Market power and import bans: the case of Japanese pork imports

Abstract

Animal disease outbreaks trigger import restrictions that penalize exporting countries where the outbreak originates. However, significant increases in sales for the remaining exporters are likely to be observed only once the importer is confident that the outbreak is localized and contained. In March of 1997, Japan imposed an import ban on Taiwanese pork. At the time, Taiwan was supplying 41% of Japan's pork imports. The authors rely on the framework developed by Goldberg and Knetter (1999) and implement a generalized method of moments procedure to estimate the inverse residual demand elasticities of the current three largest exporting countries: United States, Canada, and Denmark. Structural change was investigated by adapting Qu and Perron's (2007) methodology that endogenizes the break dates. The authors found that foreign exporters were delayed by 2 years in making adjustments after Taiwan's exit. The ban on Taiwan's exports made the U.S. residual demand more inelastic and reinforced the case for U.S. market power. Denmark's reduction of market power may be due to their export product mix. [EconLit citations: L11; Q13]. © 2010 Wiley Periodicals, Inc.