March 29, 2016 12:44PM

Crony Catfish Rule Goes to Geneva

After years of controversy and equivocation, a new federal catfish inspection program has finally come into force.  The program—supported by the U.S. catfish industry—ranks among the crony-est of crony boondoggles.  It’s also a blatant example of thinly-disguised regulatory protectionism and a violation of U.S. trade obligations.

Catfish inspections were originally conducted by the Food and Drug Administration, but under a provision of the 2008 Farm Bill, that responsibility has now been assumed by the U.S. Department of Agriculture.  The excuse for the switch is that the USDA’s more rigorous inspection regime will help protect consumers. 

But it won’t.  The USDA itself has said that the program will not reduce risks associated with catfish consumption, which is a very low risk food.  The Government Accountability Office has flatly told Congress the program is wasteful and should be repealed.  Despite bringing no measurable benefits to consumers, the USDA program will cost an estimated $14 million more per year than the original FDA inspection regime.

This damning analysis hasn’t kept the program from being implemented, of course, because it’s true purpose is to protect the politically powerful U.S. catfish industry from foreign competition.  Here’s what I wrote a couple of years ago when there was still a chance that Congress might repeal the program:

The main impact of the new inspection regime—and its actual purpose—is that foreign catfish producers will be banned from the U.S. market until they can show equivalence to U.S. production standards.  Regardless of how they produce the catfish, showing equivalence will take years.  In the meantime, U.S. consumers will be left with nothing but domestic catfish at hugely inflated prices.

By far the most common source country for catfish in the U.S. market is Vietnam.  There was a small hope that the some deal could be reached to reform the catfish program as part of the Trans-Pacific Partnership negotiations.  Ultimately, the Obama administration agreed to an 18-month transition period before applying the new inspection standards to imports.  

The transition period will help alleviate much of the program’s harm to consumers and downstream businesses by giving producers time to demonstrate equivalence without shutting down export operations.  However, catfish prices have already been reported to be on the rise in anticipation of the new regulatory environment.

Now that the inspection regime is officially in place, Vietnam has begun to make its case that the regulations violate the rules of the World Trade Organization.  The WTO Agreement on Sanitary and Phytosanitary Measures prevents WTO members from abusing food safety rationales to impose protectionist import barriers.  Specifically, food safety regulations must not be more trade-restrictive than necessary to meet the goals of the regulation and must be based on scientific evidence.

These rules—long championed by the United States as a way to prevent unjustified foreign trade barriers—are designed to prevent exactly the sort of protectionist shenanigans at play in the catfish inspection regulation.  Moving catfish inspection to the USDA imposes a disproportionate burden on imports without being justified by any rigorous analysis or legitimate scientific research.

Vietnam has now formally raised the issue at the WTO but has not yet initiated dispute settlement procedures.  If they do, Vietnam could eventually be authorized to retaliate by imposing tariffs on various products from the United States.