Export of raw materials: Economic impacts

Abstract

One of the main findings of economic theory is that unhampered international trade will improve allocation of resources and increase overall production. On the basis of this finding, nations of the world have cooperated in global efforts remove trade barriers and render international trade as free as possible. Free international trade demands that nations that hold valuable raw materials such as minerals, energy sources or fish stocks make them available to the highest bidder. This bidder is often located abroad where industrialization is highly advanced and large markets readily accessible. As a result the home country may assume the role of a raw material exporter while the processing and marketing of the final products takes place abroad. This paper attempts to elucidate certain economic aspects of the export of raw materials. More precisely, answers to the following questions will be sought: Is the export of raw materials likely to increase the net domestic product of the export country? If so, will all domestic groups benefit? Will the raw material exporting country be strengthened in terms of other measures such as population? Will the free export of raw materials increase the net global product? It is found that unhindered international trade will generally increase the combined net national product of the export and import country. However, it is possible that export of raw materials will reduced the net domestic product and reduce the population of the exporting country.