Order Code RS21709
Updated June 27, 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
Confirmation by the Secretary of Agriculture of a second case of bovine
spongiform encephalopathy (BSE, or mad cow disease) in the United States on June 24,
2005, could complicate efforts to normalize U.S. beef and cattle trade, which has been
disrupted by previous discoveries of BSE 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, but efforts to reopen Asian markets, notably Japan and
Korea, have progressed slowly. USDA’s efforts to reopen the border to Canadian live
cattle have been impeded 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 $3.1 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. Beef exports grew rapidly
during the decade beginning in 1992, increasing by 85%, while domestic beef
consumption grew by just 14%. Before the 2003 discovery of BSE in a Washington state
dairy cow, the United States, the world’s third largest beef and veal exporter, shipped
about 1.1 million metric tons (MMT) or 18% of the world beef/veal market. Australia and
Brazil were the first and second largest exporters, with market shares of 20% and 19%
respectively.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 and
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
Argentina, while 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. Imports from Canada (and
Mexico) reflected an integrated North
American market. Until May 2003,
Canada was the United States’ major
Japan
Canada
37%
source of beef and cattle imports. In
10%
Others
2002 Canada sent more than 1.5 million
9%
cattle to the United States, where large
feeding and slaughter capacity readily
absorbed them.4
Trade Implications of the Second BSE Case
An immediate reaction to the confirmation of a second case of BSE in the United
States was Taiwan’s announcement that it was reinstating its ban on all U.S. beef, lifted
for boneless beef from cattle aged less than 30 months in April 2005.5 South Korea
suspended beef trade talks prior to the Secretary’s confirmation announcement, but they
are expected to resume.6 The effects of the second BSE case on efforts to reopen the
Japanese market to U.S. beef exports are less certain. The Financial Times reported that
a delegation of Japanese lawmakers investigating U.S. safety measures implied that the
discovery could delay a planned resumption of imports scheduled for August.7 Another
Japanese view is that the case would not affect U.S.-Japanese negotiations because “the
likelihood of a second infection had not been unexpected.”8 The Japanese press also
reported, however, that a confederation of Japanese consumer groups suggested that more
information was needed about the extent of BSE infection in the United States before beef
imports could be declared safe. USDA officials maintained that the discovery of a second
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 CNA News at [http://english.www.gov.tw/index.jsp?action=cna&cnaids=10990].
6 See “Pac Rim Trade Fragile,” in Western Livestock Journal, June 20, 2005 at [http://www.wlj.
net/editorial/062005pac_rim_trade_fragile.asp].
7 “Japan import fears grow after new U.S. mad cow case,” Financial Times, Monday June 27,
2005, p. 5.
8 “2nd BSE Case May Mean Import Delay,” Asahi Shimbun, June 27, 2005, available at [http://
www.asahi.com/english/Herald-asahi/TKY200506270115.htm].

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case of BSE should not affect Japan’s movement toward reopening its market to U.S.
beef.9 USDA officials suggested that the case would not affect the USDA’s determination
to reopen the U.S. border to Canadian cattle. Canadian producers suggested that the case
would spur efforts by both countries to reopen markets closed to North American beef.10
Cattlemen and ranchers who won a preliminary injunction against USDA’s final rule that
would have allowed younger cattle to enter the United States directly for slaughter or
feeding said their litigation would continue.11 (Testing issues raised by the latest BSE
case are discussed in other CRS reports).12
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 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
improper rulemaking procedures. Further expansion in Canadian imports (beyond
products announced August 2003) was halted until the October 2003 rule was finalized.13
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.”
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.
9 Washington Trade Daily, Vol. 14, no. 125, June 27, 2005.
10 CBC News: “BSE case should prompt border reopening, producers say,” June 25, 2005, at
[http://www.cbc.ca/story/world/national/2005/06/25/canadaonmadcow-050625.html]
11 “Cattle Alert: R-Calf CEO Says BSE Case Won’t Affect Litigation,” at [http://www.
cattlenetwork.com/content.asp?contentid=5493].
12 CRS Report RL32414, The Private Testing of Mad Cow Disease: Legal Issues. Testing and
other new U.S. BSE safeguards are described in CRS Issue Brief IB10127, Mad Cow Disease:
Agricultural Issues for Congress.
13 See CRS Report RL32627, Bovine Spongiform Encephalopathy (“Mad Cow Disease”) and
Canadian Beef Imports.

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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.
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. 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
resolution (H.J.Res. 23) was pending in the House, where passage was considered less
likely. 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

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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.”
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 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 later in 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;
until government agencies, with concurrence of their Food Safety Commission, complete
rulemaking; and until U.S. and Japanese negotiators can agree on a number of trading
details.
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.

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Related U.S. Price and Trade Impacts14
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
the United States, learning from Europe, was able to put BSE safeguards into place prior
to its own first 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 reported that average U.S. fed steer
(i.e., slaughter-ready cattle) prices were nearly $85 per cwt. for all of 2004, compared with
average fed steer prices of $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. In Japan, other countries, notably
Australia, have filled U.S. lost market share.
A recent study by researchers at Kansas State University of the impact that BSE has
had on the U.S. beef industry found that average U.S. wholesale boxed beef prices during
2004 were 12 to 17 cents per pound lower than they would have been if all the export
markets had been open. The loss of beef export markets also meant that by-product prices
were lower than they would have been. The total estimated U.S. beef industry losses
attributable to the loss of beef and by-product exports in 2004 ranged from $3.2 to $4.7
billion, according to the study.15
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.
14 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.
15 The Kansas State study can be found at [http://www.agmanager.info/livestock/marketing/
bulletins%5F2/industry/demand/EconomicImpactofBSEonUSBeefIndustry.pdf].

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