By Dr. Tung Bui, Director of Vietnam Executive MBA, University of Hawai.
With President Obama’ upcoming trip to East Asia next month to give a much needed push to the Trans-Pacific Partnership (TPP) Trade agreement, Vietnamese export of catfish to the US is unwillingly back on the negotiation table.
Vietnam accounts for 60% of the catfish market in the US and American catfish farms in Southern land claim that they have to cut down their production by half – 300 million pounds down from a peak production of 660 million. In free trade, any business that meets customers’ satisfaction should enjoy a competitive advantage. It seems to be the case for Vietnamese catfish. Recognized as a healthy diet, annual fish consumption in the US was 14.6 pounds per person in 2012, and pricing of Vietnamese catfish must have been competitive enough to win a large market share. Since there are no clear economic arguments against Vietnamese catfish, Senator Thad Cochran of Mississippi— the leading catfish producer state — and a few other lawmakers in the South claim that Vietnamese catfish and basa are raised with antibiotics in polluted water. They introduced last month a section in the 2014 Farm Bill that would require the US Department of Agriculture, and no longer the Food and Drug Administration (FDA), to implement a more rigorous catfish inspection program. As a common statistical approach to quality control, FDA randomly inspects only 2% of the food. Opponents of Vietnamese catfish claim that this practice is not safe enough. When this bill becomes law, Vietnam will have to stop exporting catfish to the US until it has its own inspection station that meets the US standards. The process could take between 3 to 7 years.
Vietnamese workers processing tra fishes
The Vietnamese are not the only people potentially hurt by the move. Blocking Vietnamese catfish also means immediate price increase to millions of American consumers, hurting along large American distributors and restaurants serving catfish and basa, according to the US National Fisheries Institute. Senator John McCain with 12 other senators have attempted to undo the Bill, that requires the creation of a $15-million-a-year cattish office inside the US Department of Agriculture. Their attempt has not been successful so far at the Senate level. McClain warns that blocking Vietnamese catfish would cause Vietnam to retaliate by stopping US exports of goods to Vietnam. US farmers selling beef or soybean would be likely affected.
Dispute is common in international trade. International bodies such as WTO with Vietnam as a member since 2007 are set up as a venue to resolve trade conflicts. Historically, developed nations with advanced institutional support have always accounted for the highest number of complaints. As such, the US-VN catfish dispute is just another event in international competition, and Vietnamese exporters should be prepared to fight back.
With theTPP, however, the US government seeks to intensify trade between members via tariff reductions. Slightly different than the WTO, TPP is about fostering partnership, and the Obama administration would not wish to be accused as raising protectionism on behalf of a local industry.
With the Obama administration not supporting the idea of the Catfish Office, and the bill still have to go through the House, the fight is not over. Ironically, if one of the goals of President Obama trip to Asia is to discuss the role of China in Asia, launching a trade war with Vietnam because of the popularity of Vietnamese catfish in the US would indirectly benefit China in a big way.
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