Getting the shrimp back on their feet

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Some more thoughts on the shrimp tariffs.

In the standard free trade models, if country X can produce a product more cheaply than country Y, then it's efficient for country Y to import rather than produce locally, and tariffs in this environment are bad. Now, in this particular case the claim is that the Chinese and Vietnamese are selling shrimp below natural cost, presumably with the intention of raising prices onces the US shrimpers have been driven out of business. This tactic works best when there is a large barrier to entry for a given industry. So, if it's really expensive to build your production facilities, then a country (or manufacturer) can (at least potentially) drive their competition out of business. In this kind of scenario, it might make sense for the US to temporarily subsidize US manufacturers to prevent this kind of attack.

That said, I'm skeptical that shrimp fishing is this kind of situation. Are shrimp boats really expensive so that startup costs are really high? Are they so specialized that you can't buy another boat and convert it? Indeed, there's some argument to be made in favor of negative barriers to entry. In a lot of parts of the US, overfishing has substantially reduced the return from fishing. If shrimping is the same way, then having the US industry temporarily shut down would actually make future entries easier.

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5 Comments

The Thais and Vietnamese are farming shrimp, which grow quickly in their warm tropical waters. This a good source of quality protein, healthy and sustainable, but obviously Louisiana can't compete as its waters are not warm enough.

The whole measure is nothing more than politically opportunistic protectionism, pure and simple.

Yeah, I figured that the "dumping" charge was bogus.

Yes, shrimp boats are not likely to pose an excessive barrier to entry. However, you'll notice that the Chinese and Vietnamese shrimp at issue aren't, in fact, caught using boats. They're farmed. I would think that the start up costs associated with shrimp farming might be somewhat steeper than shrimp fishing -- but I'm not really involved in that industry (having grown up in the Houston/Galveston area, though, I do have some awareness of US shrimp fishing).

Shrimp boats, by the way, are really distinctive looking monsters with huge booms off either side. It may well be impractical to convert other boats for the purpose. In fact, I would be surprised if such weren't the case.

As far as I know, the shrimp population in the Gulf of Mexico (from which 80% of US shrimp comes) is both plentiful and resiliant (mostly owing to a sexual maturity at less than one year of age, and the ability for females to lay over 200,000 eggs every three days). There are some environmental issues associated with the trawling involved, but shrimp stock depletion isn't currently a concern.

"In the standard free trade models, if country X can produce a product more cheaply than country Y, then it's efficient for country Y to import rather than produce locally."

Not quite right, unless you put a lot of qualifications on what you mean by "more cheaply".

Recall that in Ricardo's original presentation of comparative advantage, Portugal produces *both* cloth and wine more cheaply than England. It would still be efficient for England to produce one of the two locally (e.g cloth) and import the other (e.g. wine) from Portugal.

Doesn't really affect your argument, though.

True enough, but I claim poetic license :)

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