Abstract
The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper provides systematic evidence on the structure and evolution of primary commodity exports by industrial countries and undertakes an econometric analysis of the determinants of these exports. In recent years, there has been increasing recognition of the fact that for several primary commodities, industrial countries are also significant exporters. This recognition has, however, been reflected mainly in a discussion of the role played by industrial country subsidies in their agricultural sectors. While an analysis of agricultural subsidies plays a key role in any discussion of international agricultural policies, relatively much less work has been done on the structure, evolution, and determinants of the aggregate of primary commodity exports of industrial countries.
This paper tries to complement the emerging literature on industrial countries’ influence on commodity markets and focuses on two main areas. First, it analyzes the structure of commodity exports by industrial countries during the period 1965-87 and compares this structure with that of commodity exports by developing countries. Second, it specifies and estimates an econometric model of the demand for, and the supply of, industrial country commodity exports. The model is estimated at a broad commodity group level and disaggregated into five groups of industrial countries: the United States, Canada, the European Economic Community, other European countries, and Australia and New Zealand.
The results show that the industrial countries account for nearly half of all world commodity exports, about the same share as they accounted for in the late 1960s. As a proportion of their total merchandise exports, however, commodity exports account for around 20 percent, compared with nearly 50 percent for the developing countries. “Intraregional” commodity exports have shown a secular decline since the mid-1960s. As a share of world nonfuel commodity exports, industrial countries account for over 60 percent. While their share of food exports exceeds 70 percent, industrial country exports of agricultural raw materials and metals and minerals also account for nearly 65 percent of world exports.
The econometric results show that the price elasticities of supply of major commodity exports of industrial countries appear to exceed the comparable elasticities for the developing countries. This, it is suggested, could reflect availability of resources for better inventory management, as well as the possibility of increasing production relatively more quickly. The price and income elasticities of demand for industrial country commodity exports are also somewhat higher than those for the developing countries. This could reflect, in part, some differences in the composition of commodity supplies from the industrial and developing countries. There are a number of important policy implications of the results discussed in the paper.