Working Paper: CEPR ID: DP1934
Authors: Sallie James; Kym Anderson
Abstract: Quarantine policy reviews are becoming more sophisticated following the Uruguay Round?s Agreement on Sanitary and Phytosanitary (SPS) Measures and, in Australia?s case, following also the 1996 Nairn Report. Yet they still focus primarily on the effects of restrictions just on import-competing producers. A fuller analysis that includes the consumers demonstrates that even if imported diseases were to wipe out a local industry, the gains to consumers may outweigh the losses to import-competing producers from removing a ban on imports. This paper provides the simplest partial-equilibrium framework for thinking more about the economics of quarantine policy measures. An empirical analysis of Australia?s ban on imports of bananas, used to illustrate the methodology, suggests a move to free trade may well cause a major contraction of banana growing in Australia but the economic welfare gains to consumers are almost certain to far outweigh the losses to producers. The paper concludes by arguing that there is a need for a comprehensive economic review of Australia?s myriad quarantine restrictions.
Keywords: quarantine; SPS measures; externalities; risk and uncertainty; optimal policy
JEL Codes: F13; F14; O17; O28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lifting quarantine restrictions (R48) | significant contraction of the local banana industry (L79) |
| lifting quarantine restrictions (R48) | consumer welfare gains (D61) |
| consumer welfare gains (D69) | outweigh losses to producers (L11) |
| lifting quarantine restrictions (R48) | net economic welfare gain (D69) |
| net economic welfare gain (D69) | consumer surplus increases (D11) |
| net economic welfare gain (D69) | producer surplus decreases (D21) |