WEB: CH. 3, Salvatore’s International Economics, 9th Ed.
Comparative Advantage of Canada, China and S. Korea in 2004
The revealed comparative advantage of Canada, Brazil, and China can be measured by the excess in the
percentage of total exports over the percentage of total imports in each major commodity group for each
country.
The following table shows that Canada has a revealed comparative advantage in food and fuels
(since Canadian exports of food and fuels as a percentage of total overall Canadian exports exceed
Canadian food and fuel imports as a percentage of total Canadian imports). In manufactures, Canada has a
revealed comparative advantage automotive products, but a revealed comparative disadvantage in
chemicals, office and telecommunications equipment, and textiles and clothing.
Brazil seems to have a very strong comparative advantage in food and a weak one in automotive
products. On the other hand, Brazil seems to have a strong comparative disadvantage in fuels, chemicals,
office and telecommunications equipment, and a weak one in textiles and clothing. China seems to have a
strong comparative advantage in office and telecommunications equipment, as well in textiles and
clothing, but a comparative disadvantage in all other product categories.
The degree of revealed
comparative advantage of Brazil, but especially that of China, inferred from the data shown in the table
must be viewed with caution in view of the fact that Brazil provides a great deal of subsidies and trade
protection to some of its sectors while China keeps its currency grossly undervalued. These distort the
pattern of trade and the measurement of revealed comparative advantage.
TABLE Composition of Exports and Imports of Canada, Brazil, and China
in
2004 and Their Revealed Comparative Advantage
________________________________________________________________________
Canada
% of Total
Brazil
% of Total
China
% of Total___
Exports Imports
Exports Imports
Exports Imports
________________________________________________________________________
Primary commodities
Food
Fuels
Manufactures
Automotive products
Chemicals
Office & telecom. equip.
29.1
7.3
21.8
59.5
20.1
6.9
3.6
15.6
5.7
9.9
80.7
19.3
10.3
9.1
42.1
28.4
13.7
53.2
9.1
6.1
2.1
27.8
5.1
22.7
70.5
5.3
22.1
10.9
7.8
3.5
4.3
91.4
1.1
4.4
29.0
19.6
3.7
15.9
76.3
2.6
11.7
22.9
Textiles and clothing
1.4
3.4
1.7
2.0
16.1
3.0
________________________________________________________________________
Source: WTO, International Trade Statistics (Geneva, 2005).
Relative Labor Productivity in Various Industries in the United States, Japan,
and Germany in 1990
The following table shows the labor productivity in terms of value added per hour of work in
various industries in Japan and Germany relative to the United States in 1990. Taking the labor
productivity in the United States as 100, we can see from the table that Japan's labor was more
productive than U.S. labor by 47 percent in steel, 24 percent in auto parts, 19 percent in metal
working, 16 percent in automobiles, and 15 percent in consumer electronics. On the other hand,
U.S. labor was more productive than Japanese labor in computers, beer, soaps and detergents, and
especially food. For all industries together, Japanese labor was, on the average, only 83 percent as
productive as U.S. labor. The table also shows that German labor was as productive as U.S. labor
only in metal working and steel and less productive in all other industries, especially in beer
production. Overall, German labor was only 79 percent as productive as U.S. labor. Labor
productivity determines relative wages and is an important determinant of the nation’s comparative
advantage or disadvantage in the various industries.
Table: Productivity of Japanese and German Labor Relative to U.S. Labor in 1990,
with the U.S. Index = 100
_________________________________________________________________________
Industry
Japanese
German
_________________________________________________________________________
Steel
Auto parts
Metal working
Automobiles
Consumer electronics
147
124
119
116
115
100
76
100
66
76
Computer
Soap and detergents
Beer
Food
95
94
69
33
89
76
44
76
All industries
83
79
_________________________________________________________________________
Source: McKinsey Global Institute.