BSE and the Ban on U.S. Beef Imports

Senior Fellow, RIETI

Japan has banned the import of beef from the United States since the outbreak of bovine spongiform encephalopathy (BSE) there late last year. As a result, we are unable to eat "gyudon" (a bowl of rice topped with beef). The U.S. is demanding that Japan lift this ban, but Tokyo is maintaining its stance that imports should not resume until the U.S. introduces blanket testing of cows similar to the inspection regime in place in Japan. In response, Washington is urging Japan to resume beef imports even without such testing, arguing that younger cows have fewer abnormal prions (the protein particles said to cause BSE), that the current Enzyme-Linked Immunosorbent Assay (ELISA) method to test for BSE cannot fully detect abnormal prions in cows less than 30 months old, and that it would suffice to just remove the dangerous parts of the meat. They claim that these are the reasons why many other countries only test cattle that are at least 30 months old, that the removal of the dangerous parts make the beef safe, and that testing all slaughtered cows in the manner demanded by Japan would place a tremendous cost burden on the cattle industry. Although one meat firm in the U.S. has suggested that blanket testing only be introduced for beef for export to Japan if that is what Japan wants, the U.S. government has rejected this request.

The beef import ban issue shows the basic nature of global trade negotiations

The present situation is one in which the U.S., the seller, is demanding that Japan, the consumer, buy its beef, and is threatening to take the matter to the World Trade Organization to force Japan to lift the import ban. Do you not think something is wrong with this line of thinking? Although Japanese consumers are saying they want to buy beef that has undergone blanket testing, the U.S. is saying that this is unnecessary and that they should buy U.S. beef that has only been checked if the cow was at least 30 months old. If you go to the butcher for sliced meat and are told that the store will only sell the meat in blocks, is it wrong for you not to buy it?

Here lies the basic nature of global trade negotiations. The benefits of trade are on the side of import and consumption, not export and production. Anyone who has studied international economics should have learned that policies which lead to a higher social indifference curve, in other words, a higher level of consumption, are the best policies. However, the world's trade negotiators do not understand this logic. The classic mercantilist logic that says exports are good is dominating global trade negotiations.

In spite of such phrases as consumer sovereignty and "the consumer is king," the logic that dominates global trade negotiations is producer sovereignty and the idea that the party that refuses to buy is in the wrong. This is what lies behind the current U.S. beef import ban issue. From the viewpoint of normal business logic, you would think that, as did that one U.S. meat firm, if the buyer says blanket testing is necessary, then blanket-tested beef should be supplied. However, U.S. trade negotiators think the exact opposite. So, if you were a negotiator for the Ministry of Agriculture, Forestry and Fisheries (MAFF), what would you do?

The U.S. is demanding that Japan resume beef imports, using the threat of WTO action as leverage. However, domestic consumers oppose this. What is more, it would be illogical for authorities to demand that domestic beef undergo blanket testing while not subjecting imported beef to a similar inspection regime. On the contrary, if you were to lift the blanket inspection requirement for domestic beef to match the rules for imported beef, Japanese consumers would be outraged, saying that authorities had lowered safety standards. Even if, as Washington maintains, there is no scientific evidence to support the need for blanket testing, consumers would not be convinced. It would be a case of enraging one party while trying to appease the other. The following suggestion is one way to deal with the matter.

How should Japan respond to the U.S.?

Firstly, you should demand that the U.S. introduce blanket testing only on beef bound for Japan. Washington would probably reject this request. If it were to agree, it could trigger calls from U.S. consumers for blanket testing on domestic beef, and the U.S. beef industry would then have to shoulder a huge cost. As mentioned above, the logic of placing priority on producers would be at work.

Then, what next? The best course of action would be to do nothing. Even if the U.S. were to threaten you with WTO action, Japan is the buyer. It is the U.S. that suffers if the purchaser does not buy, not Japan. Washington, in a bind, will then have to decide whether or not to bring the matter to the WTO. If the U.S. negotiators have good sense, they would hesitate to do so as it might fuel anti-WTO sentiment among Japanese consumers. This in turn could affect WTO talks on agriculture. The U.S. government must not think only of the beef industry, but also of other interests such as the wheat industry. Furthermore, if the WTO Dispute Settlement Process drags on, there is the possibility of other beef exporters, such as Australia, securing a greater foothold in the Japanese market. As the U.S. itself often does, Japan may be able to stall for time in the dispute settlement process, for example, over the selection of panelists. However, if the U.S. negotiators are simple-minded, they will probably take the matter to the WTO without giving it much thought.

Let us say that the U.S. takes the matter to the WTO. Can Japan win? Tokyo would probably argue that there was a BSE case in Japan where the cow was 21 months old, and that both France and Germany test cows that are at least 24 months old. However, it would probably be difficult for the WTO to support blanket testing.

But Japan does not need to win. If Japan were to lose, Japanese consumers would probably still demand that the government come up with measures other than the import ban to protect them. Then what should you do? The key lies in labeling. Consumers can be kept from purchasing beef they feel is dangerous by showing on the label whether it is U.S. beef or not, and whether the cow had been tested for BSE or not. When the Diet was deliberating legislation regarding the traceability of beef, the U.S. pressured the Japanese government to quell demands by the opposition that such regulations also be applied to imported beef. It is likely that they will use the same tactics again, but the U.S. itself enacted the U.S. Farm Security and Rural Investment Act in 2002 (the 2002 Farm Bill), which requires beef to carry country-of-origin labels.

Consumers have the right to information regarding food

Labeling provides information to consumers. Even if food products are safe, consumers have the right to know what kind of food it is. The issue of whether or not to allow the distribution of beef that has not undergone blanket testing and genetically-modified food from the viewpoint of safety should be separated from the issue of labeling food so that consumers can be made aware of whether the beef has undergone blanket testing or not and whether it is genetically-modified food or not. Consumers do not purchase food solely from the perspective of safety. Consumers have justified interests in how the food in their hands was made and where it was produced. This has nothing to do with safety. The provision of such information comes in the form of labeling. Senators from South Dakota, which is a major beef producer, stressed that the labeling of country of origin on beef under the U.S. Farm Bill was not a matter of safety, but enacted to provide consumers with information regarding food (The Yankton Daily Press and Dakotan, June 12, 2003). If labeling were introduced, beef labeled as U.S. beef (beef that has not undergone blanket testing) would probably not be so popular among consumers, even if the import ban were lifted.

In accomplishing this, you would long be remembered as the first Japanese negotiator in the history of Japan-U.S. farm trade talks that was able to outsmart the U.S. Your outstanding negotiating abilities would be highly regarded, and you may even rise to the top of MAFF.

April 13, 2004

April 13, 2004

Article(s) by this author