A Decision Theoretic Appproach to Choose among Alternative Import Protocols for an Import Competing Commodity

Ali Abdalla, Gil Rodriguez and Anna Heaney
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Ali Abdalla: Australian Bureau of Agricultural & Resource Economics
Gil Rodriguez: Australian Bureau of Agricultural & Resource Economics
Anna Heaney: Australian Bureau of Agricultural & Resource Economics

Economic Analysis and Policy, 2001, vol. 31, issue 1, 1-11

Abstract: The global push toward free trade and the consequent rise in volume of imports from a wider range of countries incurs the likelihood of introducing unwanted pathogens. Given that a zero-risk quarantine policy is not possible, there are tradeoffs between the gains from international trade and the potential costs to society of disease incursions. The aim in this paper is to demonstrate a means for choosing among alternative import protocols through a combined trade and decision model. The economic modeling approach applied to a stylised set of import protocols is a two-step process. First, the gains and losses to consumers and producers, including costs of disease, are estimated for each import protocol. In the second step, three decision rules--minimax, minimin and minimax regret--are applied to a cost matrix to determine the most efficient import protocol. These rules suggest a strong association between the risk attitudes of decisionmakers, such as the Australian Quarantine and Inspection Service (AQIS) and the type of protocol chosen. For example, if AQIS is not willing to accept the risks of pest and disease incursions and adopts the minimax criterion, the most conservative import protocol that severely restricts imports would be chosen.

Keywords: Free Trade; Import; International Trade; Policy; Trade (search for similar items in EconPapers)
JEL-codes: F13 Q17 (search for similar items in EconPapers)
Date: 2001
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