The Economics and Potential Protectionism of Food Safety Standards and Inspections: An Application to the U.S. Shrimp Market

Abstract

We formally investigate the effects of an inspection system influencing safety of foreign and domestic food products in the domestic market. Consumers purchase domestic and imported food and value safety. Potential protectionism à la Fisher and Serra (2000) can arise: inspection frequency imposed on foreign producers set by a domestic social planner would be higher than the corresponding policy set by a global social planner treating all producers as domestic. The domestic social planner tends to impose most if not all of the inspection on foreign producers, which improves food safety for consumers and limits the production loss for domestic producers. Despite this protectionist component, inspections address a potential consumption externality such as health hazard in the domestic country when unsafe food can enter the country undetected. We then calibrate the analytical framework to the U.S. shrimp market incorporating key stylized facts of this market. Identifying protectionist inspection requires much information on inspection, safety, damages, and costs. We also investigate how to finance the inspection policy from a social-planner perspective. Financing instruments differ between the domestic and international welfare-maximizing objectives.

Something fishy in seafood trade? The relation between tariff and non‐tariff barriers

“…A number of articles have empirically explored food standards as NTBs, and the majority of these articles ask whether standards act as barriers or as catalysts for trade. Empirical evidence on the effect of standards is mixed, with some authors finding positive trade effects (Andersson, 2019; Fiankor et al, 2020; Moenius, 2004; Swann et al, 1996), some finding no effects (Beghin et al, 2013; Chen et al, 2018; Xiong & Beghin, 2012), and others finding that increased standard stringency can impair trade (Beestermöller et al, 2018; Disdier et al, 2008; Disdier & Marette, 2010; Otsuki et al, 2001). Other studies argue that the standards largely redistribute export market shares to exporters who are able to meet the standards as opposed to a general reduction in trade (Jaffee & Henson, 2004; Wang et al, 2002; Zaibet, 2000).…”