Catfish and Globalization

What can we learn about globalization and global trade by zeroing on a common bewhiskered bottom-feeder?

November 15, 2003

What can we learn about globalization and global trade by zeroing on a common bewhiskered bottom-feeder?

The Vietnamese should count themselves lucky. Americans — who are among the world's largest coffee consumers — grow almost none of their own at home.

Without Americans' love for caffeine, Vietnam's efforts to become a global powerhouse in coffee exports would have surely come to naught.

Well, if U.S. coffee growers existed, the U.S. government — based on ample precedents in areas such as oranges, sugar and cotton — would have rushed to their aid and imposed huge tariffs on cheap Vietnamese coffee beans.

However, with no U.S. coffee bean farmers to protect, Vietnam continues to grow and export coffee in huge quantities to American coffee drinkers.

Until recently, the same could be said of a more esoteric food variety, catfish fillets. Frozen catfish fillets have seen a revival of consumer interest in the United States.

In part, this is the result of all the publicity about the health risks of red meat — and the use of hormones and antibiotics in commercial poultry farming.

Vietnamese catfish farmers spied an opportunity to make a few bucks — and started to export their product to the United States.

Not surprisingly, imports of Vietnamese catfish have caused the fish’s price to fall in the United States. In due course, Vietnamese imports captured about 20% of the $600 million per year U.S. catfish market.

It also displaced domestic producers located mainly in such states as Louisiana and Mississippi.

Vietnam is, of course, one of the world's poorest nations, with its per capita GDP measuring a dismally low $400 a year.

On the other hand, thanks to its low wages, Vietnam enjoys a considerable competitive advantage — and should therefore benefit from the expansion of its international trade. This is, in fact, precisely what the government in Hanoi has been trying to do.

In early 2002, it signed a free trade deal with the United States, abolishing punishing tariffs that had been in effect on Vietnamese goods since the end of U.S. engagement in Indo-China in the 1970s.

At first, catfish farming seemed to be a great industry in which the Vietnamese could pull themselves up by their bootstraps.

Cheap labor, vertical integration and favorable farming conditions in the Mekong Delta seemed to give Vietnam an edge in the competitive global marketplace.

Besides, aquaculture has been one of the most promising fields of food production in recent decades. For example, during the 1990s, the global fish farming industry was growing by around 11% per year.

Unfortunately for the Vietnamese, they did not reckon with the political power of U.S. fish farmers. On a big scale, catfish farming may be a small industry. The entire U.S. market amounts to around $600 million, but it has grown to such proportions with the help of the low prices of Vietnamese imports.

Even now, the industry employs just 13,000 U.S. workers, mainly unskilled ones earning the minimum wage. Despite downward pressure on prices, America's catfish farmers are clearly making enough in profits to pay for a powerful lobbying effort in Washington.

And that is how, believe it or not, the U.S. Congress passed a law in December 2001 banning the use of the word "catfish" to market any product except the indigenous North American variety.

The original English word was obviously invented to describe the bewhiskered European bottom-feeder. Since U.S. consumers can recognize a catfish even when they see one marketed under another name, Washington eventually decided to resort to more direct means.

With lobbying pressure from the domestic catfish industry continuing unabated, in January 2003 it slapped Vietnamese imports with a tariff — measuring up to 64%.

What is overlooked in all this is that the hounding of the Vietnamese catfish industry brings back dark memories of the Ku Klux Klan. Specifically, the Klan’s attacks on Vietnamese immigrant shrimpers along the Texas Gulf Coast in the late 1970s and the early 1980s.

Then, too, locals complained that the newcomers' industriousness and willingness to work for less created an unfair competitive advantage. Back then, white fishermen started by pressuring merchants not to sell the Vietnamese bait — and to raise the price they charged them for their boats.

They also lobbied the state legislature to restrict the issuance of new shrimping licenses.

When all that failed to deter the newcomers, the Texans resorted to violence, burning some Vietnamese-owned boats and harassing their owners.

You would expect the agencies of U.S. government and the mighty U.S. Congress to act in a more dignified manner and to have a global picture in mind when they make such decisions.

But apparently, all such considerations go by the way side when political influence becomes involved. After all, southern states in general have always wielded disproportionate power in Washington.

Whether or not U.S. and Vietnamese farmers feed worms to their catfish, the U.S. Commerce Department has certainly opened a whole new can of them while calculating the exact amount of tariffs to impose on Vietnamese catfish.

It came up with the figure of 64% because it decreed Vietnam to be a non-market economy. This creates a precedent to an enterprising U.S. manufacturer, for example, to bring a case against Chinese producers — who are, after all, also operating under an essentially unreformed Communist economic system.

What would millions of U.S. consumers say then?