Economic impacts of a disease outbreak in Canada’s pork industry: Case of a price-taking, open country

Abstract

The world has been experiencing a notable increase in disease outbreaks that have resulted in significant economic impacts and loss of life, both human and livestock. Here we consider the economic impacts of such an outbreak in a small (price-taking), open country case. Specifically, we consider a generic disease outbreak in the Canadian pork industry. The economic costs and animal welfare impacts of a disease outbreak in swine could prove devastating to Canada’s pork industry, due to potential border closures and large-scale animal depopulation. We build a multi-region, partial equilibrium trade model composed of three Canadian regions (Ontario, Quebec, and Western Canada), the United States, and the rest of the world. The partial equilibrium model imposes the appropriate zero feedback assumption (across world markets and domestic substitutes). Each Canadian region has a vertically integrated supply chain beginning with the breeding herd, progressing through the live animal market, processors, to end consumers with trade across regions within each of those markets. We estimate the Canadian economic impacts of a disease outbreak occurring in excess of $3.6 billion. The closure of international borders to exports is shown to be the dominant economic impact. Significant producer and processor losses are marginally offset by consumer benefits.