 |
| A catfish no more: U.S. legislation
says this fish has to change its name for immigration
purposes. |
| Courtesy VASEP |
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| Catfish farming on a houseboat
anchored in the Mekong: The fish are reared
in cages underneath. |
| Photo by Thomas Jandl |
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| Vietnam’s catfish industry
benefits from plenty of free natural resources. |
| Photo by Thomas Jandl |
| Volume and
total value of U.S. catfish imports from Vietnam |
1999
Vol: 3.3 million kilos
Value: $13.4 million
2000
Vol: 8.6 million kilos
Value: $30.0 million
2001
Vol:13.5 million kilos
Value: $38.2 million
2002
Vol: 18.3 million kilos
Value $55.1 million |
Fish and shrimp play a central role in Vietnam’s
export-led economic growth and poverty alleviation
policy. The aquaculture sector ranks third among
the country’s leading staples, after crude
oil and garments and textiles, but ahead of footwear
and rice. Sales of aquatic products in 2002 topped
$1.5 billion.
In 2001, Vietnam exported 13,500 tons of frozen catfish
fillets to the U.S. market, worth a total of $38 million.
These numbers increased to 18,300 tons and $55 million
in 2002.
In addition, $467 million worth of shrimp made their
way across the Pacific from Vietnam, making Vietnam
the sixth-largest supplier to the United States, with
China and Thailand in the lead.
Catfish was first exported to the United States presumably
even before the embargo was lifted in 1995, through
a middleman to serve the Vietnamese American community,
says Dr. Nguyen Huu Dung, general secretary of the
Vietnam Association of Seafood Exporters and Producers
(VASEP). “But the boom started in 1999, when
raw seafood tariffs dropped to zero.”
Vietnamese catfish is produced to U.S. standards and
regularly undergoes quality controls by the Food and
Drug Administration (FDA), says Dung.
So it didn’t even harm the Vietnamese trade when
a U.S. Senator spread the rumor that Vietnamese catfish
was contaminated with Agent Orange, a toxin sprayed
onto Vietnam by the U.S. military during the war.
“They checked and found nothing, of course,”
says Ngo Phuoc Hau, the general director of Agifish,
the leading exporter to the United States, and vice
president of VASEP.
So the U.S. industry, feeling threatened by the new
competitor, began to take the backdoor to market competition
– protectionist legislation. Driven by the U.S.
catfish industry in the South, Congress passed an
obscure amendment to an unrelated Bill making it unlawful
to call a catfish a catfish unless it is an American
catfish.
While this legislation was enacted, the United States
was supporting a trade action before the World Trade
Organization denouncing European protectionism on
sardines. The European breach of free trade rules:
legislation preventing sardines not caught in the
Mediterranean from being called sardines.
When the hypocrisy in this position was pointed out
to the U.S. Administration, it withdrew its support
from the sardines case.
So the Vietnamese grumbled and renamed their product
basa and tra, basically the local names for the
subspecies of catfish. There are 2,500 subspecies
in the catfish family, and experts are in agreement
that the Vietnamese catfish are just as much members
of the family as the American version.
It’s flavor and price, stupid
To the horror of the American producers, it turned
out that the consumers did not care about the name,
but about quality, flavor and price. “During
the first three months it was difficult,” says
Hau, but then the price, the flavor and the odor won
the customers back.” The odor of fish raised
in free-flowing water is considered better, and the
price of Vietnamese catfish – basa, to avoid
potential lawsuits – is lower than the American
competition’s. So the market recovered fast.
The United States and Vietnam are the two only large
catfish producers, and although the U.S. Department
of Agriculture has an export promotion program (talk
about free market!), U.S. catfish did not meet with
much success internationally, says VASEP’s Dung.
The United States does not produce catfish under optimal
conditions. U.S. farmers use pumped groundwater, which
produces a lower quality fish and makes production
more costly, says Dung.
But the U.S. industry did not give up. In another
blow to the Vietnamese hope for free trade in a product
where Vietnam has a clear competitive advantage, the
industry filed complaints against Vietnam under anti-dumping
provisions.
The charge of dumping, any number of people with knowledge
of the Vietnamese economy will tell, is unrealistic.
Vice Prime Minister Vu Khoan sums it up when he says
that Vietnam could probably dump one load of fish
into the United States market, but there is just no
money to do so for an extended period.
Others chime in along the same lines. Chanh Truong,
the country representative for U.S. agro giant Cargill,
which has the largest share of fish feed in the Vietnamese
market, making 3,000 tons of it in Ho Chi Minh City
per year, says: “Since the feed is sold by a
U.S. company, I can tell you there is no underpricing
here.” Cargill also sent a letter of support
of the Vietnamese position to the Department of Commerce
in the dumping case.
Adam Sitkoff, the executive director of the American
Chamber of Commerce agrees, and sees the potential
fallout for trade relations: “Catfish has been
seen as the big guy picking on the little guy. That
has fueled the fire. But there is no dumping here.
Labor is cheap, inputs are cheap.” But he adds
that U.S. companies did only what they are allowed
to do under the law. The Bilateral Trade Agreement
(BTA) did not override domestic legislation on anti-dumping
or protectionist laws regulating product standard
rules, such as those forbidding the use of specific
names for fish.
Lack of sensitivity
“People and businesses here always thought that
America was the champion of free trade,” says
Pham Chi Lan, executive vice president of the Vietnam
Chamber of Commerce and Industry. She says farmers
could not understand that the United States would
raise barriers against Vietnamese products. They feel
it is very unfair that a country with per capita income
100 times that of Vietnam could do this to poor farmers.
But she realizes that this is not only done to Vietnam.
Whenever even a small number of U.S. businesses are
impacted by foreign imports, she says, the legislature
tries to raise barriers. So the chamber advises businesses
that this is not just about Vietnam, but a general
problem and that negotiations are needed. “We
also advise them to diversify and find as many partners
as possible.” Vietnam now exports catfish to
Europe, Japan and Australia.
And the very pragmatic vice chairman of the Ho Chi
Minh City People’s Committee – roughly the
equivalent of a vice mayor – realizes that “no
producer likes imports, no consumer likes exports
— they drive domestic price levels up. But we
have to learn to live with contradictions.”
Nevertheless, the Vietnamese side is unhappy about
the lack of care with which the Commerce Department
has calculated production cost. “The Department
of Commerce established that Vietnam is not a market
economy,” says Hau. “Then they took prices
for catfish in India and Bangladesh as surrogates
for our prices. But they used retail prices to establish
a ‘reasonable’ wholesale price!”
The Commerce Department has since had to revise its
initially imposed tariffs of up to 64% due to a simple
mathematical error, and the Vietnamese are hopeful
that this embarrassment will force the American side
to be extra careful not to do anything equally careless
when the Department returns to take a second look.
Hau says that if Commerce Department takes the time
to start from the beginning of the process and calculates
prices up the production chain, the truth will emerge
and a clean bill of health provided to the industry
in Vietnam.
Next target shrimp
With catfish already hard hit by protectionism and
anti-dumping legislation, shrimp farmers are bracing
for a suit as well. More than $400 million worth of
Vietnamese shrimp went to the United States last year,
making the market worth almost 10 times that of catfish,
and the issue proportionally more dramatic for a poor
country like Vietnam.
Earlier this year, Rep. Ron Paul, R-Texas, sponsored
a bill that would restrict shrimp imports from a number
of countries, including Vietnam. In addition, the
Southern Shrimp Alliance has hired the Washington
law firm of Dewey Ballantine to initiate a preliminary
investigation to bring a trade action against various
countries, and Vietnam fears it will end up on the
target list.
Vietnam’s Foreign Ministry called the bill, H.R.5578,
“nothing but a protectionist move inconsistent
with the BTA spirit and detrimental to the desires
… of the two peoples, especially American consumers.”
Shrimp is even more important for Vietnam than catfish.
On the other hand, the United States imports large
amounts of shrimp, and tariffs would have a more pronounced
impact on end user prices, thus angering consumers
and restaurants. Therefore shrimp tariffs would run
into more domestic opposition than legislation against
catfish imports.
Another problem the United States may face in a broad-based,
multi-country shrimp suit is that the suit is likely
to end up before the World Trade Organization (WTO).
Since Vietnam is not yet a member, the United States
could impose tariffs on Vietnam, but if the WTO ruled
against the U.S. position with regards to WTO members
states named in the suit, the U.S. position would
become morally difficult to defend, especially since
the United States has preached the beauties of the
free market to Vietnam and other communist countries
for so long.
Vietnam calls the trade action “a move running
counter to the trade liberalization spirit being
upheld by the United States.”
Business must go on
In spite of the trade row, Vietnam’s master plan
for the catfish sector development in the Mekong continues
to call for a doubling in production by 2005 to a
total harvest worth $3 billion, and shrimping obviously
continues as always. Of particular importance to assure
growth in exports in both industries are continued
improvements in breeding and farming techniques, food
safety and hygiene and overall product quality.
Another key strategy pushed by the Ministry of Fisheries
is product diversification, to avoid dependence on
any one particular product and market.
But implementation of the plan depends on finding
an accommodation with the United States. To find a
negotiated solution on catfish, VASEP proposed a transitional
period during which Vietnam would accept an export
quota on frozen fillets while the U.S. producers shape
up and adjust to the tougher international competition.
That compromise would limit Vietnam’s exports
to 90% of 2002-levels in 2003, 95% in 2004 and 100%
in 2005. Thereafter, no limitations would apply.
The Catfish Farmers of America, however, said that
the quotas were too high and demanded lower import
levels.
If negotiations fail, the impact would be harshest
on the poorest segment of the population. Catfish
farming and shrimping are most popular in the poorest
parts of the country, where due to flooding and saline
soils other forms of agriculture are less productive.
When the catfish and shrimp booms began, many already
poor farmers sold or mortgaged their land to buy fish
cages or dig drenches and ponds for shrimp. These
farmers face ruin if their investment in fish or shrimp
farming fails to produce enough income to repay the
loans. And many of them have no farm to go back to
if the promise of the American free market fails to
deliver.
Ultimately, says the Chamber of Commerce and Industry’s
Lan, the solution to the problem is WTO accession.
Once a member, disputes like these would be internationalized
and international rules would override U.S. law, depriving
powerful U.S. special interest of the ability to legislate
foreign competition out of a fair deal.
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