Animal Disease Outbreaks and Trade Bans by dfhdhdhdhjr

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									Animal Disease Outbreaks
    and Trade Bans

  WTO Impacts on U.S. Farm Policy
 Southern Regional Trade Research
        Committee (S1016)
       World Trade Center
           New Orleans
          June 1-3, 2005
• Dr. Thomas Marsh
    Associate Professor, School of Economic Sciences
    Fellow, IMPACT Center
    Washington State University

• Dr. Thomas Wahl
    Professor and Director, IMPACT Center
    Washington State University

• Tamizheniyan Suyambulingam
    PhD Student
    School of Economic Sciences
    Washington State University


School of Economic Sciences
                        Overview
• Provide background information/motivation
• Objectives
• Examine selected historical outbreak data
• Highlight selected WTO SPS policies
• Discuss a game theory model focusing on
    Disease outbreaks
    Trade bans
    Perceived risk
• Draw some implications
School of Economic Sciences
            Background Information
  • Animal diseases are public goods that
    impose externalities on trade throughout
    the world.

  • Typically, trade bans are imposed on
    exports from counties infected with a
    disease by importing countries.

School of Economic Sciences
            Background Information

  • Even though the WTO agreements call for
    scientific basis of trade barriers, imposing
    trade bans are controversial, and costly

  • Moreover, re-establishing trade is relatively
    difficult to achieve


School of Economic Sciences
            Background Information
  • Key concerns
       Importing countries impose trade sanctions
        based on perceived risks rather than real risks.
       WTO regulations are not disease specific, but
        rather generically defined to accommodate a
        myriad of animal and plant diseases.
       WTO regulations are centrally planned
        schemes that are rule-based and not market-
        based.

School of Economic Sciences
                       Objectives
  • Review selected livestock outbreak data and
    policies governing major animal disease
    outbreaks across the world.

  • Conceptually assess the effectiveness of
    trade bans as a mechanism to control these
    outbreaks.

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              Outbreak Information
  • Focus on selected diseases
         Avian Influenza (AI)
         Bovine Spongiform Encephalopathy (BSE)
         Classical Swine Fever (CSF)
         Foot and Mouth Disease (FMD)

  • World Organization for Animal Health (OIE)
       Outbreak Data

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              Outbreak Information
         Human Health   Animal       Highly     Available
            Threat    Health Threat Contagious Vaccination

 AI            X              X         X          X

 BSE           X              X

 CSF                          X         X          X

 FMD                          X         X          X

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                  Outbreak Information

Mean and Standard Deviation of Outbreaks by Region from 1996 to 2003.
                   FMD                 CSF               BSE                     AI
                Mean      Stdev    Mean      Stdev     Mean      Stdev   Mean      Stdev
Oceania          0.00      0.00     0.00      0.00      0.00      0.00    0.13      0.35
Europe         341.00    738.44   546.00    240.94   3406.25   2603.75   81.25    152.78
Americas       724.13   1597.88   278.50     89.19      0.25      0.71    0.25      0.71
Asia          4836.38   3153.67   798.63   1201.86      1.25      1.75   10.75     15.65
Africa         556.75    313.68    10.38      8.93      0.00      0.00    0.00      0.00




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                                                 AI Outbreaks

               450


               400
                                   Oceania
                                   Europe
               350                 Americas
                                   Asia
               300                 Africa
   Outbreaks




               250


               200


               150


               100


                50


                 0
                     1996   1997          1998    1999           2000   2001   2002   2003
                                                         Years

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                                         BSE Outbreaks

            10000

             9000
                                            Oceania
             8000                           Europe
                                            Americas
             7000                           Asia
                                            Africa

             6000
Outbreaks




             5000

             4000

             3000

             2000

             1000

                0
                    1996   1997   1998     1999           2000   2001   2002   2003
                                                  Years
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                                             CSF Outbreaks

                 4000


                 3500                           Oceania
                                                Europe
                 3000                           Americas
                                                Asia
                                                Africa
                 2500
     Outbreaks




                 2000


                 1500


                 1000


                  500


                    0
                        1996   1997   1998     1999           2000   2001   2002   2003

                                                      Years

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                                           FMD Outbreaks

              12000



                                              Oceania
              10000
                                              Europe
                                              Americas
                                              Asia
              8000                            Africa
  Outbreaks




              6000




              4000




              2000




                 0
                      1996   1997   1998     1999           2000   2001   2002   2003

                                                    Years
School of Economic Sciences
              Summary: Outbreaks
• The data exhibit that temporal trends and skewness are
 important characteristics of disease outbreaks.

• Disease outbreaks can be spatially concentrated and clustered
 regionally around the world.

• Economic impacts
    Outbreak costs are estimated to exceed billions of $US
    Export losses alone due to the single BSE case in 2003 for
     the US range from $US 3-4 billion (Coffey et al. 2005)
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               WTO SPS Standards
• The apparent role of the WTO is to maximize
 security against the international spread of disease
 with a minimum interference to world trade.

• WTO regulations are rule-based schemes covering
 risks to humans from diseases carried by animals,
 plants and their products; the entry or spread of
 pests; and additives, contaminants, toxins, and
 disease-causing organisms in food and beverages.

School of Economic Sciences
                  Trade Ban Game

• Should a country impose a trade ban on imports
  from another country in the event of an animal
  disease outbreak?




School of Economic Sciences
                  Trade Ban Game

• Game theory model focusing on trade bans in the
  event of disease outbreaks with perceived risk
  (Bauch and Earn 2004)

• Game theory is relevant in modeling
  interdependent behavior in the presence of risks,
  where risks faced by any one agent depend not
  only on its choices but also on those of all other.

School of Economic Sciences
                  Trade Ban Game

   • Let P denote an individual country’s strategy to
     ban trade and p be the proportion of other
     countries instituting a trade ban (i.e., the ban
     coverage level)
        Pure strategies are
          • P=1 impose a ban with probability 1
          • P=0 not impose a trade ban.
        A mixed strategy arises if 0<P<1.



School of Economic Sciences
                  Trade Ban Game
   • Expected payoff to country k facing perceived
     morbidity risks rb (with a trade ban in place) and ri
     (from infection with no trade ban) is

              Ek  P, p   P  rb   1  P   ri  p 
     where  p is the probability that an unprotected
     country’s livestock will be infected.




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                  Trade Ban Game
   • Intuitive outcomes are driven by thresholds
                                 P  0 
             rb                            
                   p           P  1 
             ri                   0  P  1
                                          
   • Thresholds depend on
        Perceived risks (both subjective and objective)
        Disease specific attributes in  p
          • Likely also perceived


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                  Trade Ban Game
   • Some implications
        Diseases have differing characteristics that
         influence individual country strategies
          • FMD and CSF predominately have morbidity risk for
            animals
          • AI and BSE have morbidity risk for animals and
            humans
          • FMD, CSF, and AI are highly contagious




School of Economic Sciences
                  Trade Ban Game
   • Some implications
        Temporal issues and patterns are important.
          • AI has immediate risks for animals and humans

          • BSE exhibits temporal patterns that are latent in
            nature, having longer-term effects for animal and
            human risks




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                     Trade Ban Game
   • Some implications
        Spatial issues and patterns of diseases are important.
           • Assuming uninfected countries can be isolated from infected
             regions of other countries, then countries should implement
             a trade ban with some nonzero probability.

           • Trade bans are likely to be ineffective and remain
             sufficiently risky if there is unfettered black market trade or
             livestock smuggling across borders.

           • Effective border monitoring of adjacent countries, border
             buffer zones, or regionalizing the outbreak are essential for
             a trade ban to be successful.



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                       Summary
• Specific model outcomes are that
    Perceived information is critical to the likelihood
     of a trade ban

    Generic trade bans are not necessarily effective
     nor efficient tools in the event of a trade ban




School of Economic Sciences
                       Summary
• General recommendations are that
    Because risks are often based on public perception
     it is vital to have effective risk communication
     strategies

    Public policies should be mixed with innovative
     market-based mechanisms and private incentives
     to effectively control disease outbreaks.


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                 Questions/Comments?




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