How commodities move: Trade policy and the producing countries

5.1 Importers protect farms and processing, and escalation hides the true rate

Radetzki and Wårell list the importer's toolkit: tariffs, variable levies that move inversely with world prices to hold domestic prices steady, quotas, 'voluntary' export restraints that are seldom voluntary, health standards and subsidies. Most of it falls on food. In 2001 average applied tariffs were 17% on agriculture and food against 3.5% on manufactures other than textiles. OECD producer support fell from 37% of farm receipts in 1986-1988 to 18% in 2016-2018, but stood at 55% for rice.

Tariff escalation keeps processing in the importing country. Duties rise with each stage of processing, and because processing adds only part of the final value, a small step in the nominal tariff becomes a large tax on the processor's margin. In 2009 the United States, the EU and Japan let cocoa beans and green coffee in duty free, but charged 12%, 32% and 30% on chocolate and 0%, 9% and 12% on roasted coffee. For metals the steps were small: zero on ores, 2.2%, 2.9% and 0.9% on finished metal. Escalation in rich countries is mainly an agricultural problem.

Other tools reach the same end. EU subsidies of US$300 million to its tomato processors shrank Senegal's tomato paste industry from 73,000 tonnes in 1991 to under 20,000 by 1998. China rebates part of its import VAT to copper smelters, letting them charge low processing fees and expand at the expense of smelting in Chile.

Commodity tariffs mostly divert trade. When China put a 25% tariff on US soybeans in 2018, Brazil and the United States each supplied about 40% of its imports. Chinese buyers switched to Brazil, other importers switched to the United States, and Washington paid farmers $12 billion in aid.

• Radetzki & Wårell (2021), A Handbook of Primary Commodities in the Global Economy · pdf pp. 66-75, 78-81

5.2 Export taxes, bans and quotas push the cost of a shortage onto importers

An export restriction splits one market into two. Supply kept at home lowers the domestic price, and supply withheld from the world raises the world price. Domestic consumers and processors gain, while domestic producers and foreign buyers lose. The bigger the exporter's share, the larger the effect on everyone else.

Such measures spread with the boom. OECD records show that three quarters of documented export barriers on raw materials were introduced from 2007 onwards, mostly by developing countries; Pitron cites about 900 measures between 2009 and 2012. The stated motives are food security, cheap inputs for local industry, environmental harm and conservation.

In food, restrictions spread contagiously: each government shields its own consumers, and together they deepen the world spike, while importers cutting their tariffs add to it. Anderson and Nelgen estimate that changes in trade policy during 2006-2008 raised world rice prices by 40%, maize by 20% and wheat by 10%. The World Bank attributes 40% of the 2010-2011 rise in wheat prices to such policies. Russia had restricted grain exports before its 2010 ban, and India, with 33.6% of 2024 rice export value, can move the world price with one decision.

In minerals, China is the leading case. Its rare-earth export quotas cut exports from about 50,000 tonnes in 2009 to 30,000 in 2010, and in September 2010 deliveries to Japan stopped for months after a fishing-boat clash. The WTO ruled against China in 2014, and it dropped the quotas in January 2015, but licensing has returned: gallium, germanium and graphite since 2023, antimony since 2024 and rare earths since 2025. Congo halted cobalt exports in 2025 and then set a quota of 96,600 tonnes a year for 2026-2027. Restrictions do not always cut output: Chinese molybdenum simply sold at home.

• Radetzki & Wårell (2021), A Handbook of Primary Commodities in the Global Economy · pdf pp. 69-72, 77-78, 203-204
• Pitron (2020), The Rare Metals War · pdf pp. 73-76, 80
• USGS Mineral Commodity Summaries 2026, Introduction (Table 4, Export Control on Mineral Commodities) web ↗ · Introduction
• Blas & Farchy (2021), The World for Sale · pdf pp. 236-237
• USGS Mineral Commodity Summaries 2026, Cobalt web ↗ · Events, Trends, and Issues

5.3 Dependence turns world prices into national shocks, but the curse is not destiny

Radetzki and Wårell call a country a monoeconomy when one non-fuel commodity makes up at least 40% of its exports. In 2013-2017 there were 17, all poor and small: Botswana relied on diamonds for 85% of exports, Mali on gold for 68% and Zambia on copper for 67%. Oil produces more extreme cases: Iraq 97%, Angola 96%, Venezuela 90%, Nigeria 81%.

If one commodity is 60% of exports and exports are 25% of GDP, a doubling of its price adds export revenue worth 15% of GDP, and the fall back removes about 13% of the enlarged GDP. Between 1980 and 1984 the average yearly shortfall in commodity export revenue below trend was 8.9% of GDP in Côte d'Ivoire and 10.6% in Niger, against the 2-3% of GDP that each 1970s oil shock added to the OECD's import bill.

Booms also reshape the economy, which is the Dutch disease. Export income raises demand; tradable goods are priced abroad, so imports expand, while non-tradables such as housing and services rise in price; the booming sector bids up wages and the currency appreciates. Other tradables, often farming and manufacturing, shrink. Nigeria lost its farm exports this way. Harding and Venables find that each extra dollar of resource exports is associated with about 75 cents less of other exports.

Whether dependence slows growth is disputed. Sachs and Warner's 95-country sample shows no fast grower among the most dependent economies in 1970-1990, but sceptics question its periods and methods, and Davis found 22 mineral economies outgrew 57 others in 1970-1991. Radetzki and Wårell conclude that dependence is not harmful in itself; Erten and Ocampo urge exporters to prepare in upswings for the downswing and to diversify, given the step-wise fall in real non-oil prices.

• Radetzki & Wårell (2021), A Handbook of Primary Commodities in the Global Economy · pdf pp. 267-273, 286, 288-292, 297-298
• Tilton & Guzmán (2016), Mineral Economics and Policy · pdf pp. 208-214
• Erten & Ocampo (2012), Super-cycles of commodity prices since the mid-nineteenth century web ↗ · pdf pp. 25-26

5.4 Resource nationalism pulls processing toward the mine

Humphreys notes that 'resource nationalism' is the mining companies' word, never the governments'. The wave of the 1960s and 1970s meant nationalisation. The boom of the 2000s brought minority state stakes and local ownership rules instead. Zimbabwe began enforcing 51% indigenous ownership in 2012, Mongolia capped foreign ownership of strategic mines at 49%, and Guinea and Sierra Leone took a free 15% stake in new projects. Investors are most exposed once they have built, the 'obsolescing bargain'; in an industry survey resource nationalism rose from eighth to first among mining's risks between 2008 and 2011.

Humphreys traces the movement to a structural shift. In 1960 the big consuming regions mined 82% of their own iron ore, 78% of their nickel and 52% of their copper; by 2010 the shares were 35%, 38% and 27%. Producers and consumers became separate camps, and producers wanted processing, not just royalties.

Indonesia is the test case, though the sources date it differently. Radetzki and Wårell and Pitron place the first ban in 2009, when it was declared; Humphreys describes a 20% export tax in 2012 and a ban effective January 2014. Pitron reports a loosening in 2017; USGS lists nickel ore banned from 2020, bauxite and copper concentrate from 2023. With Chinese capital behind the new smelters, Indonesia's share of world nickel mining reached 62% in 2024, and USGS estimates 2.6 of 3.9 million tonnes in 2025. Ore exports are now led by the Philippines, and Indonesia even imports ore. Higher-cost Australian output fell an estimated 54% in 2025.

Zimbabwe's lithium ore ban and Gabon's planned manganese ban follow the same path. Humphreys warns that mining advantage rests on ore quality, while processing needs cheap power, capital and technology and runs on thin margins. Value added is not the same as a return on capital, and each project must be judged on its own merits.

• Humphreys (2015), The Remaking of the Mining Industry · pdf pp. 183-191, 237
• Pitron (2020), The Rare Metals War · pdf pp. 79-80, 95-96
• USGS Mineral Commodity Summaries 2026, Nickel web ↗ · World Mine Production and Reserves
• USGS Mineral Commodity Summaries 2026, Introduction (Table 4, Export Control on Mineral Commodities) web ↗ · Introduction
• Radetzki & Wårell (2021), A Handbook of Primary Commodities in the Global Economy · pdf p. 82

See it in the table

Check your understanding

A crude commodity worth $80 enters duty free; the processed product worth $100 pays 30%. What is the effective rate of protection on processing?

Why do food export restrictions tend to amplify world price spikes?

What does Humphreys identify as the structural basis of resource nationalism?