Import Restrictions in the Presence of a Health Risk: An Illustration Using FMD

We present a simple model linking infection risk from imports to a tariff. The risk causes the exporter of the infected product to face a higher tariff than would otherwise be the case. A numerical example is developed for U.S. beef imports from nations with Foot-and-Mouth Disease (FMD). The additional tariffs are sensitive to the specification of risk and the expected magnitude of loss due to an FMD outbreak. For a low risk of importing FMD, the tariffs levied against the exporter of FMD-infected beef are not prohibitive but become so as the risk or expected output loss rises. Copyright 1998, Oxford University Press.