North Bay Village, Miami, Florida, Presidente Supermarket, frozen food aisle, seafood, uncooked and … [+] cooked shrimp, tilapia and fish. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)
Jeffrey Greenberg/Universal Images Group via Getty Images
The conduct of U.S. trade policy in recent years has served to squander America’s soft power and deplete a once deep reservoir of international good will toward the United States. Since 2017, Washington has turned its back on trade agreements, thumbed its nose at the rules-based trading system it created, massively subsidized efforts to draw global production capacity to the United States, and imposed punishing trade restrictions on countries rich and poor.
Although a rapidly evolving geopolitical environment may justify certain policy changes, depriving U.S. consumers of anti-inflationary imports, throttling the economies of important allies, and providing greater opportunities for China to win over the Global South constitutes a lot of collateral damage. Yet Washington forges ahead, sticking to script and disregarding consequences.
On October 22, the U.S. International Trade Commission (ITC) will hold a hearing to decide whether the domestic shrimp industry is suffering material injury on account of “unfairly” low-priced imports of frozen warmwater shrimp from Ecuador, India, Indonesia, and Vietnam – countries accounting for 85% of the 1.8 billion pounds of shrimp consumed in the United States in 2022. An affirmative finding would likely result in the imposition of new tariffs (i.e., customs duties or border taxes), which would raise grocery store prices of an increasingly popular source of protein, while dealing a blow to promising industries in developing countries that Washington should be courting.
Consider Ecuador. This small, oil-dependent economy is beginning to succeed at diversifying its economic profile, becoming the world’s largest exporter of shrimp in recent years. Shrimp accounts for a significant portion of Ecuador’s total exports, employment, and national output. Of course, that helps explain the government’s and industry’s record of meeting – and commitment to maintaining – the highest standards for product traceability, which is crucial for food safety and for monitoring and deterring environmental infractions and other illicit practices, such as forced labor.
The industries in Ecuador and the other countries subject to the pending trade decision operate in a controlled setting, where shrimp are raised from larvae in aquaculture farms. Relative to the U.S. industry, the production process is more advanced – more modernized, more capitalized, more predictable, more cost-effective, and more environmentally sustainable. The U.S. industry is dominated by traditional, “wild caught” methods, involving shrimp boats casting nets out at sea. The outcomes are subject to the whims of weather and stock, and typically beset by high rates of by-catch – the residual capture and depletion of turtles, fish, and other aquatic life.
It doesn’t have to be this way. The domestic industry has had plenty of opportunities to upgrade. For 20 years, the domestics have been protected by import tariffs. Antidumping measures have been in place on shrimp imports from China, India, Thailand and Vietnam since 2005. But rather than use this long period of protection to invest in modernization, U.S. shrimpers opted to extort payments from foreign producers in exchange for their suspension of proceedings that might have resulted in higher duties.
Tuesday’s hearing may lead to the addition of countervailing duties on imports from India and Vietnam and both new antidumping and new countervailing duties to imports from Ecuador and Indonesia. Under the antidumping law, duties can be imposed on imports if a foreign producer’s U.S. prices are lower than his home market prices (or priced below cost) and those imports are determined to be causing or threatening material injury to the domestic industry. Under the countervailing duty law, similar relief is granted when imports are found to be injurious and specifically subsidized by foreign governments. But the process is slanted in favor of domestic producers.
Unfortunately, these laws are administered with only the petitioning industry’s health in mind. There is no statutory requirement that the impact of prospective duties on consumers or downstream industries, such as processors, distributors, or restaurants, be considered. When you stroll down the frozen food aisles at your grocer, you may notice large bags of shrimp. More frequently, they are placed in multiple locations due to their growing popularity. Chances are the labelling on those bags reads “Product of India” (or Indonesia or Ecuador) – the three top foreign sources. After rulings are issued in these cases, consumers may notice those bags carry much higher prices.
The trade laws are portrayed as necessary for protecting upstanding U.S. companies and their workers from predatory practices of foreign producers hell bent on driving down prices and driving American firms out of business. But they are really just tools that enable domestic producers the ability to raise their prices, which means higher costs for other domestic firms in the U.S. supply chain. Ultimately, it’s a regressive tax, that ensures inflation persists most acutely for lower-income Americans.
Arguably, no U.S. trade policies breed more frustration in developing countries than these “unfair trade” laws. Political, whimsical, and sometimes capricious decisions made by administrative agencies in the course of an antidumping or countervailing duty investigation can make or break the financial prospects of businesses, industries, and even entire economies. Yet, the laws provide no scope for weighing the likely impacts on foreign economies, bilateral relations, or the social and geopolitical consequences.
Accordingly, while Ecuador’s success at diversifying its economy and building its shrimp farming industry is at risk in the pending decision, it is not an official concern of the ITC commissioners. Others in the U.S. government should make the connection and take note of the fact that Ecuador is one of handful of democracies in Latin America. It is a reliable ally in a region where U.S. initiatives are opposed and U.S. interests undermined by countries, such as Venezuela and Bolivia. Moreover, while the United States is still Ecuador’s largest trading partner, China has been active in the region, aggressively courting the Ecuadoran government and industry with financing and infrastructure investment, and concluding a comprehensive trade agreement last year.
To many businesses and governments abroad, U.S. trade policy is the face of U.S. diplomacy – the most bankable feature of foreign policy. It can be a useful tool in the battle with China to win the hearts and minds of other countries. It is also the bridge between U.S. consumers and global markets. It’s past time for U.S. policy to coherently reflects these realities simultaneously.
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Publish date : 2024-10-21 00:50:00
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