Case Study The Indian Shrimp Industry Submitted By: Aditya Goel(2A), Ankur Sinha (6A), Ashim Kumar

r Kar(9A), Atul Kumar(11A), Ratin Duggal(37A)

Summary The Petition

The Ad Hoc Shrimp Trade Action Committee (ASTAC) filed an anti-dumping petition against six countries Brazil, China, Ecuador, India, Thailand and Vietnam. The petition alleged that these countries had dumped their shrimps in the US market. The petition meeting statutory requirements, on 21 January 2004 the US Department of Commerce (DOC) announced the initiation of anti-dumping investigations against the six countries. Products covered include warm water shrimp, whether frozen or canned, wild caught (ocean harvested) or farm-raised (produced by aqua-culture), head-on or head-off, shell-on or peeled, tail-on or tail-off, deveined or not deveined, cooked or raw, or otherwise processed in frozen or canned form. The Indian government and the Indian shrimp industry were aware of the threat much before the actual petition was files. Arun Jaitley, the then Minister for Commerce, made a statement in June 2003 after his official visit to the United States that they are anticipating an action against their shrimp exports because Indian Shrimps share in the US market is on the rise. The main contentions of the petitioners were as follows. The six named countries accounted for 74% of shrimp imports in the US market. Imports from the six countries increased from 466 million lb. in 2000 to 650 million lb in 2002. Import prices of the targeted countries had dropped by 28% in the previous three years. The average unit value of the targeted countries in 2000 was $3.54; this had fallen to $2.55 in 2002, on a headless, shell-on equivalent basis. The average dockside price for one count size of gulf shrimp dropped from $6.08 to $3.30 per pound from 2000 to 2002. The United States was the most open market in the world. High tariff rates in other large importing countries provided a powerful incentive for exporters to increase shrimp shipments to the United States. Likewise, the US market also served as the market of last resort when shrimp shipments were denied entry to other markets such as the European Union due to the discovery of unacceptable levels of contaminants.

Response of the Indian shrimp industry

Indias marine products industry has been one of the major export success stories. From an export base of just Rs. 450 million in 1971-2, it increased to Rs 68,810 million in 2002-3. Shrimp is the mainstay of Indias marine product exports.

To explore the possibilities of avoiding the anti-dumping action and, if necessary, to take legal action, a delegation comprising senior members of the SEAI went to Washington in September 2003. The Seafoods Exporters Association of India (SEAI) announced that it would meet the cost of the legal process and not leave the cost to be borne by those Indian firms that might be selected for investigations. The SEAI estimated a total budgetary requirement of Rs. 70 million to fight the case. Of this, SEAI would mobilize Rs. 40 million internally and the remaining Rs 30 million would be collected from its members, depending on the volume and value of their individual exports to the US market. It put forward two major differences between the Indian and the US sea-caught shrimp and offered reasons why Indian shrimp is cheaper. First, there are specific variations between the shrimp caught off the south-west coast of the United States and in Indian waters, so that prices are bound to be different. The threat for the domestic shrimp farmer in the United States comes from China, Thailand, Indonesia and Ecuador. Indias shrimp exports are predominantly of black tiger and scampi varieties which are not cultivated in the United States, according to the president of SEAI. Second, while fishing in the United States is a capital-intensive activity calling for major investment, in India shrimp capture is carried out with a very low level of capital and requiring hardly any investment. This makes the cost of production considerably lower in India compared with that for shrimp sea-caught off the US coast. When the International Trade Commission (ITC) decision on the preliminary affirmative decision came on 17 February 2004, the Indian shrimp industry termed it discriminatory and unjust. The SEAI and its members were getting ready for the next set of actions. After the preliminary positive determination by the ITC, the next step was for the Department of Commerce (ITA) to prove whether there had been dumping and at what level. As part of that exercise, a few leading firms would be selected from each country and detailed questionnaires would be sent to them. By April 2004 there was widespread concern among the exporters, growers and other stakeholders. According to Joseph Zavier, general secretary of the Kerala Boat Owners Association, since February the shrimp catch had been reduced by 40-45%. The price per kilogramme of white shrimps, Rs. 280 a few months previously, had crashed to Rs. 100 in April, while the price per kilogramme of another variety of prawn had fallen from Rs. 80 to Rs. 40. The preliminary determination came on 28 July 2004. In a media briefing on 29 July 2004 the chairman of the Marine Products Export Development Authority (MPEDA) observed, We are not happy with the preliminary determination of the duty rates. The final determination would be on 16 December 2004 and we will fight the case further and try to bring it down to zero level. The investigation has now moved into the final determination stage. As part of the procedure, DOC officials visited India in August-September 2004 for onsite verification of the information and data submitted by the mandatory respondents during the preliminary phase of the investigations.

Analysis and Learning Planning early brought an understanding of the nature of the problem and how to face it.
This resulted in the selection and appointment of the legal counsel, as early as September

2003. The importance of co-ordinated action by the threatened partners, even those outside India, was commendable and was worked on by the trade representatives with their counterparts in several Asian countries included in the petition.

Another achievement has been the speedy resolution of the issue of financing. The fact that
the Association decided to bear more than 50% of the total costs from its internal resources and the rest from the contribution of members according to the value of their respective exports was critical. Equally critical has been the governments steadfast support for the shrimp industry.

Anti-dumping cases take a long time to be finally decided. During this period, trade is
affected because importers are risk-avoiders and will, therefore, be likely to shift to new sources of supply until the uncertainty is resolved. Becomes a huge problem where the exported product originate in small and mediumsized enterprise sectors, and a large number of poor and marginal farmers, artisans or unskilled or semi-skilled labour are engaged in the production of such goods. It becomes very difficult for them to earn their livelihood because trade is affected in a huge manner. This case has highlighted the need for the government to look at this issue.