Natural resources and non-cooperative trade policy

Joelle Latina, Roberta Piermartini and Michele Ruta

No ERSD-2011-06, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

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 (search for similar items in EconPapers)
JEL-codes: F13 F59 Q34 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Journal Article: Natural resources and non-cooperative trade policy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wtowps:ersd201106

DOI: 10.30875/047c5893-en

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