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EU industrial structure 2011 — Trends and Performance
iv24 revealed comparative advantage
The third indicator of competitiveness is the index of
revealed comparative advantage (RCA), which compares
the share of a given sector’s exports in the EU’s total
manufacturing exports with the share of the same sector’s
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exports in the total manufacturing exports of a group of
reference countries. Values higher (lower) than 1 mean that
a given industry performs better (worse) than the reference
group, and are interpreted as a sign of comparative
advantage. The RCA indicator is thus used to rank EU
products by comparative advantage, cf. Box IV.3.
box IV.3: Revealed comparative advantage (RCA) indicator
The RCA indicator for product ‘i’ is defined as follows:
where: X=value of exports; the reference group (‘W’) is the EU‑27 plus 142 other countries (as listed in Section
IV.1.1 Goods); the source used is the UN COMTRADE database. In the calculation of RCA, XEU stands for exports to
the rest of the world (excluding intra‑EU trade) and XW measures exports to the rest of the world by the countries
in the reference group.
IV.2.4.1 RCA In MAnUFACTURES
In 2009, the EU‑27 recorded RCAs above 1.6 for industries
producing printing, beverages, and tobacco products.
At the bottom of the graph, computer, electronic and
optical products, textiles, other manufacturing, clothing
and refined petroleum have an index lower than 0.8.
When interpreting the results some considerations
should be taken into account: first, the level of sectoral
aggregation may mask differing performance in various
categories of goods within the same group of products.
This is particularly relevant for industries which have
a large variety of brands and quality levels for the same
type of goods. Another consideration concerns country
heterogeneity within the EU, as the performance of the EU
as a whole is explained in some cases by the performance
of a few EU countries. Finally, the weight of each sector and
country in the export structure of the EU should be borne
in mind to get to a balanced assessment of the EU’s sectoral
performance in external trade, cf. Figure IV.3.