Dynamic sanitary and phytosanitary trade policy

Abstract

This paper characterizes the optimal use of sanitary and phytosanitary standards to prevent the introduction of harmful pests and diseases through international trade. Because established pest and disease infestations grow and spread over time their introduction has intertemporal consequences. In a dynamic economic model, an efficient trade policy balances the costs of SPS measures against the discounted stream of the costs of control and social damages that are avoided by using SPS measures, where future growth of any established infestation is accounted for. We examine when phytosanitary trade policy makes good economic sense, when it is efficient to provide full protection against pests and diseases, and when restrictive, but not fully protective trade policy is efficient.