Catfish and Big Business

Many people seem to believe that regulation is something that big business hates, and that someone who opposes a particular regulation must be acting as a "stooge" for business interests.

That belief is more of a caricature than anything else. In 1971, Nobel economist George Stigler published a famous article: The Theory of Economic Regulation. Stigler argued that industry regulation, far from being oppressive to big business, is usually "acquired by the industry and is designed and operated primarily for its benefit."

How does this occur? Often what occurs is the industry demands that the state control who gets to enter the industry in the first place -- say, licensing laws (an egregious example would be laws requiring casket salesman to be licensed). As Stigler says, "every industry or occupation that has enough political power to utilize the state will seek to control entry," usually by trying to "retard the rate of growth of new firms."

The catfish industry is just the latest in many examples of this phenomenon. As the Associated Press reported on July 3, 2009:

It looks like catfish, it tastes like catfish, and it acts like catfish.

But to U.S. catfish farmers, the whiskered bottom-feeding fish from Vietnam is something else: a cheap variety that’s usurping the humble catfish’s place on Americans’ tables and threatening their livelihoods.

So after years of arguing that the Vietnamese fish isn’t catfish — and winning a federal law saying as much — U.S. farmers are trying to have it both ways. Under their latest lobbying strategy, they want the Vietnamese imports considered catfish so they will be covered by a new inspections regime they pushed through Congress last year.

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The U.S. industry — mostly located in Mississippi, Alabama and Arkansas — has had a string of successes on Capitol Hill and in Southern legislatures.

Along with winning frequent federal aid, it pushed a labeling law through Congress in 2002 that forced the Vietnamese fish to be sold in the U.S. under unfamiliar names such as pangasius, basa or tra. A year later, it won an anti-dumping case authorizing tariffs of up to 64  percent on the Vietnamese fish.

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The inspections requirement could be the U.S. producers’ silver bullet, stopping imports in their tracks. Applying to all catfish sold in the U.S., it would require Vietnam to establish a complicated inspection system and demonstrate that it is equivalent to U.S. inspections, a process that could take years.

Last year, the industry persuaded catfish-state lawmakers led by Sen. Thad Cochran, R-Miss., to slip the inspection requirement into the massive farm bill.

The crucial thing to notice is that these sorts of regulations always come with noble-sounding public purposes. After all, who could be against truth-in-labeling or rigorous inspections of fish quality? But the reality is that such regulations are often used as a tool to suppress competition.