reLAKSation 192.
Obvious,
isn’t it?: According to Intrafish, Claude
Veron-Reville, spokeswoman for EU Trade Commissioner Peter Mandelson, told the
Danish news bureau, Ritzau that ‘it is obvious that Norway is dumping
salmon’. Yet, the one thing that is totally obvious to us at Callander
McDowell, is that it isn’t obvious at all that Norway is dumping salmon into
the EU.
We
assume that Ms Veron-Reville believes that it is obvious that dumping has
occurred because as recorded in paragraph 36 of Commission Regulation 628, for
eight of the exporting producers sampled, a dumping margin could be calculated.
To be clear what this means, the regulation states that the weighted average
normal value for each product exported to the Community was compared with the
weighted average export price of the corresponding type of product concerned.
The dumping margins found ranged from 6.8% to 37.7% with an average value of
22.5%.
We
don’t doubt that the Commission did find such dumping margins, but what we
question is whether these dumping margins prove that dumping had actually
occurred.
Dumping
margins have been found by the Commission in every previous dumping case against
Norway and by the US authorities in cases against both Norway and Chile. There
has yet to be a single case involving farmed salmon in which no dumping margins
were found. Are these dumping margins part of a pattern or even as some might
suggest, part of a world conspiracy to dump fish into the major salmon markets?
In
their submission to the European Commission, the EUSPG state that ‘the salmon
farming industry has a long a relatively inflexible production cycle.’ Not
only would we at Callander McDowell fully concur with this view but we would
also argue that the salmon’s natural life cycle is extremely complex and this
is echoed by the farming process. There are two features of the salmon life
cycle that can significantly affect the production process. The first is that
salmon are cold blooded animals and therefore temperature greatly affects the
growth rates. Within a defined temperature range, salmon will grow faster in
warmer waters. This means that salmon grown off the west coast of Ireland, which
benefits from the warming waters of the Gulf Stream should grow a lot faster
than fish grown in the northern extremes of Norway. Cool spells in warmer climes
slow down growth, whilst warm spells in cooler climes, speed it up.
The
second feature is that salmon have a capability of early maturation. Salmon,
usually in their first year at sea, which mature early are known as grilse. From
the farmers point of view, grilse are a problem. The fish start to put all their
energies into reproduction rather than growth and the longer that this is
allowed to progress, the poorer the eating quality of the fish. Fortunately, it
is easy to identify such grilse because these changes are accompanied by changes
in skin colouration which is an indication of a return to fresh water.
When
salmon start to grilse, they must be harvested even though they are still
relatively small fish. In terms of profitability, it is usually best if farmers
can grow salmon as large as possible. The sea cycle of the production process
usually last two years, but most of the real growth appears in the last few
months. Harvesting fish when they are still small is uneconomic but in the case
of grilse, is essential. The relative cost of producing grilse is high, but the
returns are low. In economic terms, the farmer would prefer to leave the fish to
grow more but he has no choice.
We
would argue that dumping margins are an inevitable artefact of the combined
effects of a complex life cycle, variable growth rates and early maturation. It
is for these reasons, that dumping margins have always been found during dumping
investigations.
The
likelihood of finding these margins is enhanced by the character of the spot
investigations conducted by the Trade Directorate. In this current case, the
investigation covered a period of 10 months, but the salmon life cycle can last
three years. The investigators are only getting a snapshot of what is happening.
This maybe perfectly acceptable in other type of trade investigations such as
steel, where the production process is extremely short. In the morning, the
steel works can have a set of ingredients and by the afternoon can have changed
this into the finished steel product. This is very different from what happens
in salmon farming.
The
almost certain presence of dumping margins in farmed salmon does not mean that
such dumping margins will be found in salmon from Norway. Dumping margins will
undoubtedly be identified in every salmon farm including those in Scotland. The
problem for the Norwegian farmers trying to defend themselves against these
accusations is that whilst the investigators sample some Community producers to
discover the extent of the supposed injury, they do not look for dumping margins
,but we are sure that if they looked, they would find them.
Whilst
it is obvious that dumping margins do exist, it is clearly not obvious that
dumping has actually occurred.
That
Community producers have resorted to repeated anti-dumping cases over the last
fifteen years, continuously disrupting the marketplace in the process, masks the
fact that the real issue has nothing to do with dumping nor has ever had
anything to do with dumping, nor is likely to in the future. The real issue
concerns the market image of Scottish salmon. Community producers believe that
their salmon is superior to any other, especially imported Norwegian salmon and
that consumers should be willing to pay a premium price to buy it.
The
main reason that salmon was selected as a candidate species for farming in
Scotland was because the wild fish had a high market price and a luxury market
image. This was simply because salmon had an inherent rarity value. They were in
short supply and in common with all luxury goods, this meant that consumers were
often willing to pay a much higher price. What the pioneering farmers failed to
appreciate is that the very act of farming would seriously undermine this rarity
value and as salmon become more common, consumers would be less willing to pay a
high price to buy it.
In
1989 the price finally collapsed. Salmon farmers were producing too much salmon
for the small luxury market and the high price could not be sustained. Scottish
farmers considered this to be a catastrophe. They blamed the presence of
Norwegian salmon in the European market for devaluing the Scottish image. They
called in an agricultural consultant whose view was that the market was
saturated, the industry had become saturated and the problem had been
exacerbated by the presence of Norwegian salmon in the marketplace.
Unfortunately, this view was wrong, however, the Scottish industry now had
someone to blame and their immediate response was to accuse Norway of dumping
cheap salmon into Europe.
Why
this consultant was wrong was because the market for salmon was far from
saturated as the subsequent fifteen years have clearly demonstrated. What had
happened was that the small niche market for salmon as a luxury product had
become saturated, but falling prices had created a whole new demand for value
for money salmon, which has continued to grow unabated. This meant that the
market image of salmon had changed from a luxury treat occasion to a value for
money every day meal choice. To cater for this market, the salmon industry had
also to change. From being an industry of high margins and low volumes, it had
to evolve into one of low margins and high volumes.
As
the new market developed, consumers became less interested in the origin of the
salmon, whether it was of superior quality and much more interested in whether
it could be used in the every day family meal. Price became much more important.
Unfortunately,
this was not the image these Community producers wanted for their salmon. They
still perceived their salmon as something special, but as demand increased
beyond the capabilities of the
Community industry, more salmon flowed into Europe from Norway. With more salmon
to choose from, consumers were unable to tell one slab of fillet from another
and any differential between Scottish and Norwegian salmon began to disappear.
Community producers found that whilst they were still producing a supposedly
superior product, they were actually competing directly against Norwegian
salmon. This was not what they wanted.
The point of bringing a dumping case is simple. If the flow of salmon from Norway can be restricted or even stopped, then suddenly salmon would again be in short supply and thus artificially regaining its rarity value and thus its perceived market image.
It
is only necessary to read the words of Angus Morgan responding to the imposition
of provisional dumping duties to see that this is true. On the 22nd
April he said ‘For the future we can now look forward to be in a position to
supply consumers in the UK and in Europe with what they most prize –
Irish and Scottish salmon’. What they most prize? The problem for Mr Morgan
and the EUSPG is that they have never gone out into the market and seen what
consumers really want. Their view of the salmon market stems from the past and
this is where the salmon industry will remain unless the Commission realise that
they have made a grave error in allowing this anti-dumping case to progress.
Equally, Mr Morgan and his colleagues in the EUSPG need to recognise that their
vision of the salmon industry has long gone. It is time to adapt to the new
realities of the marketplace rather than try to adapt the market to their
vision.
Claude
Veron-Reville said that dumping isn’t a fair practice; it is a predatory
practice designed to win markets in an unfair fashion. What she doesn’t
realise is that the Norwegians are not winning markets from the Community, but
meeting an untapped share of a growing market which the Community industry
cannot supply. The EUSPG have never supplied any examples of Community producers
who have been unable to sell their salmon because of a market saturated with
Norwegian fish. They may not be getting the price they want, but the markets are
driven by the consumer not the producer. This is why those farming companies
that are now successful are those that have moved from the production-led
strategies of old to those which are more market-led. Instead of producing the
salmon these companies think that the consumers want, as in the EUSPG’s case,
they are now producing the salmon that the consumers actually want.
It
is not to late for the European Commission to realise this. After all, its
obvious isn’t it?