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Natural resources and non-cooperative trade policy

  • Joelle Latina
  • Roberta Piermartini

    ()

  • Michele Ruta

    ()

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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File URL: http://hdl.handle.net/10.1007/s10368-011-0194-z
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Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 8 (2011)
Issue (Month): 2 (June)
Pages: 177-196

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Handle: RePEc:kap:iecepo:v:8:y:2011:i:2:p:177-196
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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.
  2. 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).
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  5. Antimiani, Alessandro & Salvatici, Luca, 2005. "EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework," Working Papers 18856, TRADEAG - Agricultural Trade Agreements.
  6. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
  7. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  8. 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.
  9. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, vol. 44(1), pages 21-44, February.
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