Distortion to Terms of Trade through SPS Measures

The Sanitary and Phytosanitary (SPS) Agreement has brought concern to its distortion of trade. The value of trade distortion since the implementation of SPS measures, are of increasing interest, these are evaluated by taking a qualified trade volume in proviso of estimating the terms of trade between nations before adopting the SPS measure and after. The paper is of theoretical assumption, assessing high-valued agricultural products between European members and their trading partners. It aims to provide theoretical evidence of the changes adopted in the terms of trade structure from implementing SPS Measures. The paper explores how European Agricultural Trade volumes have changed. Producing at SPS measure requirements, lead to an increase in costs, while it may be a small proportion of the value-added to the final value, it still will have an affect upon the bilateral Terms of Trade Agreement. An assessment is made upon the risk of compliance using a Cost-Benefit analysis to evaluate the costs of implementing SPS measures. Also incorporating an inventory approach, the extent of SPS measure distortion is assessed. The consequence of the distortion may be seen with the loss of comparative advantages and the movement towards other products