reLAKSation 248. Callander McDowell
Deal or no deal?: The latest issue of Fishupdate newspaper highlights the debate in Norway as to the merits or not of taking the EU salmon case to the WTO. Odd Eriksen, Norway’s industry and trade minister said that Norway is the world’s third largest exporter of fish and seafood and it is vital that WTO regulations do not hamper this trade as it is just as important for the European market as it is for Norway. It is too easy for disgruntled European producers to bring dubious anti-dumping cases to interfere with the market. The Norwegian foreign minister, Jonas Gahr Støre believes that by taking the matter to the WTO, the situation for Norwegian salmon exports will be clarified. He also hopes that it will lead to a suspension of the measures and that the market will be again normalised.
By comparison, EU expert, Paal Frisvold believes that the case could backfire on Norway. He said that taking the EU to the WTO is akin to going to a divorce court to sort out the future of your children. He is concerned that Norway is willing to argue over a market in which it is still very dependent. The last time that Norway went to the WTO about salmon was 15 years ago over the US market. Norway lost the case then and has not sold a single salmon to the US since. Mr Frisvold argues that Norway could well lose this case too. He said that this is not diplomacy but Russian roulette.
Mr Fisvold added that it was tactically unwise for Norway to adopt a full frontal attack on the EU because it creates a bad atmosphere between both parties over an issue which is of great importance to Norway. He also criticised Mr Støre for not listening to the EU experts in his department suggesting that it is more important to become the one who is right rather than to be right. The best case scenario is that the WTO will say that Norway is right but this will not give a great foundation for dialogue on future market access. He said that the real problem is that contrary to Mr Støre’s position, as long as Norway remains outside the EU, then the imposition of anti-dumping measures remain completely legal.
We, at Callander McDowell, agree with Mr Frisvold that the EU is not acting illegally by imposing anti-dumping measures against Norway. They are perfectly entitled to do so. Where we disagree with him is that in our view, Norway is not taking a risk by going to the WTO. However, we believe that the real issue is not whether the anti-dumping case against Norway is, or is not, legal but rather how the case was actually conducted. In our view, the EU did not follow the correct procedure as laid out in WTO rules after the original complaint was submitted. If they had, then the complaint would have been invalidated and any subsequent investigation quashed. We have previously argued that DG Trade appear to act as prosecutor, judge and jury and do so without any form of scrutiny as to whether the correct procedure has been followed. In this case, it is clear that it was not. Unfortunately, rather than being transparent and open, DG Trade will not even consider that they may have been deficient in this area. They judge that they have been completely fair and just. Their reluctance to even discuss this issue is the precise reason why Norway needs to seek independent arbitration from the WTO.
We also disagree with Mr Fisvold that Norway is inviting trouble by taking the case to the WTO. He suggests that arguing over a market on which Norway is still very dependent is comparable to going to a divorce court but this is not about divorce. Norway has been accused of a trade violation of which it is not guilty. Norway has every right to defend itself but has never been given the opportunity to do so. Mr Frisvold bases his concerns about the WTO on the fact that Norway lost a previous case fifteen years ago when it challenged a US decision to impose similar anti-dumping measures. Mr Frisvold is correct to suggest that Norway has not been able to resume exports to the US since but the US case of fifteen years ago is very different to the European situation now. Then, Norwegian salmon was just beginning to make inroads into the US markets. The local salmon industry which was equally trying to persuade US consumers to try farmed salmon opted to follow the Scottish example of using trade measures to exclude any competition. What they failed to realise was that imports would help boost market demand as can now be seen from the rise of imported Chilean salmon. Imported salmon can sit alongside home produced fish. The US market had not really established a demand for Norwegian fish when it was excluded, which contrasts with the European market now which is totally dependent on salmon from Norway. The local Scottish and Irish industries cannot even meet demand from their home markets, let alone supply the rest of Europe. Norwegian salmon is an accepted part of the wider European market and any attempt to exclude it through imposed trade measures would hit the markets badly. The European market needs Norway just as much as Norway needs the European market. This is why the question of market access should be resolved once and for all. Mr Frisvold criticises the Norwegian Foreign Ministry for not listening to its EU experts and instead taking the issue to the WTO. Perhaps, this is exactly what is needed. This salmon dumping issue has already gone on for far too long. It should have been resolved many years ago. The problem has been that no-one in Norway appears to have been willing to take control of the matter and sort it out once and for all. Instead, the Norwegian authorities have sat on the fence allowing the issue to fester on like an open sore on the international salmon farming industry.
One of the reasons why this is has been the fact that politicians have just accepted that this is an anti-dumping issue like Mr Frisvold has, whereas the fact is that the Scottish complaint have little to do with dumping at all. They are simply using the anti-dumping legislation as a vehicle to attain their aspirations. The real issue is about, and has always been about market image. Mr Morgan and his cronies at the EUSPG blame the presence of Norwegian salmon in the European market for their failure to persuade consumers that Scottish salmon is a first-class product for which they should be prepared to pay a premium price. The presence of imported salmon in the retail markets has made consumers realise that one salmon is very much like any other. As a result, the premium for Scottish salmon has disappeared. Clearly, the EUSPG logic considers that if Norwegian imports can be excluded from Europe through trade measures then the premium price can be regained.
DG Trade will argue that whatever we would suggest, their repeated investigations over the years have clearly shown that Norway has been dumping salmon into Europe as proved by the absolute presence of dumping margins. We, at Callander McDowell, have no doubt that DG Trade have found these dumping margins but we would argue that they do not prove that dumping has occurred. In the reception area of their offices in Rue Joseph in Brussels, DG Trade provide a document which summarises every case they have undertaken that year. It is a very large document listing many cases but in 2004, when the dumping complaint was submitted, salmon appears to have been the only biological subject investigated. All the other cases involved steel, pharmaceuticals, chemicals, etc which are completely different to salmon. As far as we are aware, it is possible to take the raw materials in the morning and by the end of the day, produce steel ingots. This is a very precise process. By comparison, salmon are a live cold blooded animal with a three year production cycle. Fish can die, fish can grow slowly, in the case of salmon, fish can grilse. All these can effect the production cycle and its cost. It is inevitable that any spot investigation will elicit dumping margins at some point or other. Dumping margins are a natural artefact of the salmon production system. This is why every dumping investigation whether it has taken place in Europe or the US has found dumping margins of some type. The simple fact is that if the EU were to investigate the EUSPG, they would find dumping margins in their farms too.
This is only one issue of many that the WTO needs to investigate and which Norway needs to resolve. Let us only hope that they address the right issues?
Blocked: The latest news from IntraFish indicates that the European Commission blocked a Norwegian request to establish a WTO panel to investigate the Commission Regulation setting a minimum import price for farmed salmon. This was not surprising. They argue that consultations between the EU and Norway have not yet been exhausted but such consultations can only continue if the EU is prepared to discuss the issues which they are clearly unwilling to do. As we discussed above, to them the discovery of dumping margins makes the matter clear cut and any discussions are simply intended to persuade Norway to accept their decision to impose the MIP.
We, at Callander McDowell, are not lawyers or trade experts or even specialists on the European Community. Our specialism is the salmon market and we have always argued that what we see in the marketplace and what we hear from the Commission appear to be two very different things. We have openly expressed this view in our reLAKSation viewsletter, which we know members of DG trade do read. As a consequence, we have received invitations to visit Brussels so that the record can be set straight. However, DG Trade’s inability to answer any of our questions simply increases any doubts that we have about this case. These doubts have not been eased by the EUSPG’s unwillingness to face the public where they can be challenged. During one of our Brussels meetings, we decided to focus on one single issue and managed to get the DG Trade investigator to admit that there was a problem with the complainants data however they dismissed the error as being irrelevant since the investigation had proved the case. As we already know that dumping margins are an artefact of the complex life cycle of salmon, then it is clear that the case proves nothing at all.
The EU has said that it is ‘regrettable’ that Norway is pursuing this WTO action. They are wrong. What is ‘regrettable’ is that the EU allowed this case to proceed to investigation at all.
Missing: The Scottish Executive has just published their analysis of responses to their proposed Aquaculture & Fisheries Bill. We would have liked to discuss the fact that only 10% of responses come from the aquaculture industry with the others coming from angling clubs, fishery boards and the like. We would liked to have suggested that yet again, it seems that the views of those with a negative view of salmon farming may dictate further governmental fish farming policy. However of more interest was the list of aquaculture industry bodies who responded. These were:
Association of Scottish Shellfish Growers
British Marine Finfish Association
British Trout Association
Scottish Salmon Producers Organisation
Seafood Shetland
Shetland Aquaculture.
An obvious omission from this list is the EUSPG, an industry body recognised by the Scottish Executive, yet who seem to be uninterested in the future of the salmon industry unless it involves an opportunity to engage in Norway bashing or take advantage of FIFG funding!