Combining Risk Assessment and Economics in Managing a Sanitary–Phytosanitary Risk

The Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures provides guidelines for countries to protect domestic production from pests and diseases. The guidelines permit consideration of consumer welfare. We find an optimal set of SPS measures considering total welfare and mitigation strategies. Our model suggests that it is optimal and less restrictive to apply mitigation strategies first and then an additional smaller tariff if necessary. Relative cost of mitigation determines the amount of the mitigation strategies applied in the importing and exporting countries.