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04 May 2008

US 'catfish war' defeat stings Vietnam

HO CHI MINH CITY - Vietnamese exporters and officials are still smarting from an unfavorable ruling on the country's huge catfish exports to the United States - and the painful lessons it teaches when it comes to the perils of freer trade and a market economy. A week after Vietnam lost what has been called the "catfish war" between the country and the United States, strong protests continue to spread across Vietnam, not just among business people and officials but also in local media. "It's totally unfair and does not reflect the objective fact," said Phan Thuy Thanh, spokeswoman for Vietnam's foreign minister. "The application of unfair protective barriers to Vietnam's tra and basa catfish exports to the US over the protest of public opinion - including American opinion - shows the increasing tendency to protect domestic production in the United States." She was reacting to the July 23 ruling by the US International Trade Committee (ITC), which found that the importation of Vietnamese catfish had caused losses to the US market, and subsequently imposed higher tariffs on imports from Vietnam. In recent years, the United States has become the biggest importer of Vietnamese catfish, importing 13,000 tonnes valued at US$38.3 million in 2001. The figure increased to 18,300 tonnes, worth $55.1 million, between January and November 2002. The ITC's ruling, made after a 40-second vote, clears the way for the slapping of stiff duties - 37-64 percent and retroactively - proposed earlier by the US Department of Commerce. Before the lawsuit, catfish import duties were just 5 percent. Last month, the US Commerce Department itself ruled that Vietnamese fillets have been "dumped" or sold in the US market at unfairly low prices. The new tariffs will come into force by July 30, 2003. "It's not us but them that are unfair," the chairman of Vietnam's Association of Seafood Exporters and Processors (VASEP), Nguyen Huu Dung, said of the US catfish farmers and the government. Since the start of the "catfish wars" in 2002, VASEP has maintained that Vietnam's catfish exports are cheaper than US products because of cheaper labor and feed costs. At the core of the issue is resentment by US catfish farmers and processors, represented by the Catfish Farmers of America, who complained that Vietnam had captured 20 percent of the $590 million market for foreign catfish fillet by selling at prices below the cost of production. TCFA lobbied the US Congress to declare that out of 2,000 catfish types, only the US-born family named Ictaluridae could be called catfish. Vietnamese producers had to market their fish in the United States by using the Vietnamese terms of basa and tra. Later, US commerce officials initiated an anti-dumping case against Vietnamese catfish and declared Vietnam a "non-market" economy, one where the government seeks to determine economic activity largely through central planning, instead of market forces. The ITC last week followed suit, voting that the US catfish industry was hurt by Vietnam's unfair competition. For Vietnamese officials, the catfish issue shows how tough the going can get in the area of the free market, more than a decade after the country went down the road of doi moi or economic renovation. The ITC's ruling proves that "a small group of US catfish farmers could create pressure, forcing US public servants to distort truth and present falsified evidence, to apply trade protectionism, despite the so-called 'trade liberalization and fair competition' that US politicians often preach", Dung said in a VASEP statement. The statement quoted market analysts and economists from the US Precision Economics LLP and HM Johnson and Associates as affirming that imports of Vietnamese frozen catfish did not cause material harm to the US catfish industry. Andrew Forman, president of Infinity Seafoods Inc of Franklin, Massachusetts, and an importer of Vietnamese catfish, said the new tariffs are unfair and will not solve the problems US catfish farmers have been facing. "It is basic supply and demand," he said.For Vietnam, the new tariffs will cause lots of hardship, officials say. "The unfair ruling will create difficulties for thousands of catfish farmers and workers, as well as the catfish industry," Dung said. Some half-million Vietnamese live off the catfish trade in the Mekong Delta. Already, the catfish dispute has pushed down prices at An Giang province - the biggest producer of catfish in the delta - and threaten the livelihoods of thousands of farmers. Already, Prime Minister Phan Van Khai has called on traders to buy Mekong catfish at higher prices to help farmers. Vice Minister Nguyen Thi Hong Minh proposed that traders seal contracts with producers and assure them that they will buy their products at a minimum price of VND9,000 (56 US cents) a kilogram. Already, the Ministry of Fisheries has forecast that the dispute on Vietnamese catfish would affect the country's exports this year. It forecast that Vietnam's catfish exports to the United States would reach just $20 million this year, compared with $55 million in 2002. "Our error in the past few years was to focus too much on the US market. The Bilateral Trade Agreement makes us look through rose spectacles and forget the ill-fated side of that giant market," Dung said. "We should have studied the market thoroughly and known the rules of the game better." Indeed, "the fate of Vietnam's catfish offers a warning to poorer nations short on leverage in the world trading system: beware of what may happen if you actually succeed at playing by the big boys' rules", said a New York Times editorial on July 22. Nevertheless, an optimistic Dung says there is a bright side: the "catfish wars" helped promote basa and tra catfish on the world market. VASEP vice chairman Ngo Phuoc Hau supported Dung's assertion. He said Vietnamese catfish exporters and producers either have to raise US catfish or develop processing plants inside the United States, just as Japanese auto makers did successfully in the 1960s and 1970s. Seafood exporters have also been scouting new markets such as France, Russia, Canada, Sweden, Britain, Australia, China and Hong Kong. At the same time, Fisheries Ministry officials are busy reminding seafood exporters to watch out for another pending lawsuit in the United States - this time, against shrimp exports from Vietnam and other countries.

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