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Proposed EU Ban on Specified Risk Materials (SMRs):
An Action Plan for the American Meat Association

 

Commercial Diplomacy
Master’s Project

Jeanette Kelly

June 1998

 

 

This paper was researched and written to fulfill the M.A. project requirement for completing the Monterey Institute of International Studies’ Master of Arts in Commercial Diplomacy. It was not commissioned by any government or other organization. The views and analysis presented are those of the student alone. For more information about the Commercial Diplomacy program and the M.A. project requirement, please visit www.commercialdiplomacy.org.





Proposed EU Ban on Specified Risk Materials (SRMS):
An Action Plan for the American Meat Association

Scenario

 

For the purposes of this project, I assume the fictious role of an independent trade policy consultant hired by a fictitious industry association, the American Meat Association (AMA).

In order to exempt the United States from the proposed European Union (EU) ban on sales of materials that could potentially carry the Bovine Spongiform Encephalopathy (BSE) or “mad cow” virus, I have been asked to create a strategy to gain recognition of the United States as a BSE-free country.

Without BSE-free status, exports of AMA members’ products to the EU could be blocked, resulting in potential economic losses of more than $17 billion in U.S. pharmaceutical exports, $125 million in U.S. tallow and tallow derivative exports, $100 million in cosmetics exports, and hundreds-of-millions of dollars in animal feed and human food product exports. This project assumes a report on November 1, 1997.

Issue

On July 30,1997, the EU announced plans to ban the sale of products that contain specified risk materials (SRMs) such as brains, spinal cords, tallow and gelatin. Products that would be covered by the ban include certain animal feeds, human foods, cosmetics, and pharmaceuticals. Known as the SRM Directive, the ban is scheduled to be implemented beginning January 1, 1998, and is intended to prevent the spread of Transmissible Spongiform Encephalopathies (TSEs), specifically BSE.

The United States argues that its SRMs are free from BSE since the United States maintains a vigorous monitoring system and no cases of BSE have ever been confirmed in the United States.

If the EU implements the proposed SRM ban in its original form (i.e., without derogations), the United States stands to lose billions of dollars in exports of animal products. For the AMA and its members, this could be a devastating blow. In 1996, the EU was the second largest export destination for U.S. tallow. In the event the EU decides to expand the ban to additional SRMs, the potential impact would increase.         

 

Background

Economic Impact of the Ban

The EU ban would cost the United States more than $125 million in U.S. tallow and tallow derivative exports, $17 billion in U.S. pharmaceutical exports, and $100 million in U.S. cosmetics exports to the EU. In addition, hundreds-of-millions of dollars in animal feed and food product exports to the EU also would be lost. Exporters and farmers, as well as Americans working in jobs that support these export activities, would all be affected.

The U.S.-EU trading relationship would also be affected by the ban. The EU and the United States together account for more than 30 percent of world trade and represent almost 60 percent of the industrialized world's GDP. Our bilateral trade and investment flows with the EU equals more than $1 trillion annually. Maintaining good U.S.-EU relations is important to continuing this economic prosperity, particularly for U.S. agricultural exporters because the EU is one of the largest export markets for U.S. farm products.

Political Briefing

Since the ban would have a substantial negative impact on numerous American and EU interest groups, AMA can form a broad coalition of opposition to the ban. Within the United States, AMA can expect the support of the Pharmaceutcial Research and Manufacturers of America (PhRMA), the Cosmetics, Toiletry and Fragrance Association (CTFA), the National Renderer's Association (NRA), the National Cattlemen's Beef Association, the U.S. Meat Export Federation, and the American Farm Bureau Federation. All of these organizations represent major industries that would be negatively affected by the ban.

AMA can also expect that the United States Department of Agriculture (USDA) and the Office of the U.S. Trade Representative (USTR) will continue to support AMA. USDA and USTR are already discussing the proposed ban with the EU.

Other less obvious allies are EU member states that have not had native cases of BSE. These allies could prove to be extremely important because of their ability to influence the European Commission. Some member states have told the Commission they deserve to be exempt from the ban because of their low risk for BSE.

Since U.S. animal product exports are used by EU pharmaceutical and cosmetics industries to create products and consumer goods, these companies are another potential set of allies for AMA. EU member states rely on U.S. pharmaceuticals to some degree, but many American companies operate in Europe through subsidiary companies. Since 1995, France has been the number one producer of pharmaceuticals in Europe. U.S. imports account for only eight percent ($234 million) of the French pharmaceutical market. Subsidiaries of U.S. companies operating in France account for about 20 percent of local production. According to Agripharm, a U.S. working group of pharmaceutical companies in France, American pharmaceutical companies account for more than 10 percent of the market in EU member states: France-23 percent, Germany-22 percent, Italy-16 percent, and United Kingdom-12 percent.

AMA should expect the EU Commission and EU member states that have reported BSE cases in native cattle, particularly the United Kingdom, to oppose AMA’s efforts. Less clear are the interests of the EU Standing Scientific Committee and other scientific committees that study BSE and advise the Commission. Although these committees are supposed to make decisions based on objective, scientific criteria, they are not necessarily free from political pressure from the Commission and other EU member states.

Scientific Basis and Criteria for Evaluating the Ban

In July 1997, the EU Commission introduced Directive 97/534, known as the SRM Directive, as a follow-up to Directive 97/01, the Cosmetics Directive, of January 1997. Together these Directives ban the sale of all SRMs and SRM-containing products (SRM Directive), as well as beef tallow and tallow-containing products (Cosmetics Directive). The purpose of these Directives is to prevent the spread of BSE, a slowly progressing degenerative disease that affects the nervous system of cattle.

Commonly referred to as "mad cow disease," BSE was first identified in the United Kingdom (UK) in 1986. The scientific community believes that cattle contracted BSE by consuming contaminated meat-and-bone meal in concentrate feed, with sheep or cattle being the original source. The epidemic of BSE in the UK, the only country with a high incidence of the disease, appears to be the result of recycling affected bovine material back to cattle before July 1988 when the UK instituted a ban on using ruminant-derived materials in feed. Ruminants include cattle, sheep and goats.

BSE is one of several different transmissible animal brain diseases known as Transmissible Spongiform Encephalopathies (TSEs). Other TSEs include scrapie, a disease commonly found in sheep; a similar neurological disease in mink and captive North American mule deer and elk; and a neurological disease in household cats and captive ruminant and feline species, the majority of cases of which have occurred in the UK. Although there is no evidence to date that TSEs/BSE can be transmitted either maternally or horizontally to different animal species, scientists worldwide continue to study various aspects of these diseases.

Similar forms of brain spongiform disease have been diagnosed in human beings, including the deadly Creutzfeldt-Jakob disease (CJD). At the time of the BSE epidemic, health officials in the UK diagnosed a new variant of CJD (nv-CJD) in approximately 20 patients. No cases of this disease have been diagnosed in the United States.

Although scientists believe that human exposure to BSE is the most probable cause of nv-CJD, no clear scientific evidence has been found to link this new strain to BSE. Nonetheless, the potential link has raised questions as to whether animal products from BSE-infected cattle could infect human beings or other animals, and it is the potential link that led the EU to ban the sale of SRMs and animal by-products that contain SRMs.

As outlined by the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement), the EU has the right to take measures to protect human, animal or plant health, it is required to base these measures upon sound scientific principles and evidence and to minimize any negative trade effects. The United States maintains that the ban violates the EU’s SPS obligations and acts as an unnecessary trade barrier.

The SPS Agreement does not proclaim that the WTO will engage in setting scientific standards for determining the appropriate level of protection or risk related to SPS measures. Instead, it requires all members to ensure that their SPS measures are "based on an assessment . . . of the risks to human, animal or plant health, taking into account the risk assessment techniques developed by the relevant international organizations." The Agreement also refers members to the guidelines developed by international organizations when adapting SPS measures to regional conditions, including disease-free areas. For animal and animal-disease issues (including TSE/BSE), the SPS Agreement refers members to standards set by the International Office of Epizooties (OIE), the international veterinary association. Because the EU ban involves protecting human and animal life, the Codex Alimentarius Commission standards of the Food and Agriculture Organization (FAO) and World Health Organization (WHO) recommendations also must be considered.

Exhibit 1 summarizes these guidelines. Exhibits 2-5 address OIE, CODEX, and WHO guidelines for BSE. These international guidelines and recommendations should be followed in designing and evaluating BSE risk assessments and prevention, surveillance, and response strategies. The guidelines should also be used in determining what materials should be considered to be SRMS.

Risk Assessment

CODEX and OIE identify risk assessment and management as the basis of any country's BSE management/surveillance program. CODEX combines recommendations for risk assessment with guidelines for effective management and communication of BSE risk levels (Exhibit 5).

The OIE International Animal Code provides a detailed outline of the risks specific to BSE and provides guidelines for countries to follow when identifying the potential for BSE occurrence, including:

·        The risk arising from imports of animals potentially infected with TSEs and potentially contaminated animal feedstuff;

·        The indigenous risks of cattle consuming animal-derived proteins from TSE-infected animals and rendering processes that do not inactivate the agent; and

·        The potential vertical transmission of BSE from cows originating from infected countries.

Prevention

International recommendations for preventing the spread and introduction of BSE include:

·        Banning (or placing restrictions on) the use of feeds that contain ruminant-animal-derived materials from TSE-infected countries (OIE, WHO, CODEX);

·        Taking measures to ensure that rendering procedures eradicate TSEs, particularly when dealing with SRMs (WHO); and

·        Preventing parts of any animal (including tissues) that has shown TSE symptoms from entering any human or animal food chain (WHO, CODEX).

Surveillance

International recommendations for domestic BSE surveillance programs include:

·        Establishing continuous BSE surveillance monitoring systems (OIE, WHO);

·        Declaring compulsory notification for BSE cases (OIE, WHO); and

·        Completing clinical investigations of suspect cases by post-mortem examination of brain material (OIE).

Response

To prevent the spread of BSE, these international organizations recommend that animals confirmed to be infected with BSE be completely incinerated or otherwise effectively destroyed.

SRMs

The EU must also consider WHO safety recommendations concerning certain bovine by-products and SRMs. The EU ban seems to disregard WHO findings that:

·        Gelatin is considered safe for human consumption because its preparation involves a chemical extraction process that destroys BSE infectivity;

·        Tallow is considered safe if it is produced using effective rendering procedures; and

·        With respect to medicinal products (which differ from food in that they can be injected as well as taken orally), the risk of transmitting the BSE agent can be minimized by using only SRM materials that come from countries that have surveillance systems in place and report either no or only sporadic cases of BSE.

The United States’ BSE Risk

Although the United States already has proven its BSE-free status in international fora, the EU has refused to exempt the United States from the ban for two reasons:

·        An EU scientific committee studying the BSE issue has argued that the lengthy BSE incubation period would require inspections over a 60-month period to verify a country's BSE status; and

·        Granting the United States BSE-free status would open the door for some EU member states to ask for the same status, something the EU Commission wants to avoid.

However, the EU must recognize and follow OIE guidelines to determine a country's BSE status. According to the OIE Code, a country may be considered free of BSE if it:

·        implements a comprehensive BSE risk management strategy and bans the feeding of meat-and-bone meal to cattle (derived either from ruminant animals from TSE-infested countries or countries that do not maintain a BSE surveillance program);

·        certifies that there have been no clinical cases of BSE in the country, makes BSE a notifiable disease, and maintains an effective surveillance and monitoring system; and

·        (if BSE has been confirmed within a country) proves that all cases of BSE originated from BSE-infected countries and ensures that all suspect animals are destroyed.

The United States not only meets these guidelines but also meets the international recommendations for preventing the spread and introduction of BSE by establishing both monitoring and response systems for BSE.

The U.S. BSE Monitoring System

Although no cases of BSE have been confirmed in the United States, the U.S. Department of Agriculture (USDA), in conjunction with the U.S. Food and Drug Administration (FDA), maintains a detailed monitoring system for BSE. USDA’s Animal and Plant Health Inspection Service (APHIS) and the Food Safety Inspection Service (FSIS) are the main agencies responsible for developing and implementing this system. The monitoring system is divided into four components: prevention, surveillance, education, and response.

 

Prevention Through Import Restrictions

Recognizing the potential risk of introducing BSE into the United States through imports of animals and potentially contaminated animal feedstuff, USDA maintains a series of import restrictions. To prevent BSE from entering the country, APHIS prohibits imports of live ruminants from countries having confirmed cases of BSE in native cattle. In addition, USDA prevents other products derived from ruminants from entering the United States unless permission or a USDA permit is granted due to special conditions or for scientific research purposes. Products included under this ruminant derivative ban include beef, fetal bovine serum, bone meal, meat-and-bone meal, blood meal, offal, fats, and glands. The United States does not allow imports from slaughter plants in countries with confirmed BSE cases.

Recognizing that Europe’s recent outbreak of BSE was probably caused by TSE-contaminated ruminant feed for cattle, the FDA prohibits the inclusion of ruminant and mink protein in ruminant feed. This rule came into force on August 4, 1997, and is consistent with safety recommendations set forth by the OIE, WHO, and CODEX.

Education and Training Initiatives

The education component of the United States’ BSE monitoring system includes efforts to ensure that a variety of groups and individuals are aware of the disease. APHIS educates the veterinary community, including veterinary practitioners and veterinary laboratory diagnosticians, on the clinical signs and pathology of BSE. APHIS also provides educational/training briefings for U.S. cattle industry groups and producers. APHIS veterinary pathologists and field investigators receive BSE diagnosis training from their British counterparts.

Surveillance

In accordance with the guidelines established by OIE, APHIS leads the United States’ comprehensive BSE surveillance program (Exhibit 6). Since the only proven test for BSE is a post-mortem examination of brain tissue, well-trained APHIS staff and other veterinary laboratories examine brains from adult cattle that have exhibited neurological signs which could signal BSE or another form of TSE. After cattle exhibiting these signs (and rabies-negative cattle) are identified on the farm or at slaughter, brain samples are submitted for testing to veterinary diagnostic laboratories and teaching hospitals. As of April 30, 1997, BSE-diagnostic tests on a total of 5,621 brains from 48 states and Puerto Rico have shown no evidence of BSE or other TSE.

Also included in the surveillance program is a monitoring system for cattle that were imported from Great Britain between 1981 and 1989 (before the ban on imports went into effect). As of February 26, 1997, 463 (93 percent) of the 496 cattle imported from the UK had been identified. Twenty-five of these animals have been confirmed to be alive, and APHIS is attempting to purchase them for diagnostic research purposes. To date, no evidence of the disease has been detected. Based on the ages of the remaining cattle, APHIS estimates that most of them are dead. However, APHIS continues efforts to locate them.

Response

To be prepared in the event that BSE is detected in the United States, a joint APHIS/FSIS working group drafted the USDA BSE Response Plan in August 1996. The plan provides a step-by-step set of actions designed to minimize the spread of the disease.

APHIS also established a TSE Working Group to monitor and assess all on-going events and research findings regarding TSEs to determine if and when steps should he taken to revise U.S. prevention and diagnostic measures. The group also responds to questions about TSEs.

Present Situation (November 1, 1997)

The United States continues to meet with the EU to discuss the proposed ban. Although the EU still refuses to consider granting the United States BSE-free status, it is considering exempting some products from the ban.

The EU announced plans to consider exempting U.S. tallow and tallow-containing products from the ban following the release of an EU Scientific Committee on Cosmetology report that confirmed U.S. assertions concerning tallow; if produced under certain heat and pressure conditions, tallow and tallow-containing products should be considered free of BSE. The Commission, however, has not yet approved the proposed amendment.

The EU is also considering a partial exemption for certain "lifesaving" pharmaceuticals deemed necessary for obvious medical and health reasons. However, since none of these exemptions has been presented in writing to the United States, AMA members’ exports remain threatened.

White Paper

The EU plans to ban imports of animal products that contain animal proteins or animal parts to guard against the spread of  "mad cow disease,” or Bovine Spongiform Encephalopathy (BSE). The EU fears that these animal products, called specified risk materials, may contain the disease.

The United States understands and shares the EU desire to prevent the spread of BSE, but the EU is not justified in enacting the ban. The ban does not adhere to international guidelines set forth by the World Trade Organization (WTO) and other international organizations, including the international veterinary association, the Office of International Epizootics. As required by international guidelines, the United States has already set up a strict and comprehensive monitoring system to detect and prevent the spread of BSE, and no cases of the disease have been detected in the United States.

The ban would block hundreds-of-millions of dollars in U.S. animal feed and food products from entering the EU and cost U.S. exporters billions of dollars. Other animal products that the EU plans to ban, including tallow and gelatin, are also extremely important to U.S. companies and consumers worldwide.

·        Tallow is a white, nearly tasteless, solid fat from cattle (and sheep) that is used by cosmetics manufacturers and others to make products such as soap, margarine, and candy. Although scientists have found that tallow is free from BSE if processed under certain temperature and pressure conditions, the EU still plans to ban more than $125 million in U.S. tallow exports and $100 million in U.S. cosmetics exports that contain tallow.

·        Gelatin is a gummy material obtained by boiling animal tissues. U.S. pharmaceutical companies use gelatin in 80 percent of their medicines, such as capsules and gelatin-coated tablets. The ban would prevent nearly $17 billion in U.S. pharmaceutical products from reaching EU consumers and could potentially endanger the lives of many patients.

Because the United States maintains a rigorous monitoring system and has not found any cases of the disease, the United States has asked the EU to grant it BSE-free status and to allow U.S. companies to continue to export to the EU. The United States has proven to international organizations that it meets the guidelines for recognition as a "BSE-free country." As mandated by the WTO, the EU must take into consideration these same international guidelines when determining EU human/animal health and safety standards, including the EU ban on animal products. However, the EU still refuses to follow these guidelines and recognize the United States as BSE-free.

As the world's largest trading partners, the EU and the United States must work together to resolve this issue and maintain their strong economic and politically important relationship. The EU and the United States together account for more than 30 percent of world trade, represent almost 60 percent of the industrialized world's GDP. Their bilateral trade and investment flows equal more than $1 trillion annually. Maintaining good relations with the EU will continue this economic prosperity. This is especially important for United States agricultural exporters since the EU is one of the largest export markets for U.S. farm products. The United States also relies on the EU for support in other areas such as international security and drug programs. For these reasons, the United States should continue to work with the EU to find a mutually-beneficial solution to this important trade issue.

Strategy Paper    

AMA’s goal is to secure the EU’s recognition of the United States as BSE-free. Obtaining this recognition will protect U.S. exports to the EU and set an important precedent to ensure that other countries also recognize the United States as BSE-free. Since the EU Commission has the authority to grant BSE-free status to the United States, the ultimate objective of AMA's strategy must be to pressure the EU Commission to accept the United States' scientific data proving it should be granted this status. Accordingly, AMA must implement a dual-track strategy that mobilizes support from domestic and European communities.

A major component of the strategy is to use the media. Exhibit 7 explains the specifics of the media strategy.

Domestic Strategy

In order to bring more pressure to bear on the EU, AMA should first concentrate on building a broad base of domestic support for its efforts. The Office of the U.S. Trade Representative (USTR) and the U.S. Department of Agriculture (USDA) already agree that the EU ban is a problem and have been meeting with the EU to discuss the issue. AMA should ensure that both agencies continue to give this issue high priority. Additionally, AMA needs to increase coordination with other domestic stakeholders and lobby Congress to put pressure on the administration to resolve the problem.

Increase Coordination with Other Domestic Stakeholders

The following organizations are likely to support our position:

·        Pharmaceutical Research and Manufacturers of America (PhRMA);

·        Cosmetics, Toiletry and Fragrance Association (CTFA);

·        National Renderers’ Association; and

·        National Cattlemen's Beef Association.

AMA should write letters to these parties proposing the establishment of a coalition that would work toward gaining BSE-free status for the United States (Exhibit 8 provides a sample letter).

By working together, AMA and its allies can:

·        Protect their shared interest in ensuring access to the EU market;

·        Coordinate the sharing and dissemination of scientific information that illustrates the steps the United States is taking to ensure its products are safe;

·        Work together to educate Congress on the importance of this issue for a number of U.S. industries; and

·        Share the organizational and financial burden associated with the campaign.

Build Awareness of the Issue within Congress

Although AMA should continue current efforts to communicate directly with Congress, it should also work with the coalition to:

·        Provide members of Congress and their staff with 1) scientific data relevant to BSE status in the United States, and 2) trade figures that illustrate the impact of the proposed ban;

·        Ensure that those members of Congress that might agree with the objective of the EU ban realize that there is no proper scientific basis for the ban; and

·        Encourage Congress to support AMA's position with the ultimate goal of convincing Congress to urge the Administration’s action on this issue.

AMA should send letters (Exhibit 9) to key members of Congress and provide testimony (Exhibit 10) to the House Subcommittee on Livestock, Dairy and Poultry and the Senate Committee on Agriculture, Nutrition and Forestry. The letters and testimony should emphasize the importance of gaining BSE-free status for the United States, as well as the potential impact of the EU ban. The legislative strategy document (Exhibit 11) contains more details on preparation for this testimony.

Encourage USDA/USTR to Push Harder for BSE-free Status

Congressional support will assist AMA in encouraging USTR and USDA to step-up their campaign for BSE-free status. However, since USTR, along with USDA, are the agencies that represent U.S. concerns directly to the EU, AMA will also want to work closely with USTR and USDA. AMA should write letters (Exhibit 12) and maintain daily contact via telephone, fax, and e-mail with appropriate personnel at these two agencies in order to:

·        Acknowledge progress made;

·        Provide relevant scientific information about the safety of U.S. products; and

·        Keep this issue on the front burner.

AMA also should provide the U.S. government with a strategy for approaching negotiations with the EU (Exhibit 13).

EU Strategy

In addition to encouraging the U.S. government to make the ban a priority issue, AMA should also build EU allies, including EU consumers, EU member states without native BSE cases, and EU industries that rely on U.S. imports or would be otherwise negatively impacted by the ban. AMA needs to alert these allies to the potential effects of the ban and ensure that they will support the U.S. request for BSE-free status. AMA should hold a press conference (Exhibits 14) to provide information to EU parties that both support and oppose the ban.

Influence EU Consumers

Given the general consumer fear of BSE in the EU, AMA should provide scientific and safety information to reassure EU consumers that U.S. products are safe. A general public advocacy campaign, using advertisements (Exhibits 15) and op-ed pieces in EU newspapers, should help assure consumers that U.S. products do not pose BSE risks. EU consumer support can be used to remind the EU Commission of the impact that this ban would have on EU citizens.

Align with EU Member States without Native BSE Cases

AMA should encourage EU member states that have not identified BSE in native cattle to support the United States position. Because member states can influence the Commission’s decision regarding the ban, AMA should encourage these countries to propose that the Commission grant exceptions for trading partners that are BSE-free. Through op-ed pieces, letters (Exhibit 16), and personal contact with these countries, AMA can demonstrate that they share an interest in securing BSE-free status.

Initiate Dialogues with EU Industries

The EU pharmaceutical and cosmetics industries are potential allies for AMA since these companies use U.S. animal products in their products and consumer goods. As for U.S. pharmaceutical imports, some member states rely on U.S. pharmaceuticals to a degree, but many American companies operate in Europe through subsidiaries. AMA must reassure these industries that U.S. products are safe and encourage their support in getting the EU to recognize the United States as BSE-free. Another industry that should be targeted is the medical industry, which could be affected by price increases that would likely result if the ban is implemented. AMA should write letters to these industries to solicit their support (Exhibit 17).

Some EU industries will want to use the ban to take back market share previously held by foreign imports. Although these industries may not respond well to our overtures, we should contact them to explain that they, too, will benefit from convincing the Commission to recognize BSE-free status of some trading partners. For industries in countries that do not have native cases of BSE, this recognition would legitimize the safety of the industry's products.

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Continued - Exhibits