- Email: [email protected]
A game model of international trade, transport costs, invasive species, and protocol compliance
Transportation Research Part D 46 (2016) 267–272
Contents lists available at ScienceDirect
Transportation Research Part D journal homepage: www.elsevier.com/locate/trd
A game model of international trade, transport costs, invasive species, and protocol compliance q Amitrajeet A. Batabyal a,⇑, Peter Nijkamp b,c a
Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623-5604, USA Department of Spatial Economics, VU University, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands c A. Mickiewicz University, Poznan, Poland b
a r t i c l e
i n f o
Article history:
Keywords: Compliance International trade Invasive species Transport cost Porter hypothesis
a b s t r a c t We study the duopolistic interaction between two monopolists located in two different countries who sell an imperfect substitute good in two markets. The traded good is transported between the two nations on ships using solid wood packing materials (SWPMs) and hence the presence of one or more invasive species is a problem. We use a game model to analyze this interaction in three steps. First, we study the benchmark case of autarky or no trade between the two nations. Second, we introduce transport costs and then study the effect of free trade on the profits of the two monopolists. Finally, we suppose that invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. We model this compliance by increasing the transport costs associated with trade and then demonstrate that a version of the so called Porter hypothesis holds. In other words, we show that compliance with a cost increasing environmental protocol can give rise to higher profits for the two monopolists under consideration. Ó 2016 Elsevier Ltd. All rights reserved.
Introduction Overview The fact that invasive species1 have been and continue to be introduced into one part of the world from another is now well known. Along with this recognition, new findings have emerged about the economic costs of such introductions, particularly the accidental ones. In this regard, consider the recent results obtained by Pimentel et al. (2005). Limiting their attention only to the United States (US), these researchers claim that the total costs stemming from the environmental damage and losses caused by invasive species are almost $120 billion per year. In addition, there are approximately 50,000 non-native species in the US and this number is increasing over time. Limiting attention to maritime international trade, the main subject of this paper, there are two key ways in which invasive species have been accidentally carried from one part of the world to another. First, many invasive species have been introduced into a country, often inadvertently, by ships discarding their ballast water. Cargo ships usually carry ballast water
q We thank an anonymous reviewer and the Editor-in-Chief H. Oliver Gao for their helpful comments on a previous version of this paper. In addition, Batabyal acknowledges sabbatical funding from RIT and financial support from the Gosnell endowment, also at RIT. The usual disclaimer applies. ⇑ Corresponding author. E-mail addresses: [email protected] (A.A. Batabyal), [email protected] (P. Nijkamp). 1 Invasive species are also known as alien or non-native species. In the remainder of this paper, we shall use these three terms interchangeably.
http://dx.doi.org/10.1016/j.trd.2016.04.001 1361-9209/Ó 2016 Elsevier Ltd. All rights reserved.
268
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
in order to increase vessel stability when they are not carrying full loads. When these ships come into a seaport, this ballast water must be jettisoned before cargo can be loaded. This manner of species introductions is important, and Nunes and Van den Bergh (2004), Yang and Perakis (2004), and Batabyal and Beladi (2006) have all studied the problem of managing alien species that have been introduced into a particular nation by means of the discharge of ballast water. The second way in which alien species have been introduced into a particular country is by means of the solid wood packing materials (SWPMs) that are routinely used to secure international cargo on ships. These materials are frequently constructed from poor quality wood that is often from trees damaged or killed by pests. As a result, bark inclusions in the SWPMs increase the likelihood of one or more insects and it is now believed that alien insects such as the emerald ash borer, the Asian longhorn beetle, and the Sirex noctilio woodwasp were all accidentally introduced into the US via SWPMs. In addition, a joint report from the United States Department of Agriculture (USDA), the Animal and Plant Health Inspection Service (APHIS), and the United States Forest Service (USFS) has noted that nearly 51.8% of maritime shipments contain SWPMs and that infection rates for SWPMs are substantial (USDA, APHIS, USFS, 2000, p. 25). For example, inspections of wooden spools from China revealed infection rates between 22% and 24%, and inspections of braces for granite blocks imported into Canada were found to hold live insects 32% of the time (USDA, APHIS, USFS, 2000, pp. 27–28). Given the undeniable link between maritime trade and the transport of invasive species from nations where they are native to nations where they are not, economists have now begun to systematically analyze this maritime trade/invasive species introductions nexus. We now briefly review this literature. Review of the literature Batabyal (2006) constructs a queuing theoretic model of maritime trade and seaport inspections with one importing and two exporting nations. Using this model, he derives a ratio criterion that specifies a condition under which it makes sense for a seaport manager in the importing nation to grant favorable regulatory treatment to the imports from one or the other exporting nation. Tu et al. (2008) show that an escalation in the use of tariffs increases the likelihood of invasive species introductions by biasing trade flows toward increased trade in primary commodities and decreased trade in processed products. Merel and Carter (2008) show that when a cleaning technology is available to foreign exporters and the optimal level of import inspections is both relatively inexpensive and strictly positive, a penalty levied on contaminated imports is likely to be a better policy than a simple tariff designed to reduce the overall volume of trade. Batabyal and Beladi (2009) use a trade model with four different market structures and identify conditions in which it makes sense to use tariffs to regulate invasive species and conditions in which it does not. Ameden et al. (2009) study an agent based model of border enforcement for invasive species management. They contend that such a model can generate policy relevant findings about the behavior of an importing firm and the conditions in which an increase in enforcement can lead to a significant reduction in the risk from invasive species and the related crop damages. Margolis and Shogren (2012) use a political economy model of policy formation to demonstrate that it may be counterproductive to prefer policies that are designed to make imports contaminated with invasive species safer over policies that are explicitly designed to discourage imports. Lawley (2013) estimates the parameters of a structural model and points out that a biosecurity import restriction such as US border inspections for foreign pests and diseases can also be effectively used to serve as a protectionist non-tariff barrier. Finally, Springborn (2014) constructs an adaptive management model that is designed to make decisions under environmental uncertainty. He shows that when risk aversion increases, the relative value of adaptive management goes up and hence this can increase the rate of what he calls ‘‘exploratory actions.” The papers discussed above in this section have certainly advanced our understanding of many aspects of the nexuses between international trade and invasive species management. Even so, there is very little theoretical research on the ways in which the presence of invasive species and the required compliance with an environmental protocol influences the profits of exporting and importing firms. Given this lacuna in the literature, we study the duopolistic interaction between two monopolists located in two different countries who sell an imperfect substitute good in two markets. The traded good is transported between the two nations on ships using SWPMs and therefore the presence of one or more invasive species is a problem. We use a static game model to analyze this interaction in three steps. First, we study the benchmark case of autarky or no trade between the two nations. Second, we introduce transport costs and then study the effect of free trade on the profits of the two monopolists. Finally, we suppose that invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. We model this compliance by increasing the transport costs associated with trade and then demonstrate that a version of the so called Porter hypothesis holds.2 Put differently, we show that compliance with a cost increasing environmental protocol can give rise to higher profits for the two monopolists under consideration. To the best of our knowledge, this is the first theoretical 2 As noted by Jaffe and Palmer (1997) and Lanoie et al. (2011), there are many versions of the so called Porter hypothesis which was initially stated in Porter (1991) and in Porter and Van der Linde (1995). One version holds that environmental regulations will stimulate environmental innovations. A second version maintains that properly designed environmental regulations need not reduce the profits of compliant firms. In other words, such regulations may actually make compliant firms efficient and hence more competitive. Clearly, if this last possibility arises then a compliant firm’s profits will increase and this is the version of the Porter hypothesis that we work with in the present paper.
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
269
demonstration of the validity of a particular version of the Porter hypothesis in the context of international trade and invasive species management. The remainder of this paper is organized as follows. The section ‘The game model’ provides a detailed description of the static game model of two monopolists located in two different nations. The section ‘Autarky’ analyzes the benchmark case of no trade between the two nations. The section ‘Free trade’ introduces transport costs and then examines the impact of free trade on the profits of the two monopolistic firms. The section ‘Free trade with invasive species’ first focuses on the case where invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. The cost of complying with this protocol is modeled by increasing the transport costs associated with trade. Next, this section demonstrates that the version of the so called Porter hypothesis discussed in footnote 2 holds. The section ‘Conclusion’ concludes and then offers two suggestions for extending the research described in this paper. The game model Consider an aggregate economy made up of two countries called Home and Foreign. We denote Home by H and Foreign by F. There is a monopolistic firm in Home and one in Foreign and these two firms produce and sell an imperfect substitute good. Let firm 1 be located in Home and firm 2 in Foreign. Let qij ; i 2 f1; 2g and j 2 {H, F} denote the quantity of the relevant good that firm i sells in country j. Therefore, it is clear that qi ¼ qHi þ qFi is the total quantity of the relevant good produced by firm i 2 {1, 2}. Similarly, q j ¼ q1j þ q2j is the total quantity of the pertinent good that is sold in country j 2 {H, F}. The demand for the relevant good in the two countries H and F is given by the following function j
p j ¼ a bq ¼ 90 q j ;
j 2 fH; Fg:
ð1Þ
The cost of producing the good under consideration for each firm is given by a function that takes the form
ci ðqi Þ ¼ cqi ¼ 10qi ;
i 2 f1; 2g:
ð2Þ
Clearly, the demand and the cost functions in our static game model given in Eqs. (1) and (2) are linear. Therefore, if we work with the model in full generality and do not allow the demand (a, b) and the cost (c) parameters to take on specific numerical values then it will be impossible to obtain any interpretable results. This is why we have chosen to work with the triple (a, b, c) = (90, 1, 10). So, while we recognize that this modeling approach involves some loss of generality because (a, b, c) are not arbitrary, the chosen approach does allow us to obtain concrete results that make economic sense. In addition, we note that from a qualitative standpoint, our analysis is general in the sense that this kind of analysis can be usefully conducted for any positive values of the triple (a, b, c). We now proceed to analyze the case of autarky or no trade between Home and Foreign. Autarky In the absence of international trade, the two monopolist firms sell only in their respective domestic markets. In symbols, this means that qH2 ¼ qF1 ¼ 0 and we have to determine the values of qH1 and qF2 . Recall that each of the two firms is a monopolist in its own country. Therefore, each firm solves
max ð90 qij Þqij 10qij ; j
ð3Þ
fqi P0g
where, in the two cases of interest, we have either (i, j) = (1, H) or (i, j) = (2, F). The first order necessary condition for an optimum and the two optimal quantity amounts are
90 2qij 10 ¼ 0 ) qH1 ¼ qF2 ¼ 40:
ð4Þ
Now, substituting qH2 ¼ qF1 ¼ 0 and qH1 ¼ qF2 ¼ 40 into the two profit functions given in Eq. (3), we see that when there is no trade between Home and Foreign, the maximized profit for the two monopolistic firms from domestic sales only equals $1600.3 How do these profit numbers change when we introduce free trade between these two nations under study? We now proceed to answer this question. Free trade Because there is free trade, the two firms under study now interact in a larger market consisting of two nations and therefore engage in duopolistic competition. In this regard, we suppose that transporting the output of the firm in Home (Foreign) 3 We have designated the profit in dollars. Even so, it should be clear to the reader that our analysis is independent of the precise monetary unit that is chosen to represent the profit.
270
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
to Foreign (Home) for consumption there is costly. Therefore, if firm i sells quantity qij in the other country, i.e., if firm 1 sells in Foreign or if firm 2 sells in Home, then we assume that the transport costs are given by4
cti ðqij Þ ¼ tqij ¼ 10qij ;
i 2 f1; 2g:
ð5Þ
In this scenario, each of the two firms chooses a pair of quantities ðqHi ; qFi Þ; i ¼ 1; 2 simultaneously. Therefore, a profile of actions consists of four quantity choices. Our task now is to model this duopolistic interaction as a normal form game and to then compute the Nash equilibrium of this game. The game we are studying has two players or firms i = {1, 2} and each of these two firms selects a strategy that consists of two non-negative quantities (qHi P 0; qFi P 0). Therefore, we can write the profit functions of the two firms as
p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH1 þ ð90 qF1 qF2 ÞqF1 10ðqH1 þ qF1 Þ 10qF1 ;
ð6Þ
p2 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH2 þ ð90 qF1 qF2 ÞqF2 10ðqH2 þ qF2 Þ 10qH2 :
ð7Þ
and
On the right-hand-side (RHS) of Eqs. (6) and (7), the first term denotes the firm’s profit in the Home market, the second term denotes the firm’s profit in the Foreign market, the third term is the total cost of production, and the fourth and last term represents the transport cost. From the standpoint of firm 1, let (qH2 ; qF2 ) denote this firm’s belief about what firm 2 will produce in the Home and the Foreign markets. Then, the two choice variables for firm 1 are qH1 and qF1 and the first order necessary conditions to this firm’s profit maximization problem are given by
@ p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ 90 qH2 2qH1 10 ¼ 0; @qH1
ð8Þ
@ p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ 90 qF2 2qF1 20 ¼ 0: @qF1
ð9Þ
and
The RHSs of Eqs. (8) and (9) can be simplified further to give us the two parts of firm 1’s best response function. Doing this, we get
qH1 ðqH2 Þ ¼
80 qH2 ; 2
ð10Þ
qF1 ðqF2 Þ ¼
70 qF2 : 2
ð11Þ
and
From the structure of the game between the two firms that we have been analyzing thus far, it should be clear to the reader that firm 2’s goal is symmetric to that of firm 1. Therefore, some thought tells us that the two parts of firm 2’s best response function are given by
qH2 ðqH1 Þ ¼
70 qH1 ; 2
ð12Þ
qF2 ðqF1 Þ ¼
80 qF1 : 2
ð13Þ
and
The Nash equilibrium in pure strategies that we seek is given by a profile of strategies or outputs (qH1 ; qF1 ; qH2 ; qF2 ) such that Eqs. (10)–(13) are satisfied simultaneously. Now, solving Eqs. (10) and (12) simultaneously, we get (qH1 ; qH2 ) = (30, 20). Similarly, solving Eqs. (11) and (13) concurrently, we get (qF1 ; qF2 ) = (20, 30). Putting these two pieces of information together, the unique5 Nash equilibrium quantities produced by the two firms under study are (qH1 ; qH2 ; qF1 ; qF2 ) = (30, 20, 20, 30). Finally, substituting (qH1 ; qH2 ; qF1 ; qF2 ) = (30, 20, 20, 30) into the two profit functions given in Eqs. (6) and (7), it is straightforward to verify that when there is free trade with transport costs between Home and Foreign, the maximized profit for the two monopolistic firms equals $1300. Our last task in this paper is to analyze free trade between Home and Foreign when invasive species are present in the SWPM that is used to pack the good that is shipped between these two nations. 4 Also see the discussion in the paragraph immediately following Eq. (2). See Beladi and Oladi (2011) for an alternate perspective on the modeling of transport costs. 5 To see why this Nash equilibrium is unique, note that there are no interactions between the Home and the Foreign markets in the pertinent best response H F F functions. In this regard, see, for instance, Eqs. (10) and (11). We see that qH 1 depends only on q2 and, similarly, q1 depends only on q2 .
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
271
Free trade with invasive species Suppose that before the game analyzed in the section ‘Free trade’ is played by the two firms, firm 1 in Home discovers that the SWPM used to pack and ship the good it produces to Foreign contains one or more invasive species. As noted in the section ‘Introduction’, actual examples of such pests that have been introduced into the United States accidentally via SWPMs include, but are not limited to, the emerald ash borer and the Asian longhorn beetle. Given its discovery, firm 1 is required to report this matter to an appropriate international body and to comply with an environmental protocol that is designed to prevent the spread of invasive species via SWPMs. A real world example of such a protocol would be the International Standards for Phytosanitary Measures (ISPM15) which is an international standard adopted by the International Plant Protection Convention (IPPC). Compliance with a protocol such as the ISPM15 requires the SWPM used in international trade to either be treated with heat or to be fumigated. After this has been done, an IPPC logo is affixed on the SWPM and the country in which the treatment occurred is also noted.6 We model the need to comply with an environmental protocol such as the ISPM15 by supposing that this compliance increases the transport costs faced by the two firms in Home and in Foreign. Specifically, the transport costs faced by the two firms are now given not by Eq. (5) but instead by
cProtocol ðqij Þ ¼ t Protocol qij ¼ 40qij ; i
i 2 f1; 2g:
ð14Þ
The question that we now want to answer concerns the impact that this increase in transport costs has on the profits of the two firms under study. In this regard, note that intuitively speaking, a monopolist—in either country—would never willingly take any actions that would increase its overall costs. Therefore, this point alone suggests that the two monopolists would prefer non-compliance to compliance with an environmental protocol such as the ISPM15. However, in the game that we are analyzing, there is a second and strategic point to contend with because the higher transport costs will tend to tone down the competition between the two firms. Let us now investigate the simultaneous impact of these two points. The profit functions of the two firms with the higher transport costs are given by
p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH1 þ ð90 qF1 qF2 ÞqF1 10ðqH1 þ qF1 Þ 40qF1 ;
ð15Þ
p2 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH2 þ ð90 qF1 qF2 ÞqF2 10ðqH2 þ qF2 Þ 40qH2 :
ð16Þ
and
Once again, following the logic of the analysis conducted in the section ‘Free trade’, we can show that there are four equations that together describe the best response functions of the Home and the Foreign firms. Specifically, the two equations for the Home firm are
qH1 ðqH2 Þ ¼
80 qH2 ; 2
ð17Þ
qF1 ðqF2 Þ ¼
40 qF2 : 2
ð18Þ
and
Similarly, the two equations for the Foreign firm are
qH2 ðqH1 Þ ¼
40 q1A ; 2
ð19Þ
qF2 ðqF1 Þ ¼
80 qF1 : 2
ð20Þ
and
Solving Eqs. (17) and (19) simultaneously, we get (qH1 ; qH2 ) = (40, 0). Similarly, solving Eqs. (18) and (20) concurrently, we get (qF1 ; qF2 ) = (0, 40). Putting these two pieces of information together, the unique Nash equilibrium quantities produced by the two firms with higher transport costs stemming from the need to comply with an environmental protocol are (qH1 ; qH2 ; qF1 ; qF2 ) = (40, 0, 0, 40). Finally, substituting (qH1 ; qH2 ; qF1 ; qF2 ) = (40, 0, 0, 40) into the two profit functions given in Eqs. (15) and (16), it is straightforward to verify that when there is free trade with higher transport costs between Home and Foreign, the maximized profit for the two monopolistic firms equals $1600. Note that this value of the maximized profit for the two firms is identical to the maximized profit we computed in the section ‘Autarky’ in the no trade scenario between Home and Foreign. So, there are two ways to interpret the result that we have just obtained in the preceding paragraph. First, compliance with the environmental protocol effectively ‘‘kills off” the duopolistic or international competition between the two firms in Home and Foreign. Second and more importantly, compliance with an environmental protocol need not reduce firm prof6
See Leung et al. (2014) for additional details on these and related matters.
272
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
its. In fact, in the case that we have analyzed, such compliance actually raises firm profits. This is the sense in which we contend that the Porter hypothesis—see footnote 2—is valid. To conclude this discussion, we emphasize that we are not saying that the Porter hypothesis is always valid or, for that matter, that it is always invalid. What we are saying is that there exist theoretical circumstances of the sort analyzed in this paper in which this hypothesis is valid. Conclusions In this paper, we studied the duopolistic interaction between two monopolists located in two different countries who sold an imperfect substitute good in two markets. The traded good was transported between the two nations on ships using SWPMs and thus the presence of one or more invasive species was a problem. We used a static game model to analyze this interaction in three steps. First, we studied the benchmark case of autarky or no trade between the two nations. Second, we introduced transport costs and then studied the impact of free trade on the profits of the two monopolists. Finally, we supposed that invasive species were present in the SWPMs. This fact required compliance with an environmental protocol. We modeled this compliance by increasing the transport costs associated with free trade and then demonstrated that a version of the so called Porter hypothesis held. Put differently, we showed that compliance with a cost increasing environmental protocol gave rise to higher profits for the two monopolists under study. The analysis in this paper can be extended in a number of directions. In what follows, we suggest three possible extensions of this paper’s research. First, it would be useful to introduce uncertainty into the model and to study a scenario in which the presence of invasive species in the SWPMs is a probabilistic and not a deterministic occurrence. Second, it would be helpful to see how the existence of one or more trade policy instruments such as tariffs affects the protocol compliance decision and the subsequent impact on firm profits. Finally, it would be interesting to compare a scenario in which the accidental introductions of invasive species occur via the SWPMs with an alternate scenario in which such introductions occur from the dumping of ballast water by ships. Studies of international trade and invasive species management that incorporate these aspects of the problem into the analysis will provide additional insights into a management problem that has significant economic and ecological ramifications. References Ameden, H.A., Boxall, P.C., Cash, S.B., Vickers, D.A., 2009. An agent-based model of border enforcement for invasive species management. Can. J. Agric. Econ. 57, 481–496. Batabyal, A.A., 2006. A rationale for the differential regulatory treatment of imports when invasive species are a potential problem. Stud. Reg. Sci. 36, 179– 187. Batabyal, A.A., Beladi, H., 2006. International trade and biological invasions: a queuing theoretic analysis of the prevention problem. Eur. J. Oper. Res. 170, 758–770 http://ssrn.com/abstract=569842. Batabyal, A.A., Beladi, H., 2009. Trade, the damage from alien species, and the effects of protectionism under alternate market structures. J. Econ. Behav. Org. 70, 389–401. Beladi, H., Oladi, R., 2011. An elementary proposition on technical progress and non-traded goods. J. Math. Econ. 47, 68–71. Jaffe, A.B., Palmer, K., 1997. Environmental regulation and innovation: a panel data study. Rev. Econ. Stat. 79, 610–619. Lanoie, P., Laurent-Lucchetti, J., Johnstone, N., Ambec, S., 2011. Environmental policy, innovation, and performance: new insights on the Porter hypothesis. J. Econ. Manage. Strat. 20, 803–842. Lawley, C., 2013. Protectionism versus risk in screening for invasive species. J. Environ. Econ. Manage. 65, 438–451. Leung, B., Springborn, M.R., Turner, J.A., Brockerhoff, E.G., 2014. Pathway-level risk analysis: the net present value of an invasive species policy in the US. Front. Ecol. Environ. 12, 273–279. Margolis, M., Shogren, J.F., 2012. Disguised protectionism, global trade rules, and alien invasive species. Environ. Resour. Econ. 51, 105–118. Merel, P.R., Carter, C.A., 2008. A second look at managing import risk from invasive species. J. Environ. Econ. Manage. 56, 286–290. Nunes, P.A.L.D., Van den Bergh, J.C.J.M., 2004. Can people value protection against invasive marine species? Evidence from a joint TC-CV survey in the Netherlands. Environ. Resour. Econ. 28, 517–532. Pimentel, D., Zuniga, R., Morrison, D., 2005. Update on the environmental and economic costs associated with alien-invasive species in the United States. Ecol. Econ. 52, 273–288. Porter, M., 1991. American green strategy. Sci. Am. 264, 168. Porter, M., Van der Linde, C., 1995. Towards a new conception of environment-competitiveness relationship. J. Econ. Perspect. 9, 97–118. Springborn, M.R., 2014. Risk aversion and adaptive management: insights from a multi-armed bandit model of invasive species risk. J. Environ. Econ. Manage. 68, 226–242. Tu, A.T., Beghin, J., Gozlan, E., 2008. Tariff escalation and invasive species damages. Ecol. Econ. 67, 619–629. USDA, APHIS, USFS, 2000. Pest Risk Assessment for Importation of Solid Wood Packing Materials into the United States.. Yang, Z., Perakis, A.N., 2004. Multiattribute decision analysis of mandatory ballast water treatment measures in the US Great Lakes. Transport. Res. Part D 9, 81–86.
Contents lists available at ScienceDirect
Transportation Research Part D journal homepage: www.elsevier.com/locate/trd
A game model of international trade, transport costs, invasive species, and protocol compliance q Amitrajeet A. Batabyal a,⇑, Peter Nijkamp b,c a
Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623-5604, USA Department of Spatial Economics, VU University, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands c A. Mickiewicz University, Poznan, Poland b
a r t i c l e
i n f o
Article history:
Keywords: Compliance International trade Invasive species Transport cost Porter hypothesis
a b s t r a c t We study the duopolistic interaction between two monopolists located in two different countries who sell an imperfect substitute good in two markets. The traded good is transported between the two nations on ships using solid wood packing materials (SWPMs) and hence the presence of one or more invasive species is a problem. We use a game model to analyze this interaction in three steps. First, we study the benchmark case of autarky or no trade between the two nations. Second, we introduce transport costs and then study the effect of free trade on the profits of the two monopolists. Finally, we suppose that invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. We model this compliance by increasing the transport costs associated with trade and then demonstrate that a version of the so called Porter hypothesis holds. In other words, we show that compliance with a cost increasing environmental protocol can give rise to higher profits for the two monopolists under consideration. Ó 2016 Elsevier Ltd. All rights reserved.
Introduction Overview The fact that invasive species1 have been and continue to be introduced into one part of the world from another is now well known. Along with this recognition, new findings have emerged about the economic costs of such introductions, particularly the accidental ones. In this regard, consider the recent results obtained by Pimentel et al. (2005). Limiting their attention only to the United States (US), these researchers claim that the total costs stemming from the environmental damage and losses caused by invasive species are almost $120 billion per year. In addition, there are approximately 50,000 non-native species in the US and this number is increasing over time. Limiting attention to maritime international trade, the main subject of this paper, there are two key ways in which invasive species have been accidentally carried from one part of the world to another. First, many invasive species have been introduced into a country, often inadvertently, by ships discarding their ballast water. Cargo ships usually carry ballast water
q We thank an anonymous reviewer and the Editor-in-Chief H. Oliver Gao for their helpful comments on a previous version of this paper. In addition, Batabyal acknowledges sabbatical funding from RIT and financial support from the Gosnell endowment, also at RIT. The usual disclaimer applies. ⇑ Corresponding author. E-mail addresses: [email protected] (A.A. Batabyal), [email protected] (P. Nijkamp). 1 Invasive species are also known as alien or non-native species. In the remainder of this paper, we shall use these three terms interchangeably.
http://dx.doi.org/10.1016/j.trd.2016.04.001 1361-9209/Ó 2016 Elsevier Ltd. All rights reserved.
268
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
in order to increase vessel stability when they are not carrying full loads. When these ships come into a seaport, this ballast water must be jettisoned before cargo can be loaded. This manner of species introductions is important, and Nunes and Van den Bergh (2004), Yang and Perakis (2004), and Batabyal and Beladi (2006) have all studied the problem of managing alien species that have been introduced into a particular nation by means of the discharge of ballast water. The second way in which alien species have been introduced into a particular country is by means of the solid wood packing materials (SWPMs) that are routinely used to secure international cargo on ships. These materials are frequently constructed from poor quality wood that is often from trees damaged or killed by pests. As a result, bark inclusions in the SWPMs increase the likelihood of one or more insects and it is now believed that alien insects such as the emerald ash borer, the Asian longhorn beetle, and the Sirex noctilio woodwasp were all accidentally introduced into the US via SWPMs. In addition, a joint report from the United States Department of Agriculture (USDA), the Animal and Plant Health Inspection Service (APHIS), and the United States Forest Service (USFS) has noted that nearly 51.8% of maritime shipments contain SWPMs and that infection rates for SWPMs are substantial (USDA, APHIS, USFS, 2000, p. 25). For example, inspections of wooden spools from China revealed infection rates between 22% and 24%, and inspections of braces for granite blocks imported into Canada were found to hold live insects 32% of the time (USDA, APHIS, USFS, 2000, pp. 27–28). Given the undeniable link between maritime trade and the transport of invasive species from nations where they are native to nations where they are not, economists have now begun to systematically analyze this maritime trade/invasive species introductions nexus. We now briefly review this literature. Review of the literature Batabyal (2006) constructs a queuing theoretic model of maritime trade and seaport inspections with one importing and two exporting nations. Using this model, he derives a ratio criterion that specifies a condition under which it makes sense for a seaport manager in the importing nation to grant favorable regulatory treatment to the imports from one or the other exporting nation. Tu et al. (2008) show that an escalation in the use of tariffs increases the likelihood of invasive species introductions by biasing trade flows toward increased trade in primary commodities and decreased trade in processed products. Merel and Carter (2008) show that when a cleaning technology is available to foreign exporters and the optimal level of import inspections is both relatively inexpensive and strictly positive, a penalty levied on contaminated imports is likely to be a better policy than a simple tariff designed to reduce the overall volume of trade. Batabyal and Beladi (2009) use a trade model with four different market structures and identify conditions in which it makes sense to use tariffs to regulate invasive species and conditions in which it does not. Ameden et al. (2009) study an agent based model of border enforcement for invasive species management. They contend that such a model can generate policy relevant findings about the behavior of an importing firm and the conditions in which an increase in enforcement can lead to a significant reduction in the risk from invasive species and the related crop damages. Margolis and Shogren (2012) use a political economy model of policy formation to demonstrate that it may be counterproductive to prefer policies that are designed to make imports contaminated with invasive species safer over policies that are explicitly designed to discourage imports. Lawley (2013) estimates the parameters of a structural model and points out that a biosecurity import restriction such as US border inspections for foreign pests and diseases can also be effectively used to serve as a protectionist non-tariff barrier. Finally, Springborn (2014) constructs an adaptive management model that is designed to make decisions under environmental uncertainty. He shows that when risk aversion increases, the relative value of adaptive management goes up and hence this can increase the rate of what he calls ‘‘exploratory actions.” The papers discussed above in this section have certainly advanced our understanding of many aspects of the nexuses between international trade and invasive species management. Even so, there is very little theoretical research on the ways in which the presence of invasive species and the required compliance with an environmental protocol influences the profits of exporting and importing firms. Given this lacuna in the literature, we study the duopolistic interaction between two monopolists located in two different countries who sell an imperfect substitute good in two markets. The traded good is transported between the two nations on ships using SWPMs and therefore the presence of one or more invasive species is a problem. We use a static game model to analyze this interaction in three steps. First, we study the benchmark case of autarky or no trade between the two nations. Second, we introduce transport costs and then study the effect of free trade on the profits of the two monopolists. Finally, we suppose that invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. We model this compliance by increasing the transport costs associated with trade and then demonstrate that a version of the so called Porter hypothesis holds.2 Put differently, we show that compliance with a cost increasing environmental protocol can give rise to higher profits for the two monopolists under consideration. To the best of our knowledge, this is the first theoretical 2 As noted by Jaffe and Palmer (1997) and Lanoie et al. (2011), there are many versions of the so called Porter hypothesis which was initially stated in Porter (1991) and in Porter and Van der Linde (1995). One version holds that environmental regulations will stimulate environmental innovations. A second version maintains that properly designed environmental regulations need not reduce the profits of compliant firms. In other words, such regulations may actually make compliant firms efficient and hence more competitive. Clearly, if this last possibility arises then a compliant firm’s profits will increase and this is the version of the Porter hypothesis that we work with in the present paper.
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
269
demonstration of the validity of a particular version of the Porter hypothesis in the context of international trade and invasive species management. The remainder of this paper is organized as follows. The section ‘The game model’ provides a detailed description of the static game model of two monopolists located in two different nations. The section ‘Autarky’ analyzes the benchmark case of no trade between the two nations. The section ‘Free trade’ introduces transport costs and then examines the impact of free trade on the profits of the two monopolistic firms. The section ‘Free trade with invasive species’ first focuses on the case where invasive species are present in the SWPMs. This fact requires compliance with an environmental protocol. The cost of complying with this protocol is modeled by increasing the transport costs associated with trade. Next, this section demonstrates that the version of the so called Porter hypothesis discussed in footnote 2 holds. The section ‘Conclusion’ concludes and then offers two suggestions for extending the research described in this paper. The game model Consider an aggregate economy made up of two countries called Home and Foreign. We denote Home by H and Foreign by F. There is a monopolistic firm in Home and one in Foreign and these two firms produce and sell an imperfect substitute good. Let firm 1 be located in Home and firm 2 in Foreign. Let qij ; i 2 f1; 2g and j 2 {H, F} denote the quantity of the relevant good that firm i sells in country j. Therefore, it is clear that qi ¼ qHi þ qFi is the total quantity of the relevant good produced by firm i 2 {1, 2}. Similarly, q j ¼ q1j þ q2j is the total quantity of the pertinent good that is sold in country j 2 {H, F}. The demand for the relevant good in the two countries H and F is given by the following function j
p j ¼ a bq ¼ 90 q j ;
j 2 fH; Fg:
ð1Þ
The cost of producing the good under consideration for each firm is given by a function that takes the form
ci ðqi Þ ¼ cqi ¼ 10qi ;
i 2 f1; 2g:
ð2Þ
Clearly, the demand and the cost functions in our static game model given in Eqs. (1) and (2) are linear. Therefore, if we work with the model in full generality and do not allow the demand (a, b) and the cost (c) parameters to take on specific numerical values then it will be impossible to obtain any interpretable results. This is why we have chosen to work with the triple (a, b, c) = (90, 1, 10). So, while we recognize that this modeling approach involves some loss of generality because (a, b, c) are not arbitrary, the chosen approach does allow us to obtain concrete results that make economic sense. In addition, we note that from a qualitative standpoint, our analysis is general in the sense that this kind of analysis can be usefully conducted for any positive values of the triple (a, b, c). We now proceed to analyze the case of autarky or no trade between Home and Foreign. Autarky In the absence of international trade, the two monopolist firms sell only in their respective domestic markets. In symbols, this means that qH2 ¼ qF1 ¼ 0 and we have to determine the values of qH1 and qF2 . Recall that each of the two firms is a monopolist in its own country. Therefore, each firm solves
max ð90 qij Þqij 10qij ; j
ð3Þ
fqi P0g
where, in the two cases of interest, we have either (i, j) = (1, H) or (i, j) = (2, F). The first order necessary condition for an optimum and the two optimal quantity amounts are
90 2qij 10 ¼ 0 ) qH1 ¼ qF2 ¼ 40:
ð4Þ
Now, substituting qH2 ¼ qF1 ¼ 0 and qH1 ¼ qF2 ¼ 40 into the two profit functions given in Eq. (3), we see that when there is no trade between Home and Foreign, the maximized profit for the two monopolistic firms from domestic sales only equals $1600.3 How do these profit numbers change when we introduce free trade between these two nations under study? We now proceed to answer this question. Free trade Because there is free trade, the two firms under study now interact in a larger market consisting of two nations and therefore engage in duopolistic competition. In this regard, we suppose that transporting the output of the firm in Home (Foreign) 3 We have designated the profit in dollars. Even so, it should be clear to the reader that our analysis is independent of the precise monetary unit that is chosen to represent the profit.
270
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
to Foreign (Home) for consumption there is costly. Therefore, if firm i sells quantity qij in the other country, i.e., if firm 1 sells in Foreign or if firm 2 sells in Home, then we assume that the transport costs are given by4
cti ðqij Þ ¼ tqij ¼ 10qij ;
i 2 f1; 2g:
ð5Þ
In this scenario, each of the two firms chooses a pair of quantities ðqHi ; qFi Þ; i ¼ 1; 2 simultaneously. Therefore, a profile of actions consists of four quantity choices. Our task now is to model this duopolistic interaction as a normal form game and to then compute the Nash equilibrium of this game. The game we are studying has two players or firms i = {1, 2} and each of these two firms selects a strategy that consists of two non-negative quantities (qHi P 0; qFi P 0). Therefore, we can write the profit functions of the two firms as
p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH1 þ ð90 qF1 qF2 ÞqF1 10ðqH1 þ qF1 Þ 10qF1 ;
ð6Þ
p2 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH2 þ ð90 qF1 qF2 ÞqF2 10ðqH2 þ qF2 Þ 10qH2 :
ð7Þ
and
On the right-hand-side (RHS) of Eqs. (6) and (7), the first term denotes the firm’s profit in the Home market, the second term denotes the firm’s profit in the Foreign market, the third term is the total cost of production, and the fourth and last term represents the transport cost. From the standpoint of firm 1, let (qH2 ; qF2 ) denote this firm’s belief about what firm 2 will produce in the Home and the Foreign markets. Then, the two choice variables for firm 1 are qH1 and qF1 and the first order necessary conditions to this firm’s profit maximization problem are given by
@ p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ 90 qH2 2qH1 10 ¼ 0; @qH1
ð8Þ
@ p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ 90 qF2 2qF1 20 ¼ 0: @qF1
ð9Þ
and
The RHSs of Eqs. (8) and (9) can be simplified further to give us the two parts of firm 1’s best response function. Doing this, we get
qH1 ðqH2 Þ ¼
80 qH2 ; 2
ð10Þ
qF1 ðqF2 Þ ¼
70 qF2 : 2
ð11Þ
and
From the structure of the game between the two firms that we have been analyzing thus far, it should be clear to the reader that firm 2’s goal is symmetric to that of firm 1. Therefore, some thought tells us that the two parts of firm 2’s best response function are given by
qH2 ðqH1 Þ ¼
70 qH1 ; 2
ð12Þ
qF2 ðqF1 Þ ¼
80 qF1 : 2
ð13Þ
and
The Nash equilibrium in pure strategies that we seek is given by a profile of strategies or outputs (qH1 ; qF1 ; qH2 ; qF2 ) such that Eqs. (10)–(13) are satisfied simultaneously. Now, solving Eqs. (10) and (12) simultaneously, we get (qH1 ; qH2 ) = (30, 20). Similarly, solving Eqs. (11) and (13) concurrently, we get (qF1 ; qF2 ) = (20, 30). Putting these two pieces of information together, the unique5 Nash equilibrium quantities produced by the two firms under study are (qH1 ; qH2 ; qF1 ; qF2 ) = (30, 20, 20, 30). Finally, substituting (qH1 ; qH2 ; qF1 ; qF2 ) = (30, 20, 20, 30) into the two profit functions given in Eqs. (6) and (7), it is straightforward to verify that when there is free trade with transport costs between Home and Foreign, the maximized profit for the two monopolistic firms equals $1300. Our last task in this paper is to analyze free trade between Home and Foreign when invasive species are present in the SWPM that is used to pack the good that is shipped between these two nations. 4 Also see the discussion in the paragraph immediately following Eq. (2). See Beladi and Oladi (2011) for an alternate perspective on the modeling of transport costs. 5 To see why this Nash equilibrium is unique, note that there are no interactions between the Home and the Foreign markets in the pertinent best response H F F functions. In this regard, see, for instance, Eqs. (10) and (11). We see that qH 1 depends only on q2 and, similarly, q1 depends only on q2 .
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
271
Free trade with invasive species Suppose that before the game analyzed in the section ‘Free trade’ is played by the two firms, firm 1 in Home discovers that the SWPM used to pack and ship the good it produces to Foreign contains one or more invasive species. As noted in the section ‘Introduction’, actual examples of such pests that have been introduced into the United States accidentally via SWPMs include, but are not limited to, the emerald ash borer and the Asian longhorn beetle. Given its discovery, firm 1 is required to report this matter to an appropriate international body and to comply with an environmental protocol that is designed to prevent the spread of invasive species via SWPMs. A real world example of such a protocol would be the International Standards for Phytosanitary Measures (ISPM15) which is an international standard adopted by the International Plant Protection Convention (IPPC). Compliance with a protocol such as the ISPM15 requires the SWPM used in international trade to either be treated with heat or to be fumigated. After this has been done, an IPPC logo is affixed on the SWPM and the country in which the treatment occurred is also noted.6 We model the need to comply with an environmental protocol such as the ISPM15 by supposing that this compliance increases the transport costs faced by the two firms in Home and in Foreign. Specifically, the transport costs faced by the two firms are now given not by Eq. (5) but instead by
cProtocol ðqij Þ ¼ t Protocol qij ¼ 40qij ; i
i 2 f1; 2g:
ð14Þ
The question that we now want to answer concerns the impact that this increase in transport costs has on the profits of the two firms under study. In this regard, note that intuitively speaking, a monopolist—in either country—would never willingly take any actions that would increase its overall costs. Therefore, this point alone suggests that the two monopolists would prefer non-compliance to compliance with an environmental protocol such as the ISPM15. However, in the game that we are analyzing, there is a second and strategic point to contend with because the higher transport costs will tend to tone down the competition between the two firms. Let us now investigate the simultaneous impact of these two points. The profit functions of the two firms with the higher transport costs are given by
p1 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH1 þ ð90 qF1 qF2 ÞqF1 10ðqH1 þ qF1 Þ 40qF1 ;
ð15Þ
p2 ðqH1 ; qF1 ; qH2 ; qF2 Þ ¼ ð90 qH1 qH2 ÞqH2 þ ð90 qF1 qF2 ÞqF2 10ðqH2 þ qF2 Þ 40qH2 :
ð16Þ
and
Once again, following the logic of the analysis conducted in the section ‘Free trade’, we can show that there are four equations that together describe the best response functions of the Home and the Foreign firms. Specifically, the two equations for the Home firm are
qH1 ðqH2 Þ ¼
80 qH2 ; 2
ð17Þ
qF1 ðqF2 Þ ¼
40 qF2 : 2
ð18Þ
and
Similarly, the two equations for the Foreign firm are
qH2 ðqH1 Þ ¼
40 q1A ; 2
ð19Þ
qF2 ðqF1 Þ ¼
80 qF1 : 2
ð20Þ
and
Solving Eqs. (17) and (19) simultaneously, we get (qH1 ; qH2 ) = (40, 0). Similarly, solving Eqs. (18) and (20) concurrently, we get (qF1 ; qF2 ) = (0, 40). Putting these two pieces of information together, the unique Nash equilibrium quantities produced by the two firms with higher transport costs stemming from the need to comply with an environmental protocol are (qH1 ; qH2 ; qF1 ; qF2 ) = (40, 0, 0, 40). Finally, substituting (qH1 ; qH2 ; qF1 ; qF2 ) = (40, 0, 0, 40) into the two profit functions given in Eqs. (15) and (16), it is straightforward to verify that when there is free trade with higher transport costs between Home and Foreign, the maximized profit for the two monopolistic firms equals $1600. Note that this value of the maximized profit for the two firms is identical to the maximized profit we computed in the section ‘Autarky’ in the no trade scenario between Home and Foreign. So, there are two ways to interpret the result that we have just obtained in the preceding paragraph. First, compliance with the environmental protocol effectively ‘‘kills off” the duopolistic or international competition between the two firms in Home and Foreign. Second and more importantly, compliance with an environmental protocol need not reduce firm prof6
See Leung et al. (2014) for additional details on these and related matters.
272
A.A. Batabyal, P. Nijkamp / Transportation Research Part D 46 (2016) 267–272
its. In fact, in the case that we have analyzed, such compliance actually raises firm profits. This is the sense in which we contend that the Porter hypothesis—see footnote 2—is valid. To conclude this discussion, we emphasize that we are not saying that the Porter hypothesis is always valid or, for that matter, that it is always invalid. What we are saying is that there exist theoretical circumstances of the sort analyzed in this paper in which this hypothesis is valid. Conclusions In this paper, we studied the duopolistic interaction between two monopolists located in two different countries who sold an imperfect substitute good in two markets. The traded good was transported between the two nations on ships using SWPMs and thus the presence of one or more invasive species was a problem. We used a static game model to analyze this interaction in three steps. First, we studied the benchmark case of autarky or no trade between the two nations. Second, we introduced transport costs and then studied the impact of free trade on the profits of the two monopolists. Finally, we supposed that invasive species were present in the SWPMs. This fact required compliance with an environmental protocol. We modeled this compliance by increasing the transport costs associated with free trade and then demonstrated that a version of the so called Porter hypothesis held. Put differently, we showed that compliance with a cost increasing environmental protocol gave rise to higher profits for the two monopolists under study. The analysis in this paper can be extended in a number of directions. In what follows, we suggest three possible extensions of this paper’s research. First, it would be useful to introduce uncertainty into the model and to study a scenario in which the presence of invasive species in the SWPMs is a probabilistic and not a deterministic occurrence. Second, it would be helpful to see how the existence of one or more trade policy instruments such as tariffs affects the protocol compliance decision and the subsequent impact on firm profits. Finally, it would be interesting to compare a scenario in which the accidental introductions of invasive species occur via the SWPMs with an alternate scenario in which such introductions occur from the dumping of ballast water by ships. Studies of international trade and invasive species management that incorporate these aspects of the problem into the analysis will provide additional insights into a management problem that has significant economic and ecological ramifications. References Ameden, H.A., Boxall, P.C., Cash, S.B., Vickers, D.A., 2009. An agent-based model of border enforcement for invasive species management. Can. J. Agric. Econ. 57, 481–496. Batabyal, A.A., 2006. A rationale for the differential regulatory treatment of imports when invasive species are a potential problem. Stud. Reg. Sci. 36, 179– 187. Batabyal, A.A., Beladi, H., 2006. International trade and biological invasions: a queuing theoretic analysis of the prevention problem. Eur. J. Oper. Res. 170, 758–770 http://ssrn.com/abstract=569842. Batabyal, A.A., Beladi, H., 2009. Trade, the damage from alien species, and the effects of protectionism under alternate market structures. J. Econ. Behav. Org. 70, 389–401. Beladi, H., Oladi, R., 2011. An elementary proposition on technical progress and non-traded goods. J. Math. Econ. 47, 68–71. Jaffe, A.B., Palmer, K., 1997. Environmental regulation and innovation: a panel data study. Rev. Econ. Stat. 79, 610–619. Lanoie, P., Laurent-Lucchetti, J., Johnstone, N., Ambec, S., 2011. Environmental policy, innovation, and performance: new insights on the Porter hypothesis. J. Econ. Manage. Strat. 20, 803–842. Lawley, C., 2013. Protectionism versus risk in screening for invasive species. J. Environ. Econ. Manage. 65, 438–451. Leung, B., Springborn, M.R., Turner, J.A., Brockerhoff, E.G., 2014. Pathway-level risk analysis: the net present value of an invasive species policy in the US. Front. Ecol. Environ. 12, 273–279. Margolis, M., Shogren, J.F., 2012. Disguised protectionism, global trade rules, and alien invasive species. Environ. Resour. Econ. 51, 105–118. Merel, P.R., Carter, C.A., 2008. A second look at managing import risk from invasive species. J. Environ. Econ. Manage. 56, 286–290. Nunes, P.A.L.D., Van den Bergh, J.C.J.M., 2004. Can people value protection against invasive marine species? Evidence from a joint TC-CV survey in the Netherlands. Environ. Resour. Econ. 28, 517–532. Pimentel, D., Zuniga, R., Morrison, D., 2005. Update on the environmental and economic costs associated with alien-invasive species in the United States. Ecol. Econ. 52, 273–288. Porter, M., 1991. American green strategy. Sci. Am. 264, 168. Porter, M., Van der Linde, C., 1995. Towards a new conception of environment-competitiveness relationship. J. Econ. Perspect. 9, 97–118. Springborn, M.R., 2014. Risk aversion and adaptive management: insights from a multi-armed bandit model of invasive species risk. J. Environ. Econ. Manage. 68, 226–242. Tu, A.T., Beghin, J., Gozlan, E., 2008. Tariff escalation and invasive species damages. Ecol. Econ. 67, 619–629. USDA, APHIS, USFS, 2000. Pest Risk Assessment for Importation of Solid Wood Packing Materials into the United States.