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1997 United States-China Crawfish Tail Meat Dispute

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Case Number: 476

Mneumonic: CRAWFISH

Case Name: 1997 U.S.-China Crawfish Tail Meat Dispute

I. Identification

    1. The Issue:

    On August 29, 1997, the U.S. International Trade Commission confirmed a U.S. Department of Commerce ruling that imports of Chinese-processed frozen crawfish tails were being sold at lower prices than crawfish tail meat processed in the United States and that U.S. producers had been materially injured by the imports. The decision came after months of investigations spurred by complaints from the crawfish industry, state officials, and members of the Louisiana congressional delegation. In seeking trade penalties against the Chinese, the U.S. industry told officials in a complaint that imports of Chinese crawfish had leapt by 350% from 1993 to 1996, taking up to 70% of the U.S. market and depressing prices and sales for American competitors. As a result, a tariff on Chinese exports was imposed, ranging from 86% to 210% depending on the company exporting it to the U.S. While this decision ended a brief era of cheaper crawfish tailmeat for American consumers, it saved the ailing Louisiana crawfish industry.This issue is not purely an economic one. The small, lobster-like crustacean is a Louisiana mainstay, a symbol of Cajun heritage that has colored Louisiana culture for generations. An essential ingredient in such Cajun dishes as gumbo and etoufee, the crawfish has embodied Louisiana cuisine, a distinctive style of cooking that enjoyed a surge in popularity in the last decade. As Louisiana Senator John Breaux averred, "Crawfish to Louisiana is like cars in Detroit—it’s very important to our economy and our culture, and we must do whatever is necessary to preserve the industry." Thus, while this case study represents a classic anti-dumping dispute, the role of culture is a distinct intervening variable.

    2. Description:

    During the New Orleans Jazz Festival in 1995, revelers discovered that the cajun cuisine they had come to enjoy was being prepared using imported Chinese crawfish rather than crawfish harvested in Louisiana's muddy waters. Crawfish, small, freshwater crustaceans that are used in jambalaya, etoufee, and all manner of other Creole dishes, used to come almost exclusively from Louisiana. Fresh, whole crawfish commanded premium prices from local gourmets, while the frozen tail meat ended up in thousands of restaurants across the country. But since weather problems severely disrupted production in 1994 and 1995, the state lost its market dominance. By mid-1997, some 80 percent of the frozen variety were coming from private farmers in Jiangsu Province, China. In the course of four years, Louisiana crawfish farmers had seen their nearly 100 percent market share dwindle to almost nothing.

    Chinese crawfish imports rose sharply since the first year of imports in 1991. In 1993, China exported about a half million pounds to the United States. By 1995, the figure had jumped to 2.8 million pounds. The reason for the astounding increase of Chinese crawfish sales in the United States was that the imported crawfish was significantly cheaper than crawfish processed in Louisiana. In fact, the price was approximately half of the U.S. market price, generally ranging from $1.99-2.50 per pound for Chinese crawfish compared to $4.50-6.00 per pound for Louisiana crawfish. As a result of the drastic price difference, Louisiana crawfish producers, between 1993 and 1996 saw the value of their product decline from $13.5 million to $4.9 million. Approximately 4,000 seasonal jobs were estimated lost at a cost of about 360,000 man-hours.

    In response to this situation, in 1996, the Louisiana businesses that process raw crawfish persuaded the Louisiana State Legislature to appropriate $350,000 and, under the coalition named Crawfish Processors Alliance, retain the Washington, D.C. law firm Ablondi, Foster, Sobin and Davidow, P.C. to petition the U.S. Department of Commerce for protection, charging that Chinese farmers were selling crawfish below cost in order to drive out the domestic crawfish business. This practice is otherwise known as "dumping." A determination of dumping requires rulings by the Commerce Department and the International Trade Commission on two conditions: first, that the imported product has injured the domestic industry, and second, that the product itself sells for less in the United States than it does in its home country.

    In late August, 1997, the International Trade Commission, an independent U.S. government agency, upheld the Department of Commerce's July 24, 1997 ruling that the case was indeed dumping and imposed a tariff ranging from 92-202% depending on the exporting company. This tariff would boost the price of Chinese crawfish tails to a price comparable to Louisiana crawfish, thus making the domestic product competitive once again with the cheap import. The rationale for the decision was based on the fact that because China is not a member of the World Trade Organization, it is officially viewed as a "non-market economy". Because of this, the Department of Commerce was not required to rely on the actual cost of production to determine the "fair" price of crawfish raised in ponds by Chinese farmers. Instead, it used the cost of fish caught at sea in "comparable" economies with free markets--India, Pakistan, Sri Lanka, and Indonesia. Furthermore, transport costs within China were estimated from a 1994 newspaper report on trucking costs in India. Finally, as a cost measure for actual crawfish, the Commerce Department used the numbers on the cost of Spanish imports of live crawfish from Portugal.

    While the above measurements may seem absurd in the eyes of free traders, they are legal, according to Lawrence White of New York University's Stern School of Business. "Looney Toons assumptions" are built into the anti-dumping laws in order to give domestic producers maximum advantage, said Mr. White, the former chief economist for the Justice Department's antitrust division. Hence, the International Trade Commission deemed that the Chinese export practices were indeed "injuring" the domestic producers.

    From the Chinese point of view, it has been argued that the oversupply of Chinese crawfish tail meat in the U.S. market was primarily a result of unusually good weather conditions in China during 1995. Because China's crawfish tail meat industry is export-driven, with the United States as its primary export market, the additional three to four months of crawfish production in China resulted in additional exports to the United States. This oversupply became evident during September 1995, and as more product continued to be imported, the importers' price structures began to decline significantly, affecting pricing through July and August 1996.(information obtained from the ITC Preliminary ruling on Crawfish Tail Meat from China, 1996)

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    4. Draft Author:

    Sharyn Fitzgerald

    March 12, 1998

    II. Legal Clusters

    5. Discourse and Status: [DIS]agreement and [COMP]lete

    The International Trade Commission's August ruling makes permenant a tariff on Chinese crawfish imports ranging from 85% to 201%. This tariff more than doubled the price of most frozen Chinese crawfish tails to the current U.S. industry average of about $5.80 per pound wholesale.

    6. Forum and Scope: United States and [UNI]lateral

    7. Decision Breadth: 2

    8. Legal Standing: Law

    III. Geographic Clusters

    9. Geographic Locations

      a. Geographic Domain: North America

      b. Geographic Site: Eastern North America

      c. Geographic Impact: United States of America

    10. Sub-National Factors: No

    11. Type of Habitat: Freshwater; River Basin

    IV. Trade Clusters

    12. Type of Measure: Tariffs and Taxes [IMTAX]

    U.S. dumping investigations all follow the same course as they proceed through the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce (DOC). The first significant step after the filing of a dumping petition by a U.S. industry is at the ITC, which will make a preliminary finding as to whether the imports from the accused country or countries injure, or threaten to injure, a U.S. industry. If the ITC preliminarily finds injury the investigation then moves to the DOC. The DOC then conducts an investigation of individual companies' pricing to determine if dumping is occurring. If the DOC so determines that dumping has occurred, the investigation returns to the ITC, which would then make the final decision on whether imports from a particular country injure a U.S. industry. The ITC final injury investigation will be much more rigorous and detailed than the prelimary ITC injury investigation.

    For a detailed guide to a typical dumping investigation visit the library of Ablondi, Foster, Sobin, and Davidow, p.c.

    13. Direct v. Indirect Impacts: [DIR]ect

    14. Relation of Trade Measure to Environmental Impact

      a. Directly Related to Product: Crawfish

      b. Indirectly Related to Product: No

      c. Not Related to Product: Yes

      d. Related to Process: No

    15. Trade Product Identification:

    As identified by the U.S. Department of Commerce: "Freshwater crawfish, frozen, edible". Louisiana is a major player in the worldwride crawfish market. Competitors include Spain, Greece, Turkey, Russia, Sweden and China. There are 150 species of crawfish worldwide, inclusing 35 found in Louisiana. Most are too small to eat, but the two premier species--the White River Crawfish and the Red Swamp Crawfish--are found in Louisiana. Within the United States, crawfish also are found in Michigan, Illinois, California, and Oregon, but Louisiana's balmy temperatures allows the crustaceans to thrive. As a result, Louisiana produces nearly all the domestic crawfish sold commercially. Of the crawfish produced each year in Louisiana, 60% are raised on crawfish farms in ponds 12-to-18 inches deep. The remaining 40% are "wild" crawfish harvested in nets from shallow sloughs within the Atchafalaya Basin in Louisiana.

    Approximately 95% of the Chinese production of crawfish is in Jiangsu Province, with the remaining 5% in Anhui and Hubei Provinces. The crawfish tailmeat industry in China was created primarily for export sales to the United States, as there isonly a small, undocumented market for tailmeat in China. U.S. importers began to explore the possibility of importing crawfish tail meat from China in the late 1980s. There were reportedly only two processors in China in 1990. As demand for Chinese crawfish tailmeat increased in the United States, the number of Chinese processors grew to 15 in 1993 and to 50 in 1995.

    16. Economic Data:

    Louisiana state officials estimated that Louisiana lost 3,000 jobs, mostly crawfish peelers, because of the loss of market share to the Chinese product. The tables below display figures on money lost by the crawfish industry during the period of investigation. In addition to lost revenue, the Crawfish Processors alliance spent $350,000 to petition the case. However, even though a great deal of money was spent, the case was won, and anticipated revenue would keep the processors in business. Statistics on recovered revenue have not been compiled as of yet, however, as the tariffs on Chinese imports made retail prices the same for crawfish from both Chinese and American producers, the lost market share was expected to be recovered in a short period of time.

    Effect on Louisiana Crawfish Tailmeat Industry, 1993-1996

    Increased Imports From China                     1993: .58mil. lbs.            1996: 2.9 mil. lbs.

    Louisiana Domestic Market Share                    1993: 100%                    1996: 20%

    Decline of La. Processors' Domestic Shipments     1993: $13.5 mil.     1996: $4.9 mil.

    1993-1996 Industry Decline

    Decline in Jobs: -23%

    Decline in Hours Worked: -47.5%

    Decline in Wages: -54.3%

    17. Impact of Trade Restriction: Low

    18. Industry Sector: Food

    19. Exporters and Importers: China and United States of America

    V. Environment Clusters

    20. Environmental Problem Type: none

    21. Name, Type, and Diversity of Species:

    Name: Crawfish, like shrimp, crabs, and lobsters, belong to the scientific class Crustacea. The red swamp crawfish, Procambus clarkii, is the one that most often comes to mind when Louisianians refer to crawfish, accounting for 90 percent of the 70 to 100 million pounds of crawfish harvested each year in Louisiana. The Red Swamp Crawfish is considered the most desirable because it is a more prolific and faster growing crawfish, that produces a fat that has a characteristic deep yellow color that is preferred by customers. The crawfish grown in China for export to the United States in the form of tail meat are believed to be of the Red Swamp species.

    Type:

    Diversity:

    22. Resource Impact and Effect:

    23. Urgency and Lifetime:

    24. Substitutes:

    VI. Other Factors

    25. Culture: Yes

    The crawfish has become the ultimate symbol used to represent the Cajun people, dwellers of Louisiana since the mid-18th century. The Cajuns were cruelly exiled from New Acadia (Nova Scotia) by the British in 1765 after refusing to swear allegiance to the British Crown. In one of the nation's mass migrations, more than 10,000 found a permanent home in Louisiana. Since then, the transplanted Acadians settled into the bayous of Southwestern Louisiana, living in relative isolation, and developing one of the oldest and most distinctive cultures in America. Today, more than one million people of Cajun or mixed Cajun blood live in Louisiana. Acadiana, or "Cajun Country" has been recognized and authenticated in the State of Louisiana in 22 of the 65 parishes that comprise the state.

    "Liassez les bons temps rouler" (Let the good times roll) has always been a part of theCajun basic philosophy. Lacking formal education, they lived close to the land, intermarried, and proudly retained their customs, their religion and their own provincial form of the French language, a form of provincial French passed down orally for three centuries. Quite different from both the written Parisian Frence, "Cajun French" has virtually disappeared. But their distinctively accented English and Cajun idioms prevail as do their music and food, in which the crawfish plays an important role. Cajuns are justifiably proud of their association with the crawfish, as evidenced by the many folktales concerning the creature: for example, one such folktale tells the story that crawfish actually came to Louisiana with the Acadians. They were originally lobsters up in Acadia, but chose to follow their people into exile. During the long and difficult trip, the lobsters got smaller and smaller, so that by the time they got to Louisiana they were only a few inches long.

    Today in Louisiana and throughout the United States, the crawfish has come to symbolize the Cajun culture, showing up everywhere--on bumper stickers, t-shirts, and other souvenirs sold to visitors from around the world. The crawfish is celebrated in such Louisiana festivals as Mardi Gras and even the annual Breaux Bridge Crawfish Festival, an annual clebration that attracts tens of thousands of visitors who travel from afar to sample crawfish in Cajun cuisine, participate in a crawfish eating contest, attend a crawfish peeling demonstration, or even cheer on the contestants in the crawfish race.

    Hence, the crawfish dispute between China and Louisiana represents more than trade. As a symbol of a distinct culture, crawfish in Louisiana have been compared to cars in Detroit and wine in France. To upset the crawfish industry would not only put thousands of Louisianians out of work, but it would seriously jeopardize a way of life for a culture.

    26. Trans-Boundary Issues: Yes

    27. Rights:

    28. Relevant Literature:

    Dunne, Nancy and Stella Burch, "Shellfish Imports Stick in the Cajun Claw", Financial Times, August 21, 1997, p. 16.

    McQuaid, John. "Jefferson Sees Hope in China on Settling Crawfish Dispute", New Orleans Times-Picayune, April 4, 1997, p. A6.

    ____________. "U.S. Raises Tariffs to Stem China's Crawfish Imports", New Orleans Times-Picayune, July 24, 1997, p A1.

    Passell, Peter. "Economic Scene: Protecting America's Crawfish From Those Chinese Crawfish", New York Times, August 28, 1997, p. D2.

    Sayre, Alan. "Commerce: China Crawfish Are Being Dumped Into U.S.", Houston Chronicle, March 24,1997, p. 6B.

    Yardley, Jim. "Recipe for a Trade War; Louisiana Resists Imports of Chinese Crawfish," Atlanta Journal and Constitution. September 17, 1996.

    "Breaux: Louisiana's Suffered From Chinese Crawfish Imports", Congressional Press Release, July 28, 1997.

    "Breaux: Ruling Shows Dumping Crawfish Tailmeat in U.S.," Congressional Press Release, March 20, 1997.

    "China Faces Crawfish Tariffs", Financial Times, August 30, 1997, p.2.

    "Crawfish Issue Boils Over Into Anti-Dumping Case", Houston Chronicle, August 28, 1997, p. 3.

    "Landrieu: Louisiana Crawfish Industry in a Crisis!" Congressional Press Release, August 28, 1997.

    "Path Clear for Crawfish Fines", Journal of Commerce, September 2, 1997, p. 3A.

    "Trade Wars: Hunting Commie Crawfish," Economist, February 28, 1998, p. 35.

    "U.S. Rules China Dumping Crawfish; Readies Punitive Tariffs", Agence France Presse, August 30, 1997.

    U.S. International Trade Commission. Publication 3002. Crawfish Tailmeat From China: Investigation No. 731-TA-752 (Preliminary). November, 1996.

     

     


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