The great barrier debate

New research to be published in the Australian School of Business Magazine reveals there's a double edge to quarantine restrictions. They may be designed to keep us safe, but at what cost?

Consumers who are grateful to quarantine regulations they perceive as limiting the threat of epidemics such as avian flu or mad cow disease may not realise that biosecurity measures can sometimes be to their economic disadvantage.

In some cases, it is claimed that biosecurity regulations function as de facto trade barriers, protecting a country's producers from competition on the basis of sometimes flimsy scientific evidence. In these cases, consumers effectively pay to subsidise a protected local industry.

The economic cost of quarantine is the subject of a major research project led by Professor of Economics Kevin Fox, the director of the Centre for Applied Economic Research at the University of New South Wales. Working with UNSW PhD student Daniel Bunting and Professor R. Quentin Grafton from the Australian National University, Professor Fox is aiming to estimate the economic impact of biosecurity restrictions such as quarantine, and to use these estimates to formulate informed policy initiatives and an appropriate approach to the quarantine issue.

"There's been a lot of attention on the issue of biosecurity regulations and how they are replacing traditional trade barriers such as tariffs and quotas," says Professor Fox.

"As international trade agreements have moved forward to freer trade there is an increasing use of non-tariff barriers to restrict trade and quarantine is right up there as one of the leading alternatives."

One of the key parts of the study is an analysis of the Australian banana industry, and in particular its behaviour after the cyclone in North Queensland. Australia does not allow the importation of bananas, and consumers who wanted bananas were forced to pay extremely high prices for them in the aftermath of the cyclone, which severely restricted supply at a time when Australia was actually reviewing its policy on banana imports.

The researchers are looking to what happened to banana prices during the shortage and Professor Fox says there are "some interesting results". "It's a possibility that some retailers were then taking advantage of consumer confusion on banana prices, so we are looking at the gap between the farm gate price and the retail price," he says.

The most important aspect of this case, says Professor Fox, is that the Government used quarantine regulations to make a "welfare choice" to keep banana prices high and not let Australian consumers have access to cheaper bananas.