The unmentionable fish

February, 2003: Publius

By Greg Rushford

Published in the Rushford Report

There was much to celebrate at a December 10 holiday reception held at the Vietnamese embassy in Washington , marking the first anniversary of the U.S.-Vietnam Bilateral Trade Agreement. As the end of 2002 neared, new foreign direct investment in Vietnam for the year was approaching $2.3 billion. In bustling Saigon alone, in response to Vietnamese legal reforms nearly 7,000 new enterprises had been established in the previous twelve months. Vietnamese exports to the United States had more than doubled; and U.S. exports to Vietnam had shot up 30-some percent, with the total two-way year’s trade involving more than $2 billion.

            Of course, we won’t talk about problems like “special seafood,” remarked Ambassador Nguyen Tam Chien with a knowing diplomatic smile. Virginia Foote, president of the U.S.-Vietnam Trade Council, remarked wryly that it would not be polite for her to mention “the unmentionable fish” in distinguished company.

            The special, unmentionable fish is the Vietnamese catfish. And the Vietnamese sure weren’t celebrating on January 27, when Assistant Commerce Secretary for Import Administration Faryar Shirzad announced his intention to hit Vietnamese catfish with prohibitive antidumping tariffs ranging from 38- to 64 percent. Shirzad was responding to an antidumping petition brought by the Catfish Farmers of America, who are at war with their Vietnamese competitors. Of course, the assistant secretary didn’t actually say the word “catfish.”

            According to U.S. law, Vietnamese catfish cannot be called catfish. Americans must only refer to Vietnamese catfish in the Vietnamese language, where they are “basa,” or perhaps “tra” fish. Officials at the Commerce Department can’t even bring themselves to speak Vietnamese, referring instead only to “certain frozen fish fillets” from the Socialist Republic of Vietnam. Commerce is busy trying to tax the unmentionable socialist Vietnamese fish out of the American marketplace.

            U.S. seafood importers, who now are scrambling to post cash bonds with U.S. Customs to cover the potential duties, are furious. Their business plans have been upended by their government, inconveniently just at the onset of the busy Lent season. And the Vietnamese are furious over headlines like this one from the Associated Press: “U.S. Says Vietnam Dumping Fish Illegally.”

            Such headlines are unfortunate. The U.S. antidumping statute has nothing to do with “illegal” criminal activities. American businesses routinely engage in below-cost sales. Price discrimination within U.S. borders is praised as a sign of healthy marketplace competition. But when foreigners do the same thing, America ’s trade policemen — always looking for commodities that Americans are buying too cheaply — are ready to strike. 

            Do the Vietnamese deserve the taint of being called “unfair?” What is it exactly that has caused Mr. Shirzad to affix his good name to a document accusing Vietnam of “unfairly” selling catfish to American consumers at prices below the true costs of production in the Mekong Delta?

            Consider the notice that Shirzad has published in the Federal Register, to see why he has become convinced that the Vietnamese have not been playing fair. 

            Commerce’s Import Administration sent questionnaires to more than 50 Vietnamese seafood companies, thirteen of which took the time to submit data on what they had sold to the United States . But the bureaucrats said that they only had time to look at data from the four largest exporters, and refused to look at the numbers of the others (six of whom were eventually assigned an antidumping tariff of 49 percent anyway). All other Vietnamese catfish exporters have been assigned a 64 percent tariff, even though Commerce has no idea what their costs of production really are. To the U.S. Department of Commerce — supported by the antidumping laws and the American judicial system — this is sufficient due process.

            The big four Vietnamese catfish exporters asked Commerce to look at their actual costs of production. But Commerce declined the offer, saying that Vietnam was a non-market economy case — meaning that the government directed markets. Yet, Commerce’s notice in the Federal Register admits that the four catfish companies are free of both de facto and de jure government control in setting their prices. “Each exporter sets its own export prices independent of the government and without the approval of a government authority,” Commerce found. A normal person might wonder why Commerce would go ahead and use a “non-market methodology” analysis to determine prices, when the real pricing data was readily available.

            Armed with its non-market methodology rationale, Import Administration officials scoured the world to find an appropriate surrogate “market-economy” country of comparable economic development. That surrogate became Bangladesh , mostly. “Where Bangladeshi values were not available or were impracticable to use, we relied upon data from India ,” Shirzad’s Federal Register notice reports. I guess if it is okay to pretend that Vietnam is Bangladesh , you might as well pretend that Vietnam-Bangladesh is also India .

            So the minions who work for the Assistant Secretary of Commerce for Import Administration crunched the numbers to figure what it costs to raise the pretend catfish on the subcontinent. One of Commerce’s big sources to estimate the costs of producing catfish in Vietnam was the 2000 Statistical Yearbook of Bangladesh, which is published by the Bangladesh government. Another source was the Monthly Trade Statistics of Foreign Trade of India. Commerce adjusted Bangladesh takas and Indian rupees for inflation, and converted them into U.S. dollars by using wholesale price indices published in the International Monetary Fund’s International Financial Statistics.

            “The Department decided to value live fish using data from the financial statement of a Bangladeshi company that produces Pangasius fish, Gachihata Aquaculture Farms Limited,” Commerce reported, deftly using a scientific name to avoid the unmentionable C-word. Problem here was that Gachihata’s data “was not contemporaneous with” the period of investigation, which was from October, 2001-March 2002, the officials acknowledged. The data was from the previous fiscal year. No matter, Commerce said, that still was “reasonably close” to the period of investigation. As long as you are talking about pretend fish, it’s okay to pretend that one year is pretty much the same as the next.

            To calculate the costs of water in Vietnam, Commerce reported that “we used data reported as the average water tariff rate for four cities in India as reported in the Asian Development Bank’s Second Water Utilities Data Book: Asian and Pacific Region published in 1997.” Because 1997 was five years before the antidumping petition was filed, Commerce helpfully “adjusted the rate for inflation.” The idea that the actual Vietnamese economy had changed light years in those five years did not occur to the American officials.

             “To value electricity, we used data from Bangladesh government statistics,” again converting takas into dollars, Commerce reported. To calculate domestic inland freight rates in Vietnam , officials looked at Bangladesh government statistics, and pretended that they were really Vietnamese. To figure the costs of labor in Vietnam , Commerce looked not at the actual costs of labor in Vietnam ’s catfish industry, but to the Import Administration’s own website for something called “the Vietnam regression-based wage rate.” In the officials’ minds, that’s probably what Vietnamese employers do when they hire someone.

            Commerce even calculated the costs of farming and exporting catfish in Vietnam by refusing to look at the costs of farming catfish. The bureaucrats pretended that the Vietnamese catfish came wholly grown as mommy and daddy fish — and that Vietnamese catfish farmers had never raised and fed baby fish, or fingerlings. The reason is that fully grown mommy and daddy catfish are more expensive than baby catfish. If you only look at the “whole” grown fish instead of the fingerlings, the Vietnamese costs of production appear higher. It then becomes easier to calculate that they have been selling their expensive adult catfish at a loss of between 38- to 64 percent.

            That’s the story of how Assistant Secretary of Commerce for Import Administration Faryar Shirzad came to stake the credibility of the U.S. government on the preposterous allegation that the Vietnamese catfish industry has not been playing fair in American markets. Shirzad is a smart man. He knows fully well that if he had crunched the numbers differently — and more honestly — the Vietnamese would not today stand accused of “dumping.”

            In his Federal Register notice, Shirzad held open the possibility that he would revisit the issue before the final determination, which gives him options to adjust the proposed tariffs depending upon political considerations. The Vietnamese and outraged senators like John McCain might raise hell. On the other hand, if Shirzad crunched the numbers honestly, a passel of angry lawmakers from Mississippi and Alabama would want to eat him for lunch instead of Made-in-the-USA catfish.

            There is a word for what the United States government is doing to the Vietnamese catfish industry. But like the fish itself, that word is unmentionable in polite company.

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