Unilateral resource management in a two-country general equilibrium model of trade in a renewable fishery resource
2000
Emami, A. | Johnston, R.S.
We explore the effects of free trade in a renewable natural resource between two countries in the presence of incomplete property rights. While resource management by one country may benefit one or both trading partners, we demonstrate that resource management by only one of the partners may reduce welfare for both, when compared to the case in which neither manages its resource sector. These trade-induced losses may be reduced through import tariffs and production subsidies on the resource good or by permitting harvest beyond the rent-maximizing level. Our preliminary work suggests that the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) policy makers should not always insist on free trade and resource management. Rather, they must pay careful attention to the particular relationships between trade conditions and natural resource policies among trading nations.
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