Incentive-Based Tariffs and Invasive Pests

Ernie NeffPests, Trade

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The Asian citrus psyllid is an invasive pest that has decimated Florida’s citrus industry.

Incentive-based policies have had success in some industries by helping regulate air quality, control pollution and protect wildlife and fisheries. But two University of Maryland professors in agriculture and resource economics have determined that incentive-based tariffs likely aren’t the answer to controlling invasive pests in imported fruits and vegetables. Erik Lichtenberg and Lars Olson published their findings recently in the Journal of Environmental Economics and Management.

“The goal of an incentive-based policy is to make somebody pay a price for things that they do that impose costs on society (such as pollution), or to subsidize a cost for creating benefits for society that would otherwise be expensive to bring to market (such as vaccination programs),” explains Lichtenberg. “Right now, every shipment into the United States that contains plant materials of some kind has to be inspected. If inspectors find something that might be an invasive pest, they have to act quickly, notify a scientist who can make an assessment, and turn it around within 24 hours because these are perishable commodities. But the idea here was that taxes could incentivize exporters to ensure that their cargoes were cleaner, which would reduce the burden of inspection or even the need for inspections completely.”

To examine this concept, Lichtenberg and Olson developed a statistical model to simulate scenarios and determine the feasibility, possible effects and overall cost to the consumer of an increased tariff on fruit and vegetable imports. They examined 10 years worth of data in their analysis, including information on tariff rates and characteristics of fruit and vegetable shipments such as the type of commodity, country of origin, average commodity value, port of entry, growing season and transportation pathway.

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The researchers did in fact find that higher tariffs were related to a decreased likelihood of finding an invasive pest in a shipment, but this correlation was very small. “We are talking about increasing tariffs 4 to 13 times what they are now to get a measurable impact, and even then the impact is small,” says Lichtenberg. “The changes aren’t sensitive enough to really be a good tactic.”

“But it gets worse,” Lichtenberg adds, “because the majority of fruits and vegetables that come into this country come in without paying any tariff at all because of free trade agreements.”

Lichtenberg and Olson conclude, “There are a lot of places where incentive-based policies like an extra tax is a great idea, but this isn’t one of them.”

See a more complete summary of the research here.

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About the Author
Ernie Neff

Ernie Neff

Senior Correspondent at Large