reLAKSation 27.
Avoiding the MIP: Political Science student Tommy Fredriksen has written about the EU Norwegian salmon agreement. He has implied that the Norwegian negotiators played their cards badly and were forced into accepting the EU salmon agreement. Not unexpectedly, FHL project director Per Dag Iversen disagrees.
According to Intrafish, Mr Fredriksen suggests that Norway could have avoided the Minimum Import Price on salmon exported from Norway to the EU. This is provided the Norwegians had committed themselves to an effective market arrangement within Europe.
However, the imposition of the salmon agreement, along with the MIP, had little to do with any likely market arrangement. Instead, the salmon agreement can be attributed directly to Scottish dumping action.
It is true that the Norwegian negotiators did play their cards badly for they clearly failed to defend the action. Although dumping margins are a natural artefact of the salmon production cycle, the negotiators preferred to demonstrate their 'responsible approach' to salmon production. However, the European Commission must have been left wondering why any industry, innocent of dumping charges, would take unilateral action to cull smolts and introduce feed quotas. The reality was that this unilateral response made Norway appear very guilty.
The Norwegian negotiators were faced with a choice. The imposition of Draconian dumping tariffs or acceptance of the EU salmon agreement. They chose the agreement, although without real consideration of the longer-term implications. This is why at the time; the Norwegian negotiators hailed the agreement as a great success.
Whilst salmon prices remained high, the Minimum Import Price was never going to be a problem. However, once they fell, the likelihood that Norwegian salmon might be excluded from the EU market has increased, even though salmon imports from other countries would be allowed to continue unimpeded.
The passage of time has shown that the EU salmon agreement has not been a success since it has achieved very little. Had the Norwegian salmon industry started to develop more market led strategies, they would have seen that the MIP could have been avoided anyway, even within the terms of the salmon agreement. It always was, and is still possible to circumvent the agreement itself without contravening any of the terms of the agreement.
The MIP is not the real issue but rather it is this readiness to resort to trade actions, which is the underlying problem. The EU salmon agreement and the MIP are simply a function of the unwillingness to develop long-term strategies, resolving the conflict between a high volume production and an established market image.
Cod forecasts?: Prices for French sea bass are at an all time low. Intrafish report that some farmers are experiencing financial difficulties and the situation is becoming critical. The low prices are being blamed on cheap fish being dumped onto the French market. Thankfully, the French industry has recognised that trade actions are not the way to fight against cheap imports and instead are planning to fight the crisis through improved marketing.
The experience of sea bass farmers appears to mirror that of the salmon industry. A high priced, highly regarded food fish selected as a candidate species for aquaculture has been devalued by the very act of farming. As production volumes have increased, the market price has correspondingly fallen. This has meant that farmers have had to work hard to reduce the cost of production to maintain margins. This is similar to the salmon industry.
However, unlike the salmon industry, the potential to retain margin may not be as great for sea bass and other marine species. This is because of the very nature of marine fish farming, which is much more cost intensive, especially through the larval stages. Farmers may therefore encounter some difficulty in trying to further reduce the production costs for sea bass. After many successful years, the sea bass industry may well find that the continued volume increases have now brought economic production into question.
The similar decline in salmon prices has encouraged some farmers to diversify into turbot, halibut and now cod farming. The fall in the wild catch has encouraged widespread investment in cod farming to the extent that some commentators have forecast that production will quickly rise to many thousand tonnes.
Unlike some species, there is a huge consumer demand for cod. All farmed production should therefore find a ready market. However, the current marketplace has shown that if the price of cod is too high, consumers look to buy other cheaper species, most notably salmon.
The question for cod farmers is whether they will be able to produce cod at sufficiently low enough price to stimulate market demand. Clearly, prices will fall as production increases, but can these price falls be sustained or like sea bass farmers, will cod producers find it increasingly difficult to maintain sufficient margin between the cost of production and the farm gate price?
To Compensate or not?: The Advocate General of the European Court of Justice has ruled that UK fish farms are not entitled to compensation for stock, which is compulsorily destroyed because of disease.
The industry argued that similar disease outbreaks in other forms of intensive livestock production, which resulted in compulsory culling, recompensed the farmer with some form of payment, as occurred with BSE. However, the salmon industry is also well aware that farmed fish do not fall under the specific agricultural legislation (Disease of Animals Act, 1936), which allows such compensation. Whether rightly or wrongly, fish farming falls within the European Directorate of Fisheries and not that responsible for agriculture and this is reflected in national Government. No argument for compensation, however strong, can change the rules for any unforeseen disease outbreak. This would require a change in legislation.
It could be argued that fish farmers have been aware of the absence of compensation legislation for numerous years and therefore should have been working to ensure that they would not be faced with enforced culling without compensation. Dr Ted Needham, then convenor of the Scottish NFU's fish farming committee, said in 1981 "if we suffered a foot-and-mouth style disease outbreak in fish farming today, we wouldn't be equipped as an industry to deal with it. This was said with reference to a foot-and-mouth style slaughter and compensation policy to combat the arrival of new diseases from abroad. Dr Needham also mentioned that first representations to Government about the discrepancy between compensation for farmed livestock and farmed fish were made three years previously, i.e. back in 1979, or over twenty years ago.
The lack of compensation legislation, relevant to fish farming, was highlighted again in 1983 when the then MP, John Corrie introduced his private members bill, which subsequently became the Fish Diseases Act of 1983. In an interview in January of that year, Mr Corrie stressed that as his was a private members bill, it was not backed by a commitment from the Treasury to allow him to come up with a slaughter and compensation policy to deal with any potential disease outbreak.
This has remained the Government's position leaving the fish farming industry without the potential lifeline of a compensation policy. According to Intrafish, the joint industry statement, which followed this latest ruling, says that this decision threatens the whole future of aquaculture in Scotland. Perhaps, if the very future of Scottish aquaculture is in jeopardy, now is the time for the industry to take up where John Corrie left off and seek the overdue introduction of a full compensation policy.