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A Decision Theoretic Appproach to Choose among Alternative Import Protocols for an Import Competing Commodity

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  • Abdalla, Ali

    (Australian Bureau of Agricultural & Resource Economics)

  • Rodriguez, Gil

    (Australian Bureau of Agricultural & Resource Economics)

  • Heaney, Anna

    (Australian Bureau of Agricultural & Resource Economics)

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    Abstract

    The global push toward free trade and the consequent rise in volume of imports from a wider range of countries incurs the likelihood of introducing unwanted pathogens. Given that a zero-risk quarantine policy is not possible, there are tradeoffs between the gains from international trade and the potential costs to society of disease incursions. The aim in this paper is to demonstrate a means for choosing among alternative import protocols through a combined trade and decision model. The economic modeling approach applied to a stylised set of import protocols is a two-step process. First, the gains and losses to consumers and producers, including costs of disease, are estimated for each import protocol. In the second step, three decision rules--minimax, minimin and minimax regret--are applied to a cost matrix to determine the most efficient import protocol. These rules suggest a strong association between the risk attitudes of decisionmakers, such as the Australian Quarantine and Inspection Service (AQIS) and the type of protocol chosen. For example, if AQIS is not willing to accept the risks of pest and disease incursions and adopts the minimax criterion, the most conservative import protocol that severely restricts imports would be chosen.

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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 31 (2001)
    Issue (Month): 1 (March)
    Pages: 1-11

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    Handle: RePEc:eap:articl:v:31:y:2001:i:1:p:1-11

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    Keywords: Free Trade; Import; International Trade; Policy; Trade;

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    1. Scott McDonald & Deborah Roberts, 1998. "The Economy-Wide Effects of the BSE Crisis: A CGE Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 458-471.
    2. James, Sallie & Anderson, Kym, 1998. "On the need for more economic assessment of quarantine/SPS policies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(4), December.
    3. Harsanyi, John C., 1992. "Game and decision theoretic models in ethics," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 19, pages 669-707 Elsevier.
    4. Philip L. Paarlberg & John G. Lee, 1998. "Import Restrictions in the Presence of a Health Risk: An Illustration Using FMD," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 175-183.
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