Design of Systems Approaches to Invasive Pest Risk Management

2004 PRESIM Workshop 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


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


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


Domestic Production and Imports of Hass Avocados

0

100

200

300

400

500

600M

illi

on lb

s

97/98 98/99 99/00 00/01 01/02 02/03

Marketing Year

Mexico

Chile

California


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


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


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

1 11

1 1

, 1,n n

j j jj j

U x


ResultsBase Short-Run Long-Run

Variable

(Million lbs) 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

California -$114.4 -$35.9

Chile -$24.4 -$3.9

Equivalent Variation $184.4 $116.2

Net US Welfare Change $70.0 $80.3


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

Design of Systems Approaches to Invasive Pest Risk Management

Documents

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