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Point of View: Tariff time for tuna?

Greg Rushford
By Greg Rushford
August 01, 2010

Some hard numbers highlight the decline of the canned tuna industry in American Samoa, an economically depressed U.S. territory in Polynesia. In 2007, the U.S. Congress passed legislation gradually raising the minimum wage for American Samoa cannery workers from $3.26 per hour to $7.25, the same level as the U.S. mainland, by 2014. Currently, it stands at $5.26.

The territory's two tuna canneries have reacted predictably. Chicken of the Sea, which had been operating in American Samoa for a half-century, shut down its Pago Pago cannery, moving some 2,000 jobs to other tuna-exporting nations like Thailand, where workers are still paid less than $1 per hour. StarKist quickly dropped plans to produce tuna in pouches in American Samoa. Now, StarKist's cannery in Pago Pago, which had employed some 3,000 workers two years ago, is down to about 1,700 - and is phasing out another 600 to 800 jobs by year's end.

U.S. Rep. Eni Faleomavaega, American Samoa's non-voting representative in the U.S. Congress, blames "unfair" foreign competition from low-wage tuna-exporting nations. The lawmaker has been pressing for a $25 million subsidy package to keep StarKist in Pago Pago, while accusing the company's two major competitors of being "un-American." Both Chicken of the Sea and Bumble Bee, says Faleomavaega, "have adopted a business model of exploiting cheap foreign labor to clean their fish while employing skeletal crews of 200 employees or less in small U.S. operations in Georgia, Puerto Rico and California to package the final product." Faleomavaega is calling for a U.S. antidumping investigation that could slap punitive tariffs on canned tuna exports from Thailand, aimed mainly at Thai Union, which owns Chicken of the Sea. The congressman says the tariffs would help save American jobs.

While nobody would blame any politician who fights for his constituents, a closer look at who is really "American" in the eyes of the bureaucrats who administer the U.S. antidumping laws indicates that this is not a simple matter. And Faleomavaega's complaints about the adverse impact that foreign minimum-wage rates have for American jobs are undercut by a little economic research, as American Samoa itself has long been living off comparatively lower minimum-wage rates that, undeniably, pulled several thousand jobs away from the U.S. mainland. In sum, while StarKist's Charlie the Tuna is a true American icon, he might perhaps be a little confused about his real nationality these days.

Let's look first at who might be considered a true American according to the U.S. antidumping regime. StarKist, which has headquarters in Pittsburgh and employs about 70 Americans in the United States, is owned by Korea's Dongwon Industries Co. While no tuna company would comment for this article, it is unlikely that StarKist, which also exports canned tuna from Thailand to the United States, would support the imposition of antidumping tariffs on that country. Moreover, even though Thai Union's Chicken of the Sea has opened a $20 million canned-tuna facility in Lyons, Ga., which directly employs some 200 Americans, for purposes of the antidumping laws these employees could be excluded from the definition of the American tuna industry. And even Bumble Bee, which is American-owned and employs several hundred domestic tuna jobs in southern California and Puerto Rico, might not be considered "American" enough. Bumble Bee imports tuna loins from countries like Fiji and also has tuna operations in Thailand.

What about those dwindling "American" jobs in Pago Pago? American Samoans, strictly speaking, are U.S. nationals, not U.S. citizens. And according to a 2008 report to the American Samoan government by consultant Malcolm McPhee, "80 percent of the employees in fish processing are foreign workers," many from the neighboring independent nation of Samoa, where wage rates are several times lower. The foreign workers, McPhee observed, came to American Samoa "in search of higher pay."

Published statistics from the U.S. Department of Labor reveal what has been going on. Congress used to set the minimum wage lower for American Samoa than for other U.S. territories and the mainland. In 1974, the minimum wage for Puerto Rico and the U.S. mainland was $2, compared to $1.42 in Pago Pago. By 1998, the minimum wage for the Puerto Ricans and Americans had been raised to $5.15, thus giving American Samoa, then at $3.17, a comparative wage advantage.

As a U.S. territory, American Samoa has been able to export its tuna duty-free to the mainland, while other tuna exporting countries have had to pay U.S. tariffs on canned tuna, which average about 9 percent, depending upon whether the tuna is packed in water or oil. But in recent years, Congress has also given some other countries (Ecuador and Fiji) the same duty-free access to U.S. markets.

The American Samoan economy has long been propped up by artificial tariffs and wage rates that were supposed to shelter Samoans from the global economy. But now, American Samoa is facing the consequences of trying to live on an economic diet that is unsustainable in the long run.

 

Greg Rushford is editor and publisher of the Rushford Report, an online journal that tracks the politics of international trade.

July 2011 - SeaFood Business

 

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