reLAKSation 227. Callander McDowell
Challenge:
This week, the European Commission finally implemented a permanent minimum
import price on the import of Norwegian salmon. Various news reports suggest
that Norway is now contemplating legal action through both the World Trade
Organisation and through the European Courts.
Yet
another unnamed spokesman for the EUSPG told IntraFish that any challenge to the
legislation was a matter for the Norwegians. He said that the vast majority of
the member states have considered the Commission's proposals and found them to
be well founded. This may be very well true but there is also the possibility
that the member states have based their decision on flawed information. It is
entirely possible that even the Commission have been totally misled as to the
true facts of the case. IntraFish report that the continuing saga of salmon
dumping rose again in August 2004 when the European Commission accepted an EUSPG
complaint that a flood of cheap Norwegian salmon was driving their members out
of business. Yet, clearly many of the EUSPG members, far from going out of
business, seem to be doing extremely well. Loch Duart Salmon has just featured
in a major food magazine and Angus Macmillan's farm appeared on fish chef's Rick
Steins TV programme. Some farms did go bust, all based in Shetland and whilst
one or two of these may have been genuine bankruptcies, others have allegedly
been accused of implication in some financial irregularities associated with
grants and loans whilst their owners continue to farm under different company
names.
It
would seem that none of the dire forecasts that were issued by the EUSPG along
with the complaint have failed to materialise. Independent Scottish farms have
not gone bust and Scottish production has not collapsed as the Scottish
Executive surveys have shown. Even after the Commission had decided in their
favour, the EUSPG continued to warn of imminent disaster. An unnamed spokesman
told the Glasgow Herald that unless the Government issued immediate help the
whole independent industry would disappear within two months. That was back in
August and yet the EUSPG members are still actively farming.
The
Norwegian industry may yet decide to challenge the European Commission as to the
validity of their decision but the real challenge should be issued to the EUSPG
to explain why all their dire warnings appear to be nothing more than just hot
air.
Losing
out: According to IntraFish, Torbjorn
Lorentzen, a research economist at the Norwegian Institute for Research in
Economics and Business Administration believes that EU consumers will be the
ultimate losers as a result of the imposition of the MIP and we at Callander
McDowell certainly agree. DG Trade have virtually ignored the interests of the
consumers at all points of their investigation. Yet, without consumers, the
independent Scottish salmon industry would have no reason to exist. After all,
why produce salmon if no consumers are prepared to buy the harvested fish.
The
final regulation does include two short paragraphs about consumer interest. They
relate how they informed various consumer organisations of the opening of the
investigation but did not receive any real response. This is not surprising
since the Commission have totally ignored the responses of these organisations
in previous cases. No doubt, the consumer organisations considered that it would
be a total waste of time expressing their views again if they were not going to
be given any real consideration. From the outset, DG Trade have expressed a
single view on consumer interest and that is that consumers should be prepared
to pay a fair price for the salmon they buy. However, DG Trade remain totally
indifferent to the fact that the majority of consumers aren't prepared to pay
what the Commission considers to be a fair price and therefore have continued to
push this regulation through regardless.
DG
Trade seem to believe that there is sufficient margin between whole fish ex farm
and the finished retail product that the effect of these measures will not be
passed onto the consumer. This has not been the case. Retail salmon prices have
risen.
There
is also one other problem with the concept of a fair price. DG Trade have
seemingly used the idea of a fair price based on what happens in industry in
general. Cost of manufacture hardly changes except between production areas with
differences in wage costs. By comparison, salmon farming is a new agricultural
type industry where increasing experience has led to dramatic reductions in the
cost of production. (This is why prices have also fallen). The cost of
production now will be very different in five years time when this regulation
ends. Prices will have fallen but the MIP will remain the same. This means that
producers will gain an even greater margin at the expenses of the consumer. This
cannot be described as a fair price.
However,
one area that DG Trade has not considered at all is the impact that these
measures will have on the overall supply of fish to the consumer. It is clear
that they have not even taken their own policies into any sort of consideration.
The
DG Trade website reports on sectoral issues including fisheries. They state that
"The EU is increasingly dependent on imports of fish and fishery products
to meet its needs. In 2003, the EU15 imported nearly €13 billion worth of fish
and fishery products with exports amounting to almost €2.5 billion. 50% of
imports came from 10 countries with Norway accounting for the largest share
(15%). The most significant imported products in value terms were fish fillets
(€2.5 billion) crustaceans (€2.4 billion) and prepared/preserved fish
(€1.6 billion). The main export items were frozen and fresh fish (€870 and
€300 million respectively). Japan was the most important export market with a
value of €300 million.
40%
of world fish production is traded but whilst income derived from fish trade can
generate significant benefits, such trade can also cause social and
environmental problems. Increased foreign demand for fish products can
exacerbate pressure to harvest fish in an unsustainable manner or can lead to
excessive investment in fishing capacity. This in turn can lead to over-fishing
and depletion of the resources on which coastal communities in developing
countries depend for their nutrition and livelihood."
DG
Trade clearly admit that the European Community is increasingly dependent on
imports of fish, especially from Norway. However, DG Trade appear unable to
distinguish that farmed salmon are fish just as much as wild caught cod. When
buying fish, consumers do not make any such distinction. They are all fish.
Norwegian
salmon are extremely important to EU consumers as are Norwegian cod, probably
even more so since the supply of farmed salmon at affordable prices increasingly
takes the pressure off wild fish stocks, reducing the same possibility of
over-fishing and subsequent depletion of fish stocks that DG Trade highlight as
damaging to coastal communities in developing countries. The collapse of the
Grand Banks fisheries illustrates that this is just as critical for developed
countries.
The
imposition of the MIP means that the message emanating from DG Trade is that low
cost affordable farmed fish are not something that the Commission should
encourage. After-all, the blinkered interests of 15 or so Scottish farmers is
clearly of much more importance than those of
all EU consumers and the health of wild catch fisheries!
Wild
about salmon: Phillippe Barbe of Direct Ocean
has told IntraFish that high farmed salmon prices and continued media scrutiny
has forced buyers to turn to bargain basement chum and pink salmon for
reprocessing and high-end coho and sockeye for smoking. However, this is not a
recent development but more importantly it is a development which has had
immense bearing on the dumping case.
The
market for salmon is no different to that of many other food items. The majority
of consumers are driven by price, however, there is a top end to the market
where price is not important. These consumers are driven by issues such as the
environment or quality. This is the market targeted for example by organic
producers who expect to receive a premium for the fish they produce.
In
the past, the Scottish salmon industry has believed that it is they who supply
the top end of the market. They have argued that it is Scottish salmon that
merits a premium price. As imports of salmon from elsewhere have grown, the
distinction between Scottish and imported salmon has diminished along with any
premium. This is the sole reason why the EUSPG submitted their dumping complaint
to Brussels. Instead, the top end of the market has opted to buy only farmed
salmon from organic sources. Top end consumers have also been persuaded that
wild pacific salmon meets their requirements and as a result, more and more
supermarkets have been stocking fresh pacific salmon and consumption is growing
rapidly.
Imported
pacific salmon is therefore extremely significant to the dumping case because it
has displaced Scottish farmed salmon from the top end sector. Instead, most
Scottish salmon is now sold alongside imported Norwegian and Chilean salmon as
being just salmon. Wild pacific salmon is now considered to be the premium
salmon and this is reflected in it's price. The price of wild pacific salmon in
most supermarkets is shown below alongside the price of equivalent farmed
salmon.
Booths
Fish
counter
Farmed
Scottish £9.50/kg
Wild
Pacific £23.80/kg
Marks
& Spencers
Prepacked
Farmed
Scottish £16.18/kg
Wild
Pacific £22.60/kg
Morrisons
Fish
counter
Farmed
Scottish £6.49/kg
Wild
Pacific £14.99/kg
Sainsburys
Fish
counter
Farmed
Scottish £9.99/kg
Wild
Pacific £16.99/k
Prepack
Farmed
£6.29
Wild
Pacific £16.62/kg
Tesco
Fish
Counter
Farmed
£6.27/kg
Wild
Pacific £11.99/kg
Prepack
Farmed
£6.48/kg
Wild
Pacific £12.71/kg
Waitrose
Farmed
Scottish £11.29/kg
Wild
Pacific £16.99/kg
It
is important to point out that wild pacific salmon has not just started to
appear in supermarkets as a result of this latest dumping case. Wild Pacific
salmon has been present in the retail market for some time as our regular market
survey confirms. We, at Callander McDowell point this out because it is worth
quoting from the European Commission's latest regulation. This states:
'It
is important to recall that there is no distinction between farmed salmon and
wild salmon in the import statistics. However, it has been found that the taste
of wild salmon is significantly different from that of farmed salmon. More
importantly, the investigation showed that contrary to farmed salmon, wild
salmon is practically not offered in the market for sale as fresh product but is
mostly sold in tins and cans. It is clear that these products are not directly
competing with each other on the market. This explains why the price of wild
salmon is lower compared to farmed salmon and why these products are not
interchangeable.'
So
much for a verifiable investigation!!