Scarce Resources and National Policy Responses – an application to the steel sector

In response to skyrocketing and volatile resource prices, fears of imminent resource exhaustion and the question of secure supply of resources, nation states have devised different national resource supply strategies. Some have chosen a more confrontational approach, such as acquisition of resource extracting firms abroad and domestic protectionist measures, while others are more oriented towards long-term supply contracts or free markets. Why do we observe such different policy reactions to this common shock? The paper argues that different configurations in industry structure and the institutional setting lead to the observed variation in policy outcomes. It develops a three-stage theoretical argument to explain the diverging state reactions. Firstly it suggests that a large economic weight of the resource sector makes resource policy politically salient. Secondly, the argument implies that those industries that are able to organize well are more likely to influence resource policy in their interests. Lastly, it argues, that the predominant specialization of the resource industry on metal extraction, metal production or metal processing will shape the objectives of the policy. The paper uses resource policies in the iron and steel sector to evaluate the argument, as steel is necessary for most industrial production and infrastructure and thus politically highly relevant. It then tests the implications of the theoretical framework with a qualitative comparative analysis of OECD and BRICS countries. This study wants to contribute to understanding the mechanism behind the choice of resource policies and to shed light on the question of state behavior in other situations of scarcity.