Senior Fellow, RIETI

Agriculture is viewed as one of the most internationally competitive sectors of the U.S. economy. In 2002, sales of U.S. farm produce came to ¥20 trillion, of which the beef industry accounted for ¥5 trillion, or 25%, making it the largest industry in the farm sector. Of some 8.6 million tons of U.S. beef produced that year, 780,000 tons was exported. Japan imported 220,000 tons of that amount, making it the top importer of American beef. This is why the United States is so adamant about resuming beef exports to Japan.

The first case of bovine spongiform encephalopathy (BSE) was reported in the U.S. in December 2003. In response, Japan immediately banned all U.S. imports of beef and related products. The U.S. government announced measures to ensure beef safety, including a ban on distributing meat for human consumption from cows that have difficulty walking, and requiring the removal of specified high-risk materials such as brains and spinal cords from cows aged 30 months or older. In addition, Washington said it would expand its cattle inspection regime to include animals aged 30 months or older that showed symptoms of BSE infection, such as having difficulty walking or central nervous system problems. However, even with the expanded measures, only about 1% of the 35 million cows slaughtered in the U.S. annually would be tested, far from Japan's demand for blanket testing of all cattle.

In an effort to narrow their differences, the two nations held three rounds of senior official talks between December 2003 and April 2004. The U.S. urged Japan to resume imports of American beef without blanket testing, citing the fact that there are few of the abnormal prions that cause BSE in young cows, even if they are infected. U.S. officials also argued the current enzyme-linked immunosorbent assay (ELISA) method used to test for BSE cannot detect cattle with a low accumulation of abnormal prions. This is why countries where BSE has broken out only test cattle aged 30 months or older. They further argued most of the risk of human infection can be eliminated by removing high-risk materials, and that blanket testing would be a massive financial burden on the livestock industry. Finally, at the fourth high-level bilateral meeting in October 2004, the two sides issued a joint press statement in which they agreed that: (1) specified high-risk materials would be removed from all cattle regardless of age; (2) beef items must be derived from cows verified to be 20 months of age or younger at the time of slaughter via animal production records such as individual animal age verification; and (3) experts from both countries will continue discussions on carcass grading and quality attributes to verify the physiological age of carcasses.

Unlike in Japan, individual animal verification systems that provide data such as a cow's birth date are not common in the U.S. This makes it difficult to prove an animal's age. Production records can only verify the birth dates of 10% of the cattle in the U.S. Since Japan-bound beef accounts for less than 3% of total U.S. beef production, it may theoretically be possible to limit beef imports to those from carcasses whose age can be verified. However, most of the beef products Japan imports from the U.S. are specialty cuts, such as short plate for gyudon beef-on-rice dishes and short ribs for barbecuing, not whole carcasses. According to one estimate, the ages of 10 million head of cattle, about 30% of the annual amount slaughtered in the U.S., would have to be confirmed to meet Japanese market demand. Because of this, experts tasked with determining a method of confirming carcass age based on the maturity of meat said it was highly unlikely for carcasses older than 21 months to be graded below A40, and they listed the points to watch out for when adopting the A40 grade as a benchmark.

At the same time, Japan's Food Safety Commission discussed whether to review domestic BSE countermeasures and issued an interim report in September 2004 that said: (1) the risk would not increase if animals younger than the testable limit were exempted; and (2) it should be taken into consideration that BSE infection in a cow 20 months old or younger could not be detected. Based on this report, the Ministry of Health, Labour and Welfare and the Ministry of Agriculture, Forestry and Fisheries called on the commission to discuss the pros and cons of revising Japan's blanket testing policy to exclude cows less than 21 months old. The Food Safety Commission issued a draft report in March 2005 that said the concentration of abnormal prions in a BSE-infected cow that was 21 months old was low, and that the risk of BSE infection among domestic cows 20 months old or younger is low because they were born more than two years after the March 2001 introduction of government regulations on feed. They estimate that fewer than two animals slaughtered per year aged 20 months old or younger would be infected with BSE, and that the likelihood of abnormal prions remaining in the meat once specified high-risk materials are removed is extremely low. Public comment on the recommendations is being accepted until April 28.

Japan's position is that the U.S. must implement the same safety measures that it applies to domestic cattle. The Food Safety Commission will now consider whether it is appropriate to apply the same conditions to U.S. beef if cattle aged 20 months or younger are exempted from the domestic testing regime, whether the U.S. inspection system is sufficient, and how the age of U.S. cattle can be confirmed. In addition, the commission will also discuss problems with the U.S. feed regulations, such as the fact that although meat and bone meal are banned as feed for cows, they can be used as feed for other animals, and whether the feed regulations are being properly implemented.

This issue has attracted political attention because the beef industry is important to the U.S. economy. President George W. Bush and top administration officials including Secretary of State Condoleezza Rice have called for a swift resumption of the beef trade. The U.S. Congress adopted a resolution calling for economic retaliatory measures if Japan drags its feet in resuming U.S. beef imports. At the same time, however, it passed a resolution calling for the postponement of imports of live cattle aged 30 months or younger from Canada. Also, in the public comment on the recommendations of Japan's Food Safety Commission, the U.S. government has called for the threshold age for beef testing to be raised to 30 months.

Separately from the talks between Japan and the U.S., the World Organisation for Animal Health (OIE), an international organization dealing with livestock disease, has proposed revisions to its BSE code that would add items such as deboned beef to its current list of items such as milk and milk products whose unconditional import should be allowed. The code is expected to be revised in late May. Based on these standards, Japan must allow the import of all deboned U.S. beef regardless of carcass age. Although the OIE standards are not strictly binding, under the World Trade Organization Agreement on the Application of Sanitary and Phytosanitary Measures, measures that are in line with international standards are considered compatible with WTO rules and countries that wish to adopt more stringent measures must prove that they are scientifically justifiable. The OIE standards are thus virtually binding. This may be more problematic for Japan than Washington's demands.

This issue goes beyond traditional trade matters to touch on consumer sentiment. If Japan is forced to resume imports of U.S. beef, it can take steps protect consumers from products they feel is risky by labeling beef products to show their origin and whether they have been tested for BSE. The U.S. itself is calling for country-of-origin labeling. Labeling provides consumers with essential information. Even if a food product is safe, the consumer has the right to know what sort of product it is.

>> Original text in Japanese

* Translated by RIETI.

May-June 2005 JPN Management

June 10, 2005

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