U.S., Vietnam in Dispute Over Catfish Exports

LONG XUYEN, Vietnam —  Nguyen Hoang Kha has no regrets that he sold his small construction business and invested in catfish farming when Vietnam and the United States ended a generation of enmity and became trading partners. The decision lifted him out of poverty, offering opportunity beyond his dreams as his communist homeland changes to a free-market economy.

“I did all this without a bank loan and with a lot of hard work,” said Kha, 47, his hand sweeping across acres of catfish cages stretching up the waterways of the Mekong River. “But it is mine, not the government’s. If it goes well, I benefit. If it goes badly, I lose money. It is a risk I am willing to take.”

Like Kha, hundreds of farmers in the Mekong Delta are talking like capitalists these days as catfish -- the whiskered, flat-headed, bottom-dwellers -- has become Vietnam’s fastest-growing export to the United States, grabbing nearly 20% of the $590-million U.S. market and providing powerful ammunition for reformers who want to lay Vietnam’s Marxist economy to rest.

But the 300,000 or so mostly poor Vietnamese engaged in catfish farming haven’t had much time to savor their success. Last December, 10 days after a bilateral trade agreement between Vietnam and the United States went into effect, they found themselves in the middle of a trade dispute with the U.S. that threatens to penalize them for putting their fish on America’s barbecues. The clash left Vietnam perplexed and resentful and could, the Hanoi government says, threaten relations between the two countries.

Vietnam’s adversaries are America’s catfish farmers, who have spent millions of marketing dollars to transform the image of the fish dubbed “river rats” into a delicacy. “Catfish: The Cultured Fish,” says one slogan. The campaign has helped make catfish the fourth-best-selling fish in the U.S., after tuna, Alaskan pollock and salmon. But concerned by falling prices and Americans’ growing penchant for frozen Vietnamese fillets, they have set out to teach Vietnam a lesson about the hardball world of global trade.

Backed by a powerful political ally, incoming Senate Majority Leader Trent Lott (R-Miss.), the Mississippi-based Catfish Farmers of America began advertising in trade publications. “Never trust a catfish with a foreign accent,” one ad said. Then the group got Congress to slip a proviso into law declaring that of the 2,500 species of catfish, only those raised in America, known by the scientific name Ictaluridae, could be sold as catfish; Vietnam’s species -- which look like catfish and taste like catfish -- weren’t catfish. They were basa or tra, to which U.S. diners asked, “What’s that?”

In June, the Catfish Farmers of America filed a petition charging Vietnam with “dumping” catfish in the U.S., selling at below-market cost. The group is seeking import duties of as much as 190% on basa and tra. The U.S. International Trade Commission ruled in August that there was a “reasonable indication” the U.S. industry was threatened by “material injury” by dumping. A final U.S. ruling on the dispute is expected in April.

“The popular mood at home is bad over this problem,” said Vu Quang Minh, chief economist for the Vietnamese Embassy in Washington. “The bilateral trade agreement took four years of negotiation, and we have people who didn’t want to rely on trade with the U.S. Now they’re saying, ‘See, I told you so.’ I’m sure this is an economic issue, not a political one, but the timing is very unfortunate.”

Valerie Slater, a Washington attorney representing the Catfish Farmers of America, notes that the dumping petition is not related to the bilateral trade agreement and that after years of running a rigid state-controlled economy, Vietnam has been exposed to the big leagues of fair-trade practices.

“The United States has filed dumping cases again and again against all kinds of products, some of them from our closest trading partners, in Canada, Europe, Latin America,” she said. “If you are going to trade in this country, you have to be aware of the laws and the definition of fair trade.”

Still, Hanoi officials are irate.

Sen. John McCain (R-Ariz.), who was a prisoner of war in Vietnam and later helped forge reconciliation between Hanoi and Washington and encouraged Vietnam to open its markets, calls the catfish war “a troubling example of the very protectionism we have urged the Vietnamese to abandon.”

As part of its investigation into Vietnam’s catfish industry, the Commerce Department judged the nation as having a “nonmarket economy,” a decision that could hurt Hanoi’s export of products other than catfish. The ruling appears to support the U.S. catfish farmers’ contention that Mekong Delta farmers sell their catfish at artificially low prices because of government subsidies.

“Compared with many Eastern European countries recognized by the United States as a market economy,” stated Tuoi Tre, the Communist Party’s youth newspaper, “Vietnam has taken greater steps than them in applying economic market principles.” Other papers have commented that Washington subsidizes U.S. farmers with $180 billion a year. Does that mean the U.S. has a nonmarket economy, they asked.

“The government provides training classes for farmers and infrastructure like roads ... nothing else,” said Doan Huu Luc, chief agriculturist for An Giang province, Vietnam’s largest catfish producer. “Farmers can sell to private or state processors. Their costs are low because labor is cheap, the feed is largely locally grown rice and wheat, and the flow of the Mekong River provides a good natural setting for raising fish. Go to the market down the street and you see that catfish sell here for only” 25 cents a pound.

Nguyen Hoang Kha, the catfish farmer, said the dispute hasn’t yet hurt his business, but it will if the Commerce Department rules against Vietnam. He added: “I’ve heard the U.S. says we’re selling below cost. Why would we do that? I’ve got to pay myself at the end of the day. I’m not a charity.”