Investigating Pakistan’s Revealed Comparative Advantage and competitiveness in Cotton Sector

Abstract

Cotton sector, one of the most important sectors of agriculture, plays a pivot role in the socio-economic uplift of Pakistan as its contribution to agriculture value addition is 5.5 % and to GDP is 1 %. It along with low wage cost also ensures the massive availability of raw material for textile industry which enables Pakistan to attain competitiveness in the world market. The aim of present study is ,therefore, to measure the export competitiveness in cotton sector of Pakistan by utilizing a set of Revealed competitive advantage and Revealed comparative advantage (RCA) indices such as RCA, RCA#, Symmetric Comparative index (RSCA), Revealed Import Advantage index (RMA), Net export index (NEI)and Revealed Trade Advantage index (RTA) vis-a-vis world trade. The data was taken from International Trade Center (ITC) UN-COMTRADE Statistics for Pakistani cotton from 2003-17. The results of the study explored that Pakistan had a comparative and competitive advantage in cotton exports, while comparative disadvantage in cotton imports. Moreover, Pakistan had net competitive advantage in cotton sector.The study suggests that there should be more emphasis on Infrastructure, reduction in the cost of production, utilities and finance, use of modern technology, investment in agricultural sector and marketing in international market to boost the exports volume of cotton. Net export index (NEI), Revealed, Symmetric Comparative index (RSCA) (Larsen 1998), Vollrath index (1991) (RCA#), Revealed Import Advantage index (RMA) and Revealed Trade Advantage index (RTA).

Comparative Advantage of Agricultural Trade in Countries along the Belt and Road and China and Its Dynamic Evolution Characteristics

“…There are several ways of using the RCA indexes in measuring trade performance, including comparing the calculated value with the neutral point, comparing given sectors by using the calculated value, and comparing the calculated value at the national or regional level [ 14 , 43 ]. Given that agricultural trade is an important part of overall economic activity, continues to play a major role in domestic agricultural production and employment and also plays a fundamentally important role in global food security, some existing studies measured the comparative advantage of agricultural trade at national and regional levels by utilizing the RCA indexes, such as Serbia [ 40 ], Hungary [ 44 ], Russia [ 45 ], China [ 46 ], Pakistan [ 47 ], Indonesia [ 48 ], Myanmar [ 14 ], India [ 49 ], Brazil [ 50 ], Canada [ 51 ], and Ghana [ 52 ]. Despite the utilization of the RCA indexes analysis over the past decades, the existing research on the comparative advantage of countries along the B&R and China mainly focuses on the manufacturing industry, and there were relatively few studies on the comparative advantage of agricultural trade in the two sides from a dynamic perspective [ 35 , 53 , 54 , 55 ].…”

Measuring the Global Trade Competitiveness of Pakistan’s Cotton Crop

“…During 2018, the total value of cotton export from Pakistan was US$3498.997 million (GOP, 2018), and the main foreign markets were China, UK, the USA, Germany, Italy, Spain, Australia, and many other countries. The exports of cotton and cotton made products contribute 10 percent to the GDP of Pakistan and 55 percent of the total export earnings of the country (Maqbool et al, 2019). Pakistan is also a major consumer of cotton, consuming 9 percent of the world's total cotton (PCCC, 2017).…”

“…As M denotes to imports, i is a product, j is a country, t is a set of all products, and w is a set of all countries. In this index, if the RMA index is less than 1 shows higher competitiveness and relative comparative advantage (Maqbool et al, 2019;Mamoon et al, 2011).…”

“…The change in the RSCA values of the last decade shows that Pakistan did not improve its comparative advantage rather is remains almost the same. There are several reasons for this, i.e., regional devaluation in the currency, inconsistency in yield of the cotton crop, shrinking global demand resulted in the decrease of cotton prices in the market, low wages, high cost of energy, high tax rate, bad government policies, energy crisis, high running cost, shortage of raw material, less productivity of labor, low level of technology, law and order situation in the economy and global financial crisis (Maqbool et., 2019;Malik et al, 2017;Syed, 2009). The cotton sector of Pakistan has a comparative advantage and competitiveness, doing well to fulfill the global demand and production share of the cotton crop.…”

Pakistan’s Exports and Global Economy: Export Competitiveness and Efficiency of Toys and Games

“…(Source: Maqbool et al, 2019) This index lies between +1 and -1 and avoid the problem with zero values which occur in the logarithms transformation (Erkan and Sarıcoban, 2014). Vollrath (1991) also introduced the index for CA, and it is considered to be a better measure of competitiveness because the current index eliminates the dilemma of double-counting in the global trade (Gnidchenko and Salnikov, 2015).…”