Vietnam calls U.S. catfish policy unfair trade practices
BELZONI, Miss. With the exception of the annual catfish festival, which still draws thousands on the first Sunday of April (unless it’s Easter), this once-bustling town is a dusty shell.
Sculptures of the whiskered fish decorated as various figures such as Uncle Sam still stand on the sidewalks of the few blocks that comprise downtown, but many businesses are shuttered and more than a third of the roughly 2,200 inhabitants live below the poverty line, according to census figures.
“Vietnam dumped all that fish on the market,” said Anthony Wade, 34, Belzoni’s best chef, who worked on a catfish farm through high school. “All those farmers were all leveraged, they’ve lost all their money, and nothing’s come yet to replace that.”
Locally farmed catfish remains the pillar of Mr. Wade’s small restaurant empire. He serves it fried or grilled at The Varsity, a classic Southern spot with thick onion rings, jalapeno hush puppies and waitresses who move among the regulars with pitchers of iced tea. At Alison’s, his more upscale venue on Belzoni’s sleepy main drag, Mr. Wade tempts Mississippi Delta gourmands with John Grisham Catfish, a sauteed filet with shrimp and cream sauce.
The collapse of the local catfish industry did not go unnoticed by elected officials in Mississippi and the handful of other Deep South states that farm it. Their efforts to ensure Mr. Wade and others have plenty of the tasty bottom dweller raised in the U.S. has raised trade hackles in Vietnam.
Faced with intense competition from catfish farmed cheaply in Vietnam, those politicians got the inspections of imported catfish moved from the Food and Drug Administration to the Department of Agriculture’s Food Safety and Inspection Service in 2013′s gargantuan farm bill. The Agriculture Department’s service could rule that an import’s source country did not meet code “equivalence” to U.S. standards in trade parlance and ban the product.
More recently, in the omnibus budget bill President Trump said he reluctantly signed last month, those politicians buried another nugget: Vietnam must complete that equivalence process, which sometimes takes years, in the next 180 days. Analysts said such a timetable is absurd.
Anticipating the latest twist, Vietnam determined that the whole process amounts to an unfair trade practice. In February, it filed what most would label a complaint with the World Trade Organization, but which that body calls “officially requesting bilateral consultations with the United States.” In other words, a government-to-government sit-down in Geneva.
“I’m not surprised at all that Vietnam has done this,” said Paul Drazek, a consultant on agricultural trade issues and former special assistant to the secretary of agriculture for international affairs. “It was clearly done to help the Mississippi catfish farmers more than anyone. If anything, I’m surprised it took Vietnam this long.”
In theory, the U.S. moves weren’t made to help farmers exclusively. Rather, more rigorous inspections supposedly offer protection to American consumers from fish farmed in less-healthy conditions in the Mekong River’s delta than the Mississippi’s. But critics say even that rationale is dubious and point to a recall last month of nearly 70,000 pounds of Mississippi catfish that the USDA said “may be adulterated with a residue of public health concern, specifically leucomalachite green,” one of the very substances Vietnam is accused of using.
Most of Washington opposes the catfish inspection carve-out. The Departments of Agriculture and State, the Office of the U.S. Trade Representative and a host of other agencies said the switch away from the FDA was unnecessary and wasteful.
In its own review of the process, the Agriculture Department concluded that “there is substantial uncertainty regarding the actual effectiveness of [a Food Safety and Inspection Service] catfish inspection program.”
On top of the uncertain benefits are the costs, which could expand if Vietnam is successful with the WTO. Vietnam could slap tariffs or install other trade barriers against American exporters of many other products.
The National Fisheries Institute argues that it makes no sense to have an industry that exports virtually nothing domestic catfish crafting trade policy for the U.S.
Catfish is the single biggest product in global aquaculture, according to trade figures, but it represents mere crumbs of the overall trade pie.
Retaliatory trade steps by Vietnam would hurt more than aquaculture. Cotton, wheat and other grains, pork, soybeans, beef, poultry, eggs and fruit could get caught up in tariffs.
Farmers from Texas to Oregon and California to Georgia, who export tens of millions of dollars worth of their harvest to Vietnam annually, could become collateral damage.
“The outcome of this eventual WTO case will have a negative and quantifiable impact on a wide variety of U.S. agriculture exports to an important and growing market,” Gavin Gibbons, a vice president at the National Fisheries Institute, wrote in an email. “The non-tariff barrier that is the USDA catfish program is designed solely to illegally benefit the catfish lobby while dragging down safe, legal, growing agriculture trade with Vietnam. That trade is part of a booming agricultural export market increasingly relied on by American farmers and ranchers.”
The Office of the U.S. Trade Representative declined to comment, and the Vietnamese Embassy did not respond to requests for comment.
Yet figures from the Office of the U.S. Trade Representative show dramatic growth in trade between the U.S. and Vietnam.
In 2016, U.S. exports to Vietnam totaled $10.2 billion, according to the office, an increase of 43 percent from 2015 and a more than 800 percent increase over the past decade.
Electrical machinery, aluminum, aircraft and cotton are key exports, and $2.7 billion in the agricultural sector made Vietnam the 10th-largest U.S. trading partner.
On the other hand, the U.S., Vietnam’s second-largest trading partner, maintains a trade imbalance. In 2016, the trade office put the deficit with Vietnam at $32 billion, the sixth-largest for the U.S.
The trade squabble is unfolding during an otherwise vibrant time in relations between the U.S. and Vietnam. Although China stands as Vietnam’s biggest trading partner, it has also historically been its greatest enemy.
With China flexing its military muscles around the Spratly Islands and the South China Sea, the U.S. and Vietnam have begun exploring a closer relationship. Last month, the USS Carl Vinson and its carrier group anchored off the coast of Danang, the first time a U.S. Navy aircraft carrier had appeared in those waters since the end of the Vietnam War nearly a half-century ago.
In addition, the Trump administration has been threatening tariffs against Chinese imports, a position that could lead to greater restrictions on trade between those powers. Although the U.S. is reconsidering a planned withdrawal from the Trans-Pacific Partnership under President Trump, the prospect of crippling trade barriers between the U.S. and the southern Asian rim grows.
It is unlikely that Vietnam’s WTO complaint will have an immediate impact. Analysts said WTO rulings are typically protracted, with hearings, appeals and decisions on additional tariffs or inspections that could be spread out over years.
Still, the years have been grim for many domestic catfish farmers. Belzoni, which sits northwest of the capital in Jackson along the Yazoo River and was famous for honky-tonks long before Elmore James ever picked up an electric guitar, is ground zero in the catfish squabble. At one point late in the last century, three-quarters of the world’s catfish came from ponds of Humphreys County, of which Belzoni is the seat.
Sitting behind a box of catfish with the USDA inspection stamp in a comfortable booth at Alison’s, Mr. Wade conceded that the best-selling Mississippi author has yet to taste the dish named after him there. He also takes a more nuanced view of the collapse of Belzoni’s and the wider production of domestic catfish.
“Well, sure,” Mr. Wade said, when asked if other reasons might explain it. “And it’s hard to regulate fish.”
In fact, the culprits cited by some industry observers are familiar to Belzonians. Chief among them are the prices of corn and diesel fuel.
Diesel is a surprisingly high cost, said Bill Hawkins, a native who once labored on the catfish farms but now works in Belzoni’s main lumberyard. Because the catfish are raised so densely, in ponds that average a depth of 4 feet, the water must be artificially oxygenated. In the daytime, the sun usually handles those duties, but when clouds move in and at night, dozens of tractors serve as generators to the apparatus that churns the pond’s water. Increasingly expensive diesel fuel powers the tractors for hours on end.
Mr. Hawkins and his wife, Renee, were busy unpacking boxes of festival T-shirts inside Belzoni’s Catfish Museum and Visitor Center. They believe catfish are mounting a comeback, although they weren’t able to put their finger on any concrete evidence.
Mrs. Hawkins acknowledged that aquaculture is no longer as prevalent in the Delta and said her relatives in Arkansas live in areas where farmers who once aerated water now plow dirt. The National Fisheries Institute released figures from 2000 to 2010 that show farmers let 48,000 acres of catfish ponds dry up and replaced them with corn and soy crops.
Yet Mr. Hawkins declined to blame Vietnam exclusively for the industry’s collapse.
“I think it’s very important, as it once employed just about everyone in Humphreys County,” he said. “And [Vietnam] put a hurt on us, that’s for sure. But some of it’s just the economy.”
More than some, analysts say. In another example of unintended consequences, the ethanol requirement in gasoline has sent the corn price skyrocketing, which, in turn, made the price of catfish feed ruinous for Delta farmers.
The National Fisheries Institute calculates that the price of domestic farmed catfish would be competitive with Vietnam’s if the ethanol boost were removed from the price of corn.
The Obama administration stayed true to ethanol but tried unsuccessfully to get rid of the USDA catfish inspections, low-hanging fruit for budget hawks as something the Government Accountability Office has repeatedly cited as something to eliminate.
The Trump administration has proposed defunding the redundant inspections next year.
For the moment, however, both the Agriculture Department teams and Vietnam’s trade complaint are active. Something will have to give.
“It’s simple economics,” Mr. Gibbons said. “They say the ‘cheap imports’ are running them out of the market, but they’re wrong. The domestic price point is not coming down, so people aren’t buying the product simple. It has nothing to do with cheaper imports or the need for field-leveling regulations.”
In Belzoni, people suffering through a sustained economic downturn see things differently. They also insist their catfish tastes a bit better, less metallic, than the foreign version.
For Mr. Wade, who hosted a recent party for his grandmother at Alison’s, every bit helps.
“I wish the best for the Delta,” he said.