ANDEAN TRADE ACT HEAVY BLOW TO THAI TUNA POUCH, BUT CANNED SAVED

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ANDEAN TRADE ACT HEAVY BLOW TO THAI TUNA POUCH, BUT CANNED SAVED
(By Henk Brus, July 29, 2002)

If the U.S. Senate votes this week in favor of the current bill with the Andean Trade Act (ATPA) this week, and follows the vote of the House of Representatives last Friday night, it could well mean a heavy blow to the Thai Tuna pouch industry.

The new Andean Trade Act might finally indeed give the Ecuadorian Tuna industry indeed the duty free access it lobbied for. Local Ecuadorian tuna industrialists invested heavily in lobbying, and they took fourteen trips to Washington in the last 18 months to get it their way. In their campaign they were supported by StarKist/ Heinz. Problem is, they might not get the volume they were looking for ! Instead of duty free access for all tuna products, both pouched and canned, they might only end up with 0% duty for pouched tuna. Considering that pouched tuna represents between 3-4% of the total U.S tuna consumption of 53.5 million cases of preserved tuna, merely few will be cheering in Ecuador. This weekend just one Ecuadorian tuna industrialist cried victory in the press. It was the man who leases the tuna plants to StarKist in Ecuador, where they already produce their tuna pouch today!

So basically this new Andean Trade Act, should it pass the Senate this week, would not devastate the Asian canned tuna industry, nor would it bring the great profits the Ecuadorian tuna canners were hoping for. But for sure it will bring a heavy blow to the Thai tuna pouch industry. Although tuna pouch is only a minor part of Thailand's exports to the USA, a lot of Thai canned tuna processors investment has gone that way. They bought new special spray cooling retorts and sealing equipment. But now it looks like a sure thing they will not get any return on their investments.

Expectations of tuna in pouch have been high, StarKist bet its future tuna strategy on pouch, but it has all turned out in a great disillusion. StarKist first produced tuna pouch in Thailand, but then started shifting most of its volume to Ecuador. If the new ATPA passes, also Chicken of the Sea (COS) and Bumble Bee (BB) will move their production to Andean countries, probably within the next 6 months. With duty free access for Andean tuna in pouch, Thai pouches will get slapped with 12% more duty when entering the USA. Private label buyers in the USA will soon follow. There is little alternative output for the Thai processors. The European market does not have an appetite for the pouches yet. In case that should change, likely most of the production will be based in the ACP countries, which have 0% duty in Europe, while Thailand has 24%.

But in the end the Thai and Philippine processors have little reason to complain about this new act. They also got the single duty quota enlarged by 15%, and got the threatening trend of a shrinking single duty quota stopped. But most importantly, in a coalition with the Philippine's, Samoans, COS and BB, their lobbying stopped the Ecuadorians from hitting the jackpot. So their most important export market is secured for the coming years, should this bill pass.

The big question mark remains: Will by the end of this week the ATPA really be passed? There are still serious doubts whether the Democrats-controlled U.S. Senate will also accept this bill. The Republican controlled House of Representatives said YES, so the Senate might just say NO. Two other controversial bills included in the same vote might just be the cause of that. Most parties may be happy with this tuna proposal. If the Senate will not pass the bill this week,, nobody knows what will happen next. With a month of recess for the Senate, all parties will be able to re-group, and revise their strategy and allocate their forces again. Perhaps by that time tuna pouch consumption will have shrunk another percent !

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