Trade policy and natural resources

This section looks at the ways government policy responds to the unique features of natural resources. It examines how the unequal distribution of natural resources give importing and exporting countries incentives to use restrictive trade and domestic measures to “capture” monopoly rents. It analyzes how governments can use trade restrictions and domestic measures to strengthen property rights or reduce the exploitation of the natural resource. Where the consumption or extraction of a natural resource affects the environment, it considers the steps governments could take to make producers and consumers take account of the social costs of their activities. However, the use of trade and domestic policies will have consequences for trade partners through changes to their terms of trade. In some instances, the availability of large resource rents may make government policies hostage to vested interests involved in the extraction and trade of natural resources. Finally, this section will consider how regional trade cooperation can assist in mitigating or resolving these potential frictions in natural resources.