EU and China’s comparative advantage, trade complementarity and trade specialization dynamics in agricultural products

Abstract

This paper aims to analyse the comparative advantage of selected agricultural products for both EU and China in the context of EU-China bilateral trade and explore how the trade specialization changes along with the economic development based on the data between 2001 and 2017. First, we obtain the static results from both a comparative advantage perspective and a trade complementarity perspective. We then analyse three types of trade specialization dynamics by using the OLS regression and Markov transition probability matrix from a more dynamic perspective. Results show that EU’s comparative advantage includes meat products, dairy products, animal originated products, preparations of cereals or milk products, beverages, wool and vegetable textile fibres. China has a comparative advantage in fish, animal originated products, edible vegetable, lac, gums, resins, vegetable, plaiting materials, preparations of vegetables, silk, wool and vegetable textile fibres. We also find that both EU and China have unstable trade specialization for their agricultural products trade and we give policy implications for EU-China bilateral trade based on the results.