1 Comparative Advantage and Competitiveness Analysis for Japans Synthetic Fibre Export K.F. AU and...

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Comparative Advantage and Comparative Advantage and Competitiveness Analysis for Competitiveness Analysis for Japan’s Synthetic Fibre ExportJapan’s Synthetic Fibre Export

K.F. AU K.F. AU and M.C. WONG and M.C. WONG Institute of Textiles and ClothingInstitute of Textiles and Clothing

The Hong Kong Polytechnic UniversityThe Hong Kong Polytechnic University

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Presentation OutlinePresentation Outline

I. Introduction

II. Overview of Japan’s synthetic fibre industry

III. Revealed Comparative Advantage (RCA)

IV. Revealed Competitiveness (RC) concepts

V. Empirical Analysis of RCA in Japan’s synthetic fibres export

VI. Japan’s Comparative Advantage and Competitiveness of synthetic fibre exports

VII. Conclusion

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1. Introduction 1. Introduction In 2004 :In 2004 :

An increase of 6.7 % in world textile fibre consumption

At 67.4 Mn tons

Per capita fibre consumption: 10.5 kg/capita

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1. Introduction1. Introduction 2004: World synthetic fibres consumption: 38

Mn tons (56.3%)

Synthetic fibre consumption

38Mn tons

Natural fibre consumption

24 Mn tons

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1. Introduction1. Introduction

Synthetic textile fibres

Artificial petrochemical products created by chemical synthesis process

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1. Introduction1. IntroductionMost important and popularly-used synthetic fibres

Relative Importance of Textile Fibres Polyester Polyester (25%)(25%) Nylon Nylon (12%)(12%) Polypropylene Polypropylene (12%)(12%) AcrylicAcrylic (6%)(6%)

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1. Introduction1. Introduction

FIGURE 1: WORLD CONSUMPTION OF MAJOR TEXTILE FIBRES (MN TONS)Source: Complied from Fiber Organon, various issues.

Note: Natural Fibres include cotton, wool and silk

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5

10

15

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1982 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Wor

ld F

ibre

s C

onsu

mpt

ion

(mn

tons

)

Manmade Synthet ic Fibres Natural Fibres Manmade Celluosic Fibres

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Assured growth in world synthetic fibre consumption

1. Introduction1. Introduction

Increasing world population

Surging economic growth in 1990s and new millennium

Increasing scope of substitution for natural fibres

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1. Introduction1. Introduction Synthetic fibre production:

Capital-intensive manufacturing activity Dominated by developed countries since

the early 1970s e.g. Germany, Italy, France, UK, US and Japan etc. losing shares to low-cost Asian regions From 1980 to 2003, world share dropped from 94% to 34%

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1. Introduction1. Introduction

JAPAN : ExceptionJAPAN : Exception

No similar declining trend

As world’s top-3 exporter

World share of synthetic fibre exports maintained around 14 % from 1990 to 2004

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2. Overview of Japan’s synthetic fibre 2. Overview of Japan’s synthetic fibre industryindustry

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Wor

ld S

hare

Japan Germany UK France Italy

FIGURE 2: WORLD SHARE OF SYNTHETIC FIBRE EXPORTS OF SELECTED COUNTRIES, 1990-2004Source: Data complied from International Trade Statistics Yearbook, various issues.

Japan:

• world’s leading synthetic fibre exporter

• maintains a steady and significant share, with an annual growth 2.8%

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2. Overview of Japan’s synthetic fibre 2. Overview of Japan’s synthetic fibre industryindustry

Shift from quantity to quality

Shift from commodity products to specialty and niche items

Focus on technical fibre innovations

Develop market opportunities for new applications

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3. Revealed Comparative Advantage (RCA)3. Revealed Comparative Advantage (RCA)

Balassa defined the concept of RCA as the ratio between:

(1) share of commodity exports from a certain country in commodity exports from all countries, and

(2) share of total manufactured goods exports from the country in total manufacturing merchandise exports from world

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3. Revealed Comparative Advantage 3. Revealed Comparative Advantage (RCA)(RCA)

In mathematical interpretation, RCA can be written as:

RCAij = (Xij / Xnj) / (Xir/Xnr)where, • RCAij = revealed comparative export advantage of country j in commodity i

• X = exports• i = commodity• j = country• n = rest of the commodities• r = rest of the world

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4. Revealed Competitiveness (RC)4. Revealed Competitiveness (RC)

More appropriate measuring index as supply and demand balances are embodied

Show clear distinctions between specific commodity and all other commodities, as well as between specific country and rest of the world

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4. Revealed Competitiveness (RC)4. Revealed Competitiveness (RC) In mathematical interpretation, RC can

be expressed as:

RCij = Ln(RXAij ) - Ln(RMAij) where,  • RCij = Revealed competitiveness index of country

j in commodity i • RXAij = Relative export advantage of country j in

commodity i• RMAij =Relative import advantage of country j in

commodity i • Ln = Natural logarithm

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5. Empirical analysis of RCA in Japan’s 5. Empirical analysis of RCA in Japan’s synthetic fibres export synthetic fibres export

Based on: (1) Balassa’s RCA index

(2) Vollrath’s RC index

Similar economic background comparators include: Belgium, France, Germany, Ireland, Italy, Spain, UK and US

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5.1 RCA in synthetic fibre exports5.1 RCA in synthetic fibre exports

RCA > 1 have revealed comparative advantage

RCA < 1 having revealed comparative disadvantage

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5.1 RCA in synthetic fibre exports5.1 RCA in synthetic fibre exports

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5.1 RCA in synthetic fibre exports5.1 RCA in synthetic fibre exports Japan, Ireland and Spain:

Their RCA > 1Have revealed comparative advantage in synthetic fibre exports

Japan: only country shows “increasing” RCA RCA index increased significantly, from 1.35 in 1990 to 2.68 in 2004

Ireland and Spain:Their RCA indices demonstrated a downward trendLosing their revealed comparative advantage in synthetic fibre exports

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5.1 RCA in synthetic fibre exports5.1 RCA in synthetic fibre exports

Germany and Italy:Their RCA indices dropped below 1 Losing their revealed comparative advantage and exhibiting comparative disadvantage since 1990s

Belgium, France, UK and US:Their RCA indices < 1Have revealed comparative disadvantage in synthetic fibre exports

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5.2 RC in synthetic fibre exports5.2 RC in synthetic fibre exports

Positive RC country is competitive in commodity trade

Negative RC country is not competitive internationally in the specific trading commodity

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5.2 RC in synthetic fibre exports5.2 RC in synthetic fibre exports

Japan:

Most competitive synthetic fibre exporter

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6. Analysis of Japan’s Comparative Advantage and 6. Analysis of Japan’s Comparative Advantage and Competitiveness of synthetic fibre exportsCompetitiveness of synthetic fibre exports

Key factors for the success of Japan’s synthetic fibre industry: High technological level Innovative development Highly- educated scientists Abundant capital resources Large investment in R & D

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6. Analysis of Japan’s comparative advantage and 6. Analysis of Japan’s comparative advantage and competitiveness of synthetic fibre exportscompetitiveness of synthetic fibre exports

Japan has a comparatively higher R&D/GDP ratio

Higher potential to innovate new products or technology

Enhanced the RCA in her synthetic fibres export

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7. Conclusion7. Conclusion

(a) From Balassa’s RCA study: Increasing RCA trend in Japan synthetic

fibre exports Related with R&D/GDP ratio Able to produce hi-tech and niche

synthetic fibres

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7. Conclusion7. Conclusion

(b) From Vollrath’s RC study: Japan has the highest RC index among

the other studied countries Demonstrated export competitiveness in

synthetic fibre sector

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7. Conclusion7. ConclusionFuture Prospect of Japan Synthetic Fibre SectorFuture Prospect of Japan Synthetic Fibre Sector Face competitive challenges from other low cost

producing countries Continue her edge in synthetic fibre sector by

exerting more R&D efforts Focus on developing high-value added niche

products

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- End -

Thank You