USDA Official Discusses Beef Trade Issues in Tokyo

Dr. Charles Lambert
USDA Deputy Under Secretary
for Agriculture and Regulatory Programs

US Embassy - Tokyo, Japan
January 19, 2005

MODERATOR: Good afternoon, ladies and gentlemen. And welcome. We are on the record this afternoon with our delegation from the United States. Our briefer today will be Charles Lambert, who is the Deputy Under Secretary of Agriculture for Marketing and Regulatory Programs.

Joining him on my right - Dan Berman - who is our Minister for Agriculture at the Embassy and Mr. Barry Carpenter, Deputy Administrator of the Agriculture Marketing Service Livestock and Seed Program, from the Department of Agriculture in Washington.

LAMBERT: I would like to first start by publicly thanking the Japanese expert panel for their time and hard work; we met with them in December in an unofficial meeting and in preparation for this. We have found their input and assistance invaluable in moving forward in this process.

Most of you probably were at the public presentation, so I will not go through that, but will respond to questions, but there are three or four points that I'd like to make before we do open for questions.

First, we feel we have reached a mutual resolution for trade resumption under a marketing program that recognizes the Japanese unique situation and that that resolution is close at hand.

Second, the study was completed, per the October 23rd joint press statement or the joint understanding. We have had the opportunity, as I said, to discuss with experts a month ago, and those experts have had the report for a week to review it prior to today's discussions.

A science-based approach was taken by both sides - we had statisticians and anatomists and meat scientists at the table from both sides, so a science-based approach was taken and we feel we were able to show objectively, both statistically and physiologically, that A-40 is the appropriate in-point to assure Japanese consumers that they will receive beef only from animals 20 months and younger.

While A-40 was the focus of today's presentation and of the study, it's important to remember that the October 23 shared understanding, also calls for age verification in four other ways - group age, individual age, insemination age and then animals that are already in a program. So the A-40 will be in addition to the age verification programs that will be spelled out in a special export verification program for Japan.

So again, we appreciate the attention of the Japanese experts and we hope for the earliest consideration by the experts of the information we've presented today. And they will have a final meeting to be held soon and based on any additional information that we are to provide between now and before we leave town. We hope for an early consideration and resolution of the question on A-40.

I might make one other point on the BEV - the export verification program that we have. This program is consistent with WTO, except that ISO 9000 procedures to provide a government audited program, backed up by the full integrity of the U.S. government to insure that Japan's requirements are being met.

We are the only country in the world, including those countries that are currently shipping to Japan, and aspiring to ship to Japan, that will provide a government audited system to verify that we are doing what we say we do, as well as verifying through the signature on the export certificate that Japan's specifications are being met.

With that, I understand you have copies of the power point presentation today and I will be glad to answer any questions that came up through the discussions today or any other questions that you may have. Thank you very much for being here.

QUESTION: My name is Okubo from TV-Asahi. My first question is when will the delegation leave Japan?

LAMBERT: At this time, we are slated to leave the day after tomorrow.

QUESTION: The next time the expert panel will hold the meeting on age determination, are you planning to also attend that expert meeting yourselves?

LAMBERT: It's my understanding that the expert panel will meet on their own to discuss information that we've presented today. We will have non-public meetings tomorrow regarding the BEV and age verification in the other four categories that were spelled out in the October 23rd shared understanding.

QUESTION: My last question is you have discussed the A-40 end point category. Assuming that the two governments will come to agreement on this, the cattle that will fall under this A-40 category and looking at the traceability record of the cattle in the United States, what will be the percentage of the U.S. cattle population at this current moment, that will be covered by this?

LAMBERT: It's purely an estimate. The A-40 cattle in our data set were about 9 percent of all of the cattle that would have qualified that were 20 months of age or under, so about 9 percent of the eligible cattle would be covered by A-40, and it's our estimated that that plus the cattle that have age verified records will be something on the order of 25 to 35 percent of the production system in the U.S. at this time.

And maybe just to clarify that, in our data set we had 2,832 animals that were younger - 20 months of age or younger in the total data set, and of those, 256 animals were A-40 or younger. So, we are eliminating a lot of animals to assure that we are only providing animals that are absolutely 20 months or younger.

QUESTION: Natalie Pearson from the Associated Press. I am very sorry I wasn't at your earlier presentation today. Could you explain very briefly exactly what A-40 is and if I could just go back to what you were saying earlier to verify - you had said that before you leave town you hope to have an early resolution with the Japanese side on this A-40. I just wanted to double check that I had heard you correctly and if they do agree to it, that would presumably reopen resumption of trade pretty quickly.

LAMBERT: I should clarify. The expert panel had a request for one or two evaluations and some additional numbers. Our intent is to provide that to them before we leave town. They will have to go through their next meeting before they make this decision, and that meeting is yet to be determined. We are urging it to be as soon as possible, but that is up to the Japanese government to determine when that panel is reconvened. So, whether we have an answer or not before we leave town is probably highly unlikely.

Since you weren't at the presentation, I'll just do a thumbnail sketch. The purpose of the study is to look at chronological age - the age of the animal in days or in months, and physiological maturity. Physiological maturity being determined primarily by the speed with which cartilage turns to bone as animals - all mammals - mature.

We were able to determine from the expert panel today that there is a correlation between physiological age and chronological age and that is important in validating this, the use of an "A maturity" as a means of determining animals that are 20 months and younger. The objective of the study obviously is to assure that Japan is not receiving product from animals that are 21 months of age or older.

If you look at the graphs at the bottom of page four, the bottom right hand corner of page four and the upper right hand corner of page five. At A-40, physiological maturity there is 0 animals at 21 months of age. In fact, the oldest animal at A-40 is 17 months of age, so that's providing a 3 month additional cushion for the Japanese consumer. The oldest animal in this data set was 17 months of age and the vast majority of those animals were 15 and 16 months of age. And, we have made the case and the claim to the expert panel that at A-40 we are more than adequately assuring the Japanese consumer that they will not receive product from animals that are age 21 months or older. In a nutshell that was what our presentation was.

And I would just make an additional point, that when A-40 is accepted we have met our obligations under the October 23 joint press statement and trade should resume.

QUESTION: Jimbo, with the Video News Network. In October last year, in this very same room, I asked Dr. Lambert that same question and the question was what was the margin of error for the physiological traits examination and your answer was you're going to look into it; you are going to spend 40 days of study and you should be able to tell us. So, if you could tell us what the margin of error for the physiological examination turns out to be. And just to follow up, you mentioned this chart on the bottom of page 4, the A-40 that's covered between the ages of 12 and 17; however, if you add all these numbers, that's slightly under 200. My question is how you can say that no cow under the age 21 will enter the Japanese market, statistically with this very small sampling? Thank you.

LAMBERT: When we came here in December we actually proposed A-60 to the expert panel and that A-60 provided a 99.99 percent confidence interval of no animals over 21 months being exported to Japan. But in the data set, there were a few numbers of animals that were 21 months, so while it was highly statistically probable, the expert panel made it clear to us that if any animals were in that 21 month column, that it would be unacceptable to the Japanese consumer. So with that input in mind is when we went back and determined that A-40 was the line that we should propose because that is the line where there are zero animals 21 months of age or older.

We feel that it is important to consider the 21-month age criteria in the overall scope of the risk system in the U.S. We have done surveillance since 1990 and have found one imported cow. There have been no domestic cases of BSE.

We've been doing the enhanced surveillance program since June of last year. To date, we've examined more than 188,000 high risk animals - those with C&S symptoms and the other high risks categories and to date we have found no domestic cases of BSE.

We've had a feed ban in place for more than 7 years, since August of 1997 and the European experience and international science shows that a feed ban is the number one way to prevent the spread of the disease in the domestic herd.

The rest of the world, including the U.S. domestically and Canada and Mexico, trade product from animals 30 months and younger with removal of only the distal ileum and tonsils. For the Japanese market, we have agreed to remove all SRMs from animals of all ages for the marketing program for Japan.

And, finally, in recognition of the unique situation in Japan, we've agreed to the marketing program to assure that there are no cattle 21 months of age or older - no products shipped from those cattle.

And so while in statistics, there are no absolute zeros, there is always some probability, no matter how remote, of a random event occurring. So we recognize that statistical probability, but we feel that when taken in the context of the actual data, the three month cushion at A-40 - the oldest animals being 17 months - and all the other firewalls that are in place, that we are more than adequately ensuring that the Japanese consumer will not receive product from animals over 21 months and that the product that they receive is absolutely safe.

QUESTION: My name is Fuji from Nihon Nogyo Shimbun. I would like to make a clarification on the numbers that you have mentioned earlier. The slaughtered animals in the United States - what would be the percentage for the maturity - A-20, A-30 and A-40? You mentioned 9 percent of the A-40 maturity levels, but is the number 9 percent only for the A-40 or does it also include A-20 as well as A-30? This is my first question. And further more, you have four different methods for the age verification in the shared understanding, and I would also like to know the percentage figures for each of those age verification methods. And, also, in addition to that, the total percentage, that is to say, all the four age verification methods, percentages, as well as the maturity percentage combined together in total, what would be the number of the percentage?

LAMBERT: The first part ... the clarification ... - The nine percent is animals that would be eligible to ship, so that would include A-40 and those categories below - the 257 animals out of the 28,032 that are younger than 21 months in the sample. So, a nine-percent includes the 828 and 830 animals.

LAMBERT: And we ... to be honest, we don't know how many animals in each of those four age verified programs ... we estimate about 25 percent of the animals will have records from one of those four categories. So, 25 plus the 9 percent of A-40 gets us to approximately 30-35 percent of the US population that would be eligible to ship under one of these two types of programs.

QUESTION: I would like to ask a second question. Now, assuming that at this time, the A-40 is agreed between the two sides, but A-40 would indicate that the cattle would be quite young. So, my question is, on the other hand, the Japanese people, as a preference, have a stronger preference of fatty meat for beef, especially for the beef bowl. So, I would like to know whether such A-40 and younger cattle would meet the taste for the Japanese public or not.

LAMBERT: I think we are willing to let the, you know, Japanese public decide that. First, we have to get the product into the market before we see whether it's accepted or not. It's apparent from the discussion with the Japanese experts that anything older than A-40 would not be acceptable, so we've agreed to draw that line. We are willing to let the Japanese consumer make those decisions of whether to purchase the product or not, but we're just asking for the opportunity to offer that product for consumption.

I had two good inputs from both sides first for the beef bowl - typically is the "short plate," which is a, like bacon, it is a naturally fatty cut from the animal. The second is that these animals are marketed kind of at an optimal quality and production endpoint and so the animals, while they are marketed at a relatively young age, would be expected to come from a high-energy, fast-growth program so that they would be to an optimal fat point at this relatively young age. So, the combination of these things, we think, will make our product acceptable to the Japanese consumer.

QUESTION: I would like to ask a short follow-up question to the previous one. Now, when and if the A-40, as an endpoint, is agreed between the two governments, would you believe that the US beef exports, will be able to recover to the level before the suspension of the beef exports from the US to Japan, in terms of annual export volume? Also, especially for short plate for beef bowl, do you think that you will be able to fully recover back to the level before the suspension of the exports?

LAMBERT: I think we're all optimistic that over time we can regain our markets and that prior to being shut out of the market, our product was accepted, well accepted by Japanese consumers, so we are optimistic that over time we can regain that market share.

We know in our absence that our competitors have gained a market share and they are not just going to roll over willingly and say "Welcome back, take back what you had." We will have to earn that. We will have to do that through risk communications. We will have to do that through promotions. We will have to do that through regaining and continuing to maintain the trust of the Japanese consumers. And we are willing to take those steps, but first we have to be here so we can compete and that is what we are moving to now - is to establish those conditions under which we can begin to re-offer our product to the consumer.

MODERATOR: Can we take a question from someone who hasn't ... Yes, please.

QUESTION: Richard Hanson, of DTN of Omaha. After you go home, with or without a final agreement, who does actually make the final agreement? Are we going back to another round of the high-level negotiations or just what procedure follows what would be acceptance of your report and what kind of timeframe, considering that you've just gone through, or you've just going through, a change of high-level positions in the United States, or will be going through this week? Could you just clarify just who is going to negotiate and how it's going to negotiate the final leg, so to speak?

LAMBERT: Recognizing that you're from Omaha ...

QUESTION: I'm not from Omaha. I'm from Massachusetts.

LAMBERT: ... but your organization is from Omaha, that the governor from Nebraska will likely be my secretary by the time I return home and he has indicated that resolving this issue will be a high priority and that there will be no let-up, in fact, probably even intense focus on this issue to make sure that it gets resolved as soon as possible.

As far as the timing, the acceptance of "A maturity" and the discussions tomorrow to resolve the BEV we would view as the end of the technical portion of these discussions. Beyond that, I don't know what exactlyc it will be up somewhat to the Japanese government as to when product can actually begin to enter and the process that leads up to that - I honestly am not clear on at this time.

QUESTION: My name is Fukuda from Jiji Press. I have two questions. The first question is that assuming that the maturity A-40 level is accepted by the government of Japan, my first question is to what extend will that decision be welcomed by the livestock industry in the United States. My second question is: for the USDA, the US authorities, is your final goal being achieved by the acceptance of A-40 maturity score and also the age verification records? Is this your final goal? Or, is it that you would be going toward the next stage, the next round of perhaps asking for further relaxation of the export conditions for your side?

LAMBERT: As to A-40 ... our industry, as you probably recall, we started off at A-70. Our industry has felt that we have, if anything, given too much. But in order to start the process, we have done what we feel is necessary to get to A-40 and our industry has grudgingly gone along with that. It will not be received with wild acclaim as a big victory, but they have agreed to accept it.

Age verification is in the implementation stage. We are in the process of implementing a voluntary animal I.D. system. This will, I think, add economic incentive for participation. If you look at the numbers of animals that would qualify if they had records relative to the number of animals that would be allowed under A-40, there will be incentives for producers to continue to expand age verification.

As to what follows, I think the October 23rd shared understanding was very clear that this in an interim marketing program ... we view this as a place to start, but that technical discussions will continue, including OIE and WHO officials.

Both sides will continue to gather additional information. By July, our enhanced surveillance program should be pretty much coming to an end and we will know what that enhanced surveillance program tells us.

The shared understanding of October 23rd says that we will review the BEV as this additional information comes online, so there are additional steps to follow and I think those are clearly outlined in the October 23rd shared understanding.

MODERATOR: We have already taken one hour, so this will be the last question.

QUESTION: Thank you. Jimbo with Video News again. If you are so eager to get back into the Japanese market, and if 25 percent of US beef already has some type of age identification data, what's the rationale behind your insistence on including A-40 as condition for the Japanese import? You have 25 percent and I understand that the (inaudible) the beef export of US is about 10 percent of the market. Japan is about half of it - maybe four to five percent. So, you have enough beef to satisfy Japanese demand with age verification data already attached to it. Why do you have to limit, additionally, by adding A-40 and could jeopardize the whole agreement just by insisting on this A-40? So, what's the rationale behind it?

LAMBERT: I think two points there; the first is - yes, exports to Japan accounted for about five percent of our total production. But we, in actuality, export about two percent of 50 percent of the carcass. We export short plate for the beef bowls and a few select cuts. We do not export the whole carcass or the whole animal. So, it's a small portion of a lot of carcasses, so we need to build as much numbers as we can. That's the first point.

A second part is - you know - while nine percent is, you know, can maybe be considered only nine percent, it does allow the participation of some key players in the US industry who may not otherwise be able to participate in the Japanese market at all because of the uniqueness of their systems and they do not have age verified systems within their programs.

And, you know, to be frank, when we started this study we didn't know where the line would be drawn. Had it been at A-60, where we proposed last time, that would have allowed for a much higher volume, we faced the realities of the expert panel and gone to A-40, but it is what it is and 9 percent is an important part of the overall production.

MODERATOR: Finally, let me indicate that this report is posted on the embassy's Web page and it is 44 pages

LAMBERT: I would like to just thank you for being here, for your attentiveness and your good questions and look forward to working with you in other capacities as we continue to endeavor risk communications and to work our way back into this market. Thank you very much.