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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 106 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.
FIgURE IV.3: EU-27 RCA index in 2009 Printing Beverages Tobacco Pharmaceuticals Paper Motor vehicles Furniture Machinery n.e.c. Rubber & plastics Non-metallic mineral products Wood & wood products Chemicals Metal products Other transport eq. Food Electrical equipment Leather & footwear Basic metals Rened petroleum Clothing Other manufacturing Textiles Computers, electronic & optical Chapter IV — International competitiveness of EU industry 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Source: own calculations using COMTRADE data. Cyprus, Greece, Lithuania, Luxembourg, the Netherlands, Portugal and Romania, all appeared to be highly specialised in tobacco products in 2009. Wood and wood products is another category of goods where many EU countries recurrently exhibit high revealed comparative advantages. The high RCAs in wood and wood products of Austria, Estonia, Finland, Latvia and Portugal are in line with the specialisation patterns that could be observed in Section II.1 (Table II.2). Interestingly, only Finland and Sweden are the only countries which are highly specialised in paper and paper products. Cyprus and Ireland, followed by Belgium appear to be significant players in basic pharmaceutical products. In Ireland, this is also coupled with high RCAs in chemical products. Bulgaria and Romania are the only EU remnants that still had high revealed comparative advantages in trade of wearing apparel while Portugal, Italy and Romania have important revealed comparative advantages in leather and related products. In reference to Section II.1.2, and as illustrated in Figure II.6, smaller countries tend to have stronger specialisation patterns. This also applies to sectoral trade characteristics. A problem with the RCA measure is that countries with a relatively small manufacturing industry can turn out to have high RCAs even though the industry with the high RCA only consists of a few firms but accounts for a large share of total manufacturing exports in the country. Natural examples in the EU are Cyprus, Luxemburg and Malta where some industries display very high RCAs. Compared to the EU, the US seemed to have high revealed comparative advantages in the following groups of products in 2009: other manufacturing, computer, electronic and optical products, chemicals, refined petroleum products and machinery, and equipment. Japan had high RCAs in capital equipment, particularly motor vehicles and machinery. In China, the trade specialisation profile is strongly oriented towards textiles, clothing, leather and furniture; although China also has a high RCA in sectors such as office machinery and computers, cf. Table IV.8. 107
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EU industrial structure 2011 Trends
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EU industrial structure 2011 — Tr
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Chapter I The aftermath of the cris
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i12 services recession and recovery
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Chapter I — The aftermath of the
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nacE rev 2 growth 2009 Chapter I
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The third step in assessing future
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The business survey indicator used
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Chapter II Changes in EU Industrial
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While there is some variety in the
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developments. This is confirmed by
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Looking at the overall specialisati
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TAbLE II.2: Sectoral specialisation
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For countries as a whole, it should
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Chapter II — Changes in EU Indust
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technology scale. They are less and
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ox II.4: SME definition FIgURE II.7
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definition of shocks. Shocks, or di
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