reLAKSation 321. Callander McDowell
True colours: Following last week’s ruling by the WTO, Scottish salmon farmer Angus MacMillan told Fishupdate.com that ‘I have been saying for years that the Scottish Government should take control of salmon farming and look after it accordingly’.
If confirmation was ever needed that the trade dispute between Scotland and Norway was about protectionism and not salmon dumping, then Mr MacMillan’s latest comments are clear proof. At long last, Mr MacMillan’s true colours are shining through.
We, at Callander McDowell, have always argued that the long running trade dispute between Scotland and Norway was never about dumping. Instead, it is the ongoing attempt to preserve the perceived, but unfulfilled, premium image of Scottish salmon. Scottish farmers blamed growing Norwegian exports to the EU market for undermining Scottish salmon’s former luxury image. They hoped that if these imports could be stemmed, then Scottish salmon could regain its premium image. Norway simply became a scapegoat for Scottish ills. Unfortunately for Scottish producers, the EU has never imposed the sort of Draconian measures required to curtail the flow of salmon into Europe. Instead, they resorted to an MIP that does little to help Scottish farmers improve their market position or address the underlying problem of market image.
According to Mr MacMillan, ‘the industry in Scotland is still struggling’, which seems to indicate that the MIP has done little to help? If after a couple of years of strong prices, the industry is still ‘struggling’ then perhaps the time has come for totally different approach. In today’s global market, any form of protectionism is clearly not the answer nor is taking the salmon industry into Government control, as Mr MacMillan demands. Instead, the industry needs to determine its own future destiny by investing in a modern market-led strategy that ensures the industry produces exactly what the market wants. This was the solution back when the first dumping complaint was submitted and is still the solution now. Taking the case to appeal simply defers the need for change yet again allowing the problems to fester on. Hopefully, the EU will see sense and not prolong the agony. They even have a way of saving face (which appears more important than the case itself) and that would be to announce that their review recommends that the salmon industry has evolved sufficiently to allow the MIP to be withdrawn.
Short memories: Mr MacMillan told Fishupdate.com that it is obvious that the major companies don’t care too much what happens to the industry in Scotland. This is why he hopes that the Scottish Government will take control of the industry so it will no longer be left to the whim of these multinational concerns. Mr MacMillan added that there is very little of the industry left in Scotland under independent control implying that only Scottish owned companies care what happens to the industry in Scotland.
Although it cannot be judged in any scientific way, the multinational companies that have crossed our path appear just as passionate, if not more so, about the Scottish industry, as those from the independent sector. Ownership is not any real indicator of commitment to the industry in Scotland. It is only the independent producers that are making it an issue, no doubt because it is easier to attack others than look at themselves.
The independent sector must sometimes look to Norway and wonder how the industry there has remained in local ownership whereas their own industry has become dominated by multinational companies. Not so long ago, a member of the Scottish Executive was at pains to point out that the reason why foreign owned companies had been attracted to invest in the Scottish industry was because of the premium image of Scottish salmon. Sadly, if only this were true. The reality was very different.
From the outset, the aim of taking the salmon dispute to Brussels was to stem the flow of Norwegian salmon into the European market. The imposition of a high level of trade duties would be sufficient to make Norwegian salmon commercially unattractive as happened in the US. Norwegian producers were naturally concerned that they might be excluded from their main market and looked for ways in which any potential measures could be mitigated. The most obvious solution was to establish their own base within the European market to continue farming salmon. The only logical choice was Scotland and hence a number of concerned companies went on a trail of acquisitions. This happened so long ago and these companies are so integrated into the Scottish industry that it is easy to forget what brought them to Scotland in the first place. We can forgive the member of the Executive for not being aware of this because of his short term involvement but Mr MacMillan has been around long enough to know better. Of course, Mr MacMillan won’t like to be reminded that if he and his colleagues hadn’t been in such a rush to seek trade protection, then all the Scottish industry might still be in Scottish ownership since there would have been no point in Norwegian companies seeking a European base.
What premium?: It is a nice idea that overseas companies were attracted to invest in Scotland because of the premium image of Scottish salmon. However, when the first companies looked for Scottish acquisitions, there was little premium to be had. This is why the Scottish industry had sought help from Brussels; the premium price they had obtained for Scottish salmon had disappeared. There are a number of reasons why this happened but the fundamental reason was that production volumes had increased without any real market initiatives. This has something to do with the lack of connectivity between farming and the consumer for which all producers are equally to blame, irrespective of their nationality.
In 2005, an Ernst & Young report for the Scottish Executive concluded that UK consumers are favourably disposed towards salmon sourced in Scotland and in most cases are prepared to pay a premium for a Scottish product. Unfortunately, the full report is deemed to be confidential so it is impossible to see any supporting data fro this claim. As observers of the retail sector, we have great difficulty in finding even one example where consumers pay a premium for Scottish salmon. We can conclude that this premium image is a perception rather than a reality. When questioned, our contact in the Scottish Executive was happy to point out that a premium can be often found at the farm gate (which is good for Scottish farmers, especially if they are still struggling as Mr MacMillan suggests). However, the Ernst & Young report also concluded that most of the salmon consumed in the UK is of Scottish origin conferring an advantage to local producers in terms of freshness and flexibility of supply. It could be for these advantages, rather than origin per se that a premium is generated.
We also acknowledge that Scottish producers do receive a premium for Label Rouge Scottish salmon in the French market but the volumes are small and the margin shrinking as more consumers find they are unable to ascertain any difference between this and other salmon. Most consumers now seem to view one piece of salmon as being like any other, which is why they won’t pay any more for it. This is the challenge facing the Scottish industry. It is not enough to say that their salmon is different; it must be noticeably so, if consumers are expected to pay more for it. The MIP is clearly not a reason for paying more which is why it should be withdrawn as soon as possible.
In the middle: The argument between the EU and Norway about who is right and who is wrong could go on forever. We prefer to listen to those outside this dispute. Gus Pastoor of the AIPCE told IntraFish said that they are between the two sides and see each others point of view. However, Mr Pastoor believes that the MIP should be withdrawn. He argues that it is against all market logic, which it is.