Revealing Comparative Advantage

Using Bela Balassa's index of revealed comparative advantage (RCA), this chapter explores the United States' comparative advantage across time, trading partners, and sectors at an increasing level of commodity detail. U.S. patterns of comparative advantage seem to be different in different parts of the world, and the differences seem to have changed during the period 1980–1995. These differences look different at different levels of aggregation. The chapter compares U.S. exports in 1980 and 1995 to those of thirty-eight of its largest trading partners and rivals. These thirty-eight also form both the world of U.S. peer exporters and the markets (regional groups) in which U.S. and peer exporters compete. The chapter draws its export data from Statistics Canada's World Trade Data Base, which provides annual trade flow data among countries as reported to the United Nations. It analyzes patterns of comparative advantage by focusing on manufactures, machinery and equipment, and all merchandise.