Trade and regulation

Within this section we explore the implications of livestock disease on global markets. We first explore the risks of transboundary livestock disease on trade and then turn to the impacts of regulatory measures, and subsequent market outcomes, on producers and consumers within respective import and export markets.

Access to and participation in efficient trade markets will increase incomes and decrease unemployment in comparison to existing levels without trade. The availability of pasture area per head of rural population in underdeveloped areas provides a comparative advantage for livestock production and export (172). Considering efficient and safe markets, areas with less-efficient production will have incentive to import livestock products from areas with a production advantage.

Trade is promoted through investment in infrastructure and supply chain organization in areas with growth in commercial enterprise and areas dependent on smallholder farming systems for livestock products. Both infrastructure and organization act as compliments for establishing and sustaining trade markets (173), with public and private sector involvement and partnership remaining equally important (174).

Average public investment from OECD countries in agriculture within sub-Saharan Africa has increased by 87.5% from USD $0.08 billion to USD $0.15 billion over the period 1980–2012 (175). While accurate and comprehensive data on private investment in developing areas is not readily available and/or accessible, an analysis of foreign direct investment in agribusiness has shown low but slowly increasing levels of investment in areas typically focused on value-added processes (176). Public programs targeting increased private investment for agricultural development, such as the Comprehensive Africa Agriculture Development Program, show the importance of private sector funding and the public-private relationship.

Trade has the potential to increase the risk of zoonotic disease and foodborne related illnesses. Compliance with regulatory safety standards and inspections, as well as public and private certification of livestock and livestock products mitigate risks of disease and illness transmission. Market inefficiencies arise when trade embargoes, which ban all export goods from one country or region, or tariffs, which decrease consumption of goods by making them more costly, are enacted in response to a livestock disease outbreak in an exporting country, or in response to a country’s failure to adhere to established safety standards and inspections.

Transboundary diseases occur alongside trade and can threaten the continuity of international trade. The FAO defines transboundary animal diseases as those that are highly contagious and easily transmissible across borders and that have negative impacts on socioeconomic and public health outcomes, ultimately placing risks on trade (34). Economic impacts of transboundary diseases include public and private costs of outbreak, as well as individual costs of disease prevention, control, and total loss. Wider market impacts due to shifts in consumer preference during an outbreak, or trade bans and restrictions in response to an outbreak, include changes in consumer and producer surplus, which can be thought of as a measurement of benefit gained from market participation, as well as costs imposed on secondary industries as a result of market impacts. Food security and nutrition in developing areas is also negatively affected by transboundary disease when substitution across animal-sourced foods is not possible. Disability-Adjusted Life Years (DALYs) can be used as a public health measurement of the burden of infectious disease in humans through loss in life years due to poor health, disability, and death (177) that may occur in transboundary disease incidents. Infectious disease accounts for 30% of global DALYs (18), with an estimated 60% of infectious diseases being zoonotic (178). While any value chain is subject to the negative impacts of transboundary disease, smallholder farming systems have greater vulnerability (179). The World Organization for Animal Health lists notifiable transboundary diseases, among them are FMD, rinderpest, African and Classical swine fever (ASF and CSF, respectively), CBPP, and RVF. Prevention, monitoring, and effective response to FMD and African and classical swine fever carries high importance as they are three of the most detrimental diseases to producer livelihood and international trade outcomes (180).

Foot and mouth disease is highly contagious in cattle and other cloven-hoofed animals, and spreads through populations during movement of infected animals and products. Access to trade markets is restricted to countries and regions free of FMD. As an example, in 1996 Uruguay was recognized as being free of FMD and gained access to valuable trading markets. Uruguay filled export quotas to the United States and received higher world prices than domestic prices, resulting in additional annual revenues estimated at USD $20 million (181). Access to Pacific Rim trade markets was estimated to provide an additional USD $90 million annually. As restriction from trade is an indirect cost of transboundary disease, Uruguay’s total additional revenue gained contributes to the full costs of FMD. Cost–benefit analysis of FMD eradication in Bolivia and Thailand found that benefits exceeded costs only if eradication allowed participation in trade markets (34). It is estimated that Latin America experienced a 4.1% decrease in meat exports attributed to their FMD outbreak in 2001 (182). During trade restrictions, export production increases domestic supply, resulting in lower domestic prices and consumers benefit from these lower prices under the assumption that products are safe and marketable, and meat substitution is not made. However, it is important to consider a country’s depopulation strategy and domestic demand elasticity when measuring welfare changes between consumers and producers. Given inelastic demand for domestic beef, if depopulation reduces excess supply enough, producer surplus increases while consumer surplus decreases during an outbreak (183). During an evaluation of the Australia’s livestock export industry, increased domestic supply of livestock products due to trade restrictions resulted in a greater-than USD $1.5 billion industry loss during a hypothetical FMD outbreak. A simulated study of a FMD outbreak in the United States found that total livestock industry losses occurred over 16 quarters until recovery, totaling between USD $2.8–4.1 billion due to impacts on trade, domestic supply, and demand (184). In another study simulating an FMD outbreak in the United States, producer sector welfare, defined as the change in producer surplus for non-quarantined livestock and the loss in sales revenue for livestock quarantined and slaughtered, declined by USD $1.4–1.8 million (185). In general, it is estimated that market prices for major beef importing and exporting countries among FMD-free areas will be up to 50% greater than domestic prices received in FMD areas (186). Other FMD case studies include control and vaccination strategies across the United Kingdom and South Vietnam (187, 188). Optimal disease response strategies minimize socioeconomic disruptions at the local and national levels and are weighed against impacts of loss in export trade, its associated value, and market restriction (189).

In the Knight-Jones and Rushton (96) review of FMD impacts, general findings across simulations and data analysis point toward FMD control programs generating positive returns to an economy; FMD-free areas suffering a 0.2–0.6% loss in GDP during a new outbreak, with Taiwan experiencing a 0.28% loss in GDP across multiple sectors during their 1997 outbreak (190); and that there exists an absence of studies exploring the full economic impacts of FMD in endemic areas with focus on indirect impacts at national levels.

African swine fever was recorded in China for the first time in 2018. It is estimated that 150–200 million pigs were infected by 2019, approximately 30% of the Chinese pig population, with disease impacts causing almost 100% mortality as there is currently no vaccine. In a simulated reduction of 9–34% of global swine production due to the Chinese outbreak, global pork prices were estimated to increase by 17 to 85% (191), having global economic impacts on consumer and producer surplus, and nutrition substitutions. In a simulated study of an ASF outbreak in Iowa, United States, which is a predominant swine production area, the outbreak would result in the loss of international markets to United States pork, with a decrease of domestic live hog prices by 40–50% due to supply surplus. The outbreak is estimated to have industry losses of USD $50 billion across all years of the outbreak due to trade restrictions and domestic price reductions (192).

Classical swine fever control mainly stems from vaccination and variable stamping-out strategies in Central and Eastern Europe countries, with most of the countries having legislation prohibiting swine imports from infected areas (193). Trade and industry costs of the 1997 outbreak of CSF in the Netherlands resulted in a 24% reduction in net cash-flow throughout densely populated livestock areas (194), and a EUR 636 million reduction in net welfare, which measures the collection of consumer, producer, and government welfare (195). Although the United States has been CSF free since 1976, a study evaluated a hypothetical CSF outbreak in the United States and estimated that full export market recovery does not occur until 14 quarters after the initial outbreak with expected total industry losses between USD $2.6–4.1 billion (196).

While trade offers opportunities for countries to exploit comparative advantages, it has the potential to increase the risk of zoonotic disease and foodborne-related illnesses. Trade facilitates the movement of animal diseases across borders which can threaten the continuity of international trade. Effective prevention and monitoring of FMD, ASF, and CSF in global livestock production systems, as well as all transboundary diseases, helps mitigate risks of trade bans and restrictions, and its subsequent effect on livelihoods, associated industries, and national/regional economies. It is important for private and public stakeholders to consider costs related to virus control, disease spread, prevention and zoning, as well as costs related to market and price shocks in the affected livestock sector and across associated sectors (197–199). Benefits to society from access to and participation in trade, and from efficient domestic markets, validate the cost of disease prevention and eradication (184).