Page 42 - International Marketing

NPP

44 International Marketing BRILLIANT'S

Dynamic Comparative Advantage
Comparative advantages enjoyed by different countries and their actual
pattern of specialization undergo a continuous process of change due to
two reasons: One of them is changes in factor supply. Of course, such
changes are rather slow. This is true of land, less so of labour, due to
possibilities of migration which is subject to Govt. regulation and the leas
of all of capital, secondly, rapid technological developments and the progress
of scientific research and their application might change the relative
advantages enjoyed by different countries and the fields of their
specialization.
In recent years, there has been a rapid change in the comparative
advantage enjoyed by various nations due to following factors:
(a) Tendency of manufacturing plants to become larger and more
specialized.
(b) Shifts in the demand pattern in industrial countries.
(c) Almost free trade amongst industrial countries of Europe and glo-
bal reduction of tariffs on industrial products.
(d) Exploitation of natural resources and industrial development in
developing countries, and
(e) Increasing labour costs in developed countries.
As a result, the developing countries have gained a comparative ad-
vantage in a number of areas. The number of products where developing
countries may have a comparative advantage is bound to increase in course
of time.
Special Considerations
There are many cases where the principle of specialization on the
basis of comparative costs is not strictly followed. Considerations of national
security and social policy might necessitate a specialization different from
the one warranted by the country's productive facilities. Attempts to achieve
self sufficiency in food on the part of most industrial countries and the
policies of agricultural protection followed by them can be explained on
these grounds. So was the case with India's priority for heavy industries.
Considerations of economic stability explain the attempts on the part
of various agricultural countries to diversify their exports in order to make
their country less vulnerable to changes in business activities in
industrialized countries.
Though in the initial stages, the manufacturing costs are high, yet
with gradual development and passage of time, such industries can
compete favorably with imported products.