Halal market emergence and export opportunity: the comparative advantage perspective

The comparative advantage theory of international trade states that countries should export commodities for which they have high comparative advantage and import commodities for which they have low comparative advantage. Analyzing the Halal trade flows for Malaysia’s 11 food/foodrelated commodities from 1991 to 2012, this study finds an interesting development of the standard view of comparative advantage in the emerging Halal export market. It finds that the greater the country’s current comparative advantage in an exported good, the higher the risk of export diversion (one- or two-way causality) between the Halal market and the conventional market with the country’s expansion of Halal exports; while the diversion risk disappears with lower current comparative advantage. Thus, the study suggests that if a country wants to take advantage of the fast-emerging market, it should aim to expand export of commodities with relatively low current comparative advantage but high demand in the emerging market