South-Western College Publishing - Economics  
The U.S. giveth; the U.S. taketh away.
Subject Vietnam braces itself for a trade fight over shrimp.
Topic International Trade
Key Words

shrimp, U.S., Vietnam, trade, tariffs, dumping

News Story

Vietnamese shrimp producers, who farm shrimp in fairly cheap coastal land ponds, have been able to exploit advantages over U.S. shrimpers, who still trawl the oceans for shrimp. As a result of their cost-effective means of harvesting shrimp, Vietnamese producers support fully 90% of the US shrimp market, much to the dismay of U.S. shrimpers. Ever since the 1980s, when the Vietnamese economy was engaged in "doi moi," a version of perestroika, Vietnam has increased its trade with the U.S., and the U.S. is now Vietnam's largest trading partner. Trade restrictions could threaten that trading relationship Wholesale shrimp prices have fallen 40% since 1997 after the increase in world shrimp supply, which was led by Vietnam. In response, the U.S. government may impose tariffs on imported Vietnamese shrimp, arguing that farmers are "dumping" shrimp on the U.S. market at prices below the cost to harvest the shrimp and ship the product to market. This action is seen by many as a curious contradiction of U.S. economic globalization: Reward the most efficient producers so that consumers everywhere can benefit, except when consumers' benefits come at the detriment of U.S. producers' interests. Vietnam's vice minister for trade argued, "If the tariffs are imposed, that will mean fewer shrimp for the U.S. market and higher prices for consumers."

(Updated December, 2004)

Questions
1.

Consider the statement made in the summary by the Vietnamese vice minister for trade. Is the assertion correct? Draw a graph of supply and demand to explain why or why not.

2. Explain why Vietnam may have a comparative advantage over the U.S. in shrimp production.
3. If the U.S. shrimpers are not as efficient as the Vietnamese, why don't U.S. shrimpers try to become more efficient? How might they do so?
Source Peter Fritsch. "As Shrimp Industry Thrives in Vietnam, Trade Fight Looms." The Wall Street Journal, 21 October 2004, http://www.wsj.com.

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