Island Profile
Tuna, Tuna, Tuna
American Samoa’s Economy Is Dependent On The Tuna Industry,But What Will Happen If The Canneries Pack Up?
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Year in and year out, the continued existence of American Samoa’s thriving tuna canning industry is imperiled, and thus the economic foundation of the territory is imperiled. At least that’s the story line advanced by the two multinational companies operating tuna processing plants in Pago Pago.
But despite the dire warnings that American Samoa’s tuna processing industry is becoming globally uncompetitive, the two canneries keep investing more money and hiring more workers. In the past 25 years, the American Samoa canneries have increased their work forces approximately four-fold, far outpacing job creation in the government or the rest of the private sector.
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The two plants are now reported to be the largest and third largest tuna processing plants in the world. StarKist Samoa and Samoa Packing directly employ more than 5,000 full-time workers (compared to 1976, when they employed 1,400). They process almost 1,000 tons of tuna each working day, enough to fill a thousand 20-foot containers each month for an annual export of $500 million worth of tuna (the majority of the canned tuna eaten in the U.S). StarKist Samoa is owned by food conglomerate HJ Heinz (annual sales: $9 billion), while Samoa Packing is part of Chicken of the Sea, now owned by Thai Union, a privately held company based in Thailand with annual sales of about $800 million.
American Samoa’s tuna plants face global competition from newly emerging tuna processors in low wage countries such as Thailand, Ecuador, Indonesia, the Philippines and Vietnam. Thus the canneries are constantly fighting to keep minimum wages low in American Samoa. The vast majority of the tuna industry workers earn between $3.26 and $3.30 an hour. Although such wages are low compared to the United States and Guam, where the minimum wage is $5.15 an hour, they are relatively high in Polynesia and thus draw workers from Samoa and Tonga.
In fact, 52 percent of the residents of American Samoa aged 25-44 were born in independent Samoa, while only 33 percent were born in the territory. The statistics reflect not only the attractiveness of American Samoa wages within the region, but also the preference for many American Samoan youth to join the U.S. military or migrate to the United States after high school.
The territory’s rapid population growth (American Samoa’s population has almost doubled in just 20 years, from 32,000 in 1980 to about 60,000 today) and immigration imbalance has caught the attention of the politicians, but few specific actions have been taken to address immigration or population issues. During the years of rapid population increases, the economic engine driven by the canneries and federal government transfers has been powerful enough to keep the local economy chugging at a steady if not spectacular pace.
A congressionally approved subsidy for the American Samoa Government was increased year by year throughout the 1970s and 1980s, but it has remained fixed at about $33 million for the past 15 years. The frozen subsidy level has drastically reduced the purchasing power of the government, due to a 50 increase in population and inflationary cost increases.
In the late 1990s, it appeared that a garment manufacturing industry might blossom alongside the tuna industry. An American company, BCTC, employed about 600 workers (300 locals and 300 females from the People’ Republic of China, who were allowed in under a special immigration exception) for three years before closing shop in 1999. The company cited global competition as the reason for its premature departure.
BCTC was followed by the disastrous Daewoosa Samoa experience. Daewoosa also brought in large numbers of Chinese workers, but the company was mismanaged or worse, and its president will soon be tried in federal court in Hawaii on charges that he subjected the Chinese workers to conditions of “involuntary servitude” while they resided in the company’s American Samoa compound.
Daewoosa also sullied American Samoa’s reputation as a place to do business, although it is not clear whether that will hurt the government’s efforts to build up the economy. Following the Daewoosa experience, which was widely publicized in the United States, Gov. Tauese Sunia proclaimed that he would not allow any more special immigration exceptions for garment plants, and that he was also going to reject proposals for new corporate tax exemptions.
At present, the government employs one-third of the local workforce, one-third is employed by one of the two canneries, and the remaining third is employed by the rest of the private sector (much of which is geared to support the tuna industry and the tuna fishing fleet).
After 40 successful years in American Samoa, the Pago Pago canneries are accustomed to making the adjustments necessary to remain competitive, but few people in American Samoa expect the canneries to remain another 40 years, or even 10 years.
An important federal tax advantage now enjoyed by the territories expires in five years, and the trend towards global free trade means the canneries will probably lose the significant tariff advantage they now enjoy. A bill presently before the U.S. Congress, for example, would give Andean nations such as Ecuador the same tariff advantages that American Samoa now has. The difference is that the prevailing wage rates in Ecuador are well below $1 an hour, and the regulatory environment is presumably less strict (the canneries are subject to U.S. EPA rules in American Samoa). Nobody knows if or when the canneries will leave, but most everyone in American Samoa believes there will be a day of reckoning.
Lt. Governor Togiola Tulafono, point man for the economic development efforts of the Governor’s Office, believes that the revolution in global-telecommunications will provide solid opportunities for American Samoa to participate in the new global economy. Togiola told Pacific Magazine that American Samoa already has an excellent Internet infrastructure (including T1 connections in every classroom), and now must better educate students who lag far behind their mainland counterparts in almost all measures. Formation of an E-Commerce Business Development Center, slated for 2002, will allow integrated job training and placement.
Meanwhile, tourism continues to be a non-starter, despite the considerable natural beauty of American Samoa and the presence of a U.S. National Park and National Marine Sanctuary. The government has been unable to find a buyer for its run-down Rainmaker Hotel, and (despite the rhetoric) the government does not promote tourism as a serious economic development opportunity. Only about 5,000 bona fide tourists enter the territory each year.
In late 2001, the main runway at Pago Pago International Airport was extended to 10,000 feet. Government officials and private sector members both hope to lure more planes to American Samoa, where they can take advantage of the low cost fuel.
Despite its handicaps, American Samoa has several advantages, most of which derive from its relationship to the United States. The U.S. dollar is the coin of the realm, and there is a stable political and legal environment to go with the excellent harbor and shipping connections. The infrastructure is well developed and includes high-grade telecommunications, water and electricity.
The local political scene has been lively but not too lively since the inception of local self-government in 1977. Although virtually all local elections are hotly contested and often narrowly won, the elections have never been the cause for social unrest. Gov. Sunia was narrowly re-elected to a second four-year term in 2000. He is ineligible to run in 2004. Congressman Faleomavaega Eni Hunkin was elected in 2000 to his seventh consecutive two-year term as American Samoa’s non-voting Delegate to the U.S. House of Representatives.
There have been few major political trends in the local legislature, but one thing is clear: the local tax burden has been rising steadily for several years. For example, the income tax on low-income wage earners was recently doubled, from 2 to 4 percent, and import duties on cigarettes, gasoline and soda were all significantly increased in the past year.
The public was especially unhappy when the legislature increased the import duty on soda by 10-cents per can to raise money that was earmarked to boost the compensation levels of a handful of the political elite. For example, the 40 legislators received 40 percent increases and now earn $35,000 a year, while the governor was given a 70 percent pay raise and a new lifetime pension.
The chief executive now earns $85,000 a year and will receive a lifetime pension of $50,000 a year after leaving office.
As the territory looks to the future, it is trying to identify a post-tuna, higher-wage economy, while holding onto the low-wage, tuna-based economy that has led to general prosperity the past 30-40 years. The challenge is a difficult one and it is not yet clear how it will be met.
