Catfish row could hurt US-Vietnam ties

The US is expected to issue a final ruling in June on a recent tariff hike on Vietnamese exports.

Phan Tung Son has most of his capital tied up in his house on the chocolate-colored Hau Giang River. Not that the metal-roofed shack has much resale value. What keeps his fortunes afloat are thousands of whiskered fish swimming beneath the wooden floorboards, inside a three-foot-deep cage.

But for Mr. Phan and other catfish farmers in the Mekong Delta, trouble is brewing: Local processors are buying fewer catfish these days, and this crop may not bring in much money. "I'm worried because prices are falling. I think overproduction must be affecting the prices."

Nguyen Hoang Kha, who runs a bigger catfish farm further up the river, shares Phan's gloom, but not the diagnosis. He says he knows exactly what lies behind the downturn: Vietnam's old foe, the US.

Hunkered down beside a murky breeding pond, Nguyen grumbles over a US decision earlier this year to impose higher tariffs on frozen fillets from Vietnam. The tariff hike is in support of an antidumping suit filed by US producers last summer. "They can't compete against our fish, so they stop us from entering the market."

For their part, US producers say cheap, state-subsidized Vietnamese catfish is hurting thousands of US farmers in the Mississippi Delta. Val Slater, a Washington-based lawyer for the Catfish Farmers of America says the aim is simply to ensure fair trade. "The government isn't looking to lock out imports, but to force exporters to revise prices so they are fair," Mr. Slater says.

As the US tries to counter a surge of anti-American feeling abroad, such trade rows seem far from the national agenda. But Vietnam is taking the catfish issue seriously.

The signing of a landmark trade deal with the US in December 2001 helped Vietnamese exporters increase their share of the $590 million US frozen catfish market to 20 percent. Losing that market share would be a blow for one of Asia's poorest countries, and could strengthen Communist hard-liners opposed to economic reforms. It could also hurt relations between the US and Vietnam, after ties were restored in 1995.

"Catfish was the first thing out of the box for the Vietnamese after the (US) bilateral trade accord. So it sends a bad message to Vietnam," says Frances Zwenig, senior country director of the US-ASEAN Business Council, a lobby group.

This isn't the first attempt by US catfish farmers to counter imports. US farmers claim Vietnam's fish isn't really catfish. They successfully lobbied the Senate in 2001 to pass a law forcing Vietnamese exporters to label their catfish as Tra or Basa - a similar subspecies.

Sen. John McCain, a former prisoner-of-war in Vietnam, objected to that campaign and has also lobbied against the antidumping suit. But in a preliminary ruling Jan. 27, the US Department of Commerce imposed tariffs of between 38 percent and 64 percent on four Vietnamese exporters it said were dumping catfish in the US. A final ruling is expected in June.

Critics say the case is riddled with faulty math. Instead of using data from Vietnam - such as the price of raw materials - to calculate a fair value, the US used equivalent data from Bangladesh and India - claiming Vietnam's data is invalid because the Communist-ruled country is a "nonmarket economy."

Walter Blocker, chairman of the American Chamber of Commerce in Ho Chi Minh City, the commercial hub of southern Vietnam, laughs at this category. "This is a free-market economy. The American business community knows a free-market economy when it sees one," he says, calling the suit "hypocrisy."

Seafood exporters deny taking government handouts or selling fish below market costs. They say their product is cheaper due to lower input costs and superior breeding grounds in the Mekong Delta. "America is good at making Boeing airplanes, but when it comes to catfish farming, we are better," says Truong Dinh Hoe, vice secretary-general of the Vietnamese Association of Seafood Exporters and Producers.

What's more, Vietnamese factories pay farmers less than 30 cents a pound for catfish, which is processed by workers earning $50 a month for filleting, packing, and freezing the fish. Since the January ruling, exporters report a sharp fall in sales to the US, which buys around 30 percent of Vietnam's processed catfish. Some are now turning to markets like China and Europe to take up the slack.

"We're increasing sales to other markets, but I'm not sure we can make up for the loss," says Nguyen Dinh Huan, deputy general director of An Giang Fisheries, one of those named in the antidumping suit. He says the factory is down to 70 percent capacity, from 100 percent in 2002.

But while factories can switch to packing other seafood, self-employed farmers have fewer options. A study by ActionAid, a nonprofit agency working in Vietnam, predicts a decline in catfish processing "is likely to result in destitution for thousands of families" in the Mekong Delta.

Nguyen Hoang Kha, the catfish breeder who produces 1,000 tons a year, says he expanded last year as factories were demanding more product for US customers, but worries about what will happen to his next harvest.

"We can still make a profit, I think, but it's reduced.... I'm just waiting for the final (US) ruling," he says.