Economic Impacts of Potential Foot and Mouth Disease Agroterrorism in the USA: A General Equilibrium Analysis

Abstract

The foot and mouth disease (FMD) virus has high agro-terrorism potential because it is contagious, can be easily transmitted via inanimate objects and can be spread by wind. An outbreak of FMD in developed countries results in massive slaughtering of animals (for disease control) and disruptions in meat supply chains and trade, with potentially large economic losses. Although the United States has been FMD-free since 1929, the potential of FMD as a deliberate terrorist weapon calls for estimates of the physical and economic damage that could result from an outbreak. This paper estimates the economic impacts of three alternative scenarios of potential FMD attacks using a computable general equilibrium (CGE) model of the US economy. The three scenarios range from a small outbreak successfully contained within a state to a large multi-state attack resulting in slaughtering of 30 percent of the national livestock. Overall, the value of total output losses in our simulations range between $37 billion (0.15% of 2006 baseline economic output) and $228 billion (0.92%). Major impacts stem from the supply constraint on livestock due to massive animal slaughtering. As expected, the economic losses are heavily concentrated in agriculture and food manufacturing sectors, with losses ranging from $23 billion to $61 billion in the two industries.

Total Economic Consequences of an Influenza Outbreak in the United States

“…Following a major influenza outbreak, it is likely that individuals would avoid activities and locations due to the fear of catching the virus. International and domestic tourism and leisure activities are an- 7 This percentage reduction is different from that presented in Table I. The figure described in Table I also includes workforce reductions due to deaths, thus increasing the magnitude of the shock to labor force from −0.052% to −0.065%.…”

“…For example, this implies a 18.7 × 100/(150 × 240) = 0.052% reduction in labor inputs for the 12-month period of Case 1 (No Vaccination, Seasonal Outbreak) scenario. 7 Labor supply is represented in the USCGE model as a factor input to the production function for each sector. One challenge here is that the labor and capital factor supply elements are related to account balances, or "closure rule" conditions.…”

“…It represents a significant advance over its predecessor, I-O analysis, by maintaining I-O model strengths (full accounting of all inputs, multisector detail, and focus on interdependencies, and overcoming the limitations of linearity, lack of behavioral content, and omission of markets and prices). (28) CGE models have been used extensively to model various types of biothreats, (7) , including influenza (5,27) , and disasters in general. (41) The USCGE model was developed by Oladosu and Rose for environmental policy analysis (42) and for terrorism consequence analysis.…”

“…CGE is the state‐of‐the‐art approach for analyzing total economic impacts of natural disasters, technological accidents, terrorist attacks, and other threats. It has been successfully applied to biothreats previously by members of the research team . CGE analysis has also proven effective at modeling the two major consequence types that have the greatest influence on our results—resilience and behavioral responses .…”

“…It has been successfully applied to biothreats previously by members of the research team. (4,5,7) CGE analysis has also proven effective at modeling the two major consequence types that have the greatest influence on our results-resilience (8,9) and behavioral responses. (10,11) This analysis makes use of the USCGE Model, which has been applied successfully in previous studies of the economic consequences of a broad range of disasters and countermeasures (10,12) as well as related studies on travel behavior.…”