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.