July 2002
Seafood Business Magazine

By Greg Rushford

When politicians, not fishmongers, tinker with markets, watch out.

Just look at the tuna tiff. What began on Capitol Hill as a fight over money between two giant tuna companies , ConAgra's Bumble Bee and H.J. Heinz's StarKist Seafood Co. , threatens to distort the flow of global trade. It has also become a diplomatic issue that complicates two important U.S. foreign policy priorities: fighting the wars against narcotics and terrorism.

There is clearly enough money to fight over. American consumers buy more than $2 billion annually of packaged chunk light and albacore tuna. The canned tuna that Americans buy in supermarkets is taxed dearly (from 12.5 percent, packed in water, to 35 percent, packed in vegetable oil)

The tariffs , which are paid by importers and passed along to consumers , date to the olden days when Cannery Row sought protection from foreign competitors. But now that the canneries have moved offshore, there is no longer any economic rationale for the taxes. So tuna countries in Latin America and the Pacific now seek relief (with the exception of American Samoa, which exports duty-free to the United States because it is a U.S. territory and is lobbying to keep high tariffs on everyone else).

First, Washington agreed in 1993 to phase out Mexico's tuna tariffs under the North American Free Trade Agreement. Next, Caribbean countries like Trinidad & Tobago got the same deal under the Caribbean Basin Initiative. Now, in the Andean Trade Preference Expansion Act, the House of Representatives has (sensibly) voted to give Ecuador duty-free treatment also.

But the Senate , led by Sen. John Breaux (D-La.) , has refused to go along. In its version of the Andean trade pact, Ecuador won't get the tariff concessions. Breaux has been lobbied by Bumble Bee, which has figured out a way to work around high U.S. tariffs. Some 2,000 Bumble Bee tuna workers in Ecuador turn the fish into filets, after gutting, cleaning, and cooking them. The filets are then exported to Bumble Bee facilities in southern California and Puerto Rico, where they are canned (a job mostly performed by machines). The fillets are taxed upon entry into U.S. ports at a rate of only about 1.5 percent.

StarKist cans its tuna in Ecuador, and is taxed at the existing 12.5 to 35 percent range. If the Senate version of the Andean pact survives pending House-Senate conference negotiations, Charlie the Tuna will be in hot political water. Bumble Bee is in effect asking Congress: Don't tax us; tax Charlie.

StarKist, of course, is not happy that lawmakers would do that. Nor is Ecuador, which points out its cooperation in the war against narcotics. "This is not only a matter of economics," says Foreign Minister Heinz Moeller. "This is vital to our national security."

Meanwhile, important Asian tuna producers , who will be at a competitive disadvantage if U.S. tariffs favor only the Latin American countries, are asking the same questions. In Bangkok, officials point out that they also are helping the United States fight illicit narcotics. And Philippine President Gloria Arroyo has written to President George W. Bush, pointing out that some 17,000 tuna workers in Mindanao , a front line in the war against terrorism , are mostly Muslims. Arroyo asks why America would risk provoking an Islamic backlash by fixing tariffs to throw Philippine Muslims out of work.

Instead of tinkering with tuna tariffs for no justifiable reason, politicians in Washington might consider the advice that any fishmonger would surely offer. Cut all these tariffs. Let tuna markets alone.

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