Can Strategic Trade Policies Improve Comparative Advantages of Exports? A Heterogeneous Panel Analysis of Chinese Agro-Based Manufactures

This study tests for the effects of export oriented strategic trade policies on the comparative adv0061ntages of Chinese agro-based manufactured products, which are consisted of 39 SITC (Rev.3) 3-digit products. "Net exports ratio " is employed to capture the strength of strategic trade policies, while "revealed symmetric comparative advantage" is used to measure the comparative advantages. Using yearly data from 1992 to 2008, a heterogeneous panel cointegration test indicates a cointegrating relation across the NX and RSCA panels. No short-run Granger causal relationship of either direction can be identified. In the long-run, however, there exists a bi-directional causality. By examining the coefficients of the first-differenced lagged terms in panel vector error correction models, this study argues that the net exports of Chinese agro-based manufactures are virtually based on the comparative advantages, and the strategic trade policies which are featured by export promotion may contrarily hurt the comparative advantages in the long-run.