Comparative advantage: please handle carefully
Megan McArdle misuses the term:
The one question everyone here wants answered--including the Vietnamese--is how Vietnam will manage to compete with China. China's mountainous economies of scale loom over every discussion; Vietnam has no offsetting advantages to speak of. [...]
[But] Vietnam does have one comparative advantage I can think of: it isn't so big. To be sure, it's been saddled with textile limits, but it isn't the target of the kind of ire that China's enormous market draws. It's not unreasonable to hope that the 600 pound gorilla may attract the attention of all the big game hunters in the anti-dumping movement, leaving the Vietnamese to trade in peace.
You always have a comparative advantage in producing something. All that comparative advantage requires is that the relative costs of producing different goods in a country are not identical across all countries.
The term Megan should have used here is competitive advantage - a fluffy management term meaning that (because of fixed costs, trade barriers etc) you have some monopoly power as a producer of something, and you can command excess profits.
