St-Petersburg State Technical University The Department of Economic
& Management The Chair of World Economics Work on subject
“International Raw Materials Market”
The Student A. E Epechourin Group 1078/2 The Tutor O. G.
Lebedinskaj St-Petersburg 1997 Contents Introduction I. Trade
intermediates and natural resources I. I Middle products
(intermediates) I. II Natural resources II. Raw Materials Summary
Addendum 1 Bibliography 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 [1In 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. ]. 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
Both papers cite the use of the continuum concept in Dornbusch,
Fischer, and Samuelson (1977). ]. 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 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. ]. [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 This
model is described in simplified terms by Findlay (1979). ]. 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
“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