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Natural resources and non-cooperative trade policy

Author

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  • Joelle Latina
  • Roberta Piermartini

    ()

  • Michele Ruta

    ()

Abstract

When looking at the conditions of trade in natural resources the world appears upside down: Tariff protection in natural resources sectors is generally lower than for overall merchandise trade, while export restrictions are twice as likely as in other sectors. On the other hand, tariff escalation is significant in natural resources sectors, where materials in their raw state face, on average, lower duties than in their processed form. In this paper, we discuss how export taxes and tariff escalation may be the result of an uncooperative trade policy. Specifically, tariff escalation and export taxes can be beggar-thy-neighbor policies because governments may be tempted to use them to alter the relative price of exports to their advantage (terms-of-trade effect) or to expand the domestic processing industry at the expenses of foreign production (production relocation effect). In equilibrium, these policies offset each other in a Prisoners' Dilemma situation, where trade is inefficiently low.
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Suggested Citation

  • Joelle Latina & Roberta Piermartini & Michele Ruta, 2011. "Natural resources and non-cooperative trade policy," International Economics and Economic Policy, Springer, vol. 8(2), pages 177-196, June.
  • Handle: RePEc:kap:iecepo:v:8:y:2011:i:2:p:177-196 DOI: 10.1007/s10368-011-0194-z
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    References listed on IDEAS

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    1. Bela Balassa, 1965. "Tariff Protection in Industrial Countries: An Evaluation," Journal of Political Economy, University of Chicago Press, vol. 73, pages 573-573.
    2. Lindland, Jostein, 1997. "The impact of the Uruguay Round on tariff escalation in agricultural products," Food Policy, Elsevier, vol. 22(6), pages 487-500, December.
    3. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, pages 295-316.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, pages 950-959.
    5. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, pages 21-44.
    6. Hudson, Darren & Ethridge, Don E., 1998. "The Implications Of An Export Tax On Sectoral Growth: A Case In Pakistan," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20986, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Bhagwati, Jagdish N. & Srinivasan, T. N., 1973. "The general equilibrium theory of effective protection and resource allocation," Journal of International Economics, Elsevier, pages 259-281.
    8. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, pages 215-248.
    9. Antimiani, Alessandro & Salvatici, Luca, 2005. "EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework," Working Papers 18856, TRADEAG - Agricultural Trade Agreements.
    10. J. Bhagwati & T. N. Srinivasan, 1972. "The General Equilibrium Theory of Effective Protection and Resource Allocation," Working papers 91, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Cited by:

    1. Charlier, Christophe & Guillou, Sarah, 2014. "Distortion effects of export quota policy: an analysis of the China-Raw Materials dispute," China Economic Review, Elsevier, vol. 31(C), pages 320-338.
    2. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers 07-2013, Economics Section, The Graduate Institute of International Studies.

    More about this item

    Keywords

    Natural resources; Export taxes; Tariff escalation; Prisoners’ dilemma; WTO; F13; F59; Q34;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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