Refusing welfare gains: A study of FDA import refusal practices in the United States

Recent research shows that Sanitary and Phytosanitary (SPS) measures can act as barriers to trade, particularly impacting developing countries. This work analyzes the role of FDA import refusals as barriers to trade, particularly identifying their impacts on the US. This paper builds a theoretical framework based on the Specific Factors model in order to show that increased enforcement of SPS measures increases prices and decreases welfare. The analysis finds that on average increases in the probability of refusal have a negative effect at the extensive margin and zero effect at the intensive margin. For some industries, increases in the probability of refusal lead to decreased import values, which indicates welfare losses from this barrier to trade