According to Haby et al. (2003), increases in shrimp imports have been the primary cause of the recent decline in U.S. shrimp prices. A complete discussion of the factors contributing to the increase in imports can be found in Haby et al. (2003). In general, recent surges in imports have been caused by increases in the production of foreign, farm-raised shrimp. More specifically, increased competition from shrimp imports has been due to three primary factors: 1) changes in product form due to relatively lower wages in the exporting countries, 2) shifts in production to larger count sizes, and 3) tariff and exchange rate conditions which have been favorable to shrimp imports into the U.S. With respect to the first factor, lower wage rates have allowed major shrimp exporters (e.g. Thailand) to increase production of more convenient and higher value product forms, such as hand-peeled raw and cooked shrimp. With respect to the second factor, changes in farming technology and species have allowed production of foreign product to shift towards larger, more valuable sizes. As a result of these factors, imports are more directly competing with the product traditionally harvested by the domestic industry, thereby reducing the latter’s historical comparative advantage with respect to these product forms and sizes. Finally, with respect to the third factor, the lack of duties on shrimp imports into the U.S., the presence of relatively significant duties on shrimp imports into the European Union (E.U.), and the recent strength of the U.S. dollar relative to foreign currencies have created favorable conditions for countries exporting products to the U.S.
As Haby et al.(2003) note, the increase in imports has caused the domestic industry’s share of the U.S. shrimp market to decrease from 44.6% to 14.8% between 1980 and 2001. While the growth in imports was relatively steady throughout most of this time period (for e.g., 4% to 5% in the late 1990's), shrimp imports surged by 16% in 2001. Since 2001, which is the last year accounted for in their analysis, shrimp imports have continued to rise. Although the increase in 2002 was a modest 7.2%, relative to the increase in 2001, a significant increase of 17.5% occurred in 2003 according to the most recently available data.15 Undoubtedly, these increases have led to further erosion in the domestic industry’s market share and additional price declines.
The economic analysis of the 2003 Texas Closure was recently re-examined and updated to further investigate changes to the industry’s current economic status. This analysis revealed that, on average, vessels were not even able to cover their variable costs in 2002. Preliminary information indicates that prices have continued to decline in 2003,16 which would lead to the expectation that the vessels’ inability to cover their variable costs has continued in 2003. If vessels cannot cover their variable costs, they will be forced to cease operations (i.e. exit the fishery), at least until conditions change.
Projections of fleet size, as measured by full-time equivalent vessels (FTEVs), and nominal effort were updated and extended farther into the future (20 years, or through 2021) to determine how long it would take for the fishery to reach an equilibrium state, assuming no changes in external factors (e.g. imports, regulations, etc.). In general, equilibrium occurs once economic losses are no longer being incurred (i.e. economic profits are zero) and fleet size is stable (i.e.
15Shrimp import data can be found at Statistics cited in this report were based on data posted as of March 25, 2004.
16Currently available data for 2003 indicates that the decline in nominal prices from 2000 is 36% across all size categories. Depending on the size category, the declines range from 27% to 40%.