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1 Comparative Advantage and Competitiveness Analysis for Japans Synthetic Fibre Export K.F. AU and M.C. WONG Institute of Textiles and Clothing The Hong.

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Presentation on theme: "1 Comparative Advantage and Competitiveness Analysis for Japans Synthetic Fibre Export K.F. AU and M.C. WONG Institute of Textiles and Clothing The Hong."— Presentation transcript:

1 1 Comparative Advantage and Competitiveness Analysis for Japans Synthetic Fibre Export K.F. AU and M.C. WONG Institute of Textiles and Clothing The Hong Kong Polytechnic University

2 2 Presentation Outline I. Introduction II. Overview of Japans synthetic fibre industry III. Revealed Comparative Advantage (RCA) IV. Revealed Competitiveness (RC) concepts V. Empirical Analysis of RCA in Japans synthetic fibres export VI. Japans Comparative Advantage and Competitiveness of synthetic fibre exports VII. Conclusion

3 3 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

4 4 1. Introduction 2004: World synthetic fibres consumption: 38 Mn tons (56.3%) Synthetic fibre consumption 38Mn tons Natural fibre consumption 24 Mn tons

5 5 1. Introduction Synthetic textile fibres Artificial petrochemical products created by chemical synthesis process

6 6 1. Introduction Most important and popularly-used synthetic fibres Relative Importance of Textile Fibres Polyester (25%) Polyester (25%) Nylon (12%) Nylon (12%) Polypropylene (12%) Polypropylene (12%) Acrylic (6%) Acrylic (6%)

7 7 1. 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

8 8 Assured growth in world synthetic fibre consumption 1. Introduction Increasing world population Surging economic growth in 1990s and new millennium Increasing scope of substitution for natural fibres

9 9 1. 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%

10 10 1. Introduction JAPAN : Exception JAPAN : Exception No similar declining trend As worlds top-3 exporter World share of synthetic fibre exports maintained around 14 % from 1990 to 2004

11 11 2. Overview of Japans synthetic fibre industry FIGURE 2: WORLD SHARE OF SYNTHETIC FIBRE EXPORTS OF SELECTED COUNTRIES, Source: Data complied from International Trade Statistics Yearbook, various issues. Japan: worlds leading synthetic fibre exporter maintains a steady and significant share, with an annual growth 2.8%

12 12 2. Overview of Japans synthetic fibre industry 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

13 13 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

14 14 3. Revealed Comparative Advantage (RCA) 3. Revealed Comparative Advantage (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

15 15 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

16 16 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

17 17 5. Empirical analysis of RCA in Japans synthetic fibres export Based on: (1) Balassas RCA index (2) Vollraths RC index Similar economic background comparators include: Belgium, France, Germany, Ireland, Italy, Spain, UK and US

18 RCA in synthetic fibre exports RCA > 1 have revealed comparative advantage RCA < 1 having revealed comparative disadvantage

19 RCA in synthetic fibre exports

20 RCA in synthetic fibre exports Japan, Ireland and Spain: Their RCA > 1 Have 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 trend Losing their revealed comparative advantage in synthetic fibre exports

21 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 < 1 Have revealed comparative disadvantage in synthetic fibre exports

22 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

23 RC in synthetic fibre exports Japan: Most competitive synthetic fibre exporter

24 24 6. Analysis of Japans Comparative Advantage and Competitiveness of synthetic fibre exports Key factors for the success of Japans synthetic fibre industry: High technological level Innovative development Highly- educated scientists Abundant capital resources Large investment in R & D

25 25 6. Analysis of Japans comparative advantage and competitiveness 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

26 26 7. Conclusion (a) From Balassas 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

27 27 7. Conclusion (b) From Vollraths RC study: Japan has the highest RC index among the other studied countries Demonstrated export competitiveness in synthetic fibre sector

28 28 7. Conclusion Future 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

29 29 - End - Thank You


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