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Sebastian Mallaby, Columnist

Jumbo Shrimp Follies

By Sebastian Mallaby
Monday, November 15, 2004; Page A25

Bureaucrats are known for arrogance, thick webs of red tape and a robust commitment to boredom. This characterization is brutally unfair; the truth is often quite the opposite. Bureaucrats can be humble. Bureaucrats can be giddily carefree. Bureaucrats can be subtly hilarious.

Consider, for example, shrimp -- small, somewhat tasteless, an excuse for salsa, usually. The very act of devoting days and weeks to this unassuming crustacean, as officials at the Commerce Department have done, is a Zen exercise in humility. But American shrimpers claim (after some encouragement from fee-seeking lawyers) that they are being driven out of business by cheating foreigners. The future of the universe may not be at stake. But somebody has to adjudicate.

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The humble officials at Commerce proclaim that they will simply apply the law; they will be red-tape-bound and boring. If foreigners are found to be "dumping" shrimp at artificially low prices, they will be punished with tariffs that level the playing field for American shrimpers, in accordance with established rules and policies. But this straight-man shtick is really just a way of teeing up the comedy to come. For the truth is that the Commerce Department is only loosely bound by rules. It has a whimsical notion of what's fair, and its methods can be downright witty.

Dumping is reckoned to take place when a foreigner sells something in the United States for less than it costs in the home market. But the application of this simple-sounding rule can be surprisingly complicated. The U.S. market, you see, is dominated by frozen shrimp, whereas shrimp are mainly eaten fresh in exporting countries such as Thailand. And so, to compare like with like, the Commerce Department first contemplated taking the price of frozen shrimp in Japan as a proxy for the home price in Thailand. Never mind that Japanese prices are notoriously high. If Thai shrimp cost less in Toledo than in Tokyo, this would count as evidence of dumping.

Choosing high-priced Japan was a blow against U.S. consumers, because dumping duties hit them with higher prices. But the Commerce Department cares only about producer lobbies, and it is wittily creative. Having considered Japan as a comparison country, it noted that shrimp there are generally sold raw, with their heads and shells on, whereas shrimp sold in the United States are processed. And so, again in order to compare like-with-like, Commerce attempted to adjust U.S. prices to their imagined unprocessed level, metaphorically replacing the shells and heads and magically uncooking them. Presto: firm evidence of dumping.

Unfortunately for the Commerce Department, not everyone enjoys its humor. Restaurant owners, who lure diners by serving up cheap shrimp, organized a counter-lobby to protest the heads-on-again voodoo. And so, when the department announced its preliminary decision in the summer, it gave up on the nonsense about recapitating and uncooking shrimp, and used prices from Canada instead of Japan. The preliminary tariffs that it announced were less awful than they could have been.

This raises the hope that, as it gets ready to announce final tariffs in the next few weeks, Commerce may abandon two other jokes that harm U.S. consumers. One is called "zeroing:" It works by dividing the shrimp market into dozens of subcategories and then calculating the dumping margin in each of them. This sort of exercise typically finds that some categories of shrimp sell for more in the United States than in the "home market" and some others sell for less -- on average, there may not be a huge difference. But the wizards at Commerce take the categories in which U.S. prices are higher -- that is, where there is "negative dumping" -- and zero them out of the equation. The average dumping margin is thus magically inflated.

The other joke concerns a thing called "normal value." This is pretty obscure stuff, but that's the point: Dark corners shelter cockroaches. Sometimes, instead of comparing export prices with those of the "home market," Commerce compares them with the cost of production. But this cost of production can be an arbitrary thing: In the case of Vietnam's processed shrimp exports, Commerce "derived" costs by studying Bangladesh, then "normalized" the most important input cost (namely raw, unprocessed shrimp) by coming up with a single price for all shrimp sizes and qualities. This "normal price" was then compared with the minutely subcategorized prices of exports. Again, cases where this showed no dumping were quickly zeroed out. The rest were seized upon as evidence that foreigners were cheating.

World Trade Organization panels have twice ruled against zeroing, and the "normal value" trick seems just as dubious. No new law is needed for the United States to discard both pieces of voodoo, which mock the whole idea that anti-dumping laws serve fairness. President Bush could make the change with one phone call. He posed as the free-trade candidate during the campaign. Does he believe his rhetoric?


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