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Resource management and trade policies: a two-country general equilibrium model of trade in renewable natural resource

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  • Most trade literature is concerned with gains from free trade under the assumption that traded goods are produced under complete property rights. Seldom have researchers examined the consequences of free trade in the presence of incomplete property rights over renewable natural resources. In this paper, we explore these consequences. In particular, we look at the welfare effects of trade between two countries, one of which manages its natural resource sector, while the other does not. Using a modified Heckscher-Ohlin-Schaefer model developed by Brander and Taylor and extended in this study, we show that a resource-exporting country with national open access to its resource may not necessarily gain from engaging in free trade, whether or not the importer manages its resource sector. We also demonstrate that there are circumstances in which resource management by one of the two partners may reduce welfare for both, when compared to the case in which neither manages ifs resource sector. We sure further, however, that this may be addressed by the use by the importer of a tariff on the resource good. Five numerical simulation models compare the national welfare of the trading countries under: (1) autarkic national open access revere production; (2) autarkic national resource management; (3) free trade with national open access resource production; (4) free trade with national open access in the exporting country and managed resource production in the importing country; and (5) trade with national open access in the exporting country, resource management in the importing country together with a tariff imposed by the importing country. In general, our findings suggest that organizations such as the NAFTA and WIO must pay careful attention to the relationships between trade and natural resource policy.
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  • Emami, Ali, Richard S. Johnston. 1996. Resource management and trade policies: a two-country general equilibrium model of trade in renewable natural resource. Peer Review: No. In: Proceedings of the Eighth International Conference of the International Institute of Fisheries Economics and Trade, July 1-4, 1996, Marrakech, Morocco. Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2002. CD ROM.
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