Реферат: International Raw Materials Market

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







I. <span Times New Roman""> 

Trade intermediates and natural resources

I.I Middle products (intermediates)

I.II Natural resources




II. Raw Materials




Addendum 1





1. RawMaterials — A natural of semifinished god that is used in manufacturing orprocessing to make some other good. Bauxite is the raw materials (ore) fromwhich aluminum is made; aluminum is turn can be the raw material from whichhousehold utensils are manufactured.[1]


2.There is another definitions from the subject area of raw materials  distinct from the above mentioned:   

·Rawmaterials are products immediately extracted from nature which have undergone afirst processing through which they have become marketable and, consequently, atradable commodity. Raw materials include all energy raw materials (crude oil, naturalgas, coal, uranium), metals, semi-metals and industrial minerals (kaolin,graphite, sulfur, salts, phosphates), rocks, water as well as all plant andanimal products, whether they come from tropical regions (coffee, jute,tropical timber) or from temperate latitudes (wheat, meat, wool, etc.).[2]

·Rawmaterial economy: It comprises all activities which are part of the plannedhandling of raw materials, i.e. explanation, evaluation, extraction, conversioninto a tradable product, trade and forecasting. «Planned» here meanseconomically 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 existenceof the earth's chemical and physical equilibrium and, consequently, for thesurvival of mankind. Resources include: the ozone balance, the CO2 balance, theequilibrium of sea water, the tropical forest, the krill and fish population,etc.[2]

·World resource balances are the planned (i.e. ecologically useful and sociallyresponsible) 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

·rawmaterial deposits and connected environmental problems in east Siberia(addendum 1)

·structural questions and environmental problems of the Polish energyand metal economy[2]

I. Tradeintermediates 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 alreadydiscussed the limitations in a multi-commodity wordof comparing autarky prices in two countries to predict item-by-item the patternof trade; generally only correlations can be made except under additionalassumptions. With trade in intermediates allowed, the problems in predictingtrade in final goods became even greater. As MakKenzie(1945) remarked in one of his classic problem on the Ricardian model, thefamiliar nineteenth century trade pattern in which Lancashireproduced and  exported cotton textileswould most probably not have been observed if England  had had to grow its own cotton <span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[1].We shall have occasion both in this section and to revert to this theme: thepattern of trade in final goods may not be readily deducible from thecomparison of pre-trade relative prices in these markets.[3]    

I.I Middle products (intermediates)

The phrase «middle-products» was used by Sanyaland Jones (1982) to encompass what traditionally are referred to asintermediate goods, goods-in-process, and natural resources which have beenextracted and prepared for trade on world markets. The core concept in theirmodel is that of a productive spectrum whereby, at initial stages, naturalresources and raw materials are processed and, in the final stages,goods-in-process and intermediate products are locally assembled for nationalconsumption. International trade, according to this view, takes place incommodities, somewhere in the «middle» of this productive spectrum, freeing upa nation’s input requirements in the final stages of production from its outputtradeable middle products at earlier stages.[3]

Such a view of the role of international trade suggests a naturaldivision between that part of the economy which produces commodities (middleproducts) for the world market (including the local economy), called the InputTier, and that section of the economy which makes use of internationally tradedmiddle products as input along with local resources to produce none-trade goodsfor final consumption (the Output Tier). Ruled out by assumption in the simpleversion on this model is the notion that the «middle» stages of the productivespectrum might be «thick» in the sense that tradeable middle products might useother tradeable middle products as inputs. In addition, in production structurein each tier of the economy as assumed to resemble that of the specific-factorsmodel. Labor is mobile both among sectors in each tier and between tiers. Thebalance of payments provides an additional link between the two tiers; if thetrade account is balanced, the value of total output from the Input Tier of theeconomy is matched by the value of middle products used as inputs (along withlabour) in the Output Tier.[3]

Several types of questions have been raised in the context on thismodel, and of central concern in each case is the allocation of labour betweentiers and the real wage. Fore example, a transfer payment which gives rise to atrade surplus requires labour to be reallocated to the Input Tier  as consumption falls, and this servesunambiguously to reduce the real wage.[3]

  If domestic (and world) pricesof trade middle products remain constant to the small country, all non-labourinputs in the Output Tier can be aggregated, a la Hicks, into a compositemiddle product input, which serves to convert the production structure in theOutput Tier from an (n+1)-factor, n-commodity specific-factors model into atwo-factors, many-commodity Heckscher-Ohlin model.[3]

In the middle-products model Input Tier is the existence of a worldmarket in which middle products can be exchanged for each other that permitssuch a conversion.[3]


The middle-products model allows countries and sectors to differ in theextent to which local value must be added to transform middle products intofinal commodities,  and  much depends  upon  this comparison.  It  does  not,  however, focus upon anotherquestion: in à  verticalproduction  structure with  many stages, which goods-in-process  or middle products does  àcountry  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  à commodity is produced in àcontinuum of stages, with  differentRicardian  labor-only input structures.Depending upon technological differences and relative country  size, àcut-off point  will be  determined, with  one country producing the  commodity from rawmaterial 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 à specific-factors model, with one  of  the commodities (manufacturing) produced in  àcontinuum  of stages using capital andlabor (the other sector using land and labor) <span Times New Roman",«serif»; mso-fareast-font-family:«Times New Roman»;mso-ansi-language:EN-US;mso-fareast-language: RU;mso-bidi-language:AR-SA">[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-abundantcountry will tend to specialize in later stages of the productive spectrum<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[3]


They analyze how  endowmentchanges  alter the  cut-off point,  as well as investigating issues related to content protection.[3]

I.IINatural resources

As Chapter 8 in this volume discusses, the normative  question of  pricing natural resources (exhaustible orrenewable) has received much attention in the literature of the past decade. The  middle-productsapproach  stresses that  some activities, the extraction of naturalresources, must take place locally although international trade then allowsother 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 naturalresources, and suggested that asymmetries in resource use and availabilitycould account for the Leontief paradox. In àcontext of multi-level trade, the costs of recourseextraction  in one  country often depend on the availability offoreign capital. Kemp and Ohyama(1978) have  presented  à 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<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[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 tariffsin  the two  regions. But the model also  stresses  the involvement  of capital flows in  resourceextraction.  Schmitzand Helmberger (1979)  argue  strongly for  complementarity  between trade  in  resources and trade in capital, àpoint also stressed  by Williams  in his  1929 article. We turn to  consider  more generally, now,  theinteraction  between trade  in goods and trade in factors.[3]

Addendum 1

Siberiais Among Leaders in Raw Materials Markets[5]

Siberia's rating looks more impressive in some groups of goods than its7-th general placing. Split the whole flow of commercial projects into 9 groupsof 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


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


I       Moscow          23.6

II      Siberia         12.4

III     Volga           12.1


I       St.-Petersburg  20.9

II      Urals           19.6

III     Siberia         11.7


1. «TheNew Polgrave a dictionary of economic» Editor: J.Eatwell, M.Mmilgate P.Newman

2. Chairof Raw Material Economy and World Resource Balances Prof. Dr.rer.nat.E. Machens (temporary appointment)

3. «PositiveTheory 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 ofthe World Economy», pages 610-618)

5. «Siberia is Among Leaders in Raw MaterialsMarkets»Editors: Alexei Alexeev,Andrey Kiselev

<span Times New Roman",«serif»;mso-fareast-font-family: «Times New Roman»;mso-ansi-language:RU;mso-fareast-language:RU;mso-bidi-language: AR-SA">[1]

In Jones (1980) a two-country Recardian model is illustrated in which one commodityrequires an intermediate input and technologies differ between countries Thepattern of trade can be reversed as a result of variations in the price of thetraded intermediate.    

<span Times New Roman",«serif»;mso-fareast-font-family: «Times New Roman»;mso-ansi-language:RU;mso-fareast-language:RU;mso-bidi-language: AR-SA">[2]

Bothpapers cite the use of the continuum concept in Dornbusch, Fischer, and Samuelson (1977).

<span Times New Roman",«serif»;mso-fareast-font-family: «Times New Roman»;mso-ansi-language:RU;mso-fareast-language:RU;mso-bidi-language: AR-SA">[3]

Àlimitation of both papers is the assumption that costs (or  factor proportions)  move monotonically from lower to higherstages of production. If not, trade may take place à1 many points  in the productive spectrum in the absence ofinhibiting transport costs.

<span Times New Roman",«serif»;mso-fareast-font-family: «Times New Roman»;mso-ansi-language:RU;mso-fareast-language:RU;mso-bidi-language: AR-SA">[4]

Thismodel is described in simplified terms by Findlay (1979).
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