Kodiak (Alaska) Daily Mirror
The need to support U.S. seafood by implementing import protections
By Duncan Fields
Sometimes I've eaten something and experienced a vaguely unpleasant taste. After setting for a while, it soured in my stomach. That's how I've come to feel about the John Sackton "Winding Glass" piece published in Seafood.Com on November 28 claiming that "Domestic Producers from Pollock to Shrimp Upend Seafood Supply at their Peril". The more I've thought about John's reasoning, the more I realize it is flawed and just doesn't set right.
First, a disclaimer. I don't know about nor will I comment on shrimp…. domestic, international or extraterrestrial. While I suspect, as John has indicated, that U.S. shrimp producers' concerns are parallel to Alaska pollock producer concerns, I'm not qualified by information or experience to address them. On the other hand, Alaska seafood and the domestic market for our pollock products is something I do know about.
The Sackton thesis is that regulators should "not rewrite customs laws so as to ban Russian fish raw material transformed into other products in China." He builds on this thesis by assuring us that U.S. pollock is just in a "bust "cycle after covid and therefore, by inference, will "boom" again without regulation. Mr. Sackton further asserts that Russian pollock reprocessed in China is like a car manufactured in the U.S. with foreign parts, it's still a U.S. car and therefore, why would we treat Russian pollock reprocessed in China as anything other than a Chinese product? Finally, John asserts that because so much pollock (and cod and haddock) sold in the U.S. is of Chinese/Russian origin, stopping China/Russian imports would create a market vacuum. This market vacuum cannot be filled by U.S. and non-China/Russia suppliers. Therefore, our pollock markets will collapse and our customers will be lost. He concludes, "we are not the boss of the consumer" and that "we will lose the benefit of a diverse and dynamic market." In other words, anything other than status quo is unacceptable. None of these arguments make sense to me.
Alaska seafood producers do not compete with China/Russia on a level playing field and the highest good, for America and for the world, is not the consumer's lowest price. Artificially low prices have negative real-world consequences. Generations of Americans have decided, through legislation, that it is better to have American fishing vessels built with American steel and that American seamen need to be protected with the Jones Act safety net. Environmentally, Americans have legislated that our fisheries must be managed sustainably and with heavy monitoring at-sea and in processing plants. We try to ensure that fuel spills and harmful environmental discharges will not occur and we are permitted and monitored as such. In addition, Americans have prescribed that seafood workers must be protected with a host of safety requirements. Working hour restrictions, over-time, equipment safety and work-place safety protocols are strictly enforced. Finally, yet another regulatory regime regulates seafood consumer safety, chain of custody and quality control. These requirements all reflect honored American values, but they come with real costs. These costs are transferred to American seafood processors, America's fishermen, and America's consumers. Yes, generally speaking, American produced seafood costs more to produce.
If we in America believe in American made, worker safety, a fair wage, environmental stewardship, and seafood sustainability we should also believe in a competitive domestic environment and recognize that the American seafood companies and individuals that bear the costs of our regulations also deserve protection or at least fairness in our domestic market. It's that simple. And our current trade policies and resulting domestic market does not reflect this.
Cheap consumer pricing of Russian/Chinese pollock subsidizes and sustains two countries that have few if any parallel, cost inducing, regulations. Just in the last few months, we've seen headlines regarding Chinese slave labor, illegal, unreported and unregulated fishing, Russia dumping product on the global market at very low value to fund their war, market manipulations, banking shenanigans and government interference. Moreover, in contrast to how the U.S. has, until now, treated Russia and China, American seafood producers have been banned from exporting American origin seafood to Russia since 2014. In addition, in 2018, China imposed a series of high import tariffs on a number of American seafood products. The "diverse and dynamic" market that Mr. Sackton champions does not exist and only advantages Russia and China. What does exist is a manipulated market that, in many cases, excludes American seafood products like pollock, cod and haddock because of the U.S. cost structure that protects U.S. workers, the resource and the environment. And by the way, Alaska once frozen pollock is the better product. Ninety nine percent of all U.S. caught pollock sold in the United States undergoes primary processing here in the U.S. A simple focus on consumer price blurs this quality distinction.
Am I stretching my point? This is what the House Select Committee on the strategic competition between the U.S. and China said in their report, released today, regarding the American seafood sector: "China uses an intricate web of industrial policies, including subsidies, forced technology transfer, and market access restrictions, to distort market behavior, achieve dominance in global markets and increase U.S. dependency on PR imports". This "dependence" described by Mr. Sackton as a necessary supply for maintaining consumers is, according to Congress, a dependence that undermines American seafood producers and corrodes the economic fabric of our country, not a dependence that should be encouraged or continued.
Let's get back to the Sackton car analogy. Yes, component parts that go into a car can become, when combined as a whole, a vehicle "made" in a country other than where the parts originated. Food products are different than cars. The product is the thing itself. It can be sliced and breaded and blocked and minced but the product is the fish. Just like a car can be prepped and painted and waxed and tuned, but you are still starting and finishing with a car. So, it is with seafood. China is not taking a protein from somewhere and combining it with an enzyme for somewhere else and a series of genes to make a pollock fillet. They are taking Russian pollock and making it into a Russian pollock fillet with Chinese cutting or Chinese breading. This does not make it Chinese pollock! Moreover, speaking of cars, the U.S. does recognize the need to protect other domestic industries from inequitable Chinese competition. U.S. electric vehicle manufactures are protected with tariffs on Chinese electric vehicles. If Chinese import tariffs are justified for protecting American electric vehicles, they are also justified for protecting American seafood producers.
Why is the U.S. so slow to grasp the basic truth that America's seafood industry needs Chinese/Russia import protections? Europe is way ahead of us. The day before Mr. Sackton published his views, the European Economic Community announced that they would no longer allow duty free treatment for Russian and Belarusian origin fishery products, including those products reprocessed in China. The EU is imposing standard tariffs, such as the 13.7% tariff imposed on Alaska pollock fillet blocks. While this wasn't an all-out ban, it does show that the rest of the western world recognizes the need to protect American and European seafood producers from Russia and China.
Just a week later, Senators Cotton, Hyde-Smith and Scott also recognized that the Sackton thesis of status quo was not tenable for U.S. seafood producers. They introduced the "Ban China's Forbidden Operations in the Oceanic Domain (C-FOOD) Act", legislation that would ban U.S. imports of Chinese seafood and aquaculture products. I understand that Senators Murkowski and Sullivan are working on parallel legislation focused on Russia. Also, on December 14, 38 house members including Alaska's Congresswoman Mary Peltola presented a bi-partisan letter to President Biden requesting that his administration "close the loophole" of Russian seafood passing through China or other 3rd parties and entering the U.S. The letter states, "sanctions against Russian seafood would provide greater fairness to domestic seafood producers." I trust that these Senators and Representatives see the China pass through for what it is, and will be able to persuade their colleagues to rapidly pass American produced seafood protective legislation.
My final point is that if the status quo is maintained and Mr. Sackton and his allies are successful, many American fishermen and processors will go out of business. Fishermen are the very beginning of the supply chain and are drowning in costs, as are U.S. processors. Many seafood producers have been caught with significant inventory trying to compete in the global seafood market (including with countries like Russia and China) while seafood prices have plummeted. In the next production cycle, I would venture most seafood processors and wholesalers will attempt to adjust the price paid to fishermen in an effort to secure their historical operational margins. But processors are caught in a box if operational costs are so high and markets so depressed that there are no margins. And if the ex-vessel price is reduced too far, fishermen can't afford to operate (and the processor will lose their supply). On the other hand, if they pay enough for fishermen to make a living, they may lose their business.
Fishermen also have little control over their operational costs fuel, equipment, nets, insurance, wages and supplies just keep costing more money. Fishermen have already absorbed, in part, lower ex-vessel prices due to increased processing costs for labor, freight and materials. Now, this year, inflation, contracted credit and the currency fluctuations are further ensnaring fishermen. Fishermen don't have anyone further down the supply chain to whom they can transfer some of their costs. Consequently, fishermen margins for most U.S. caught species are so thin that they may be non-existent. In summary, unfair competition from China/Russian seafood products entering the U.S. have pushed much of America's seafood industry to the brink of economic failure.
John Sackton predicts that import limitations on China and Russia seafood will reduce American consumer seafood consumption particularly for products like Alaska pollock. John's predictions may or may not come true. However, we do know without a shadow of a doubt on the docks here in Alaska that Chinese/Russia seafood imports are sinking our industry and that legislation to protect us from Russia and China will serve to stabilize prices and enable equitable, level playing field, competition.
Duncan Fields is a life-long Alaska fisherman and advocate for small boat fishermen and rural communities. He served 9 years on the North Pacific Fisheries Management Council, 7 years on the Advisory Panel to the Council and has served on the Alaska Seafood Marketing Institute as both a processor and a fisherman where he continues to champion Alaska seafood.