Estimating the social welfare effects of New Zealand apple imports

Abstract

International trade of agricultural products not only generates wealth but is also responsible for the introduction of invasive pests beyond their natural range. Comprehensive bioeconomic modelling frameworks are increasingly needed to assist in the resolution of import access disputes. However, frameworks that combine welfare analysis attributable to trade and invasive species spread management are lacking. This study provides a demonstration of how a comprehensive economic framework, which takes into account both the gains from trade and the costs of invasive species outbreaks, can inform decision-makers when making quarantine decisions. We develop a partial equilibrium trade model considering international trade and combine it with a stratified dispersal model for the spread and management of potential outbreaks of an invasive species. An empirical estimation is made of the economic welfare consequences for Australia of allowing quarantine-restricted trade in New Zealand apples to take place. The results suggest the returns to Australian society from importing New Zealand apples are likely to be negative. The price differential between the landed product with SPS measures in place and the autarkic price is insufficient to outweigh the increase in expected damage resulting from increased fire blight risk. As a consequence, this empirical analysis does not support the opening up of this trade. © 2011 The Authors. AJARE © 2011 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.