U.S. Talks Freedom But Tampers With Free Market
Will Republicans Follow Bush Away from Free Trade into Protectionism?
During the 1990s, Republicans were united in favor of so-called free trade. But the Bush administration broke sharply away from that policy, going with protectionist tariffs against steel, against lumber, against agriculture, and now -- amazingly -- against Vietnamese catfish. Will Republicans follow Bush and condemn free trade? They might have to make up their minds before the next elections.
Here is a remarkable story of the latest anti-trade maneuver by the Bush administration, circulated by the U.S.-Vietnam Trade Council and originally appearing in the New York Times.
"The Great Catfish War"
For Tran Vu Long, who lives atop his floating catfish trap on the Mekong River near the border with Cambodia, the recent biannual harvest day was not the joyous payday it usually is. Mr. Long, a 35-year-old Vietnamese catfish farmer, sold his flapping fish — 40 tons' worth, all painstakingly weighed and carried in bamboo buckets onto the trading company's launch — at a loss of some $2,000, a small fortune here.
Mr. Long, who stood sullenly to the side as his hired hands scooped out seemingly endless gaggles of fish from underneath the space that doubles as his living room, has Washington politicians to blame. "The United States preaches free trade, but as soon as we start benefiting from it, they change their tune," he said.
His misfortunes are just another part of the tale of how wealthy countries that preach the gospel of free trade when it comes to finding markets for their manufactured goods can become wildly protectionist when their farmers face competition. 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.
After embracing decidedly un-Marxist reforms, Vietnam became one of globalization's brightest stories in the 1990's. The nation, a onetime rice importer, transformed itself into the world's second largest rice exporter and a player in the global coffee trade. The rural poverty rate was slashed to 30 percent from 70 percent.
The normalization of ties between Hanoi and Washington brought American trade missions bent on expanding Vietnamese free enterprise. One of these delegations saw in the Mekong Delta's catfish a golden export opportunity, with the region's natural conditions and cheap labor affording Vietnam a competitive advantage. Sure enough, within a few years, an estimated half-million Vietnamese were living off a catfish trade nurtured by private entrepreneurs. Vietnam captured 20 percent of the frozen catfish-fillet market in the United States, driving down prices. To the dismay of the Mississippi Farm Bureau, even some restaurants in that state — the center of the American catfish industry — were serving the Vietnamese species.
Soon Mr. Long and the other Vietnamese farmers were caught in a nasty two-front war being waged by the Catfish Farmers of America, the so-called "trade group" (actually an anti-trade group) representing Mississippi Delta catfish farmers. The Mississippi catfish farmers are generally not huge agribusinesses, and many of them struggle to make ends meet. But that still does not explain how the United States, the international champion of free market competition, could decide to rig the catfish game to cut out the very Vietnamese farmers whose enterprise it had originally encouraged.
Last year, with the aid of Trent Lott, then the Senate majority leader, the American catfish farmers managed to persuade Congress to overturn science. An amendment, improbably attached to an appropriations bill, declared that out of 2,000 catfish types, only the American-born family — named Ictaluridae — could be called "catfish." So the Vietnamese could market their fish in America only by using the Vietnamese terms "basa" and "tra."
That was only the first step in a bipartisan assault. Congressman Marion Berry, an Arkansas Democrat, joined in a stupendously tactless disinformation campaign against the Vietnamese, suggesting that their fish were not good enough for American diners because they came from a place contaminated by so much Agent Orange — sprayed over the countryside by American forces during the Vietnam War. Catfish Farmers of America, for its part, ran advertisements warning of a "slippery catfish wannabe," saying such fish were "probably not even sporting real whiskers" and "float around in Third World rivers nibbling on who knows what."
Not satisfied with its labeling triumph, the American group initiated an "antidumping" case against Vietnamese catfish. And for the purposes of this proceeding, Congressional taxonomy notwithstanding, the fish in question were once again regarded as catfish, not basa or tra. (Don't try explaining to Mr. Long how two branches of the American government, conveniently enough, can simultaneously maintain that his fish are two different creatures.)
Antidumping cases involve allegations that imports are being sold more cheaply than they are back home or below cost, practices rightly banned by trade laws. But too often, domestic industries allege dumping in an attempt to shield themselves from legitimate competition.
In this case, the Commerce Department had no evidence that the imported fish were being sold in America more cheaply than in Vietnam, or below their cost of production. But rather than abandoning the Mississippi catfish farmers to the forces of open competition, the department simply declared Vietnam a "nonmarket" economy. The designation allowed it simply to stipulate that there must be something suspect going on somewhere — that Vietnamese farmers must not be covering all the costs they would in a functioning market economy. Tariffs ranging from 37 percent to 64 percent have been slapped by the department on Vietnamese catfish.
Hence Mr. Long's hardship. Prices along the Mekong crashed, as the exporters who buy his fish moved to protect their margins. Many farmers are refusing to sell at a loss. Faced with the prospect of losing their investment, they might be shocked to learn that our Commerce Department says they do not operate in a free market.
The other shoe is expected to drop as early as tomorrow, when the United States International Trade Commission, an administrative agency in Washington, decides whether the American catfish industry was indeed hurt by unfair competition. Such a finding would make the tariffs permanent.
There is usually a decided home-field advantage in these proceedings, but Vietnam's cause has been taken up by a half-dozen senators from both parties, led by John McCain, Hanoi's former prisoner. He considers this case not only naked protectionism but also a betrayal of the nation's strategic commitment to use trade to encourage change in a Communist society.
Senator McCain is right. The catfish war is an obscure story here, but it is front-page news in Vietnam. Bush's anti-trade solicitousness on behalf of a few lobbyists for U.S. catfish farmers has stirred a great deal of anti-American resentment in Vietnam, a country of 80 million, resurrecting images of an imperial bully. One lawyer on the case compares the Vietnamese public's strong interest in the catfish saga with Americans' obsession with the Tripp/Lewinsky scandal.
This all saddens Nguyen Huu Dung, the general secretary of the Vietnam Association of Seafood Exporters, who said in a recent interview, "Our nation has a heavy history, and we try to forget it, try something new based on a spirit of cooperation and free trade, but now we are made to wonder whether you wish us ill, as much in the present as you did in the past."
We urge the International Trade Commission to listen to Senator McCain and his colleagues and decide this case on its merits. If not, Vietnam will become yet another case study in the way the United States, Europe and Japan are rigging global trade rules so they remain the only winners.
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