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Free Trade Meets Real Life
By Prof. Vo Tong Xuan
January 8, 2004
First there was the tra and basa incident. Now American shrimp farmers are going to press an anti-dumping case against Vietnam. What is really behind all this?
Agricultural production in developed countries like Japan, the United States and others in the European Union, is usually costly because of high labor costs and the use of too much petroleum-chemical energy. Therefore, to support farmers' livelihoods governments have to raise the producers' prices and practice clever trade policies to control the import of cheap agriculture products from Third World countries.
For years, the United States has been using import quotas to protect farmers producing sugar, peanuts and tobacco. Former dependants like Hawaii, Puerto Rico, the Virgin Islands and the Philippines used to wait for an annual quota allotment so they could export sugar to the U.S. and earn twice as much as exports to other countries.
When the world sugar price rose close to that in the U.S. and the political regimes of those dependants changed, quotas were replaced with preferential taxation systems. However, when world sugar prices plummeted, the U.S. Government again limited the importation of sugar to protect sugar producers in several southern states, and maintained the domestic sugar price at nearly twice that of the world's. This measure helps support about 50,000 workers, at the annual cost of US$1.4 billion, which American consumers have to pay for when buying sweetened food and foodstuffs.
Since the free-trade phase, promoted by industrialized countries, farmers in developed countries have had to compete with their peers in Third World countries. Conflicts of interest have always been settled in court with verdicts favoring the more powerful clients. The controversial anti-dumping case filed against Vietnamese tra and basa producers showed that the rights of American consumers had been overlooked in protecting about 3,000 incompetent U.S. catfish farmers.
Now, it is the turn of the bungling U.S. Southern Shrimp Alliance, the SSA grouping producers in eight southern states, that will try its luck with another anti-dumping case. It claims that the lower-priced shrimp from Latin America and Asia has forced a lot of shrimp farmers to quit the business. Once again, a legal course of action was preferred instead of technology modification, which would lower production costs, so as to conceal the lack of competitiveness.
The SSA can actually provide for only about 18% of the shrimp demand in the United States; the rest of the demand has to be met by imports. According to the U.S. Department of Commerce, the imported shrimp volume increased by 36% in October 2003, with the three leading exporters being Thailand, Vietnam and China. In the first 10 months of 2003, Vietnam shipped to the U.S. market about 47,614 tons of shrimp, a year-on-year increase of 36%. The lack of competitiveness of the American shrimp farmers is due to the farming technique in which shrimps are farmed in ponds with feed pellets; the uneaten pellets promote the growth of blue alga in the pond, affecting the taste and smell of the shrimp despite the use of expensive aerators. Unable to compete with imported shrimp in term of quality and price, many shrimp farmers went out of business.
It is understood that once the anti-dumping case is accepted by the Department of Commerce, all shrimp importers will have to set up bonds, equivalent to a taxable amount of the imported shrimp, which, according to the Byrd supplementary laws, would be turned over to SSA members as a subsidy when and if they won the case. Determined to go the length, the SSA has engaged the renowned Dewey Ballantine law firm as its counselor, at the cost of at least US$3 million.
More than 20 lawyers representing the exporters and The American Seafood Distributors Association (ASDA) have met in Washington D.C., at the headquaters of the law firm, Akin Gump Strauss Hauer Feld, to plan for the defense. The preliminary conclusion is that the importation of shrimp has nothing to do with the SSA's business loss; the cause of the SSA's financial crisis is the American shrimp production industry itself. The facts confirm that the downward trend of the U.S. shrimp prices is because of the small-scale production and high labor cost in a world market flooded with shrimp. Wally Steven, ASDA president, told the press that ASDA is taking the lead in the defense of the exporters because it wants to protect the rights of American consumers.
Shrimp exporters, having appointed their counselors in Washington D.C., are preparing themselves and their establishments at home for inspection and verification to prove that they are not dumping their shrimp in the U.S. Thai and Indonesian shrimp farmers have contracted the law firm of Willkie Farr & Gallagher, India has Garvey Schubert and Barer, Canton China has Perkins Coie, Vietnam has Willkia Farr & Gallagher, and Brazil has Dennis James. Thailand, being the biggest exporter to the U.S., has had the support of its Prime Minister and relevant ministers since the Bangkok APEC conference in October 2003. The Thai ambassador to the U.S. has written to the 12 countries exporting shrimp to the U.S., asking for a joint effort in the fight against the anti-dumping case.
However, the SSA knows it would be difficult to win because most of the nations under the SSA's fire have clear-cut market economies. But because of the precedent of the Vietnamese tra and basa case, the SSA still banks on the lengthy court proceedings providing a price hike as a temporary shrimp shortage would result from most importers waiting for the outcome of the case instead of importing under bond.
From experience, whenever the economy undergoes a slump, trade barriers are erected in the U.S. despite the ceaseless call for a free trade environment. Is the shrimp anti-dumping case reflecting a difficult period for the American economy? If so we will have to wait and see if American consumers can alter the balance of justice in the fight against the absurd lawsuit of the incompetent American shrimp farmers.
VASEP protests shrimp dumping suit in U.S.
Vietnam Association of Seafood Exporters and Processors (VASEP) has protested the U.S. Southern Shrimp Alliance (SSA)'s move to sue Vietnam for dumping shrimps in the U.S. market.
The SSA on December 31 filed an anti-dumping suit against six shrimp exporting countries, including Vietnam, China, Thailand, India, Brazil and Ecuador, which meet 75% of the American shrimp demand. They said the dumping, made possible by subsidies by governments and preferential tax, had sent the domestic shrimp industry's revenue down to US$560 million in 2003 from US$1.25 billion in 2000. During the period, 40% of the industry's workforce lost jobs. They proposed anti-dumping tax of up to 267% on shrimp imports from the six countries, with 30%-99% for Vietnam.
According to Nguyen Huu Dung, general secretary of VASEP, Vietnamese shrimps have competitive prices and good sales thanks to low labor cost, favorable breeding environment and improved farming techniques. "Vietnamese shrimp producers and exporters do not receive subsidies and operate under the market rule. They are responsible for risks and pay tax under government regulations," Dung says.
In a communique issued last week, VASEP says the SSA's lawsuit is a wrong act that does not respect fairness and freedom in trade. It goes against the global trade liberalization that the U.S. has initiated and asked other countries to observe. VASEP has requested the U.S Department of Commerce (DoC) and International Trade Commission (ITC) to ensure fair judgment and take U.S. consumer interest into consideration. The DoC is expected to decide on an investigation on Jan. 20 and the ITC to start determination of injury on Feb. 17.
VASEP's Shrimp Committee will hire the U.S. law firm Willkie Farr & Gallagher to deal with the case. It estimated US$1.2-1.5 million will be needed for the legal battle.
Deputy Minister of Trade Tran Duc Minh called the lawsuit groundless, as the Vietnamese Government does not subsidize shrimp producers, processors and exporters. "The suit should be resolved in a fair and objective manner in accordance with the Vietnam-U.S. Bilateral Trade Agreement and the spirit of free trade as espoused by the U.S.," Minh told the local press.
The U.S. accounts for half of Vietnam's shrimp exports. According of the Ministry of Fisheries, the country's shrimp exports last year were nearly US$1.1 billion.
Vietnam News Agency reported that the American Seafood Distributors Association, an NGO which represents American seafood distributors, importers and traders, has protested the SSA's suit. The association has issued a statement saying that imported shrimps are essential to help U.S. businesses and workers maintain job and income. Even if SSA wins the suit, it will not benefit the market and consumers as the domestic fishing has run at its full capacity. Moreover, about 90% of shrimp consumed in the U.S. is imported, and it's essential that trade not be restricted.
Vietnam's shrimp exports to the U.S. soared from US$31.3 million in 1997 to an estimated US$500 million last year. The U.S. consumes 454,000 tons of shrimps annually but domestic production can supply only 12%-15%, the balance must be met by imports estimated at US$3.4 billion a year.