Order Code RS21709
Updated January 29, 2008
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 110th Congress is expected to monitor closely U.S. efforts to regain foreign
markets that banned U.S. beef when a cow in Washington state tested positive for
bovine spongiform encephalopathy (BSE, or mad cow disease) in December 2003.1
Rebuilding foreign confidence in the safety of U.S. beef and cattle has been impeded by
two other confirmed U.S. cases of BSE, announced June 2005 and March 2006. The
four major U.S. beef export markets, Canada, Mexico, Japan, and Korea, are again
accepting U.S. product. Resumption of beef trade with Japan and Korea has not gone
smoothly. Japan is permitting imports of beef from animals 20 months old or younger.
U.S. beef imports are currently prohibited by Korea pending negotiation of a new animal
health protocol. U.S. officials are using a World Animal Health Organization
classification of the United States as a “controlled risk” country for BSE as an argument
for beef importing countries to reopen their export markets to U.S. beef. Legislation has
been introduced in both chambers to disapprove a rule to permit imports of live cattle
and products from Canada. In the 110th Congress, Korea’s suspension of quarantine
inspections of U.S. beef has become a key issue in congressional consideration of the
Korea-U.S. Free Trade Agreement.
U.S. and World Beef Trade
In 2003, the United States exported about 1.1 million metric tons (MMT) of beef,
veal and beef variety meats, valued at $3.9 billion. This was equivalent to approximately
10% of the farm value of U.S. cattle and calves. U.S. beef exports had grown rapidly
during the decade beginning in 1992, increasing by 85%, while domestic beef
consumption grew by just 14%.2
1 For additional details and background see CRS Report RS22345, BSE (“Mad Cow Disease:):
A Brief Overview, and CRS Report RL32199, Bovine Spongiform Encephalopathy (BSE, or
“Mad Cow Disease”): Current and Proposed Safeguards.
2 Unless noted, trade data sources are USDA, Foreign Agricultural Service (FAS), World Markets
and Trade: Dairy, Poultry and Livestock, various issues available at [http://www.fas.usda.gov/
(continued...)

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After USDA’s 2003 BSE announcement, most countries banned or restricted some
or all imports of U.S. beef and cattle products. These included Japan, South Korea,
Mexico, and Canada, which together had purchased approximately 90% of U.S. beef
exports. Canada and Mexico resumed importing some U.S. beef in 2004. Japan and
Korea reopened their markets in July and November 2006, respectively.
In 2003, the United States was the world’s third largest beef/veal exporter, claiming
18% of the world beef/veal market. Australia and Brazil ranked one and two, with 1.3
MMT and 1.2 MMT in exports, respectively. U.S. market share plummeted to 3% in
2004 (209,000 MT) and has climbed to almost 9% (650,000 MT) in 2007. Meanwhile,
Brazil has become the top beef/veal
exporter in 2007 with 32% of the world
2003 U.S. Beef Export Markets
market share, followed by Australia
with 19%.
Korea
24%
Imports have represented about
13% of total beef consumption in the
Mexico
20%
United States, the largest world beef
importer. Imports from Canada (and
Mexico) reflected an integrated North
American market. Prior to its own May
2003 BSE event, Canada was the United
Japan
Canada
37%
States’ major source of beef and cattle
10%
Others
imports. In 2002 Canada sent about 1.7
9%
million cattle to the United States,
where large feeding and slaughter
capacity readily absorbed them.3 U.S.
imports of Canadian cattle fell to 508,000 head in 2003, but recovered to 1.1 million head
in 2006.
The World Animal Health Organization (known by its historical acronym, OIE) has
formally classified the United States as a controlled risk country for BSE.4 The OIE is the
internationally recognized standard-setting agency for animal health. The OIE’s
International Committee unanimously adopted a resolution on May 22, 2007
recommending that the United States, along with Canada, Switzerland, Taipei-China,
Chile and Brazil, be recognized as having “controlled risk” status for BSE. Controlled
risk status recognizes that regulatory controls for BSE are in place and effective. The OIE
classification is reviewed annually. The Administration is arguing that beef importing
countries should acknowledge this OIE determination and reopen their markets to U.S.
beef exports.
2 (...continued)
currwmt.asp]; and FASonline’s U.S. Trade Internet System at [http://www.fas.usda.gov/ustrade/].
3 Center for Agricultural and Rural Development, Iowa Ag Review, summer 2003, at [http://www.
card.iastate.edu/iowa_ag_review/summer_03/article4.aspx]. Canadian cattle imports resumed
in 2005; see “Canada Situation.”
4 The OIE website is at [http://www.oie.int/eng/en_index.htm].

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U.S. Beef Exports to Japan
After months of negotiations, the United States and Japan announced on October 23,
2004, that the United States would establish, with Japanese concurrence, an interim
marketing program — a modified version of its Beef Export Verification (BEV) Program
— enabling a resumption of some U.S. exports to Japan. BEV would certify that only
beef products from cattle of 20 months or younger are shipped. Also, 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) 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 U.S. SRM definition, which applies
mainly to cattle over 30 months old. The United States also agreed to permit Japanese
beef, previously banned because of the prevalence of animal disease including BSE, into
the U.S. market following relevant domestic rule-making. USDA’s Animal and Plant
Health Inspection Service (APHIS) published a final rule on December 14, 2005,
permitting such imports (whole boneless beef cuts under specified conditions).5
Japan finalized its decision to permit U.S. beef imports in December 2005, following
a final report from its independent Food Safety Commission (FSC) certifying the
adequacy of U.S. safeguards, at which point shipments resumed. However, the Japanese
abruptly halted imports from all U.S. importers again on January 20, 2006, after they
found vertebral column bones in several boxes of veal from one U.S. processor.
Following Japan’s review of the eligibility of U.S. slaughter facilities to export beef to
Japan, the market reopened for U.S. beef on July 27, 2006.
Reestablishing U.S. beef in the Japanese market will not be easy. U.S. beef exports
to Japan confront several constraints: consumer beef safety concerns, strict port scrutiny
of U.S. shipments, uncertainty about U.S. supplies of age-qualified animals, a shift in
consumer choice of protein from beef to pork, and competition for the Japanese market
from Australia, a BSE-free exporter.6 Australia currently provides about 88% of Japanese
imports of chilled and frozen beef. Another potential constraint to expanding U.S. beef
exports to Japan is that country’s possible imposition of a beef import safeguard (a 50%
tariff) should imports in 2008 exceed trigger levels.7 The current beef import safeguard
is set at a level that would not trigger imposition of the safeguard, but it is possible that
the safeguard, established annually, could be set at a level in 2008 that would seriously
affect U.S. beef exports.
In Congress. Legislative initiatives in the 110th Congress will depend in large part
on the pace of resumption of U.S. beef imports by Japan. During the 109th Congress,
many Members expressed deep frustration with the Japanese situation. Introduced in
March 2005 were H.Res. 137 and S.Res. 87, calling for economic sanctions against Japan
if it does not permit U.S. beef. Also, S. 1922/H.R. 4179, introduced in October 2005,
would have imposed $3.14 billion in retaliatory tariffs on Japanese imports if Japan did
5 70 Federal Register, pp. 48494-484500 and pp. 73905-73919.
6 See U.S. Dept. of Agriculture, Foreign Agricultural Service, Japan: Livestock and Products
Annual Report 2007, at [http://www.fas.usda.gov/gainfiles/200710/146292723.pdf].
7 Ibid., p. 6.

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not lift the beef ban by December 15, 2005. Elsewhere, a Senate floor amendment to the
FY2006 USDA appropriation (H.R. 2744) that would have blocked the rule permitting
some Japanese beef imports was deleted in conference (H.Rept. 109-255, P.L. 109-97).
U.S. Beef Exports to Korea
Korea’s prohibition on U.S. beef, which had been in place since December 2003,
was lifted on September 11, 2006. Resumption of U.S. beef exports to Korea, the United
States second largest export destination for beef in 2003, is expected to proceed slowly
for the same reasons that will slow Japan’s resumption of beef imports. Strict quarantine
inspection requirements in Korean ports have resulted in refusal of a few shipments of
U.S. beef because of the presence of bone fragments.
In October 2007, Korea suspended quarantine inspections of U.S. beef because of
discovery of vertebral column in a U.S. shipment. Although vertebral column from cattle
under thirty months of age is not considered a specified risk material by the OIE, it is
included as such in the current Korea-U.S. health protocol, which was negotiated in
January 2006. U.S. beef will not be able to enter the Korean market until the United
States and Korea negotiate a new animal health protocol. In the near term, U.S. exporters
are unlikely to share in expected increases in the demand for beef in Korea, where
exchange rates and rapid economic growth favor increased beef imports. As in Japan,
Australia has emerged as the main U.S. competitor for the Korean beef market, and now
enjoys a 72% share of current beef exports to Korea. The United States is a long way
from attaining its historic annual share of Korean beef imports, which amounted to around
50% of the export market for beef prior to the 2003 BSE event.
In Congress. In the 110th Congress, U.S. access to Korea’s beef market has
become a key issue in the debate over implementation of the U.S.-Korea free trade
agreement (FTA). The FTA phases out Korean tariffs on beef over 15 years, but does not
address animal health related barriers. A number of Members of Congress have signaled
that their support for legislation to implement the FTA is contingent on Korea fully
opening its market for U.S. beef.8
Canada Situation
On July 18, 2005, the U.S. border reopened to imports from Canada of live cattle
under 30 months old, under USDA’s Initial Minimal Risk Rule.9 The reopening was the
first time in more than two years, since Canada’s BSE incident in May 2003, that live
cattle from Canada were eligible to enter the United States. On September 14, 2007,
USDA announced its Minimal Risk Rule 2 (MRR2), a final rule that allows for the
importation of live cattle and other bovine species (e.g., bison) for any use (including
breeding animals born on or after March 1, 1999, a date APHIS had determined to be the
effective enforcement of Canada’s ruminant-to-ruminant feed ban). The final rule became
8 See CRS Report RL34134, Agriculture in U.S. Free Trade Agreements: Trade with Current
and Prospective Partners, Impact, and Issues.
9 Information on the Canada situation is based on Canada: Livestock and Products Annual 2007,
USDA, Foreign Agricultural Service, GAIN Report CA7050, October 3, 2007, at
[http://www.fas.usda.gov/gainfiles/200710/146292635.pdf].

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effective November 19, 2007. Also in effect as of November 19, 2007, is a measure
allowing imports of meat from Canadian cattle older than 30 months; this was a
suspended part of a USDA rule issued in January 2005.
The Ranchers-Cattlemen Action Legal Fund United Stockworkers of America (R-
CALF USA) did not succeed in court action to block the border opening, although the
court has yet to rule on R-CALF’s request for a temporary restraining order that could
result in putting on hold the MRR2 cattle rule until the court rules on its legality.10 R-
CALF’s legal efforts to block issuance of earlier rules also did not meet with success.11

One major concern of some cattlemen is that MRR2 would result in a flood of
Canadian cull cattle exports to the United States. Analysis by USDA’s Foreign
Agricultural Service (FAS), however, suggests that, for a variety of reasons, this is
unlikely to occur.12 FAS lists, among factors that will impede the flow of cull cattle from
Canada to the United States, an increase in Canadian slaughter capacity for cull cattle that
reduces the supply of culled animals available for export; a large number of Canadian cull
cattle that are currently older than eight years and thus disqualified from export eligibility
by the age requirements in MRR2; and a strengthening of Canadian cattle prices as the
MRR2 rule goes into effect.
In addition to concerns about competition from increased Canadian live cattle
imports, there are worries that opening the border to what they believe are potentially
risky Canadian animals will undermine efforts to regain the Japanese and Korean markets.
Others counter that moving forward with the Canada rules was necessary for the United
States to convince other countries that North American beef is safe, that U.S. and
Canadian safeguards are sound, and that all countries should, like the United States, base
their import policies on thorough, scientific risk assessments.
In Congress. In the 110th Congress, resolutions of disapproval of MRR2 have
been introduced in both chambers (H.J.Res. 55 and S.J.Res. 20). If passed by both
chambers and signed by the President, MRR2 would have no force or effect. During the
109th Congress, the Senate passed its resolution (S.J.Res. 4) to disapprove the 2005
Canada import rule, by a vote of 52-46. A related resolution (H.J.Res. 23), however, did
not reach the House floor for a vote. Another bill introduced in the 110th Congress, S.
1308, would prohibit imports of Canadian cattle over 30 months of age or of beef derived
from such cattle, until mandatory retail country-of-origin labeling (COOL) is
implemented. The current statutorily set deadline for COOL for fresh meats is September
30, 2008 (see CRS Report 97-508, Country-of-Origin Labeling for Foods). Bills
introduced in both chambers (H.R. 357 and S. 404) proposed accelerating the date of
implementation of COOL to September 30, 2007.
10 See “U.S. Accepts All Canadian Cattle, Meat from Cows Over 30 Months,” Inside U.S. Trade,
online version, November 19, 2007, at [http://www.insidetrade.com/secure/dsply_docnum_txt.
asp?f=wto2002.ask&dn=11192007_cattle].
11 See An Economic Chronology of Bovine Spongiform Encephalopathy in North America,
USDA, Economic Research Service, June 2006, at [http://www.ers.usda.gov/Publications/LDP/
2006/06Jun/LDPM14301/].
12 USDA, FAS, Canada and Products Annual 2007, p. 6.

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Related U.S. Price and Trade Impacts13
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. Before the BSE events, Canada
exported 37% of its beef production, whereas the United States exported 9%.
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 had to absorb some 23
million more pounds of beef weekly or 1.2 billion pounds annually 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 were
affected by the bans on U.S. beef products. In Japan, as noted, other countries,
particularly Australia, have filled U.S. lost market share.
A 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.14
USDA estimates that U.S. beef and veal exports will climb from 519,000 MT in
2006 to 776,000 MT in 2007.15 Had Korea not suspended U.S. beef imports in October
2007, total U.S. beef exports were on track to reach 850,000 MT. Cattle prices averaged
more than $86 per cwt. in 2006, and are predicted to be around $92 per cwt. in 2007.
13 Sources for this section include USDA/ERS, Livestock, Dairy, and Poultry Outlook, various
issues, the ERS website (see footnote 11), and ERS, U.S. 2003 and 2004 Livestock and Poultry
Trade Influenced by Animal Disease and Trade Restrictions (LDPM-120-01), July 2004.
14 The Kansas State study can be found at [http://www.agmanager.info/livestock/marketing/
bulletins%5F2/industry/demand/EconomicImpactofBSEonUSBeefIndustry.pdf].
15 Data on projected beef exports and cattle prices are from USDA, World Agricultural Supply
and Demand Estimates, November 9, 2007, at [http://www.usda.gov/oce/commodity/wasde/
latest.pdf].

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