions between the Liquidity Balance and Official Settlements Balance. United States and foreign residents. Because it is based on double-entry bookkeeping principles, the balance of (III) Government — The net outflow of Government payments always balances in the sense that receipts loans, grants, and transfers was $4.0 billion in 1969, up equal payments. The double-entry nature of the balance $1.5 billion from 1968. Foreign official institutions, which of payments is illustrated on the lefthand side of the had purchased $1.8 billion of U.S. Government bonds table on the next page. This accounting balance must in 1968, sold $.2 billion in 1969. This $2.0 billion turn- not be confused, however, with a meaningful economic around more than explains the deterioration in the balance, because the economic behavior underlying some Government capital account. of these transactions may not be sustainable. For exam- ple, the receipt of $.8 billion in 1969 from the sale of (IV) Other — Private transfers (IV.1.) represent gifts convertible currencies (IV.3.b) can only continue as and similar payments by American residents to foreign long as the United States’ stock of convertible currencies residents. Errors and Omissions (IV.2.) is the statistical lasts. There are two officially recognized measures of discrepancy between all specifically identifiable receipts the economic balance of payments: the Liquidity Bal- and payments. -
22 Comparative Advantage Measurement in ASEAN's Ten
BISE: Jurnal Pendidikan Bisnis dan Ekonomi https://jurnal.uns.ac.id/bise p-ISSN 2548-8961 | e-ISSN 2548-7175 | Volume 4 Nomor 1 (2018) Ó Program Studi Pendidikan Ekonomi, FKIP Universitas Sebelas Maret Comparative Advantage Measurement in ASEAN’s Ten Leading Export Commodities: A Case Study of ASEAN-5 Estira Woro Astrini1, Nurul Azizah Az zakiyyah2 1 Magister Science of Economics, Faculty of Economics and Business, Gadjah Mada University 2 Non Functional Budget State Analys Setjen DPR RI Article Info Abstract DOI: This paper analyzed ASEAN-5’s comparative advantage of their best http://dx.doi.org/10.20 ten products using “products mapping” as now we faced ASEAN 961/bise.v4i1.17560 Economic Community (AEC). Its a need to know which commodities are those countries in comparative advantage and as a net exporter. JEL Classification: Using data retrieved from UN COMTRADE accessed from F13, Q56 INTRACEN website, we used information of best ten ASEAN’s leading export commodities which was under 2 digits HS classsification. For Keyword: ASEAN, analysis in this paper, we derived those products into 4 digits HS International Trade, classification, so then we were not only use 10 commodities but 320 TBI, Product Mapping commodities. Comparative advantage measurement that we used were Revealed Symmetric Comparative Advantage (RSCA), as for know if 1 this paper is a the countries were net-importer or net-exporter we used Trade Balance personal idea of the Index (TBI). Lastly, we combined those two indexes of comparative authors without advantage to draw each country’s products mapping. From the analysis, representing the we got the result that, Indonesia’s exported commodities (net-exporter) university or and comparative advantage mostly are from animal or vegetable fats organization and oil, Malaysia’s mostly are from rubber and articles thereof, Singapore and Thailand’s mostly from organic chemicals, and Philipines’s mostly from electrical and electrical equipment. -
Answers: Free Trade Or Protectionism?
www.hoddereducation.co.uk/economicreview Volume 36, Number 1, September 2018 Answers Free trade or protectionism? Jon Guest This resource provides answers to the questions set in the article on trade, on pp. 12–15 of the September 2018 issue of ECONOMIC REVIEW. Question 1 Using a simple numerical example, explain the difference between absolute and comparative advantage. The following example illustrates two countries that can use their resources to produce either whisky or motorbikes. The numbers in the table illustrate the number of motorbikes and bottles of whisky they can produce a day. Motorbikes Whisky Country A 9 36 Country B 6 12 Country A has an absolute advantage over Country B in the production of both goods. It can produce both more motorbikes and whisky per day than Country B. Comparative advantage depends on opportunity costs. The country with the lowest opportunity cost of producing a good has a comparative advantage in producing that good. Assuming the opportunity costs of using resources remain constant, the table below illustrates the opportunity cost of producing either one motorcycle or one bottle of whisky for each country. Opportunity cost of Opportunity cost of producing one motorcycle producing one bottle of whisky Country A Four bottles of whisky A quarter of a motorcycle Country B Two bottles of whisky Half a motorcycle Country B has a comparative advantage in producing motorbikes, i.e. it has a lower opportunity cost than Country A. It forgoes two bottles of whisky by using its resources to produce one motorbike whereas Country A forgoes four bottles. -
Oecd Development Centre
OECD DEVELOPMENT CENTRE Working Paper No. 16 (Formerly Technical Paper No. 16) COMPARATIVE ADVANTAGE: THEORY AND APPLICATION TO DEVELOPING COUNTRY AGRICULTURE by Ian Goldin Research programme on: Changing Comparative Advantage in Food and Agriculture June 1990 TABLE OF CONTENTS SUMMARY . 9 PREFACE . 11 INTRODUCTION . 13 PART ONE . 14 COMPARATIVE ADVANTAGE: THE THEORY . 14 The Theory of Comparative Advantage . 14 Testing the theory . 15 The Theory and Agriculture . 16 PART TWO . 19 COMPETITIVE ADVANTAGE: THE PRACTICE . 19 Costs and Prices . 19 Land, Labour and Capital . 20 Joint Products . 22 Cost Studies . 22 Engineering Cost Studies . 23 Revealed Comparative Advantage . 25 Trade Liberalisation Simulations . 26 Domestic Resource Cost Analysis . 29 PART THREE . 32 COMPARATIVE ADVANTAGE AND DEVELOPING COUNTRY AGRICULTURE . 32 Comparative Advantage and Economic Growth . 32 Conclusion . 33 NOTES . 35 BIBLIOGRAPHICAL REFERENCES . 36 7 SUMMARY This paper investigates the application of the principle of comparative advantage to policy analysis and policy formulation. It is concerned with both the theory and the measurement of comparative advantage. Despite its central role in economics, the theory is found to be at an impasse, with its usefulness confined mainly to the illustration of economic principles which in practice are not borne out by the evidence. The considerable methodological problems associated with the measurement of comparative advantage are highlighted in the paper. Attempts to derive indicators of comparative advantage, such as those associated with "revealed comparative advantage", "direct resource cost", "production cost" and "trade liberalisation" studies are reviewed. These methods are enlightening, but are unable to provide general perspectives which allow an analysis of dynamic comparative advantage. -
Topic 12: the Balance of Payments Introduction We Now Begin Working Toward Understanding How Economies Are Linked Together at the Macroeconomic Level
Topic 12: the balance of payments Introduction We now begin working toward understanding how economies are linked together at the macroeconomic level. The first task is to understand the international accounting concepts that will be essential to understanding macroeconomic aggregate data. The kinds of questions to pose: ◦ How are national expenditure and income related to international trade and financial flows? ◦ What is the current account? Why is it different from the trade deficit or surplus? Which one should we care more about? Does a trade deficit really mean something negative for welfare? ◦ What are the primary factors determining the current-account balance? ◦ How are an economy’s choices regarding savings, investment, and government expenditure related to international deficits or surpluses? ◦ What is the “balance of payments”? ◦ And how does all of this relate to changes in an economy’s net international wealth? Motivation When was the last time the United States had a surplus on the balance of trade in goods? The following chart suggests that something (or somethings) happened in the late 1990s and early 2000s to make imports grow faster than exports (except in recessions). Candidates? Trade-based stories: ◦ Big increase in offshoring of production. ◦ China entered WTO. ◦ Increases in foreign unfair trade practices? Macro/savings-based stories: ◦ US consumption rose fast (and savings fell) relative to GDP. ◦ US began running larger government budget deficits. ◦ Massive net foreign purchases of US assets (net capital inflows). ◦ Maybe it’s cyclical (note how US deficit falls during recessions – why?). US trade balance in goods, 1960-2016 ($ bllions). Note: 2017 = -$796 b and 2018 projected = -$877 b Closed-economy macro basics Before thinking about how a country fits into the world, recall the basic concepts in a country that does not trade goods or assets (so again it is in “autarky” but we call it a closed economy). -
Balance-Of-Payments Crises in the Developing World: Balancing Trade, Finance and Development in the New Economic Order Chantal Thomas
American University International Law Review Volume 15 | Issue 6 Article 3 2000 Balance-of-Payments Crises in the Developing World: Balancing Trade, Finance and Development in the New Economic Order Chantal Thomas Follow this and additional works at: http://digitalcommons.wcl.american.edu/auilr Part of the International Law Commons Recommended Citation Thomas, Chantal. "Balance-of-Payments Crises in the Developing World: Balancing Trade, Finance and Development in the New Economic Order." American University International Law Review 15, no. 6 (2000): 1249-1277. This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University International Law Review by an authorized administrator of Digital Commons @ American University Washington College of Law. For more information, please contact [email protected]. BALANCE-OF-PAYMENTS CRISES IN THE DEVELOPING WORLD: BALANCING TRADE, FINANCE AND DEVELOPMENT IN THE NEW ECONOMIC ORDER CHANTAL THOMAS' INTRODUCTION ............................................ 1250 I. CAUSES OF BALANCE-OF-PAYMENTS CRISES ...... 1251 II. INTERNATIONAL ECONOMIC LAW ON BALANCE- OF-PAYVIENTS CRISES ................................ 1255 A. THE TRADE SIDE: THE GATT/WTO ...................... 1255 1. The Basic Legal Rules .................................. 1255 2. The Operation of the Rules ........................... 1258 a. Substantive Dynamics ................................ 1259 b. Institutional Dynam ics ................................ 1260 B. THE MONETARY SIDE: THE IMF ......................... 1261 C. THE ERA OF DEEP INTEGRATION .......................... 1263 III. INDIA AND ITS BALANCE-OF-PAYMENTS TRADE RESTRICTION S .............................................. 1265 A. THE TRANSFORMATION OF INDIA .......................... 1265 B. THE WTO BALANCE-OF-PAYMENTS CASE ................ 1269 1. The Substantive Arguments ............................ 1270 a.