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Archive for May, 2012

Man Bites Dog, Part 2

(If you don’t know the meaning of the phrase “man bites dog” try this.)

Taxing imports and promoting exports are the default positions of most governments, so when a story like this one comes along, I have to flag it for my students:

Indonesia, rich in resources, is imposing a tax of 20 percent on some metal ore exports and will prohibit shipments of raw minerals unless miners submit plans to build smelters.

The rules are likely to affect less than a third of Indonesia’s metal exports but are a precursor to a total ban on exports of raw materials.

Why would a government block exports? The article gives the Indonesian government’s stated reason. What else could be behind this unusual decision? Who gains and who loses?

You can be sure this story will make it into either next year’s Microeconomics lecture on the benefits of international trade. Even better, if I teach International Economics again next year, this would make a great presentation topic. Especially for my Indonesian students!

(See Man Bites Dog part 1, too.)