International Raw Materials Market
by A.E
Epechourin, group 1078/2
St-Petersburg State Technical University
The Department of Economic & Management
The Chair of World Economics
St-Petersburg
1997
Introduction
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]
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
Список литературы
«The New Polgrave a dictionary of economic» Editor:
J.Eatwell, M.Mmilgate P.Newman
Chair of Raw Material Economy and World Resource
Balances Prof. Dr.rer.nat. E. Machens (temporary appointment)
«Positive Theory of International Trade» Editor: R.W.
Jones, J.P. Neary (pages 31-37)
«The World Economy
History & Prospect» Editor: W.W Rostow (part 52 «The Future of the
World Economy» , pages 610-618)
«Siberia is Among Leaders in Raw Materials
Markets»Editors: Alexei Alexeev, Andrey Kiselev
[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).