The Changing Role of The United States in World Mineral Trade

In the garden of national problems recognized by the American public, imports of mineral products is a hardy perennial. Concern for the security of mineral supplies has preoccupied nations since the industrial revolution and the mechanization of warfare. Since 1973, Americans have also been sensitized to the potential economic costs of overseas mineral supply disruptions and the cartelization of foreign production. Though oil prices have plunged since 1981, the import dependency issue remains topical. Political turmoil in Southern Africa reminds us that mineral supply disruptions will occur in the future as they have in the past. Producers of iron and steel, copper, and refined petroleum products seek protection from imports on national security grounds. The Reagan administration is proposing sweeping changes in the management of the federal mineral stockpiles. s an enduring need to take stock of the mineral trade position of the United States. This article considers the changing role that the U.S. has played in the twentieth century in non-fuel minerals trade. We begin by enunciating some principles that are useful in analyzing this trade. The changing pattern of trade in the 1900-1969 period is then reviewed. There follows a more detailed analysis of mineral trade trends in the 1970-84 period. Some consideration is given in the final section to the significance of non-fuel mineral trade for the U.S. economy. THE ECONOMICS OF U.S. MINERAL TRADE The allocation of non-fuel mineral products in the United States has in this century been accomplished primarily through the market mechanism. Except where trade barriers have distorted price signals, this means that mineral supplies have been obtained from the least cost source, with little regard for their country of origin. Mineral prices facing U.S. firms are sensitive to shifts in the domestic supply and demand, but are also sensitive to economic conditions overseas. The balance of trade in each mineral product has depended on the amount that is profitably produced and consumed domestically at the world price. The nation has produced exactly as much as it has consumed only by chance. U.S. demand for non-fuel minerals is derived from the demand for manufactures, farm commodities, and other goods whose production requires mineral products as inputs. The demand for such goods can be quite volatile, and in most industries moves cyclically due to its sensitivity to the level of aggregate economic activity. The supply of mineral products depends on the cost of extracting and processing mineral raw materials. These costs do not vary greatly in the short run. Because of these attributes of mineral markets, U. S. trade in mineral products fluctuates considerably from year to year. Most of this volatility results from shifts in domestic and overseas demand and from changes in exchange rates and trade barriers. Longer run changes in the mineral trade pattern can also be discerned. These depend on secular trends in demand and in the cost of mineral extraction and processing at home and overseas. The United States was originally endowed with extensive reserves of an array of mineral-rich ores and fossil fuels. It is also a nation with an entrepreneurial climate and technological capability conducive to extracting and processing those reserves. Not surprisingly, it has at one time or another ranked among the world's leading producers of a great many mineral products. With a population that is large and an economy that is technologically advanced by world standards, the U.S. has also been a leading consumer of mineral products. Because of its voracious appetite, the bulk of mineral products produced domestically has traditionally been consumed domestically as well. Net exports have been sizable only in those industries in which the nation has enjoyed an extraordinary cost advantage. Depletion has gradually reduced the cost advantage that the U.S. mining industry once enjoyed. The economic conditions that encouraged early development of U.S. mineral resources have