American Samoa, China’s Legal Tariff Free Access to US Markets
John Wasko
Chairman, American Samoa Chamber of Commerce
684-733-0833
October 1, 2018
About midway between Honolulu, Hawaii and Auckland, New Zealand lies a speck of volcanic rock covered in lush tropical rainforest; American Samoa.
Always an object of America’s colonial eye, the group of five Polynesian islands officially became American Samoa in 1900. Pago Pago Harbor, located on American Samoa’s largest island, Tutuila, is the Pacific’s deepest, largest and safest natural harbor in the Pacific. During World War II, American Samoa was a major staging area for US forces. The attack on Guadacanal was launched from here.
By the 1950’s American Samoa took on another role. Major American fish processing companies settled along the shores of Pago Pago Harbor. International Distant Water Fishing fleets from Japan, Korea, the US, Taiwan and, most recently, China, took their turns at off loading their catches of prized tuna.
In order to facilitate the American territory’s economic success, the US congress passed legislation under the United States International Trade Commission allowing “value added” goods originating in American Samoa to enter the United States duty and tariff free. This competitive advantage kept American Samoa’s tuna processing economy buzzing and vibrant.
Over the years, a series of international bilateral trade agreements began to lessen American Samoa’s tariff free advantage. Fish processors migrated to low cost operation countries such as Indonesia, Philippines and Vietnam. Today, American Samoa’s lone fish processor, StarKist Foods, still ships sizable amounts of tuna to the US market. But the glory days of an economic boom town are over.
Except that tariffs specifically aimed at China, the world’s second largest economy, are back.
American Samoa is hoping to cash in on the US China trade war that appears to be waged for an unforeseeable future. And that tiny speck of volcanic rock along the US Asia shipping lanes just might make the magic happen again. The math is fairly simple. With American Samoa’s local minimum wage set atUS $5.00 an hour, labor costs are not excessive. Consequently if American Samoa’s shipping and production costs are less than the increased tariff added costs from China, its game on for American Samoa.
The local American Samoa Chamber of Commerce has taken up the challenge to build a new economy for the territory. And they have a few interesting infrastructure weapons in their economic development arsenal; American Samoa controls her own immigration and customs. There is no limit, for example on the number of high tech H1b engineers who can legally work and reside in American Samoa with their families. The newly built undersea Hawaiiki high speed internet cable provides up to 200 gigabytes of access. American Samoa is, well, American. Hospitals, schools, and federal agencies such as the Department of the Interior and the Department of Education all render a distinct American vibe to the islands; Ford 150’s abound. The locally elected government has long experience working with foreign companies and willingly accommodates their development needs. American Samoa’s large commercial dock serves four shipping agencies, the largest being Swire Shipping based in Hong Kong and formerly know as China Navigation. Swire is represented on the Chamber board of directors.
Chamber members don’t have to travel far to directly make their tariff free, legal access to the American market pitch to Chinese diplomatic officials and potential business entrepreneurs. In neighboring Independent State of Samoa China has maintained full diplomatic relations since the 1960’s .
The unique wild card in American Samoa’s economic restructuring, is China immense infrastructure build out, the Belt and Road Initiative. Direct foreign investment in American Samoa would add a stepping stone to the US market with the added value of duty and tariff free access to US buyers. And since China has reciprocated with their own tariff plan, value added goods from American Samoa or Samoa going to China also fall under the tariff free umbrella.
The real hard work in achieving American Samoa’s economic rebuild is targeting the right products. The new NAFTA agreement, for example, calls for 75% of American auto parts to be legally labeled “Made in USA”; American Samoa. Solar panels, subject to a whopping 40% protective tariff might easily fit into the scheme; American Samoa
With a long history of a productive work force, and the governmental and private sector infrastructure to support new manufacturers, American Samoa is taking a shot at regaining its former glory days past when every tuna fish sandwich eaten in the US originated from a can packed, sealed and shipped out of America’s Asia Pacific territory.
In the future American buyers will conceivably appreciate that their dollar saving utility bill solar panel and battery storage originates from “Made in the USA” American Samoa.