Can Trade Policies Soften the Economic Impacts of an Avian Influenza Outbreak? Simulations From a CGE Model of the Philippines

U-Primo E. Rodriguez (), Yolanda T. Garcia (), Arnulfo G. Garcia () and Reynaldo T. Tan ()
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U-Primo E. Rodriguez: College of Economics and Management, University of the Philippines Los Banos
Yolanda T. Garcia: College of Economics and Management, University of the Philippines Los Banos
Arnulfo G. Garcia: Southeast Asian Regional Center for Graduate Study and Research in Agriculture, Philippines
Reynaldo T. Tan: College of Economics and Management, University of the Philippines Los Banos

Asian Journal of Agriculture and Development, 2007, vol. 4, issue 2, 41-50

Abstract: The paper examines the possibilities of using trade policy to address the adverse economic effects of an avian influenza outbreak in the Philippines. In particular, it employs a computable general equilibrium (CGE) model for analyzing the likely effects of two options; namely, a) a ban on imported poultry, and b) the removal of tariffs on non-poultry meat products. Using six model scenarios (i.e., production shocks, consumption shocks, ban on poultry imports, removal of tariff on non-poultry imports, and selected combinations of these shocks), the simulation results reveal that (a) the consumption and production shocks are expected to have a contractionary effect on real GDP; (b) the expected fall in the output of poultry products explains most of the decline in real GDP; (c) the production shock appears to have a larger impact since this explains most of the decline in real GDP as well as the increase in the general price level; (d) while the consumption shock tends to have a larger impact on the poultry products, the production shock dominates the aggregate responses because of its effects on other industries, and (e) avian influenza is likely to have far-reaching effects on the economy, way beyond the poultry sector. Based on these results, this paper supports the use of an import ban as a preventive measure against the occurrence of an avian influenza attack. This is based on the finding that the economic costs from such a measure appear to be lower than the costs associated with the disease. In contrast, the study finds that there is a weak case for removing tariffs on non-poultry meat products as a means to soften the harmful impacts of an avian influenza outbreak.

Date: 2007
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