Tariffs and the Risk of Invasive Pest Introductions in Commodity Imports: Theory and Empirical Evidence

Abstract

Expanded world trade carries with it increased risks of biological invasions and the ecological and economic damage that accompanies them. The economics literature has suggested that it might be desirable to use tariffs as corrective Pigouvian taxes to reduce those risks. This paper conducts a theoretical and empirical investigation of that proposition and provides the first comprehensive analysis of the potential effectiveness of tariffs as a measure to reduce the arrival of invasive pest species. A theoretical analysis focusing on individual shipments indicates that the effect of higher tariffs on invasive pest introductions is ambiguous and depends on whether marginal pest abatement cost is more or less responsive to changes in shipment volume and pest levels than is the marginal loss from expected pest interceptions. The theoretical framework provides the foundation for an econometric model of the effects of tariffs, shipment value, and duty free status on the risk of invasive pest introductions in import shipments of fruits and vegetables. We estimate the model using data from surveillance screening conducted by the Animal and Plant Health Service of the US Department of Agriculture from 2005-2014. Shipment data is used to separately estimate the responsiveness of the number of shipments to changes in the tariff rate and the removal of duty free status. The estimated parameters of these two models are then used to calculate the effects of raising tariff rates/removing duty free status on the probability of invasive pest detection and on the expected number of invasive pest detections per year for commodities differentiated by type, region of origin, growing season, and port of entry. For commodities currently facing positive tariffs our empirical analysis shows that tariff rates exert a negligible influence on the probability of detecting an invasive pest and on the annual number of shipments. Raising tariffs on these commodities would have a small effect on the expected number of invasive pest introductions. For commodities that currently enter duty free, our analysis suggests that removal of duty free status would reduce both shipments and intercept probabilities, thereby decreasing expected detections per year, especially for commodities currently responsible for the most pest intercepts. But removing duty free status from these commodities would likely undermine other goals of US trade policy as well as lowering consumer welfare due to higher fruit and vegetable prices and less variety in winter diets. We estimate trade elasticities for a subset of commodities and find the consumer welfare loss to be on the order of $14 million per expected intercept avoided.