|St-Petersburg State Technical University |
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|The Department of Economic & Management |
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|The Chair of World Economics |
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|Work on subject |
|«International Raw Materials Market» |
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|The Student A.E Epechourin|
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|Group 1078/2 |
|The Tutor O.G. |
|Lebedinskaj |
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|St-Petersburg |
|1997 |
Contents
| |Pages |
|Introduction |1 |
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|Trade intermediates and natural resources |3 |
|I.I Middle products (intermediates) |3 |
|I.II Natural resources |5 |
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|Raw Materials |6 |
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|Summary |10 |
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|Addendum 1 |12 |
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|Bibliography |13 |
Introduction
1. Raw Materials - A natural of semifinished god that is used in manufacturing or processing to make some other good. Bauxite is the raw materials (ore) from which aluminum is made; aluminum is turn can be the raw material from which household utensils are manufactured.[1]
2. There is another definitions from the subject area of raw materials
distinct from the above mentioned:
Raw materials are products immediately extracted from nature which have
undergone a first processing through which they have become marketable and,
consequently, a tradable commodity. Raw materials include all energy raw
materials (crude oil, natural gas, coal, uranium), metals, semi-metals and
industrial minerals (kaolin, graphite, sulfur, salts, phosphates), rocks,
water as well as all plant and animal products, whether they come from
tropical regions (coffee, jute, tropical timber) or from temperate
latitudes (wheat, meat, wool, etc.).[2] Raw material economy: It comprises all activities which are part of the
planned handling of raw materials, i.e. explanation, evaluation,
extraction, conversion into a tradable product, trade and forecasting.
"Planned" here means economically useful, ecologically and socially
responsible activities.[2] Resources are all natural material systems which as such are no
commodities, but the intactness of which is a basic prerequisite for the
continued existence of the earth's chemical and physical equilibrium and,
consequently, for the survival of mankind. Resources include: the ozone
balance, the CO2 balance, the equilibrium of sea water, the tropical
forest, the krill and fish population, etc.[2] World resource balances are the planned (i.e. ecologically useful and
socially responsible) handling of resources. This comprises: the
explanation, evaluation, risk assessment and forecasting regarding world
resources.[2]
Current research emphasis [2]
international raw material balances supply problems of the industrial countries location disadvantages of the developing countries dumping problems in international raw material trade recycling as a source for raw materials raw material deposits and connected environmental problems in east Siberia
(addendum 1) structural questions and environmental problems of the Polish energy and
metal economy[2]
I. Trade intermediates and natural resources
Once international trade in more than final consumer goods is allowed,
basic notions of comparative advantage need to be re-examined. We have
already discussed the limitations in a multi-commodity word of comparing
autarky prices in two countries to predict item-by-item the pattern of
trade; generally only correlations can be made except under additional
assumptions. With trade in intermediates allowed, the problems in
predicting trade in final goods became even greater. As MakKenzie (1945)
remarked in one of his classic problem on the Ricardian model, the familiar
nineteenth century trade pattern in which Lancashire produced and exported
cotton textiles would most probably not have been observed if England had
had to grow its own cotton [1]. We shall have occasion both in this section
and to revert to this theme: the pattern of trade in final goods may not be
readily deducible from the comparison of pre-trade relative prices in these
markets.[3]
I.I Middle products (intermediates)
The phrase «middle-products» was used by Sanyal and Jones (1982) to
encompass what traditionally are referred to as intermediate goods, goods-
in-process, and natural resources which have been extracted and prepared
for trade on world markets. The core concept in their model is that of a
productive spectrum whereby, at initial stages, natural resources and raw
materials are processed and, in the final stages, goods-in-process and
intermediate products are locally assembled for national consumption.
International trade, according to this view, takes place in commodities,
somewhere in the «middle» of this productive spectrum, freeing up a
nation’s input requirements in the final stages of production from its
output tradeable middle products at earlier stages.[3]
Such a view of the role of international trade suggests a natural
division between that part of the economy which produces commodities
(middle products) for the world market (including the local economy),
called the Input Tier, and that section of the economy which makes use of
internationally traded middle products as input along with local resources
to produce none-trade goods for final consumption (the Output Tier). Ruled
out by assumption in the simple version on this model is the notion that
the «middle» stages of the productive spectrum might be «thick» in the
sense that tradeable middle products might use other tradeable middle
products as inputs. In addition, in production structure in each tier of
the economy as assumed to resemble that of the specific-factors model.
Labor is mobile both among sectors in each tier and between tiers. The
balance of payments provides an additional link between the two tiers; if
the trade account is balanced, the value of total output from the Input
Tier of the economy is matched by the value of middle products used as
inputs (along with labour) in the Output Tier.[3]
Several types of questions have been raised in the context on this
model, and of central concern in each case is the allocation of labour
between tiers and the real wage. Fore example, a transfer payment which
gives rise to a trade surplus requires labour to be reallocated to the
Input Tier as consumption falls, and this serves unambiguously to reduce
the real wage.[3]
If domestic (and world) prices of trade middle products remain
constant to the small country, all non-labour inputs in the Output Tier can
be aggregated, a la Hicks, into a composite middle product input, which
serves to convert the production structure in the Output Tier from an (n+1)-
factor, n-commodity specific-factors model into a two-factors, many-
commodity Heckscher-Ohlin model.[3]
In the middle-products model Input Tier is the existence of a world
market in which middle products can be exchanged for each other that
permits such a conversion.[3]
The middle-products model allows countries and sectors to differ in
the extent to which local value must be added to transform middle products
into final commodities, and much depends upon this comparison. It
does not, however, focus upon another question: in а vertical
production structure with many stages, which goods-in-process or middle
products does а country import and which does it export? Two recent
papers have tackled this issue independently and with different
models. Sanyal (1980) assumes that in each of two countries а
commodity is produced in а continuum of stages, with different Ricardian
labor-only input structures. Depending upon technological differences and
relative country size, а cut-off point will be determined, with one
country producing the commodity from raw material stage to some
intermediate point, and then exporting this good-in-process to the
other country where labor is applied to finish the production process. By contrast, Dixit and Grossman (1982) use а specific-factors model,
with one of the commodities (manufacturing) produced in а continuum
of stages using capital and labor (the other sector using land and labor)
[2]. These stages are arranged such that, as goods-in-process develop
towards the final stage, more labor-intensive techniques are required.
Thus with two countries, the labor-abundant country will tend to
specialize in later stages of the productive spectrum[3].[3]
They analyze how endowment changes alter the cut-off point, as
well as investigating issues related to content protection.[3]
I.II Natural resources
As Chapter 8 in this volume discusses, the normative question of
pricing natural resources (exhaustible or renewable) has received much
attention in the literature of the past decade. The middle-products
approach stresses that some activities, the extraction of natural
resources, must take place locally although international trade then allows
other countries access to these resources. Obviously, comparative
advantage changes over time for countries engaged in exporting
exhaustible resource. In early work Vanek (1963) traced through the
changing pattern of United States trade in natural resources, and
suggested that asymmetries in resource use and availability could account
for the Leontief paradox. In а context of multi-level trade, the costs of
recourse extraction in one country often depend on the availability of
foreign capital. Kemp and Ohyama (1978) have presented а simple model
of North - South trade in which South makes use of Northern capital to develop its resources and exports these resources to the North
where they are used to produce final commodities[4]. They put their
model to use in exploring the normative issue of different degrees of
bargaining strength and ability to exploit via export taxes and tariffs in
the two regions. But the model also stresses the involvement of
capital flows in resource extraction. Schmitz and Helmberger (1979)
argue strongly for complementarity between trade in resources and
trade in capital, а point also stressed by Williams in his 1929 article. We turn to consider more generally, now, the interaction between
trade in goods and trade in factors.[3]
Addendum 1
Siberia is Among Leaders in Raw Materials Markets[5]
Siberia's rating looks more impressive in some groups of goods than
its 7-th general placing. Split the whole flow of commercial projects into
9 groups of goods, and for 6 of them Siberia joins the leading three:
Timber and Paper
I Siberia 32.6
II Moscow 19.1
III St.-Petersburg 14.2
Fuel
I Siberia 20.3
II Urals 13.2
III Moscow 12.3
Chemical Products
I Moscow 17.2
II Siberia 15.7
III St.-Petersburg 11.9
Construction Materials
I Moscow 22.0
II Siberia 14.1
III Urals 5.6
Transportation
I Moscow 23.6
II Siberia 12.4
III Volga 12.1
Metals
I St.-Petersburg 20.9
II Urals 19.6
III Siberia 11.7
Bibliography
1. «The New Polgrave a dictionary of economic» Editor: J.Eatwell, M.Mmilgate P.Newman
2. Chair of Raw Material Economy and World Resource Balances Prof. Dr.rer.nat. E. Machens (temporary appointment)
3. «Positive Theory of International Trade» Editor: R.W. Jones, J.P. Neary (pages 31-37)
4. «The World Economy History & Prospect» Editor: W.W Rostow (part 52 «The Future of the World Economy» , pages 610-618)
5. «Siberia is Among Leaders in Raw Materials Markets»Editors: Alexei Alexeev, Andrey Kiselev
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[1] In Jones (1980) a two-country Recardian model is illustrated in which
one commodity requires an intermediate input and technologies differ
between countries The pattern of trade can be reversed as a result of
variations in the price of the traded intermediate.
[2] Both papers cite the use of the continuum concept in Dornbusch,
Fischer, and Samuelson (1977).
[3] А limitation of both papers is the assumption that costs (or factor
proportions) move monotonically from lower to higher stages of production.
If not, trade may take place а1 many points in the productive spectrum in
the absence of inhibiting transport costs.
[4] This model is described in simplified terms by Findlay (1979).