Economics- Shirmp

A recent article that appeared in the April 2, 2007 Wall Street Journal discussed an ongoing battle over imported shrimp into the US market. The article details the ongoing plight of a former US shrimper- John Williams- who started an organization called Southern Shrimp Alliance (SSA) after growing concern that foreign shrimp producers were dumping shrimp in the US at unfairly low prices. Dumping is a practice where a firm or manufacturer sells the same good to a foreign country at a lower price, often a price below production cost, than that charged to the domestic buyer.

Dumping usually occurs in situations where producers in one country are trying to stay competitive with producers in another country but in this case, US shrimper John Williams argued that foreign shrimpers were trying to eliminate the producers in the US in order to gain a larger share of the world market. John Williams founded the Southern Shrimp Alliance (SSA) in 2002 to assist US shrimpers fight the increasing competition from foreign produced shrimp- mainly from Latin America and Asia. The SSA obtained signatures on petitions and hired a law firm to put forth a dumping complaint that would lead to an investigation by the US Commerce Department and the International Trade Commission. The claim was that farmers in Asia and Latin America were taking advantage of their region’s warm climate and cheap labor- (areas where the US does not have a competitive advantage) to raise shrimp in ponds. Unlike US domestic shrimp that are harvested from the ocean, the foreign producers were able to raise shrimp in carefully controlled conditions in inland ponds. The manufactured shrimp could produce three harvests per year- more than the US annual harvest- and allowed the foreign shrimpers to export shrimp to the US at prices far below US market prices.

US law protects domestic business from low priced imports. Currently, if a domestic business feels that imports are being shipped to the US at below production costs, they can seek tariffs to again balance the market. However, the World Trade Organization disagreed with a previous amendment regarding this policy- the Byrd amendment. The Byrd amendment was enacted in 2000 and enabled the government to funnel antidumping tariffs to US companies that complained about low-market imports. The WTO felt that this amendment benefited domestic business because it punished the foreign producers twice- once with the tariff and a second time by giving the domestic producers additional money. US shrimpers are in favor of a higher tariffs on imported shrimp because they stand to benefit- the increased prices will be passed on to the US consumers and foreign producers- the imposition of an even higher tariff will have the same effect as an increase on the world price of shrimp.

Once the SSA realized that Congress was moving towards repealing the Byrd Amendment, they quickly worked to put forth a request to the US Commerce Department for review the foreign shrimp producers. It named 800 foreign shrimpers in the claim and not only wanted to increase tariffs, but also to stop the foreign producers from using antibiotics in their shrimp ponds that were banned in the US and stricter labeling policies on the shrimp. It was important for the US shrimpers and the SSA that the shrimp was not imported through third countries in order to avoid the tariffs and that the country of origin was clearly labeled on the shrimp.

After John Williams and the SSA filed the petition for a second increase in tariffs on imported shrimp, foreign producers decided to pay millions of dollars directly to the SSA in order to have the petition dropped. Since an even high tariff would undoubtedly be passed on to the US consumers and the foreign producers. The restrictions scarred the foreign producers into settlement

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