reLAKSation 307. Callander McDowell
Victory (for common sense): We, at Callander McDowell, wouldn’t normally try to pre-empt the WTO’s announcement of their final ruling in the salmon case but as Norway’s Foreign Minister, Jonas Gahr Støre, has confirmed earlier leaks, it does seem that the WTO report appears to come out in favour of Norway. This is a victory for commonsense, which will hopefully draw a line under this continuing and pointless trade dispute between Scotland and Norway and allow all farmers to continue producing a healthy to eat and value for money meal choice for consumers everywhere.
According to Seafoodintelligence.com, the report says that the EU’s basis for addressing the alleged salmon dumping was ill founded because the EU had failed to prove that dumping had actually taken place. It will be interesting to read the final report when it is published to see how the WTO arrived at this conclusion but in the meantime, we can offer our own conjecture.
We have always argued that dumping margins are the natural artefact of the complex life cycle of the salmon. This is why dumping margins have been uncovered in every single salmon dumping case, whether it was conducted in Europe or North America. However, these margins are relatively insignificant and over the course of a full production cycle, they would be absorbed into the overall economics of salmon farming. Unfortunately, the type of spot investigation conducted by the trade directorate failed to take this into account and they saw the presence of dumping margins as evidence that dumping had occurred, even though it clearly had not. Unfortunately, DG Trade were not interested in such possibilities. They had already decided that Norway was guilty of dumping and were determined to pursue this to its inevitable conclusion irrespective of whether Norway was guilty or not. This was apparent to us because of our own involvement in the process.
Fritz Harald Wenig, head of the section of DG Trade investigating the salmon dumping complaint took exception to some comments that appeared in reLAKSation and invited us to Brussels so he could ‘educate’ us as to the realities of the dumping issue. Whilst Mr Wenig was happy to recite his own mantra, he and his colleagues avoided answering a single one of our questions. His view was simple - Norway was guilty; end of story. He was not interested in any other possibility. We ended up returning to Brussels three more times including once when we clearly showed that their data was incorrect eliciting a response that they had proved Norway guilty of dumping anyway so any errors were irrelevant. Over the course of the meetings, it seems that the investigation team held a great deal of sympathy for the Scottish industry believing that large scale farming had destroyed salmon’s luxury image. Norway was always going to be a loser. Of course, all this ignores the fact that DG Trade should have never even taken this complaint to investigation. Had the original submission been properly validated in the first place, the complaint would have been correctly thrown out. Regardless, DG Trade should have used a bit of commonsense and never had pursued the dumping complaint whilst the application for safeguards was under investigation. Sadly, DG Trade did not see that they were being manipulated by the EUSPG into running a parallel investigation over what was effectively the same complaint.
In part, the Scottish Executive should also shoulder some responsibility for allowing this to happen. They should never have made the application for safeguards on behalf of such a small section of the industry. They risked far more than just protecting a handful of small farms. Many hundreds of more jobs and livelihoods in Scotland were been paid for by the same Norwegian companies that they aimed to sanction. The fact that the whole process was done in secret without consultation with the rest of Scottish industry lends weight to its dubious aims. Its shows how out of touch the Executive were then given that some of its agencies have just returned from Norway where they have been courting inward investment.
Equally, the Norwegian industry was not blameless for it allowed the recurring dumping complaint to fester. Until now, it has never fought the dumping issue based on whether it considered itself innocent of dumping. It always seemed that they were willing to accept the accusation. This can be seen by their response to the 1996 dumping complaint. Rather than protest their innocence they culled 4 million smolts and imposed unilateral feed restrictions. They then went to the Commission saying that they were taking a responsible approach to controlling production. However, the question that would be asked was why would any industry adopt such Draconian measures if it were innocent of the charges? It seems that they received some very poor advice for in the end they accepted the EU salmon agreement when free and open trade should have prevailed.
It has taken until this latest case for the European Commission response to be questioned and it now seems that this belated action has resulted in the correct decision. IntraFish report that the European Commission have denied this outcome to the case. Perhaps, they too will see some commonsense when the report is finally published.
Over-produced!: According to IntraFish, Scotland’s new First Minister, Alex Salmond, had demanded that the European Commission ask Norway to shrink its production volumes, as at the time, prices had been falling. It is a shame that the new force in Scottish politics has resorted to an old vision of Scottish salmon farming. Once again, the claim that Norway is over-producing salmon has reared its ugly head. It is eighteen years since such claims were first made and now, just as then, these claims are simply nonsense. Mr Salmond is just repeating the ‘mantra’ put forth by a minority who hold a blinkered view of their industry.
The evidence put forward to support this claim is falling prices, yet since Mr Salmond’s visit to Brussels, prices have turned around and are heading upwards again which seems to put paid to Mr Salmond’s demands. As we have repeated several times before, the real problem is not over-production but under-marketing, not just in terms of promotion and advertising but also of market and product development. The industry, as a whole, has not really invested in these areas so when there are problems with supply, prices suffer.
The latest short term price fall can be explained using a simple example. Mr Salmond might consider that if production expanded by 12,000 tonnes this year then the industry might be considered to be overproducing. Yet, if this production was harvested at a rate of 1,000 tonnes a month, the impact on prices would be much less significant than if all 12,000 tonnes were harvested at the same time. Because of a lack of market and product development, there is always a risk that too much salmon might come to market at the same time, competing for the same customer and consequently forcing down prices. However, if this production was spread into different market areas, then any pressure on prices could be avoided. This appears to be what has happened recently as too much salmon came to market at the same time, especially during months with a traditionally lower demand for salmon than at other times of the year.
The industry has shown some reluctance to invest in marketing although there have been some isolated attempts to stimulate demand. For example, Kyst.no reported that the Norwegian Seafood Export Council have this summer invested in a promotion on French radio to encourage female consumers to eat more salmon because of its healthy attributes. It will be interesting to see how much this encourages increased consumption.
Such promotions tend to boost sales during the campaign, but demand can fall to previous levels once the promotion comes to an end. Promotions do have a value to highlight product but they do have a limited life. This is why market and product development are so important, as these can be a better approach to sustaining demand. Intrafish reports that in France, demand has been strengthened by the increasing appearance of salmon prepacks in supermarkets, something that we, at Callander McDowell, have observed in our regular visits to the French retail sector. Fishmongers and fish counters may be seen as the traditional way of retailing fish but many modern consumers don’t like the interaction that such counters require especially if they are unsure about what they want. Prepacks allow shoppers to look at and compare products without the commitment of making a purchase. They can see what the product is and what it costs and are able to make a buying decision without the pressure of dealing with counter staff.
The recent launch of salmon wraps in MacDonalds also shows the way that the market can be expanded without affecting the existing markets. Surprisingly, Angus Macmillan of West Minch Salmon and erstwhile spokesman for the EUSPG, told Fish Farming International that this was positive news for the whole industry and will benefit everyone. He added that some people have an image of salmon that is expensive and that it is something of a luxury item whereas now it is coming within most people’s price range. This is something of an about turn since it was not so long ago that the sector to which Mr Macmillan belongs, accused Callander McDowell of heresy for suggesting that if it was necessary to put salmon into fish fingers to expand the market, then so be it.
Mr Salmond has a new vision for Scotland yet it is a pity that he can’t extend it to the salmon farming industry. Rather than perpetuate this myth about over-production, he should be helping the industry look at ways to engage in market development. However, this won’t happen until the industry recognises this need as well. If Mr Macmillan is anything to go by, then perhaps the corner has been turned and Scottish salmon farming can start to look forward rather than harp back to the past. Unfortunately, the slate cannot be wiped clean until the WTO finally closes the chapter on the past claims of dumping and over-production which still influence the fate of the industry.
Unsustainable?: Seafoodnews.com reported that the Anchorage Daily News’s Highliner Blog (http://community.adn.com/adn/node/109581) has asked whether the Marine Stewardship Council is itself sustainable. It has been given a confidential letter from the Chief Executive of the MSC, Rupert Howes, in which he pleads with the Alaskan pollock and salmon producers to remain within the MSC scheme (read the letter through the link to the blog). He said that any threats to pull out of the MSC would result in its collapse.
According to The Highliner, Alaskan producers are unhappy because the certification procedure is too long, too tedious and too expensive. In addition, salmon producers were alarmed when the salmon fishery came up for recertification in 2005. The MSC decreed that they would judge each of the 16 fisheries separately rather than as a whole as was previously the case. This raised the possibility that some parts of the fishery would keep their certification whilst others might not. This had the potential for confusion amongst consumers.
The letter is almost a year old and therefore The Highliner wonders where things stand now. However, as reports on the IntraFish website have previously indicated that the Alaskan Seafood Marketing Institute are considering whether they should develop their own eco label, the MSC may not yet have satisfied the Alaskan industry.
It does seem to us, at Callander McDowell, that if the only way that the MSC can survive is if the Alaskan fisheries participate, then it does not have a future. It suggests to us that there are insufficient fisheries that can successfully undergo the MSC certification and make an impact on the world’s markets. It is all well and good to certify local fisheries but they will not have any impact on the consumer marketplace. This needs the involvement of the big fisheries able to meet growing world demand. As we already know from data produced by the WWF, too many of the world’s fisheries are either threatened or near collapse that wild catch fisheries alone cannot meet the world’s needs. This is why the MSC is in our view fundamentally flawed. It is not enough to tell consumers that they must only eat fish from sources approved by the MSC, they must also ensure that there are enough fish available to supply the market. We know this cannot be met by the wild fish catch alone. This is why aquaculture is so important, yet the MSC will not give their approval to farmed fish. This is not surprising since the WWF are one of their founding fathers and the WWF are not known supporters of aquatic farming.
The MSC want consumers to only eat fish from certified fisheries but this is not sustainable unless they can persuade consumers to eat much less or even no fish. If MSC certified fish are not sustainable, then neither is the MSC!