Monday, March 18, 2013

The fair price of catfish in Vietnam

Source: Wikipedia
Another fish story.  In recent news, our Federal Government is now taking on the "fair price" of catfish in Vietnam, and imposing large "anti-dumping" tariffs. Can the price of tea in China be far away?

Lovers of free markets and free trade, this is for you. Fry it with a little hot sauce.

Who gets hurt here? US catfish consumers. Who is that? Hint: catfish isn't on the menu in fancy Washington DC restaurants, or even at Spiaggia here in Chicago.

Well, I'm glad we can come to bipartisan agreement -- Republican Congressemen and Senators, and the Administration's trade apparatus -- to take money out of the pockets of relatively poor catfish consumers.

I'm interested in the language and rhetoric that we use to describe economic policy.  I highlighted some particularly interesting words and phrases (all emphasis mine.) 

Press release from Senator Jeff Sessions:
Commerce Department Will Enforce “Fair Value” Pricing, Protect Alabama Catfish Industry Following Letter Organized By Sessions Thursday, March 14, 2013

WASHINGTON—U.S. Sen. Jeff Sessions (R-AL) commented on a decision today from the Commerce Department regarding the need to protect Alabama’s catfish industry from unfairly priced Vietnamese imports and non-market economies. Sessions organized a bipartisan letter to the Commerce Department to urge them to take action.

“Domestic production and fair value pricing are essential aspects of a sound economy. [JC: "fair value pricing?"] I am very encouraged by the findings of the Commerce Department’s 8th Administrative Review. This decision is a step in the right direction to protect US workers and our catfish industry in Alabama. [JC: What happened to the US catfish consumer?] The dramatic catfish production decrease over the last decade can be directly attributed to unfairly priced imports, leaving our local catfish farms at risk. The Commerce Department’s decision to use Indonesia as a surrogate country for Vietnam helps correct unfair competition and ensures that jobs and industry in our state are protected. [JC: well, there you have it. The goverment's job is to "protect industry."]  By enforcing our nation’s trade laws, and fostering an environment that requires healthy competition, I am confident that our local catfish farms will again be a market leader.”

BACKGROUND: On February 7, Sessions organized a letter signed by Senate colleagues, Richard Shelby, Thad Cochran, Roger Wicker, Mark Pryor, John Boozman, David Vitter, and Mary Landrieu regarding the 8th Administrative review, from the Department of Commerce, determining “fair value” pricing for Vietnamese producers’ frozen fish fillets. The Department of Commerce uses surrogate countries to determine the fair value of products for non-market economies. In previous reviews, the Department of Commerce has used Bangladeshi data to set the market price for the Vietnamese producers’ fish fillets despite industry proposals for a surrogate nation with higher quality data available, such as the Philippines or Indonesia. The Bangladeshi prices range from $0.29/lb-$0.43/lb whereas the U.S. price is about $0.80/lb. The lower rates have had significant negative effects on the US market and this continued approach would bolster the volume of Vietnamese frozen fish fillets to the detriment of the United States industry.

Today, the Department of Commerce announced that Indonesia would be used as a surrogate country for Vietnam to best calculate the price per pound of frozen fish fillets. This decision helps ensure that Vietnamese production will be subjected to appropriate and reasonable standards and that domestic catfish producers will not be victims of unfair pricing.
Congressman Rick Crawford:
Washington, Mar 14 -

Today, Congressman Rick Crawford (R-AR) welcomed news for the U.S. Catfish industry after the Commerce Department issued their final results of the 8th Administrative Review of the antidumping duty order on Certain Catfish Filets from Vietnam. The results indicate that Vietnamese catfish will face fair antidumping duties when imported into the domestic U.S. market.  For years, the Commerce Department has been unfairly assigning a near-zero antidumping duty on Vietnamese Catfish, which has led to unfair competition, and a flood of Vietnamese imports. Since 2008, Vietnamese imports of catfish fillets have tripled, and have taken nearly 80 percent of the domestic market. The Department decided to switch from a Bangladeshi surrogate value to Indonesian price index for calculation of antidumping duties...

Crawford issued the following statement after hearing the welcome news:

“For too long, the Arkansas catfish industry has faced unfair competition from non-market economies, such as Vietnam. I am pleased to hear that the Commerce Department heeded my call to assign a fairer price calculation to the value of Vietnamese Catfish. This is a win for the U.S. Catfish industry and the Delta region in the First District of Arkansas. [JC: and noticeably not a win for US catfish consumers] I am confident that the Commerce Department’s decision to fairly enforce our trade laws is a great first step towards a U.S. catfish industry recovery that will create jobs and grow the Delta economy.”
Maybe we should feel a bit sorry for Sessions and Crawford. At least other senators get to lobby for real money, like bank bailouts.

The Department of Commerce memo is worth reading too. Sometimes it's worth seeing just what goes in to our Federal sausage
The product covered by the order is frozen fish fillets, including regular, shank, and strip fillets and portions thereof, whether or not breaded or marinated, of the species Pangasius Bocourti , Pangasius Hypophthalmus (also known as Pangasius Pangasius ), and Pangasius Micronemus .
Frozen fish fillets are lengthwise cuts of whole fish. The fillet products covered by the scope include boneless fillets with the be lly flap intact (“regular” fillets ), boneless fillets with the belly flap removed (“shank” fillets), boneless shank fillet s cut into strips (“fille t strips/finger”), which include fillets cut into strips, chunks, bl ocks, skewers, or any other shape. Specifically excluded from the scope are frozen whole fish (whether or not dressed), frozen steaks, and frozen belly-flap nuggets. Frozen whole dressed fish are beheaded, skinned, and eviscerated. Steaks are bone-in, cr oss-section cuts of dressed fis h. Nuggets are the belly-flaps. The subject merchandise will be hereinafter referr ed to as frozen “basa” and “tra” fillets, which are the Vietnamese common names for these species of fish.
It goes on like this for 54 mind-numbing pages. A random excerpt
Bangladesh is a significant producer of identical merchandise pangasius hypophthalmus
...The production experiences of pangasius producers in Bangladesh replicates those of the Vietnamese respondents in that produce pangasius through commercial pond-based aquaculture. This directly implies that the cost of production, related expenses, and revenues for pangasius farmers in Vietnam and Bangladesh are very similar.

In Indonesia, only 70 percent of the 2011 pangasius production is from ponds, and the record is unclear as to what proportion of the Indonesian pond based aquaculture production is accounted for commercial-based pond aquaculture as opposed to homestead-based pond aquaculture.
The life of a planner is a hard one.

I do feel for the producers. I hope someone knowledgeable will write in, answering the question: what else can you do with a catfish farm? Is it possible to change from catfish to, say, genetically engineered salmon? Trout? Caviar sturgeons? Usually when low-price low-quality competitors appear (and frozen catfish from Vietnam is clearly that), the answer for a domestic producer (if Congress doesn't protect it) is to change to high-value skill-intensive products. 


  1. Isn't it a conflict of interest for bottom feeders to be regulating other bottom feeders?

  2. It's possible that some "protection", even from fairly priced foreign imports is proper government policy. If U.S. catfish industry labor and capital adjustment costs are large, then given a shock such as introduction of foreign sourced catfish, the optimal policy could be short-term protection that phases out. This allows time for reallocation to take place. Of course in a one-period optimization this wouldn't be true.

    1. Oh please....Yes, sure, that's what they were thinking. Do you think this will ever be phased out?

    2. Shri: Would you say the same if catfish consumers simply had a change of taste - say, came to substitute much more pork in their diets for catfish? Would you say "If U.S. catfish industry labor and capital adjustment costs are large, then given a shock such as a change in consumers' preferences - specifically, a shrinkage in consumer demand for catfish - the optimal policy could be short-term protection that phases out."

      If you agree with me that government protection of U.S. catfish farmers under such a scenario is unwise, why do you think such protection is wise if the reduction in consumer demand for U.S. catfish is the result of lower-priced catfish from Vietnam?

  3. "... include fillets cut into strips, chunks, blocks, skewers, or any other shape."

    It seems like, "fillets of any shape," would have sufficed.

    1. James, you can't get to 54 pages with that kind of common sense! C'mon now.

  4. Well, anti-dumping duties expire after five years. After that, a new petition has to be filed. But don't fret over the resource cost of lawyers yet: By then, foreign producers will have raised their prices, obviating the need to file another petition!

    The US government acts as a cartel manager, but only if some of the cartel member reside abroad.

    If Microsoft had had overwhelmingly foreign competitors, the US government would have acted differently.

    1. "After that, a new petition has to be filed."

      No. The duties can be extended rather than re-imposed. For example, duties on ball bearings from Japan and England ran from 1989 to 2011. For a long time the United States was accusing that notorious low wage producer Sweden of dumping ball bearings. Then there is the continuing harassment of Canada's lumber because the American industry thinks that it is unfair that Canada has so much land that is not good for anything except for growing pine trees.

  5. what else can you do with a catfish farm? Is it possible to change from catfish to, say, genetically engineered salmon? Trout? Caviar sturgeons?

    Depends on the kind of system they raise the catfish in. catfish are bottom feeding muck loving kinds of fish compared to salmon and trout and sturgeons.

    so if you look at the large scale farms, you may notice that they mostly are converted rice paddies. large rectangular ponds in a patchwork... flooded paddies...

    trout farms are more complicated, because they simulate a stream. a constant flow of water. so rather than flooding your back yard, throwing fish in, and using some of that corn that you grew all season for the west (as in Indonesia where i go to visit family i now belong to), and didn't get the promised prices for.

    salmon farms tend to be large pens in open waters, or large bodies of water. and they kind of have piers that people walk to tend them.

    sturgeon (a particularly ugly fish) is also a kind of muck lover, and could be in similar pens... except for their size... sturgeon get real big, catfish not so much...

    so the catfish places will probably go back to growing rice...
    or, the shock and drop in prices may start a small domestic industry

    what i think will happen is that they will instead process the catfish, and then have them turned into things like fish patties and sticks. with the rest ground up and used as meal to feed the fish (with corn).

    and ultimately over time, the populations earning money now and expanding, will eventually get bored and want to try new things

    thanks for letting me make some use of the tons of stuff i know that has no real use... :)

  6. Poked around the commerce dept. memo, and found the word "complicated" only once, in perhaps the key sentence: "[P]roviding parties with a range of countries with varying GNIs is reasonable, given that any alternative would require a complicated analysis of factors affecting the relative GNI differences between Vietnam and other countries which is not required by the statute." I wonder why they would think firms from countries with similar incomes would have the same production costs.


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