A counterfactual experiment about the eradication of cattle diseases on beef trade

In response to disease outbreak alerts in exporting countries, importing countries usually impose trade bans that vary in terms of product coverage and in terms of duration. We rely on a unique balanced panel dataset that covers four-digit disaggregated beef products over the 1996–2013 period, to estimate the effect of a hypothetical removal of animal diseases outbreaks on trade flows. More specifically, we investigate how bovine spongiform encephalopathy (BSE) and the foot and mouth diseases (FMDs) affect beef trade flows. We use a sectoral structural gravity approach to measure direct, conditional, and full effects, allowing inward and outward multilateral resistance indices, expenditures, and factory-gate prices to adjust to the eradication of animal diseases. The indirect channels through which BSE and FMD impact trade are important. Our counterfactual experiment suggests that Canada would secure substantial gains from BSE and FMD eradication.