Studies on comparative advantage have occupied a large segment of international
trade literature as it has been studied extensively, particularly for developed economies. Even
today this issue is still often discussed in trade negotiations among nations. It is a complex
concept that encompasses several interrelated aspects of an economy. Balassa (1965, p. 116)
contended: “Comparative advantages appear to be the outcome of a number of factors, some
measurable, others not, some easily pinned down, others less so.” Among different
approaches to comparative advantage, Hirsch (1974) offered an interesting approach to
consider a country‟s comparative advantages as the outcome of the interaction between factor
endowment (country characteristic) and factor intensity (industry/product characteristics).
In an increasingly globalized world of trade, small countries in terms of resource
endowment and capital accumulation appear, at the first glance, to have little chance to
compete with much larger and stronger competitors. However, in such a huge world of
production there should be certain commodities, in which these small economies would have
comparative advantages. Vollrath (1991) stated: “It is not unusual for a country to have a comparative disadvantage for a composite commodity and yet have a comparative advantage
for a particular niche within this composite.” Opening up the economy and liberalizing its
trade, a country‟s comparative advantage is said to be affected at different levels, since
domestic producers are exposed to more direct competition with foreign competitors when
protection has been reduced.