Over the past 20 years Australia has experienced a general decline in the terms of trade for traditional commodity exports. As these commodities form the bulk of exports, Australia's trade performance has also been deteriorating over this period. In contrast, many of the East Asian economies have experienced a rapid expansion and sustained growth of exports and imports over the past few decades. As individual economies within the region experience economic growth, they may also find their relative factor endowments altering. This, in turn, will have important implications for Australian trade.
This paper provides a rigorous analysis of the changing patterns of comparative advantage in manufactures within the Asia-Pacific region. An investigation is also undertaken into the determinants of Australia's 'revealed' comparative advantage in manufactures, and the policy relevance for Australia is examined.
The results of the analysis indicate that Australia's greatest comparative advantage within the manufacturing sector lies in the production of a range of human capital- and technology intensive commodities. Australia's recent poor export performance has been collaborated by her lack-lustre performance in intra-industry trade, high levels of protection and apparent failure to exploit her relatively abundant human resources.