For example, Europe has extensive coal
deposits, but finds it more economic
to import cheaper foreign
coal. So we see the very high
imports shown for north-western
Europe, Japan and South Korea
in Figure 10.4. Resource depletion
is also an issue, and we have
very large countries such as
China and USA with abundant
resources, but where imports are
high because the resources are
insufficient to meet domestic
demand. In the case of China
this is due to the high population
and for USA the high GNP.
In these large economies the
domestic resources are diverted
to the domestic market, whereasfor large landmasses with smaller population or GDP such as the Middle East, Australia
and Indonesia, which appear at the bottom of the graph, local resources are the sufficient
so there is little demand for imports. As we shall see when we study trade theory,
factor endowments play a vital part in explaining trade, but this does not allow us to
generalize about the relationship between resources and trade. The results of the regression
analysis are a reminder of this fact.