There have been many attempts to measure the international competitiveness of goods that are traded in world markets.  To name a few, there are the revealed comparative advantage approach, the import market share approach, and so on.  Although these measures achieve their stated goals, they are somewhat unsatisfactory in comparing the international competitiveness of traded goods.  The import market share in a certain market, for example, is a good measure for comparing the absolute value of market power of each exporting country in an importing country.  However, as the import market share is determined by the quantitative size of imports, it varies with the size of exporting countries, and therefore cannot reflect the relative competitiveness of exporting countries.  That is, if a country with a large GDP is compared with a small country which exports a vast share of its products, it is possible that the large country will always have a much higher market share, even though it exports a relatively smaller share of its products.

To avoid this kind of country size distortion, this paper attempts to develop a new method to measure the bilateral competitiveness of exporting goods in an importing market.  By combining the concepts of import market share and the export similarity index, which was developed by Finger and Kreinin(1979) and measures the structural similarity of exporting goods between two countries, I have made it possible to detect the direction of changes in the bilateral competitiveness of exporting goods in an importing market.  MSER-ESDR method, which stands for the market share expanding ratio and the export similarity deepening ratio, can be used for comparing the bilateral competitiveness between any countries that export to the same market.  Also, by tracing down the values of MSER and ESDR for several years, we can detect the direction of changes in the competitiveness of the past and, based on this past trend, it is possible to forecast the future direction of competitiveness.

Using the MSER-ESDR method, this paper attempts to analyze the changes in the competitiveness of Korea, Japan, and China in the U.S. market in the period between 1989 and 1996.  Using OECD trade data, the analysis of the MSER-ESDR method in this paper confirms the general belief that Korea has been losing its competitiveness against Japan and China in the U.S. market.  However, it shows that Korea has started to recover competitiveness against Japan since 1993.  Although Korea has continuously lost their overall competitiveness to China, an analysis of more detailed data category shows that there are some areas of hope to overcome such difficulties.