1. Economic Impacts of Bovine Spongiform Encephalopathy in Canada and Europe And The Effect of Compensation Programs

Abstract

Before the first domestic case of bovine spongiform encephalopathy (BSE) was identified in May 2003, Canada was the world’s third largest exporter of cattle behind the United States (U.S.) and Australia. After the BSE disclosure, the U.S. and 40 other countries imposed an immediate ban on imported Canadian beef and cattle products. The interdependence of the Canadian beef industry with that of the U.S. prior to the outbreak of BSE was a critical factor in Canada’s market vulnerability and the resulting economic impact. As the re-opening of the U.S. border was prolonged, beef producers adopted a variety of strategies to deal with the loss of income including refinancing existing loans and selling land or other assets. However these measures taken by individual farmers were not sufficient in completely supplementing their loss of income, thus creating a need for government funding and support. Little research has been done to assess the impact of government subsidies as a tool to offset the economic losses incurred by BSE. The analysis of the impacts of BSE and the resulting subsidies is extended to Britain, France, Germany and the European Union to see if government subsidies had a similar impact as compared to Canada. Analysis of existing literature shows the economic impacts to be heavily impacted by the structure of the beef industry and the subsidies to be impacted by consumption levels. The result of the subsidies is unclear; however due to lack of recent information the full analysis of the result of subsidy programs is difficult to determine.