Natural Resources and Non-Cooperative Trade Policy

World Trade Organization Economic Research and Statistics Division Staff Working Paper No. ERSD-2011-06

29 Pages Posted: 24 May 2011

See all articles by Roberta Piermartini

Roberta Piermartini

World Trade Organization (WTO) - Economic Research and Analysis Division

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Joelle Latina

University of Applied Sciences Western Switzerland - Geneva School of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2011

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.

Keywords: Natural Resources, Export Taxes, Tariff Escalation, Prisoner's Dilemma, WTO

JEL Classification: F13, F59, Q34

Suggested Citation

Piermartini, Roberta and Ruta, Michele and Latina, Joelle, Natural Resources and Non-Cooperative Trade Policy (March 1, 2011). World Trade Organization Economic Research and Statistics Division Staff Working Paper No. ERSD-2011-06. Available at SSRN: https://ssrn.com/abstract=1850611 or http://dx.doi.org/10.2139/ssrn.1850611

Roberta Piermartini (Contact Author)

World Trade Organization (WTO) - Economic Research and Analysis Division ( email )

Rue de Lausanne 154
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+41 22 739 5492 (Phone)
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Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

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New York, NY 10027
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International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Joelle Latina

University of Applied Sciences Western Switzerland - Geneva School of Business Administration ( email )

7 Route de Drize
CH-1227 Geneva
Switzerland

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