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Stephen Taufen

A public watchdog and advocate for fishermen and their coastal communities. Taufen is an "insider" who blew the whistle on the international profit laundering between global affiliates of North Pacific seafood companies, who use illicit accounting to deny the USA the proper taxes on seafood trade. The same practices are used to lower ex-vessel prices to the fleets, and to bleed monies from our regional economy.

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February 16th, 2006

Tensions High at Advisory Panel on GOA Privatization

February 16th

Council Scared of Capitalism:
Serves Transnational Masters Instead

Catching up on the recent Council week and "how we arrived here"... a long overdue piece.

Yes, that's a red NEFCO hat. You might even say that Groundswell started soon after I climbed aboard the New England Fish Company in mid-1976 - as a cost analyst for 90 retail products - instead of in 1992, when we took the first of several product laundering (international tax evasion) cases to the criminal division of the IRS.

In the late-1970's, interest rates were sky high in the USA, but not for Japan - as central bankers intent on "Trilateralizing the World" had allowed extreme interest rate differentials so that Japan could more easily rise to financial power in Asia, in the third seat alongside European and USA partners. (China now has a bit to say today about that temporary scheme.) Globalism was in full bloom, in new financial ways.

Soon, the world would no longer be conducting "fair trade" - at arm's length between unrelated parties who establish "comparable, uncontrolled prices" - but largely transferring goods and services among related affiliates within transnational corporations who would become bigger than governments. We'll tell you more on that, and the methods of Abusive Transfer Pricing, later.

NEFCO had invested to own a percentage of a Japanese distribution company, and the financial backlash of this forbidden "foreign direct investment" designed to reach our overseas consumers was subtle, but brutal. NEFCO was already having severe problems between its accounting and operations staff. And, to deaf ears, I predicted that they'd go bankrupt within a year. We weren't truly bankrupt, just blindsided by the new roulette game of a then budding global "Casino Economy." NEFCO had played its chips on the wrong colors - the red, white and blue of Americanization. And in Japan's eyes, it had to go.

It took just a few months more, but most of the plant superintendents - and their once-NEFCO fleets, too - were already over at Peter Pan Seafoods by the end of 1977. The firm soon called me to join them for corporate product cost analysis and management accounting. At that time, it was still American owned by the Bristol Bay Native Corporation - before Nichiro Gyogyo Kabushiki Kaisha took over. It wasn't long before I was converting once-USA-proprietary cost models to Japanese corporate marginal models, where labor costs were considered fixed: models soon finding their way into all of the Japanese major fishing companies.

It's that simple, buyer cartels weren't illegal in Japan, and given the naivete of US law enforcement, American fish companies were ripe for the picking. High interest rates and problems financing the pack were scaring our under-prepared executives, as well. But let's go back to NEFCO's halls for a minute.

The United Nations Law of the Sea Conferences (UNCLOS) had cleared the way for nations to establish "exclusive economic zones" or 200-nautical mile limits around our borders. The successful lobbyist for Earth Day (Ed F.) was in our building to push through the new rights, and the renowned Harold Lokken was busy crafting the nation's first major fishery act for Washington's senior Senator Warren Magnuson. A junior senator from Alaska, Ted Stevens, was hardly mentioned - if at all. And the main discussion was the biological management of the resources in our desired EEZ, and kicking out the foreigners who were fishing it - Russians, Polish, Germans, Koreans, Japanese and others.

It was not until 2005 that I finally saw a picture of Ted Stevens' little get-together in some back room at the DC Capitol, after Magnuson's Fisheries Act passed - with just a couple of Alaskans at his side. Do my eyes deceive me, or were those Trident Seafood product packages on the table in front of them? At that time, it was an unmentioned firm, and certainly no competitor, but Stevens clearly was influenced to show off its simple products. Maybe he was feeling scorned by his junior role, while believing the fish was Alaska's - not the Nation's? The Japanese trade press - about 200 of them, it was said - had already rushed away from Magnuson's announcement to the international wires to report the remarkable passage of "Americanization." Need I say that it was not until Mr. Lokken died a few years ago that Ted could lay claim in the act's headliner for his bloodline?

The way a leading NEFCO executive put it to us in early 1977 - during a typical Friday lunch of hamburgers, fish and chips and beer - was that instead of 'a national fish price' being established, the spirit and intent was that 'an economic marriage of U.S. fishermen and U.S. processors' had just occurred. It was taken for granted that together they'd create U.S. profits, and pay U.S. taxes to our Treasury, instead. But one partner took over the checkbook, and the best we have now is a forced nuptial "cooperative" agreement where a battered fisherman is told which master's bed he must lie in. And the new marriage licenses are printed with ink supplied by the corporatocracy. Hardly rational, is it?

So, that first tier of fishery legislation in 1976 concentrated on the issues of biological stewardship, not allocation. After all, UNCLOS made it clear that no nation "owns" the ocean resources in its EEZ. We simply have stewardship control, and that can lead to a healthy national development in biological and economic terms. There was no provision for fences and deeds. And to privatize the resources is downright illegal, for several reasons. World Trade Organization, WTO Uruguay Round rules also forbid such corporate subsidies created by giving away public resources to select firms.

And that's what Groundswell repeatedly reminds the Council family. It was the full Congress that was supposed to take up any issues of allocation of the People's resource rights, at some later date. It's called a representative republic that believes in some form of democracy instead of bureaucrats-plus-corporations crafted economic fascism. Rationalization schemes.

Back in 1977, the Japanese fishing giants - already financiers for salmon egg production - were soon buying into the industry and the largest canner of salmon at the time, Peter Pan, became their target, too.

There's not enough space here for all these institutional memories, but the timeframe is instructional because it was also in the mid-1970's when I first learned about "rationalization" schemes by large multinational corporations. In economic geography, we heard how 'Rationalization' was a codeword for the destruction of once sustainable, local agricultural systems by corporations that were intent upon converting foreign small businessmen into worker bees for the exportation of bulk agricultural products desired elsewhere. The enslavement idea was to pay wages to people who once sustained themselves, and take the products for export, and thus shift the profits to non-local shareholders. It's often called "good business."

Yes, that's the model of agricultural globalism that served large suppliers well, for example, for selling tractors across the globe. Hey, those in the know are aware that the European Community itself was formed because a majority of the large multinationals long scooping up world resources were USA firms - but we'll cover that privatization and transfer pricing issue later. (You'll be able to read about the concept in links soon posted.)

So, when I heard about "rationalization" (privatization) in Alaskan fisheries, I immediately understood. But propagandists are still trying to define the schemes for themselves, to hide what they are really up to: problem is, few of you believe them any more. Crab rationalization has singed the rose petals of public relations prattle beyond recognition. And the corporatocracy is left with no choice but to rush forward.

At the recent North Pacific Fishery Management Council meeting, I testified that this is all about "structural economics" and maintaining the opportunities for economic viability. The rational price is the free market price. That means Competition - not Statism. The declared goal of "economic efficiency" (more on that in a future post) is an element of Capitalism, not this Soviet-style Collectivism. The structures of GOA Rationalization are components of Statism structures that are well known to real economists as "Coercive Monopoly" formations.

Competition relies on three essential components. One is "buyer versus buyer" - competing to sell their time, quality and species differentiated fish catches. Second is "seller versus seller" - attempting to manufacture the product mix most desired by consumers in the marketplace, for the greatest value. And third is "seller versus buyer" - where fish processors would normally use a free market price mechanism to compete for fishermen catches, convincing them to deliver the best, freshest products, and more. Yes, higher ex-vessel prices are a center plate issue in determining whether or not competition is still hanging around instead of indentured servitude.

All three of these components must be preserved, in order to serve consumers and attain the rational price. But nowhere in the decade-plus long march of species-by-species privatization schemes (pollock, crab, and now multi-species GOA) has there been a stop sign at the intersection of Competition. What's happening is the construction of what Groundswell long ago called the creation of "an alternative essence of management" from that promised under the Magnuson Fisheries Conservation and Management Act. Substituted for American ownership and profits for our Treasury has been a "buyers-as-owners cartel" - oligopolists and oligopsonists: i.e. coercive monopolizers, instead.

Oh, and lobbyists are the only "jobs" they have ever created. The fish itself and consumer desires for certain products determine the hand movements required to cut, dress, process and package and otherwise manufacture food items for the protein section. Processors do not create jobs unless they serve consumers. Politicians and bureaucrats never create true wealth, real jobs. And when they buy into this propaganda of rationalization, they don't even serve those paying them - taxpayers.

At the February Council session on GOA Ratz, I reminded them about the structural economics, and Antitrust laws forbidding exclusionary practices, lessening of competition, tying and exclusive dealing, and other forbidden infringements on the free market. It matters not if the illicit price-making behavior of the oligarchs is proven, as the structure itself can be at fault - as Crab Ratz has already shown. Antitrust enforcement can eventually call for measures to de-concentrate.

So, to rest my case about why we must not only stop creating these non-competitive structures right now, but also turn back all these rationalization schemes, I quoted Donald Turner, a Harvard economist who said:

"If effective and workable [antitrust] relief requires a radical structural reformation of the industry, this indicates that it was the structural situation, not the behavior of the industry members, which was fundamentally responsible for the unsatisfactory results."

But the Council Family continues to believe it knows what's best for the neighborhood market. So, addressing another myth - the ridiculousness of "overcapitalization" propaganda - I quoted Alan Greenspan (the recently retired Fed chairman), who back in 1961 reminded us:

"The ultimate regulator of competition in the free economy is the capital market. So long as capital is free to flow, it will tend to seek those areas which offer the maximum rate of return. It is a regulator of prices, not necessarily profits."

If overcapitalization were a Reason, then we'd have to shut down over three quarters of the shopping mall stores in America. But this Council has gone berserk with the notion that it is capable of crafting the economics of an industry as complex as seafood. It defines the heights of beyond-Orwellian madness. Giving these power-sick, disconnected folks a vote in OUR economy is insanity in action. And from the likes of willing fishermen falling into their traps, the insanity (of greed) is contagious.

Next, we reminded the Under-Lords of Political Economics that Robert Carter, an honest fisherman from Kodiak, submitted a "from the mouths of babes comes the truth" letter that simply reminds us that it is not the Council's business to look out for the profits of large corporations. After all, true competition levels profits as other capitalists enter an industry, while the standard of living rises from all the free market activity that's taking place. Robert believes that the free market must be preserved, come win or lose, as it's the chosen way of American business.

A little guy like him is willing to face the free market. So, why is the Council so scared of Competition and Capitalism? I'd guess that it's hard for them to give an honest answer when the Transnational pliers have hold of their tongues - and the Prozac can't make it past the myths of 'public relations' corking.

Stephen Taufen - Groundswell Fisheries Movement