As if Thailand didn’t already have enough troubles, now comes an influential U.S. congressman who wants to attack one of the bright spots in the Southeast Asian nation’s economy: its thriving seafood-exports. Last year, Thai exports of canned tuna to the U.S. reached $360 million, a 19 percent increase from 2008, according to the UN’s Food and Agriculture Organization. In the view of Rep. Eni Faleomavaega, this is “unfair” trade that deserves to be rolled back with stiff U.S. anti-dumping tariffs. Faleomavaega is a Democrat who represents the U.S. territory of American Samoa. While he doesn’t get a vote, the lawmaker is nevertheless a force to be reckoned with. Known for his gregariousness, Faleomavaega once told the Comedy Channel’s Stephen Colbert that “I tattoo my butt,” explaining with a grin that he was only conforming to Samoan cultural traditions. More importantly, Faleomavaega chairs the House Foreign Affairs Committee’s subcommittee for Asia and the Pacific. Educated at Brigham Young University, Faleomavaega earned a law degree from the University of Houston. He has important friends on the Hill, including fellow Mormons like Sen. Majority Leader Harry Reid (D-NV) and Utah Republican Orrin Hatch, a senior member of the powerful Finance Committee which has jurisdiction over trade.
It’s not that the gentleman from Pago Pago has evidence that the Thais are guilty of anything other than being very good in competing in the global tuna trade. Far from it. But Faleomavaega does have ample evidence that the tuna industry in his American Samoa — a dot in the South Pacific, about half-way between Hawaii and New Zealand — is collapsing and has no viable future. Canned tuna has long been the backbone of American Samoa’s economy. The other half of the territory’s economy is comprised of various forms of federal welfare dispensed by the U.S. government, the largest employer in Pago Pago. The federal largesse includes generous tax breaks, hurricane disaster-relief monies, Medicaid, Nutrition Assistance Block Grants, and so on. “[T]he tuna canneries and federal financial aid accounted for virtually all of the economic growth in American Samoa between 1975 and 2005,” according to a 2008 report submitted to the American Samoa government by U.S. consultant Malcolm McPhee. The territory’s annual per-capita income of about $8,000 is “about one-fifth the US average,” McPhee noted. “American Samoa has the lowest per capita income in the entire US system including 3141 counties, 50 states and the other US territories.”
American Samoa’s poor performance illustrates that bad economic policies — in this case, so obviously bad that they would be quickly understood and discredited in any Econ 101 classroom — have consequences. Beyond the basic economics lessons, American Samoa’s unfortunate economic plight has ramifications that go far beyond remote South Pacific fishing grounds. The fight over tuna tariffs and access to U.S. markets is being closely watched by other important U.S. trading partners from Asia to Latin America. For those who study tuna tariffs, national security issues are never far from the surface. Muslim tuna workers in the southern Philippines, for instance, have long protested that they have been disadvantaged because Uncle Sam gives preferences to otherwise uncompetitive American Samoans that are withheld from Filipinos. And diplomats from Ecuador have stressed to U.S. officials in recent years that the tuna trade is an important national security priority for them — one alternative to narco-trafficking. Charlie the Tuna is a political fish — swimming in seas where economic favors granted or withheld can affect bottom lines, not to mention real lives in global tuna canneries.
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The story of how American Samoa has landed in troubled economic waters further illustrates a lack of vision in Washington, D.C. The U.S. government has long acknowledged its moral responsibility to help American Samoa, a territory of some 66,000 people which as recently as the 1960s basically had only a subsistence economy. But over the last half-century, instead of preparing the traditionally-inclined Samoans to integrate themselves into the global economy, Washington has encouraged them to hide from it.
Pago Pago’s private sector — basically, the tuna canneries — has been living on an economically toxic combination of high tariffs and an unsustainable minimum-wage structure as mandated by the federal government. The high tariffs have been aimed at giving American Samoa — which enjoys duty-free access to the U.S. marketplace — a competitive edge over neighboring tuna-exporting countries like Thailand, the Philippines, and Indonesia, which are subject to the tariffs. I’ll explain the minimum-wage structure shortly — for now, suffice it to say the driving idea was to keep the minimum wage in Pago Pago low enough to permit the Samoans to pull cannery jobs away from the U.S. mainland and Puerto Rico, which they did. (Nobody in official Washington, it seems, has ever considered letting the Samoans set their own minimum wage.) But what Washington gives, it can also take away, a painful lesson that the Samoans are now learning. So when Rep. Faleomavaega protests that the federal government has put his constituents between the proverbial rock and a hard place, he knows what he is talking about. Whether the congressman knows what to do about the problem is more debatable.
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A few hard numbers highlight the decline of the canned tuna industry in American Samoa. In 2007, the U.S. Congress passed legislation aimed at raising American Samoa’s minimum wage from $3.26-per-hour by 50 cents every year until it reaches $7.25, the same level as the U.S. mainland, in 2014. Currently, American Samoa’s minimum wage is at $5.26. The territory’s two tuna canneries, which apparently had been losing money even before the congressional move three years ago, have reacted predictably.
Chicken of the Sea, which had been operating in American Samoa for a half-century, has shut down its Pago Pago cannery, moving some 2,000 workers to other tuna exporting nations like Thailand, where workers are still paid less than $1 per hour. Starkist dropped plans to produce tuna in pouches in the territory, which would have added 300 new Samoan jobs. Now, Starkist’s cannery in Pago Pago, which had employed some 3,000 workers two years ago, is down to about 1,800 — and rapidly falling, as the company now plans to phase out another 600- 800 jobs by the end of this year, leaving perhaps a core of 1,000 to 1,200 workers. No matter how one crunches those numbers, to American Samoa, such job losses constitute real economic pain.
Rep. Faleomavaega blames “unfair” foreign competition and accuses Starkist’s two major competitors of being “un-American.” Both Chicken of the Sea and Bumble Bee, Faleomavaega has complained, “have adopted a business model of exploiting cheap foreign labor to clean their fish while employing skeletal crews of 200 employees or less in small U.S. operations in Georgia, Puerto Rico, and California to package the final product.” Faleomavaega has asked U.S. Secretary of Commerce Gary Locke to slap on punitive tariffs on canned tuna exports from Thailand. The congressman’s main target is Thai Union, which owns Chicken of the Sea.
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Faleomavaega, like many other U.S. lawmakers who see their constituents thrust into desperate economic conditions, is looking to pick up the nearest available economic weapons. First, he is pressing for $25 million in taxpayer-financed subsidies aimed at helping Starkist, which runs the only cannery left in Pago Pago, compete with its major rivals in global markets. While no tuna company was willing to be interviewed for this article, Chicken of the Sea and Bumble Bee have quietly complained that such a legislative bail-out for Starkist would be the classic example of a special-interest law written to benefit only one company.
Faleomavaega contends that the anti-dumping tariffs would help save American jobs
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If Commerce Secretary Locke and the Obama White House would target Thailand’s tuna exports, surely this would be one of the strangest anti-dumping actions ever. This is because while the anti-dumping laws are designed to help protect American jobs, in this case, it’s not clear who the real Americans are. Starkist’s Charlie the Tuna, while a true American icon, might be a tad confused these days as to his real nationality.
Starkist is Korean-owned. While its headquarters remain in Pittsburgh, and the company employs about 70 Americans in the United States, Starkist is owned by Korea’s Dongwon Industries Co., Ltd. It is unlikely that Starkist — which also exports considerable canned tuna to the U.S. from its operations in Thailand — would support the imposition of anti-dumping tariffs on that country.
Starkist’s workers in American Samoa could petition for anti-dumping tariffs on behalf of the U.S. tuna industry. But mostly, these workers are foreigners. According to the previously-noted 2008 report to the American Samoan government by consultant Malcolm McPhee, “80 percent of the employees in fish processing are foreign workers,” many from the neighboring independent nation of Samoa, where wage rates are several times lower than in Pago Pago. (Even the American Samoans who work in the Starkist cannery are U.S. nationals, not U.S. citizens.)
Meanwhile, rivals Chicken of the Sea and Bumble Bee actually have operations in the U.S. proper. But in the eyes of the bureaucrats in the U.S. Commerce Department who administer the trade laws, the Starkist competitors might not be considered parts of the American tuna industry. Even though Thai Union’s Chicken of the Sea has opened a $20 million canned-tuna facility in Lyons, Georgia, which directly employs some 200 Americans, for purposes of the domestic anti-dumping laws these employees could be excluded from the definition of the American tuna industry. It’s not just that they are foreign-owned, but that their jobs depend upon putting imports of processed tuna into cans. While international trade lawyers are paid the big bucks to fight over such questions, there is a legal argument that those workers in Lyons, Georgia should not be considered part of the American canned tuna industry.
Even Bumble Bee, which is American-owned and employs a few hundred domestic tuna jobs in southern California and Puerto Rico, might not be considered “American” enough in anti-dumping litigation aimed at Thailand. Bumble Bee imports tuna loins from foreign countries like Fiji, and also has tuna operations in Thailand.
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Enter the minimum-wage part of the story. The reason the foreign workers were attracted to American Samoa in the first place is that wages there are higher than anywhere else in the Polynesian neighborhood. As consultant McPhee observed, those workers came to Pago Pago “in search of higher pay.” Over the years, they were encouraged to do so by the U.S. Congress, which gave U.S. tuna canneries a viable economic incentive to shift production to Pago Pago.
For several decades, the U.S. government set the minimum wage lower for American Samoa than for other U.S. territories and the mainland. A U.S. Department of Labor Department document published by the wage and hour division (available online) explains the economic reasoning in a chart with some telling numbers. In 1974, the minimum wage for cannery workers in Puerto Rico and on the U.S. mainland was $2.00-per-hour, compared to $1.42 in American Samoa. At the time, Puerto Rico and the U.S. mainland each employed 6,000 cannery workers, compared to 1,200 for American Samoa. There were eight tuna canneries in California.
By 1987, the jobs had begun to shift to American Samoa. The minimum wage in Puerto Rico and on the U.S. mainland was then $3.35, compared to American Samoa’s $2.82. There were 1,000 cannery jobs on the mainland, and another 8,000 in Puerto Rico that year — and 5,100 in American Samoa. By 2001, the American canneries had all fled the United States mainland and Puerto Rico for American Samoa and other lower-wage countries — except for two surviving Bumble Bee operations, one in California, and one in Puerto Rico.
By 2002, the minimum wage was $5.15 in Puerto Rico and the U.S. mainland, American Samoa’s was $3.26 — and there were 5,133 tuna jobs in Pago Pago, compared to a few hundred in Bumble Bee’s two largely-automated canneries in California and Puerto Rico. Now, with Chicken of the Sea’s new cannery in Georgia, there is a third.
An note to the aforementioned chart sums up the fundamental economics at work. Having a lower minimum wage than the U.S. mainland and Puerto Rico “made American Samoa a more attractive location to process tuna due to the cost benefits associated with lower labor costs and duty-free status on canned tuna,” the Labor document explains. “Thus, between 1974 and 1998, American Samoa’s tuna processing employment as a percent of the U.S. total has gained by a multiple of eight times, while the mainland and Puerto Rico employment have been drastically reduced.”
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The federal government also found a way for American Samoans to get around the fact that their higher wages put them at a competitive disadvantage with their low-wage neighbors in the Pacific: tariffs.
While American Samoa, as a U.S. territory, enjoys duty-free access to the United States, tariffs for other tuna exporters like Thailand, the Philippines and Indonesia average about 9 percent (depending upon whether the tuna is packed in water, or oil). But in recent years Pago Pago’s tariff advantage is not what it once was, as Congress has also given some other countries the same duty-free access to U.S. markets. The most economically significant of these is Ecuador. Starkist — which was thinking of hiring more American Samoans to package tuna in pouches — now exports to the United States tuna packed in pouches by some 2,500 workers in Ecuador. (Bumble Bee’s tuna that is canned in the USA is made from loins that are processed in low-wage countries like Fiji. By contrast to canned tuna, loins are virtually duty free when they enter the United States.)
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The bottom line: American Samoans are a people with a proud culture. Rep. Faleomavaega rightly boasts that many of his constituents have served with distinction in the U.S. military. They have long been assured by the U.S. Congress and the federal government in Washington that their needs would be taken care of. But now, thanks to an unthinking U.S. Congress, the Samoans are facing the consequences of trying to live on an economic diet that is unsustainable in the long run. They have a right to feel betrayed.
There is an answer, but it has nothing to do with the prospect of anti-dumping tariffs on Thailand — which would simply divert trade to the Philippines, Indonesia, and other tuna exporters who would stand to pick up any lost Thai business. That better answer is, most simply put: education.
While American Samoa will never be a Singapore, the Samoans could be helped to develop more of what economists call their “human capital.” Diana Furchtgott-Roth, a former chief economist at the Labor Department and now a senior fellow at the Hudson Institute, points out that thanks to a fiber-optic cable that links American Samoa to the U.S. mainland, Samoans might be trained to work in call centers. An even better idea, Furchtgott-Roth notes, would be to become a viable center that would attract students from the Pacific area for much-needed medical education: nurses, dental assistants, occupational therapists — and why not doctors? “American Samoa could be the health education hub of the Pacific — one giant community college, producing excellent jobs,” Furchtgott-Roth reasons.
Alas, such well-intended and creative suggestions aimed at fostering a more entrepreneurial-minded culture in Pago Pago have not been received with much enthusiasm on Capitol Hill. Nor has the Obama administration shown much interest in doing anything about a minimum-wage structure that continues to encourage Charlie the Tuna to swim away from Pago Pago.