The Comparative advantage &Comparative Advantage Trap about China and Countermeasures in Foreign Trade15 国贸全英傅文琦2015333517006AbstractThe theory of comparative advantage is the basis of international trade theory and participates in the international division of labor for all countries, and plays an active role in the development of international trade. Developing countries tend to be advantaged in the international division of labor and labor-intensive and resource-intensive Industry-oriented sectors, which is not conducive to the sustainable development of foreign trade in the long run, and may even fall into the trap of comparative advantage. Currently, China has not yet fallen into the trap of comparative advantage, and is changing from the extensive foreign trade growth mode to intensive growth mode .Under this circumstance，the driving force to achieve the trade power and gain the leading status in the international market is comprehensive innovation.Key words：Comparative advantage，comparative advantage trap，China’s economy, competitive advantageparative Advantage Theory and Comparative Advantage TrapIn the 18th and 19th centuries, from the classical economist Adam Smith's theory of absolute cost, David ricardo's theory of comparative cost, then Heck herschel - OLin's theory of factor endowments, finally through L eontief’s comprehensive extension, comparative advantage theory system is formed, which has long beenregarded as the mainstream of international trade theory, becoming the guidance of foreign trade around the world. However, with the great impact of knowledge economy, the speeding-up process of economic globalization, the world trade environment has changed significantly, the defects of the comparative advantage theory have been exposed, thus the consequence is caused by the comparative advantage trap, which also shaked the countries especially developing countries who have worship the theory.1.1Comparative AdvantageComparative advantage can be summarized as: between two countries, any product's production efficiency gap is not equal.Concentrate on outputting product with comparative advantage, importing products which has comparative disadvantage(that is, the "two take the heavy phase right, two bad balance take its light"), both countries can save resources, made by the benefits of specialization. The core part of this theory is: when countries participate in the world economy market, follow the principle of comparative advantage, promoting the establishment of the structure of comparative advantage in world trade.Developed countries use their capital and technological advantages, mainly produce and export products are capital and technology oriented. Developing countries with labor and resource advantage, product and export products on the basis of the labor and resources advantage, this way, each country can benefit from the world trade, and enhance national economic quantity. Moreover, starting from the mutual association of comparative advantage theory to inference, it is relatively mature. But we can’t deny that in the actual worldtrade, comparative advantage theory is not completely fit to explain the situation, such as phenomenons like"Leontief paradox" . Although a great number of developing countries follow it as a fatal policy, the implementation of comparative advantage and trade policies, in contrast to that, prompting the trade to a more serious and poverty situation , fall into the so-called comparative advantage trap.1.2 Comparative Advantage Trap"Comparative advantage trap", it is said when a country's foreign trade is absolutely following the theory of comparative advantage, relying on the advantages of the labor, resources, mainly on production of primary products in foreign trade.When trading with powerful countries, although it is possible to get profit,but it is harmful in the long run ,the industrial structure will be unstable and unbalanced and will be long trapped in a passive position. That’s why we call it “trap”.Here are two kinds of comparative advantage traps: the primary products comparative advantage trap and the manufactured goods comparative advantage trap. Primary products comparative advantage trap.It refers to the less developed countries has been implementing the strategy of comparative advantage, in order to find the location of the world division of labor, blindly follow the opportunity cost of which is light, simply rely on the advantage in the division of labor, resources to establish foreign trade , so only get very low primary value-added benefits. And, performing comparative advantage strategy for a long time will also continue to strengthen this effect. What’s worse, our world just need a rather constant amount of primary products, and the primary products production technology is gradually beingperfected, reducing the production cost thus commodity prices fall, deteriorate the world markets situation for developing countries . Inevitable poverty is not decreasing but increasing ,this situation is not surprising.Manufactured products comparative advantage trap. Due to the severe primary products market situation, some developing countries began to look for new ways, with exports of manufactured goods to replace primary products, using advanced science and technology to promote industrial transformation. In order to improve the position in the world economy, prompting into high value-added camp ,developing countries have done a lot. Yet because of the limitations of their own technology, they can only rely on imitation, draw lessons from the world's advanced science and technology, or buy the mature technology of developed countries directly. To be honest, this is just a modified improvement of the comparative advantage strategy, second, in the process rely on foreign technology import too much, which will cause their own innovation ability be limited in the long run or even no achievement ,although entered in the high value-added camps ,but still under constraint thus can’t develop rapidly as it desired.2The Comparative Advantage Strategy Analysis of ChinaChina ,nowadays the leading trade power in this world, having manipulated the comparative advantage strategy for decades,already having important influence on international trade, and have gained remarkable achievements.2.1The Improvement of Traditional Industrial StructureAfter nearly 40 years of development, reform and opening up, the country's trade product structure have had stepped out the shadow of the low efficiency, and transformed to be dominated by manufactured goods.Since the 1980 s, China's primary commodities in the foreign trade share have reduced year by year, and the share of manufactured goods have increased then,moreover manufactured goods of deep processing has replaced the main export primary commodities.It is good to see that the unique advantages are emerging in our country, the structure of foreign trade products has been greatly optimized.2.2Big Economy Effect to the Rest of the WorldChina having participated in the world trade nearly 40 years,the volume of foreign trade is continuously growing to a enormous scale.The expansion in trade of China, have inestimable impact on the world economy, China's primary manufactured goods has become a necessity to Europe and the United States and other developed countries, besides,the price fluctuation of labor force , mineral resource is also have a shaking power in the world price domain. It is without doubt that China is a big economy entity and fatal part of the world business chain.2.3The New "World Factory"Because of the unique labor resource advantage, numerous countries around the world flood in China ,countless foreign capital enterprise gather in, bringing capital, technology, projects and many other resource we need. Breeding a manufactrue boom and the significant development of China's foreign trade, making our country a veritable "world factory".Analyze comprehensively, the comparative advantage strategy makes our country modify the industrial structure, promote the formation of scale economy, establish the big power status in the world economy.3The Influence of the Comparative Advantage Trap on ChinaAlong with the deepen relationship of world economy and the fluctuation of domestic market, the comparative advantage strategy shows some insufficiency.3.1The Traditional Comparative Advantage Effect DeclinedThough the structure of foreign trade has some progress, as the comparative advantage of China's foreign trade, primary products ‘s market share and gaining decreased instead, revealing that the traditional comparative advantage effect is getting smaller. Among which, the representative of primary products, light textile, its comparative advantage is dropping. Continue to develop primary products is not easy, the core reason is that the efficiency of China's labor productivity did not get a distinct improvement , higher salary increase the unit product cost. In addition, the world market prices of these commodities also appeared to reduce, the price change range of this kind of goods is also not big, most countries adopt the low profit but high turnover sales approach hoping to increase the sale amount, making prices dropsharply. Moreover, the aging of population also hinder the growth of these industries. Although the domestic region exist some differences, there is still a big development space for primary commodities industry. But if thing continue this way , sliding into the comparative advantage trap is inevitable.3.2Big Economy Effect Limits the Effectiveness of Comparative AdvantageChina's foreign trade scale expanding progressively,yet simultaneously ,the difficulty to expand further also continues to increase. Due to the huge size of foreign trade volume, the later expansion will surely be accompanied by those disturbing trade friction, the most typical case is the growing anti-dumping investigation on China's export products. In addition, China's import flow is also increasing largely, huge imports is easy to cause the rising of world market price, thus the import costs of China rises.With primary commodity prices reduced at the same time, China's foreign trade foreground is not so optimistic.3.3The Deviation Between Foreign Capital Introduction and the Upgrade ofIndustrial StructureDue to the comparative advantage strategy,the provinces and cities in China give more attention to the growth of primary products industry. Although the utilization of foreign capital is a dominant part, primary products industry has absorbed most of the foreign capital, inducing foreigner enterprise to start grabbing our export quotas, cracking down the local industry export.Besides, the foreign enterprises also piled into the domestic market.This against the intention of using external resources to improve the local industrial structure.On the other hand, our country’s tertiary industry development level is not high, even lower than some developing countries, the third industry is in urgent need of evolution, however, in the introduction offoreign capital is not good enough.We also need to mention that the foreign capital provided to the second industry also mainly received by the primary processing industry.The prime factor is the comparative advantage strategy , we always pay too much attention to labor advantage, which have cause the use of foreign capital go largely to expand the primary processing industry, yet kind of neglect the foreign advanced technology, and improvement of the industrial structure the foreign capital may bring about.In this way, although the foreign capital enterprises are playing an increasingly important role in the trade in our country, but the truth is ,the work originally done by domestic enterprises transformed to the foreign enterprises,the industrial structure is not reformed fundamentally.4Strategic Choice and CountermeasuresIn order to adapt to the new situation of the world trade environment, seeking a foothold in the tide of world trade, optimizing trade development strategy is imperative in our country. Break the former bondage, reposition the traditional advantages, continue to play a comparative advantage, meanwhile explore more new competitive advantages, to perform competitive advantage strategy.4.1Develop Competitive Advantage , Maintain Comparative AdvantageCompetitive advantage can be summarized as: the output contains some unique and enduring properties the other people can't create. So carrying out competitive advantage strategy,we need to continue to play our unique comparative advantage, and because the products will be updated from its comparative advantage to competitive advantage, in particular the upgraded comparative advantage will be our unique competitive advantage. Primary commodities in our country in the worldmarket has already been in a leading position, if we want to improve the market share coutinuely, we must review the market situation, seek new market demand, take it as our new guidance, commit to the application of advanced technology in products, do perfect the traditional processing procedure, improve commodity delicate degrees as well as the use of advanced technology, improve the use value of commodity production, accordingly, improve the added value of products, cater to consumer’s demand. Simultaneously, labor resources advantage also can take the express of the development of science and technology and pludge into capital-intensive products even technology-intensive production, continue to maintain a comparative advantage.4.2Utilize the Multinational Companies and Other External ResourcesReasonablyMultinational companies have important function in the developing procedure of economic globalization, therefore, how to exert comparative advantages in China by using multinational companies "competitive advantage" is critical, and apparently our biggest advantage is labor, which is not only required by multinational companies to reduce the production cost, but also essential for China in the world's advanced science and technology industry. Multinational companies are the main force of the world economy, through cooperation with multinational corporations, we can get closer to the world market. Which could fully take advantage of our country's labor source, and can assimilate the spillover technology, management experience, improve the quality of the overall labor, reduce the cost of learning, thus accumulate human resource and hi-tech which is necessary for the improvement of the industrial structure and export commodity structure ,upgrading labor comparative advantage to competitive advantage at the same time.4.3Promote Science and Technology Innovation, Enhance CompetitiveAdvantageThough China has not fallen into the comparative advantage trap, it is of great need to complete the implementation of the competitive advantage strategy.Encourage technology innovation. Turning comparative advantage into competitive advantage and maintaining it, the key is the technological innovation. Developing countries can easily get into the comparative advantage pie,but because of ignoring the technology variable and improper in the path choice of technology innovation. At present, China's primary manufactured goods exports declining percentage of an important reason lies in the product technology content is low. The technique of Chinese manufactured goods are imported from abroad or just of imitation, the proportion is small. This also reveals we have to undertake technological innovation. Technical innovation means we should give full play to the role of the supply and demand, price, competition mechanism. At the same time, countries should pay more attention to the guide and incentive of technology innovation.Establish new leading industries. Industrial structure is the basis of product competitive advantage, our products are lack of competitiveness for which the important factor is the imbalance of industrial structure, and upgrade is slow. Industry structure in our country at present is mainly labor-intensive industries, capital and technology intensive products ratio is very low.The government should play a guiding role in the formation of competitive advantage.The government in promoting the status of competitive advantage strategy is very important. First of all, from the policy level to promote institutional innovation, We should establish the market as soon as possible, establish a fair reasonable standard, unified import tax system, dynamic tariffs on import quantity and structure adjustment. The second is to play a role of the government as guide. Both technologyinnovation and industrial structure adjustment are involved in the introduction of foreign advanced industries and advanced technology.5ConclusionIn the development of international trading, China had gone through a lot of detours, wrong way in the past, however, in the process of continuous development, we constantly adjust the direction, constantly optimize the development course, from the comparative advantage strategy to today's comparative advantage and competitive advantage complementary strategy, make our country rise up in the world economy and took a big step forward in the trend. 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