DUMPING DUTIES ARE LEAST OF SHRIMP FARMERS'

UNCLAS SECTION 01 OF 02 CHENNAI 001306

SIPDIS

SENSITIVE

USDOC FOR MAC/ANESA/OSA/LDROKER/ASTERN
USDOC FOR ITA/TD/ITI/KJENCI/EHOLLOWAY
USTR FOR SOUTH ASIA - A WILLS/BSTILLMAN/ JROSENBAUM

E.O. 12958: N/A
TAGS: PGOV PREL ETRD EFIS SENV IN CE BR EC US
SUBJECT: DUMPING DUTIES ARE LEAST OF SHRIMP FARMERS'
WORRIES

REF: CHENNAI 00944


1. (SBU) SUMMARY: Early fears that USDOC anti-dumping
duties on warm water shrimp from India could become a hot-
button political issue appear to be groundless. Shrimp
farmers do not blame the duties for their problems, but
rather four years of slumping international demand.
While politicians initially rallied to the farmers'
cause, interest has waned, and the current political
configuration makes future action unlikely. END SUMMARY.

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SHRIMPING INDUSTRY ON DECLINE FOR PAST FOUR YEARS
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2. (U) To gauge the effects of the recent USDOC anti-
dumping duties on shrimp farmers in Andhra Pradesh, Post
spoke to farmers in the East Godhavari district as well
as other industry experts. Located in northeastern
Andhra Pradesh, the East Godhavari region saw a shrimping
boom in the 1990s. However, according to the farmers,
the good times came to an end four years ago, when a
series of shocks hit the industry. First, "white spot"
disease struck the shrimp farms, forcing farmers to use
more antibiotics than European Union phyto-sanitary
regulations allowed. In 2002, Japanese importers
complained that Indian shrimp had a "muddy smell."
Closing this second international market dropped the
price of 20-count shrimp from USD 9.50 to USD 6.50.


3. (U) The drop in shrimp prices over the past four years
mirrored an increase in feed supply prices, worsening the
situation for farmers. According to Bakshinathan,
Assistant Director of the Shrimp Authority of India -
Tamil Nadu, South Indian farmers rely on fishmeal
imported from Thailand, Chile, and Peru. Global weather
patterns have reduced the supply of fishmeal from these
countries, boosting the price. Because of this,
Bakshinathan said, "The industry is going through a
difficult period. Farm gate prices have been falling,
making the activity unprofitable."

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SHRIMP FARMERS DO NOT BLAME WOES ON ANTI-DUMPING DUTIES
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4. (U) Following the anti-dumping duties in 2004, the
price of a kilogram of 20-count shrimp dropped to USD
5.90. While farmers noted the effect of the duties on
their industry, they felt that the penalties were not
solely responsible for the decline. According to
Maniraju, President of the Aquaculture and Shrimp Farmers
Association of the East Godhavari District, "The duties
are just one more problem in a long list of
difficulties."

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AFTER INITIAL ACTIONS, LOCAL GOVERNMENT INDIFFERENT
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5. (U) Initial reports indicated that the Andhra Pradesh
state government might take up the farmers' cause at the
national level. Shortly after the imposition of the
duties, Chief Minister Y.S. Rajashekar Reddy sent a
letter to the prime minister urging action on the matter
(Reftel). In addition, former BJP president Venkaiah
Naidu's personal shrimping interests in Vishakapatnam led
him to raise the issue. However, East Godhavari shrimp
farmers told Post that these efforts soon tailed off.
According to Maniraju, Reddy was simply paying lip
service to pre-election promises. Maniraju added that
local leadership has been even less responsive. When
asked about the needs of shrimp farmers in East
Godhavari, Arun Kumar, the Member of Parliament
representing the area, stated that he believed the
activity was not environmentally friendly.

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EXPORTERS MAD, BUT DUTIES NO LONGER A POLITICAL ISSUE
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6. (SBU) COMMENT: It seems unlikely that the anti-dumping
duties will be as important a political issue as once
thought. Early reports that they could hurt bilateral
relations appear to have been misleading. After an
initial flurry of activity, local and state politicians
seem to have dropped the farmers' cause. Local Congress
leadership seems unlikely to assume a cause that would
indirectly help a prominent former BJP leader. In
addition, fear of losing domestic suppliers may have
prompted shrimp exporters to overstate the farmers' anger
and political muscle. END COMMENT.

HAYNES