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RESEARCH AND ANALYSIS: WORKING PAPERS

International Trade in Natural Resources: practice and policy

Natural resources account for 20% of world trade, and dominate the exports of many countries.

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Policy is used to manipulate both international and domestic prices of resources, yet this policy is largely outside the disciplines of the WTO. The instruments used include export taxes, price controls, production quotas, and domestic producer and consumer taxes (equivalent to trade taxes if no domestic production is possible). We review the literature, and argue that the policy equilibrium is inefficient. This inefficiency is exacerbated by market failure in long run contracts for exploration and development of natural resources. Properly coordinated policy reforms offer an avenue to resource exporting and importing countries to overcome these inefficiencies and obtain mutual gains.

No: ERSD-2012-07

Authors:

Michele Ruta — World Trade Organization and Anthony J. Venables — University of Oxford

Manuscript date: March 2012

Key Words:

natural resources, trade, export tax, tariff escalation, OPEC, WTO, terms of trade

JEL classification numbers:

F1, F13, Q3

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This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title.

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