sDFG means that IFG is small relative to DFG and also that DI and I are large other things being
equal. Hence the contribution of IFG to the externality gets smaller relative to the contribution of
I as the share sDFG gets larger. The larger initial tariff escalation (τIFG /τI large) and the higher
pest risk for the raw input relative to the processed final good (ZI/ZIFG large), the more likely the
condition will be satisfied and welfare will be improved by a decrease in tariff escalation.
Other extensions
The argument of Costello and McAusland on ambiguous effects of unilateral trade liberalization
could be the basis to relax the sufficient conditions underlying propositions 2 and 3. The basic
argument is that the externality may not increase when imports increase because the higher IS
risk is applied to a lower land base corresponding to a lower D. This argument could be applied
in our context of tariff escalation. Sufficient conditions established in propositions 2 and 3 could
be relaxed somewhat to account for the decrease in D induced by a lower tariff on raw inputs.
The potentially higher β is applied to a lower basis and may reduce the total externality if the
decrease in D offsets the impact of higher raw imports on the externality.
The analysis provided in this paper would also hold with some IS-related environmental
policies initially in place as long as the policies are not optimal, that is, a cost in the production
of D is not internalized. Parameter zI can be policy dependent and as long as it is not equal to
zero the cost is not fully internalized or the pest associated with imports is not fully eliminated.7
4. Conclusions
Our paper investigated the interface between trade and IS risk, and the impact of tariff escalation
in agricultural and food-processing markets on IS hazard and associated externalities. Tariff
escalation in processed agro-forestry products increases the risk of IS by biasing trade flows
toward primary commodity flows and against processed-product trade. We show that reductions
7 Having zI =0 does not invalidate our results but makes them a mute point focusing exclusively on tariff escalation.
20
More intriguing information
1. Quality Enhancement for E-Learning Courses: The Role of Student Feedback2. A Dynamic Model of Conflict and Cooperation
3. PROTECTING CONTRACT GROWERS OF BROILER CHICKEN INDUSTRY
4. Computational Batik Motif Generation Innovation of Traditi onal Heritage by Fracta l Computation
5. THE MEXICAN HOG INDUSTRY: MOVING BEYOND 2003
6. Dementia Care Mapping and Patient-Centred Care in Australian residential homes: An economic evaluation of the CARE Study, CHERE Working Paper 2008/4
7. The Impact of Financial Openness on Economic Integration: Evidence from the Europe and the Cis
8. Inflation Targeting and Nonlinear Policy Rules: The Case of Asymmetric Preferences (new title: The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences)
9. The name is absent
10. Synthesis and biological activity of α-galactosyl ceramide KRN7000 and galactosyl (α1→2) galactosyl ceramide