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Welfare Assessment of SPS Standards: An Empirical Study of Indo-US Mango Trade Case

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  • Rastogi, Siddhartha K.

Abstract

Sanitary and phytosanitary (SPS) standards under WTO’s ambit have gained prominence in recent years. However, due to mostly thin evidence, standards are set at prohibitively high levels, inducing sub-optimal outcomes. One such case is of mango trade between India and USA. The US banned import of Indian mangoes from 1989 to 2006 and permitted it thereafter under strict treatment and inspection standards. This study has examined the impact of various policy options on the two trading partners and has explored if the benefit from a higher standard regime is worth the marginal effort. Welfare impact of mango trade on India and US under four policy options (trade ban, nuclear irradiation, hot water treatment, and free trade) has been estimated using partial equilibrium framework with stylized microeconomic models. The study has suggested that policy choices of both the nations are consistent with their respective payoff estimates. However, if India undertakes to compensate the US for any losses due to an India-favouring policy, both the nations may gain more through trade; thereby, implying that there is social improvement if the gainers can fully compensate the losers and still be better off (Kaldor-Hicks efficient outcome).

Suggested Citation

  • Rastogi, Siddhartha K., 2012. "Welfare Assessment of SPS Standards: An Empirical Study of Indo-US Mango Trade Case," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 25(2).
  • Handle: RePEc:ags:aerrae:137351
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    File URL: http://purl.umn.edu/137351
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    References listed on IDEAS

    as
    1. Islam, Nurul, 1990. "Horticultural exports of developing countries: past performances, future prospects, and policy issues," Research reports 80, International Food Policy Research Institute (IFPRI).
    2. Surabhi Mittal, 2006. "Structural Shift in Demand for Food - Projections for 2020," Macroeconomics Working Papers 22223, East Asian Bureau of Economic Research.
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    More about this item

    Keywords

    SPS; India-USA trade; mango trade; cost-benefit analysis; microeconomic stylized model; Agricultural and Food Policy; F13; F14; F51; Q17;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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