Mad cow disease scare has hit U.S. firms hard East Asian export markets have dried up

Posted: December 08, 2004

SEOUL, South Korea — At the bustling meat counter at the Grand Supermarket, attendant Choi Young-lee surveyed the short ribs and flank steak on display, and remarked how the meat has changed.

"The display case used to be full of American beef," Choi said. "But after the mad cow scare, they don't want American beef anymore."

The supermarket now offers only domestic meat and carefully packaged cuts from Australia. A sign on the counter reads: "Australian Beef: Clean & Safe."

It has been almost a year since much of East Asia suspended imports of U.S. beef, frightened by the first case of mad cow disease in the United States, discovered in Washington state. Prospects for the imminent lifting of the beef ban grew uncertain last month with reports of a possible new case of mad cow in the United States. Tests on the animal came back negative, the U.S. Agriculture Department said on Nov. 23.

Worries about possible new cases, and subsequent roiling in stock prices for restaurant companies such as McDonald's Corp., underscore how widespread and painful the mad cow scare has been for U.S. business and agriculture.

The repercussions have rippled from cattle ranches in Texas and Kansas to beef noodle fast-food restaurants in Tokyo and supermarkets and steakhouses in South Korea and Taiwan.

Before the suspension began late in December 2003, Japan was the largest export market for U.S. beef, chalking up $1.4 billion a year in purchases. Next was Mexico. South Korea was the third-largest U.S. export market, accounting for $815 million annually. Taiwan was in sixth place, with $76 million in U.S. beef imports annually.

Authorities in East Asia have taken a cautious approach to resuming the beef imports, wary that consumers will blame them if anyone catches the brain-wasting ailment triggered by a variant of mad cow disease.

"Anybody who works in the beef industry knows that the danger is not high. But consumers have a tendency to think, 'Oh, one cow was found.' They get scared," said Lee We-hyoung, a meat industry consultant and supplier in Seoul.

In South Korea, where the barbecued beef strips known as bulgogi are a delicacy, beef consumption plunged after the scare. Then, amid an outbreak of avian flu in Asia in late 2003, chicken sales also fell, upending the meat industry.

"Beef consumption has decreased 30 to 40 percent," said Baik Young-su, the president of Seoul Trading, a meat importer. "People started to adopt more vegetarian diets."

Since U.S. cattle ranches supplied about half of South Korea's beef, the suspension sent shock waves around the food industry.

"We estimate that there could be 150,000 layoffs in the Korean food-service sector because of this. That's mainly mom-and-pop butcher shops and restaurants," said Joel Haggard, vice president for the Asia and Pacific region for the U.S. Meat Export Federation, a nonprofit trade association.

At least 340 restaurants have closed, and an additional 970 took beef dishes off their menus, industry figures show. In the retail sector, many butcher shops shut, and losses of $30 million a month are mounting because of the removal of U.S. beef from store shelves.

Shoppers now are accustomed to the grass-fed beef from Australia, which has less marbling - small white flecks of fat - than grain-fed U.S. beef. Those who can afford it buy more costly South Korean beef.

"Korean is the best," said Chang Mihyun, a tax-bureau clerk who was browsing for meat in a downtown market, "but I always choose low cost. I choose Australian. I'm used to it."

Mad cow disease surfaced in Britain in 1986 and spread through Europe, decimating the European cattle industry. Later, scientists found that humans could contract a variant of mad cow, Creutzfeldt-Jakob disease, if they ate infected beef or nerve tissue.

Millions of cattle have been destroyed because of mad cow disease. Since 1995, there have been 153 cases of the human illness reported worldwide, 143 of them in Britain.

Last year's mad cow scare slammed the American cattle industry, which sends 10 percent of its production overseas. China, Hong Kong, Singapore, Thailand and Malaysia still bar U.S. beef. The Philippines and Indonesia just lifted their bans, and Vietnam said last month that it would reopen its market to American beef.

Japan agreed on Oct. 23 to allow limited imports of U.S. beef from cattle up to 20 months old. Some critics later said the announcement was premature, noting a spate of outstanding issues before American beef can be loaded aboard ships. Imports may not resume until well into 2005.

Japan has complex reasons for moving slowly. One is that it is the only country in Asia to have mad cow - bovine spongiform encephalopathy - in its own cattle. Since September 2001, Japan has reported 14 cases of mad cow. Experts think it is because Japan delayed restricting the use of meat byproducts and bone meal in cattle feed, importing meal from BSE-infected countries in Europe until 2000.

U.S. officials say new safeguards are in place to assure the safety of American beef exports, although they insist on testing cattle only randomly, saying that to do otherwise would not be cost-effective.

Under U.S. pressure, Japan backed off from its own regulations requiring each animal to be tested for BSE before slaughter. Once the regulations are changed, they will allow imports of American beef from cattle up to 20 months old that have not been tested. Mad cow is thought to rarely infect animals that young.

Remaining sticking points include how to determine the age of cattle. Japan has a more rigorous system of checking birth dates than the United States does.

The American industry also must soothe Asian customers' fears about infected beef.

"BSE is a tough issue to communicate because it's so complicated. It's not a bacteria. It's not a virus," Haggard said, noting that a rogue protein known as a prion triggers the ailment in cattle. He said many people did not know that the risk to humans was very low.

Not all U.S. meat exporters are facing tough times. Pork exports are up sharply. At some American restaurants in Seoul, such as TGI Friday's and Bennigan's, pork is trendy.

"Their most popular menu item is barbecued pork ribs," Baik, the importer, said.

Contact reporter Tim Johnson at tjohnson@krwashington.com.

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