Opinion Page
"THE BANGKOK BOTTLENECK"
By Henk Brus (September 26, 01)
Preferential duty status is a very important element in today’s global tuna business. Only last week George Bush granted Indonesia duty free access for all its frozen and chilled tuna into the United States, in a move to assure Islamic Indonesia’s support in the battle against terrorism. Favorable duty rates are good news to those who benefit, but bad news for those who are excluded. GSP (General System of Preferences) has become a crucial factor in the global distribution of tuna, and will continue to fulfill a very important role in the future. Free Global Trade, being one of the WTO ( World Trade Organization) main objectives is still far away.
The way Europe has been regulating its market; by granting a 0% duty tariff to ACP (African Caribbean Pacific nations) and Andean Countries has had a definite effect on the global tuna trade over the last five years. By slapping canned tuna imports from Thailand, Philippines and Indonesia with a 24% duty rate , the EU has created a situation in which exports of these countries into Europe have sharply declined. Their business was taken over by renovated factories in Ghana, and Seychelles, but also by new industries in Ecuador. These countries have duty-free access into Europe. ACP and Andean countries now supply more than 70% of all imported tuna to the EU.
Many blame the ACP system for what is called “ The Bangkok Bottleneck”. The name refers to the obstruction in the supply of canned tuna from the Western Pacific Ocean to Bangkok. More than 50% of the worlds supply of canning grade skipjack is coming from the Western Pacific Ocean. With Thailand being the world’s largest exporter of canned tuna, the Taiwanese, Korean and Japanese purse seiner fleet always had for a great outlet nearby. However due to declining exports from Thailand, Philippines and Indonesia to the European Union, and even recently to the US market the fishing fleet in the Western Pacific is faced with a dilemma.
When catches in the WPO peak, the Asian tuna canning industries cannot absorb all the tuna supplied. But also this tuna cannot be shipped to canning industries in Africa, like Ivory Coast, Seychelles and Ghana, which are big exporters to the EU. These African tuna producers can only use EU or local originated tuna for their exports to the European canned tuna market. When catches are also good in the Eastern Pacific, Asian boat owners have besides American Samoa, hardly any other option then to deliver their fish to the Bangkok Tuna Industry. The Bangkok Bottleneck, in combination with oversupply of skipjack tuna around the world, has already caused a very sharp price decline several times. Once large quantities of frozen skipjack start flowing to Bangkok, cold-storages fill up, reefer carriers remain unloaded, packers start claiming the price down, and the disaster is complete. The Bangkok bottleneck then chokes tuna businesses all over the world.
On the other hand the African, and Andean Countries and not to forget the Spanish Tuna industry have been great beneficiaries of the ACP agreement. They have been growing strongly within the EU market, and will continue to benefit for at least another 4-5 years. In the future we might see some important shifts in where tuna will be produced, also due to significant changes in the system of Preferential Duties for tuna.
For instance by 2008 Mexico will have duty free access for canned tuna to the USA and Canada, in accordance with the NAFTA Agreement. At the same time Mexico's imports tariffs for tuna to the EU are also reduced annually, although still a quota is applicable. It could well be that in five years time, the Mexican Industry will be an even more dominant force in global tuna canning. Already a major US tuna producer has been scouting production sites in Mexico. Still discussions over dolphin safe are banning Mexican tuna from the US market, but once these issues are solved, Mexico will become an important exporter of canned tuna both to the USA and Europe, and not to forget its home market.
It is also obvious that the EU cannot maintain the 24% duty on canned tuna forever. Policy makers in Brussels realize that their call for Free Trade is not really supported by their own policy to protect the domestic tuna canning industry with a 24% duty. Not many imported products to the EU apply for such high duty percentages, which shows which level of protection is given to the European tuna industry. But perhaps not for so much longer… EU officials have been voicing over the years that they want to gradually eliminate the duties on tuna. Sofar they met heavy opposition from the Spanish Tuna industry and ACP countries. But when the WTO Qatar Round starts the EU might no longer want to support this high duty, fearing that the community would lose trading opportunities in other fields. Although it is impossible to predict how WTO negotiations (behind closed doors) will develop, there could be in 3-5 years time a shift to lower tuna duty tariffs. Also in 2004 the Andean Agreement, which grants tuna exporters Ecuador and Colombia 0% to the EU, will come up for review. It still remains far from sure if these S- American countries will keep their 0% status.
Recently the Philippine Tuna Congress accepted a resolution, which calls for the Philippine government to demand for tuna a 0% ACP status from the EU. The Philippines feel they are entitled to this advantage because they are a former colony of Spain, a long time ago. It is doubtful if their attempt will be successful, but it is clear that in order to solve the “ Bangkok Bottleneck”, and create more free movement of fish within the tuna segment, changes in preferential duty regimes will have to be made.
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