July, 2003: The Yankee Trader

By Greg Rushford

Published in the Rushford Report

The notion that Americans must be protected against “unfair” foreign traders drives the powerful political support for the U.S. antidumping laws on Capitol Hill. But when you dig into the actual cases to see what’s really going on from the perspective of real people, the world suddenly becomes more complex. Such is the case with the pending antidumping petition brought against Vietnamese catfish by the Catfish Farmers of America.       

            On July 18, the four sitting commissioners of the International Trade Commission are expected to determine that the domestic catfish industry has been injured by “unfair” foreign Vietnamese traders. Antidumping tariffs ranging from 37- to 64 percent will then be imposed on the foreign fish  based on  a calculation by Secretary Don Evans’ Commerce Department that the Vietnamese have been selling their catfish to Americans at 37- to 64 percent below cost. For the ITC commissioners, it’s safe to vote against the Vietnamese,who don’t vote here. [By act of Congress,

Vietnamese catfish must be called by their Vietnamese names, such as basa, or tra.]

            When you take an honest look at Certain Frozen Fish Fillets from Vietnam , it quickly becomes apparent that neither American nor Vietnamese catfish farmers and processors have done anything except compete. The only people in the case who really have taken actions that are really unfair are the U.S. antidumping officials at the Commerce Department who have cooked the books to stick it to the Vietnamese.

            Let’s think this through by first taking a sympathetic look at the American catfish people. 

American success stories turned sour

Take David Pearce. If the ITC should rule for the Vietnamese side, he’s in trouble.

            Pearce is a catfish farmer in Browns, Alabama . Until recently — say, about 1999, when Americans held 95 percent of the domestic catfish market — Pearce was a model of success in business. But that model has been hit hard by low-priced catfish imports from the resourceful Vietnamese, who now hold perhaps 20 percent of a $590 million U.S. market for frozen catfish fillets.

             Thirty-two years ago, Pearce’s farm started with 40 acres of ponds; he now has 1,425. Over the years, U.S. catfish farmers and processors like Pearce have done what smart businesses are supposed to do. They have turned catfish, once eaten mainly in the rural South and Midwest , into a significant national market. Aided by an estimated $50 million in advertising and marketing campaigns since the mid-1980s, catfish has become the largest aquaculture industry in the country.

            Three years ago, before the Vietnamese became a significant presence in the domestic  market, Pearce was getting more than 70 cents for each pound of catfish; last year the price dropped to 50 cents. “At 50 cents per pound, catfish farming is unsustainable,” Pearce told the ITC in a hearing on June 17. Pearce related that he is a member of the board of an Alabama bank, and sees farmers who “have maxed out their lines of credit and are having a difficult time feeding their families, much less their fish.” But Pearce has been losing money, has fired two employees (out of 17), and is paying some of the rest less. You can say those two employees are insignificant statistics — their families wouldn’t.

            What will happen to Jack Perkins, should the Catfish Farmers of America lose the case? He’s a vice president for Consolidated Catfish Cos., which is based in Isola , Mississippi . ConFish is owned by 114 catfish farmers. In 2000, the national Piccadilly restaurant chain was one of ConFish’s biggest customers — until Piccadilly switched to Vietnamese catfish. “Over the last two years our frozen filet business has operated at a loss, and we have not paid a dividend to our farmer owners,” Perkins told the ITC at the June 17 hearing. “Twenty of our stockholders have ceased their catfish operations in the last year and a half.”

            Or how about Danny Walker, the CEO of the Heartland Catfish Co. in Itta Bena , Mississippi ? Walker has been in the catfish business for 18 years, and claims — credibly — to run “one of the largest, most modern” and efficient processing operations in the United States . “If the market continues to be flooded with low-cost Vietnamese imports, Heartland and other processors will not survive,” Walker testified at last month’s ITC hearing.

            Ever heard of Itta Bena , Mississippi ? Or Isola , Mississippi ? Or Browns, Alabama ? Probably not. But real people live in small southern towns like these — towns where jobs in the catfish industry count. They haven’t done anything wrong.

            But neither have the Vietnamese. While the U.S. Commerce officials have played bureaucratic games, some experienced American journalists have gone to the Mekong Delta to find out what is really going on with Vietnamese men and women in the budding catfish industry.

Vietnamese risk takers

Take Nguyen Hoang Kha. Veteran Los Angeles Times’ reporter David Lamb found Kha in Long Xuyen. Kha sold his small construction business and invested in catfish farming. In this, he was encouraged by the U.S.-Vietnam bilateral trade agreement to trust his fortunes to free markets. That brave decision lifted the Vietnamese entrepreneur out of poverty, Lamb reported. “I did all this without a bank loan and with a lot of hard work,” Kha told the American journalist. “But it is mine, not the government’s. If it goes well, I benefit. If it goes badly, I lose money. It is a risk I am willing to take.”

            Another American reporter seasoned by years in Asia , Seth Mydans, reported in the New York Times that one of the victims of a cut in American catfish imports would be Mekong Delta fishermen like 42-year-old Nguyen Van Dam. “His production costs are lower than those of American fishermen, he said, because Vietnamese labor is cheaper and because the flowing water of the river washes the fish,” Mydans wrote.  

            Margot Cohen of the Far Eastern Economic Review tracked down 60-year-old Truong Huu Duc in An Giang Province. This man sold his rice fields and risked his life savings to get into catfish farming, and now could be taxed out of business by Uncle Sam. He’s done nothing to deserve this.

            Cohen also spoke with a Vietnamese woman who buys her high-protein catfish feed from Cargill. Here’s how Cohen described the encounter: “A Cargill cap is perched on the head of Nguyen Ngoc Duyen as she surveys her squirming stock in a floating cage in the Hau Giang River . Duyen believes that anyone who can produce good quality at a cheaper price deserves customer loyalty — that’s why she uses American-brand Head and Shoulders shampoo to wash her hair. But now that the U.S. won’t be returning the favour, she may drown in debts of 820 million dong ($54,373). She used the loan to build and stock her seven floating cages — once the symbol of a more buoyant future.”

            When the ITC rules for the Catfish Farmers of America, who would like to explain to these Vietnamese that they have been giving Americans their catfish at prices up to 64 percent less than it cost them to raise and process those fish? Who would want to explain that to come up with such an absurd calculation, U.S. Commerce officials cooked the books. As I reported in detail in February, for example, to calculate the costs of water in Vietnam, Commerce reported that “we used data reported as the average water tariff rate for four cities in India as reported in the Asian Development Bank’s Second Water Utilities Data Book: Asian and Pacific Region published in 1997.” Even if it wasn’t already ridiculous that “non-market economy” Vietnam was transformed into India , the economic data from 1997 was five years before the antidumping petition was filed.

            The Vietnamese government already has learned why their antidumping margins deserve little credibility anyway. Their source was Commerce official Joseph Spetrini, who shocked Vietnamese officials last December by telling them that in crunching the numbers to come up with antidumping margins, he had “options.” Depending upon how he crunched the numbers, Spetrini said that those options ranged from taxing Vietnamese catfish at perhaps a prohibitive 50 percent, or perhaps 100 percent, or perhaps as low as 15 percent. This is bureaucratic corruption, and the Vietnamese know it (even if the U.S. Congress doesn’t).

Americans vs. other

Americans

If you dig a little deeper, the imposition of antidumping duties also pits American catfish interests against the interests of other Americans. Like American and Vietnamese catfish people, these Americans also haven’t done anything except go about their businesses, taking risks in the hope of profit.

            Certainly, Wally Stevens hasn’t done anything wrong when he has bought Vietnamese catfish. Stevens is president and chief operating officer of Slade Gorton & Co., which sells more than 100 million pounds of fresh and frozen seafood products to foodservice and retailers throughout the United States . Concerned over protectionist trends in his industry, Stevens is also chairman of the American Seafood Distributors Association. ASDA members include major restaurant chains like Darden, and other major distributors, retailers, warehouses and trucking companies.

            “Our members are extremely concerned about the protectionist threats that we are now seeing, particularly in regards to Vietnam and the seafood products that Vietnam is exporting to the U.S. market,” Stevens told the ITC in a prepared statement last month. “Today, it is catfish. Tomorrow, we fear that we will stand before you talking about shrimp — from Vietnam, China, Indonesia, Ecuador, Mexico, and from subtropical countries all over the world.”  

            Another innocent bystander who would be hit by high taxes on Vietnamese catfish is Richard Catanzaro, who is the director of seafood marketing and procurement for the H-E-B grocery chain that employs more than 55,000 people and 300-plus stores in Texas , Louisiana and Mexico . “Vietnamese seafood exports to the U.S. (and seafood exports to the U.S. from a variety of countries around the world) simply do not pose a threat to the US . Seafood industry,” Catanzaro wrote to ITC Chairwoman Deanna Tanner Okun on June 6. “On the contrary, these products have been a great addition to the domestic seafood marketplace.”

            The H-E-B executive also reminded Okun that it was unfair for the government to ask consumers to pay the price of higher taxes on imported seafood: “U.S. grocery store chains (and a variety of other businesses across the country) are now relying on the growth and improved competitiveness seen in the international seafood industry over the last several years to support what can only be described as ‘extreme’ U.S. consumer demand for a wide range of quality seafood products.” 

            Some of those American consumers live in catfish country. While the residents of Itta Benna , Mississippi might like the idea that other Americans will pay higher prices for their catfish, how much money would consumers in Itta Benna like to take out of their pockets and fork over to support the lifestyles of Americans in other parts of the country who have obtained trade protection?

            People in towns like Itta Benna are already paying more than they should have to for the clothes they buy, the orange juice they drink, the sugar they put on their cereal, their peanut butter, the steel that goes into their cars and refrigerators, the lumber they buy to build their homes — to name just a few of a long list of domestic protectionist schemes. Without realizing it, every time these American consumers turn around they are taxed in the form of higher prices for protected products. These hidden taxes are supposed to bring “fairness” to the marketplace, but they are anything but fair.

            Who wouldn’t sympathize with the plight of Americans who work in the catfish industry, and have suddenly found themselves to be at a competitive disadvantage with Vietnam ? Who wouldn’t want to reach out to them? The siren call of protectionism is always alluring.

            But when the government gets in the business of bailing out troubled industries, where does it stop? In every one of these antidumping cases, more people are hurt economically than helped. When should the broader interests of the American economy take precedence? And what about the injustice done to Vietnamese catfish entrepreneurs who have only done what Uncle Sam has asked them to: compete?

            Easy questions to ask. It’s the answers that are hard, at least if you can imagine trying to explain what’s really going on to the innocent people who get hurt in these antidumping cases.

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