IDEAS home Printed from https://ideas.repec.org/p/ift/wpaper/1006.html
   My bibliography  Save this paper

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

Author

Listed:
  • Siddhartha.K.Rastogi

    () (Indian Institute of Management,Indore,India)

Abstract

As trade quotas have been eliminated under GATT and tariffs have been rationalized under WTO; the focal point of disputes and negotiations in international trade has shifted to non-tariff barriers (NTBs), particularly Sanitary and Phytosanitary (SPS) standards. However, in the absence of any past experience and concrete scientific or empirical evidence, standards are usually kept at prohibitively high levels, thereby inducing sub-optimal outcomes. One such case is the mango trade dispute between India and USA. India ranks first in mango production worldwide, supplying about 40 per cent of world mangoes; whereas, USA is world’s biggest mango importer accounting for 32.7% of the total imports worldwide during 2003-05. However, USA imposed a ban on import of Indian mangoes between 1989 and 2006 due to high pesticide levels and incidence of pests. The US permitted import of mangoes from India in 2006 under high standards and strict inspection norms. This study examines the impact of various standard regimes on the two trading partners and explores if the benefit from a higher standard regime is worth the marginal effort. As the importing nation, US has four policy options – 1) a complete ban on mango trade, which was in application between 1989 and 2006; 2) Hot Water Treatment (HWT), the policy advocated by India; 3) nuclear irradiation, the policy favored by US and presently in force, and; 4) free trade, policy regime with no SPS standards in place. Welfare impact of mango trade on both, India and US, under all four different policy regimes is estimated using partial equilibrium framework with stylized microeconomic models for different components. The results suggest 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 from a policy change in favor of India, both the nations may reach a Kaldor-Hicks efficient outcome. A brief sensitivity analysis is performed, indicating that the developed north can afford to be more flexible in adopting SPS standards. This study also underscores that the impact of risks arising out of invasive species cannot be studied in terms of science alone but it has to be wedded to the economic implications.

Suggested Citation

  • Siddhartha.K.Rastogi, 2011. "Welfare Assessment of SPS Standards: An Empirical Study of Indo-US Mango Trade Dispute," Working Papers EC-11-05, Indian Institute of Foreign Trade.
  • Handle: RePEc:ift:wpaper:1006
    as

    Download full text from publisher

    File URL: ftp://wpaper.iift.ac.in/WorkingPapers/eciift1006.pdf
    File Function: First version, 2011
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Surabhi Mittal, 2006. "Structural Shift in Demand for Food - Projections for 2020," Macroeconomics Working Papers 22223, East Asian Bureau of Economic Research.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    SPS; India - USA Trade; Mango Trade; Cost-Benefit Analysis; Harberger Triangles; Microeconomic Stylized Model.;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ift:wpaper:1006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (S. Balasubramanian). General contact details of provider: http://edirc.repec.org/data/iifttin.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.