The Costs and Benefits of Introducing Mandatory Hygiene Regulations

In an idealised model the costs of capital and maintenance and the resulting flow of income benefits over a period of years enables the analyst to produce computations of present values and internal rates of return that summarise the whole investment process in a micro environment. In approaching an industry investment problem like mandatory hygiene regulations with benefits or costs to other entities involved, identifying the appropriate capital and maintenance costs and the industry and non-industry benefits is a giant task. In this paper, we report an attempt to identify the extra costs involved in the introduction of the regulations where industry recorded data is not available, and an attempt to identify industry and non-industry benefits from modelling market effects when countries impose restrictions on exports of NZ meat products. For the latter we employ the GTAP model and examine the saved costs to NZ when countries do not impose import restrictions on hygiene grounds. The problem involves consideration of private and public costs and benefits and the flow of costs and benefits when inadequate data is only available. Although our results are confined to average responses to the hygiene programme, they do give an indication of the overall necessity for embarking on such programmes in today's trading conditions.