Order Code RS21709
Updated March 10, 2005
CRS Report for Congress
Received through the CRS Web
Mad Cow Disease and U.S. Beef Trade
Charles E. Hanrahan and Geoffrey S. Becker
Senior Specialist and Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
The United States is seeking to normalize beef and cattle trade, which has been
disrupted by discoveries of bovine spongiform encephalopathy (BSE, or mad cow
disease) in four Canadian-born cattle. After one of them tested positive for BSE in
December 2003 in Washington state, most countries banned U.S. beef and cattle
products. Of the major markets, Canada and Mexico are now importing some U.S. beef.
Efforts to reopen the others, notably Japan, have not yet borne fruit. Also, USDA’s
efforts to reopen the border to Canadian live cattle have been slowed by several legal
challenges. In Congress, committees have held oversight hearings, and the Senate on
March 3, 3005, passed a resolution (opposed by the President) that would disapprove
a USDA rule to permit younger Canadian cattle imports. This report will be updated.1
U.S. Beef Trade
The $3.9 billion value of 2003 U.S. beef and veal exports was equivalent to
approximately 10% of the farm value of U.S. cattle and calves. While domestic beef
consumption grew by 14% over the decade beginning in 1992, beef exports grew by 85%.
Before the 2003 discovery of BSE in a Washington state dairy cow, the United States
shipped about 18% of the world beef and veal market, at 1.1 million metric tons (MMT).
Australia was first with market share of nearly 20%, and Brazil also shipped 18%.2
After the December 23, 2003, BSE announcement, most countries banned some or
all imports of U.S. beef and cattle products. These included Japan, South Korea, Mexico,
and Canada, which together accounted for approximately 90% of U.S. beef exports. In
2004, Brazil became the top beef/veal exporter, followed by Australia, India, and New
1 See also CRS Issue Brief IB10127, Mad Cow Disease: Agricultural Issues for Congress.
2 Data on export market shares are from USDA, Foreign Agricultural Service, World Markets and
Trade: Dairy, Poultry and Livestock, various issues. Unless noted, other data are from the USDA
Economic Research Service (ERS) website at [http://www.ers.usda.gov/features/bse/index.htm].
Congressional Research Service ˜ The Library of Congress

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CRS-2
Zealand; U.S. market share fell to 3%. Canada and Mexico resumed some U.S. imports
in 2004 (also see “Related Price and Trade Impacts, below”).3
Imports have represented about
2003 U.S. Beef Export Markets
13% of total beef consumption in the
United States, the largest world beef
Korea
24%
importer. Much of it is leaner, from
grass-fed animals in Australia and New
Mexico
Zealand; it is blended, for example,
20%
with higher-fat U.S. meat for
hamburger. However, imports from
Canada (and Mexico) had reflected an
integrated North American market.
Until May 2003, Canada had been the
Japan
Canada
37%
United States’ major source of beef and
10%
Others
cattle imports. In 2002 Canada sent
9%
more than 1.5 million cattle to the
United States, where large feeding and
slaughter capacity readily absorbed them.4
Canada Situation
After the announcement of Canada’s first BSE-infected cow in Alberta, in May
2003, USDA published an interim final rule banning all Canadian ruminant and product
imports. In August 2003, USDA partially lifted the ban by permitting (without publishing
a rule) imports of boneless beef from animals 30 months or younger, among several other
products. On November 4, 2003, USDA published a proposed rule to permit other
Canadian ruminant imports, including younger live cattle. However, USDA already was
expanding the types of Canadian beef permitted (also without formal rulemaking). In
April 2004, in response to a lawsuit by Ranchers-Cattlemen Action Legal Fund USA (R-
CALF), a federal judge blocked this expansion, citing concerns about food safety and
failure to follow rulemaking. No further expansion in Canadian imports (beyond beef
types announced August 2003) was permitted until the October 2003 rule was finalized.5
The final rule, in the January 4, 2005, Federal Register, was to permit, among other
things, imports of live cattle under 30 months old. Specifically, the rule would create a
new category of “minimal risk” BSE regions — including those in which BSE-infected
animals have been diagnosed but where sufficient regulatory measures have been in place
to ensure that the introduction of BSE into the United States is unlikely. The rule, which
was to take effect March 7, 2005, further classifies Canada in this category, the first such
region to qualify, based on what USDA declared was “a thorough risk analysis.”
3 For the latest list and specifics on country bans, see the APHIS trade ban status website at
[http://www.aphis.usda.gov/lpa/issues/bse/trade/bse_trade_ban_status.html].
4 Center for Agricultural and Rural Development, Iowa Ag Review, summer 2003, at [http://www.
card.iastate.edu/iowa_ag_review/summer_03/article4.aspx].
5 See CRS Report RL32627, Bovine Spongiform Encephalopathy (“Mad Cow Disease”) and
Canadian Beef Imports.

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However, a Montana federal judge on March 2, 2005, ordered a delay in the final
rule until he can hold a trial on the merits of another R-CALF lawsuit, which charges that
USDA made several procedural and substantive mistakes in the rulemaking. Observers
believe the rule is now several weeks if not months away from implementation.
USDA had unveiled the final rule as Canada (in early January 2005) confirmed the
third and fourth North America BSE cases, in an Alberta dairy cow born before a 1997
ban on feeding most ruminant materials back to ruminants was published, and in an
Alberta beef cow born in March 1998 after the feed ban. Canadian officials said use of
contaminated feed was the most likely cause in both cases. Canadian and U.S.
government teams each launched a review of the Canadian feed ban, and by early March
both reported that the ban was effective. Although USDA officials continued to say that
the January 4 cattle rule remained on track, the lawsuit derailed it, at least temporarily.
A number of producers and others oppose the entry of Canadian beef and particularly
live cattle. Many say they worry about the impact on U.S. farm prices if large numbers
of Canadian cattle begin to cross the border. (USDA estimated in March 2005 that if the
border is reopened to younger cattle, about 1.3 million Canadian animals may be imported
throughout 2005, lower than previous estimates of 1.5 million-2 million head.) Some also
argue that opening the border to what they believe are potentially risky Canadian animals
could undermine efforts to regain the Japanese and other skittish foreign markets.
Others believe that impeding the rule will cause more, not less, incertitude in Japan.
They believe moving forward is necessary for the United States to convince other
countries that U.S. beef also is safe. Supporters argue that the USDA rule is sound,
because (among other reasons) Canada has safeguards that are at least equivalent to those
of the United States. They contend that the department’s risk assessment has been
scientific and thorough.
Canada historically exports around 60% of its beef production, and the United States
has taken 80%-90% of such exports. Canada fed steer prices had declined substantially
from the high US$70s per cwt. before the May 2003 BSE announcement to the mid-
US$30s shortly afterward. Prices climbed through fall 2003, but generally were in the
US$50-$60 per cwt. range during much of 2004. Canadian producers were losing
between $100 and $200, and in some cases, $300 per head, according to Cattle-Fax, a
marketing information service associated with the industry.
Canadian cattle numbers increased after May 2003, because producers have not been
permitted to export live animals to the United States and lacked adequate capacity to
slaughter them, Cattle-Fax and USDA observed. However, Canada has since added
30,000 head per week to its total slaughter capacity, a 22% increase in 2004 alone, two
meat industry officials told the House Agriculture Committee at a March 1, 2005, hearing.
This increase is likely to be permanent and place U.S.-based packers at a competitive
disadvantage, because they will not have access to the cattle that Canada will kill rather
than export to their plants, meat industry and USDA officials have argued.
In Congress. Congress has 60 legislative days from publication of the rule to
review it, as provided for in the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801-808). On March 3, 2005, after a morning of floor debate, the Senate
approved a resolution (S.J.Res. 4) to disapprove the rule, by a vote of 52-46. A related

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resolution (H.J.Res. 23) is pending in the House, but passage is considered more difficult
there. A final measure would have to be signed by the President, who opposes it.
Other bills addressing the Canada rule include H.R. 187, to prohibit the rule “unless
United States access to major markets for United States exports of cattle and beef
products is equivalent or better than the access status accorded such exports as of January
1, 2003”; and H.R. 384/S. 108, to prohibit the Canada rule unless mandatory retail
country-of-origin labeling (COOL) is implemented. The current statutorily set deadline
for COOL for fresh meats is September 30, 2006 (see CRS Report 97-508, Country-of-
Origin Labeling for Foods). S. 294 would prohibit imports (from a minimal risk region
like Canada) of meat, meat byproducts, and meat food products from bovines over 30
months old unless the Secretary reports to Congress that the region “is in full compliance
with a ruminant feed ban and other [BSE] safeguards.”
BSE in Europe and Japan
Europe has reported most of the approximately 187,000 BSE cases worldwide. The
European BSE crisis could cost $107 billion, half due to lost animal values and half to
control measures, according to a 2003 study published by the European Association for
Animal Production.6 The United States has long banned European ruminants and
ruminant products out of BSE concerns, as have most other countries. Food safety is a
leading political issue in Japan, which has reported approximately 15 BSE cases since
September 2001. Beef sales have suffered from consumer worries about its safety, which
contributed to a decline in U.S. beef and veal exports there, from a record high of about
$1.5 billion in 2000 to $831 million in 2002. Exports had recovered to nearly $1.2 billion
in 2003, before Japan banned them. Since October 2001, the United States has banned
all imports of Japanese beef. Japan exported an average of less than $1 million annually
of specialty Kobe or Wagyu beef to the United States through 2001.7
U.S.-Japan Negotiations
Japan, until 2003 the number-one foreign buyer of U.S. beef, was insisting that all
cattle be tested for BSE, but is considering an exemption for animals under 21 months
old at slaughter. As outlined in an October 23, 2004, joint announcement, the United
States said it had agreed to establish, with Japanese concurrence, an interim marketing
program — a modified version of its Beef Export Verification (BEV) Program — that
would enable a resumption of some U.S. exports to Japan. BEV is to certify that only
beef products from cattle of 20 months or younger are shipped. In addition, the United
States agreed to an expanded definition of cattle parts that have a higher risk of harboring
the BSE agent. These “specified risk materials” (SRMs) are to include — for cattle of
all ages — the entire head except tongues and cheek meat; tonsils; spinal cords; distal
ileum; and part of the vertebral column. This is broader than the current U.S. SRM
6 See USDA, ERS, International Trade and Food Safety, AER-828, Chapter 4, “International
Trade of Meat/Poultry Products and Food Safety Issues,” Nov. 2003; and “Europe’s BSE Crisis
Will Cost $107 Billion,” Cattle Buyers Weekly, Oct. 6, 2003.
7 Annual and semiannual USDA agricultural attache reports on Japan’s livestock sector, available
at [http://www.fas.usda.gov/scriptsw/attacherep/default.asp]. U.S. beef exports to Japan from
USITC Dataweb, available at [http://dataweb.usitc.gov/].

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definition, which applies mainly to cattle over 30 months old. The two countries are to
evaluate this interim system by July 2005, based in part on a scientific evaluation by
international health experts, and modify it if appropriate. The United States is to permit
Japanese specialty beef into its market following relevant domestic rule-making.
According to some industry analysts, U.S. packers may have difficulty satisfying the
new Japanese criteria, even though approximately 70% of the 35 million U.S. cattle killed
yearly are believed by USDA to be 20 months of age or younger. Verifiable age records
may only be available for anywhere from 10% to at most 25% of U.S. cattle, according
to estimates. Age verification and the expanded SRM definition would create new costs
(i.e., paperwork; plant modifications) for packers and their suppliers, analysts said.
Most observers do not expect that U.S. beef will be eligible for the Japanese market
until well into 2005 at the earliest — notwithstanding the fact that high-level Bush
Administration officials, including the President, periodically have raised the issue with
their Japanese counterparts. Several high-ranking Japanese officials have warned that any
rule changes will not be finalized until their government can explain them to consumers,
their Food Safety Commission completes rulemaking, and U.S. and Japanese negotiators
can agree on a number of trading details.
Earlier in 2004 USDA denied permission to Creekstone Farms, a smaller specialty
beef packer (and possibly other smaller firms), to conduct BSE tests on all cattle to meet
Japanese demands. Besides possibly confounding USDA and larger packers’ arguments
that testing every animal is unscientific and provides false reassurances of safety, such
private testing could violate the Virus-Serum-Toxin Act (21 U.S.C. 151-159), USDA has
said. Under this act, USDA must first license a private BSE test and its use. New rapid
BSE test methods have been approved, but only for use in an expanded, 12-18 month
USDA surveillance program begun in June 2004, to assess the extent, if any, of BSE in
the U.S. herd.8 As of early March 2005, approximately 263,000 mostly higher-risk cattle
had been tested, all negative for BSE. (In 2003, 20,000 cattle had been tested.).9
In Congress. The seemingly sluggish pace of the market-opening efforts has
frustrated the beef industry and many Members of Congress, who believe that opening
the Japanese market will convince other Asian nations, including Korea, to follow suit.
Pending is H.Res. 137, which calls for economic sanctions against Japan if it does not
permit U.S. beef. Also, 20 Senators on February 18, 2005, wrote directly to the Japanese
ambassador, indicating that consideration of economic sanctions is possible.
Related U.S. Price and Trade Impacts10
Industry analysts believe that the BSE experience has been much less devastating
economically in the United States than it has been in other countries. One reason is that
8 See CRS Report RL32414(pdf), The Private Testing of Mad Cow Disease: Legal Issues.
9 Testing and other new U.S. BSE safeguards are described in CRS Issue Brief IB10127, Mad
Cow Disease: Agricultural Issues for Congress.
10 Sources for this section include USDA/ERS, Livestock, Dairy, and Poultry Outlook, various
issues, the ERS website (see footnote 2), and ERS, U.S. 2003 and 2004 Livestock and Poultry
Trade Influenced by Animal Disease and Trade Restrictions (LDPM-120-01), July 2004.

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the United States, learning from Europe, was able to put BSE safeguards into place prior
to its own (so far) single case. Also, the U.S. beef industry is much less dependent on
export demand than the Canadians, cushioning the price effects.
In 2003, the U.S. ban on Canadian beef and cattle, coupled with already tight U.S.
supplies and strong demand, had driven up U.S. beef and cattle prices substantially. After
the December 2003 BSE case was announced, cattle prices fell. However, they had
stabilized by early January 2004. Industry analysts reported that U.S. domestic demand
(both retail and restaurant, including fast-food hamburger sales) appeared to be holding
steady. That, combined with lower U.S. cattle inventories due in part to widespread
drought in cattle country, kept cattle and beef prices high during 2004, helping to offset
the effects of the BSE-related foreign bans.
USDA has reported that average U.S. fed steer (i.e., slaughter-ready cattle) prices
were nearly $85 per cwt. for all of 2004, compared with an earlier 2004 prediction of $72-
$77; this is near the lower end of a USDA forecast, made just before the BSE case, of
$84-$91 per cwt. The 2005 price forecast (as of early 2005) was $80-$85. Average fed
steer prices were $85 in 2003 and $67 in 2002.
Nonetheless, foreign import bans mean the domestic market has had to absorb some
23 million more pounds of beef weekly or 1.2 billion pounds for the year due to lost
exports, according to Cattle-Fax. Exports of by-products like collagen, sausage casings,
brains, other organs, tongue, tails, and tendons (all adding value to each animal) also have
been affected by the bans on U.S. beef products. USDA has estimated that U.S. beef and
veal exports globally reached only 434 million pounds in 2004, or 17% of the 2003 level
of 2.523 billion pounds, even with the partial reopening of Canada and Mexico. USDA
predicted that unless more markets reopen, exports would reach only 640 million pounds
in 2005. In Japan, other countries, notably Australia, have filled U.S. lost market share.
Cattle producers were losing about $10 per cwt. or $125 per head due to lost access
to the Japanese, Korean, and other Asian markets, Cattle-Fax reported in 2004. The
National Cattlemen’s Beef Association (NCBA) recently placed losses at $175 per head
or $4.7 billion total. Hardest hit are export items like short plate, valued at $1.80 per lb.
prior to the U.S. BSE case but at 55 cents in July 2004, for a loss of nearly $36 per head,
and tongue, once valued at $4.25 per lb. but at 80 cents in July 2004, for a loss of more
than $12 per head, the U.S. Meat Export Federation has calculated.
Cattle sales represent approximately 20% of U.S. gross farm income. Four states
— Texas, Nebraska, Kansas, and Colorado — annually account for more than half of
U.S. beef cattle revenues and more than two-thirds of all cattle slaughter. Depressed
export markets — combined with smaller live cattle supplies due to the ban on Canadian
animals (which bid up cattle prices) have negatively impacted meat plants in such states.
A number of meat companies have announced production cutbacks and layoffs.

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