HI5016 International Trade: Report on Comparative Advantage

This report provides a comprehensive analysis of comparative advantages in the context of global trade, emphasizing how countries and industries strive to gain and retain these advantages to maintain a competitive edge. It explores the sources of comparative advantages, such as lower human resource costs, strategic resource availability, and favorable infrastructure. The report highlights the benefits of comparative advantages, including increased market potential and optimal resource utilization. Specific examples of countries like China, India, and the United States, along with industries like wind power, oil, and information technology, are examined to illustrate the practical application of comparative advantage. The conclusion underscores the importance of comparative advantage as a key determinant in global trading, with resource access and cost being primary drivers. The document references several academic sources to support its analysis.

GLOBAL TRADE
Discussion on comparative advantages

INTRODUCTION
 In the current international trade, most of the
countries involved in trading process are
striving to gain comparative advantages.
 Comparative advantages refer to the degree
to which a particular country is having the
upper hand in producing a particular goods
or commodity.
 Countries in the current global business
scenario are trying to gain and retain
comparative advantages to stay ahead in the
global trading process.

SOURCES OF GAINING COMPARATIVE
ADVANTAGES FOR COUNTRIES
 Lower cost of human resources
 The more will be the availability of the
human resources, the lower will be the cost.
 The countries with having larger access and
supply to human resources will be able to
initiate the production with lower cost of
human resources.

SOURCES OF GAINING
COMPARATIVE ADVANTAGES FOR
COUNTRIES
 Lower cost of strategic resources
 More access to natural resources will help in
having lower cost of the resources.
 Geographical locations of the countries also
helps in having comparative advantages.

SOURCES OF GAINING
COMPARATIVE ADVANTAGES FOR
COUNTRIES
 Favorable infrastructure
 Domestic infrastructure of the countries also
determines the comparative advantages of
the countries.
 Access to more advanced technologies will
also help the countries to produce the same
goods in less time and cost compared to
other countries.

SOURCES OF GAINING
COMPARATIVE ADVANTAGES FOR
INDUSTRIES
 Access to strategic resources
 If organizations are having the source of
strategic resources that are not accessible by
others then they will gain comparative
advantages over others.
 Their production process will also get
enhanced with the access to strategic natural
resources.

SOURCES OF GAINING
COMPARATIVE ADVANTAGES FOR
INDUSTRIES
 Lower cost of resources
 Having facilities in different countries
especially in the developing countries where
the cost of human resources is low.
 Global presence
 Sourcing the advantages from different
regions around the world and gaining
comparative advantages.

BENEFITS OF COMPARATIVE
ADVANTAGES
 Gaining competitive edge
 Increase in market potentiality
 Helps in global trade
 Optimal utilization of resources

COUNTRIES WITH HAVING
COMPARATIVE ADVANTAGES
 China hold comparative advantages in terms
of cheaper technology development and
lower cost of human resources.
 Multinational companies from around the
world are opening their manufacturing
facilities in China to take the advantage of
lower cost of human resources.

COUNTRIES WITH HAVING
COMPARATIVE ADVANTAGES
 India is having comparative advantage of
lower cost of human resources.
 Availability of eligible human resources is
more in India that is reducing the average
cost of human resources.
 India is also having the comparative
advantage in producing agricultural products.

COUNTRIES WITH HAVING
COMPARATIVE ADVANTAGES
 United States is having the comparative
advantages in terms of access to latest
technologies and investment potential in the
research and development.
 It is helping the business organizations to
develop superior products over the
companies from other countries.

INDUSTRIES WITH HAVING
COMPARATIVE ADVANTAGE
 Wind power sector
 The cost of tapping wind energy for power
generation is also relatively low compared to
burning fossil fuels.
 Oil industries in Middle Eastern regions
 Oil industries in this region are largely
benefited from having the access to the oil
reserves.
 Information technology industry in the
South Asian regions
 South Asian countries are having abundant
supply of skilled and trained employees.

CONCLUSION
 In the current global trading scenario,
comparative advantage is a major
determining factor.
 Access and cost of resources are the primary
sources of gaining comparative advantage.
 Countries and business organizations will
have competitive edge in the global trading
process with the help of the comparative
advantages.

REFERENCE
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comparative advantage of nations: Evidence of international knowledge
diffusion?. Journal of International Economics, 92(1), pp.111-123.
 Crozet, M. and Trionfetti, F., 2013. Firm-level comparative advantage. Journal of
International Economics, 91(2), pp.321-328.
 Deardorff, A.V., 2014. Local comparative advantage: Trade costs and the pattern of
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 Fattouh, B. and El-Katiri, L., 2013. Energy subsidies in the Middle East and North
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 Laursen, K., 2015. Revealed comparative advantage and the alternatives as
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 Leromain, E. and Orefice, G., 2014. New revealed comparative advantage index:
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 Schumacher, R., 2013. Deconstructing the theory of comparative advantage. World
Social and Economic Review, 2013(2, 2013), p.83.
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