Cannery Row In The South Pacific ff

At first sight, and especially driving along the poorly kept winding main road from Pago Pago International Airport towards the Fagatogo Bay and downtown area, it is hard to think of American Samoa's somewhat cluttered and ramshackle collection of houses and small businesses as being a South Pacific business hub.

But as an unincorporated territory of the United States, American Samoa does enjoy economic and political opportunities available to few other Pacific Island states. It has meant that American Samoa is indeed a land of opportunity for many, not least of which are the 4,000 or so largely unskilled migrant workers from Samoa and Tonga, who make up a large part of the territory's work force. They are attracted by the prospect of employment, and by the high $3.70 an hour wage rate, a fortune compared to the meager wages in their own countries.

There is also a sizable, and according to some, growing Asian presence mainly in retail and restaurant sectors. Much of the Asian fishing fleet that serviced the fish canneries may have departed, but a number of mainly Korean personnel have managed to stay behind after setting up businesses.

Two U.S. fish canning companies also saw American Samoa as a land of business opportunity and set up operations there more than 50 years ago, to process and can tuna for the large American market. Star Kist and Chicken of the Sea employ between them some 5,100 workers, over 70 percent of the private sector work force, according to the territory's delegate to the U.S. Congress, Faleomavaega Eni Hunkin.

Today it is the very real prospect of these two canneries leaving that is creating crisis for Governor Togiola Tulafono and his administration and for the American Samoa business community. Both canneries have been operating in American Samoa with the help of tax credits available under Section 936 of the United States Internal Revenue Code. These measures had been put in place long before the current free trade regime, in order to attract investment to American territories such as American Samoa. "But legislation passed by Congress in 1996 will mean the tax benefit will expire at the end of 2005," Congressman Faleomavaega says. While there has been worry for years about the future of American Samoa’s two canneries, the disappearance of these tax benefits raises the real possibility that the canneries will relocate to Mexico or some other low-wage country.

”The departure of these two canneries will result in an unemployment situation of very serious proportions,” says Governor Togiola. Congressman Faleomavaega, pushing for replacement legislative measures, told the U.S. Congress, “a decrease in production or departure of one or both of the two canneries in American Samoa could devastate the local economy resulting in massive layoffs and insurmountable financial difficulties.”

Strong words, indeed. But these are fears fully echoed by local business leaders. “The economy is fairly stable now,” says Dave Haleck, the managing director of Haleck Enterprises, one of the leading region's business families with interests in hotels, real estate, automobile distribution, and food and drink manufacturing. “But if the canneries leave, the effect will be devastating.”

David Buehler, vice president and country manager for the Bank of Hawaii, one of two commercial banks in the territory, was equally frank about the impact of the canneries leaving. “We are here to serve the banking needs of the community. But as the canneries go, so goes the community. And as the community goes, there go the banks also.”

Gary Ayre, president and chief executive officer of the Amerika Samoa ANZ Bank, says that right now, there are simply no viable economic alternatives to the canneries.

But some claim cannery operations have been on the decline in recent years in any case. Supplies of tuna are often short, resulting in operations shutting down for days or weeks until the boats come in again. There are now at most only 16 boats supplying American Samoa's canneries, down from a high of 40 vessels. Some of the old hands at the Pago Pago Yacht Club remember “when this town was a gold mine. You know the boats had come in when some boat owner or captain would walk into the club and it was drinks on the house. It was boom time, but those days are long gone now.”

High wage rates have been one of the reasons given for the loss of competitiveness by canning operations in American Samoa. With a minimum wage of $3.60 per hour compared to $0.60 or less elsewhere, there had to be some other incentives to attract investors or to make them stay in the face of an increasingly deregulated U.S. market. At the last biennial minimum wage hearings in June 2003, the government of American Samoa vigorously resisted any increase in minimum wages, citing loss of manufacturing competitiveness and lack of compensating revenue as reasons. They won the argument then, but these hearings are due again this month. An increase in the minimum wage rate this time, will only compound an already difficult economic situation for the canneries.

Governor Togiola says the future of the canneries now hinges on the fate of replacement legislation to Section 936, currently being marshaled through Congress by Congressman Faleomavaega. This is in the form of a new bill, HR 629, which seeks “to make permanent, or extend by another 10 years the tax benefits currently enjoyed by the two canneries in the territory.” Both Star Kist and Chicken of the Sea fully support Faleomavaega's efforts. They have also indicated they will not consider any local alternatives to the present federal tax concession.

But irrespective of what happens in Washington, Governor Togiola says American Samoa must look at other ways of promoting economic growth. His government has hired a tax consultant to look for an alternative incentives package for the canneries, and beyond the canneries, to other potential industries. “Our geographic location close to the International Date Line, the state of our infrastructure, and the level and type of English we speak, offer certain advantages for investors in telecommunications based services such as small call centers for e-commerce, to be set up here” Governor Togiola says. But this would mean looking at American Samoa’s telecommunications infrastructure and the existing skill levels in the labor market. “We are looking to offer incentives packages that will be tied to an ability to raise political status.”

American Samoa’s Pago Pago Harbor is one of the most scenic in the South Pacific