Consumer Heterogeneity and Gains from Trade in Renewable Resource Trading

Abstract

In this study, we examine the differences in preference for renewable resources that arise as a result of the production locale; with the focus on the fish in individual nation's territorial waters, lakes and ponds etc. In addition, we look at incomplete regulation which often occurs in renewable resources. Fish production locales differ and even when goods are of the same type, there are cases where consumer preferences vary, and it is not easy to compensate for such differences in resource goods; unlike industrial products which can be made close to the same quality thanks to improvements in technology etc. This is an essential point when considering trade that is based on the renewable resources held by individual countries. Furthermore, despite a relatively deep-seated awareness of the importance of renewable resource management at national level, the management of such resources by the state has not necessarily been successful. Therefore, this study deals with the impact on renewable resource management arising from incomplete regulation; i.e. technical measures that have been historically taken. Even for net exporters of resource goods, there is still the possibility of making gains from trade when preferences vary by production locale and when intra-industry trade is established between countries that often both have incomplete specialization. If each country independently adjusts its technological levels, they can achieve a situation where the regular quantity of resources of each remains the same both with and without free trade. It is extremely important for the future that these levels should be as close as possible to the MSY (Maximum Sustainable Yield) that maximizes fish catches. People in countries that are net exporters of resource goods who nonetheless continue to consume, even after trading their domestically produced resource goods, face being exposed to losses of trade.