Humanitarian Resource Institute:  A U.S. & International Resource on the Scope of Humanitarian Assistance
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August 14, 2001

Stephen M. Apatow
Director of Research and Development 
Humanitarian Resource Institute Biodefense Reference Library
Foreign Animal and Zoonotic Disease Center
Eastern USA: (203) 668-0282   Western USA: (775) 884-4680
Internet: http://www.humanitarian.net/biodefense/fazdc 
Email: s.m.apatow@humanitarian.net

APHIS ECONOMIC DISCUSSION & RECOMMENDATIONS TO PROTECT THE US ECONOMY AND AGRICULTURAL INDUSTRY

According to the report: Quantifying the Economic Impact of Foot and Mouth Disease in the UK: Results from the Nottingham Model, Christel DeHaan Tourism and Travel Research Institute, Nottingham University Business School, University of Nottingham:

The Nottingham Model of the UK includes production relationships for 115 sectors of the economy and markets for 115 goods and services. Detailed data on tourism demand in each region of the UK provide the ability to assess the effects of FMD on tourism. The Nottingham model quantifies the links between sectors, between government, households, firms and other institutions. It includes direct, indirect and induced impacts of tourism demand and agricultural restrictions, as well as labour market, capital market, and foreign exchange market links between sectors. It does this through a modelling technique known as computable general equilibrium, which simultaneously computes economic models of each sector and market.

The Nottingham Model results shows that:

  • The agricultural export ban of restricted products affects exports worth £923 million per year. This export ban will lead to a reduction in GDP of £563 million per year for as long as the export ban is in place. The main results assume that the export ban will be lifted by the end of the year 2001. 
  • The effects of FMD on domestic tourism will reduce annual expenditures of domestic tourists by £1.5 billion and of same-day visitors by £3.6 bn. The main results assume that domestic and same-day visitor revive when the restrictions on movement are fully removed, with a limited follow-on effect in 2002. 
  • FMD has reduced international tourist receipts by £2.3 bn annually. This corresponds to 19% of the level that tourism receipts would have been in 2001 in the absence of the FMD crisis. Reductions in visitors are the largest in the UKs largest source market, North America, where visitor expenditures have fallen by 26% compared with the level that they would have reached without FMD. The main results assume that international visitor numbers start to pick up in 2002.
  • Total expenditures by tourists and day visitors in the UK will fall by £7.5 billion in 2001 as a result of FMD. The largest reductions in domestic travel expenditures are in Scotland (£2 bn per year), London (£1.3 bn) and the Midlands (£1 bn). These relative sizes reflect the size of tourism in different regions of the country, the evidence of domestic tourism reductions in each region, the reliance on international (and in particular North American) tourists as well as the seasonality of tourism in each region. 
  • The damage to tourism firms is likely to be highest in Cumbria, Scotland and Wales. The percentage reduction in expenditures due to FMD is highest in these regions. Cumbria will lose 31% of its tourism revenues in 2001. 
  •  Overall, GDP will fall by £2.5 bn in 2001 as a direct result of the FMD crisis. This will be followed by a smaller fall in GDP (of £1.46 bn) in 2002. The largest part of this fall in GDP is accounted for by the effects of tourism expenditure reductions, which will reduce GDP by £1.93 bn in 2001. 
  • Value added in the hotels and restaurants sector falls by £2.0 bn as a result of the tourism reductions associated with FMD. The size of the falls in income in this and other tourism-related sectors are far higher than the reduction of earnings in agriculture and its related sectors. Farm earnings fall by £60 million after compensation payments for slaughtered animals have been received. Value added in transport sectors falls by a total of £1.4 bn; in recreation and entertainment sectors value added falls by £245 million. The reduction in value added in the hotels and restaurants sector alone is larger than the total earnings in 2001 from clothing manufacturing in the UK. 
  • Tax revenues will fall by a total of £581 million in 2001, and by £379 million in 2002. These tax revenue falls are a consequence of reductions in the levels of economic activity following the FMD crisis. Including the estimated £1.4 bn to be paid to farmers in compensation payments, the government stands to lose around £2.4 bn over two years. 
Given these results:
  • The danger of a re-occurrence of the FMD crisis risks large-scale damage to the UKs tourism sector. A cost-benefit analysis of the danger of re-occurrence would be inadequate if it did not quantify the likely effects on tourism. 
  • Government policies relating to FMD should be re-examined in the light of the costs of the disease to the tourism sector. This applies both to policies that influence the risks of future outbreaks and to policies that are in place to contain the current FMD outbreak. 
  • The policy of vaccination should be re-examined to take into account the benefits that vaccination would bring to  the tourism industry, not just in avoiding a re-occurrence of the FMD crisis, but also in allowing tourism-related businesses to plan in the knowledge that under a vaccination programme the crisis would not be repeated. 
  • A vaccination programme would also prevent the adverse effects on the welfare of the entire UK population who have viewed the effects of FMD at first or second hand. 
  • The closure of footpaths in the countryside in response to the FMD outbreak should be re-evaluated in the light of the costs that this policy imposes on other sectors of the economy as well as on scientific evidence relating to the likelihood of walkers passing FMD between animals. 
  • UK agricultural policies (and more generally, any policy that relates to a particular part of the economy) need comprehensively to consider the costs and benefits to other areas of the economy. 
Note: At the present time, the United States Foot and Mouth Disease Federal Response Plan encompasses the policy of eradicating the disease by depopulating affected and exposed animals with no alternative policy for vaccination. Reference to the lack of a vaccination  policy is significant in the light of current reports from the UK which recommend the implementation of a vaccination strategy for future outbreaks of foot-and-mouth disease due to the uncontrolled spread, economic costs and change in the macro view of the current epidemic (see: Contingency Planning for a Multi-State FMD Outbreak Crucial to Avoiding a UK Level Uncontrolled Epidemic of Foot and Mouth Disease in the United States).

USDA ANIMAL AND PLANT HEALTH INSPECTION SERVICE ANIMAL DISEASE RISK ASSESSMENT, PREVENTION AND CONTROL ACT

The following USDA APHIS release focuses on the subject of economic impacts on the national, state, local economies and agricultural industry that would be directly associated with a Foreign Animal Disease Outbreak into the United States (see: FMD US Economic Discussion & Producers Crucial Role in a Successful Eradication Campaign:

Tuesday, August 07, 2001 4:32 PM EST Washington, DC, Aug 07, 2001

DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service Animal Disease Risk Assessment, Prevention, and Control Act

USDA APHIS is seeking comments and suggestions regarding the development of a report required by the Animal Disease Risk Assessment, Prevention, and Control Act of 2001. The report will discuss the economic impacts that would be associated with the potential introduction of foot and-mouth disease, bovine spongiform encephalopathy, and related diseases into the United States; the potential risks posed by those diseases to public and animal health; and recommendations to protect the health of animal herds and U.S. citizens from those risks. We will use the information gathered through this notice and a public meeting to assist us in developing this report.

DATES: We invite you to comment on this docket. We will consider all comments that we receive by September 6, 2001. We will also consider comments made at a public meeting that will be held on August 24, 2001 from 9:00 a.m. to 12:00 p.m. AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Notice of public meeting and request for comments.

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