Title: Economic effects of trade policies on the shrimp fisheries of the United States and the Latin American nations
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Title: Economic effects of trade policies on the shrimp fisheries of the United States and the Latin American nations
Alternate Title: Shrimp fisheries of the United States and the Latin American nations
Physical Description: xii, 206 leaves : ; 28 cm.
Language: English
Creator: Whitaker, David Adair, 1936-
Publication Date: 1971
Copyright Date: 1971
 Subjects
Subject: Shellfish fisheries -- United States   ( lcsh )
Shellfish fisheries -- Latin America   ( lcsh )
Economics thesis Ph. D
Dissertations, Academic -- Economics -- UF
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
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Thesis: Thesis - University of Florida.
Bibliography: Bibliography: leaves 200-205.
Additional Physical Form: Also available on World Wide Web
General Note: Manuscript copy.
General Note: Vita.
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Volume ID: VID00001
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Holding Location: University of Florida
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Resource Identifier: alephbibnum - 000561259
oclc - 13500214
notis - ACY7184

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Economic Effects of Trade Policies
on the Shrimp Fisheries of the
United States and the
Latin American Nations











By

David A. Whitaker, Jr.







A DISSERTATIO14 PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA IN PARTIAL
FULFILLMENT OF THE REQUIREML'ITS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY








UNIVERSITY OF FLORIDA
1971







ACKNOWLEDGMENTS


I wish to express my sincere appreciation for the

assistance of the many individuals who aided, directly and

indirectly, in the completion of this study. I am

particularly indebted to Dr. Carter C. Osterbind who

suggested the topic for study and guided me in the

completion of the dissertation. I am also grateful for

the suggestions of my supervisory committee which includes

Dr. C. A. Matthews, Dr. G. B. Hurff, and Dr. I. J. Goffman.

Two years of my graduate study prior to the undertaking of

this dissertation were sponsored by the Bureau of Cornercial

Fisheries under their fellowship program. I am indeed

grateful for the freedom this gave me to concentrate on my

studies. In addition to this financial support the Bureau

of Commercial Fisheries provided the bulk of the data used

in this study. Personnel of the Bureau were very cooperative.

I wish especially to thank Dr. L. W. Van Heir, Assistant

Director for Economics; Dr. Frederick Bell and his staff in

the Branch of Economic Researchi Don Whitaker in the Branch

of Current Economic Analysis; and Billy Greer in the

St. Petersburg regional office.

Special recognition belongs to Mrs. Nina Hilt who

with untiring good humor typed the first draft of the

dissertation. The final draft was efficiently prepared by

tUe Bon Air Typing Service.


1 a,








The family of a student makes many sacrifices during

the writing of the dissertation. I have been especially

fortunate to have the understanding and encouragement of my

wife, Patricia, and my children, Teresa and Scott.









TABLE OF CONTENTS


ACKNOWLEDGMENTS . . . . . . . ii

LIST OF TABLES . . . . . . . . viii

LIST OF FIGURES . . . . . . . . . x

ABSTRACT . . . . . . . . . . . xi


CHAPTER PAGE


I. INTRODUCTION . . . . . . . ... 1

Purpose of the Study . . . . ... 1

Validation of the Study . . . . . 2

Definitions of Terms . . . . . .. 8

Organization . . . . . . . .. 10

Procedure . . . . . . . .. 10

Recent Literature . . . . . .. 12

II. THE SHRIMP FISHERY: BACKGROUND AID

POLICY FRAMEWORK .. . . . . . 16

Shrimp Production and Distribution ... 17

Fishing Craft and Gear . . . . .. 20

The Marketing of Shrimp . . . . 25

Physical Distribution . . . ... 25

Trade Policy . . . . . . . .. 31

Direct Trade Policy Factors . . .. 31

Indirect Trade Policy Factors . . .. 37

Financial Aid to Fisheries . . .. 38

Maintaining a "Free Trade" Policy . . 40

Trade Policy and Economic Development 43








CHAPTER


Public Policy Toward Foreign Investment .

Economics of a Fishery . . . . . .


III. DEVELOPMENT OF THE SOUTHERN SHRIMP

FISHERY, 1957-1968 . . . ..

Supply of Shrimp . . . .

Sources of Growth . . . .

Domestic Supply . . . .

Shrimping craft . .

Employment . . . . .

Costs . . .

Prices and productivity .

Price elasticity of domestic

Supply of Imports . . . .

Elasticity of supply of import

Demand . . . . . . .

Consumption . . .. .

Derived Demand . . . .

Elasticity of Demand . . .

Demand for Imports . . . .

Elasticity of Import Demand

Summary of Supply and Demand

Some Effects of a Non-restrictive


PACE


47


supply





.




. . .


Trade


Policy 1957-1968 . . . ......

Influence of Imports on the Domestic

Shrimp Fishery . . . . ..


. .









CHAPTER


Income and Employment . . . . 136

Investment in Shrimp Trawling Craft . 139

Foreign Investment in the Development of

the Latin American Shrimp Export

Industry . . . . . . . . 140

IV. ALTERNATIVE TPADE POLICIES . . . ... 147

Theory of Trade Restriction for a Single

Commodity . . . . . . ... 153

Effects of Alternative Trade Policies . 157

Effects of a Restrictive Policy on United

States Imports . . . . . . 157

A United States tariff on shrimp . .. 158

A United States quota on shrimp . .. 166

Response of foreign suppliers ... .169

Effects of a Restrictive Policy on the

Domestic Shrimp Industry .... . 170

A United States tariff . . . ... 172

Response of the domestic shrimp industry

to a tariff . . . . . ... 174

A quota and the domestic shrimp

industry . . . . . . . 181

Effects of Tariffs and Quotas on the

Latin American Shrimp Trawling

Industry . . . . . . .. 181


PACE







CHAPTER


PAGE


Other Policy Measures . . . ... 182

Subsidies . . . . . . . . 184

Efficacy of Restrictive Trade Policies . 185

V. SUMMARY AND CONCLUSIONS . . . . .. 193


BIBLIOGRAPHY ..................... .200

BIOGRAPHICAL SKETCH. . . . . . . .. .206








LIST OF TABLES


TABLE PAGE


I. Annual Supply of Shrimp . . . . 63

II. Origin of Imports by Area and Number of
Exporting Countries . . . . . 67

III. United States Shrimp Landings by Area
1957-1968 . . . . . . . 69

IV. South Atlantic and Gulf States Landings:
Value and Volume 1957-1968 . .. . 70

V. Shrimp Otter Trawl Boats and Vessels by
State ... . . . . . . .. 74

VI. Percentage Change in Boats Engaged in
Shrimping and Landings of Small
Shrimp by Years . . . .. . . 78

VII. Regular Fishermen on Shrimp Boats by State . 81

VIII. Casual Fishermen on Shrimp Boats by State . 82

IX. Fishermen on Shrimp Otter Trawl Vessels by
State . . . . . . . . . 83

X. Estimated Unit Value of Shrimp Imports for
Selected Countries, by Months 1958, 1959,
1967 . . . . . . . . . . 99

XI. Importance of Large Shrimp in Exports for
Selected Latin American Countries . . 103

XII. Per Capita Consumption of Shrimp and Certain
Other Fish . . . . . . . . 110

XIII. Annual Consumption of Shrimp in the
United States . . . . . .. 114

XIV. Processed Shrimp by Method of Preparation . 115

XV. Shrimp Imports by Product ....... 117

XVI. Average Receipts, Costs, and Profits for a
Selected Sample of Shrimp Vessels ... .138

XVII. United States Shrimp Imports from Latin
America . . . . . . . ... 142


viii








TABLE


PAGE


XVIII. Relative Importance of Shrimp in Latin
American Exports to the United States,
1965 . . . . . . . .. ... 143

XIX. Estimates of United States Direct Invest-
ment in the Latin American Shrimp
Fishing Industry . . . . . ... 145

XX. Estimates of Tariff Reflected in Import
and Domestic Prices for Selected Supply
and Demand Elasticities . . . . .. .163

XXI. Estimates of the Import Cffect of a 35
Percent Ad Valorem Tariff on Shrimp
Under Varying Conditions . . . . . 164

XXII. Effect of a 35 Percent Ad Valoren Tariff
on Domestic Price, Supply and Demand
Under Different Supply and Demand
Elasticities . . . . . . . . 174








LIST OF FIGURES


FIGURE PAGE


1. Shrimp Marketing Channels . . . . . 28

2. Total Revenues and Costs with Respect to
Fishing Effort . . . .. . . .. 52

3. Increase in Demand . . . . . . . 55

4. Technological Change in a Fishery . . .. 57

5. Effect of a Tariff . . . .. . . .. 59

6. Domestic and Import Market Shares for
Shrimp . . . . . . . . ... 65

7. Relative Value of Domestic and Import
Market Shares . . . . . . . 66

8. Indexes of Exvessel Price for Selected
Shrimp Size Counts 1957-1967 . . . . 85

9. Fisherman Productivity and Price . . . 88

10. Shrimp Craft Productivity . . . . . 90

11. Index of Apparent Consumption . . . . 112

12. Market Effects of a Tariff . . . .. 154








Abstract of Dissertation Presented to the Graduate
Council of the University of Florida in Partial Fulfillment
of the Requirements for the Degree of Doctor of Philosophy

ECONOMIC EFFECTS OF TRADE POLICIES
ON THE SHRIMP FISHERIES OF THE
UNITED STATES AND TILE
LATIN AMERICAN NATIONS

By

David A. Whitaker, Jr.

March, 1971

Chairman: Dr. Carter C. Osterbind
Major Department: Economics

The purpose of this dissertation is to examine the

economic effects of United States trade policies on the

shrimp trawling industries of the South Atlantic and Gulf

States, and certain Latin American countries. The major

hypothesis examined is that a free trade policy with respect

to shrimp imports did not adversely affect the domestic

shrimp industry in recent years, and further that a restric-

tive trade policy would not contribute greatly to the future

prosperity of the domestic industry. A secondary hypothesis

is that United States trade policy has facilitated

development of the shrimping industry in Latin America.

A supply and demand framework is utilized in analyzing

recent conditions in the shrimp fishery. Arguments based

on estimated supply and demand relationships are utilized

in predicting the effects of alternate trade policies on

the shrimp industry and the implications of their use. The

common property or open access nature of the shrimp resource

plays an important role in the study. Common property

xi








resources are subjected to special problems associated with

freedom of entry of fishing firms into the exploiting

industry and a tendency toward overinvestment.

It is concluded in the study that the growing demands

for shrimp products offset the steadily increasing flow of

imports and generally rising level of domestic production.

In one period imports appear to have been instrumental in

bringing about lower domestic prices, but in general prices

tended to be more closely related to domestic production.

The influence of a relatively fixed abundance of shrimp

in the domestic shrimping grounds, and the freedom of

entry nature of the industry combine to create a situation

in which a restrictive trade policy can contribute little

to improving the long run profitability of the industry.

The duty free status of shrimp has stimulated the

development of Latin America's shrimp export industries

in two ways. First, the free access to the growing United

States market provided a convenient outlet for foreign

shrimp producers. Secondly, since no penalty other than

transportation cost was attached to foreign landings, United

States investors were encouraged to develop foreign operations

near the heavy concentrations of shrimp along the Central

American and South American coasts.














CHAPTER I


INTRODUCTION


Purpose of the Study

The purpose of this study is to examine the economic

effects of United States trade policy on the South Atlantic

and Gulf Coast shrimp industry and the shrimp industries of

certain Latin American countries which supply a large share

of the United States market. Specifically, it is concerned

with the determination of the influence of unrestricted

imports of shrimp and shrimp products on price, output,

employment, income, and investment in the primary phase of

the shrimp industry and the potential impact of alternative

policies which restrict shrimp imports. Primary emphasis

is placed on the events of the 1957-1968 period.

The 1957-1968 period is used since it represents a

time span in which imports grew rapidly after having been

rather stable during the earlier 1950's. Additionally,

extensive Gulf Coast shrimp data are available after 1957.

The hypotheses to be examined are that a United

States free trade policy for shrimp did not adversely

influence price, employment, investment, and supply

conditions in the United States shrimp industry during the

1957-1968 period, and that a restrictive trade policy

1








would not contribute to future stability and progress in

the industry. A secondary hypothesis is that the U.S. free

trade policy has facilitated development of the Latin

American shrimp industry.


Validation of the Study

Why study trade policy alternatives for a "healthy"

fishery? The shrimp industry has not had to face many of

the problems of the other fisheries, such as depletion of

the resource, foreign competition in the fishing grounds,

obsolescence of equipment and craft, or a generally

declining market. The ground fish industry has been

plagued with some of these difficulties and has turned to

government in an effort to obtain a wore restrictive trade

policy in order to preserve the domestic market and value

of the landings. Additionally, some of these fisheries

have found some form of regulation necessary to prevent

destruction of the resource. Is the shrimp industry

different or has it avoided the problems only because it is

a relatively new, unexploited fishery? Could the shrimp

industry remain generally profitable if imports were

substantially increased? For example, it is estimated

that the Brazilian fishery, if developed, could produce a

volume of shrimp equal to that of the remainder of Latin

America.I Could a proportionate share, relative to imports




1Richard S. Croker, "The Shrimp Industry of Central
America, the Caribbean Sea, and Northern South America."








from the remainder of Latin America, be absorbed by the

United States market? Or one might consider the future

consequences of Asian imports, which have grown 780 percent

during the past twelve years.

Related to the above questions is the problem of

identifying the source of difficulties within a fishery.

Some of the symptoms of overfishing, overcapacity, and

saturation of the domestic market by competing imports may

be similar from the fisherman's point of view. In these

cases there is a need to identify the source of the

difficulty, since different solutions would be in order.

Such a study appears germane at this time for a

number of other reasons. First, the shrimp fishery is the

largest United States fishery in terms of dollar volume.

Total value of the shrimp catch in 1967 was $103,100,000,

making it the first fishery to reach the $100 million

category. The next largest fisheries in dollar volume of

catch in 1967 were salmon with $48,600,000 and tuna with

$44,514,000. Still, the shrimp industry has been the




Bureau of Commercial Fisheries, United States Department of
the Interior, Foreign Fisheries Leaflet 74 (Washington:
Government Printing Office, 1967), p. 118.

2United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, S-12 (March, 1969), p. 14.








object of comparatively little economic research relative

to the other fisheries.

It is not only the size of this fishery which makes

it interesting, but also the composition of the supply to

the domestic market. In 1968, shrimp imports accounted for

over half of the available supply. Twelve years earlier,

imports represented slightly over one-third of the total

supply. During this period, domestic landing of shrimp

increased about 23 percent while imports increased 200

percent. No consistent upward trend was observable for

domestic production, which fluctuated widely during the

period, but one was apparent for imports. The increasing

market share of imported shrimp suggests that trade policy

and its effectiveness are potentially very important to the

industry.

Another interesting aspect of the shrimp fishery is

that while there has been no upward trend in landings

there has been a rising trend in investment in boats and

vessels. Over the 1957-1966 period the number of vessels

and boats operating as shrimp trawlers in the South

Atlantic and Gulf Coast region increased from 6,808 to




Charles H. Lyles, Fisheries of the United States...
1967, Bureau of Conmmercial fisnerics, United States
Department of the Interior (Washington: Government Printing
Office, 1968), pp. 2-3.

United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, op. cit., p. 18.








9,361.5 In addition to the increase in numbers, new

vessels have been larger and more expensive to equip in

recent years. In most recent years the larger number of

craft has shared a total catch smaller than the 1954-1956

average catch. This implies that returns to fishermen

would be declining. The declining share of the catch per

craft may have been at least partially offset in terms of

revenue by rising prices over the period. Exvessel prices

fluctuated widely, however, and it is questionable whether

or not any real gains resulted, since the slight upward

trend would hardly offset the effect of inflation on costs.

Shrimp fishermen recognized in 1960 that the production

segment of the shrimp industry was in danger of becoming

relatively less profitable and attempted to slow the flow

of imports through a restrictive trade policy. Their

efforts were unsuccesnful, but the question remained as to

whether or not a restrictive trade policy would have been

an appropriate solution to the problem.




United States Bureau of Commercial Fisheries,
Fishery Statistics of the United States, Statistical Digest
Number 44 (1957) pp. 374-J37; bt (196u) pp. 506-508.

National Shrimp Congress, Incorporated, Brief on
Behalf of the Domestic Shrimp Industry (Tallahassee:
National Shrimp Congress, Incorporated, 1961) pp. 251-252.
Reprinted in United States Congress, House of Representa-
tives, Committee on Ways and Means, Tariff Treatment of
Shriiip Imports, earningss before the Committee, 87th Congress,
1st Session, on II.R. 6168, August 8, 1961 (Washington:
Government Printing Office, 1961).







Another reason for the study is suggested by the

above data concerning the number of fishing units.

Fisheries are a common property resource, that is, there is

no single owner and the fish belong to anyone who takes

them. In general, entry into industries involving common

property resources is not restricted. Such is the case in

the shrimp fishery. H. Scott Gordon, Anthony Scott and

others have suggested that the tendency in the common

resource case is for an excessive number of firms to enter

the industry and eventually eliminate the rent attributable

to the free resource. The result is an overexpanded

industry in which a larger quantity of resources is used to

obtain the same product which could be obtained with a

smaller investment. In view of the Scott and Gordon

analyses, which are reviewed later, the question arises as

to the effect trade policy is likely to have with respect

to entry of new firms in a common property resource

industry. Or more simply, does a restrictive trade policy

lead to an uneconomic expansion of the domestic fleet in

response to an artificially created rent?

During the 1957-1968 period, the demand for shrimp

increased steadily. Per capital consumption of shrimp




H. Scott Gordon, "The Economic Theory of a Common
Property Resource," Journal of Political Econony, LXII
(April, 1954), 124-142. Anthony Scott, "'he ishery: The
Objectives of Sole Ownership," Journal of Political Economy,
LXIII (April, 1955), 116-124.








increased 75 percent, from .96 to 1.68 pounds.8 The

domestic shrimp fishermen could not, or did not, expand

production proportionately, so that imports were needed to

meet demand. Under these, or similar conditions, what

trade policy is appropriate? Would a restrictive trade

policy stifle increasing demand for shrimp and prevent

development of a market for years in which larger quantities

of shrimp were landed domestically? And would the same

trade policy be applicable during "good" and "bad" years?

United States commercial policy toward Latin American

countries in recent years has involved the goal of assisting
9
them in their economic development. The role which trade

policy can play in economic development is not well

understood, and much additional work is needed in this area.

This study examines only a very limited aspect of the

problem. Specifically, it examines the impact of a

restrictive and a free trade policy on the development of

the shrimp industries of Latin American countries. In

order to simplify the argument it is assumed that develop-

ment of this industry is desirable and contributes to the

economic growth of these countries.




United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, op. cit., p. 18.

John F. Kennedy, Message to Connress on the
Reciprocal Trade Aqrcrents Proqr.am, January .5, 1962.
United States housu of Representatives (House Document
Number 314) 87th Congress, 2d Session. (Washington:
Government Printing Office, 1962), pp. 5-6.







Finally, United States processors, as well as

producers, have organized foreign operations to furnish

shrimp to home plants or to process shrimp for

importation.10 This creates a vested interest in a

particular trade policy which may not be consistent with

the needs of strictly domestic producers. There is a need

for a better understanding of the motives and conditions

which lead to this type of foreign investment. Of special

interest here is the role of trade policy in influencing

the investment decision.


Definitions of Terms

In order to increase the clarity of the study, some

of the frequently used terms which are common to the topic

under consideration are defined.

The shrimp industry is defined to include all

primary producers involved in the process of fishing for

shrimp. The close interdependence of local wholesalers,

packing houses, freezers, and fishermen is recognized, but

these firms will be specifically mentioned if they are

included in the discussion.

The South Atlantic and Gulf Coast shrimp industry

includes that portion of the shrimp industry located within

the states bordering the Gulf of Mexico plus the Carolinas




10Croker, op. cit., p. 4.







and Georgia. More than 80 percent of the domestic catch

is landed in this area.

A fishery enterprise is defined by Overden as "that

combination of factors operating as a fishing unit,

directly engaged in catching the fish and bringing it to

land."11 In the general literature the term "fisherman" is

used loosely to mean the fishing enterprise. Shrimp are

considered as fish for purposes of this definition.

Distributors are firms engaged in the movement of

shrimp from the dock to retailers. These include

cooperatives, local wholesalers, and secondary wholesalers.

Processors are those firms which normally alter the form of

the shrimp in order to preserve it or otherwise prepare it

for the market. Breading, canning, drying, and freezing

firms would be called processors.

Another term used frequently in this study is trade

policy. Basically the term refers to a country's control

over goods that cross its borders in trade. Traditionally,

trade policy has referred specifically to the country's

regulation of trade by tariffs, quotas or embargos, and

exchange controls. But other devices may achieve

essentially the same results, e.g. export subsidies, "Buy




A.E. Overden, Costs and Earninq Investigations of
Primary Fishing Entcrprises (Rome: Food and Agricultural
Organization of the United Nations, 1961), p. 11.







American" legislation, landing laws, and defense

provisions.12 Usage here will include policies which act

to control the flow of goods in the broader sense. Specific

policies will be reviewed in Chapter II.


Organization

This study seeks to analyze the behavior of an

industry under alternative trade policies. Chapter II

provides the less familiar reader with some background

relative to the shrimp fishing and marketing process, trade

policy pertinent to shrimp products, and some theoretical

aspects of economics applicable to the fishery. Chapter

III discusses recent development of the shrimp industry

under a non-restrictive trade policy and establishes

relationships between market conditions, the supply of

shrimp, and the economic behavior of fishermen. In Chapter

IV these relationships are used to estimate the response

of the United States and Latin American shrimp industries

to hypothetical, alternative trade policies.

Chapter V summarizes the conclusions of the study

and explores possible policy implications for the future.


Procedure

In order to know how the domestic shrimp industry

would be affected by various trade policies, something




12Roland L. Kramer and others, International Trade
(Cincinnati: South-Western Publishing Company, 1959),
p. 291.







must be known about the behavior of domestic and foreign

supply and demand. The approach used in the study is to

estimate the nature of the elasticities of supply and

demand based on the experience of 1957-1968 and use these

in analyzing industry changes. In the case of supply it is

necessary to use assumptions supported by theoretical

considerations to explain the relationship between price

and market quantities found in historical data. For demand

some regression estimates of elasticities have been made by

others, which are used along with those by the author.

This approach, although subject to limitations, is

used for several reasons. First, different elasticities of

demand or supply would imply a different response by the

industry to price changes and hence to trade policy

designed to influence price. Secondly, elasticity

influences, and is influenced by, the share of the market

controlled by domestic and foreign producers. This is an

area in which trade policy exerts its influence and is

therefore important in evaluation of the influence of trade

policy on output, price, revenue, etc. Finally, this

approach facilitates organization of the data into

manageable categories.

Development under a non-restrictive policy is

implicit in examination of the 1957-196B period. Hypo-

thetical restrictive policies must be analyzed abstractly,

using empirical supply and demand relationships developed

in Chapter III.








Consequences of restrictive and non-restrictive

policies for Latin American suppliers are discussed, but a

lack of data makes a thorough examination of their

influence impossible. However, it should be possible to

infer the direction, if not the magnitude, of the stimulus

of shrimp exports on investment, employment, and exchange

earnings.

Most of the data used are available from the Bureau

of Commercial Fisheries in its many publications. While

some field visits were made, no attempt was made to obtain

significant quantities of original data.


Recent Literature

Several important general economic studies of the

shrimp industry have been made in recent years. In 1959

the Bureau of Commercial Fisheries completed a series of

studies surveying the shrimp fisheries of the United States,

Latin America, and other areas.13 These studies were

primarily descriptive and did not attempt to subject the

industries to any form of economic analysis. They did,

however, include a considerable amount of descriptive

economic data.




United States Bureau of Commercial Fisheries,
Survey of the United States Shrirp Industry, Volume I and
11, (Washington: Cov'rnrrnt I'rinting Office, 1958, 1959).
United States Fish and Wildlife Service, Survey of Shrimp
Fisheries of Central and South America (Washington:
Government Printing Ofice, 1957).








A more thorough economic study of the United States

southern shrimp industry was made by C.C. Osterbind and

R.A. Pantier in 1961, in which emphasis was placed on the

financial problems facing shrimp fishermen as a result of

the price decline of the late 1950's. The Osterbind and

Pantier study represents the most comprehensive complication

of cost and operations data published for the 1955-1959

period.

An analysis of the utilization of shrimp vessels in

the Gulf area was made by Lassiter in 1964.15 The purpose

of this study was to determine if shrimp vessels could be

used more efficiently by changing their operation schedules

or engaging in other fishing activity.1 Lassiter concluded

that a large part of the shrimp fleet was under-utilized

during the "off season" and was not being used in

alternative fisheries. Alternative fishing activities were

limited by a lack of knowledge, skills, and equipment

needed in other fisheries.1




14
C.C. Osterbind and Pobert A. Pantier, Economic
Study of the Shrirp Industry in the Gulf and South Atlantic
States (Gainesvillu: bureau of Economic and business
Research, University of Florida, 1961).
Roy L. Lassiter, Utiliiation of U.S. Otter-Trawl
Shrimp "ossels in the Culf Are., 1959-1961 (Gainesville:
Bureau of Lconomic and business Research, University of
Florida, 1964).
6Ibid., p. 111.

17Ibid., pp. 4-5.








The problem of a trade policy for the shrimp

industry came under intensive review in 1960-1961 as a

result of attempts to impose a tariff and quota on shrimp

imports. The arguments for both sides of the controversy

were brought together in hearings before the United States

House of Representatives Committee on Ways and Means.16

These hearings included not only testimony given before the

Committee, but also briefs prepared by shrimp fishermen's

organizations, an exporter to the United States market, and

the Tariff Commission. Both the pro and con briefs present

a strong case supporting the point of view of the interest

group concerned. In the case of the fishermen's document

it was held that the import segment creates instability in

the domestic market. The brief by El Salvador suggested

that the problem was not created by imports, but by

overexpansion of the domestic industry. Additionally, El

Salvador's representative pointed out that the proposed

legislation was contrary to the basic trade policy of the

United States and the General Agreement on Tariffs and

Trade. The less biased report of the Tariff Commission

surveyed the changing situation in the shrimp industry and

the consumer market. The Tariff Cormission concluded that

a more restrictive trade policy would arrest the expanding




18United States Congress, House of Representatives,
Committee on Ways and Means, Tariff Treatment of Shrimp
Imports, Hearings before the Committee, 87th Congro':s, 1st
Session, on H.R. 6168, August 8, 1961 (Washington:
Government Printing Office, 1961).






15

domestic demand without substantially altering the shrimp

landings of the United States fleet. These Hearings

represent a thorough statement on tariff policy for the

shrimp industry for the pre-1961 period.













CHAPTER II


THE SHRIMP FISHERY: BACKGROUND AND POLICY FRAMEWORK


This chapter provides background material in three

areas which will facilitate understanding the analytical

work in later chapters. First, there is a survey of the

Gulf and South Atlantic shrimp fishery and a brief descrip-

tion of the marketing channels for shrimp products. No

attempt will be made to provide details of processes at

each level of distribution, since this has been done

elsewhere.1 Secondly, United States trade policy relevant

to the shrimp industry is presented. This review also

includes broad agreements which indicate the overall trade

philosophy of the government. Finally, some theoretical

topics relevant to the economics of fisheries are put

forward.




1
United States Bureau of Commercial Fisheries,
Survey of the United Stateq Shrimp Industry, Volumes I and
II (Washington: Government Printing Office, 1958, 1959).
United States Congress, House of Representatives, Committee
on Ways and Means, Tariff Treatment of ShrinD Inports,
Hearings before the Committee, 67th Congress, 1st Session,
on H. R. 6186, August 8, 1961 (Washington: Government
Printing Office, 1961).













Shrimp Production and Distribution


Shrimp and its closely related species are found in

most parts of the world, ranging from tropic waters to the

coasts of Alaska. Considerable variations in size are

found among regions which influences the commercial develop-

ment of the fishery. Shrimp are found on both coasts of

the United States, but the most important fishery has

developed along the South Atlantic and Gulf coasts.2

The Gulf and South Atlantic shrimp fishery provides

over 80 percent of the shrimp caught by United States

fishermen. It extends along the Atlantic coast from North

Carolina to Florida and around the Gulf to Texas. Prior to

1950 most of this fishery lay within ten miles of the coasts

however, in the early 1950's fishermen entered two offshore

areas, Dry Tortugas and the Gulf of Campeche, which had not

been exploited previously. These areas have continued to

produce relatively large quantities of shrimp.3




United States Bureau of Commercial Fisheries,
Survey of the United States Shrimr Industry, Volume I,
(Washington: Government Printing Office, 1958, 1959).
United States Fish and Wildlife Service, Survey of Shrimp
Fisheries of Central and South America (Washington:
Government Printing Orfice, 1957), pp. 4-7.

3Ibid., p. 4.







There are five important commercial varieties of

shrimp which are taken in the Gulf of Mexico and South

Atlantic Ocean. In recent years brown shrimp (Panaeus

aztecus) has accounted for about 60 percent of the total

catch. The pink shrimp (Panacus duorarum) and white shrimp

(Panaeus setiferus) provided about 25 and 15 percent

respectively of landings. Two less important species, sea

bobs (Xiphopeneus Krogori) and royal red shrimp (Hymeno-

penacus robustus) contributed less than 1 percent to

domestic landings.4 The latter variety, although desired

for its large size, has not been taken in great quantities

primarily because of the difficulties involved in fishing

at the depth, 175 to 300 fathoms, at which it is found.

Sea bobs, on the other hand, are small and less desirable

than the other varieties.

These shrimps, except the royal red, spawn offshore.

Spawning begins in early spring, but may continue until

September, depending on the species and environmental

conditions. Each female produces a large number of eggs;

however, mortality is high so that a small percentage

estimates suggest less than 3 percent) reach maturity.

After hatching, the larval shrimp move toward the shallow,

brackish, inland waters along the coast. As they develop

they migrate back to the deeper coastal waters, and by




United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, S-12 (March, 1969), p. 10.








the time maturity is reached most of the shrimp are again

in the open ocean. Growth is rapid during the surJmer

months, in which many of the juvenile shrimp reach lengths

of two inches just two months after spawning. After six

months the shrimp have grown to about six inches. Shrimp

may live as long as sixteen months, but in general they

should be considered an annual.5

The adult shrimp prefer to live on muddy bottoms in

relatively shallow water. Many such areas exist along the

continental shelf of southern North America, especially

along the coasts of Louisiana, Texas, and Florida. Similar

grounds with high concentrations of shrimp are found off

the coasts of Mexico.6

The spawning and development cycle accounts for the

seasonal nature of the shrimp landings. Since the various

species reach maturity at different times of the year,

seasonal patterns will vary throughout the fishery. For

example, pink shrimp catch reaches a peak during the

winter and is concentrated in the Florida and Campeche

area. The more plentiful brown shrimp reach a peak in

late summer and autumn and are more highly concentrated in




5William W. Anderson, "The Shrimp and the Shrimp
Industry of the Southern United States," Fishery Leaflet
Number 472, Bureau of Courrercial Fisheries (Washington:
Government Printing Office, 1963), pp. 2-3.

6United States Bureau of Commercial Fisheries, Survey
of the United States Shrimp Industry, Volume I, op. cit.,
p. 18.








the Louisiana, Texas, and Mexican area. Fishing for

juvenile brown shrimp reaches a peak in June or July,

while the young white shrimp are more plentiful in the late

fall.7 This pattern of development has encouraged migration

of shrimp fishermen over wide areas of the South Atlantic

and Gulf of Mexico. It is not unusual for fishermen based

in Jacksonville, Florida, to participate in the brown

shrimp fishery off the Texas coast.

In general, the larger the shrimp the more valuable

they are commercially. A general pattern of prices becomes

established which relates the various size categories.

Very small shrimp, used principally for canning, sell at a

considerable discount relative to larger classifications.

The price pattern is not fixed and appears to vary with

changes in supply and demand.


Fishing Craft and Gear

A number of different types of fishing gear are used

to capture shrimp; however, the otter trawl is by far the

most important and accounts for 97 percent of total catch.10




Ibid., p. 39.

Blbid., pp. 41-42.

United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, op. cit., p. 12.

10United States Bureau of Commercial Fisheries,
Fishery Statistics of the United States 1966, Statistical
Digest Number 44 (1957) p. 505.








The otter trawl is a large, bag-like net held open in

front by two diverting planes called doors, and is towed

by a powered craft. Smaller craft use relatively small

nets, while the larger vessels frequently use two nets,

each of which may be seventy feet wide at the mouth. At

one time a single large net was common, but changing to

double nets resulted in economies in initial purchase,

repair, and, in some cases, labor used to handle the nets

on board. I1hile fishing, other traul gear is towed at low

speed near the bottom. Tickler chains or similar devices

arranged in advance of the net disturb shrimp resting on

the bottom, causing them to rise and be caught by the

following net. The trawl is recovered by winches on board

the craft and emptied at intervals depending on the

abundance of shrimp being caught.

In addition to the otter trawl, haul seines, bag

nets, beam trawls, pots and traps, push nets, cast nets,

and bush traps are used to catch shrimp. These devices

are usually employed in shallow water by fishermen using

small boats and do not contribute a large share to the

commercial output of shrimp. These techniques produced

6.4 million pounds in 1966.11

Individual states place restrictions on types of

gear which can be used in the area they control, but gear

used for catching shrimp in open water is not restricted.




1bid., p. 505.








Craft used in the shrimp fishery are classified as

boats (capacity less than five net tons) and vessels

(capacity of five net tons and over). The Bureau of

Commercial Fisheries classifies only those boats or vessels

using otter trawl gear for statistical purposes, but these

account for nearly all of the United States shrimp landings.

Boats are usually less than thirty feet in length and are

used primarily on inland or coastal waters near the shore.

Vessels, on the other hand, are from thirty to eighty feet

in length and have much greater cruising ranges. Most

vessels are less than seventy tons (gross), but the larger

craft may exceed 150 gross tons and be capable of staying

at sea for extended periods. The average gross tonnage for

vessels in the Gulf and South Atlantic is about thirty tons,

but the 10-19 and 60-69 ton classes predominate in numbers.12

Shrimp vessels in the Gulf and South Atlantic are

typically of wooden hull construction, although steel hulls

have been increasing in popularity among fishermen. Fish

Boat magazine in its annual survey of new boat construction

revealed that steel construction increased from 40 percent

of the total in 1965 to 60 percent in 1966 and 52 percent

in 1967.3 The wooden vessels, which are somewhat less




Ibid., pp. 505-506.

"1U.S. Fishing Vessel Construction," Fish Boat, X
(December, 1965), pp. 47-64; XI (December, 1966), pp. 58-75;
XII (December, 1967), pp. 43-67.








expensive initially, require more maintenance and have a

shorter average life. Diesel engines provide power for

essentially all of the shrimp vessels which operate on the

open seas. Larger engines have been installed in recent

years and appear to improve the performance of vessels.

Other modern equipment of several types has been increasingly

important to fishermen. For example, freezing equipment has

been installed on many vessels in order to preserve the

quality of the catch. Addition of this equipment permits

longer trips and reduces losses from the deterioration which

occurs with prolonged ice packing. Improved electronic

navigational and communications equipment, such as radio

telephone, loran, and depth recorders, add to the safety and

efficiency of the vessel. Radar has not been found to be of

great value to the shrimp fisherman.14

Typically, three men are employed on a shrimp vessel,

a captain and two crew members. This size crew is sufficient

to man some of the newer vessels which are somewhat larger.

On medium size vessels two crew members may be able to

operate the equipment using modern power devices, but a

third member is frequently desired to assist in separating

the shrimp from the nets and trash, especially during the




4United States Bureau of Commercial Fisheries,
Survey of the United States Shrinn Industry, Volume I,
op. cit., pp. 94-10J.








peak season.5 In general, a share system is used to pay

men employed on the vessels. The share system, which is

based to a large extent on local custom, may be altered to

fit the situation of particular vessels. For example, if

the owner is not the captain he may furnish ice, fuel, and

gear. In return the owner receives one-half to two-thirds

of the sales proceeds from the catch. The remainder is

divided among the captain and crew, perhaps favoring the

captain with the larger share. The crew is responsible

for repairing the nets, a measure which serves to reduce gear

destruction and loss. Cannery owned vessels usually have

the proceeds divided into five shares; one each for the

cannery, captain, two crew members, and the rig (until paid

for). On craft owned by the captain, the captain may receive

the owner's 50 percent share, plus one-third or more of

the remaining share, i.e., he may take about 80 percent

of the proceeds and divide 20 percent between the two

crew members. Adjustments are made in shares depending on

variations in crew size. A variety of share agreements are

used throughout the South Atlantic and Gulf area, so that

no one type can be presented as typical.6 The share system

has several important economic implications which will be

examined later.




15United States Tariff Commission, Shrimp (washington:
Government Printing Office, 1961), p. 28. reprinted in
Tariff Treatment of Shrimp Inports.

16Ibid., p. 29.








The Marketing of Shrimp

Two factors which have been of primary importance in

the development of the processing and marketing system for

shrimp are location of the resource and its perishable

nature. During the early portion of the twentieth century,

when the Gulf shrimp fishery was developing, ice was used

to preserve the product. Since shrimp packed in ice deteri-

orates in quality after about five or six days, it was

necessary that the shrimp be sold fresh for consumption or

else be processed by canning or drying. Canneries and

drying plants tended to locate near the principal ports in

order to obtain the shrimp while they were still fresh.

Later, as freezer plants were built, they also located near

the ports so that they could obtain fresh shrimp while it

was still in good condition for freezing. Today the

majority of plants processing most of the domestic catch

are located in Texas, Louisiana, Georgia, Florida, and states

adjoining the Gulf.17


Physical Distribution

The first step in the distribution of shrimp takes

place at the landing facility sometimes called a shoreside

packing house. Packing houses receive the shrimp from the




United States Bureau of Commercial Fisheries,
Survey of the United States Shrimp Industry, Volume I,
op. cit., pp. 2, 2 2.







boats and in most cases wash, grade, weigh, and package it.

These facilities vary widely, but frequently they are small

units operated only during the season. Ownership of the

packing houses also varies. They may be operated by

independents, boat or fleet owners, processors, or coopera-

tives. Ownership may determine from whom shrimp will be

purchased. For example, fleet owned houses may receive

shrimp only from their own vessels, whereas some independents

may buy from any vessel. Usually more than one type of

buyer is found in a port. A packing house owner's compensa-

tion is based on the number of functions his plant performs.

In some cases he may not receive payment until the shrimp

have been prepared and delivered. Or the packing house may

purchase the shrimp outright, taking title to them and

paying the vessel captain a price discounted enough to pay

the landing fees, if any are charged. The fee and arrange-

ment for paying it vary throughout the Gulf.1

Packing houses and processors use several criteria

in setting the price which they will pay. For example,

published wholesale prices in major market areas, trend in

cold storage holdings, quantity of shrimp in the area, and

price recently paid there are considered in setting local

prices.19 These factors do not appear to bear equally on




1BUnited States Tariff Commission, op. cit., p. 32.
19nited States Congress, House of Representatives,
Committee on Ways and Means, op. cit., p. 460.








pricing decisions and vary in importance with changing

conditions. The pricing mechanism will be discussed further

in Chapter III.

Once the shrimp have been washed, graded, weighed,

and packaged, they are ready to move along to the next step

in the distribution system which will be determined by the

planned utilization of the shrimp. Figure 1 illustrates

a generalized view of the flow of shrimp from fishermen to

consumer; of course, exceptions exist. Broken lines

indicate where brokers facilitate the movement of shrimp

through the marketing channel, although they may not take

possession or title. The figure does not show the

integration of firms which perform more than one of the

functions or trade in more than one form of processed

product.

The marketing of shrimp has been altered by the

increased use of refrigeration facilities during the past

twenty years. Shrimp markets which were once confined to

the coastal areas were expanded to include the entire country.

Although the influence of the trend toward prepackaging of

meats and seafoods on shrimp distribution will not be explored

here, a general reading of advertisements in food trade

periodicals suggests that it has been important in the retail

merchandising of many shrimp products.







28










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The relative importance of each marketing channel

depends on the demand for the various processed forms of

shrimp. The marketing of fresh and frozen shrimp is by

far the most important, since it handled 89 percent of

total product in 1967. The canning segment has a smaller,

but somewhat more stable output. Cured shrimp, which have

a very specialized demand, represent a very small portion of

total product.20

The solid lines representing the physical flow of

shrimp products might also represent transportation

facilities, especially motor truck, among middlemen at

various levels. The perishable nature of shrimp requires

rapid transportation and, in most cases, refrigerated

facilities. Smaller refrigerated vans may be used for local

transfer while larger equipment would be needed to handle

shipments to major market centers. Railroad transportation,

once important, is no longer used extensively for shipping

shrimp.

Storage facilities may be required at each level of

distribution. This is especially important, since cold

storage is required for the various frozen products. Public

cold storage warehouses are used extensively by processors,

wholesalers, and jobbers. For example, public cold storage




20United States Dureau of Commercial Fisheries,
Shellfish Situation and Outlook, op. cit., p. 20.








holdings of shrimp were 62 million pounds in December,

1968.21 An additional undetermined amount of frozen shrimp

was held in private warehouses, but figures are not available

since these holdings are not reported to the Bureau of

Commercial Fisheries. Frozen holdings fluctuate during the

year, absorbing larger quantities during season and

distributing them through the remainder of the year. During

the peak season monthly stock levels sometimes reach as

much as 20 percent of the annual supply. This stock will be

discussed later in relation to supply, since it has the

potential for influencing prices and buying decisions of

middlemen.

The primary wholesalers shown in Figure 1 are usually

the initial purchasers of the shrimp. They may be packing

houses with large volumes or assemblers of shrimp landed

at smaller packing houses. Shrimp to be sold fresh will be

rushed on to the market by the local wholesaler, but frozen

shrimp can readily be sold by description in more distant

markets or to secondary wholesalers. Secondary wholesalers

typically handle larger volume and consolidate holdings in

central market areas, such as Chicago and New York. Imports

may act as a source of supply for the secondary wholesaler

in addition to his domestic volume.2




21Ibid., p. 17.

22United States lurcau of Commercial Fisheries,
Survey of the United States Shrimp Industry, Volume II,
op. cit., pp. 6-11.








Shrimp canneries obtain their supplies from their own

fleets, packing houses, and primary assemblies. They prefer

fresh shrimp whenever possible, since they make a better

canned product than previously frozen shrimp. Canned shrimp

are distributed in much the same way as other canned foods.

In fact, canneries usually combine other food lines with

their shrimp operations.

The development of quick frozen foods altered the

nature of shrimp marketing. Unlike the highly perishable

fresh shrimp, packaged frozen shrimp could be sold readily

from freezers in any grocery store throughout a national

market without quality deterioration. The result was a

widening of the market and an increase in the number of

available outlets. Figure 1 indicates that the marketing

of frozen shrimp products is considerably different from

that of fresh shrimp: it more closely follows the channel

of other frozen foods as opposed to fresh products.

This section and Figure 1 are intended to illustrate

the general distribution of shrimp. Related topics, such

as pricing, will be covered in greater detail in Chapter III.


Trade Policy


Direct Trade Policy Factors

The foreign trade policy of the United States embodies

at least four basic principles: (1) official encouragement




23Ibid., pp. 4-5.








of international trade and cooperation on matters involving

trader (2) non-discrimination among trading partners; (3)

elimination of quotas and exchange restrictions; and (4) use

of tariff where protection is determined to be desirable.

Yet a fifth principle is implied in item (4), that trade

policy will not injure domestic industries.24 Current policy

based on these ideas evolved out of the experience of the

1920's and early 1930's and was expressed in the Tariff Act

of 1930 and the Trade Agreements Act of 1934. The latter

act, which has been a cornerstone of trade policy, has

undergone considerable revision to reflect a growing

preference in more recent years for multilateral agreements,

as opposed to the bilateral agreements of the 1930's and

1940's. The present state of the evolving United States

commercial policy is probably best exemplified in the General

Agreement on Tariffs and Trade (GATT), to which it is a

contracting party.

The purpose here is to select for discussion those

specific and general aspects of trade policy which relate to

the shrimp industry and trade in shrimp products. The most

significant element in this policy was provided by the Tariff

Act of 1930 (paragraph 1761) which placed shrimp in a duty




24William B. Kelly, Jr., "Antecedents of Present
Commercial Policy, 1922-1934, Studies in United States
Commercial Policy, William B. Kelly, Jr., editor (Chapel
Hill: University of North Carolina Press, 1963), pp. 3-68.






33

free category.25 Only one group, representing Texas Fisher-

men's Organization, appeared before the Committee on Ways

and Means to oppose the duty free status of shrimp. This

group recommended a ten cents per pound duty in order to

offset the lower cost of Mexican labor and equalize a cost

differential created by a state tax on shrimp landed in

Texas.26 Despite this objection the duty free status was

retained in the law and has continued to the present time.

A second basic element of United States trade policy

is the avoidance of quantitative restrictions, that is,

quotes and exchange restrictions. The United States

position, which rejected the use of quotas, was formalized

in the International Convention on the Abolition of Import

and Export Prohibitions and Restrictions, ratified in 1929;

however, no laws had to be altered in order to conform to

the Convention.27 The United States objection to quotas

was based on the idea that although the tariff creates a

price differential, the price system still operates.

However, the price system cannot overcome the restrictive




25United States Congress, House of Representatives,
Tariff Act of 1930, House Document 476, 71st Congress, 2d
Session (Washington: Covernment Printing Office, 1930),
p. 102.
26United States Congress, House of Representatives,
Committee on Ways and Means, Tariff Readjustment Act 1929,
Vol. VII, Hearings before the Corrmttcu on 11ays and I:Uans,
70th Congress, 2d Session. (Washington: Government Printing
Office), pp. 4261-4262.

27William B. Kelly, Jr., op. cit., p. 53.








effects of a quota, so the quota becomes discriminatory.

The discriminatory mechanism varies depending on the nature

of the quota limitation. For example, the quota may operate

on a first received basis, which would discriminate against

late arrivals of potential imports. The Convention failed

as an international agreement, but the principle was

retained and is expressed today in the General Agreement on

Tariffs and Trade, Article XI.

No prohibitions or restrictions other than duties,
taxes, or other charges, whether made effective
through quotas, import or export licenses or other
measures, shall be instituted or maintained by any
contracting party on the importation of any product
of the territory of any other contracting party or
on the exportation or sale for export of any product
destiny for the territory of any other contracting
party.

Three exceptions to the above rule are also provided

by Article XI. First, temporary restrictions may be employ-

ed to relieve shortages of essential products in the

exporting country. Secondly, restrictions may be imposed

if necessary to facilitate classification, grading, and

marketing of commodities. And finally, agricultural and

fishery products may be exempted if their limitation is

necessary to the enforcement of governmental programs, such

as domestic production limitation, surplus disposal, or

control of production of animal products primarily dependent




28General Agreement on Tariffs and Trade, Basic
Instruments and Selected Documents, Volume I (ReviseI)
(Geneva: The Contracting Parties to the General Agreement
on Tariffs and Trade, 1955), pp. 22-23.








on imported materials.29 One additional exception,

provided by Article XII, permits quotas in the event of

need for a balance of payment safeguard.30 If quantitative

restrictions are applied under the above exceptions, they

should be assigned and administered in a non-discriminating

manner. Article XIII provides that "In applying any

quantitative restriction all countries should be treated

equally" and the quota "should attempt to approximate the

market share which would be expected to exist in the absence

of restrictions."31

Another important aspect of United States trade policy

is the "escape clause" which permits the government to

rescind an agreement on tariff concessions which causes or

threatens serious injury to a domestic industry. The

principle was included in the Trade Agreements Act of 1934,

and later included in General Agreement on Tariffs and Trade,

Article XIX. Prior to 1958, the escape clause could not be

applied to duty free products furthermore, such products

could not be transferred from a duty free status for this

purpose. The Trade Agreements Act of 1958 revised the 1934

Act and permitted a 50 percent ad valorem duty on

previously duty free items where injury to the domestic

industry was threatened. The Trade Expansion Act of 1962




2Ibid., p. 23.

3Ibid., pp. 23-24.

3Ibid., p. 27.








continued this provision and also permitted implementation

of a quota in cases where injury resulted from tariff cuts

under the Act. As an alternative to imposing duties, the

President could authorize economic assistance for the

injured industry.32

In practice, it has been difficult to apply the

escape clause because of the problems involved in determin-

ing the presence, extent, and cause of injury to the

industry. No request has been made by the shrimp industry

for relief under the escape clause. However, in another

fishery the request for restrictive action against imports

of ground fish fillets was denied three times.33

Among the less significant ingredients of commercial

policy are export subsidies, which the General Agreement

on Tariffs and Trade opposes but does not effectively

regulate. These subsidies may be offset by countervailing

duties, but these may not exceed the amount of the foreign

subsidy. A similar offsetting duty can be imposed in the

case of dumping. (General Agreement on Tariffs and Trade,

Articles XVI and VI.)




32Congress and the Nation (Washington: Congressional
Quarterly Service, 155), p. 2uJ.

33John M. Leedy and Janet L. Norwood, "The Escape
Clause and Peril Points Under the Trade Agreements Program,"
Studies in United States Cor-mercial Policy, William B.
Kelly, Jr., v.ditor (Chapol Hill: University of North
Carolina Press, 1963), pp. 173-175.







Although the above list of trade policy elements is

not complete, it provides the direct policy background in

which the international trade of shrimp has taken place with

respect to the United States and its trading partners. All

of the listed policy elements have not been applied to the

shrimp trade, but they have served as a potentially useful

part of the generally established policy. The duty free

status of shrimp, the absence of quotas or restrictions,

and the non-discriminatory importing of shrimp have provided

an essentially free trade policy for the shrimp industry

for over forty years.


Indirect Trade Policy Factors

Some regulations outside the realm usually included

in the category of trade policy have significant effects

on international trade. Such controls as agricultural

inspections, subsidies, and pure food regulations are

usually put into this category, since their effect can be

similar to a quota or tariff with respect to the volume of

trade or goods included in international trade. This is

the case with shrimp, though to a relatively minor degree.

For example, only vessels constructed in the United States

may be used by United States fisherman if the catch is to be

landed in a domestic port.34 The effect here is probably not

a direct alteration of trade patterns, but an indirect




34Congress and the Nation, op. cit., p. 1070.








modification of trade patterns caused by different cost

structures in the trading countries. If domestic costs are

higher because of the requirement, then imports will be

given some advantage in this area. Incidentally, domestic

shipbuilding facilities have remained relatively efficient

in the building of shrimp vessels, and export sales are

common.

Another regulation which attempts to preserve the

market and fishing grounds for domestic fishermen is a

requirement that vessels under foreign registry cannot land

fish in the United States. Certain exceptions to this rule

exist in territories where the fish is to be used for

direct consumption.35 The effect of this legislation is

to require foreign vessels fishing near United States

coasts to return to their home port or other foreign port

in order to discharge their catch, which may then enter as

imports. Additional travel time and expense thus incurred

tends to discourage foreign vessels fishing in international

waters near much of the United States coast.


Financial Aid to Fisheries

The Fish and Wildlife Act of 1956 (PL 84-1024)

created a Bureau of Commercial Fisheries which is charged

with protecting and assisting the fishing industry. This

Act also provided a fund from which loans could be made for




3546 USC 251 (1964 Edition).








financing and refinancing of operations, maintenance,

replacement, repair, and equipment of fishing gear and

vessels, and for research into the basic problems of

fisheries.36 Loans made under this authority are restricted

to those of less than ten years' maturity at interest of at

least three percent which could not reasonably be obtained

from other sources. For this purpose Congress authorized

ten million dollars to establish a revolving loan fund. In

1958 the limit was raised to twenty million dollars. Dy

1968, only thirteen million dollars had been appropriated,

but because of the revolving nature of the fund, a total

of $24,402,660 in loans had been approved.37

Another form of financial assistance to the fishing

industry is the subsidy for construction of fishing vessels
38
in shipyards in the United States.38 This program may have

some advantages for fisheries in which large vessels are

required, but it has been of little, if any, importance to

the shrimp industry, since the production of small vessels

has remained relatively competitive in domestic shipyards.39




370 United States Statutes 1121.

3United States Bureau of Cormercial Fisheries,
"Summary of Status of Fisheries Loan Fund as of December 31,
1968" (Washington: Bureau of Cor-cercial Fisheries, 1969),
p. 6. (Mimeographed)
346 USC 1401-1413.
39
United States Bureau of Commercial Fisheries, "Status
of Subsidy Applications as of December 31, 196B" (Washington:
Bureau of Commercial Fisheries, 1969), p. B. (Mimeographed)
No subsidies were indicated for the South Atlantic and Gulf
of Mexico region.








Also, this program is more properly a subsidy to shipyards

and, except for the requirement that vessels be constructed

domestically, would not seem to be necessary from a fisher-

man's viewpoint.

Finally, the Fishing Vessel Mortgage Program, created

in 1960 by Public Law 86-577, provides government insurance

of privately financed mortgages on new or used vessels.40

Participation by shrimp vessel buyers has been extremely

small, although the program is generally popular in the

other fisheries.


Maintaining a "Free Trade" Policy

Legislation has been introduced in Congress from time

to time to alter the essentially free trade status of

shrimp. During the 1957-1965 period, over fifty bills to

place a duty and/or quota on shrimp imports were introduced.

The volume of these bills reached a peak during the 1959-

1960 price decline.41 This prompted the Senate Finance

Committee to request a Tariff Commission study of the

situation. In 1961 similar bills were offered in the House

of Representatives, resulting in a second study by the

Tariff Commission. The bill (H.R. 6168) introduced by




4016 USC 742e.

41United States Congress, House of Representatives,
Committee on Whys and Means, op. cit., pp. 1-2.








Hale Boggs of Louisiana follows:42

Be it enacted by the Senate and House of
Representatives of the United States of America
in Congress assembled, That Paragraph 1761 of
the Tariff Act of 1930 (19 U.S.C. 1201, par.
1761) is amended by striking out "Shrimps,
lobsters, and other shellfish" and inserting
in lieu thereof "(a) Lobsters and other shell-
fish," and by adding at the end thereof the
following new subparagraph:
"(b) Heads-off, shell-on, vion-in shrimps
imported in any calendar year within the
limits of the applicable quota fixed in
paragraph 721(f)."
Sec. 2. Paragraph 721 of the Tariff Act of
1930 (19 U.S.C., sec. 1001, par. 721) is amended
by adding at the end thereof the following
new subparagraph:
"(f) Shrimps, fresh or frozen (whether or
not packed in ice), or prepared or preserved
in any manner (including pastes and sauces),
35 percentum ad valorem, but not less than
35 cents per pound: except that heads-off, shell-
on, vien-in shrimps, not otherwise advanced in
condition may be entered or withdrawn from
warehouse for consumption free of duty in
any calendar year in an amount not exceeding
the total quantity of shrimps entered or
withdrawn from warehouse for consumption in
the calendar year 1960. The Secretary of
the Interior is authorized and directed to
allocate this duty-free quota among the
countries supplying imports of shrimps to
the United States in the calendar year 1960
in accordance with the volume of imports of
shrimps received from each such country in
that year; except that imports in any one month
during the balance of the calendar year 1961
shall not exceed imports during the same month
in the calendar year 1960."
Sec. 3. Nothing in this Act shall be deemed
to affect any rights conferred by paragraph 1730




42United States Congress, House of Representatives,
Committee on Ways and Means, op. cit., p. 1.








(a) of the Tariff Act of 1930 (19 U.S.C., sec.
1201, par. 1730 (a).
Sec. 4. The amendments made by this Act shall
apply with respect to articles entered, or with-
drawn from warehouse, for consumption, after the
expiration of thirty days after the date of
enactment of this Act.

Amendments to the bill were suggested by the participants in

the hearings which would have permitted the Secretary of the

Interior to adjust the quota to permit larger quantities of

imports during periods when domestic production could not

adequately satisfy domestic demand.

In general, shrimp fishermen's groups and their

Congressional representatives supported the restrictive

legislation. The fishermen's case was presented in a

"Brief on Behalf of the Domestic Shrimp Industry" prepared

by the National Shrimp Congress, Incorporated, an

organization composed of five Gulf fishermen's groups.3

The "Brief" was well documented and provides a rather

complete explanation of the 1960 problem from the producers'

viewpoint. They contended that imports and domestically

produced shrimp were competitive, so that the larger

increases in imports were causing all shrimp prices to be

depressed. Therefore, the solution to the problem was to

control imports in such a manner that domestic prices would

remain high. Opponents held that imports were not very

competitive with domestically landed shrimp, and that




national Shrimp Congress, Incorporated, Brief on
Behalf of the Domestic Shrimp Industry, Peprinted in Tariff
Treatment of Shrimo Injorts, op. cit., pp. 173-268.








United States production was inadequate to meet demands,

therefore imports were necessary to provide for expanding

consumption. Further, they suggested that an over-expansion

of the domestic fleet relative to the size of shrimp re-

sources had occurred and that declining earnings in 1959-

1960 were a reflection of this overcrowding in the shrimp

fishing industry. In addition to this argument, it was

pointed out that the proposed restrictive policy would

violate the General Agreement on Tariffs and Trade and be

contrary to the general trade philosophy expressed in other

agreements or laws.

House Rule 6168 died in the House Ways and Means

Committee, as did the many similar bills introduced in

recent years, as Congress reaffirmed a free trade policy

with respect to shrimp.44 Advocates of the tariff on shrimp

have been less active since 1961, which is an interesting

fact for later consideration.


Trade Policy and Economic Development

The role of commercial policy in economic development

is not completely understood. Kindleberger states that

"Commercial policy can hardly make much of a positive

contribution to economic development . But commercial

policy still falls short of refinement to the point where




44Congressional Record, 87th Congress, 1st Session,
1961, p. D602.








short run instability of prices of primary products ex-

ploited by underdeveloped countries can be overcome or

where its effects on development in underdeveloped countries

can be smoothly offset."45 Still, both developed and

underdeveloped countries must have a trade policy. The

most generally accepted for both categories has been that

of non-discrimination based on the most favored nation

principle, rejection of quantitative restrictions, and

general reduction of tariffs.

During the last decade this policy has been subjected

to a considerable amount of criticism, especially by those

concerned with economic growth and development. A new

policy which Myrdal calls a "double standard of morality

in international trade" has received wide advocacy from

the developing nations.46 The "double standard" policy

proposes that developing nations be permitted to use

restrictive measures in order to protect their foreign

exchange earnings. This, Myrdal concludes, would not

restrict total trade, since the earnings will surely be

spent for development needs. On the other hand,

developed nations with fewer serious foreign exchange

problems would restrict total world trade if they used




4Charles P. Kindlcberger, Economic Development.
(New York: McGraw-llill, 1965), p. 320.

Gunner Myrdal, An International Economy (N w York:
Harper and Brothers Publishing Co., 1956), p. 288.








protective devices.7 The conclusion reached by Myrdal is

that developed nations can aid underdeveloped nations by

permitting the existence of a protective foreign commercial
48
policy while liberalizing domestic trade policy.48 A

similar thesis was expressed at the United Nations

Conference on Trade and Development in 1964. The fiscal

policy statements called for more discrimination in favor
49
of underdeveloped countries. There may be a move toward

granting preferences in international trade, but the initial

response of the developed nations has been a reiteration of

the non-discriminatory principles of the General Agreement

on Tariffs and Trade.

Discussion such as those referred to above are set in

a multi-national framework which includes many commodities

with alternative sources. The aspect under study here is

much narrower in that it deals with one commodity and a one

way flow of goods. In this simple case, it may be easier to

see that the immediate effect of trade is to provide foreign

exchange earnings, which at best on the surface increase the

underdeveloped country's potential for growth.




4Ibid., pp. 288-289.

48Ibd., p. 292.
49
4United Nations Conference on Trade and Development,
Trade and Development: Policy Statements, Volume II,
Proceedings of the United Nations Conference on Trade and
Development, Geneva, March 23-June 16, 1964. (New York:
United Nations, 1964), pp. 60-61.








The realities of foreign trade practices are not

always consistent with the policies described in the

preceding pages. For example, quotas are rejected in

principle, but applied in practice. The sugar quota of the

United States has received much attention in recent years.

Other items subject to quotas are listed in Chapter IV.

Quotas are not always levied explicitly by the importer.

Japan has imposed "voluntary export quotas" on certain goods

traded with the United States. Recently requests have been

made for extension of those "voluntary quotas" to other

countries. "Voluntary quotas" are generally as unpopular

as import quotas and are imposed under pressure from the

importing country.

The escape clause has also been an unpopular part of

United States foreign policy. The United States has been

one of the more frequent users of the escape clause.

Disposal of agricultural products abroad may also violate

the spirit of the export subsidy and dumping provisions of

GATT.

Indirect trade policies have played a role in recent

foreign trade practice. The meat inspection provisions and

proposals for fish inspections are discussed briefly in a

later chapter. Although these regulations may be imposed

in the interest of safeguarding the public from unsafe foods,

they tend to be discriminatory in their impact on exporting

countries.








Public Policy Toward Foreign Investment

In general, the government tried to provide a favor-

able climate for foreign investment during most of the

study period 1957-1968. The United States policy was

reviewed in a speech by Dean Rusk before the National

Business Advisory Council in 1962.50 lie acknowledged the

role business played in foreign investment and encouraged

it to "expand its present important role in the world

economy.51 The administration was aware of the short run

balance of payments problems created by the outflow of

capital, but believed that "In the longer term . the

flow of earnings, foreign subsidiaries procurement from the

United States, and more generally the global scope, vitality,

and profitability of American firms all strengthen both the

international position of the dollar and our domestic

economy.52 This policy was modified somewhat by the

interest equalization tax, which was used in an attempt to

slow the pace of capital outflow and improve the balance of

payments position in the 1960's.53




Dean Rusk, "Trade Investment and United States
Foreign Policy," Department of State Bulletin (November 5,
1962), pp. 683-688.

51Ibid., p. 684.

5Ibid., pp. 684-685.

Congress and the Nation 1965-19G8, Volume II
(Washington: Congressional quarterly Service, 1969),
pp. 143-144.








Secretary Rusk further indicated that "the United

States Government is prepared to intervene on behalf of

American firms and make strong representations to host

governments in case of economically unjustified expropriation

or harassment."54 In addition to the above action, the

government provides investment guaranty programs under the

Mutual Security Act and the Federal Assistance Act. For a

fee the businessman can obtain insurance against losses due

to non-convertability of earnings, expropriation, and war

damage. These programs indicate the interest of government

in improving the climate for investment spending, especially

in less developed countries.


Economics of a Fishery


In recent years a body of theory has been developed

to explain behavior in an industry which uses a common

property or, as some suggest, an open access resource.5

By open access resource is meant that title to the resource

in this case the fish cannot be claimed in advance of taking

the resource. Individual, and frequently national, claims

on the resource cannot be economically enforced if the




54Ibid., p. 686.

55James P. Crutchfield and Giulio Pontecorvo, The
Pacific Salmon Fisheries (Washington: Resources for the
Future, The Johns lopkins Press, 1969), p. 11.








resource is mobile and undergoes its development in

different geographical areas. International law may in

fact prevent national enforcement of claims to the resources

of the high seas. A second element which distinguishes the

fishery from some other national resources is that it is

capable of replenishment. This gives rise to the question

of maintenance of the species and the influence of fishing

on its reproduction and the general ecological balance of

the fishery. Traditionally, the fisheries have not been

regulated or managed by government in order to preserve or

fully utilize the resource; however, there are exceptions,

such as the Pacific halibut and salmon fisheries. The theory

which will be discussed represents attempts to rationalize

management of the fishery with a view toward its continued

and/or efficient use. No attempt will be made to review

the development of the theory of common property resources,
56
since this information can be found elsewhere. Instead,

the theory will be summarized in its current form with




56H. Scott Cordon, "The Economic Theory of a Common
Property Resource: the Fishery," Journal of Political
Economy, LXII (April, 1954), 124-142. Anthony D. Scott,
"The fshery: The Objectives of Sole Ownership," Journal
of Political Economy, XLIII (April, 1955), 116-124.7 altph
Survey and Jack Iiseman (editors). The Economics of
Fisheries (Rome: Food and Agriculture Organization of
the United Nations, 1957). Ralph Turvey, "Optimization
and Suboptimization in Fishery Regulation," Amcrican
Economic Review, LIV (March, 1964), 64-76. Francis T.
Christy, Jr., and Anthony Scott, The Cor.-on We.alth of
Ocean Fisheries (Baltimore: Pesources zor the future,
The Johns Ilopkins Press, 1965), pp. 6-16.








emphasis placed on those aspects which will aid in under-

standing developments in the shrimp industry.

The size, in numbers and weight, of the population of

a fishery depends on the rates of regeneration and growth

of the species, and on the rate of mortality caused by

natural forces and fishermen. To some extent the fishermen

capture fish which would otherwise die from natural causes

and their efforts do not reduce the population however,

beyond this quantity fishing will reduce the total population.

The quantity of fish taken can be maintained indefinitely

if the natural mortality and fishing mortality are balanced

by recruitment of new members of the species. The most

likely outcome to be expected by the addition of a new

predator, the fisherman, is the eventual reduction of the

population in the fishery. The effect of fishing also

depends on the ecological changes created by a smaller

species population. For example, a decrease in the species

may permit a competing species to over-run and destroy it.57

The weight, but not necessarily the number, of fish

may be reduced by increased fishing. This is a result of

catching the fish before they mature and may eventually

result in a decline in the yield of the fishery. Whether

or not the removal of fish at an early age is harmful to




57James Crutchfield and Arnold Zellner, Economic
Aspects of the Pacific Halibut Pishery, Fishery Industrial
Research, Vol. 1, r.o. 1 (lashington: Government Printing
Office, 1962), p. 11.






51
the species depends upon the ability of a smaller number of

mature fish to produce sufficient eggs to replenish the

population. If the species multiplies rapidly from a few

members, then heavy fishing will probably not threaten the

stock with depletion.58 The size and type of fishing gear

used largely determines the age at which the fish are

caught. Similarly, it influences the overall quantity of

fish taken by the fishermen.

The physical yield of a fisheries' stock which can be

maintained depends on the amount of fishing effort, i.e.,

labor and capital, which is applied. Application of

additional inputs of labor and capital to a given fish

stock will cause the catch to increase but by successively

smaller amounts until the maximum sustainable yield is

obtained. After this point, additional fishing effort will

result in a smaller yield since the population and the

recruitment of new individuals will have been reduced.

The maximum annual yield which can be sustained in the

fishery is illustrated by AM at fishing effort level OA in

Figure 2. From economic theory it may be recalled that the

rent maximizing output for a monopolist is the point where

revenue exceeds cost by the greatest amount. In Figure 2

this point is represented by DB where the rent maximized is

CD. This rent is attributable to the resource and is the




58Ibid., p. 12.

























DOLLARS



TOTAL COST
AND
TOTAL CATCH
REVENUES
(per season)






O


TOTAL CATCH
REVENUE AND
SUSTAINABLE
YIELD


B A C


FISIINC EFFORT LEVEL


FIGURE 2

TOTAL REVENlUES AND COSTS WITHl RESPECT TO
FISHING EFFORT








amount which could be earned by the owner if the rights to

the fishery were appropriated. This point has been referred

to as the maximum net economic yield. Extensive fishing

effort applied beyond OA may result in a serious depletion

of the fish stock. How far this process could go, assuming

an increase in demand, is not certain. It has been argued

that this process will not continue to the point of

extinction of the resource.59 Instead, it becomes unprofit-

able to seek out the smaller population or the industry

accepts some regulation to restore the resource. Unprofit-

able "overfishing" of the type just described occurs beyond

OC in Figure 2.

Before proceeding, it should be pointed out that the

revenue and cost functions in Figure 2 are different from

those usually found in economics textbooks and depend upon

several implicit assumptions. Typical revenue and cost

curves treat output as the independent variable, while

fishing effort serves this purpose in Figure 2. In this

case, output is reflected in the level of the revenue and

cost curves. To obtain this result, it must be assumed that

per unit costs are constant for fishing effort and that

demand for the output is infinitely elastic so that price

will not vary with the size of the catch. Fixed costs are

assumed to be zero. In reality, these assumptions are un-

likely to be true; however, the outcome in the event that




59Christy and Scott, op. cit., p. 9.








costs are increasing or demand is not infinitely elastic

would be to accentuate the conclusions of the model rather

than repudiate them. The share system of wages, which

can cause a considerable variation of cost with output, will

be discussed later in the chapter.

The economic rent, which is represented by the

excess of revenues over costs in Figure 2, serves as an

incentive for more fishing units to enter the fishery. Each

of the new units will be acting rationally as it tries to

maximize its profits; however, as a whole the effect is

dissipation of the rent caused by the increasing total costs

and reduced catch. The total landings of fish may actually

be less than the maximum sustainable yield, as indicated

by Figure 2. Yet the smaller output is achieved through

the application of additional resources to the fishery.

As long as freedom of entry exists, the tendency will be

for excessive fishing effort to be applied to the industry

beyond the point of economic efficiency or maximum

sustainable yield of the resource. This "overfishing"

economic equilibrium depends on the particular relationship

of cost and revenue curves postulated in Figure 2. If the

slope of the cost function is increased, then the economic

equilibrium may occur below the maximum sustainable yield.

It is conceivable that the costs involved in taking the

resource would be so great with a given technology that

fishing would not be undertaken at all. The same result

can be produced by a very low market price, which would








cover cost only at low levels of effort or would fail to

cover costs at all. The conclusion which is most often

drawn from this model is that economic efficiency or conser-

vation of the resource to provide continued exploitation,

whichever goal is chosen, can best be served by some manage-

ment program to limit entry of firms into the fishing or

restrict the fishing effort which is applicable to it.

The model described above can be used to show how the

misallocation of resources can continue even though changes

occur which maintain the rent at least temporarily. One of

these changes is an increase in the demand for the product.

Figure 3 shows the effect on revenue, yield, rent, and

economic equilibrium of an increase in demand which results

in a higher price.



NEW TOTAL REVENUE
TOTAL COST TOTAL COST
AND /
TOTAL CATCH







g YIELD
SANJD TOTAL
REVEIEUE
FISHING REPORT



FIGURE 3

INCREASE IN DEMAND








Profits of R'-R are restored to the industry and act as an

incentive for new firms to enter. Fishing effort increases

to OC' when money revenues are greater than previously, but

costs are higher. The catch is likely to be even smaller

than before the increase in demand. In the long run the

fishermen are no more prosperous.60 Technological changes

can also alter the yield curve associated with various

quantities of fishing effort. The consequence of improved

technology is illustrated by the new yield curve in Figure 4.

Initially, each fisherman is able to improve his catch; but

the more efficient technique eventually results in a more

rapid reduction in the fish population.61 Revenue yield is

then reduced and consequently the fishery is capable of

supporting fewer fishermen than it did using older techniques,

which may help explain why some fishermen prefer to maintain

a status quo with respect to fishing methods and gear. An

alternate method of showing the effect of the technological

change would be to lower the total cost curve in Figure 4:

the conclusions would remain essentially the same. The

effect of a subsidy on the industry might also be illustrated

by the latter method.

The generalized model described above is subject to

a number of limitations; however, it does offer an




60Christy and Scott, op. cit., p. 12.

61Ibid., pp. 12-13.













I
7Z
U) <



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V" 8


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00

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< al








explanation of the observable long run tendency of some

fisheries to become chronically "sick" industries. The

model rests heavily on assumptions concerning the nature

of production functions for fisheries and the response of

fish populations to increased fishing effort. In a recent

empirical study which used a model similar to the one

described above, the authors concluded that "the generalized

model . works as a priori reasoning suggests it will."62

In applying a model to a particular fishery, one should take

into account the nature of the production function for that

industry. Unfortunately, these data are not readily avail-

able and perhaps cannot be obtained at all. It is possible

that the general model with its familiar production function

may need some modification for the shrimp industry, since

the relevant time span for the development of the shrimp

may be slightly over one year while a similar cycle for

halibut may cover seven to fourteen years. In the observance

of full information concerning the real production functions,

the general model as described above will be used.

The most common use of the model has been to show

how various management schemes might concerve the stock of

fish, rent, or both. It appears that the model is also

applicable in a discussion of trade policy. Unlike




62Crutchfield and Pontecorvo, op. cit., p. 196.



















t S a
U 10
















a:

In





F44

0a





















l t
1 \ I

*\h
\4













a c"



UEO 2








management policies, the intent of trade policy is to

conserve the domestic market for domestic fishermen instead

of restricting the landing of fish. In terms of the model,

the impact on the fishermen may not be too dissimilar. For

example, fishermen may observe the industry becoming

unprofitable but be unable to identify the cause, since

"overfishing" and a decline in market share may exhibit

many of the same symptons.

With respect to the model discussed above, the

situation in which a tariff or import restriction program

is used to support declining earnings in the domestic

industry might be described as in Figure 5.63 The

restriction of imports resulting from the added cost of the

tariff would be expected to raise the price in the domestic

market. At least temporarily, fishermen could earn larger

revenues since a rent would thus he created for the industry

as a whole. However, the same forces as before would operate

to attract additional investment, so that eventually the

rent would be dissipated, additional investment would be

undertaken, and the tariff might result in a smaller annual

catch per vessel. Again, this is something of an




6Arlon R. Tussing and others, Alaska-Japan Economic
Relations (College, Alaska: Institute of Social, Economic
and Government Research, University of Alaska, 1968),
pp. 37-38.






61

Oversimplification. Some of the complications will be

examined in conjunction with the application of a tariff

as an alternative policy for the shrimp industry in a later

chapter.














CHAPTER III


DEVELOPMENT OF THE SOUTHERN SHRIMP FISHERY,
1957-1968


The purpose of this chapter is to examine the devel-

opment of the Gulf and South Atlantic shrimp fishing

industry under an essentially non-restrictive trade policy

which has existed since the fishery began. Included will

be a discussion of the influence of imports on factors,

such as employment, investment, and incomes of fishermen.

The fishery background and policy perspective described in

the preceding chapter provide the setting for the following

discussions. Relationships established in this chapter

will be used in future chapters to analyze the efficacy of

alternative policies. As indicated earlier, a supply and

demand framework is to be used throughout the study. The

first portion of this chapter presents an analysis of

supply conditions followed by a discussion of demand

conditions for shrimp in recent years.


Supply of Shrimp


The total supply of shrimp available for a given

period depends on the volume of landings, imports, and

frozen stocks. Table I illustrates the annual quantity of

shrimp supplied for the years under study. tt should be








TABLE I

ANNUAL SUPPLY OF SHRIMP



Quantity Available
Year (Million Pounds)


1957 212.8
1958 241.2
1959 313.6
1960 289.5
1961 297.8
1962 355.9
1963 358.4
1964 376.7
1965 381.4
1966 434.0
1967 445.7


Bureau of Commercial Fisheries, Shellfish Situation
and Outlook, 5-12 (March, 1969), p. 18.


noted that the quantity of shrimp available in the market

increased in all years except 1961. Over the time period

shown the quantity of shrimp available more than doubled,

which represents an average annual growth rate in excess of

6 percent. This growth rate exceeded that of any of the

other major food fishes.


Sources of Growth

Increases in both domestic production and imports

account for the overall increase in the availability of

shrimp. Substantial increases in domestic production

occurred in the Alaska, Pacific, and New England fisheries;

however, these still provide less than one-fifth of total

landings. The Gulf and South Atlantic fishery, with only








irregular increases in output, continued to supply the

bulk of domestic shrimp. Import volume also continued to

grow. The rising importance of imported shrimp as the major

source of supply is shown in Figure 6. On the basis of

heads-off weight equivalent, the market share of imports

grew from 36 to 58 percent during the twelve year span.

On the basis of dollar value, imports claimed an even larger

market share, as indicated in Figure 7. This resulted in

part from increased processing abroad which increased the

value of shrimp in 2ach pound of imports. Another factor

influencing the shift in relative dollar values has been

the increasing proportion of smaller lower value shrimp in

the domestic catch.

Expanded imports from existing suppliers were supple-

mented by shipments from an increasing number of countries

not previously selling in the United States. The number

grew from thirty-eight exporters in 1957 to sixty-two in

1965. Asia, South America, and Africa posted the largest

percentage gains in the United States market. North

America, the largest supply area, experienced a decline

from 80 to 55 percent in share of the total market it

served.1 North and South America are of special interest

to this study, and the changes in production in each will

be considered in greater detail later. Table II indicates




ICharles H. Lyles, Historical Statistics: Shrimp
Fishery, Bureau of Commercial fisheries, United States
Department of the Interior (Washington: Government
Printing Office, 1967). pp. 28-31.







PER CEUT


1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968


FIGURE 6

DOMESTIC AND IMPORT MARKET SHARES FOR SHRIMP

Charles II. Lyles, Fisheries of the United States...1967,
Bureau of Commercial Fisheries, United States Lopartrne'nt ot
the Interior (Llashing'ton: Government Printing Office, 1968),
p. 50: and United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, S-12 (larch, 1969), p. 18.







MILLIOt
DOLLARS
120

110


100


90


80


70


60


50


40


30


20


10


DOMESTIC
-----------IMPORTS


1957 1958 1959 1960 1961 1962 1963 1964 1965



FIGURE 7

RELATIVE VALUE OF DOMESTIC AID
IMPORT MARKET SHARES


Charles H. Lyles, Fisheries of the United States. .1967,
op. cit., p. 50; and United States bureau of Comr.ercial
Fisheries, Shellfish Situation and Outlook, op. cit., p. 18.
















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the relative importance of United States suppliers by

major areas in terms of number of suppliers and percent of

imports.


Doineatic Supply

The dominance of the Gulf of Mexico and South Atlantic

regions in the domestic production of shrimp is shown in Table

III. New England has experienced a rapid increase in landings,

but in general the shrimp found in this area are smaller and

are used to fill a particular demand. The Pacific,

especially the waters near Alaska, has provided an increasing,

though variable, quantity of shrimp in recent years. New

England and Pacific shrimp fisheries have been excluded from

this study, but this should not be taken as an indicator of

importance. Both areas are estimated to have the potential

to supply very large quantities of shrimp in the future.

Landings in the South Atlantic and Gulf states

include quantities of shrimp caught in the high seas off the

coasts of Mexico, Central America, and South America, as

well as the contiguous waters. Fluctuations in landings

data for this region may reflect conditions which exist

over a very broad area. Landings for the South Atlantic

and Gulf states are given in Table IV in terms of volume

and value. It is difficult to identify a consistent

growth pattern in the data. It can be observed that rela-

tively low landings occurred during the earlier years,

while higher landings were recorded toward the end of the









TABLE III

UNITED STATES SIIRIMP LANDJINGS DY AREA 1957-1968
(Million Pounds Heads-Off Weight)


New South Gulf of
Year England Atlantic Mexico Pacific Totall


1957 17.0 99.2 4.9 121.4

1958 13.4 103.1 10.6 127.3

1959 15.5 115.2 12.3 143.0

1960 .1 18.6 122.4 7.4 148.5

1961 11.8 79.6 12.4 103.9

1962 .1 16.5 89.3 13.2 119.1

1963 .3 9.8 128.4 12.1 150.7

1964 .5 11.0 113.3 8.3 133.1

1965 1.2 16.7 122.9 11.5 152.3

1966 2.2 13.6 112.8 19.6 148.2

1967 4.0 13.1 141.4 31.0 189.5

1968@ 7.7 15.1 127.5 28.0 178.6




*Loss than 50,000 pounds.

May not add due to rounding. Total includes
quantities of shrimp frou other areas.

Preliminary.

Bureau of Commercial Fisheries, Shellfish Situation
and Outlook, op. cit., p. 6.








TABLE IV

SOUTH ATLANTIC AND GULF STATES LANDIIJGSz
VALUE AND VOLUItE 1957-196d8


Volume
(Million Pounds Value
Year Heads-Off) (000)


1957 116.2 $ 72,438

1958 116.5 71,829

1959 130.7 56,875

1960 141.0 66,134

1961 91.4 50,589

1962 105.8 74,814

1963 138.2 68,785

1964 124.3 69,328

1965 139.6 80,067

1966 126.3 93,785

1967 154.5 90,300

1968 142.9 113,0001




Charles H. Lyles, Historical Statistics: Shrimp
Fishery, op. cit., pp. 7-:v; urcau of Cor.crcial
Fisheries, Shellfish Situation and Outlook, op. cit.,
pp. 6-7.

Preliminary








period. This is a result of the period chosen.

Extending the series back to 1953 would reveal that the

large landings of 1967 were some four million pounds less

than the 1954 catch and about equal to the 1953 supplies.2

A longer time span will be needed to verify whether or not

the larger landings of recent years can be maintained.

Landings in individual states have mostly followed

a pattern similar to that for the southern area. North

and South Carolina, Georgia, Florida, Mississippi, and

Texas experienced fluctuations in shrimp landings with no

observable long run upward trend. On the other hand,

Alabama more than doubled its landings, and fishermen

landing shrimp in Louisiana increased their catch from 18

to 42.7 million pounds from 1957 to 1968. In some years

the growth in these two states was offset by declines in

others.

A change in the size distribution of shrimp in the

landings has occurred. The smaller sizes, 51 and over

per pound, have increased as a percentage of total landings.

During 1957-1960, these shrimp comprised on the average

20 per cent of the catch however, the 1965-1968 average was

31 per cent.4 If this pattern continues, it could have a




2United States Bureau of Commercial Fisheries, Shell-
fish Situation and Outlook, op. cit., p. 10.

3Ibid., p. 10.

4Ibid., p. 10.








significant effect on the character of fishing enterprises

and the nature of employment and investment in the shrimp

fishery. In particular, it could encourage increased

numbers of boats and casual fishermen as opposed to vessels

with full time fishermen.


Shrimping craft

The general characteristics of shrimp craft were

outlined in the preceding chapter. Attention is now turned

to examining relationships among the number of craft and

other variables, such as landings and price.

There are few artificial barriers to industry entry

and exit; anyone who has a suitably equipped craft is

permitted to fish for shrimp. Similarly, the craft may be

withdrawn from the fishery at any time. This should not

be taken to imply that financial, technical, and other

barriers to enterprise do not exist. They have been

discovered to be all too real by many who entered the

industry.

The different roles of boat: ?-" vessels in relation

to landings have not been thoroughly explored. In Survey

of the United States Shrimp Industry, shrimp boats are

loosely associated with the inshore shrimping areas while

vessels are associated with offshore areas, although the

relationship is not documented.5 Osterbind and Pantier




5United States Bureau of Commercial Fisheries, Survey
of the United States Shrimp Industry, Volume I, (Washington:
Government Printing office, 195B), pp. 63-67.









recognized the problems of aggregating unlike craft,

associating this total with total landings, and leaking

generalizations based on the derived averages.6 Tie

problems of aggregating unlike units constitute a serious

limiting factor in broadly analyzing the shrimp industry.

Data are not available for a separate analysis of boats and

vessels however, some indirect approximations of their

relative roles are attempted to show the problems involved

in treating all shrimp craft as homogenous units.

Table V shows the number of operating boats and

vessels by state. Vessel figures for each state are not

very meaningful for the present purpose because of

duplication in counting caused by the migration of vessels

from one area to another as tne season progresses. The

total exclusive of duplication figure is smaller than tne

sum of the state figures because a vessel landing shrimp

in more than one state will be counted only once. Boats,

which are less I.obilu, usually land shrimp in only one

state. It can be observed from the table that a concen-

tration of boats occurs in Louisiana and Texas, where an

extensive inshore fishery exists. l1hile boat operations

cannot be associated only with shrimp taken in shallow

inshore waters, there is some evidence that boats catch a

substantial part of the snail shrimp taken in these waters

which is bought by the canneries. For example, in



Carter C. Osterbind and Robert A. Pantier, Econonic
Study of the Shrimp Industry in the Gulf and South Atllntlc
States~[Cainesville: bureau of Liusiness and Economic ,iusearcn,
University of Florida, 1961) pp. 22-23.












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Louisiana there were 3,261 boats and 1,342 vessels

operating in 1966. Incidentally, the boats accounted for

slightly over half of total net capacity measured in yards

at mouth. Shrimp taken from water of less than five

fathoms accounted for 64.3 per cent of Louisiana landings.

Approximately 75 per cent of this shallow water catch was

composed of size count of 51 and larger shrimp which is

demanded by canneries in the vicinity.7 Canneries

purchased an amount of shrimp nearly equal to the landings

in the shallow water portion of the fishery. But the

relationships among inshore landing, small shrimp, boats,

and in some instances cannery operations, can only be

inferred. Concentrations of boats in areas where small

shrimp landings are important, combined with the coincidental

growth of small shrimp landings and number of boats,

support this suggestion. To the extent that by and large

the shrimp boats catch primarily small shrimp, their

revenue per pound would be considerably less than that of

vessels. It would be expected that costs of operating

boats would be less as well. Aggregating boat and vessel

data may be misleading, but it is a difficulty which

cannot be avoided in using existing data.

The above discussion, to the extent that it is

correct, implies that there are separate forces




United States Bureau of Commercial Fisheries,
Fishery Statistics of the United States, Statistical Digest
Number uO (196b), pp. JO6-307.








influencing expansion of numbers of boats as opposed to

vessels, such as local conditions influencing the

availability of juvenile shrimp or demand conditions facing

the canneries. Investment in vessels would be much less

dependent on the restricted shrimping area and the limited

market, since vessels are more mobile.

Factors influencing the decision of boat operators

to enter the shrimping industry are difficult to identify.

One possibility is suggested by an examination of Table VI.

Based on the assumption that boats, especially in the Gulf,

are associated primarily with the catching of small shrimp

in coastal and inshore waters, it would be expected that

the number of craft would tend to vary directly with

landings of these shrimp. Such appears to be the case.

In years when the catch of small shrimp is increasing, the

number of boats is increasing also. The relationship is

less consistent if large shrimp or total landings are

considered. The absence of a lag might also be expected,

since outfitting new boats or activation of idle boats

could be undertaken on short notice. Additionally, the

small shrimp season has two peak periods, one in summer and

one in winter. Increased availability of small shrimp

during the first period could induce preparation for the

second session several months later. An abundance of

small shrimp appears to act as an inducement to investment

in shrimp boats.







TABLE VI

PERCENTAGE CHANGE IN BOATS ENGAGED IN SIIRIMPING
AND LANDINGS OF SMALL SHRIMP BY YEARS


Percentage Change in
Percentage Change Landings of 51 and
Year in Operating Boats Larger Count Shrimp


1958 3.3 9.6
1959 7.1 4.8
1960 6.3 17.6
1961 -4.1 -35.4
1962 28.6 59.3
1963 8.3 24.3
1964 -4.1 -21.8
1965 9.5 30.2
1966 4.2 .2


*Bureau of Commercial Fisheries, Pishing Statistics
of the United States, op. cit., passim; Bureau of
Commercial Fisheries, SlhllTish ituuation and Outlook, S-12
(March, 1969), p. 10.


Entry of vessels into the shrimp fishery would be

subjected to barriers similar to those facing boats, but

greatly multiplied. Vessels are much more expensive to buy

and maintain, so that a decision to enter the industry

would require a larger capital outlay. Also, a more experi-

enced and skillful crew must be found to operate the larger

vessels capable of making trips to offshore shrimp grounds.

The decline and recovery in numbers of operating

vessels during the 1960's is shown in Table V. It cannot be

correctly said that growth in number of vessels has been

consistent, because of the rapid decline in operating units

which lasted from 1958 through 1962. In 1966 the number of








operating vessels was still less than that recorded in 1958,

although high prices and landings have made the industry

more attractive in recent years.

The relationship between volume of landings and

number of vessels was not as consistent as it was for boats.

Again, this might be expected because of longer construc-

tion and outfitting times, not to mention the longer

planning and training periods needed. Some adjustment in

the number of operating boats could come about through

reactivation of idle, but seaworthy, vessels, which would

have the opposite effect of shortening any lag. A much

more likely explanation is that when investment in higher

cost vessel is involved, other variables, such as price,

revenue, and costs, must also be considered in entry or

exit decisions.

From time to time throughout the study, it is

necessary to use number of operating boats and/or vessels

as an indicator of investment in the fishery. Several

problems are involved in this representation. First, there

is considerable variation in the number of fishing days,

defined as twenty-four hours spent trawling, among vessels.

Osterbind found a variation of less than five to greater

than 120 days per year spent trawling for shrimp based on

a selected sample. His data also indicated that vessels

which were very productive one year might be idle the

following year.8 Reasons for this were not given.




Osterbind and Pantier, op. cit., pp. 54-55.








Secondly, the term "shrimp vessel" includes craft of many

sizes, with varied types of equipment, capacity, and

power. Finally, the age also affects the dollar value of

vessels which enter or leave the shrimp fishery. All of the

above factors must be kept in mind when average figures are

used which treat vessels as homogenous units.


Employment

Employment in the primary shrimp fishing industry

increased during the 1957-1966 period, but at a lower rate

than the number of shrimping craft. The resulting decline

in the numbers of fishermen per boat or vessel illustrated

in Tables VII, VIII, and IX can be rationalized in three

ways. First, the increase in casual fishermen relative

to regular fishermen indicates that shrimping is increas-

ingly becoming a part time operation for many. This

suggests that capital in the form of less expensive boats

is being used, since there is apparently no intention of

year-round participation in shrimping. Secondly,

powered equipment installed on vessels makes it possible

for a smaller crew to operate the craft effectively,

especially during the slow season, when cleaning the nets

requires less time. Finally, there may be a shortage of

crewmen who are willing to work, especially during the off

season, so that some craft are necessarily undermanned.

The importance of shrimping to the Southern area in

terms of jobs is indicated in Tables VII, VIII, and IX. These












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data are similar to those for boats and vessels in that

they involve duplication in cases where a craft and crew

made landings in more than one state. The total

exclusive of duplication figure is the best indicator of

fishermen actively engaged and is a better measure of

economic importance of the industry in terms of full time

jobs.


Costs

Although it would be very useful to examine changes

in boat and vessel operating costs occurring during the

period under study, this cannot be done. Reliable data

which would correspond with data in the Osterbind and

Pantier study are not available for the latter part of the

period. This represents a very important gap in

information concerning the shrimp industry, since profit-

ability and cost factors can only be inferred.


Prices and productivity

Exvessel prices have fluctuated widely during the

period under study, but no secular upward trend is apparent.

The indexes plotted in Figure 8 show the vacillation of
9
exvessel prices. Three separate indexes are plotted to

illustrate differences in price behavior of certain size




Indexes computed on the basis of moving averages
from unpublished monthly price data provided by the Bureau
of Commercial Fisheries.
















..... 15 & UNDER PER POL





I
-.- \ WEIGHTED AVERAGE-
-**.**. I ALL SIZES

S\ / 68 & LARGER PER
\ / POUND












57 58 59 60 61 62 63 64 65 66 67











FIGURE 8


INDEXES OF EXVESSEL PRICE FOR
SELECTED SHRIMP SIZE COUNTS 1957-1967








categories. An upward price trend is suggested by the

index for larger shrimp of size count fifteen and under.

More extreme fluctuations are observable in the price of

smaller shrimp. Both of these indexes tend to move about

the weighted price index for all shrimp. The volume of

smaller shrimp landed exerts a considerable influence on

weighted average price. Incidentally, it is this problem

of the influence ou the size structure of landings on

average price which limits its usefulness. Widening of the

margin between prices paid for small shrimp relative to

that paid for larger sizes is also indicated by Figure 8.

Such a pattern has existed since 1962, when differences

between the largest and smallest size categories was

forty-five cents. By 1967 the gap had grown to eighty-eight

cents.10 Depending on the abundance of particular sizes of

shrimp, the effect on revenue of the above price

relationship can be rather large.

The broad and frequent nature of exvessel price

changes has already been indicated. Changes in the

productivity of fishermen employed in the industry appear

to be equally variable. Figure 9 shows the changes in

physical and value productivity for shrimp fishermen

during the 1957-1967 period. An index of exvessel price

has been included to show the importance of price on value




10United States Bureau of Commercial Fisheries,
Shellfish Situation and Outlook, op. cit., p. 12.



















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