The Home Office was warned last year about the problems posed by illegal cockle pickers in Morecambe Bay, the BBC has learned.
Bereaved relatives want answers about the deaths
Morecambe MP Geraldine Smith wrote a letter in which she described cocklers "unable to speak English" under the control of gang masters.
Nineteen died when they were caught in rising tides in the bay last Thursday.
Three male and two female survivors arrested on Sunday were released on bail on Wednesday night.
Meanwhile, the family of one of dead has told of his last call to his wife.
Father-of-two Guo Binglong phoned from the beach saying: "The water is up to my chest. The bosses got the time wrong. I can't get back in time," the Daily Telegraph reported.
Ms Smith wrote to the Home Office on 28 June 2003, reports BBC political correspondent Laura Trevelyan.
The MP said a constituent told her: "Unable to speak English and under the control of a gang master, these people were being paid one fifth of the standard rate for their work.
"They were also being transported 20 to a boat in waters renowned for their currents and quicksands, where an experienced local fisherman would not consider carrying more than six."
The MP asked the Immigration Service to become involved.
Home Office Minister Fiona Mactaggart replied, saying "resource issues" meant the Immigration Service had decided not to intervene.
She said the service had already carried out raids in the area.
She said they had found Chinese people, many of them in the UK "unlawfully" but also many who had claimed asylum.
She described the problems of obtaining passports for them from China and the department's lack of resources.
"For these reasons, rather than because of any unwillingness to tackle illegal immigration ... it was decided that it would not be appropriate to participate in this particular operation," she wrote.
The minister also wrote that prosecuting gang masters is difficult because, "our experience, particularly with Chinese offenders, is that there are no written records of the employment and that the offenders will not provide statements or other supporting evidence to enable us to bring a prosecution".
Lancashire police arrested seven people on suspicion of manslaughter following the cockling deaths.
They have all been released on bail. The three men and two women released on Wednesday were from the group of survivors of the tragedy.
Many of the dead have still not been identified.
The family of Guo Binglong, 30, are demanding compensation from the UK government for their loss, and for his body to be flown home.
They spoke to BBC correspondent Louisa Lim about the heart-rending call from the cockle beds in which he asked for them to pray for him.
Mr Guo had paid $30,000 (£20,000) for his passage to England and had two young children, aged five and two and elderly parents to support in a village in China's Fujian province, she said.
On Tuesday police said the immigration service had matched eight of the dead against names in their records, but their "true identity" could still not be confirmed.
Two fishing bosses, who say they were among those arrested, issued a statement through their solicitor on Wednesday, denying responsibility over the deaths.
David Eden and his son, also called David, who run the Liverpool Bay Fishing Company, said they had volunteered to speak to the police as they thought they might have information useful to the inquiry.
Police number for witnesses or those with information - 01524 63333