Designing optimal phytosanitary inspection policy : a conceptual framework and an application

Optimal allocation of available resources to minimize quarantine risks related to international trade is a problem facing plant protection agencies worldwide. In this paper a model of budget allocation to minimize quarantine risks is developed. Theoretical conditions that budget allocation should satisfy are derived. These conditions imply that optimal allocation of resources is achieved when the marginal pest risks are equalized across risky pathways. Furthermore, an empirical model of budget distribution is developed. In the empirical model, the protecting agency wants to minimize the expected number of infested ornamental plants imported in a given country. The model is parameterized using data on import of ornamental commodities, the associated quarantine risks and costs of import phytosanitary inspections pertaining to the Netherlands. The results of the empirical model suggest that under specific assumptions (such as constant risk) greater risk reduction can be achieved by allocating larger funds to inspection of riskier pathways, and less or no funds to less risky pathways. The protecting agency has to trade off the risks from pathways that vary in terms of risk. Keywords: optimal inspection; quarantine pest; ornamental plants