reLAKSation 229. Callander McDowell
Must we wait a year?: A well informed source within the European Commission has told IntraFish that it is likely that in a year’s time DG Trade will instigate a review of the salmon dumping case as permitted under WTO trade rules. As long as the ensuing investigation confirms that production costs have continued to fall in both Scotland and Norway and that the market price remains firm, then the Commission would be prepared to terminate the permanent MIP immediately.
To avoid a long drawn out dispute with Norway at the WTO, the Commission should consider taking this unilateral action now since whilst the imposition of the MIP has no immediate effect on the market, it does undermine confidence in the industry and this in turn can destabilise the market place. The fact is that production costs have fallen throughout the industry and if the Scottish Executive had implemented their intention to conduct a comparative study of industry costs as promised in the Strategic Framework when it was first published then everyone would already be clear as to real cost of producing salmon in Scotland. Even though the study began belatedly mid way through last year, there is still no sign of the results.
As long ago as 1994, the then House of Commons Scottish Affairs Committee told the Scottish industry that the release of production costs data should be a priority before they considered any further dumping cases, yet the industry has had to suffer two further cases since then.
The outcome of any investigation into production cost data will depend on whether figures are sourced from all Scottish producers or just those of the small independent producers. It isn’t necessary to be a rocket scientist to understand that the smaller independent farms will have higher production costs, not just because of the scale of operation but more importantly because they have opted for niche market production such as organic or Freedom Food which requires much lower stocking densities. However, offset against the higher production costs, these producers should be in receipt of much higher market prices.
The investigation will also consider market prices. Whilst price forecasts are notoriously difficult, it does seem that prices will now remain firm for some time. This has nothing to do with the dumping case but is solely due to the massive increase in demand from the Russian market. There are some slight obstacles to the development of this market such as the cadmium question but as these obstacles appear to be politically motivated, they will be resolved. Russia should continue to suck salmon away from the traditional markets ensuring prices remain firm.
The Commission must realise that these conditions will remain unchanged in a year’s time and therefore the presence of the MIP is immaterial. However, it does hamper relations between the EU and Norway and if these are to be improved, then the Commission should consider removing the MIP now. A year on will change little except to undermine the goodwill.
World Class: Speaking at the third annual freshwater fisheries forum, Deputy Minister Rhona Brankin told the audience that the Scottish salmon industry was never going to compete with international competitors such as Chile but instead should concentrate on quality production at the highest possible level. According to fishupdate.com, she said that Scotland must have a world class reputation for high quality. At the same time, she said that Scotland needs to be able to compete on a level playing field .
The problem for us, at Callander McDowell, is that we’ve heard all this before and experience has shown that Ms Brankin’s view simply won’t work. It is one thing to say that Scottish salmon should be of the highest possible quality and another to persuade consumers that they have to pay a premium price to buy it. Highest possible quality is not something that consumers want. Instead, they want the best possible quality for a price they are prepared to pay. The Scottish industry needs to adapt to this and to some extent it is finally doing so. The type of small independent producers that make up the EUSPG are converting production to niche markets such as organic. Organic production doesn’t necessarily mean that the salmon is of the highest possible quality, it means that it is organic and it is for organic that some consumers are ready to pay a market premium.
Ms Brankin, like many of her predecessors, want a level playing field for Scotland. This doesn’t exist. She cannot argue that Scottish salmon should be of the highest quality and then expect imported salmon to meet the same criteria, even though it is not what the majority of consumers want. If she wants to compete fairly with imported salmon, the Scottish producers need to compete in the same marketplace, but she says this is not what Scotland should be doing.
This is the same inherent problem that the Scottish industry has suffered for many years; an inability to decide which market it wants to target. This is the main reason for the continual visits to Brussels. Now that the independent producers have decided to opt for specialist markets instead of trying to compete against imports based on the Scottish name alone, the willingness to depend on these dumping cases should recede.
Finally, Mr Brankin told the forum that Scottish producers had seen a positive impact since the MIP regime had been introduced. Yet as we indicated before, the price development has absolutely nothing to do with the MIP, for it is simply a safety net. It cannot push prices up as only the market can do this. It is rising demand in Russia that has resulted in improved prices throughout Europe. Eventually, when the Russian market stabilises, prices will again come under threat but this could be a long time away. In the meantime, the industry should focus on what consumers want, not what Ms Brankin wants for the industry.
Heavy-handed: According to fishupdate.com Rhone Brankin also told the freshwater fisheries forum that the Scottish Executive was not being ‘heavy-handed’ in its proposed regulation of the key aquaculture sector. The industry have argued that the Aquaculture and Fisheries Bill will cost them million of pounds to implement. The bill is currently out to consultation and has been despatched to nearly a thousand businesses and organisation that have expressed an interest in the aquaculture & fisheries sector. The problem with the consultation process is in exactly the same way that the Strategic Framework committee was dominated by external interests, so the majority of views expressed about the Aquaculture bill will come from interests outside the industry. Whilst it is important that views are sought from every interested party, it is also important their the interest of the industry itself are not submerged by others. It is by trying to meet the concerns of all those on which aquaculture impacts, that the regulation could well become too heavy-handed. Certainly, organisations like the Salmon Farm Protest Group will be demanding for even more stringent regulation than is justified. Already, the industry is concerned that the Code of Good Practice, which has been developed by the industry, is being downgraded by the Bill, even though Ms Brankin said it shows how the industry can relate a really positive story.
The reality is that salmon farming is like any other business, in that it will always impact on others. The risk is that if the final nature of the Bill is determined by those from outside the industry, it could very well strangle any future aspirations for many local communities and businesses. If the Bill is too heavy-handed it could well destroy what it intends to help.