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|  | JULY 8, 2004
By Paul Magnusson Peeled and Eaten by U.S. Shrimpers What to do when your industry is hit by imports? Flout international law, undercut a free-trade deal, then sock it to consumers How's this for chutzpah? U.S. 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 U.S. Treasury back into their own pockets. It may smell fishy for a country in the control of ostensibly free-trade Republicans. But on July 6, the U.S. Commerce Dept. went along with the U.S.-based Southern Shrimp Alliance, slapping tariffs of up to 93% on frozen and canned shrimp from Vietnam and duties of up to 113% on shrimp from China. Retailers say the decision, based on an antidumping complaint the industry filed last year, will raise shrimp prices in the U.S. by as much as 44% if it stands (a final ruling is pending). The tariffs cover more than $1 billion in imported shrimp. CATFISH, TOO. It's bad enough that U.S. consumers, who have made the wee crustaceans their favorite seafood, will be fleeced. But the decision also carries unfortunate consequences for U.S. trade relations with Vietnam and other developing nations. Washington is constantly exhorting them to abandon state-controlled enterprises in favor of free-market economics. "This sends entirely the wrong signal," says Richard A. Fisher, who as Deputy U.S. Trade Representative in the Clinton Administration negotiated a deal with Vietnam in December, 2000, that was eventually approved by Congress and signed by President George W. Bush. In return for agreeing to protect U.S. copyrights and investment, Vietnam was promised greater access to the U.S. market. Shrimp is its third-largest export, and the U.S. its biggest market. It's only the latest example of how Washington has done wrong by Vietnam while preaching the free-trade gospel. Take the bizarre decision by the GOP-controlled Congress in 2002 to relabel imported Vietnamese catfish. Responding to complaints by catfish farmers in then-Senate Majority Leader Trent Lott's home state of Mississippi, Congress passed a law prohibiting catfish from Vietnam from being called "catfish" in U.S. stores. Instead, they're sold as Basa Tra, a name so foreign-sounding that U.S. catfish farmers reckoned no one would ever touch the stuff. DOUBLE COMPENSATION? Never mind that icthyologists insist that the Vietnamese variety is just one of 2,000 worldwide of the ubiquitous and scaleless Siluroidei, known for its whisker-like sensors near the gills and bottom-feeding habits. Thanks to the change of name and a further antidumping penalty, sales of the Basa Tra never took off in the U.S. Congressional absurdity doesn't stop there. The 70,000 U.S. shrimpers stand to reap an added windfall from U.S. consumers because of a 2000 law known as the Byrd Amendment. It allows industries that win antidumping cases to receive the taxes imposed on offending imports. The World Trade Organization ruled in 2002 that the practice of giving industries part of the cut in dumping cases is prohibited by international trade rules, since the purpose of antidumping tariffs is only to level the playing field between imports and domestic products. To give these tax collections to domestic competitors amounts to double compensation for U.S. producers, the WTO says. But that hasn't prevented Washington from rewarding dozens of U.S. litigants with millions of tax dollars so far. Congress has refused to comply with the WTO ruling. EQUATORIAL ADVANTAGE. Dumping cases are expensive, of course, involving high-price trade lawyers and weighty research costs. So where did the money come from to pay the fees? U.S. opponents of the dumping case, including the U.S. Seafood Distributors Assn., say it came partially from federal grants to Louisiana, home to much of the U.S. shrimp fleet. Louisiana Governor Kathleen Babineaux Blanco allocated $350,000 from the state's fisheries department last May to the shrimp industry. Her office confirmed the sum was used to cover the industry's legal fees, and that it was part of a $1.2 million federal grant for disaster relief for Lousiana shrimpers. The governor's office said that paying legal fees in the antidumping case "was considered a more effective means of supporting the industry" than other possible uses. The Bush Administration insists it has done nothing wrong in finding that Vietnam is subsidizing its warm-water shrimp exports. The Commerce Dept. calculated the dumping penalties by comparing the cost of Vietnamese shrimp to that of those from Bangladesh. The Vietnam variety, which come almost entirely from aquafarms, as opposed to the U.S. variety, which are mostly hauled out of the sea in nets, aren't being sold at a fair price, says the Administration. "The message here is clear: We will enforce our trade laws," says James J. Jochum, Assistant Secretary for import administration, adding that the Administration also "takes a back seat to no one" in advancing the cause of free trade. "IT'S DUMPING." Seafood distributors have a different take. Blessed with warm water and air temperatures, shrimp-farming nations near the equator have invested millions in aquaculture and are able to grow and harvest shrimp more efficiently, says Wally Stevens, president of the American Seafood Distributors Assn. "Technology is winning out," he says. U.S. shrimpers disagree. "It's not a productivity miracle -- it's dumping," says a spokesman, pointing to the fact that prices received by U.S. shrimpers have declined by 32% over three years, and that their share of the U.S. market for frozen and canned shrimp has shrunk to just 10% of the total. The U.S. industry also complains that subsidies from the World Bank are aiding many in the developing world. Europe and Japan, with large fishing industries of their own to protect, haven't exactly embraced Vietnamese shrimp, either. Both have raised health concerns about the antibiotics sometimes used in fish farming. That's always a legitimate concern, but both nations have employed phony health objections and junk science in the past to protect domestic producers. Sometimes, such concerns mask protectionist leanings. Commerce is to rule on the exports of four other countries -- Brazil, Ecuador, India, and Thailand -- by the end of July. The six nations together account for 75% of U.S. shrimp imports. If punishing tariffs are applied to shrimp from those nations, prices will go up, and shrimp may lose its title as America's favorite seafood. The final decision isn't likely to be decided until late November, after the election. That might be the perfect time to rethink the entire case.  Magnusson is a correspondent in BusinessWeek's Washington bureau Edited by Douglas Harbrecht
BW MALL
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