Adroit Market Research - Industry Insights

This report talks about the theoretical result of trade policies of large countries affecting the other countries by hampering the prices of international goods. There are very few empirical studies analyzing the trade policy effect on the international prices. Detailed data regarding tariffs show the actions of policy in Europe disrupting the shrimp market and setting the platform for anti-dumping case in the U.S. Loss of Thailand’s preferential trade status in Europe and the global differences in the standards of food safety during the crisis in antibiotics and the several factors of business particularly in the export of shrimp in China, Vietnam and Thailand are also discussed.

The anti-dumping case of shrimp in the United States is bringing the lead to the global world economy, highlighting the various interests and roles of developing and developed countries. In the year 1997, the European Union has withdrawn the privileged trade status of Thailand, world exporter of premier shrimp. The European Union confirmed a zero-tolerance policy that controlled the exports specifically from China and Vietnam and forced the 100% analysis on shrimp from Thailand. In the year 2002, Southern Shrimp Alliance, an association of shrimp fishers, formed to combat “unfair” competition from the emerging regions. The coalition for punitive tariffs against China, Ecuador, Brazil, Vietnam, Thailand and India and it charged the shrimpers of U.S. were driven out of business by exaggerated fewer prices. Consequently, the Global Trade Commission governed that the exporters had damaged the industry and the U.S. Department of Commerce forced high tariffs for China and Vietnam and evidently reduce the ones for the other regions.

The anti-dumping case of shrimp developed in the global shrimp market that is changing dramatically in the forecast period. Progressively, the global shrimp trade becomes the one-way flow from the developing country producers to customers in Japan, the United States and Europe. The shrimp that established countries trade in has increased on the farms in Latin America and Asia where labor and waterfront property was economical and the laws of the environment were less strict. In the year 1997, Thailand was considered the largest exporter of shrimp had lost their preferential trade status in the European Union. As a result, Thai shrimp-exporters cleaned the exports from Europe in the direction of the United States. The European Union declared a policy of zero-tolerance for the antibiotics and controlled the imports specifically from China and Vietnam and exposed the shipments of Thai shrimp to around 100% testing of antibiotic. This encouraged the huge change by Vietnamese, Thai and Chinese exporters away from European to U.S. markets will less strict ethics.

The crisis of antibiotics and tariff change are the instruments that are used to calculate the demand for shrimp, for the given demand on the basis of customer prices and shift the curve of supply. It is discovered that events are leading to a drop in comparative shrimp price between Europe and the United States for the tampered regions. The analysis of shrimp market displays that the change in exports and the lesser relative price in the United States against Europe are the balanced response to the exogenous change in the global environment: antibiotic crisis and the change in preferential tariffs.

Market of Shrimp:

Anticipates by the U.N. Food and Agriculture Organization (FAO) demonstrate the global development of shrimp production. A noticeable shift occurred in this era with the developing dichotomy within the shrimp-consuming emerged regions and shrimp-generating emerging regions. The segment of shrimp production by emerging countries augmented continuously and the main consumers like Europe, United States and Japan decreased slowly. As per the Haby, et.al, United States, Europe and Japan have recently consumed more than 60% of the world production. The United States, Japan and the European Union have together continuously captivated around 85% of the worldwide exports. On considering the world exports, the share of the emerging regions hanged about 60% whereas the share of Europe was around 20% in the coming years and that of the United States and Japan was insignificant.

The important factor responsible for the constant development of the shrimp supply is aquaculture. Emerging and developing economies and other countries studying, in particular, are playing the major role in shrimp farming and broadly in aquaculture. In addition, the shrimp market is playing a major role in the export market for developing regions since the 1980s. Production of shrimp is a more profitable substitute for rice. Conventionally, the United States is the important consumer of shrimp having an open market for shrimp.

1. Changing the GSP status of Thailand in the European Union

There are lots of differences between the United States and Europe whereas the United States was an open market with no charges on the imports of shrimp. On the other hand, in Europe, the tariff of MFN for frozen shrimp was more than 15% and for canned and cooked shrimp greater than 25%. The European Union approved the emerging regions independent tariff reductions below the Generalized System of Preferences (GSP) to assist industrialization. In the European Union’s GSP, cooked and raw shrimp were questioned to correspondingly up to more than 5% and 6.5% tariff.

2. Antibiotics

Reports of summer and fall of 2001 textured in Europe regarding the high levels of nitrofurans and chloramphenicol in shipments of shrimp from East Asia. The antibiotics were restricted in the European Union. Thoughts of an extensive use of antibiotics were gathered in Asian shrimp farming. The United States will progressively monitor antibiotics in import. In addition, there was a substantial difference in how the European Union and the United States discussed the problem of antibiotic that participated in the shift in the shrimp market.

• Implementation varies with a terminus. The European Union has substitutes beyond the temporary bans used against China or Vietnam. Huge testing causes delays in cost. Earlier to the crisis the European Union verified around 11% of Thai shrimp.

• For safeguarding the food chain contamination, the European Union primarily demolished the hampered imports. In the year 2004, the European Union was studying its policy of zero-tolerance considering the possibility of sending back or re-exporting to the exporter shrimp with lesser ppb.

The crisis of antibiotics included the exporters of shrimp and the most seriously hampered exporters were Thailand, Vietnam and China. The European market for Asian Shrimp states that it had become a “crapshoot” in this period. With the loss of GSP status in Thailand, a concern of food-safety delivered an unexpected increase of shrimp exports to the United States, flagging the way for an anti-dumping petition.

Description of Data:

1. Data of Shrimp Trade

The analysis is the turning point on comparing the European and United States Market. The records of shrimp import for the United States are recovered from the U.S. International Trade Commission’s Web site. The data source offers import records across all the countries. The imports are categorized by the Harmonized Tariff Schedule number and accessible. Information on the import of shrimp for Europe is offered by Europe’s statistical agency known as EUROSTAT.

2. Data of Shrimp Tariff

For the case of the U.S., tariff data can be recovered from the HTS archives of the USITC website. The initial tariffs forced by the Commerce Department were declared at the end of the period. For Europe, the precise tariff rates are found in the TARIC database of the European Commission. In the year 1999, Thailand had progressed from the GSP system and the steady MFN tariff.

3. Crisis of Antibiotics

The crisis of antibiotics was started in the summer when the high levels of antibiotics were established in the shrimp residue. Analyzing the intensities have been decreased, and the restraints abolished and reduced for many countries. Thailand, China and Vietnam were hampered by the antibiotic crisis.

Conclusion

It is very important to consider the multidimensional frictions of all the trading partners to understand what controls the trade flows in two countries. Findings for the shrimp market are following the important line of research displaying in what manner the retraction of Thailand’s favored tariffs in Europe hampers the bilateral trade within the United States and Thailand. Eroding the preferences for developing countries and the concerns of international food and safety standards, are disappearing in future and current trade liberalizations, specifically when it comes to loosening the agricultural products.