Tariff Escalation and Invasive Species Risk

Costello compare tariff (duties) and non-tariff (quarantine measures or port inspections)
regulations aimed at monitoring the risks of biological invasions linked to commodity imports,
tariffs are found to be optimal (i.e. the optimal trade tax is positive and increasing with the risk of
invasion), while inspections are not. Paarlberg and Lee have also investigated the role of trade
policy as a tool for monitoring risks, linking infection risk such as Foot-and-Mouth Disease from
imports to a tariff, so that the exporter of an infected product faces a higher tariff than would
otherwise be the case.

Our paper departs from this limited literature and fills an important knowledge gap in
policy analysis related to trade and IS. We investigate the interface between trade and IS risk,
focusing on the existing tariff escalation in agricultural and food-processing markets and its
impact on IS hazard and associated externalities. The paper addresses and analyzes an
overlooked but important aspect of the trade-IS debate. Tariff escalation occurs when tariffs
increase with stages of transformation/processing of products into value-added products (e.g.,
from primary agricultural commodities to food-processing goods). Tariff escalation is well
established in processing sectors using agro-forestry raw inputs. Tariff escalation in processed
agro-forestry products increases the risk of IS by biasing trade flows towards primary
commodity flows and against processed-product trade. Even though precise data on differential
risk from agricultural to processed-good imports are limited, the risk of pest introduction appears
much higher for non-processed commodity than for highly transformed products. Many nature-
based processed final goods are virtually IS free, whereas their raw input is a significant IS
vector. For example, rice processing practices such as polishing, have a lethal effect on insects
like rice weevils (Lucas and Riudavets). This suggests that the potential high risk of weevils
invasions related to rice imports could be negligible for milled rice as compared to paddy rice

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