The threat of cheap U.S. farm produce
While CFA (Catfish Farmers of America) is claiming losses due
to cheap Vietnamese fish import, Vietnamese farmers could be
challenged by cheap U.S. corn and soybeans that may flood the
local market following the bilateral trade agreement
While Vietnam is trying to prove that its tra and
basa fish are sold cheaper than catfish on the
American market not because of dumping but
due to lower production costs, I would like to
point out that most of the farm produce that the
U.S. exports to other countries is very cheap
partly because of low production cost and
subsidies from the American Government.
Some typical examples are corn and soybeans.
In the years 1972 and 1973, farmers in South
Vietnam were encouraged to grow a new hybrid
corn rich in lysine to feed livestock. However,
nobody was able to sell their corn after harvest
because the local market was flooded with
American corn that was imported under the
PL480 program and sold at half the
price of domestically-grown corn. Farmers were very frustrated that the
same people who allowed the import of the dirt cheap corn encouraged
them to grow corn with all their effort.
As a traditional practice, Vietnamese farmers usually agree on a
comparative price for different farm produce. If the price is broken for a
certain reason, the market must readjust it to the agreed rate. For
instance, farmers in a village can grow rice, sweet potatoes and corn,
and raise pigs. They can exchange these products based on the price of
rice. When a farmer kills a pig, neighbors can come and share the meat.
Those who take one kilo of meat have to pay with 20 kilos of rice.
Meanwhile, one kilo of soybeans equals 3-4 kilos of rice and one kilo of
corn equals 1.2-1.5 kilos of rice. In recent years, the price of corn has
ranged between VND1,600 and VND1,800 per kilo and the soybeans
between VND4,000 and VND7,000 per kilo. The latest figures show that in
August the price of corn is VND1,800 per kilo and the soybeans
VND7,000 per kilo, exactly the same as farmers' calculations.
What will happen when American soybeans and corn are imported into
Vietnam? First, the scenario in 1972-1973 will repeat: farmers will not be
able to sell their corn and soybeans because the production cost is much
higher compared with that of the U.S.
The U.S. is the world's largest soybean exporter, accounting for 54% of
the world market in 2000 with 26.9 million tons. According to the U.S.
Department of Agriculture, American soybean output increased steadily
from 55 million tons in 1995 to 70 million tons in 2001, sending prices down
further. According to a bulletin issued by the Chicago Board of Trade
(CBOT) on August 9, the export price of American soybeans was only
US$204 per ton or VND3,060 per kilo as compared with VND6,000-7,000
per kilo of Vietnamese soybeans.
The U.S. is also the world's top corn producer. According to figures from
the Association of American Corn Farmers this year, the U.S. produces
335 million tons of corn from the 2000-2001 crop or 41% of the world's
output, and exports nearly 70 million tons, accounting for 69% of the world
market share. The average price of American corn is US$2 per bushel or
VND860 per kilo. According to the August 9 CBOT bulletin, the export
price of American corn was US$95.9 per ton or VND1,450 per kilo, lower
than the current price of VND1,800 per kilo of Vietnamese corn.
The prices of other American farm produce like meat, eggs, milk and
dairy products are still lower than those in Vietnam because they are
subsidized by the Government. Just two months ago, President Bush
signed a Farm Act that allocates an annual budget of US$19 billion to
subsidize farmers.
A comparison of prices of only two produce, corn and soybeans, shows
that Vietnamese farmers cannot compete with American farm produce.
Other Vietnamese produce such as rice and fruit are also more
expensive yet less delicious. For example, the tasty Thai durian is sold at
VND15,000 per kilo at Thai supermarkets and only VND12,000 per kilo at
wholesale markets in suburban Bangkok. Meanwhile, the Vietnamese
version costs more than VND20,000 per kilo. It is obvious that the
greatest danger to Vietnamese farmers is an inability to compete with
their counterparts in other countries. With this disadvantage and in the
context of free trade agreements that Vietnam has signed with other
countries like the ASEAN Free Trade Area and the bilateral trade
agreement with the U.S., Vietnamese farmers will certainly lose on their
home turf. Fortunately, we will not be completely defeated.
In the field of
aquaculture, with their skills and experience, Vietnamese fish raisers can
produce fish products at prices lower than in other countries, especially
their American peers.
In the production field, each country has its own advantage in natural
resources and labor. Therefore, one country cannot impose its own rule
on another. So, I would propose that the U.S. International Trade
Commission (ITC) consider American farmers' claim with a fair mind and
not let the majority of American consumers suffer from buying expensive
products due to the interest of a minority of producers. In the trade
relations between the two countries, if American judges do not base their
judgment on a clear understanding of the advantages of farm produce of
the two countries but on a biased view like the argument of the CFA, don't
they think that Vietnamese farmers will someday sue their American
peers for dumping cheap produce like corn and soybeans?
By Prof. Vo Tong Xuan, An Giang University - The Saigon Times Weekly - August 24, 2002.
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