Disease Outbreaks and Agricultural Trade: The Case of Potatoes

This study analyzed the impact of PVYn and potato wart disease outbreaks in PEI on the potato industry. These disease outbreaks resulted in the loss of the US seed export market to PEI producers. The effects of the disease outbreaks were mitigated through value-added processing. Price premiums for processed potatoes allowed PEI potato producers to abandon seed exports without incurring losses. Evidence is presented to suggest that other countries have also used this approach when export restrictions were placed on domestic agricultural industries. Policy response to the two disease outbreaks include: i) development of a zones policy that helped to reopen markets into the US; and ii) financial compensation to producers above the minimum levels required under the Seeds Act and Regulations. Implementation of the zones policy had beneficial impacts on the potato industry and is mirrored in other disease outbreaks. In contrast, compensation above minimum requirements may set a costly precedent for future disease outbreaks and may have caused moral hazard problems.