Publication

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. An interesting question is whether the exit of a major exporter had an impact on the market power of other exporters.  We relied on the framework developed by Goldberg and Knetter (1999) and implemented a GMM procedure to estimate the inverse residual demand elasticities of the current three largest exporting countries: the United States (US), Canada and Denmark. Structural change was investigated by adapting Qu and Perron (2007)'s methodology that endogenizes the break dates. We found that foreign exporters were delayed by 2 years in making adjustments after Taiwan's exit. The ban on Taiwan's exports made the US residual demand more inelastic and reinforced the case for US market power. Denmark's reduction of market power may be due to their export product mix.  As for Canadian exporters, they seem to have maintained their competitive presence in the market, without really benefitting from the decrease in competition following the exit of an important exporter.