In a recent publication, CARD researchers and USDA economists looked at the international relationships between the United States and its major export competitors in beef (Chen et al. 2020). In that article, the researchers examined beef because the 2004 bovine spongiform encephalopathy (“mad cow disease”) event caused a major disruption in US beef exports and the United States’ competitive position. The authors conclude that even when exports return to pre-disruption levels, the disruption could change the structure of the export market. What the researchers found was that it took much longer for the United States’ competitive position in beef to return to pre-disruption levels.
In this article, we use the techniques of that report, especially the normalized revealed comparative advantage (NRCA) index developed by Yu et al. (2009), to examine trade over the years 1980 to 2019 for not only beef, but pork, corn, soybeans, and wheat as well. The importance of the NRCA is that it allows researchers to measure something that is hard to measure, namely, the competitiveness of markets.
Competition is sometimes difficult to see when only looking at trade flows over time. The NRCA allows us to see whether the increasing total US export values in these important commodities masks any underlying slippage in a measure of competitiveness called “comparative advantage.” To say that a country has a comparative advantage in the production of a good is not to say that they are the best at producing that good. Rather, comparative advantage means that a country is better at producing that good in terms of its opportunity cost of producing something else (see Balistreri 2019 for a more detailed discussion.) Economists use comparative advantage in trade as a way of measuring how competitive a country is because it takes into account other things that a nation, and its rivals, could produce.
In the figures presented in this article, there are two sets of graphs for each commodity for the six main exporters of that commodity (based on 2019 export shares on the world market). The graph on the left side of each figure shows the export values for the commodities in a traditional fashion. The graph on the right side of each figure presents the NRCA measure of comparative advantage or, competitiveness. An NRCA value of zero means that a nation has neither a comparative advantage nor a comparative disadvantage. If all nations are more or less around zero, it means the market is very competitive with no nation having a distinct advantage. On the other hand, negative values do indicate a competitive disadvantage and positive values indicate a nation’s competitive advantage relative to its trading rivals. NRCA comparisons allow us to say a country with a higher NRCA has a stronger competitive position for that commodity. Trade data can be difficult to measure especially in the case of meats because the aggregations used can differ among the various reports. For consistency, we chose to use data based upon total market value measured in US dollars from the United Nations’ Comtrade database (DESA/UNSD 2021). Choosing to use value instead of quantities makes the ranking of national exports a function of exchange rates. Further, for beef and pork, our data do not include exports of live animals. The nations we rank as the top six, thus, may differ from those reported in other trade databases that look at quantity of exports or include other data in their commodity export aggregation such as the USDA/FAS database.
Figures 1 and 2 present export values and NRCA indices from the top exporters of beef and pork, which show steady growth in export values since the 1980s. As of 2018, the United States has become the leader in export value in both beef and pork. Nonetheless, the graphs on the right side of figures 1 and 2 show the NRCA indices converging, meaning that while the United States was becoming a major exporter, the markets were also becoming much more competitive. The United States is not as competitive in either pork or beef as it used to be, and in 2019, Spain became slightly more competitive in pork while Australia and Brazil became slightly more competitive in the beef trade. The international markets are very competitive in both commodities.
Figures 3, 4, and 5 show corn, soybean, and wheat export values and NRCA indices. For decades, the United States was the dominant supplier in these crops, though it recently lost the top spot in soybeans to Brazil, and Brazil has nearly caught the United States in corn exports. For wheat, the United States had been the dominant supplier until Russia’s very recent emergence—they took over the top spot around the same time that Brazil rallied in corn and soybeans, namely, during the time of the recent trade disruptions. What about the United States’ comparative advantage?
For corn, as industries in other countries started to expand, the trend in US comparative advantage moved downward—not only Brazil, but Argentina as well, surpassed the United States in 2019 as measured by the NRCA. We see an even greater decline in US comparative advantage in the soybean market—Brazil caught up by the 2000s and currently has a comparative advantage over the United States. Wheat shows a very competitive market for all involved, with Russia currently enjoying a slight comparative advantage over its rivals.
You can also find these comparative advantages demonstrated in a new animation tool on the CARD webpage. With this tool, you can choose any of the five commodities and look at the comparative advantage as measured by the commodity export share relative to a nation’s export share. This method of presenting the NRCA allows viewers to focus on changes in both relative competitive position and size of exports. Figure 6 is a screen shot from the tool that shows the relative competitive positions of the world’s six major beef exporters in 2019. In the visualization, the larger a nation’s circle the larger its export value, the higher the circle the larger its share of total beef exports, the closer the circle to the diagonal line the lower its comparative advantage.
Balistreri, E.J. 2019. “International Trade Policy: Insights from a General-equilibrium Approach.” Agricultural Policy Review, Winter 2019. Center for Agricultural and Rural Development, Iowa State University.
Chen, C-T., J.M. Crespi, W. Hahn, L.L. Schulz, and F. Taha. 2020. “Long-Run Impacts of Trade Shocks and Export Competitiveness: Evidence from the U.S. BSE Event.” Agricultural Economics 51(2020):941–957.
United Nations Comtrade Database (DESA/UNSD). Accessed March 4, 2021.
Yu, R., J. Cai, and P. Leung. 2009. “The Normalized Revealed Comparative Advantage Index.” The Annals of Regional Science 43(1):267–282.
1. The commodity classification codes used are: Beef (SITC Rev.1 0111); Corn (SITC Rev.1 0440); Pork (SITC Rev.1 0113); Soybeans (SITC Rev.1 2214); Wheat (SITC Rev.1 0410). For detailed information on the data used, see: http://unstats.un.org/unsd/tradekb/knowledgebase/what-is-un-comtrade. ↩
2. Figure 1 shows how the mad cow disease outbreak in 2003 led to a sharp decline in US beef exports (red line). ↩
Chen, C.-T., J.M. Crespi, and Y. Ji. 2021. "The United States’ Competitive Positions in Beef, Corn, Pork, Soy, and Wheat Exports: 1980–2019." Agricultural Policy Review, Winter 2021. Center for Agricultural and Rural Development, Iowa State University. Available at www.card.iastate.edu/ag_policy_review/article/?a=119.