These three
Our vessels

Then in the late spring our price came down another $20 per ton. successive prices cuts really did very little to relieve our situation. were still losing fishing time by being tied up in harbor with their loads aboard. The fish still accumulated faster than it would sell for at even the new low prices. It was during this period of our distress, you will remember, that there was established a Tuna Task Force in the executive branch of the Government to examine into the problem and recommend measures of possible relief. The task force was composed of representatives of the Departments of State, Treasury, Defense, Labor, Commerce, and Interior. It worked hard and long before making its report. Actually, and coincidentally, the report did not arrive until July 28 by which time there was no time left in that session of Congress for us to seek any relief by legislative methods had we chosen to do so, or for the task forces' recommendation to be translated into legislation had any of their recommendations led to such action requirements.

As a matter of fact the report of the Tuna Task Force, as contained in the letter of July 28, 1955, from I. Jack Martin to Congressman Bob Wilson and Senator Thomas F. Kuchel contained no recommendations that required legislative action. It contained nothing of consequence to this industry. The report was so unresponsive to the conditions of the emergency that we were in, and the proposals it contained were so unrealistic and vaporous that a further pall of gloom fell over the industry.

Since we could now expect no relief from the United States Government the only recourse left to us was to get the price of our fish below that of the Japanese fish whether or not this meant bankruptcy. Accordingly, in early August our price was driven down by another $40 per ton.

By these 4 price cuts during 1955 we had lowered our prices by $80 per ton. This is about 34 percent of the price we are now getting. This is roughly equal to $2 per case on canned tuna. These price cuts got down to about equal with the Japanese price of yellowfin tuna in terms of equivalent raw material cost in canneries here. It brought us well below the Japanese albacore price and this was to bring violent repercussions in the entire tuna trade in the world, all of which have not yet settled down.

Our California canners did not reflect any of our raw material price cuts during 1955 in their wholesale prices during 1955 for the simple reason that they wanted to dispose of as much of their higher priced inventory as they could and replace it with lower priced inventory so as to cut their losses on inventory as much as possible. But finally on April 7, 1956, one large firm reflected the entire $80per-ton drop in frozen tuna in his wholesale prices in one drop of $2 per case. He was followed in a matter of days, or hours, by all California canners.

The first effect of this was an immediate blossoming of growth in retail sales which continued throughout 1956 and 1957 even though there was a 50-cents-percase raise again in the fall of 1957. The total retail sales of canned tuna in the United States in 1956, as a result, were about 2 million cases higher than in any previous year and in 1957 they were about 9 percent higher than they were in 1956.

The next effects occurred in Japan. For some reason unknown to us the Japanese apparently did not sense the considerable importance of our 1955 price cuts upon their business and they did not respond to our moves through the first quarter of 1956. Perhaps this was because the price cuts we made in 1955 were not reflected in the wholesale price of canned tuna in the United States until early April of 1956.

At any rate the Japanese canners and the Japanese frozen tuna exporters engaged in spirited bidding and lively competition for the winter albacore catches during the first 4 months of 1956. In the course of this they drove the ex vessel price up to $350 per ton, and even as high as $360 per ton on some grades and loads.

These raw material prices were quite out of proportion with the world market prices in view of our 1955 price cuts. The reason for this bidding of the albacore price up too high is directly traceable to the cartelization of the tuna export trade in Japan which had now advanced considerably toward perfection. The 1956 catch of winter albacore was a little on the light side (although not much). The quota for each individual firm in both of the cartels was based on its historic record quota of performance. If the individual canning firm did not can its full allowable quota then the canned tuna cartel could distribute the remainder of his unfilled quota among other firms. This would mean that in the next and succeeding years his individual quota would be lower because of his 1956 performance. The same was true of the frozen tuna exporter and the frozen tuna

cartel. There was no collusion or cooperation at this stage between the two cartels, nor was there anything more than cluckings and mild warnings from the Janazese Government agencies whose responsibility it was to watch over these matters.

The upshot of it all was that the Japanese canners once more got loaded up with high-priced inventory just at the time when their American competitors were loading up on cheaper inventory and disposing successfully of their highpriced inventory. The frozen-tuna exporters during these particular months did not suffer much from the overpricing of raw albacore because their sales to the United States were brisk, they were turning over working capital quickly and they were not accumulating inventory of a serious volume yet.

Nevertheless, rustlings of serious worry went through the Japanese frozen tuna export circles and during March and April they conducted negotiations in that cartel which resulted in them establishing a joint sales company in their cartel as the canned tuna cartel had done some years before. They were preparing for a storm, if it should break upon them.

Out of the pressure that developed upon the Japanese canners there now developed a new and powerful economic force which came to bear upon the canned tuna cartel.

Tuna canning in Japan since the war had more or less concentrated in and about Shimizu in Shizuoka Prefecture. This was under the financial direction and substantial ownership of firms in and around Tokyo and the exports were handled by the canned tuna cartel through eight "window" firms who were headquartered in Tokyo and environs.

This is referred to in the Japanese press as the Kanto area, and Kanto firms. It contrasts with the Kansai area and Kansai firms which comprises the other principal industrial area of Japan consisting of the environs of Osaka, Kobe, Kyoto, etc., in southern Japan. There has been strong competition between the Kanto and Kansai areas since late medieval times, which has only intensified with the industrialization of Japan.

The canned tuna cartel was designed by the Kanto firms to attend to their problems when they were the only substantial factors in the Japanese tuna trade. Accordingly, substantially all of the quota for export was divided among Kanto firms and there was really no way for outsiders to break into the tuna canning for export business.

Their raw

The Kansai firms are heavy in the manufacture of cotton textiles. materials have to be bought with dollars or pound sterling and preferably the former. Foreign exchange can be juggled in the controlled economy of Japan in such a way that the Kansai firms (or anyone else authorized so to do) could sell tuna at a loss in order to get dollars, buy cotton with the dollars, and end up with a sufficient yen profit to cover their losses on the tuna and leave them an adequate profit. This is one of the considerable indirect subsidies, in fact, that the Japanese Government has used to support and build the export trade in tuna. The only way in which this subsidy could be gotten hold of, however, was to get hold of an export quota on either canned tuna or frozen tuna and both of these quotas were controlled by the Kanto firms and in their hands. The Kansai firms were effectively frozen out of the business and the subsidy.

The conflict between the two groups in Japan began to develop seriously in the spring of 1956. It has been growing steadily ever since. Its first prominent outcrop was in canned tuna. One or more of the Kansai canning firms simply bought some tuna and canned it. Then one of the Kansai export firms, Marubeni, made an application to the Ministry of International Trade and Industry for an export license to export the canned tuna to the United States. There was no provision in Japanese law that permitted MITI to withhold such a permit and they were preparing to issue it when the Japanese Fishery Agency of the Ministry of Agriculture and Forestry stepped in to protest.

This export would have completely sidestepped the canned tuna cartel, would have completely voided the monopoly of the canned tuna export trade held by the Kanto firms, and would have disrupted the controls over the trade exercised by the Government.

The upshot of the matter was that the export permit to Marubeni was denied, but this was not the end of the matter. The Kansai firms kept driving on this wedge as they are still doing. Early in 1957, for instance, they forced the canned tuna cartel to expand the number of export firms entitled to handle canned tuna exports from 8 to 19, which included some of their number. They forced a change in the cartel's regulations so that they as outsiders could get some quota to operate with. As will be noted below this action contributed to

a rewriting of law in Japan in 1957, and the continued pressure of the Kansai firms in later 1957 and early 1958 has kept the Japanese section of the American canned tuna market in continuous turmoil, as it is on this date of writing.

In mid-May of 1956, the summer albacore season began in Japan and it soon became apparent that it was going to be a good season. As the volume of landings grew the price to the fishermen came down to more reasonable levelssay $260 to $270 per ton on the average. The June landings, as is normal, increased sharply and then a little beyond mid-June word came from the fishing grounds that the run was tapering off.

The bulk of albacore landings in Japan are made in a 6-week period from mid-May to July 1. The fishing picks up steadily and rapidly through June and then typically drops off very sharply in a period of a few days to practically nothing and stays that way until late November or even late December. This date of sharp dropoff occurs either in the last week of June or the first 10 days of July.

The pause in catch after mid-June of 1956 was interpreted by the frozen tuna exporters as the forerunner of this period and it looked as if the season was stopping a few days ahead of time. So to fill their individual firm quotas under the cartel arrangement they stepped up the bidding and ran the price up above $300 per ton again.

But this was only a slight pause, not a stop of the season, and the price had hardly gotten up good before the fish started pouring in from sea in a heavy flood which lasted for a good 2 weeks and made the catch of albacore in Japan for 1956 only a hair less than the previous boom year of 1952. All of this happened so rapidly that orders to the buyers could not be changed rapidly enough to prevent this whole lot from being bought from the fishermen at good, high prices.

The individual firms were so intent on getting this fish into frozen warehouses while the getting was good that they did not have time, either individually as firms or collectively as a cartel, to worry about where they were going to sell it or what price they could expect to get for it.

When the heat of the buying was done and the season was over the new Joint Sales Co. of the frozen tuna cartel had before it a task with which it was unable to cope. Practically every member firm had far more albacore in frozen storage than its production quota, and it was a matter of a few weeks before the cartel could even find out what volume of albacore was in the hands of its members, both declared to the cartel and actually, and to discover that the actual volume was much higher than the declared volume.

There was no possibility of exporting this much frozen albacore to the United States with normal speed without breaking the price below what they had paid for the fish and losing money. The frozen tuna cartel in this emergency voted full sales authority and discretion to one man and kept as quiet as possible the fact that this surplus existed.

This sales agent then made a contract with one American canner for 5,000 tons of albacore at $350 f. o. b. Tokyo. This was just about what the frozen tuna exporters actually had invested in cash in the fish as of early July. As a part of this sale the contract read that if the cartel sold albacore to any other American canner prior to September 24, 1956, at a less price per ton it would rebate to this canner an equivalent amount per ton. This contract and its conditions were kept quiet.

No further sales for export were made in July, August, or September. The American albacore season was then in progress. News that there was a big surplus of frozen albacore in storage in Japan reached this industry in late September when the sales agent tried to sell some more fish, his contract with the other canner having run its time. Upon the receipt of this news the price of albacore to domestic fishermen abruptly fell from $375 per ton to $300 per ton. This of course made it impossible for the cartel salesman to peddle his fish for the then existing Japanese Government check price of $350 per ton f. o. b. Tokyo. We now got a realistic view of the effectiveness of the Japanese Government check prices under their system of voluntary controls--as we had previously gotten a picture of the effectiveness of their volume controls. The cartel salesman dropped his price to $270 f. o. b. Tokyo and found that he could move his fish. It was only a matter of days before the Japanese Government check price on frozen albacore also dropped from $350 per ton to $270 per ton f. o. b. so everything was legal and in accordance with the voluntary controls system, and the sales began.

Since this price was obviously and admittedly a minimum of $100 per ton less than the actual cash per ton that the exporters had invested in the fish (storage

charges having accumulated during the 3 months since the fish was caught), we filed a charge of dumping with the Secretary of the Treasury in early October. As is customary in our dealings with the executive branch of the Government on tuna we got the short end of the stick, but this case was so open and shut and so fully attested by Japanese statements and reports that it took the Department of the Treasury from October 18, 1956, to March 1, 1957, to search out a loophole in the Antidumping Act which would give them an excuse to dismiss our action.

During this 42-month period the export of frozen albacore to the United States was almost stopped. Of course the Japanese industry found out in late January, a full month ahead of us, what the decision was going to be and had sales made and tuna on the high seas headed here before the formal announcement of the decision was made.

We did not fuss much about this because the Japanese tuna industry usually gets news of what is going to be decided with respect to tuna by the executive branch of the United States Government well ahead of us, and we are used to it. As a matter of fact, we subscribe to Tokyo fishery newspapers to keep as closely up to date as we can on what is transpiring in Washington, D. C., with respect to tuna.

Of course this ability of the Japanese industry to find out quickly through their Embassy what is going on in our Government while our Government is keeping it secret from us gives the Japanese tuna industry a considerable economic advantage over us from time to time, but we are also used to this. What cannot be cured must be endured.

This marketing problem of getting rid of the 1956 summer albacore catch cost the firms in the frozen tuna cartel a total cash loss of over $2 million. A good many went to the wall. As a matter of fact the firm having the largest yellowfin export quota in the cartel went bankrupt and was bought up by a textile manufacturer of the Kansai area.

Had there been no cartels with their individual firm quotas to meet the canners and frozen tuna people would not have had the reason for bidding against each other and driving the price of albacore up.

Had there been no frozen tuna cartel to make a binding commitment not to sell any more albacore at a less price for 3 months, the small surplus (only 15,000 tons in a total United States market for 250,000 tons of tuna) would have been disposed of in a regular manner by the individual firms and no inventory would have been held over the market.

Had there been no cartel system with its quotas the Kansai group would not have had to upset the applecart to get into the business. Had there been no cartel system the Japanese industry and Government could not have used it as a method of trying to recoup these losses.

But there were cartels and in the attempts to recover their equilibrium from this very substantial loss of money the two cartels and their government have taken corrective measures one after another each of which has further aggravated the situation, and which has disturbed and damaged in a consequential manner every major section of the tuna business in the free world—including the Japanese.

Because of their shortage of money and credit, their frozen stock on hand until in April 1957, and their newly cautious attitude, the members of the frozen tuna cartel did not buy any albacore from the winter season catch (December 1956 to March 1957).

As a consequence, all of this catch, instead of the normal 50 to 60 percent, was bought and packed by the Japanese canners. As a consequence of them having the entire raw-material market to themselves, the price stabilized at $260 to $265 per ton, and by early May the canning firms had packed their entire quotas of albacore for the year. In the Japanese interpretation of the word "quota," they had canned substantially all of the albacore for which they could anticipate a market.

In mid-May the heavy landings of summer albacore began as normal and they kept on building up each day toward the end of June and shortly thereafter dropped off quickly to nothing, as is normal. But the season from mid-May to late June was heavy. The catches were larger even than those of 1956, and for the whole year 1957 exceeded those of the previous year by 10,000 to 12,000 tons. It was somewhat the largest albacore catch year in Japanese history.

The frozen-tuna cartel members did not at once begin buying albacore when the heavy landings commenced because the price of $260 per ton was higher than they wanted to pay. Those left in business wanted to recoup their losses of the

previous year and the only way they could do so was to take it out of the Japanese fishermen, because the Japanese Government would only tide them over and had refused to bail them out fully for their losses. The Japanese canners were not in the market at all at this time.

This stratagem worked quickly because the frozen storehouses of the fishermen's cooperatives filled up quickly, they had to get their fish unloaded promptly to prevent spoilage; they had to move the fish, and to do that the price had to drop.

Purportedly the frozen-tuna cartel firms had agreed to abstain from buying until the price got below $200 per ton; but, when they began to come into the market at about $190 rather tentatively, the price kept sliding on down to $160, then $130, and finally stabilized at between $120 and $130, although the canning grades slipped on down to $100 per ton, or even $90 per ton, which is no more than the price customarily paid for good shark in Japan.

Several consequences flowed from this:

1. The tuna-boat owners were badly hurt by these heavy losses on their albacore catches coming on top of rather poor yellowfin prices. They reacted politically as well as otherwise. They secured a small change in the Fishery Export Act of 1954 which simply provided that any fishing vessel capable of freezing its catches aboard ship could qualify as a manufacturing establishment. By other parts of the law they could form an export fishery association of their own.

As soon as the amendment to the law passed, the 117 large vessels that were able to freeze their catches aboard ship did precisely that. The reaction of the Japanese Frozen Marine Products Association was prompt. They made a vigorous complaint to the Government against this group setting up a competitive frozen-tuna export cartel, but to no avail. They then entered into negotiations with the new group. After some months these negotiations concluded by the Japan Frozen Marine Products Export Association dissolving and its members joining the new organization. The new organization now became called the Japan Frozen Marine Products Export Association, but its board of directors was now divided 50-50 between the boatowner group and the processor group. Policies and procedures are still being shaped and promulgated, but the Japanese tuna producer has now become a powerful factor in the export tuna trade and his needs and desires can no longer be ignored and trampled upon.

The force which drove the processors to this extreme act was simple. The 117 big boats in the new association caught and controlled 80 percent of the yellowfin tuna exported from Japan. The frozen tuna cartel controlled 80 percent of the albacore export production in Japan, but for reasons cited below it was impractical to export albacore at a profit without yellowfin for a tie-in sale. So the old frozen tuna cartel capitulated. It broke up and joined the new one. It was as simple as that.

2. The frozen tuna exporters had lots of albacore and this time they had it at very cheap cost. The Government check price was $270 f. o. b. Tokyo, and this meant, by and large, $100 per ton net profit to them at that price. But what American canners wanted in 1957 was yellowfin and they wanted it cheaper than they could get it in the last 6 months of 1957. The ex-vessel prices of yellowfin in Japan had risen because of market demand to where, by July 1957, 20- to 80-pound yellowfin gilled and gutted should have been selling at $265–$270 per ton f. o. b. Tokyo.

The frozen tuna export people solved this problem neatly by tie-in sales. If you wanted 500 tons of yellowfin at $220 per ton f. o. b. Tokyo you could have it if you would take at the same time 500 tons of albacore at $270 per ton f. o. b. Tokyo. They thus lost about $40-$45 per ton on the yellowfin but they made a good $100 per ton profit on the albacore which made the situation a happy one. Japanese Government check prices on albacore were thus not violated. The dismissal by the Department of the Treasury of our dumping charge last year makes it evident to all that there is no danger from the Antidumping Act. The American canners get their yellowfin at a real good price (below cost of production). The albacore price made that a good buy also for the American canner. By this means the frozen tuna exporters have succeeded in moving their exceedingly heavy stocks of summer albacore into the American market smoothly and profitably. This set up stresses and strains on the entire American market which have not yet worked themselves out.

The first effect of this tie-in sale system in America was that the American canners neither needed nor wanted the American catch of albacore for canning as white meat tuna in 1957. They were already overloaded with white meat