reLAKSation 291. Callander McDowell
Go to the gym!: At the beginning of the month, Alistair Darling, the British Minister for Trade and Industry, said that the UK Government is prepared to flex its muscles to maintain the Minimum Import Price of Norwegian salmon. He told the Glasgow Herald that he is totally opposed to any changes to the MIP and has pledged to take the matter to the wire. His comments were in response to demands by a coalition of EC Member States who demanded that the EU instigate a review of the anti-dumping measures against imports of Norwegian salmon.
Mr Darling said that any decision to review the case is premature and unjustified. He said that he intends to make the case strongly and support the Scottish salmon industry who don’t want favours but fairness. He added that the dumping measures were brought in for a simple reason that dumping was going on and damage being done to the EU salmon industry. He believes that a review will bring uncertainty and therefore will oppose this proposal and continue to vigorously defend the interests of the salmon industry.
We, at Callander McDowell, have waited to comment on Mr Darlings’ statement until it was clear whether a review would be approved or not. The Commission finally caved into pressure from Italy, Lithuania, Poland, Portugal and Spain and have published a notice initiating a partial interim review of the anti-dumping measures. It therefore seems that Mr Darlings’ intention to vigorously oppose a review has come to naught. This is not surprising since the British government has now found that their intention has been undermined by their unwillingness to support other Member States in their attempt to impose protectionist measures against shoe imports from Asia. Clearly, the salmon review has come about because of political back-scratching rather than the actual merits of the case. However, we do not believe that this to be an issue as since its inception, this dumping case has lacked integrity.
Mr Darling said that the Scottish salmon industry simply wants to be treated fairly. In a previous issue of reLAKSation, we discussed the issue of fairness after MEP David Martin warned that thousands of jobs in Scotland could be lost if the MIP is removed. He too said that the industry should be treated fairly but as we discussed then, fairness does not seem to be applied to both sides. The EUSPG recognised that if they simply submitted their dumping case to Brussels it would have been rejected out of hand. Instead, they convinced the British Government to apply for safeguards as they knew that a safeguard case would not have to be validated first since it had would be submitted by the Government and not the industry. Once the safeguard case was under investigation but not resolved, the EUSPG submitted their dumping case even though it focussed on the same salmon farming companies over the same time period arguing about the same dumping issues. Was this fair? Of course it wasn’t. They should have waited until the safeguard case was resolved before considering taking their dumping submission to Brussels. Instead, they piggybacked it on the back of the safeguard case and it was only this unprecedented parallel investigation that led to the imposition of the MIP.
We have continually argued that this parallel submission meant that the dumping case was not properly evaluated in line with WTO rules. If it had been, then surely the EU complaints team would have asked why the data provided in support of the two cases did not agree, even though it covered exactly the same time period. We have previously discussed how farm number, production costs data and production volume data differs significantly between the two submissions. In the case of farm numbers, the EUSPG appear to have misplaced nearly 50 farms in their calculation of level of representation as compared to the number in the safeguard application. Production cost data also widely differs with one set increasing and the other decreasing in the same year. Finally, there appears to be huge discrepancies in the quoted volumes of salmon produced even though the Scottish Executive produces official production data every year. These discrepancies are glaringly obvious but clearly not to the European Commission. Perhaps, they never even bothered to look?
One thing is however clear. Once the Commission has reached a decision as to whether an investigation proceeds or is rejected, there is no turning back even if errors in the validation process later become apparent. The Commission is quick to draw a line in the sand and which it is not prepared to re-cross.
Mr Darling told the Glasgow Herald that the MIP was imposed for one simple reason – dumping was going on. However, it is clear that just because the Commission found evidence of dumping does not mean that dumping has occurred. Again, we have previously discussed how dumping margins are a natural artefact of the salmon lifecycle, which is why dumping margins have been found in every single dumping case brought to investigation, even those investigated outside the EU. The problem is that salmon are not manufactured in the same way as for example, steel. Steel can be manufactured from scratch over the course of a couple of days. Costs are easy to calculate as the manufacturing period is so short. By comparison, salmon can be grown for over three years; they are subjected to varying growth rates due to their cold blooded physiology and they can mature early as grilse which means that they must be harvested early when it is least cost effective. These factors are compounded by the Commission when they conduct their almost spot investigation so it is no wonder that dumping margins are so readily found. We are convinced that if the Commission were to conduct a similar investigation in Scotland, they would equally find evidence of dumping margins. It is no wonder that the Scottish industry are so reluctant to participate in comparative studies of production parameters.
We, at Callander McDowell, do not think that a review is necessary. Instead, we would argue that the measures should have never been imposed. However, yet again the Commission has drawn another line in the sand and they are now interested in what lies ahead which is this review and not whether the investigation and subsequent findings were flawed. Yet, if this review is the quickest way to bring an end to this sorry saga, then the quicker it is conducted the better. At least the outcome should be a forgone conclusion. With prices at record levels throughout 2006 it is inconceivable that the Commission should find any more evidence of dumping. The price of salmon is way above the cost of production recorded in the Norwegian annual cost survey. The record profits, reported by many companies, is yet further evidence that dumping cannot have occurred. The picture in Scotland is less clear because production cost data is still not available (supposedly because the study belatedly conducted as part of the Strategic Framework shows that Scottish producers actually have a cost advantage and are not disadvantaged as claimed).
The Glasgow Herald reported that independent Scottish salmon producers are furious that the Commission has (considered) implemented a review. An unnamed spokesman from the EUSPG said that a review cannot be justified on the facts as presented to the Commission by the UK Government as supported by them. Well, if these facts were in anyway as misleading as presented in the original submission, then it is not surprising that they are furious.
Angus MacMillan of West Minch Salmon told the Herald that it is vital that the MIP is maintained as it has brought stability to the industry since it was introduced. We are not sure what sort of stability Mr MacMillan means but it is clearly not price. Throughout 2006, prices rocketed from just over £2/kg to £4/kg and then returned back to £2/kg. Such enormous variation is far from any representation of what stability means as many processors and buyers will attest.
Mr MacMillan said that he was uncertain what the review would entail although the publication of the Commission notice of procedure should provide clarification, however he expressed confidence that the UK would continue to support the industry. However, as the UK, as represented by Alistair Darling, appears to have failed to oppose the review despite his pledge to take it to the wire. Clearly he failed to flex his muscles sufficiently to stop the review from going ahead. Perhaps Mr Darling should leave Brussels alone and go to the gym instead to give those muscles a proper work out!!
Question 45: The intention of the reLAKSation viewsletter is to provide comment on what is happening in the news especially in relation to the aquaculture market. In a break from this practice, Callander McDowell would like to respond to a story in which the company itself is involved. Recently, IntraFish reported that the WTO had published the answers to its Panel Questions from both Norway and the European Communities in relation to the anti-dumping case of farmed salmon (DS337).
Many of the questions deal with the technicalities of the investigation and focus on the minutiae of the procedure however our attention was caught by question 45 which concerns our own correspondence with the European Commission. We were extremely surprised after reading the responses provided by the Commission as they are both misleading and distort the truth.
We hope that readers of this reLAKSation will not mind if we use this opportunity to respond to the answers given by the European Commission for the single reason that we believe that if the Commission can misrepresent events over one single letter, then it raises further questions over the accuracy of the whole case from start to finish.
The question posed by the WTO panel asks whether the investigation file contains a letter from Dr Martin Jaffa of Callander McDowell asking to explain the discrepancies between the data supplied in the safeguard case and that in the dumping case.
In their answer, the Commission replied that the letter was not germane to the investigation or the determination of the measure at issue (Para 202).
They are correct; it wasn’t germane to the investigation itself but questioned whether the investigation had actually been validated under WTO rules. As we mentioned above, the Commission are not interested in what happened before. As far as they were concerned, the investigation had been approved, whether rightly or wrongly, and that was the end of the matter. If the investigation was not valid then their view was tough luck.
Para 203 of the Commissions’ response goes on to suggest that the letter was not included in the file because Dr Jaffa is not considered an ‘interested party’ within the meaning of Article 6 of the Anti-Dumping Agreement as he is not a producer of user nor does he represent a producer or any other party in the investigation.
The Commission never asked whether Dr Jaffa would like to register to be an interested party. They simply assumed he was not one. The reality was that Dr Jaffa tried to maintain an impartial position arguing the case in the interests of salmon farming not national interest.
In Para 204, the Commission say that Dr Jaffa made several presentation to the members of the European Commission and to officials of DG Trade.
This is not quite true. Dr Jaffa made four visits to DG Trade during the course of the investigation. The first was at the direct invitation of Fritz-Harald Wenig so he could help ‘re-educate’ Dr Jaffa as to the truth of the dumping case. The meeting was attended by Mr Wenig, Dr Thinam Jakob who headed the investigation and one of the investigators M.Alain Gerzat. Dr Jaffa did not give a presentation but was given a lecture as to why Norway was clearly guilty of dumping. At no time, did any of the EU officials actually answer any question posed by Dr Jaffa.
The second visit was suggested by Dr Jaffa during the European Seafood Exposition when he would be in Brussels anyway. Fritz-Harald Wenig welcomed Dr Jaffa back to DG Trade where the theme of Norway’s guilt continued as before. No presentation was made by Dr Jaffa.
The third meeting was again at Dr Jaffa’s request, this time after being granted access to the original submission documentation. The meeting was with Dr Jakob, M Gerzat and M de Munck and did take the form of a presentation in which Dr Jaffa took the Commission through the calculation of European farm numbers. At the end of the meeting, Dr Jakob admitted that the calculation was wrong but she dismissed it as being irrelevant and making no difference to the investigation.
The fourth and final visit was again to Dr Jakob and M Gerzat and was again a presentation promoting a compromise solution but this was dismissed out of hand by Dr Jakob who said that it was tantamount to rewarding a guilty Norway.
At no time in any of these four meetings did the representatives from DG Trade answer a single question posed by Dr Jaffa.
Para 204 also states that Peter Mandelson wrote to Dr Jaffa in July 2005 as a matter of courtesy. He did, but it took a request from a local MEP (a member of the British Labour party to which Mr Mandelson also belongs) to persuade Mr Mandelson to send out this letter.
In Para 205, the Commission states that Dr Jaffa continued to send DG Trade unsolicited observations about the salmon case. The truth is that contact between Dr Jaffa and DG Trade only began when Fritz-Harald Wenig wrote to Callander McDowell to object to comments made in the reLAKSation viewsletter. This initiated a protracted correspondence between Dr Jaffa and Mr Wenig that continued through most of the dumping investigation. This correspondence did include unsolicited observations but was part of the nature of the correspondence. The exchange continued for so long because Mr Wenig avoided responding to many of the issues raised.
Para 205 says that the substance of the letter was doubtful as to its nature and accuracy. Yet, if the Commission were uncertain to either of these points why did they not request further clarification. It is not as if Dr Jaffa was inaccessible as he was in regular contact with Mr Wenig. At the same time, Dr Jakob had already admitted in a meeting that the data the Commission had approved was inaccurate and therefore why they should think that any of the other data was doubtful is unclear.
They also say that Dr Jaffa did not provide a non-limited version of the letter for the file accessible to parties. This is nonsense. As only interested parties would provide a non limited version and the Commission had already decreed that Dr Jaffa was not considered to be an interested party. Equally, the data was not confidential and could be open to all.
Finally, Para 206 states that the investigating authority was uncertain whether it could discard the letter right away. It therefore decided to as representatives of the EUSPG to comment on a provisional basis. What this meant was that the investigators asked the EUSPG whether the data they supplied was accurate or not. As if the EUSPG is likely to admit that they bent the truth in the submission?
In a sequel to these responses, Dr Jaffa again used the occasion of this year’s European Seafood Exposition to request a meeting with Mr Wenig. Surprisingly, since contact had been broken off for some months, he agreed. However at the last minute he begged off claiming to have been called to a meeting with the cabinet and instead Dr Jaffa met with Mme Kellner and M Welge who have now taken over from Dr Jakob and M. Gerzat.
Dr Jaffa reports that the new representatives are a breath of fresh air and have much more open minds to the dumping issues and thus we might expect a fair review. However, like those before them, Mme Kellner and M. Welge said that what happened before is now history and a line must be drawn in the sand and the case move on.
Sadly, the Commission do not want to appear accountable for their actions. Perhaps the best that we can hope for is a quick review and the removal of any current trade measures and a once and for all end to any accusations of dumping. As we have said many times previously, against a background of declining fish catches, how can any farming industry be accused of dumping?