Subsidies to the production of natural resources have both trade-distorting and
adverse environmental consequences. Both of these effects have a common
origin in the frustration of the resource-allocation function of the market when
natural resources do not reflect the full social costs of production. Three
different conceptual and institutional routes to defining new international
norms on natural resource subsidies could be pursued, depending on whether
the focus is on trade policy, on conservation of a particular natural resource,
or on soft law to encourage sound management of natural resources. One
strategy focused on soft law would be to introduce the issue into theAsia Pacific
Economic Cooperation forum in the form of economic instruments for full-cost
internalization.
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