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US makes a meal of shrimp dispute
By David M Lenard

HO CHI MINH CITY - On November 30, the International Trade Commission (ITC), an agency of the US Department of Commerce charged with enforcing trade laws, placed a countrywide tariff of 112.81% on imported Chinese shrimp, and a much lower one of 25.76% on Vietnamese shrimp. However, the majority of the shrimps exported from both countries are sold by several large companies, and the ITC applied much lower, company-specific tariffs to these firms, averaging 55% for Chinese exporters and only 4% for Vietnamese ones.

Effectively, the decision to impose trade barriers on the US's most popular seafood was a muddled compromise between an informal coalition of Asian shrimp exporters and American shrimp buyers on one side, and threatened US shrimp fishermen on the other. The ITC's decision was considered a partial victory in Vietnam, where shrimp is a major export industry, since the commission had been considering much higher tariffs, and the decision awarded low tariffs to Vietnamese companies that had complied with the ITC's investigation. On the other hand, US shrimpers succeeded in maintaining tariffs, albeit at a lowered level, and the Asian exporters were compelled to plead their case in Washington to maintain market access.

Other importers, meanwhile, are still waiting for a Department of Commerce (DOC) decision expected on December 20 on shrimp imports from four other countries - Brazil, Ecuador, India and Thailand. From 2003 to 2004, the largest volume increases in shrimp imports came from China and Thailand, from which shipments rose to 61.23 million tonnes. The six countries combined supplied roughly two-thirds of the shrimp consumed by Americans, according to US government figures.

The dispute first made news last July, when the DOC imposed steep duties on several Chinese and Vietnamese shrimp importers, on the grounds that they were "dumping" shrimp in the US market at prices below the cost of production, thus harming American shrimpers.

This ruling cited the US anti-dumping statute, which was originally passed as a defensive response to the strategy Japanese electronics firms used in the 1970s and 1980s to eviscerate their US competitors. Specifically, the Japanese charged higher prices in the Japanese market than in the US market for the same product, in effect using their "captive" home market as a source of profits, which made it possible for them to undercut American companies overseas. Because US corporate leaders, unlike their Japanese counterparts, were judged by short-term profits, the American firms typically responded by exiting the industries in question, ceding them to the Japanese. Whether this practice was ultimately beneficial for Japan is questionable, since its net effect was that ordinary Japanese citizens subsidized the luxurious lifestyle of Americans. Nevertheless, one result of such practices was the anti-dumping law, under which the DOC periodically requires foreign exporters to prove that they are not selling their products in the US market at prices below the cost of production.

In the shrimp case, the DOC has considered China and Vietnam separately from Brazil, Ecuador, India and Thailand under parallel dumping investigations because it regards them as non-market economies - not unreasonably, given that both nations have economies dominated by state-owned firms. As a result, the department searched for countries at a comparable level of economic development to China and Vietnam to determine the "true cost" of raising shrimp for export. In Vietnam's case, that country was Bangladesh. Based on calculations involving prices of inputs in Bangladesh, the department concluded in July that Vietnam was, indeed, dumping shrimp, and slapped duties as high as 113% on the Vietnamese product.

To call this procedure dubious would be a gross understatement: "wacky" might be a better word. Indeed, there are plenty of sound arguments for opposing "dumping" penalties on principle. For one, why should Americans care if another country wishes to penalize its own citizens in order to sell inexpensive products in the United States? One blogger put it more pungently: "Cheap shrimp? The horror!"

As one would expect in any democratic country, political interests influenced the DOC's decision. The Southern Shrimp Alliance (SSA), representing shrimpers in eight southern US states, argued for high penalties on the grounds that "farmers and processors [have been] devastated by the massive volume of dumped Chinese and Vietnamese shrimp". Opposing the SSA was the American Seafood Distributors Association, representing seafood importers and restaurants, which argued that the tariffs would represent a "tax on America's No 1 seafood". (The little crustaceans have become so popular that Americans consume more shrimp yearly than any single type of fish.) Undoubtedly, the July decision was also affected by the fact that one of the eight states represented by the SSA was Florida, a key battleground state in the November presidential election.

Domestic criticism of the decision was immediate and vociferous. Business Week, among others, poured scorn on the ruling in a July 8 editorial, "Peeled and Eaten by US Shrimpers": "How's this for chutzpah?" the magazine asked. "US shrimp fishermen file a complaint with Uncle Sam seeking to raise import duties - and prices - on imported shrimp. Friendly state officeholders lend a hand with subsidies for the industry. Then the shrimpers petition Washington to shift the resulting millions of dollars in import duties from the US Treasury back into their own pockets." The "friendly state officeholder" was Louisiana governor Kathleen Babineaux, who used US$350,000 of a $1.2 million federal disaster relief grant to support the shrimp industry's legal fees in the dumping case. The "shift[ed] millions of dollars" referred to a 2000 US law that allows industries that win dumping cases to receive directly the fees imposed on dumped imports. Thus, US shrimpers would have received a large windfall from the tariffs imposed on imported shrimp.

Why import?
Given that Asian shrimp have to be deep-frozen and carried thousands of miles to reach US markets, what could possibly allow the Asian exporters to undercut US shrimpers legitimately? The actual reason had nothing to do with international commerce, trade rules or dumping. Rather, the Asian producers had grasped a simple truth, first discovered in Mesopotamia thousands of years ago: it's easier to grow your food than hunt it. Chinese and Vietnamese shrimp are produced by aquaculture, that is, they are raised from larvae to adult in mesh enclosures with periodic feeding. Littoral, tropical Vietnam has some of the best conditions in the world for an aquaculture industry, and once Vietnamese farmers learned the technology, they did not hesitate to develop it for export purposes. American shrimpers, on the other hand, get their shrimp the old-fashioned way: by sending out boats to capture them in nets. One doesn't need to be a shrimp expert to see which method would be cheaper.

In any event, the effects of the July decision played out predictably. Vietnamese shrimp exports fell below government targets. Exporters tried to compensate for lost US orders by shipping to the European Union and Japan, but both markets have their own methods (namely, trumped-up health concerns and bureaucratic obstructionism) for keeping out unwanted imports. In mid-October, 2,500 Vietnamese shrimpers sent an extraordinary, plaintive letter to the DOC stating their case:
The preliminary decision by USDOC imposing tariffs on Vietnam shrimp from 12.11% to 93.13 % has caused a very negative impact and serious injury to our shrimp raising and trading. We shrimpers work very hard on our shrimp farms, [and] are fortunate [to] have favorable climatic, employment, [and] technological conditions for shrimp raising that produces [sic] high quality shrimp. Our shrimp meets the highest requirements for export to the United States. We do not get any subsidy from the government in shrimp farming. We would, therefore, urge USDOC and ITC to conduct their investigations objectively and without bias or prejudice in order to re-examine the dumping margin for shrimp imported from Vietnam, because we trust and rely on fair trade ... If you would like to get further information on shrimp farming in Vietnam and the likely negative impact of the dumping tariff to our lives, we are willing to supply detailed information. We would like to invite you to come to Vietnam to see our shrimp farming and trading.
A few weeks later, US President George W Bush won his second term in office, dissipating the political motive for limiting shrimp imports. Meanwhile, Commerce Department bureaucrats were pondering the shrimp dispute, and the Vietnamese farmers' input was duly considered. At the end of November, the new decision was finally issued, with the recommended tariffs considerably lower than the July ruling had called for.

Perhaps the most surprising aspect of the November decision was that the Vietnamese industry was awarded much lower rates than the Chinese one. According to assistant commerce secretary James Jochum, the change of heart on Vietnam was at least partially due to the fact that Vietnamese shrimp producers were willing to aid the DOC's investigation. The Bangladesh-based pricing formula was also changed in Vietnam's favor. Vietnam's apparent outmaneuvering of China during the shrimp dispute must be causing a few smug chuckles in Hanoi.

The shrimp fracas also was ironic in that it reversed the usual roles in international trade disputes: American shrimpers were cast as the Luddites resisting technological advancement in order to preserve a traditional way of life, while Vietnamese and Chinese aquaculturists represented globalized technological progress. Naturally, the motley anti-globalization delinquents who turn out in such tiresome numbers at every international economic event had nothing to say about this particular dispute, even though it should have plucked their environmentalist heartstrings as well, since aquaculture is a highly polluting industry. Evidently, their brains could not grasp the possibility that Americans might occasionally be the victims of globalization, rather than always its rapacious beneficiaries. Withering shrimping communities, all along the southern coastline of America, could have told them otherwise.

David M Lenard is a freelance writer now working in Ho Chi Minh City, Vietnam.

(Copyright 2004 David M Lenard.)

Dec 9, 2004
Asia Times Online Community

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