Design of Systems Approaches to Invasive Pest Risk Management

1
Design of Systems Approaches to Invasive Pest
Risk Management

• Everett B. Peterson (Virginia Tech)
• David Orden (IFPRI)
• Suzanne Thornsbury (Michigan State)
• Eduardo Romano (PIRE)
• Presentation made at 2004 PRESIM Workshop,
  Washington, DC, August 19 20, 2004

2
Project Overview

• Goal To develop and test an evaluation
  methodology for regulations that adopt a systems
  approach to reducing invasive pest risks
  associated with imports that is less
  trade-restrictive than a product ban.
• Will develop several case studies to evaluate the
  proposed methodology
• Avocado imports from Mexico
• Citrus imports from Argentina
• Current status
• Have completed economic assessment of removing
  geographic and seasonal import restrictions on
  avocado imports from Mexico
• Begun work on developing decision tree to
  evaluate alternative systems

3
Background on Avocados

• Importation of fresh Hass avocados from Mexico
  into the U.S. have been totally or partially
  banned since 1914
• Since 1997, avocados from approved orchards in
  State of Michoacán, Mexico have been allowed to
  be imported during specific time periods to
  specific regions
• In 1997, access to 19 Northeastern states plus
  D.C. during November to February
• In 2001, access to additional 12 states during
  October 15 April 15
• Currently, there is a proposed to remove all
  geographic and seasonal restrictions

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Domestic Production and Imports of Hass Avocados
600
500
400
Million lbs
300
Mexico
200
Chile
100
California
0
97/98
98/99
99/00
00/01
01/02
02/03
Marketing Year
5
Model

• Static, partial equilibrium model
• 3 supply regions US (California), Chile, Mexico
• 3 domestic demand regions currently approved
  states, avocado producing states (California,
  Florida, and Hawaii), all other states
• 2 time periods October 15 April 15, April 16
  October 14
• Consumer demand for avocados
• Derived from weakly separable nested CES utility
  function for representative consumer in each
  region
• Two substitution parameters
• Between avocados and all other goods
• Between avocados from each supply region
• Avocado supply
• CET revenue function determines supply in each
  time period
• Linear supply of an aggregate factor (determines
  location of ppf)
• Export supply of avocados from Mexico assumed to
  be perfectly elastic

6
Data and Key Parameter Values

• Baseline data is average of 2001/2002 and
  2002/2003 marketing years
• Demand elasticities
• SR Californian producer-level own-price -0.62
  (Carman and Kraft), aggregate avocado -0.60
• LR 1.75 times SR elasticities
• Supply elasticities
• SR 0.35 (Romano)
• LR 1.3 (Carman and Kraft)
• Chile Adjust above total supply elasticities to
  reflect export supply
• Long-run population and income growth
• Assumed 10 growth in real income for all demand
  regions
• Population growth varied from 3.5 to 9 across
  demand regions

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Preference Parameters

• To calibrate the CES utility function, must
  choose a set of preference parameters.
• For example, consider one-level CES
• For time periods and geographic regions with
  import restrictions in place, the preference
  parameter for Mexican avocados will equal zero in
  initial equilibrium.
• Removal of seasonal and geographic restrictions
  require adjustments in preference parameters
• Following Veneables, equate parameter value for
  Mexican and Chilean avocados
• Maintain slight preference bias for Californian
  avocados

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Results
Base Short-Run Long-Run
Variable
(Million lbs) Percent Change Percent Change
California Avocado Production 346.0 -12.2 -14.6
Mexican Exports 58.2 259.6 485.1
Chilean Exports 176.8 -16.5 -9.3
California Producer Price
October - April 0.87 -36.8 -17.2
April - October 1.10 -32.7 -8.2
Producer Surplus Millions Millions
California -114.4 -35.9
Chile -24.4 -3.9
Equivalent Variation 184.4 116.2
Net US Welfare Change 70.0 80.3
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Future Work

• Avocado case
• Incorporate APHIS risk assessment and the
  economic analysis (similar to work by Glauber and
  Narrod)
• Determine the costs alternative systems to
  controlling avocado pests
• Assess costs and benefits of alternative systems
  (including alternative geographic restrictions)
• Decision tree
• Continue to develop a generic framework for
  analyzing different system approaches
• Develop additional cases