Trade and Welfare Effects of Japan's Revised Import Protocol for American Apples

Abstract

Japan's phytosanitary restrictions on apple imports were the subject of a long trade dispute with the American apple industry, which contended that mature, symptomless apples cannot transmit fire blight. This study addresses U.S.-Japanese trade issues in two parts. By providing the first estimate of a Japanese fruit demand system in the English language, I fill a significant gap in the literature, and offer parameter estimates that may inform future research on the Japanese fruit sector. I utilize the estimated own-price elasticity for apples in an applied welfare analysis of Japan's new import protocol, which was introduced in 2005 and eliminated the costly and burdensome fire blight regulations. The per-capita Japanese welfare gain is estimated at $1.47 to $4.53, much lower than the sector-wide loss in Japanese producer surplus, estimated at $1,263 to $4,444 per grower, suggesting that the Japanese apple industry had a strong economic interest in maintaining the import restriction. The increase in trade volume is estimated to account for 13--17% of total American apple production. However, in the years since the policy change, the U.S. has not exported any apples to Japan, suggesting that other factors prevent Japanese imports of American apples, such as consumer preference for domestic produce.