The current shrimp trade is characterized by a direct dependence on the quality of and productivity of the environment, and by a large number of small own-operated farmers. During the last several years, Thailand has faced a number of environmental problems with regard to export trade of both capture and cultured shrimps. One recent example was the United States shrimp ban. In 1996, the US banned imports of shrimp from Thailand and other Asian countries, which it argued, were not taking sufficient steps to protect sea turtles that are 'incidentally' caught while harvesting wild shrimp. The US argument for this ban was based on the US Endangered Species Act, Section 609 and on the interpretation of Article XX (b) of GATT 1994. Another example is that shrimp farming has been attacked by environmental groups on the issues of mangrove and coastal environmental destruction, and particularly water quality.
In spite of the impressive growth of the industry, there have been various economic, socio-economic and environmental repercussions. These problems raise the issues of sustainability of this industry and these are to be explored and discussed.
The United Nations Conference on Environment and Development (UNCED) at Rio de Janeiro on June 1992 made a significant impact on global awareness of issues concerning the environment, particularly internalization of externalities (external costs). With the Rio declaration in mind, this research provides an assessment of the magnitude and policy significance of the sustainability of the shrimp farming industry at both national and farm levels.
At the national level, sustainability of Thai shrimp trade is assessed through applying economic principles in an environmental impact assessment (EIA) context. Extended cost-benefit analysis (CBA) is used to capture the socio-economic and environmental repercussions.
At the farm level, sustainability of this industry is analyzed via farm characteristics, private and social profitability, production cost and environmental cost functions, and risk analyses, as well as sensitivity analysis in order to capture the dynamic aspects of the industry. The key data base is raw information from a 1997 farm survey conducted by Thailand Development Research Institute (TDRI) and Institute for Environmental Studies, Vrije University, the Netherlands.
The results at the national level reveal that the present value of net externalities in converting mangroves into shrimp farms is 194, 795 Baht/rai/year or 122 Baht/kg of farmed shrimp. In converting rice farms, vacant lands into shrimp ponds in value of the externalities are 35,620 Baht/rai/year or 22 Baht/kg; 18,927 Baht/rai/year or 12 Baht/kg. For "other" lands such as fruit, rubber, fish lands and so on, the value of externalities in converting these lands is higher than rice and vacant lands but much lower than mangrove areas, i.e. 75,654 Baht/rai/year or 47 Baht/kg of farmed shrimp. If shrimp farmers had to pay the external costs to society of the environmental degradation they cause, these costs should be internalized. Then production cost would increase from approximately 113 Baht/kg of shrimps in 1997 to 235 Baht/kg in the case of mangrove area conversion; to 135 Baht/kg in the case of rice field conversion; to 125 Baht/kg in the case of vacant land conversion; and to 160 Baht/kg in the case of conversion of "other" lands.
The findings at the farm level reveal that input management, especially feed and seed, was significant for sustainability of this industry. The findings from cost function analysis reveal that the average cost (AC) in 1997 was about 100 Baht/Kg and marginal cost (MC) was 105 Baht/kg. This means that the level of production was above the minimum of average cost point. From the private point of view, the financial profitability of this industry was substantial, i.e. the average net profit per kilogram of shrimp production was approximately 46 Baht, whereas the average net profit per rai was about 75,338 Baht. When considering only the variable cost the average annual net return was 104,449 Baht/rai and the average net return per kilogram of shrimp produced was around 64 Baht. However, when environmental values in terms of non-marginal values were taken into account in the same fashion as private profitability, (known as social profitability in order to be more meaningful for policy implications) different results occur. From the social point of view, the level of net social profit was very low. The results of risk analysis show that shrimp farming was a high-risk activity in terms of net returns, yields, prices and diseases. The sensitivity analysis also shows that both the decrease in gross return which may result from decline in shrimp price or yield and the increase in production costs were significant in affecting economic viability of shrimp farming, which could convert net social profit from positive to negative.
The above findings suggest the necessity to understand the linkages of shrimp farming management, international trade, and the environment (sustainability). Different levels of integration towards policy, management and plarming are also important. However, governments of every shrimp producing nation and lending agencies should do everything to intemalize the external costs of shrimp farming to reflect the 'real' prices of shrimp in order to prevent damage to the natural environment. Otherwise, in the future, these countries may have to borrow significantly to restore the degraded environment. These amounts may even greater than the 'foreign exchange' they are now reported to be earning with shrimp export