Study Shows Tariffs are Large Block to Export Demand
A study conducted at Iowa State University concludes that tariffs are the most important determinant for exporting seed corn from the U.S. The study, "Determinants of World Demand for U.S. Corn Seeds: The Role of Trade Costs" will be in an upcoming edition of Choices, an online peer-reviewed magazine of the AAEA (Agricultural and Applied Economics Association). Unlike most research journals, this version is for business readers interested in the policy and management of agriculture, the food industry, natural resources, rural communities, and the environment.
The study by Sampath Jayasinghe, John C. Beghin, and GianCarlo Moschini has been published by ISU's Center for Agriculture and Rural Development (CARD).
The researchers showed that all trade costs matter to export sales, but tariffs matter most, followed by distance and SPS (sanitary and phytosanitary) regulations.
The researchers focused on the SPS regulations in their study since little research had been done on the effects of SPS policies such as seed safety. Seeds are well-known vectors of invasive pests and species propagation, and therefore come under critical scrutiny. Typical SPS regulations include quarantines, inspections, tests, certificates, fumigation and outright bans.
With the results, the researchers say their "analysis has relevant policy implications."
"Tariffs on agricultural goods remain important, although they have moderately decreased with the Uruguay round of the World Trade Organization and with regional trade agreements. Nevertheless, the high response of corn seed exports to tariffs suggests that tariffs remain an important barrier that could be further reduced.
" The importance of trade costs induced by SPS regulations raises the issue of sorting
which of these regulations are legitimate, that is, science-based, and which are not and could be eliminated. Distance is irreducible of course, but cost associated with distance could be reduced, which could lead to new trade."
September 2010 International Trade Briefing Newsletter
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