Natural resources are difficult to define precisely,particularly in the context of international trade. Most
people have an intuitive idea of what natural resourcesare, but “common sense” definitions cannot be relied
upon since they eventually run into problems whendealing with ambiguous cases. For example, crude oil
and wood are clearly natural resources, but it is lessobvious how intermediate and final goods made from
these products should be classified.All goods either embody natural resources (e.g.
automobiles contain iron ore) or require resources fortheir production (e.g. food crops require land and water to grow), so all goods could conceivably be classified as natural resources. Such an approach would be logically consistent but otherwise unenlightening. At another extreme, one could choose to focus strictly on resources in their natural state. However, even clear-cut examples of natural resources would be difficult to classify as such under this approach, since most resources require at least some processing before they can be traded or consumed. Regardless of the choice of definition, the line of demarcation between natural resources and other goods will always be somewhat arbitrary. For the purposes of this report we define natural resources as “stocks of materials that exist in the natural environment that are both scarce and
economically useful in production or consumption, either in their raw state or after a minimal amount of
processing”.1 Note the qualifier “economically useful” in this definition. For example, sea water is a natural substance that covers much of the earth’s surface, but it is of limited intrinsic or direct value for consumption or production. Goods must also be scarce in the economic sense to qualify as natural resources; otherwise people could consume as much as they wanted at no cost to themselves or to others.
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