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.
