Types of Trade Surplus

There are four main categories of trade surplus, organized by the type of goods being exported and the economic conditions of the exporting country.

Main Categories

• Absolute Advantage Surplus — a trade surplus that arises when a country has an absolute advantage in producing a particular good, characterized by lower production costs and higher productivity, as seen in Saudi Arabia's oil exports, which account for ~90% of the country's total exports (OPEC).
• Comparative Advantage Surplus — a trade surplus that arises when a country has a comparative advantage in producing a particular good, characterized by a lower opportunity cost of production, as seen in China's textile exports, which have increased significantly due to the country's large labor force and low labor costs (Ricardo's comparative advantage model, 1817).
• Government-Supported Surplus — a trade surplus that arises when a government provides subsidies or other forms of support to its exporters, characterized by artificially low prices and increased exports, as seen in the United States' agricultural exports, which are supported by subsidies and tariffs (USDA).
• Monopolistic Surplus — a trade surplus that arises when a country has a monopoly on the production of a particular good, characterized by high prices and limited competition, as seen in De Beers' diamond exports, which have been dominated by the company's control of the global diamond market (De Beers annual report).

Comparison Table

How They Relate

The categories of trade surplus can overlap and feed into each other, as a country with an absolute advantage in producing a particular good may also have a comparative advantage in producing that good. For example, Saudi Arabia's absolute advantage in oil production also gives it a comparative advantage in exporting oil. Additionally, government support can create a monopolistic surplus, as seen in the case of De Beers' diamond exports, which have been supported by the South African government's policies. The Absolute Advantage Surplus and Comparative Advantage Surplus are often confused, but they are distinct concepts, as a country can have an absolute advantage in producing a good without having a comparative advantage in exporting it. Similarly, the Government-Supported Surplus and Monopolistic Surplus can be related, as government support can create a monopoly, but they are not the same thing, as a government-supported surplus can also arise from subsidies or tariffs that do not create a monopoly.