Export Tariffs in Commodity Markets

This paper develops a partial equilibrium model and employs it to analyze the immediate consequences of introducing an export duty. Published materials confirm that the general premise of duopoly models is that external and internal sales markets are segmented and that this segmentation determines the long-term orientation of models in which production is a variable. In contrast to existing theoretical approaches, the relationship between domestic and foreign sales markets assuming fixed production volumes makes it possible to arrive at short-term estimates of the consequences of introducing an export duty. Such a duty will impact the domestic market price of the exporting country, the volumes of its exports and its export prices, and the price and volume of foreign supplies from global export (the totality of other exporting countries that supply to the foreign sales market of a given exporting country), etc. The results of the study indicate that the increase in welfare for an exporting country (the total increase in producers’ profits, government revenues, and consumer gains) from an export duty depends directly on the ratio between the supply of products on the domestic market before introducing the duty and the increase in domestic supply (decrease in export volumes) after its introduction. The finding is that welfare will increase only under specific conditions. The possibility of imposing an export duty without loss of welfare depends in fact on what share exports have in production volumes prior to the introduction of the duty. For quite realistic estimates of the coefficients of inverse demand functions, the conclusion is that welfare will increase for any value of the export duty if the production volume in the exporting country prior to imposing the duty was approximately twice (2.25 times) higher than the volume of exports. Estimates of the distribution of gains and losses from the introduction of export duties were arrived at for three main groups — producers, consumers, and the state budget in all sales markets. To illustrate how the theoretical constructs of the model operate, the effects of introducing an export tariff on the Russian wheat market in 2021 were analyzed.

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