Tariff Escalation and Invasive Species Risk

alone, scientists estimate that about 7,000 invasive species of plants, mammals, birds,
amphibians, reptiles, fish, arthropods, and mollusks are established and cost the economy at least
US$138 billion a year (Pimentel et al.). This estimate is much higher than data provided by The
US Office of Technology Assessment (OTA), which mainly focused on crop damages
(agriculture related costs represent over 90% of the OTA estimation, and over half of Pimentel's
calculation). For agriculture, Perrault et al. range the costs and impacts from invasive species
into six broad categories (crop losses, rangeland value decline, water resource depletion,
livestock disease, genetic contamination, and management and eradication costs), and estimate
that 40% of all insect damages to crops in the US is attributable to non-indigenous species. For
example the rice weevil (Sitophilus Oryzae) is an important crop and stored-grain destroyer that
originated in India. It attacks wheat, corn, oats, rye, barley, sorghum, buckwheat, dried beans,
and cashew nuts.

In sum large externalities are generated when IS are introduced in a new environment.
Aggregate IS risk and externalities are conditioned by the existing trade distortion structure. The
current trade distortions structure exacerbates this risk and costs by favoring imports with higher
IS risk. A reduction in trade distortions will affect the IS risk level and the environmental policy
response to address this risk, be exclusion or eradication efforts.

3. The Model

We use a simple multimarket partial-equilibrium model combining input and output markets in a
small open economy distorted by tariffs and an externality induced by IS.

3.1. Modeling tariff escalation

Suppose that domestic final good DFG is produced from input D and I with a Cobb Douglass
technology, where D and I are perfect substitutes raw inputs and fixed factor K. We denote

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