THREE ESSAYS IN INTERNATIONAL TRADE SPS AGREEMENT VIOLATION AND CONCERNS

This dissertation covers three topics of importance for international trade policy. It consists of three independent essays in the area of trade in biotechnology and regionalization of a disease outbreak. Essay one, through utilization of the Global Trade Analysis Project (GTAP), contributes to the literature by providing a global measurement on the effect that the expanding genetically modified (GM) pipeline has on international trade given the constraint of asynchronous regulations for a new GM event among countries. The model measures the effect of the GM global pipeline on international trade flows between countries, and the effect on trade flows between countries given the unintended presence of GM events in the export of non-GM crops. These measurements are achieved through the development of five simulations for the following agriculture goods: maize, soybeans, canola, wheat and rice. The simulation results indicate that asynchronicity does affect trade flows on a global level. However, society is better off overall with additional GM events on the market, even when asynchronicity is present and large, as the increase in trade flow is greater from the new GM events than the reduction in trade flow caused by asynchronicity. Essay two, through the application of a real options model, evaluates the investment risk for a biotechnology firm that aspires to enter a highly regulated European Union (EU) market for genetically modified products. The regulatory (political) risk is captured as uncertainty that can influence the optimal decision of the investment firm. The findings in this thesis indicate that the presence of political factors in the EU decision process for approving new GM varieties influences the exporter’s decision who wants to export a safe GM product into the EU market. As result exporter postpones their decision to enter the EU market into the future and reduces the level of sunk cost they are willing to invest to enter the market. However, continually postponing the investment into the future can lead to the investment never occurring. The final outcome is that the presence of political factors in the decision approval process slows the growth of the biotechnology industry and constrains the accessibility of this technology for developing countries. Essay three, through an application of a partial equilibrium model, analyses the regionalization concept accounting for the incentive for commercial and casual smuggling. The essay evaluates the model with the risk of being caught and the risk of not being caught. If there is no risk of being caught the incentive to smuggle will exist as long as the price minus the smuggling costs in the non-infected area exceeds that of the infected area. If we consider the risk of being caught and fined by the governing authorities, then the incentive to smuggle will depend on the probability of being caught. The higher the probability of being caught the lower the incentive for smuggling will be, given the losses in revenue in the non-infected market and the additional cost of being fined. Casual smuggling depends on the distance the consumer has to travel to the low priced region, the cost of transportation and the easiness of avoiding the authorities. Two policies were discussed in this essay: price support, and enforcement and punishment that were applied to commercial smuggling with and without risk, and to casual smuggling. Price support was evaluated as a more appropriate policy as it is difficult to estimate the appropriate level of enforcement and punishment under that type of policy that would bring smuggling to zero