Comparative Advantages Theory In China-Myanmar Economic Cooperation

Introduction

Globalization has created the international interdependence where countries are intertwined especially in economic activity. Country could not stand alone to fulfil all its needs just like the basic understanding of humans are living social beings we are interdependence with one another. The same understanding figures out relations between Myanmar and China. Myanmar is a country surrounded with rich minerals, natural oil and gas, fisheries, and woods it become its main resources for Myanmar. China succeed from a very poor country become one of super power country and very advance in technology and infrastructure, but they are really lack of natural resources. In order to create an economic growth among states, there must be cooperation in order to fulfil each other needs. This paper would like to examine on what are the driving factors for China and Myanmar to make a bilateral cooperation and this paper also would like to explain on how the bilateral economic cooperation could exist between China and Myanmar by using the understanding of comparative advantages theory.

Theory of Comparative Advantages by David Ricardo (1817)

Theory of comparative advantages firstly introduced by David Ricardo in 18th century in his book titled Principles of Political Economy and Taxation, he argued that to have the sense of efficiency, country must boost its economic growth by focusing on which industry has most substantial comparative advantage (Ricardo,1817). The definition of comparative advantage is when a country able to produce good or service for a lower opportunity cost than other country. Opportunity cost is the cost of something measured in terms of the opportunities that must be sacrificed in order to get it (Amadeo, 2018). By only focusing in one industry which has the most substantial comparative advantage, it creates the efficiency and this theory applied in the free trade system.

China-Myanmar Bilateral Economic Cooperation

According to data provided by OECD (Organization for Economic Co-Operation and Development) almost half of export import activity from Myanmar are done with China. China is a huge country with a high number of population and China is a landlock country which also means that China tend not to have much natural resources especially when it comes into fisheries, and natural gas and oil. But then, China is really advance in their technology there are a lot of new innovations that launched by China. We can acknowledge that with Chinese expertise to organize everything from information and various inventions to become one of the keys for them to move forward. Despite the limited natural resources but it does not make it difficult for China to continue to develop.

Turning to Myanmar, based on history China is the first country to recognize Myanmar's independence and geographically China and Myanmar are neighboring countries. Myanmar's potential brings Myanmar to have deeper relationships in the economic field. It is a country with a rich in natural resources, abundant timber commodities, and marine income is no less good. Myanmar's resources have become one of the added values ​​for Myanmar to be able to continue to develop its country. Myanmar is aware and focuses on the field of natural resource management to continue to carry out construction in the infrastructure sector.

By using a comparative advantage theory, we can see that these two countries each have specialties in their own fields. With this comparative advantage, an export-import agreement was established between Myanmar and China through many pipeline projects. Both countries are contributed to each other national interest, and it becomes more efficient if both of them focusing on one which they know is substantial for the country. Myanmar needs China's capabilities in the field of technology and infrastructure, and vice versa, China needs resources from Myanmar to reach their national interests.

Conclusion

Theory of comparative advantage is necessary to acknowledge in which a country is really substantial and that makes the country more attractive to consumers because they can easily define what are the country substance. This theory has brought China and Myanmar into a better economic cooperation by knowing each capabilities and which capability has the lower opportunity cost. As the result, both countries could fulfill their needs better because of a more efficient way to do trade.

References

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