Raw Materials, Processing Activities And Protectionism
A country's export sector may encompass a raw material, as well as a final commodity that processes that raw material. A general equilibrium model is developed in a competitive setting to analyze a nation's optimal strategy in restricting raw materials exports when allowance is made for potential beneficial effects on the export price of processed goods. When faced with a foreign tariff on exports of the processed commodity, a country's optimal response could entail an easing of raw materials export constraints instead of retaliation. Illustrations are provided of the 1986 American tariff on Canadian exports of cedar shakes and shingles.
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|Date of creation:||1988|
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