1. BSE outbreaks in the United States and Canada and the Impact on Trade Hyun J. Jin Won W. Koo Center for Agricultural Policy and Trade Studies North Dakota State University

2. BSE BSE (Bovine Spongiform Encephalophthy), widely known as “mad Cow Disease” is a lethal, central nervous system disease targeting cattle. BSE (Bovine Spongiform Encephalophthy), widely known as “mad Cow Disease” is a lethal, central nervous system disease targeting cattle.

3. Occurrence of BSE in Europe First outbreak in the U.K. (1986) First outbreak in the U.K. (1986) The total number of infected cattle in Europe: The total number of infected cattle in Europe: –over 34,000 by 1992. –over 180,000 by 2000. The U.K. government announced the linkage between BSE and Creuzfledt-Jocob disease (vCJD) on March 20, 1996; major alert on consumption of infected beef. The U.K. government announced the linkage between BSE and Creuzfledt-Jocob disease (vCJD) on March 20, 1996; major alert on consumption of infected beef. Approximately 135 people worldwide have been infected with vCJD from outbreak in Europe. Approximately 135 people worldwide have been infected with vCJD from outbreak in Europe.

4. Effects Major reductions in domestic consumption of beef. Major reductions in domestic consumption of beef. Major reductions in exports - most countries banned imports of European beef/cattle. Major reductions in exports - most countries banned imports of European beef/cattle. Increases in imports of beef from uninfected countries, mainly the U.S. and Australia. Increases in imports of beef from uninfected countries, mainly the U.S. and Australia.

5. Occurrence of BSE in Japan First case in Chiba in September 2001. First case in Chiba in September 2001. Second case in Hokkaido in November 2001. Second case in Hokkaido in November 2001. Two additional cases in December 2001. Two additional cases in December 2001.

6. Effects Major reduction in beef consumption in Japan: Major reduction in beef consumption in Japan: –About 60% of Japanese consumers have stopped eating beef since the first outbreak of BSE. Major reduction in beef exports: Major reduction in beef exports: –S. Korea, Singapore, China, Malaysia, and Philippines banned imports of Japanese beef. Increase in imports of beef from uninfected countries such as Australia and the U.S. Increase in imports of beef from uninfected countries such as Australia and the U.S. Increase in domestic consumption of beef substitutes. Increase in domestic consumption of beef substitutes.

7. Jin and Koo conducted a study to test whether there was a structural change in Japanese consumers’ demand for meat as a result of the BSE outbreak. Jin and Koo conducted a study to test whether there was a structural change in Japanese consumers’ demand for meat as a result of the BSE outbreak. –Method: non-parametric approach using WARP test. –Results: experiencing structural change in meat consumption.

8. BSE outbreak in Canada First case in May 2003. First case in May 2003.

9. Effects The United States, a major importer of Canadian beef/cattle, banned imports of Canadian beef and cattle and ruminant animal products to minimize BSE risk to the U.S. livestock industry. The United States, a major importer of Canadian beef/cattle, banned imports of Canadian beef and cattle and ruminant animal products to minimize BSE risk to the U.S. livestock industry. Other major importers also banned Canadian beef/cattle. Other major importers also banned Canadian beef/cattle. Moderate reduction in Canadian domestic consumption of beef. Moderate reduction in Canadian domestic consumption of beef. No significant changes in meat consumption pattern in Canada. No significant changes in meat consumption pattern in Canada.

10. BSE outbreak in the United States First case in the state of Washington in December 2003. First case in the state of Washington in December 2003.

11. Effects Major reductions in domestic and export demand: Major reductions in domestic and export demand: –5 - 10% reductions in domestic consumption of beef. –Importers banned imports of U.S. beef. –No significant changes in meat consumption pattern in the U.S.

12. Recent Research Jin, Skripnitchenko, and Koo conducted a study to analyze the effects of the U.S. BSE outbreak on the beef and cattle industry. Jin, Skripnitchenko, and Koo conducted a study to analyze the effects of the U.S. BSE outbreak on the beef and cattle industry. –Method: econometric simulation model.

14. Jin, Kim and Koo conducted another study to analyze the effects on U.S. agribusiness firms. Jin, Kim and Koo conducted another study to analyze the effects on U.S. agribusiness firms. –Method: Event Study

15. Cumulative Excess and Abnormal Daily Returns for the Sectors Sector12/24/03 ~ 12/24/03 ~ 12/29/03 12/24/03 ~ 01/02/04 12/24/03 ~ 01/06/04 12/24/03 ~ 01/08/04 Ranch and Dairy-0.1160.010-0.461-1.168-2.085** Mixed Meats-1.443-3.095**-3.237**-3.330**-3.477** Other Meats8.8178.863**8.940**9.190**8.595** Grain Marketing1.5720.8350.9591.0051.164 Farm Machine & Equip. -2.402-2.596**-2.531**-3.194**-2668** Other Foods-0.5810.0310.0110.218-0.310 Notes: The superscript ** denotes significance at the 5% level.

16. Thank you!