IS JAPAN READY TO DISCUSS RESTRICTIONS ON U.S.

UNCLAS TOKYO 001205

SENSITIVE
SIPDIS

USDA/FAS PASS MITCHNER, BERMAN, HALE, WETZEL
STATE PASS USTR FOR MURPHY, OCONNOR, DOHERTY, CUTLER, AND
BEEMAN

E.O. 12958: N/A
TAGS: EAGR ETRD PREL JA
SUBJECT: IS JAPAN READY TO DISCUSS RESTRICTIONS ON U.S.
BEEF?

REF: 08 STATE 689912

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.


1. (SBU) Summary: Recent media reports suggesting Japan is
willing to consider easing its requirements on testing of
cattle for Bovine Spongiform Encephalopathy (BSE) have raised
speculation the GOJ might be prepared to engage the USG to
lift remaining barriers to U.S. beef. Current BSE-related
restrictions severely limit the quantity of U.S. beef
eligible for export to Japan, which until 2004, reached as
much as $1.4 billion annually; U.S. industry estimates it now
loses two to three million dollars a day in foregone sales.
Key Japanese regulators have suggested willingness to raise
the age restrictions imposed on U.S. beef and to scale back
burdensome enforcement measures and documentation
requirements. A recent decision by the World Animal Health
Organization (OIE) to reclassify Japan as "controlled risk"
country for BSE potentially provides useful cover for Japan
to enter into new negotiations with the U.S. Persistent
political concerns within the GOJ, consumers' food safety
worries, and a problematic Japanese bureaucratic, procedural,
and legal landscape will complicate any progress. End
Summary.

Japan Ready to Engage?
--------------


2. (SBU) Japan agreed in 2007 to permit imports of U.S. beef
from cattle up to 20 months of age, but under strict
conditions that severely curtail what U.S. beef qualifies for
export to Japan. Having put the overly stringent
restrictions in place, Japanese bureaucrats and their
political masters have been loath to remove them for fear of
possible recriminations if beef from a BSE-infected cow was
later found to have been imported. The concern in the
Ministry of Agriculture, Forestry, and Fisheries (MAFF),and
reportedly in the Ministry of Health, Labor, and Welfare
(MHLW) -- a ministry burned by other food scandals on top of
its disastrous loss of 30 million pension records -- is risk
avoidance rather than risk management. Since 2007, Japan has
offered repeatedly to raise its restrictions to permit U.S.
beef from cattle up to 30 months of age, but at the same time
has insisted a separate negotiation, starting at some future
point, would be required to move Japan to full compliance
with OIE guidelines. Key Agriculture and Health Ministry
officials reiterated recently that Japan's offer of trade
based on beef from animals aged 30 months or under is still
on the table.


3. (SBU) Following the OIE's decision this month to
reclassify Japan as a "controlled risk" country for BSE --
which the GOJ hopes will improve opportunities for Japanese
beef exports -- press reports indicated MHLW is prepared to
ease restrictions on testing of Japanese cattle for BSE.
Indeed, the OIE decision likely gives MHLW adequate cover to
review domestic screening rules. There is also growing
support among Japan's beef industry and some regulators to
loosen excessive national and local requirements that
currently call for 100-percent testing of all slaughtered
domestic cattle. One leading newspaper speculates a revision
of Japan's BSE testing procedures could encourage the U.S. to
push Japan to ease further these requirements, raising the
possibility that the GOJ might even lift import restrictions
altogether to comply fully with OIE guidelines. Citing
"deep-rooted" public concerns about food safety, the article
goes on to suggest the GOJ will likely ease restrictions in a
"cautious manner."

Food Safety Commission Must Weigh In
--------------


4. (SBU) Japanese officials are familiar with the
longstanding USG position that Japan should re-open its
market to U.S. beef and beef products without any
restrictions on age or type, i.e., "all ages, all cuts by a
date certain" (ref). Although MHLW officials concede
privately that OIE guidelines may provide appropriate risk

management tools, they insist it is "impossible" to commit to
a firm time line for Japan to achieve full OIE consistency
until the Food Safety Commission has completed its scientific
review. They contend that doing otherwise would appear as
pre-judging the Commission's conclusions. MAFF officials, by
comparison, seem more open to eventually applying OIE
guidelines, although they have indicated implementation would
have to proceed carefully.


5. (SBU) Ongoing exchanges with MAFF, including members of
the GOJ's OIE delegation who drafted Japan's "controlled
risk" application, reflect a potential change in position
similar to MHLW's that could facilitate re-engagement on U.S.
beef. They have expressed appreciation for further
implementation of BSE-related cattle feed rules in the U.S.,
as confirmed in a recent exchange of letters between
Secretary Vilsack and MAFF Minister Ishiba. MAFF officials
have told us they view the OIE decision as a needed
third-party validation of its BSE-control measures and as an
essential initial step toward increasing market access for
exports of Japanese specialty Wagyu beef.

Korea Deal Not a Way Forward
--------------


6. (SBU) Agriculture and Health Ministry officials have
stated the two agreements to re-open Korea's market to U.S.
beef are neither "useful" nor "relevant" to Japan's
situation. One MAFF official asserted the commercial
agreement under which U.S. beef is traded with Korea is not
OIE-consistent and lacks a date certain by which Korea would
achieve full OIE compliance.

Obstacles Remain
--------------


7. (SBU) Beyond the age-related restrictions Japan imposes
on U.S. beef, MHLW may find it difficult to revise its
OIE-inconsistent list of "specified risk materials" (SRMs)
that must be removed from slaughtered animals since this list
is based in law rather than regulation. Changing MHLW's
heavy-handed procedures for managing import violations could
prove more straightforward since these require only
administrative adjustments. (Note: Currently, MHLW responds
to SRM violations either by suspending the meat processing
plant in question or by stopping all U.S. beef trade, as
happened in 2006. End note.) Other issues that need to be
addressed include Japan's disproportionate enforcement of
violations of minor import rules for beef such as improper
labeling, as well as BSE-based prohibitions on imports of
beef offal (a popular dish in beef bowl restaurants),U.S.
lamb, bison, veal, and medical-use gelatin.

Background
--------------


8. (SBU) BSE Testing: At the root of the problems with beef
in Japan is a fundamental policy difference on the
appropriate use of BSE diagnostic tests and public health,
risk communication, and marketing. The problem is connected
with the move by the bureaucrats and politicians to prevent
all risk of BSE rather than to manage risk. After the 2003
discovery of BSE in the U.S., Japan insisted the U.S. test
all cattle whose beef was destined for Japan. Currently, all
cattle slaughtered in Japan are tested for BSE, although
national guidelines only call for 100-percent testing of
animals over 20 months. Japan's extensive use of diagnostic
testing is done primarily to address consumer concerns. For
U.S. beef, Japan considers 100-percent testing to be a
question of equivalency with the domestic system. The
current Beef Export Verification (BEV) agreement was
negotiated primarily to bridge differences between the
appropriate role of BSE testing. The GOJ's focus on ending
domestic testing of its own young cattle should be viewed as
a positive and realistic sign that it is willing to change
its approach.


9. (SBU) Current Japan Beef Agreement: The U.S. currently

exports beef to Japan under the BEV program, which is
administered by USDA's Agricultural Marketing Service. The
program certifies all beef shipments are from cattle under 21
months old and that shipments are only comprised of closely
monitored lists of eligible products. Under the BEV program,
the U.S. agreed to further expand its definition of SRMs to
include for cattle of all ages the entire head except tongues
and cheek meat, tonsils, spinal cords, distal ileum, and part
of the vertebral column. This approach is broader than the
current OIE or domestic U.S. SRM definitions, both of which
apply mainly to cattle over 30 months of age. The BEV
program was intended to be an interim agreement and its
implementation was initially plagued by burdensome custom
clearance procedures and, later, with frequent "delisting" of
U.S. beef plants for technical violations of the BEV. Even
minor packaging and labeling-related violations result in
delisting of a slaughter plant under the current terms of
trade. Currently, two U.S. plants are under suspension.


10. (SBU) Demand for U.S. Beef Outstrips Supply: Japanese
consumers' acceptance of U.S. beef has rebounded since 2004,
due in part to a multi-million dollar investment in marketing
programs run by the U.S. Meat Export Federation funded by
USDA's MAP program and check-off funds from the U.S. cattle
industry. U.S. beef is now available in over 11,000
locations in Japan and in 2008 U.S. beef sales to Japan
increased 57 percent to $382 million. This figure is roughly
11 percent of the total value of U.S. beef exported to the
world, but an amount that still falls far short of historic
trade levels with Japan. U.S. beef exports for the first
quarter of 2009 are up 26 percent and it is clear that
Japanese demand for U.S. beef, even in time of recession,
significantly outstrips the available supply of animals under
21 months of age.
ZUMWALT