International Agricultural Trade Research Consortium
Annual Meeting
December 13-15, 2009
Ft Myers, Florida
When Certification Programs to Ensure
Compliance with Foreign Standards Enhance
Trade: The Case of Brazilian Beef Exports
Marinos Tsigas, USITC
Constanza Valdes, ERS
Jesse Mora, USITC
This presentation does not represent in any way the views of
ERS/USDA, the USITC or any of its individual Commissioners
Objective
• To estimate the costs vs. benefits to Brazil’s
beef export industry of adopting certification
(private producer) programs to comply with
foreign standards.
• To quantify the cost of measures to eradicate
foot and mouth disease (FMD) in Brazil from
Agricultural Ministry data.
• To quantify the cost of certification programs to
have traceability information from firm-level
survey data.
• To quantify the trade impacts of FMD eradication
and certification programs.
Outline
• Brazil’s beef sector
• U.S. and global beef exports before and after 2003 BSE
bans
• GTAP simulations and modeling of FMD eradication in
Brazil
• Quantifying direct effects of removing import restrictions
due to FMD
• Impact of BSE bans on Brazilian beef exports under
different FMD and certification conditions in Brazil
• Conclusions
Brazil is a key player in the global beef
market
• Largest commercial herd: 185.2 million head; produces
beef from grass-fed cattle.
• World’s largest beef exporter (in volume) since 2004;
22% of world market.
• Brazilian beef is exported to virtually every continent: the
EU accounts for nearly 60% of Brazil’s beef exports;
other important markets include the Middle East, Russia,
Asia, Chile and the United States (processed beef).
• The second largest consumer market (7.4 million tons)
and the fourth largest in per capita consumption.
• Mato Grosso do Sul is Brazil’s most important beef
producing state.
Last Foot and Mouth Disease (FMD) outbreak
and major livestock producing areas
Overcoming sanitary and trade barriers
in key consumer markets is a priority
• Brazil’s recent efforts focus on FMD eradication
and implementation of certification programs.
• There are marked differences between
government eradication and certification
programs to comply with foreign private
standards.
• The government program to eradicate FMD in
Brazil increases producer costs by 14.2%.
• Implementation of certification programs adds
10.9% to costs of production.
Cost to Brazilian beef sector of lost
exports is about $700 million in 2005-08
Thousand tons
2,500
2,300
2,100
1,900
1,700
1,500
1,300
Historical
Baseline Beef Projections
1,100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: USDA Agricultural Projections to 2015, OCE-2005-1, USDA, Office of the Chief Economist,
World Agricultural Outlook Board, February 2006.
FMD Situation in Brazil in 2009
According to OIE. General and targeted surveillance.
U.S. was largest beef exporter in 2003
2003 beef exports
3,500
Million U.S. dollars
3,000
2,500
2,000
1,500
1,000
500
0
Argentina Australia
Brazil
Canada
EU15
Mexico
Exporter
New
Zealand
USA
Uruguay
ROW*
But several countries banned U.S. beef
following discovery of BSE in Dec 2003
U.S. beef exports before and after BSE bans
Million U.S. dollars
1,200
1,000
800
600
400
200
0
Canada
China
Japan
Korea
Destination
Before BSE
After BSE
Mexico
Russia
ROW**
Brazil was not able to expand its exports
to markets that banned U.S. beef
Beef exports before and after BSE bans
3,500
Million U.S. dollars
3,000
2,500
2,000
1,500
1,000
500
0
Argentina Australia
Brazil
Canada
EU15
Mexico
New
Zealand
Exporter
Before BSE
After BSE
USA
Uruguay
ROW*
GTAP simulations and modeling FMD
eradication in Brazil
Price
BSE bans
2003 database
BSE
effects
Supply with
FMD
eradicated
Supply
2003
database,
Brazil: FMD
eradicated
2003
database,
Brazil: FMD
eradicated
and
certification
BSE bans
BSE bans
BSE effects
in the
absence of
FMD in
Brazil
BSE effects in
the absence of
FMD in Brazil
and
certification
Demand in
absence of
FMD trade
restrictions
Demand with
FMD trade
restrictions
Quantity
GTAP simulations
Market for Brazilian beef
Quantifying direct effects of removing
import restrictions due to FMD
Price
Price
Supply
Demand with
FMD trade
restrictions for
Brazilian beef
Supply
PM,nB
Demand in
absence of
FMD trade
restrictions
PM,B
Demand with
FMD trade
restrictions
Demand in
absence of
FMD trade
restrictions
for Brazilian
beef
Quantity
Market for Brazilian beef
Quantity
Market for non-Brazilian beef
FMD eradication and certification would have allowed
expansion of Brazilian exports when BSE was
discovered in the United States
Actual 2003
FMD eradicated in Brazil
FMD eradicated and certification in Brazil
8,000
8,000
8,000
7,000
7,000
7,000
6,000
6,000
6,000
5,000
5,000
5,000
4,000
4,000
4,000
3,000
3,000
3,000
2,000
2,000
2,000
1,000
1,000
1,000
0
0
0
Before BSE
After BSE
Simulations with GTAP model
Before BSE
After BSE
Before BSE
After BSE
FMD eradication and implementation of certification
programs in Brazil would have dampened impacts of
BSE on world beef markets
Change in global beef trade and welfare due to BSE bans
under different FMD conditions in Brazil
Global beef exports
Global welfare
0
Million U.S. dollars
-500
-1,000
-1,500
-2,000
-2,500
Actual 2003
Simulations with GTAP model
FMD eradicated
FMD eradicated, private standards
Conclusions
• Despite costly FMD eradication and certification
programs to ensure compliance with foreign
standards, Brazilian beef exports would expand
and global consumers would be better off.
• If Brazil can sell beef in Pacific and North
American markets, Australian and New Zealand
exports would decline.
• Substitution possibilities in the Pacific beef
market, both between grass-fed and grain-fed
beef and between chilled and frozen beef, could
marginally affect U.S. exports.
Thank you!