Economic benefits of implementing trading zones for Australian livestock disease outbreaks of limited duration

Abstract

ObjectiveThe objective is to estimate the economic benefits of trading zones as part of foot‐and‐mouth disease (FMD) control measures for limited duration outbreaks.DesignThe proposed trading zones for FMD at the state level are determined using multiple tools. Eleven individual incursion scenarios in six Australian states are simulated within the Australian Animal Disease Spread epidemiological model to identify the potential geographic extent of outbreaks, as well as the number of animals infected and the duration of outbreaks. The disease spread information is used to identify the boundaries of trading zones. The outbreak duration data are combined with historical export data to estimate the share of Australian exports that could be embargoed. The market impacts of the potential export embargoes including changes in equilibrium quantities, prices and revenue are simulated within the Australian Bureau of Agricultural and Resource Economics and Sciences' AgEmissions partial equilibrium model of Australian agriculture.ResultsResults emphasize the importance of jurisdictional and outbreak characteristics in determining trading zones. Should Australia effectively implement trading zones at the state level in response to small FMD outbreaks, the potential reductions of embargoed exports lead to a reduction in estimated producer revenue losses compared with losses under a national embargo. Producer revenue losses are reduced between $3 billion and $9 billion estimated in present value terms over 10 years at a 7% discount rate.ConclusionEconomic analysis of the implications of trading zones identifies additional investments that would be of value to livestock industries.