Revealed Comparative Advantage: Thailand to China in 2005

By Riyan Hidayat

1006690185

Revealed comparative advantage is a concept  that pertains to the relative trade performance of individual countries in particular commodities. As the commodity pattern of trade reflects the inter-country differences both in relative costs and non price factors, it reveals the comparative advantage of trading countries. The movement  in RCA itself might be contributed by some factors like structural change, imptoved world demand and trade specialization. The index of RCA has interpretation as following: if it takes a value greater than one, the country has a revealed comparative advantage in that product and  if less than one, the country has a revealed disadvantage in that product.

RCA indices have been calculated for Thailand in the China’s Market in all the 97 chapters of the Harmonized System (HS-1996) classification for the year 2005.  The index of RCA is calculated using data from UN COMTRADE . This calculation employs Balassa export-based RCA index but with some modification as following:

Based on that calculation, the index of RCA is greater than one for 20 sectors indicating that Thailand holds comparative advantage in these sectors in the China’s market. As percentage of total exports, Thailand enjoys comparative advantage in 54.41% of its total exports in 2005. India enjoys maximum comparative advantage in HS 07 namely edible vegetables and certain roots and tubers. The value of the index of RCA is 30.69972.  The details for RCA for 10 highest sector is in the table below:

Table.1 Ten Highest of Thailand’s RCA to China

Rank	HS Code	Description	RCA
1	07	Edible vegetables and certain roots and tubers.	30.69972
2	11	Prod.mill.indust; malt; starches; inulin; wheat gluten	16.06484
3	08	Edible fruits and nuts; peel of citrus fruits or melons	12.94082
4	40	Rubber and articles thereof	8.165064
5	10	Cereals	6.33459
6	17	Sugars and sugar confectionery.	4.804624
7	57	Carpets and other textile floor coverings.	4.362632
8	06	Live tree & other plant; bulb, root; cut flowers etc	4.291894
9	16	Prep of meat, fish or crustaceans, mollusk etc	3.308643
10	35	Albuminoidal subs; modified starches; glues; enzymes.	3.00553

 

 

 

 

 

 

 

 

As we can see on the table, most of the ten highest RCA for Thailand’s export to China is from agriculture, forestry and fishing sector which is HS code 07, 11, 08, 10, 06. Then, we know that Thailand’s  agriculture product has more competitiveness than other countries that export the same product to china. The competitiveness of Thailand’s agriculture product related to Policy of Thailand government in agriculture sector and also related to trade agreement between Thailand and China in Agriculture sector.

Thailand and China was set up trade agreement under the ASEAN-China free trade agreement and also the Thailand-China agreement. Under the agreement between ASEAN and China, participating countries agreed to reduce tariffs on imports of agricultural products. Besides, Thailand and China also signed the Closer Economic relations Agreement under the Early Harvest Program(EHP). This program employs mainly of tariff elimination on vegetables and fruit.

Then, before agreed in bilateral free trade agreements, Thai Government developed the pre-conditions in the agricultural sector to maximize the benefit of trade agreements. That pre-conditions are done by improve the availability of good quality seeds, agricultural research and development. Thai Government has worked hard to reinvent and improve technology in agricultural sector.

References

Zamroni. 2006. Thailand’s Agriculture sector and free trade agreements. Asia Pasific trade and investment review, vol.2.

WITS.worldbank.org