US-Vietnam Catfish conflicts (Essay Sample)

THE DELTA BLUES: U.S. – VIETNAM CATFISH TRADE DISPUTE CASE SOLUTION
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INTRODUCTION
This case study presents aquaculture in Vietnam, as the commercial production of fish and other aquaculture products began in the country in the early 1960s. Within the last two decades, rapid growth of this sector has been achieved as a result of its diversification on farming practices. Amongst these cultures is the catfish culture in the Mekong Delta in southern part of Vietnam. The Mekong delta has a rich supply of fresh water resource for fish farming. The area covered by fresh water surface is in excess of 641,000 hectares, and thus a great potential for the establishment and development of aquaculture. Historically, several species of fish have been commercialized in the area, with species such as pangassid catfish and black tiger shrimp. The production of catfish, commonly referred to as basa, was commercialized in Mekong River Delta since the 1960s. However, this was mainly done through traps and cages immersed deep at river beds. It was until 1990s when the actual growth of catfish varieties in Mekong region started.[Abrami Regina, "The Delta Blues: U.S. – Vietnam Catfish Trade Dispute (A)." Harvard Business School (2005).] [Abrami Regina, 2005.]
Industrial feeds were also introduced at this time, allowing farmers greater predictability over growing times and expected yields. This paper shall analyze the U.S. – Vietnam Catfish Trade dispute case, identifying the main issues in the case that resulted into the dispute between the two trading countries. The paper also analyses the situation to establish various perspectives that can be considered regarding the case. Alternative solutions are outlined in the case as well as a recommendation of the course of action that the two trading partners can take to ensure that there is efficient ad fair bilateral trade in Catfish industry.
CENTRAL ISSUES IN THE CASE
The major underlying issue in this case is the trade and diplomatic row that has brewed between the United States and Vietnam. Given the past history between the two nations is not a good framework for competitive trade, the trade between the two nations has been hampered by political tensions between the two countries. After the US was defeated in its war in Vietnam, the two countries embarked on modalities that they could pursue in order to enhance not only diplomatic relations but also trade relations. After a period of Vietnam War, which resulted in destruction of economic pillars of the country such as infrastructure and foreign relations with allies of the US, Vietnam slowly but steadily picked herself up as a trading partner? The country grew from a net importer of rice products, to a major exporter of the product within a span of less than two decades. The diversification of the country into Aquaculture was perhaps the main reason why the country found itself, yet again, in a trade dispute with the United States.[Abrami Regina (2005).] [Abrami Regina (2005).]
The second issue presented in this issue is the accusations leveled against Vietnam for dumping its frozen fish filets into the US market. The southern region of North America had experienced a significant economic prosperity thanks to the commercialization of Catfish farming; which supplied the whole of the US with a cheap source of proteins. Fish farming was also able to provide employment opportunities for more than 400,000 Mississippi residents, who would be otherwise unemployed without the development of fish farming. However, it is apparent that the increased agriculture is based on relatively higher costs of production and processing, which increases the overall cost of the final fish products in the domestic market. Contrary to the high prices in the domestic catfish, the imports from Vietnam were significantly low-priced relative to the US-bred catfish. This meant that the domestic fish farming industry was on the verge of collapse as more and more cheap imports from the Vietnam market reduced the demand for the more expensive domestic fish.[Abrami Regina (2005).]
The third issue presented in this case is marketing issues between the two countries. Vietnam was accused of misrepresenting its catfish products to the American consumer to mislead them into believing that they were in fact consuming American-bred catfish. According to the case, the Vietnamese fish industry and marketers were accused of "misleading the US customers through packaging and marketing strategies”. The strategists misrepresented the frozen fish fillet imports from Vietnam to match their US-bred fish fillets through name-matching. For instance, the US catfish products were branded into "Delta Pride," "Harvest Select," and "Farm Fresh”, while the Vietnamese products aped these names by misrepresenting them as "Delta Fresh," "Harvest Fresh," and "Farm Select.”. This resulted into a series of accusations and counter-accusations between the two trading partners that almost elicited another diplomatic row.[Abrami Regina (2005).] [Abrami Regina (2005).]
The last issue presented in this case is the fish-dumping claims that were instigated by the US-Aquaculture organizations that resulted in the imposition of anti-dumping penalties to firms importing fish fillets from the Vietnamese market. More interesting was the branding of the Vietnam economy as a nonmarket economy and using India as a proxy in establishing the credibility of the dumping claims.
SITUATIONAL ANALYSIS
The case presented on U.S.–Vietnam Catfish Trade Dispute can be viewed from two perspectives. The first perspective is the difference in political ideologies that exist between the two countries, while the second perspective can be attributed to the economic competitiveness of the two countries. Within the first perspective, it has traditionally been known that the United States was against the spread of communism from the Soviet Union to other developing countries. The United States believed that with the spread of this political ideology, those developing economies would increasingly depend on the Soviet for support and thus increase the latter’s grip on the world trade and politics. As such, this resulted into the US imposing economic and trade sanctions to those countries that aligned themselves with the East, restricting free flow of trade between its allies and these countries, or even waging war against such countries. Vietnam is one of the countries that have endured the wrath of the US attempting to neutralize the power and spread of communism. Therefore, the hostility between US fish-firming organizations towards cheap imports from the Vietnamese market can be attributed to the negative attitudes that US firms have since developed from the past history between the two countries.[Duval‐Diop, Dominique M., and John R. Grimes (2005).]
The second perspective can be attributed to the nature of competition between the two countries: USA and Vietnam. The key question that the American fish-producing firms could ask is, hoes does Vietnam manage to produce its products at the prices so low that they are able to sale them at lower prices and still make significant profits. Unlike the US, Vietnam is a developing country and thus has lower costs of producing fish fillets. This is so because of the lower labor costs, the free-flowing water used in cultivation of fish, and the economies of scale achieved through mass production. Since the government of Vietnam invested heavily in research and development of the fish industry, and this was facilitated by the rich supply of rivers within the country, the country was able to produce fish filets at significantly low costs and thus sale at low prices. On the other hand, the United States commercialized fish farming by ‘commercializing everything’, starting from the artificial breeding of fingerlings to construction of artificial ponds and artificial husbandry practices including aeration of these ponds (). These, coupled with relatively higher minimum wages in the United States, pushed the costs of production and thus giving Vietnam a competitive advantage in the production of fish fillets.[Duval‐Diop, Dominique M., and John R. Grimes (2005)]
According to the concept of comparative and absolute advantage in international trade, Vietnam was more advantaged in producing catfish fillets, and thus could be allowed to produce at reduced costs. However, the drive to protect the domestic industries by state agencies ensured that importation of cheap fish products was suppressed as possible. This can be evidenced by the conflicting statements provided by two different US state agencies regarding the Vietnam-bred catfish. Firstly, the sale of fish species rather than Iuctaluridae species in the United States in the name of catfish was prohibited. And thus the tra and basa species from Vietnam were restricted for sale in the country using the brand ‘catfish’. This implied that the fish species from Vietnam was not related to those sold in the United States. Secondly, the study conducted by the US ITC concluded that basa and tra were regarded as ‘like products’. These two conflicting perspectives outline the failure by the US to develop competitive methods of production to compete with Vietnam economically.[Charles Hill, Tim Richardson, and Thomas McKaig. Global business today. (New York: McGraw-Hill/Irwin, 2006).] [Abrami Regina (2005).]
ALTERNATIVE SOLUTIONS
The Catfish trade dispute between the United States and Vietnam could be amicably solved if the two countries could explore ways through which they could produce their fish and sale them using the stated Bilateral Trade Agreement. Since the catfish products sold by the two countries are ‘like products...