UNIT IV CASE: THE U.S.-VIETNAMESE CATFISH DISPUTE
Catfish, long a part of the U S. Deep South diet, are the ninth most consumed seafood or fish product in the United States. The U S. industry is centered (accounting for 86 percent of its 2015 production) in poor areas of two states—Alabama and Mississippi. At its height, it employed about 10,000 people. However, U S. per capita consumption of fish and seafood has been decreasing (by 11 percent between 2003 and 2013). Further, as catfish imports (mainly from Vietnam) have taken a larger share of the U.S. market (20 percent in 2005 versus 75 percent in 2013), U.S production has fallen. Meanwhile, Vietnam's industry is also centered in one of its poorer areas, the Mekong Delta. (The opening photo shows a fish farm in southern Vietnam.) The Vietnamese industry employs about 1 million people and accounts for about 2 percent of Vietnam's economy. The changing competitive situation has spurred the U.S. catfish industry to seek means to limit the importation of Vietnamese catfish. (Map 7.1 shows the production areas in the two countries.)
MAP 7.1 Areas of Major U.S. and Vietnam Catfish Production
The catfish production for both the United States and Vietnam are near deltas of major rivers, the Mississippi and the Mekong respectively. Both areas have a great deal of poverty.
RISE OF AQUACULTURE
During most of history, marine life grew faster than humans could consume it. However, during the last half century, overfishing has led to many species not being fully replenished, a situation caused by population growth and technology that enables locating and landing fish like never before. One factor countering the overfishing has been the rise in aquaculture, or -fish farming,- of which the U.S. and Vietnam industries have been a part. In other words, rather than being caught in the wild in nets or hooked on fish line, most catfish are grown in ponds and harvested when they grow to a certain size. In turn, catfish have ceased to be traditional scavengers; instead, they are fed corn and soybean feed, a change publicized by U.S. catfish growers as they promote sales to consumers who do not want to eat scavenger fish.
THE VIETNAMESE ADVANTAGE
The U.S. catfish industry has developed largely by converting lands that will no longer grow much cotton, but are high in clay content and hold pumped-in water very well. Meanwhile Vietnam has some competitive advantages that enable it to export to the United States. Its winterless climate permits the fish to grow faster. One of its species, the tra, can surface to breathe air; thus enabling the fish to grow in greater density. Vietnam's lack of restrictions (unlike the United States) on the discharge of fishpond waters into rivers also allows for a greater production density. Finally, its lower labor rates are an important factor for filleting and freezing the fish.
THE U.S. INDUSTRY FIGHTS BACK
Changing Names Alarmed by market losses, U.S. catfish growers' first defense was to convince Congress to disallow Vietnamese imports to be called “catfish.- Because Vietnamese fish were of a different variety (from about 3,000 catfish varieties found all over the world) than those farmed in the United States, the Vietnamese varieties had to be imported as tra, basa, or pangasius. The U.S. producers reasoned that consumers were not likely to buy some strange-sounding and unknown fish in lieu of catfish. However, the name change did not prevent Vietnamese inroads. One of the problems was that few U.S. locales have truth-in-menu laws. Thus, the names for tra, basa, and pangasius were changed on menus and grocery labels to be -catfish,- a more expensive grouper, or just plain “fish.- Clearly, the U.S. catfish producers needed a different means to stifle the imports.
In the meantime, the U.S. industry's profits diminished because of increased costs for corn and soybean feed. In order to raise prices and increase demand, an association representing catfish growers, the Catfish Institute, is now promoting a premium catfish with a different name—delacata. Basically, the name “catfish- has had a negative connotation for many people, and the Institute noted how name changing had recently helped sales of other previously unpopular fish (e.g., the slimehead became the “orange roughy- and the Patagonian toothfish became ‘Chilean sea bass-). At this writing, it is too early to tell if the change-of-name strategy will work.
Unfair Competition: Dumping Because the U.S. industry was losing jobs and sales, it petitioned for increased taxes on the imported Vietnamese fish, claiming that they were being sold below the cost of production (dumping). Given that Vietnam is a command economy, it was difficult to establish what the true production costs were; however, these were estimated on the basis of Bangladesh production costs, and antidumping taxes (tariffs) of 64 percent were placed on the importation of the fish. Later, the industry succeeded in having estimates based on higher Indonesian costs.
Health Arguments Despite the higher prices, the Vietnamese fish have taken an increasing share of the U.S. market. However, in 2007, the U.S. catfish industry seemed to have found salvation when about 39.000 U.S. dogs and cats were sickened or killed after consuming imported Chinese pet food. This led to a negative attitude toward imported food products in general, especially seafood originating anywhere in Asia. The U.S. catfish farmers responded quickly First, they publicly implied that imported fish may be contaminated, such as through publicity saying, “U.S. farm-raised catfish; Safety you can trust.- The Catfish Institute convinced several states to require country-of-origin labeling on food and menus by advocating that consumers have the right to know whether the fish and seafood they buy could be contaminated. The Institute has followed up with videos showing unsanitary areas where Vietnamese catfish are cultivated. However, studies on changes in consumer purchases indicate that these measures have had no effect on demand.
Second, catfish farmers lobbied to increase inspections of fish from Vietnam Their congressional representatives pointed out that U.S. seafood inspection is of only 2 percent of the imports, whereas the European Union inspection is of about 20 percent They were successful at burying a provision deep in the 2008 farm bill, which called for the Department of Agriculture—rather than the Food and Drug Administration (FDA)—to be in charge of catfish safety. Basically, the provision required 100 percent inspection at the production source, which is particularly difficult in Vietnam because its highly dispersed fisheries would require an army of inspectors. Further, since Vietnamese imports were no longer called catfish, enforcement had to await amendments in the bill to refer to “catfish-like- products. The catfish inspections were never enforced because of budget and other concerns, and the provision was formally revoked in 2012. However, passage of the 2014 farm bill required quarterly inspection of both U.S. and foreign catfish. This inspection was set to begin in March 2016 and be phased in over an 18-month period. Still, by the start date, there was no agreed upon criteria for what the inspection would be. Vietnamese producers speculated that the criteria would be arbitrary to exclude them from the U.S. market.
As with most regulatory changes, there has been opposition to the protection of the U.S. catfish industry, mainly along four lines:
1. Although the farm bill's inspection requirement was ostensibly to protect the health of American consumers, it singled out only catfish-like species without any evidence that these posed more danger than other types of imported fish.
2. The cost of an effective catfish inspection program will be high (e.g., Vietnam exports about 500 tons of catfish to the United States per month). Given budget deficit worries, there is considerable opposition.
3. Vietnam is a fast-growing economy with a large population. U.S. exports to Vietnam have been rising steeply. For instance, U.S. farm exports to Vietnam went from $215 million in 2006 to $2.3 billion in 2015. Additional U.S. catfish import restrictions could jeopardize U S export sales to Vietnam. Vietnam has threatened to take retaliatory action by buying less U.S. beef, for example.
4. Finally, economic conflicts between the United States and Vietnam could deteriorate political relations between the two. Further, Vietnam might bring charges against the United States in the World Trade Organization (WTO). (Chapter B discusses the WTO's dispute mechanisms.) If Vietnam were to win, the win would likely not only negate the protective catfish measures, but also weaken U.S. efforts to persuade other countries to reduce their trade barriers.
An adage says that if you give a man a fish, he will have food for a day. If you teach him to fish, he will have food for a lifetime. However, the U.S.-Vietnamese catfish controversy illustrates that knowing how to fish is insufficient in international competition. One also needs to know how to influence and maneuver through a maze of government regulations that affect competition. ¦
7-1 List the advantages and disadvantages for the U.S. protection of its cattish industry.
7-2 As you read through the chapter, list the protective measures (instruments) the United States has not used to protect its catfish industry. Briefly explain why each would or would not be successful.