What are the ethical issues in  artificial selection in the breeding of animals with favorable traits? 

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The primary ethical question is what agents determine which traits are “favorable” in changing the genetic make-up of domestic animals.  That is, the free enterprise system will dominate the taxonomy, not the community health interests or the FDA.  Fatter cows, woolier sheep, dogs that can't bark, etc.--who decides?  Should scientists be allowed to manufacture any animal they want, for any reason? So, the effects on the community will be ignored in favor of the profit motive.  The next ethical issue is the application of the belief that Man has dominion over the animals—do we have the ethical “right” to interfere with natural selection?  Then, we have to ask ethical questions about  our responsibility to the future, to the possibility of damage in the long run to future generations.  Ethics is a human construct that preserves certain often unspoken principles, and any “artificial selection” process, by definition, must answer to those basic principles inherent in being human.