East Asia or Eastern Asia is a area that
living 22% of all the people containing
the entirety of the countries such as People's Republic of China, Japan, North Korea, South Korea, Mongolia,
Taiwan etc. It is clear that the growth of exports of these countries is higher
than Sri Lanka since there are available statistics to prove such situation.
This study is approaching to explain this situation by using economic theories
in international trade. Basically there are major three economic theories which
used in this area as follows.
1. Absolute Advantage theory
2. Comparative Advantage theory
3. Opportunity Cost theory
4. The
Heckscher-Ohlin theory
The
Absolute advantage theory explains country’s
ability to produce a certain good more efficiently than another country. Since
most of the East Asian countries having much efficiency in producing various
goods such as Mechanical and electronic products, Clothes, mobile phones cars etc a country like Sri Lanka
will not able to attain a higher export growth rate than such countries. As
well as the efficient products that Sri Lanka produced within the country are
not enough to compete in the global export market due to less quantity and lack
of competitive prices too. However Absolute Advantage theory is not a base for
international trade since still Sri Lanka is exporting goods and services even
though the country is not possessing absolute advantage for production.
The
Comparative advantage theory refers to a country’s ability to produce a
particular good with a lower cost than another country. This theory is
suggested by most of the economists in order to explain the practical situation
of international trade. According to this theory the country who having less
cost will allow producing such good and they export that product to the country
which having high cost. According to that Countries like Sri Lanka can produce
products such as garments in a less cost and export them to various markets as
well as East Asian countries also having the same opportunity to enter the
international trade. If this theory
applies to the current variations in export growth rates Sri Lanka and East
Asia, there are various reasons to occur such situation. Basically the
production capacity of the country is depend on the ownership of resources and
the usage of those resources to achieve the economic advantages. Most of the
East Asian countries have their own economic policies to enhance their economic
strengths. But still the country like Sri Lanka is not able to attain a better
economic condition due to reasons such as the ethnic war which end recently in
2009.
Finally
the opportunity cost theory states that the country is producing goods which
having less opportunity cost. This theory is also applicable to the
international trade as the comparative advantage theory. In Sri Lankan context
it has less opportunity cost to produce labor intensive production practices
and most of East Asian countries probably use capital intensive production
practices. But in the existing situation East Asian countries have achieved
much higher export growth rate by using internal strengths which those
countries owns.
According to
Heckscher-Ohlin even if countries have same factor endowment, its productivity
in respect to production of a particular product differs between two countries.
Therefore each country has a comparative advantage in the production that
requires relatively less of the factor with which it is well endowed. A country
like Sri Lanka owns much Labor and The East Asian countries have capital as their
production factors and they decided their productions in accordance with those
factor endowment.
In generally
the last three theories provide a practical basement to explain the international
trade in the current context. In my
point of view it is better to use a hybrid of those theories in order to have
much idea regarding the export sector growths. As well as the type of goods
that various countries exports, the economic policies affect to the countries,
trade agreements and barriers as well as the measurement scales which used in
Sri Lanka and East Asian countries much leads to arise much variance in export growth
rates.
However following
can be state as suggestion to enhance the export growth rate of Sri Lanka
1. Increased
Production and the productivity.
2. Reduced
Production cost.
3. Increased
Quality of the exports to be competitive in the market.
4. Make
much stronger and wider economic relationships with various economic regions.
5. Government
policies should more specific and focused to enhance the traditional and non traditional exports.
6. New
entrepreneurs should allow entering the market by using tax reductions.
