Vietnamese chicken farmers plan to file a rare anti-dumping lawsuit accusing U.S. producers of selling poultry below cost, highlighting the challenges facing the Communist nation as the historic Trans-Pacific Partnership trade deal is set to opens its markets.
The first-of-its-kind complaint, to be filed next month with the Vietnam Competition Authority, will seek tariffs against imported dark-meat chicken that American consumers typically avoid. Vietnam’s Southeastern Livestock Association asserts the poultry is sold at prices lower than those in the U.S.
Vietnam stands to be the biggest beneficiary of the 12-nation TPP accord, which will boost exports with tariff reductions on a range of products, including shoes, seafood and clothes. The chicken flap highlights how some Vietnamese sectors will experience painful lessons in global trade as businesses face strong foreign competition on their turf.
“The low-cost imported chicken from the U.S. is demonstrating to Vietnam the impact of tough competition in global trade,” Murray Hiebert, a Washington-based senior fellow at the Center for Strategic and International Studies, said in an e-mail. “Vietnam is learning that, while some of its products like garment manufacturers are big winners on the global stage, others, particularly in some agricultural sectors, could end up losing to markets whose big producers have huge advantages of scale.”
The Vietnamese producers say prices of imported U.S. chicken sold in Vietnam are just one-third of the cost of similar chicken consumed in the U.S.
“We need to save our industry from dying,” said Au Thanh Long, vice chairman of the livestock association, who just returned from a fact-finding trip to the U.S. The breeders in his group produce 90 percent of Vietnam’s domestic chicken. "Our members are exhausted from tolerating the losses.”
Inexpensive frozen U.S. chicken imports have caused 2.7 trillion dong ($120 million) in losses for Vietnamese chicken breeders over the last 16 months, said Long, whose members produce 2.4 million chickens a week.
U.S. producers say the price comparisons are flawed. The livestock association is comparing premium-priced free-range, antibiotic-free, USDA process-verified chicken sold in U.S. supermarkets to commodity-type frozen leg quarters exported in bulk, said James Sumner, president of the USA Poultry & Egg Export Council.
“They are comparing the most expensive products in the U.S. to the lowest-cost products we export to Vietnam,” said Sumner. “It’s like comparing the price of filet mignon in the the U.S. to the price of hamburger in Vietnam. There is no justification whatsoever for a dumping case.”
U.S. chicken producers also rely on economies of scale and access to cheap feed, which accounts for about 70 percent of production costs, to drive prices down, Sumner said. “We are the lowest-cost producers of chicken in the world,” he said.
Vietnam imported 54,036 metric tons of U.S. chicken, mostly thighs, in the first seven months of 2015, according to the USA Poultry & Egg Export Council. That’s a 57 percent increase from the same period a year ago.
Vietnam’s animal health department rejected earlier charges by Vietnamese farmers that imported U.S. chicken was poor quality meat sold beyond expiration dates.
The suit comes as Vietnam is likely to be among the biggest winners of the TPP accord, Alan Pham, chief economist at VinaCapital Group Ltd. in Ho Chi Minh City, said in an e-mail. The country’s gross domestic product will jump more than 30 percent in 10 years because of the pact, he said. Vietnam’s third-quarter gross domestic product rose 6.81 percent, fueled by foreign investment and export growth.
“TPP may shape up as a game-changer for this country,” Pham said.
While recognizing the growth potential, Vietnamese policymakers are also concerned some Vietnamese industries will struggle to compete with foreign competitors.
“Vietnam believed it would never lose on agriculture products thanks to its low labor costs,” said Dinh The Hien, a Ho Chi Minh City-based economist. “Cheap U.S chicken imports prove we will certainly suffer losses on agriculture products if the sector fails to transform itself.”
Such trade complaints are apt to increase as more trade agreements come into full effect, said Tony Foster, the Hanoi-based managing partner in Vietnam for the law firm Freshfields Bruckhaus Deringer LLP. Vietnam also has signed free trade agreements with the European Union and South Korea this year.
“Vietnam is becoming more and more a part of world trade, so there will be more and more of these sorts of issues,” Foster said. “They just didn’t exist before. The country is just opening up gradually.”
Vietnam and the U.S. have tussled over food exports before, with the U.S. accusing Vietnam of dumping shrimp and efforts in the U.S. Congress to force Vietnamese catfish to undergo tougher health inspection regulations. Vietnam is also lobbying Washington to lift its non-market economy designation, which makes it easier for the U.S. to impose anti-dumping duties on Vietnam products, said Hiebert of CSIS. Vietnam is learning “that the international trade regime is a bit like a contact sport,” he said.
Chicken farmer Nguyen Van Ngoc said he’s lost the equivalent of $106,000 in the last 10 months due to plummeting chicken prices. “If we don’t file an anti-dumping suit, Vietnam’s chicken sector would definitely die," he said. "The prices of imported U.S. chicken are senselessly cheap.”