“Mad Cow” in America: Beyond Blaming Canada
Dr. Ron DeHaven, chief veterinarian for the U.S. Department of Agriculture (USDA), said Dec. 29 that it is highly likely the first case of "mad cow" syndrome in the United States actually originated in Canada. The USDA, in cooperation with the Canadian government, is conducting DNA tests on the cow, the results of which should be available as early as Jan. 5.
As evidence mounts that the infected cow was a Canadian import, the onus on the United States will lift, but it will still take months for the 30-odd countries that stampeded to ban U.S. beef -- because of a single case -- to lift their restrictions. In that time, the damage to the U.S. beef industry will be overshadowed only by the damage to the Canadian economy and global trade negotiations.
"Mad cow" disease, or Bovine Spongiform Encephalopathy (BSE), resides in the nervous system of cattle. It can be spread -- to humans or other cattle -- only if they consume the remains of an infected animal, and even then only through the consumption of parts of the animal (such as the brain and spinal column) that carry the disease. Eating a steak from an infected cow is perfectly safe, but anything made from brain -- as a number of regional delicacies are -- could inflict terminal twitching.
In humans, BSE can lead to the development of a variant of Creutzfeldt-Jakob Disease, a degenerative brain condition that is always fatal. Because of its lethality, using "blood meal" -- ground animal feed consisting of the remains of other cattle -- was banned in North America in 1997. That regulation, if properly enforced, makes the spread of BSE literally impossible.
How Now, Mad Cow?
The BSE case that emerged Dec. 23 in Washington state is the first in the United States. Already, health fears -- mixed with blatant opportunism -- have led to the exclusion of U.S. beef from more than 90 percent of its export markets.
If tests show, however, that the infected cow was originally from Canada, the nature of the crisis will change. On one hand, it would indicate that the domestic U.S. cattle herd remains BSE-free -- a critical factor that cannot be overstated, since it is the first and most important step toward getting U.S. beef back on the shelves of the world's supermarkets.
For Canada, a positive test result would mean its second BSE case in 2003. The first discovery in May led to a near-global ban on Canadian cattle, much of which is still in place. A second case would raise questions about the overall health of Canadian cattle herds and would extend and likely deepen the existing bans on Canadian beef, particularly if the cow in question was young enough to have been born after the blood-meal ban. The best guess of STRATFOR's industry sources is that at least one feed operation in Canada was slow to enact the 1997 ban. The USDA is working feverishly to track down all of the 81 cattle that were imported with the BSE-positive cow in August 2001 in order to test the lot.
Luckily for U.S. cattle producers, the United States already has a program in place to segregate Canadian cattle from U.S. exports. After the May 2003 BSE confirmation, Tokyo -- which enforces the world's strictest anti-BSE measures, to include testing every cow upon slaughter -- extracted promises from the United States that it would not ship Japan any beef of Canadian origin whatsoever. Applying this program to exports across the board would be somewhat difficult due to the sheer number of animals involved, but it would be done without a second thought if it would allow a resumption of the industry's $3.2 billion in annual exports. Combining such a policy with a more rigorous safety regime should provide countries with the confidence levels they need to lift their bans. An example of such an additional precaution is the USDA's Dec. 30 decision to ban the use of any "downer" cows -- those with impaired mobility (a common symptom of BSE) -- in any part of the human food chain.
STRATFOR hardly expects the current BSE case to spell the end of the U.S. cattle industry. More than 90 percent of U.S. beef production is consumed at home, and for now public trust in the industry -- along with domestic beef consumption -- is holding steady, partly courtesy of the high-protein Atkin's diet and similar fads. Canada's recent BSE outbreak, in contrast, proved devastating to the Canadian ranchers who depend upon exports for 60 percent of their sales.
The end result for the U.S. cattle industry is heavily predicated on one very important "if." If the cow -- and any new cases discovered -- is indeed Canadian, then the United States likely will be able to resume exports by the summer of 2004. In the meantime, the cattle industries of Australia and New Zealand -- the only totally BSE-free countries in the world with sufficient quality control -- stand to make a killing by supplanting U.S. supply contracts. In 2002, U.S. red meat exports to Japan alone brought in $1.8 billion.
Beyond Belligerent Bovines
There is more going on with the BSE case than mere science and logic. Governments have to address the fears of their public, and the idea of a Creutzfeldt-Jakob-induced death tends to act as caffeine for the masses -- it makes everyone jittery. Outright bans -- such as the seven-year ban that Taiwan announced Dec. 30 -- are the classic, and understandable, knee-jerk responses.
In a perfect world, once cooler heads prevailed, governments would look at the U.S. system and its ability to make it all but impossible for BSE to develop in domestic herds, nod appreciatively, and move on.
A perfect world this is not. That's where STRATFOR comes in.
A core issue for many states is that U.S. foreign policy hasn't exactly been kinder and gentler these past two years. American policy can be accurately described as unilateralist, and the U.S. position in recent trade negotiations has been just as shortsighted, nationalistic and acerbic as the stances of other countries.
And so with logic that combines twisting the lion's tail with legitimate health threats, the bans on U.S. beef began stacking up hours after the suspected BSE case emerged. In all cases, the dominant logic argues that the bans will be in place for longer than science would normally warrant. For exporters such as Argentina and Australia, it is about trying to snag some market share. For consumers such as Japan, Mexico and South Korea -- the three largest consumers of U.S. beef -- it is about health protection and boosting ailing agricultural sectors in equal measure. For Europeans, who already ban most imports of U.S. beef because it is hormone-treated, your governments are on vacation and will take a decision when they come back Jan. 5.
That European crack is only half in jest -- the European Union is playing a wait-and-see game. Since EU members import so little U.S. meat -- in 2002, the entire 15 took in only 1 percent of Japan's total -- a ban's financial impact on either side of the Atlantic is simply not worth the idlest conversation. That makes any European decision on the U.S. BSE issue political in nature. Many Europeans are still fuming over the 2001 U.S. ban on their beef exports related to BSE and foot-and-mouth syndrome. If between now and the resumption of normal European working hours more BSE cases are uncovered in the United States, then Brussels -- already in a trade war of words with Washington over export tax breaks and genetically modified foods -- might just take a quiet delight in complicating efforts to certify its beef safe and BSE-free.
The two most serious impacts in all of this will be felt by Canada and the World Trade Organization.
Canada's cattle industry is obviously over a barrel, but the implications for Ottawa and other Canadian sectors are also bleak. On Dec. 12, Paul Martin -- an avowed pro-American -- took over for Canadian Prime Minister Jean Chretien, a leader far less enthused about Canada's relationship with its southern neighbor. Near the top of Martin's foreign policy agenda was a desire to rebuild relations damaged by Chretien's oppositionist stance on the Iraq war.
That policy will simply have to wait. The leading U.S. strategy for combating the BSE crisis is to round up all the evidence and blame everything -- thoroughly, irrevocably and totally -- on Canada.
That does not give Martin much to work with.
Unfortunately for Canadian firms, this will lead to some missed opportunities. Washington has made it painfully clear that the only companies eligible for the $18.6 billion in Iraqi reconstruction contracts are those whose governments supported U.S. policy on the Iraq war. A thawing in relations likely would have been enough to remove Canada from the black list and allow it to join the herd of bidding firms, but that thawing must first wait for the BSE rodeo to end.
But where Canadian-U.S. relations are ultimately salvageable, the WTO's Doha round might not be. The negotiations -- which seek to liberalize trade and investment rules -- were in trouble before the recent BSE developments. Shifting U.S. geopolitical priorities have led the United States away from its longstanding desire to act as the global economy's importer of last resort.
Without the United States acting as the driver, the chances for a successful Doha round defaulted to other parties' willingness to make their own concessions. The most influential of these parties are either countries with total bans on U.S. beef exports (Japan, Korea and Brazil), those that the United States is attempting to blame for the BSE mess (Canada) or those that are flirting with sabotaging U.S. agriculture (the European Union). Other states, primarily in the developing world, are extremely likely to seize upon the food safety issue in order to gain leverage for their own trade agendas.
All in all, recent BSE developments have just injected an unhealthy dose of mistrust, recrimination and anger into trade negotiations of any flavor as regards the most sensitive of all topics -- agriculture -- at a time when only a broad front of cooperation would have any chance of jumpstarting the talks. To say that the Doha round was in trouble before BSE was spotted in Washington is an understatement, but to hope that the round has a chance of evolving into a meaningful agreement anymore is to flirt with fairy tales.
