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Trade restrictions backfire
Posted: 22 October 2012

That's the problem with restricting trade on a commodity in which you enjoy a comparative advantage. Others will simply innovate to reduce their dependency on it.

That is happening with China's monopoly over rare earth minerals, and in the long term, will happen with OPEC's control of the oil market. When restrictions cause prices to escalate beyond a certain level, alternatives become more attractive, and the incentive to invest in new technology rises.

Then of course, there is also the opportunity to retaliate with some restriction of your own, as this MindBullet suggests.

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