Regional Update (April-June 1997)

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Cover Story - Chinese Crawfish Reduce Louisiana Market Share

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Chinese Crawfish Reduce Louisiana Market Share

by Harriette Grissom, contributing editor

D uring the past five years, Louisiana crawfish producers have forfeited 80 percent of their market share of processed crawfish tail meat to Chinese imports, resulting in a loss of about $40 million to the state's economy, according to Louisiana Department of Agriculture and Forestry's Roy Johnson, director of market development and trade. One-quarter of the state's processing plants have gone out of business, and 3,000 workers have lost their jobs.

In Louisiana, the overall economic impact of the decline in crawfish sales represents a five-year decrease from 0.057 percent of the state's income to 0.046 percent, but the effect on the local communities where the industries are located may be greater than the numbers suggest.

'Dumping' or Global Trade?

Louisiana crawfish processors believe their markets have been targeted for "dumping"—selling for less than fair market value—by Chinese producers whose intent is to claim the market for their own. From the Chinese perspective, a successful effort at private enterprise and entrepreneurship has sparked a protectionist reaction. Inherent in the controversy are the difficulties of defining fairness in a global trade environment.

In September 1996, the Crawfish Processors Alliance of Breaux Bridge, La., petitioned the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce to investigate their claim that processed crawfish tail meat from China was being dumped on U.S. markets. Dumping of goods is a violation of the Fair Trade Act subject to redress through tariffs or other restrictions.

While Louisiana producers typically sell crawfish tail meat at between $4.50 and $7 per pound, depending on the season, prices for tail meat imported from China were as low as $2.38 per pound in 1994, hovering more typically around $3 per pound. Consumers of crawfish are primarily in Louisiana and the West Coast, though markets in New York and the East Coast are growing.

The lower prices of Chinese crawfish have effectively pushed Louisiana producers out of the U.S. processed tail meat market. Figures filed in the antidumping petition show that Louisiana tail meat sales dropped 70 percent over a three-year period. Between 1993 and 1996, U.S. tail meat shipments dropped 63 percent in value. Revenue to the state's processing industries collapsed from $21.8 million to $4.9 million. Only crawfish connoisseurs and Louisiana loyalists have been willing to pay the difference to buy the local product.

Chinese crawfish growers have increased their shipments to accommodate brisk sales abroad. Chinese crawfish exports, most of which are shipped to the United States, reached 2.8 million pounds in 1995—up from a mere 72,000 pounds in 1991. The value of Chinese imports, worth only $238,000 in 1991, climbed to $9,066,000 in 1995. Chinese crawfish tail meat now supplies more than 80 percent of U.S. markets, according to Johnson.

Crawfish grower Eric Bourgeois asserts that China is not only muscling in on U.S. tail meat markets but also courting the lucrative Swedish market—currently an important export outlet for Louisiana's product. Thus far, he says, Louisiana growers, who once provided 90 percent of the world's crawfish, have been able to hang on to the Swedish market. They also supply the brisk local market for live whole crawfish.

Bourgeois says thus far he has been able to sell all the crawfish he produces on his 50-acre farm—about 30,000 pounds a year on average—but he is waiting for a final determination about tariffs before he considers expansion of his business. He believes that in the long run continued imports of low-priced Chinese crawfish will cause the local industry to shrivel.

The Chinese Perspective

From the Chinese perspective, the situation is considerably more complex. In determining "fair value," the Commerce Department has treated the People's Republic of China as a nonmarket economy. In this situation, proxy nations are used to assess fair market value. India has been chosen to determine the costs of various inputs into the industry, and Spain has been chosen to set the value of the product—the crawfish itself—since in terms of crawfish production, Spain's economy most approximates that of China.

But Chinese representatives believe the industry provides a development opportunity. Chinese crawfish factories are located in relatively remote rural areas where crawfish proliferate and few opportunities exist for wage-earning employment. Yingchao Xiao visited 15 or 16 factories in Jiangsu Province, where much of the farming takes place, to gather information for a California legal firm representing Chinese crawfish importers in the United States. She believes that the abundance of crawfish, the ease with which they are caught, and the availability of low-cost labor contribute to an ideal occasion for this private enterprise and, in turn, economic development.

Representatives for the Chinese producers also assert that Louisiana crawfish growers have done little over the years since the 1940s, when crawfish production became a viable industry, to develop new markets for crawfish tail meat. They claim that, since importers of the Chinese product have created new markets, Louisiana producers are eager to acquire them. Bob Odom, Louisiana Commissioner of Agriculture, counters with the observation that new markets have sprung up strictly in response to the rock-bottom prices of the imported Chinese product.

Although crawfish are indigenous to the People's Republic of China, prior to their cultivation as an export crop they were viewed as pests. Bourgeois says the crawfish currently being exported from the People's Republic are a variety native to Louisiana introduced into China 30 years ago.

September Tariff Decision

If the ITC and the Commerce Department rule in favor of Louisiana crawfish producers, tariffs of up to 200 percent will be levied on Chinese imports to bring their prices more in line with Louisiana's. Preliminary rulings by both agencies indicate sufficient evidence of dumping and injury to Louisiana producers to proceed to the next stage of investigation. A final ruling is expected in mid-September 1997.

The Commerce Department will determine if dumping has actually taken place. The ITC will determine whether there has been "material injury" to Louisiana producers and whether that injury is in fact due to the importation of Chinese product.

Louisiana Commissioner of Agriculture Odom is optimistic that preliminary rulings, which have set tariffs on Chinese imports at 70 to 200 percent, will stay in place. The goal, Odom says, is not to drive the Chinese out of the market but to create a "level playing ground."