reLAKSation 187.
Enough
is enough: Once again, representatives of the
25 EU member countries have failed to reach a solution in the salmon safeguard
case. According to IntraFish, a decision about the long running and acrimonious
dispute will not be announced until the end of next week as the current talks
ended in deadlock. Clearly, sufficient member countries have yet again failed to
support DG Trade’s attempts to impose trade measures against imported salmon
that Mr Wenig and his colleagues must now realise that they have backed a losing
horse. Surely, enough is now enough. This case must be dropped. It made little
sense when it was first submitted to Brussels and makes even less sense now. As
Phillipe Barbe of Direct Ocean rightly said ‘EU salmon farmers can only meet
one quarter of the demand so what Europe needs is salmon not trade barriers’.
Sadly,
DG Trade have become so intent on imposing trade measures against Norway that
they have lost sight of the basic needs of the market. They have listened to a
handful of Scottish farmers but have forgotten that there are two sides to an
argument. Their blind faith in their case against Norway has meant that they
have ignored the wider issues. They had already decided that Norway was guilty
of dumping long before the EUSPG had submitted their dumping case and even
before they had conducted their investigation into safeguards. This has meant
that the issues have been twisted to suit the situation.
Ever
since the application was made to instigate safeguards, the message from the
British Government and then DG Trade was that Norway was guilty of dumping cheap
salmon onto the European market. This was confirmed by their own investigation
despite claims from the Norwegian authorities that their investigation found
otherwise. Yet, by the time the case came before the EU’s antidumping
committee, the reason for asking for dumping duties was not dumping at all but
alleged subsidies. Peter Bamberger of the Association of Danish Fish Processing
Industries told IntraFish that the Commission have deemed the Norwegian banking
practice of converting bank debt into shares is a form of subsidisation. This is
a very different picture to that of wholesale dumping which the EUSPG allege.
Debt
conversion may not be standard practice in Europe, but it is in Norway and the
authorities there make no attempt to hide it. It is a common solution to helping
companies in difficulty which can save jobs and the local economy. It is one way
that the banks can try to safeguard their investment. However, not every salmon
farming company has sought help from the banks and therefore even if this form
of job protection is deemed to be a form of subsidisation, it does not apply
across the whole of the salmon farming industry and therefore it is extremely
questionable whether the whole of the salmon farming industry should be
penalised. In fact, the scale of debt conversion is relatively small and
therefore it is also questionable whether any of the industry should be
penalised at all.
Perhaps,
the impartial observer should not be too surprised that the Norwegian salmon
industry is considered liable for either safeguard measures or dumping duties
since it does seem that DG Trade has mounted what appears to be a vendetta
against them. Mr Wenig has always made it clear that Norway has a choice,
safeguards or dumping duties. Some choice. In any court of law, the first choice
is whether they are innocent or not and in this issue the case is not proven. It
might even seem that the figures have been fixed.
Seafoodintelligence.com
report that a the Norwegian authorities have challenged DG Trade’s analysis of
the 10 salmon farming companies that form the Commission’s basis for imposing
a 16% punitive duty. Apparently, two companies, which had extremely strong
results were dropped from the calculation as they pulled the average up so high
that the EU investigation ‘would not have achieved the desired result’.
This
is not the first time that DG Trade have ignored the results of those companies
which have performed well so that the overall picture looks much worse than it
is.
In preparation for the safeguard application, the Scottish Executive undertook a survey of the independent salmon growers in order to assess the extent of injury. Returns were received from firms that accounted for 23% of production in Scotland in 2002; some three years ago. They decided that injury is best shown by changes in a firm's financial performance. If prices fall faster than the rate at which costs can be reduced then margins will be squeezed and will become negative once revenues fall below costs. They weighted the returns on the basis of each firm's proportion of the output produced by the total sample so avoiding small firms exerting a disproportionate impact on the averages. Their results are shown in the following graph taken from the British application.
This survey appears to suggest that all the independent producers are operating at a loss, but this was simply not the case. Loch Duart Salmon claim on their website that “Loch Duart is profitable. According to Nick Joy, managing director and one of three owner-managers, the £4.5 million turnover company has made profits in four of the five years since the trio bought it.” In fact they are so profitable that they have bought up their neighbouring farm, Ardvar Salmon, whose chairman, Angus Morgan, is seemingly the driving force behind the EUSPG. Is it possible that Mr Morgan prefers the political fight in Brussels rather than that to make his farm profitable? It seems that the foremost representative of the independent farming sector no longer farms salmon himself. Meanwhile, Loch Duart have been aided by Caithness and Sutherland Enterprise (CASE) who have supported the takeover with a development grant totalling £182,400 towards the £911,900 project. Presumably, Loch Duart have gratefully accepted the £182,400 without any concern that their acquisition has been ‘subsidised’ by public money.
Clearly, the Scottish industry is not in such bad shape as the EUSPG have made claimed. Perhaps, if the Scottish Executive had conducted the industry wide profitability survey promised in the Strategic Framework rather than cherry picking selected farms, the picture may have been very different. We still don’t know, since the promised survey has yet to materialise.
We have discussed in previous issues of reLAKSation that other indicators of the health of the Scottish industry have also been presented in a particular misleading way. The British application for safeguards included a summary of past production figures from all European countries as well as forecasts for 2003 and 2004. These figures were provided by the EUSPG, even though the Scottish Executive has a well established reporting procedure through the Fisheries Research Service. The EUSPG figures for 2000, 2001 and 2002 did not match those previously published by the FRS and the estimates given for 2003 did not match that estimated by the FRS. Their figure for 2004 suggested a dramatic drop in Scottish production to only 110,000 tonnes for the year. We will not know until October, which is when the FRS usually report whether this figure is accurate or not; that is, if the 2004 figures are published in October at all. We are still waiting for publication of the 2003 figures, which were due 6 months ago. The Scottish Executive in Edinburgh are still holding on to the 2003 survey. Could this be because they do not support the EUSPG claims that the Scottish industry is in decline.
Certainly, the predicted surge in Scottish salmon farm bankruptcies and closures has failed to materialise. When five Shetland farms went belly up in January 2004, it was heralded as the start of a similar trend through the whole of the Scottish industry. This has just not happened. Many farms might be finding it difficult to operate, but they do continue, unlike those who are most vocal in their claims of unfair competition. Perhaps, the picture is not so bleak as the EUSPG have made out.
We, at Callander McDowell, do not doubt that it is not easy for Scottish salmon farmers. We just think that safeguards and dumping measures are not the best way to help. We’ve seen in the past that previous dumping actions have not resolved the problems for the Scottish industry. This is because they do not address the real issues.
The problem for Scottish producers is not competition from Norway, for clearly, the Scottish and other European producers cannot produce sufficient salmon to meet European demand. The real problem is that they have not successfully adapted to a changing marketplace. They want to sell their salmon as a premium product, which is fine, but equally, the consumer must be able to differentiate the premium product from the rest, which they can’t.
We don’t know how many millions have been spent in fighting this case, whether it be in Edinburgh, Dublin, London, Brussels, Oslo and even Santiago, but what is clear is that if this money had been directed towards helping those in the industry that need help to adapt, we are sure that the Norwegians and Chileans would not have complained that such farmers were in receipt of illegal subsidisies. Surely this would have made more sense. Help those that need help rather than try to penalise everyone else. Sadly, whilst the European Commission covers every possible area of European life, the various departments do not seem to talk to each other. The Fisheries Department are trying to save wild fish stocks yet at the same time, DG Trade are fighting to impose trade barriers to farmed fish which could ease demand on wild stocks. It makes no sense.
We would suggest that the time has come to call on DG Trade to drop this pointless action and encourage their colleagues in fisheries and other departments, as well as national government, to help find ways to assist the independent Scottish farmers to adapt to the needs of the marketplace and so herald a return to profitability.
The need for change can be illustrated by Shetland’s North Atlantic Fisheries College which has now recognised that its mothballed fish processing unit can be better utilised as a food innovation centre to help small businesses, such as salmon farming companies create new and innovative food products. The unit will allow small businesses to investigate the opportunities for the development and then small scale production of new products. This is just one way that small independent farming companies can make their salmon special justifying the premium price that they are so keen to receive.
It only needs an organisation such as Highlands & Islands Enterprise to act as the catalyst to make this happen. Through their extensive business network, it should be possible to put together a programme of business development enabling those salmon farmers who want to move forward to seek an alternative strategy to effectively compete with imported salmon rather than restrict its presence in the European market.
The salmon industry needs to move forward and this will be only possible when DG Trade recognise that their attempts to impose sanctions on imported salmon are neither supported nor necessary. The time has come for them to realise that enough is now enough.