Comparative Advantage

Table of Contents

ABSTRACT 2

INTRODUCTION 4

I. BACKGROUND 6

1.Theory of comparative advantage 6

2.Vietnam latest Export and Import situation 7

II. PAST AND RELATED WORK 16

III.EXAMPLE OF VIETNAM 18

1.Comparative advantages of Vietnam in exporting rice 18

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

IV.VIETNAM GAINS OR LOST FROM TRADE 38

IV.FUTURE WORK 52

CONCLUSION 54

REFERENCE 56

ABSTRACT

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