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Impact on EU Pork Trade of US Regionalization for CSF

by 5m Editor
16 January 2006, at 12:00am

By USDA Foreign Agricultural Service - This report examines the amount (value) of trade between the US and the EU in pork products, looking specifically at how CSF has impacted EU pork exports to the US. This report also describes the Animal and Plant Health Inspection Service's (APHIS) efforts to regionalize the EU-25 for Classical Swine Fever (CSF), and details the progress made thus far.

Impact on EU Pork Trade of US Regionalization for CSF - By USDA Foreign Agricultural Service - This report examines the amount (value) of trade between the US and the EU in pork products, looking specifically at how CSF has impacted EU pork exports to the US. This report also describes the Animal and Plant Health Inspection Service's (APHIS) efforts to regionalize the EU-25 for Classical Swine Fever (CSF), and details the progress made thus far.

Background and Introduction

Classical swine fever (CSF), also known as hog cholera, is a highly contagious viral disease of swine. CSF was eradicated from the United States in 1978 after a 16-year effort by the industry and State and Federal governments. In 1997, several European countries, including the Netherlands and Belgium, experienced outbreaks and suffered heavy production losses ($700 million in the Netherlands, $15 million in Belgium).

Outbreaks also occurred in the United Kingdom in 2000, Austria in 2001, France and Spain in 2002, and repeatedly throughout the last decade in both Italy and Germany. These outbreaks provide an historical example of the potential consequences when appropriate control and eradication measures are not implemented and if there are insufficient risk mitigations in place. While CSF does not cause food borne illness in people, economic losses to pork producers would be severe if the disease were to become established again in the United States.

The Animal and Plant Health Inspection Service (APHIS), a division of the US Department of Agriculture, includes among its responsibilities, the protection of America's animal and plant resources from agricultural pests and diseases. Therefore, the charge to protect American agriculture from the dangers posed by CSF falls to APHIS, specifically to the Veterinary Services (VS) division.

The most common methods of transmission of CSF are (1) direct contact between healthy swine and those infected with CSF via aerosol and (2) contact with body secretions from infected animals. Healthy pigs coming into contact with contaminated vehicles, pens, feed, or clothing may also contract the disease. Birds, flies and humans can physically carry the virus from infected to healthy animals and swine.

Animal owners can inadvertently cause infection through feeding their herds food wastes containing infected pork scraps. APHIS VS evaluates the effectiveness of risk mitigation measures in place in foreign countries to interrupt these potential pathways of transmission and other applicable risk mitigation and control measures prior to opening markets in swine and swine commodities. APHIS VS has concluded that the measures in place in the EU 15 are adequate and is in the process of evaluating the measures in the 10 new Member States.

On July 20, 1999, the United States and the European Union signed the Veterinary Equivalency Agreement (VEA). As part of this agreement, both sides agreed in principle to recognize regionalization decisions taken by the other. The term “regionalization” is a WTO concept whereby members are supposed to ensure that their sanitary or phytosanitary measures are applicable and appropriate to the characteristics of a region. In making regionalization decisions, members are supposed to take into account, inter alia, the level of prevalence of specific diseases or pests, the existence of eradication or control programs, and appropriate criteria or guidelines which may be developed by the relevant international organizations. APHIS evaluates these and other applicable controls in the region as appropriate.

The Road to Regionalization

APHIS VS has been involved with regionalizing the EU for CSF for years and the process has involved many cycles of rulemaking. APHIS VS has completed its evaluation of the EU-15, and is in the process of evaluating the 10 new member states, and this will probably involve several cycles of rulemaking. Each cycle of rulemaking has had an evaluation phase during which APHIS VS obtains information from the Member State, evaluates it, conducts a site visit, and writes a risk assessment. This process can take 2-3 years for each rule, depending on the disease conditions in the region. In fact, the process was prolonged for the EU as a result of continuing outbreaks in the region. After the risk assessment is completed, rulemaking is initiated. Each rulemaking activity can also require several years. The more recent cycles of rulemaking are discussed in more detail in the next section.

For a comprehensive and detailed explanation of the US process of regionalization, see APHIS’s explanatory document entitled “Process for Foreign Animal Disease Status Evaluations, Regionalization, Risk Analysis and Rulemaking” (http://www.aphis.usda.gov/vs/ncie/pdf/region-memo0504final.pdf).

Progress to Date

Beginning in 1999, with the signing of the US-EU Veterinary Equivalency Agreement (VEA), APHIS began the considerable task of regionalizing the fifteen EU member states for CSF. Given the science-based approach of APHIS VS, and the transparent rulema king process that ensures adequate feedback, the process of regionalization is lengthy. As early as 2003, however, APHIS had made remarkable progress in this task, and had published a final rule recognizing Austria, Belgium, Greece, Portugal, the Netherlands, and certain parts of Germany and Italy as free of CSF. By 2004, APHIS had recognized 14 EU member states or parts of Member States as CSF-free, leaving only Luxemburg and parts of Italy and Germany from the EU-151. Due to recurring outbreaks of CSF in these regions, the regions could not be recognized as free but will be evaluated and handled in subsequent rulemakings. This progress occurred despite many challenges that included outbreaks of CSF as well as foot-and-mouth disease (FMD) in areas that were being evaluated.

In April 2005, APHIS published a proposed “Stage IV” rule that would recognize all of the EU-15 as low-risk for CSF and provide for greater flexibility of US reaction in the case of future CSF outbreaks in the EU 15. The period allotted for comment on the rule closed in July 2005, and APHIS is currently in the process of incorporating those comments into the final rule. In addition to this progress, in July 2005 APHIS published a final rule that identifies administrative unites (AU) for the 15 EU Member States This rule provides great benefits to EU members by allowing APHIS to geographically limit the scope of restrictions imposed due to disease outbreaks from CSF.

After May 1, 2004, when the EU expanded to include 10 new member states, APHIS started the process to regionalize these additional member states. By November 2005, APHIS had concluded site visits to 8 of the 10 new member states (NMS). In short, APHIS has made remarkable progress in its effort to regionalize the EU-15 for CSF, and continues to work hard to meet the requests of the NMS.

EU and US Concerns

APHIS clearly recognizes the dangerous and destructive consequences posed by a potential CSF outbreak in the US, and therefore VS is working arduously to examine and evaluate those outbreak controls in place within the EU. There have been calls from the EU to expedite the process of regionalization, so that member states may continue to export pork to the US after an outbreak of CSF. While APHIS hopes to accomplish the task of regionalization in a quick and timely manner, US agricultural security is the first priority, and VS is therefore doing everything to ensure that US producers and consumers are well protected.

The accession of 10 new member states in 2004 has added complexity to the process of regionalization by raising issues of border control with neighboring non-EU countries. APHIS is also cognizant of the importance of adhering to and following the World Organization for Animal Health (OIE) standards, rules, and regulations. As these regulations are constantly modified and adjusted, APHIS wants to remain abreast of these changes, and adhere to international standards.2 While addressing these issues in the careful manner that they demand may elongate the process of regionalization, APHIS VS must tackle these concerns at this point in the process in order to ensure the success of regionalization in the future.

The speed at which APHIS completes the process of regionalization is also determined by regulatory constraints in the US process of rulemaking. This process, while lengthy, is rigorous. The length of this process is necessary to ensure that the adopted rule is accurate and appropriate, as well as ensuring that the process itself is transparent and incorporates adequate feedback.

1 For a complete list of those regions of Italy and Germany not considered free of CSF, see the APHIS website,
http://www.aphis.usda.gov/NCIE/country.html#CSF.

Trade Data

In order to assess the impact that CSF has had on trade between the US and the EU since the signing of the VEA, trade runs from 1999-2004 were conducted for those pertinent pork products. For a comprehensive list of those products used, please see the appendix of this report. Due to the small amount of trade that takes place in live animals between the US and the EU, live pigs were not included in this analysis.

It is necessary to break down the analysis of pork products into two subcategories: (1) fresh/frozen pork, and (2) processed pork. This distinction is necessary due to the nature of CSF (and Foot and Mouth Disease) import restrictions. Those pork products that are fresh and frozen are subject to import restrictions, while certain processed pork products are only required to meet CFR processing requirements for the commodity. Therefore, if an outbreak of CSF were to occur in a member state of the EU, that country would still be allowed to export certain processed pork products. Given this distinction, the trade runs below are likewise broken down according to “fresh/frozen” or “processed” products. The HS codes for each category can be found in the appendix of this report.

EU Exports to the US

As can be seen from the graph and table below, EU-25 pork exports to the US increased nearly 50 percent from $264 million in 1999 to $390 million in 2004. This occurred despite a marked strengthening of the Euro which made EU pork products more expensive for U.S. consumers in dollar terms. Thus, EU claims that slow progress on regionalization of the EU for CSF has resulted in trade losses are somewhat misleading, since trade actually grew by $126 million during that period.

In the period between 2000 and 2001, there was a slight dip in trade in pork products, in which trade between the EU-25 and the US decreased from roughly $307 million to $271 million (see graph below). During 2001, the US enacted a 10-week import ban (March-May 2001) due to a Foot and Mouth disease (FMD) outbreak in Europe. Therefore, this decrease in EU pork exports to the US is attributable in large part to this FMD outbreak, and CSF did not play a role.

The EU continues to enjoy good market access to the United States for pork products. That market access may expand in the future as more EU Member States become eligible to export pork to the United States (see graphs below).

2 For a comprehensive description of the OIE’s definitions, standards, and procedures relating to the regionalization of CSF and trade of affected products, see the OIE Animal Terrestrial Code
(http://www.oie.int/eng/normes/mcode/en_sommaire.htm).


Denmark is easily the largest EU pork exporter to the US, accounting for roughly 83% of all EU pork exports to the US in 2004. Denmark, which experienced its last case of CSF in 1933, is considered CSF free by the US. Danish pork exports to the US make up approximately 16% of US pork imports. After Denmark, the UK is the next largest European pork exporter, accounting for only 3%. Italy, Poland, and the Netherlands are also among the top exporters of pork to the US, though their contribution is significantly lower (see graph below). The country responsible for the largest amount of US pork imports is Canada, with 74%.


The composition of EU pork exports is more widely spread across a number of countries, although Japan is the largest recipient with approximately 41%. The US is the second largest recipient with 12% (see graph below).

US Exports to the EU

US pork exports to the EU were less than one-tenth of their exports to the United States between 1999 and 2004 and rose a mere $6 million during that period. Thus, U.S. pork exporters were unable to benefit from a weaker dollar making their products cheaper on EU markets due to several factors that include EU import regulations. The majority of US pork exports to the EU is in the form of fresh pork, as can be seen by the graph and table below. Between 2002 and 2004, US pork exports increased dramatically, and then experienced a sudden drop off.

This dramatic fluctuation can be almost wholly accounted for by US exports to Poland, while exports to other countries were relatively stable. In Poland, importers of US pork products recognized that Poland’s accession into the EU in May 2004 would place restrictions on imports from the US. Beginning in 2002, therefore, Polish importers of US pork, in anticipation of accession, increased their stocks of US pork products, causing the surge in the value of US exports as can be seen below. When, in 2004, Poland joined the EU, US pork exports to Poland dramatically declined, as predicted.

Conclusion

While the EU has repeatedly called for the US to expedite its regionalization process for CSF, EU exports have not been significantly hindered by CSF outbreaks. In fact, the greatest decrease in EU pork exports to the US resulted (in 2001) from an outbreak of FMD. Not only has trade in pork products continued to take place between the EU and the US, but EU pork exports to the US are actually increasing, while US pork exports to the EU have declined dramatically with Poland’s accession into the Union.

APHIS is working diligently to complete the regionalization process, and hopes, through meticulous and careful evaluation, to establish a precedent for disease evaluation that may be subsequently applied to other animal diseases. In order for this process to be successful and produce long-term benefits, APHIS VS must ensure that the evaluation process is scientifically based and accurate. The rulemaking process, while also lengthy, also seeks to secure the longer-term benefits of the regionalization of animal diseases. In the meantime, however, the EU continues to enjoy increasing exports to the US of pork products, while the US is faced with closing markets.

Further Information

For additional information on CSF click here

Source: USDA Foreign Agricultural Service - January 2006