The Japanese government appears to be preparing to open their domestic beef market to products from U.S. animals 30 months old or less, up from the current 20 months old or less standard. The age limit was imposed on U.S. beef in December 2005 after the market was closed entirely in December 2003 when a U.S. animal was found with bovine spongiform encephalopathy, better known as BSE. A final decision will be driven mostly by politics and economics for Japan, now the number three market for U.S. beef exports.

 

All U.S. beef is safe to eat according to the World Organization for Animal Health (known as the OIE), the standards setting body used by the World Trade Organization. It decided in May 2007 to give the U.S. a “controlled-risk” rating for BSE meaning U.S. controls were effective and meat from U.S. cattle of any age can be safely traded as long as "specific-risk material", such as brains and spinal cords where disease-causing prions accumulate, are removed.

The U.S. government took a firm position after the OIE decision that WTO member countries should accept all U.S. beef products based on the science used by the OIE. The Japanese government suggested in 2007 that the age limit be raised to 30 months, but the U.S. government refused to accept any limit. Other major U.S. beef importers like Mexico and South Korea decided to use the 30 month age limit. About 95 percent of beef animals finished in feedlots in the U.S. are less than 30 months old.

Prior to the ban on imports in December 2003, the U.S. and Australia were the two major beef importers to Japan with each shipping about 250,000 metric tons (product weight basis) per year, with imports from the U.S. worth about $1.4 billion. In 2010, Australia had about three-fourths of that combined market at 350,000 metric tons and imports from the U.S. were about 100,000 metric tons. Consumption of Japanese domestic beef is 360,000 metric tons per year, putting total per capita consumption at 13.0 pounds, down 20 percent from 2000. In the first eight months of 2011, imports from the U.S. were up 48 percent at 77,000 metric tons, while imports from Australia declined 5 percent to 220,000 metric tons. With the age limit change, U.S. and Australian analysts expect the U.S. share to move toward 50 percent again over two-to-three years, depending on currency values, beef prices and availability of supplies in the U.S.

Japanese officials have confirmed that opinions have been exchanged at the expert level, but the government has not made a decision. Talks with the U.S. began in September 2010 after a three year lapse following an April 2010 agreement between U.S. Agriculture Secretary Vilsack and his Japanese counterpart to resume talks on beef. Japan’s Food Safety Commission will need to confirm that any changes in policy won’t increase human health risks. A decade-long study by the Japanese government has found that most cases of BSE are in cattle over 30 months old. Any final decision on increasing the age of imports will be made by the Japanese parliament. The new rules could be in place sometime in the middle of next year.

The timing of the decision is being driven by a bilateral summit in Washington, DC next month between President Obama and Japanese Prime Minister Yoshihiko Noda. At a mini-summit in September as part of UN meetings in New York City, President Obama was still pushing for fully opening the beef market.

The recent approval by Congress of the South Korea Free Trade Agreement without immediately fully opening the beef market is indicative of the Administration’s more practical approach of adhering to the science of the safety of U.S. beef while recognizing the resistance of some consumers to beef from animals beyond 30 months of age. In April 2009, the Obama Administration agreed to temporarily settle a 13 year old dispute with the EU on beef produced with growth promoting hormones. While a WTO panel ruled that U.S. beef was totally safe for consumption, the EU would not change its import policies and accepted tariffs on other products as determined by the WTO panel. The EU agreed to increase the quota for hormone-free beef from the U.S. and work toward a long-term agreement without accepting beef raised with hormones. Under President Bush the U.S. was right to push for a sound science solution as the best outcome, but President Obama is also right to accept less-than-ideal solutions that expand access for U.S. beef.

Prime Minister Noda has other policy reasons for accepting U.S. beef up to 30 months of age. He is interest in joining negotiations for a Trans-Pacific Partnership Free Trade Agreement among nine Pacific Rim countries, including the U.S. and Australia. Agriculture producers in Japan have been a key political stumbling block to joining this and similar discussions. This action would remove one of the irritations the U.S. has about Japanese trade policies. Also, since Japan’s nuclear energy problems in March, some of its agricultural produce and industrial products have been banned in other markets with little or no scientific basis. As long as Japan fails to open its beef imports based on science, protests over other countries' limits on Japanese products will have little creditability.

Other countries also want changes in Japanese beef import policies. Beef from Canada must also come from animal 20 months or younger and will likely be expanded to 30 months if allowed for U.S. cattle. France and the Netherlands have also been pressing for market access, but beef imports are not allowed now from them and their status change has not been linked to any decision for the U.S. The EU has a new FTA with South Korea and Japan will likely work to improve trade relations with the EU to partially offset the effects of the agreement.

Greater market access for U.S. beef in the Japanese market and been slow in coming, almost eight years and still counting. In the real world of consumer preferences and shifting political sentiments, science often takes a back seat. Economic and political realities provide a balance that forces compromises and outcomes that provide a way forward, while honoring WTO commitments. This compromise will not please everyone, but will provide a way forward that increases market access without doing major damage to the WTO rules based systems.

Ross Korves is the Economic Policy Analyst for Truth About Trade and Technology.