January 1, 2009
This study estimated the state-by-state U.S. economic losses from foreign export closures due to the BSE incident, based on application of the newly developed National Interstate Economic model (NIEMO). To assess direct economic losses of BSE on NIEMO final demands, we identified the ex post gaps between the estimated exports which would have occurred if BSE had not been discovered and the actually decreased exports, based on monthly pre-2004 foreign historical export data obtained from WISER Trade data. While the domestic U.S. market can move towards a new equilibrium fairly rapidly after a tightening on the supply side, international barriers that hinder U.S. exports pose critical agricultural policy choices for the U.S. government. The closure of U.S. exports for bovines with mad cow disease was directed not just at the state of Washington but introduced a shock into the U.S. economy due to simultaneous closures of exports imposed on all of the states. Therefore, in so far that NIEMO can supply information comparing different economic impacts state-by-state, it can inform agricultural policy-makers, who might contemplate distributing offsetting subsidies because of the incident, by providing new information on the incidence of the impacts.