Issues related to international trade are currently very important to the Finnish livestock sector. Especially the pig sector has faced economic downturn during the past few years as the profitability of pig farming has crashed. Crumpling profitability has been caused by soaring input prices, especially feed, and by declining producer prices. The latter is partly related to African swine fewer spreading from Ukraine, Russia or Belorussia into European Union (EU), and Russia then preventing the entry of pig meat from the EU to Russia. This has resulted in excess supply in the EU markets which, in turn, has pushed pig meat prices down.
The spread of African swine fever in the Baltic countries has caused worries about it spreading into Finland. Luke and Finnish Food Safety Authority Evira published recently a study about the impacts of disease, should it spread to Finland. Our simulation results showed that in only about 23% of cases the disease would spread from the first infected farm to another farm, and there would be on average 2.6 infected farms in an epidemic outbreak. Despite quite small number of infected farms, economic costs to the producers were estimated to rise up to the range of 7 to 38 million Euros. However, the economic costs were highly sensitive to the duration and magnitude of export disruptions arising due to the disease.
Trade issues are so important because international agreements allow countries to prohibit the importing of goods into their country if they can this way protect human, animal or plant life or health from important risks arising from the entry, establishment or spread of pests, diseases and disease-carrying or disease-causing organisms. This right is based on the Sanitary and Phytosanitary (SPS) agreement included in the agreement establishing the World Trade Organization (WTO).
Our cost estimates assumed that the expected duration of trade disruptions to non-EU countries was according to the recommendations made by the World Organization for Animal Health (OIE), i.e. the total duration of disruptions was three months plus the duration of outbreak. However, countries may impose stronger restrictions than recommended by the OIE. If the trade disruptions were expected to last for nine months instead of three, the producer’s losses would have ranged from 7 to 115 million Euros. Hence, from the economic point of view it is probably more important how trading partners would respond than how widely African swine fever would be spreading.
A ban to import animals and animal products from an infected country causes temporary excess supply in the domestic markets as it is costly to adjust production rapidly to the new situation. This tightens competition and is likely to decrease producer prices. In the short term producers can suffer substantial losses and consumers can gain some temporary benefits. Over a longer time, low prices can result in producers reducing their production and importers reducing their imports.
The number of SPS measures taken by countries has increased over time. In year 2010 more than one thousand SPS measures were taken in the world. Almost all trade concerns related to SPS measures affect the agricultural sector. Sometimes SPS measures result in trade disputes because importing and exporting countries disagree whether it is justified to use SPS measures. For instance, during 2007 to 2011, 28 percent of WTO trade disputes within the agricultural sector were related to SPS measures.
Although the situation is currently worrying, in the long term Finnish livestock production could benefit from increased importance of animal health issues. In general, Finland is lacking several animal diseases which are common in most other countries worldwide. Low use of antimicrobials and good health status of production animals in Finland is an argument that we should be able to utilize better in domestic and export markets. If branded properly, it could create added value to Finnish livestock products.