Comparative Advantage

Topics: International trade, Economics, Rice Pages: 38 (11150 words) Published: October 6, 2010
Table of Contents




1.Theory of comparative advantage6

2.Vietnam latest Export and Import situation7



1.Comparative advantages of Vietnam in exporting rice18

2.Comparative advantage of Vietnam in exporting coffee after the collapse of ICA.23

3.Example of Vietnam, appliance of theory of comparative advantage in exporting textiles:32






This paper explores the “application of theory of comparative advantage in Vietnam’s export and import and the gain and loss of the economy in trade”.

The research method is firstly study basic information of the theory of comparative advantage and background of Vietnam’s export and import. Past and related work on Vietnam market analysis are also considered to figure out current problem in research. In-depth analysis of 3 largest export industry is presented to give specific outlook and hence determine the gain and lost of Vietnam’s export and import.

The concept of comparative advantage was first introduced in 1817 by David Ricardo and applied in economics as to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party. Comparative advantage explains how trade can create value for both parties, which is the pure theory of international trade.

Vietnam’s current direction is to “open door to the world” and encounrage export and import. Vietnam is one of the strategic markets of Asean exporter. However, due to the effect of financial crisis, export/import figures of Vietnam experience remarkable decrease last year , FDI enterprises also contributed less. In 2009, the export turnovers were at an estimate of USD 56.6 billion, the import turnovers were at an estimate of USD 68.8 billion. There have been a lot of researches related to comparative advantage in importing and exporting in Vietnam such as “The structure of Vietnam’s comparative advantage: Trends in the era of globalization” by a student group from National Economics University- Ha Noi, “Current Status and Prospects for the Pig Sector in Viet Nam: A Desk Study” for market for pork in 2005 etc,. Most of these researchs have pros and cons and have not answer the question if Vietnam gains of loses in international trade.

To have in-depth analysis of Vietnam’s export and import comparative advantage, this paper studies the situtation of 3 essential export commodities of Vietnam: rice, textiles and café. These examples show great potentials for Vietnam export. An example of US and Izodia is also analyzed to figure out what a country gains from participating in international trade. According to the study, as long as the opportunity cost of production differs between the two countries, there are gains from specialization and trade. A country only trade when they see a gain from it, and this is when they have comparative advantage. As this paper still have some limitations in research method such as using secondary information from low-reliable source and focusing on single industry of agriculture, some approaches for future work are proposed. Conducting primary research on various industries and on particular entrepries are expeccted to give a more thorough outlook of Vietnam comparative advantage in international trade.


Located at the centre of Southeast Asia, Vietnam is accessible to China or other ASEAN countries. Thus, it can be a rigorous production partner for both parties. Particularly, the country borders the East Sea in the north; therefore, it has potentials to attach to the development pace of this dynamic area. This is an outstanding advantage of Vietnam against other ASEAN countries in luring FDI flows, especially in enhancing import and export situation. In addition,...
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