REVEALED COMPARATIVE ADVANTAGE AND COMPETITIVENESS OF THE TURKISH MANUFACTURING SECTOR IN THE EUROPEAN MARKET

Abstract

The purpose of this paper is to analyse the competitive performance of the Turkish Manufacturing Sector after the Custom Union Agreement with the EU and to determine whether or not the pattern of comparative advantage for Turkey has undergone a structural shift over the period 1996-2006. Then we examine if Turkey’s pattern of comparative advantage is related with industry-level productivity differentials or with differences in factor endowments. The manufacturing sector was chosen because the Custom Union covers all industrial goods but does not address agricultural products (except processed agricultural products), service or public procurement. The Revealed Comparative Advantages (RCA) index and Vollrath’s competitiveness indices are used to identify whether or not Turkey has a comparative advantage in any particular product group. In the calculating of these indices, the manufacturing industry is divided into four groups according to intensity of technology: high-tech industries, medium-to-high-tech industries, medium-to-low-tech industries and low-tech industries. It is known that a Custom Union can, in theory, have significant dynamic effects, such as increased competition, stimulation of technical change and investment. There are a number of studies where RCA has been used to investigate the competitiveness of Turkish exports. This study differs from others in terms of the classification of manufacturing sectors according to their technological characteristics. In the 20th century, technological change became recognized as the most important source of economic growth. According to RCA and Vollrath’s indices, Turkey has a comparative advantage in a few low-tech and medium-to-low-tech industries while it has a comparative disadvantage in high-technological products againstEU. Therefore, we can say that the Custom Union has not played an important role in effecting changes in trade patterns and comparative advantages in the Turkish manufacturing sector.

Keywords

• Revealed Comparative Advantage, Specialization, Competitiveness Measures

References

1. Amoroso, N., D. Chiquiar, M.R. Francia (2011), “Technology and Endowments as Determinants of Comparative Advantage: Evidence from Mexico”, North
2. American Journal of Economics and Finance, Vol. 22, No. 2, pp.164–196. Balassa, B. (1965), “Trade Liberalisation and Revealed Comparative Advantage”,
3. The Manchester School, Vol. 33, No. 2, pp. 99-123. Batra, A.,Z. Khan (2005), “Revealed Comparative Advantage an Analysis for
4. India and China”, Indian Council for Research on International Economic Relations Working Paper 168, New Delhi. Daskapan, S. (2008), “Measuring Competitiveness of Transition Economies withRicardo and Heckscher-Ohlin”,International Academy of Business and Economics Summer Conference, Stockholm.
5. Erlat, G., H. Erlat (2005), “Do Turkish Exports Have a Comparative Advantage with Respect to the European Union Market, 1990-2000”.Topics in Middle
6. Eastern and North African Economies Journal, Vol. 7, pp. 1-18. European Commission, http://ec.europa.eu/trade/creating-opportunities/bilateral- relations/countries/turkey/.  Ferman, M., S. Akgungor and A.H. Yuksel (2004), “Türkiye’nin İhracat Rekabet
7. Gücü ve Sürdürülebilirliği: Avrupa Birliği Pazarında Rakip Ülkeler ve Türkiye Açısından Bir Karşılaştırma”, Türkiye İktisat Kongresi Gelişme Stratejileri ve Makroekonomik Politikalar, İzmir. Gupta, S.D. (2009), “Comparative Advantage and Competitive Advantage: An
8. Economics Perspective and a Synthesis”, Canadian Economics Association Conference, Toronto. Hatzichronoglou, T. (1997), “Revision of the High-Technology Sector and Product Classification”,OECD Science, Technology and Industry Working Papers /02, Paris: OECD.

9. Havrıla, I., P. Gunawardana (2003), “Analyzing Comparative Advantage and Competitiveness:an Application to Australia’s Textile and Clothing Industries”,
10. Australian Economic Papers, Vol. 42, No. 1, pp. 103-117. Ince, M., H. Demir (2007), “Comparative Advantage and Competitiveness: Case of Turkey and Germany”, Review of Social, Economic and Business Studies, Vol.5/6, pp. 149-171.
11. Malkoc, S. (2002), “The Effects of the Customs Union on Turkish Foreign Trade and Industry”, Econ 490, pp. 1-38.
12. Richard, S. (2008), “Revealed Comparative Advantage and Competitiveness of
13. Uganda’s Exports with the Rest of the World”, Makerere University Business School Journal, pp. 1-30. Siggel, E. (2007), “International Competitiveness and Comparative Advantage: A
14. Survey and a Proposal for Measurement”, The International Platform of Ludwing Maximilians University’s Center for Economic Studies and the ifo Institute for Economic Research. Simsek N., D. Seymen and U. Utulu (2004), “Turkeys Competiveness in the EU
15. Market: A Comparison of Different Trade Measures”, Dokuz Eyluy University Economics Department, Izmir. Smith, A.J. (2010), “The Competitive Advantage of Nations: is Porter’s Diamond
16. Framework a new Theory that Explains the International Competitiveness of Countries?”, Southern African Business Review, Vol. 14, No. 1, pp. 105-130. UNIDO (2009), Industrial Demand-Supply Balance Database (IDSB). 2009 CD- ROM.
17. Vollrath, T. L. (1991). “A Theoretical Evaluation of Alternative Trade Intensity
18. Measures of Revealed Comparative Advantage”, Weltwirtschaftliches Archiv/Review of World Economic,Vol. 127, No. (2),pp. 265-280. Widodo, T. (2009), “Comparative Advantage: Theory, Empirical Measures And Case Studies”, Review of Economic and Business Studies,No. 4, pp. 57-82.
19. Yilmaz, B. (2008), “Foreign Trade Specialization and International
20. Competitiveness of Greece, Portugal, Spain, Turkey and the EU 12”, Center for European Studies Working Paper Series 166.