Author: Glyn Wittwer
This study uses a multi-country, dynamic quarterly CGE model, GlobeTERM, to estimate the economic impacts of a hypothetical foot and mouth disease outbreak in Australia. State government protocols in response to an outbreak concerning Local Control Areas and disease eradication have local severe short-term economic impacts. However, the national welfare losses arising from the outbreak depend mostly on the duration of trade sanctions by importers of Australian animal products. If an outbreak is contained within several months, and trade sanctions are dropped within a year of the outbreak, the net present value of Australia’s welfare losses may be around $10 billion. If all importers restore Australian access within a year, other than China which delays by 5 years, welfare losses are around $21 billion. In a less likely scenario, in which trade sanctions persist in all trading partners for 5 years after the disease has been eradicated, contrary to international guidelines, welfare losses may exceed $85 billion. Trading partners also suffer welfare losses due to trade sanctions.
JEL classification: C68; R10; N50; Q17
Keywords: CGE modelling; foot and mouth disease; trade sanctions; welfare; CGE modelling
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