reLAKSation 340. Callander McDowell
Trumped: In the last issue of reLAKSation, we suggested that the European Commission had played the Norwegian salmon industry like a ‘puppet on a string’ in their pursuit of trade measures against Norwegian salmon imports. Every time Norway tries to defend its position, the European Commission manages to pull yet another ‘trump card’ from up its sleeve. Norwegian salmon industry lawyer Trond S Paulsen has said that he believes that the trade measures will be withdrawn by July 21st but we wouldn’t be surprised if Mr Paulsen now regrets making this prediction as the European Commission reveals its latest ‘trump card’ to retain these measures.
According to IntraFish, the EU can call on a little used measure to retain the Minimum Import Price even if their review has shown that dumping has not taken place. The provision has never been used by the EU for a review whilst measures are still in force and according to Mr Paulsen, the close relationship with Norway would prevent it being deployed.
We, at Callander McDowell, think that Mr Paulsen may be being just a little bit hopeful. After all, the close relationship between Norway and the EU has not stopped the Commission from relentless pursuit of Norwegian salmon farmers even though it is clear that Norway has never dumped salmon into the European market. Meanwhile Norway missed a major opportunity to capitalise on this close relation by tying salmon exports into the existing EU-Norway fishing agreement. We think that it is unlikely that this close relationship will now be of any help in resolving this matter.
The Norwegian industry can take little comfort that this little used measure has never been used whilst existing measures remain in place. The EU is not afraid of taking a new approach when it comes to salmon. For example, the European Commission had never previously run two investigations in parallel as they did with the safeguards and the dumping case but it seems that they were so enraged over a few salmon imports that they were more than happy to break new ground in doing so. The fact that the Scottish Executive and the EUSPG submitted conflicting data to prompt these parallel investigations has been ignored by the Commission because Norway didn’t even bother to challenge them on the issue.
The European Commission wouldn’t consider using this little used measure unless they have been prompted to do so, which of course they have. The Scottish Authorities have sent a comprehensive document to the European Commission claiming that there is still a danger that Norway will dump salmon into the European market if the measures are lifted.
The history of salmon dumping complaints is littered with excessive scaremongering claims of doom and gloom unless the Norwegian industry is brought under control. Many of these claims have been without foundation yet it seems that this has not stemmed the flow of such outrageous claims.
The Scottish Authorities have written to the European Commission that Norwegian production is facing substantial growth. We, at Callander McDowell, don’t see why this should be any cause for complaint. The global aquaculture industry needs to be producing as much as possible to meet a growing demand for fish and seafood that can be longer met from wild caught sources. This growth in demand is such that Greenpeace is now arguing that species that were once considered sustainable are now under threat and should be removed from supermarket shelves. These include Marine Stewardship Certified Alaskan Pollock and Hoki. If these fisheries are no longer sustainable, then the only remaining alternative is to increase aquaculture production and that includes farmed salmon.
The Scottish Authorities claim that Norwegian production will increase by 16-20% this year with a further 20% growth in 2009 and 2010. We can only wonder how they arrived at such figures because they bear little resemblance to the estimates produced by the recognised industry analysts. Last October, Lars Liabo of Kontali told IntraFish that Norwegian production might reach 15% growth based on previous smolt releases, but this does not account for any other production issues. Kolborn Giskeodegaard from Nordea now thinks that the figure will be nearer 9%. Production growth in subsequent years is expected to be around the same level. If production for 2008 does reach 15%, then the Scottish Authorities have only themselves to blame. The high prices that followed the imposition of the MIP were clearly an incentive to put more fish to sea. Price peaks are equally damaging to the farming industry as price troughs.
At the same time as warning of the imminent danger of being swamped by excessive Norwegian production, the Scottish Authorities claim that there won’t be any increase in salmon consumption. We actually find this claim harder to swallow since the Scottish Authorities have repeatedly distanced themselves from any knowledge of the salmon market. There is absolutely no evidence to suggest that salmon consumption will not continue to grow in line with growing production. The only reason that salmon consumption would not continue to grow is if the price is too high and there lies the rub. The whole salmon dumping issue is based on two very different visions of what the salmon farming industry should be.
The Scottish Authorities and their pet independent Scottish salmon farmers want an industry that produces a limited volume for which they obtain a premium price, whilst the Norwegian industry is more interested in producing a value for money product in much larger quantities. This is the fundamental issue that has driven repeated allegations of dumping and the single reason that it has been allowed to fester for so long is that in their calculations, the Scottish Authorities and the EU have totally disregarded what the consumer wants.
The whole problem is that the small independent farmers have been trying to produce a premium product but consumers have been unwilling to pay the associated price premium. The Scots claim that the Norwegians are selling below their cost of production but this is because they have higher costs due to the various assessments and accreditations that are required for quality marks. In addition, the Scots have a higher burden of regulation costs for which the Scottish Authorities are actually responsible.
All this ignores that the fact that there is a major flaw in the argument that salmon consumption will not increase. This is that there has been an ongoing reluctance to invest any money in salmon marketing. Clearly, there is a need to boost salmon consumption and one way to make this happen is to invest in marketing. The Scottish Authorities say that this is not their responsibility but they are happy to help salmon farmers avoid theirs.
Finally, the Scottish Authorities have concluded that there is an increased risk of dumping because the cost of production is expected to rise due to higher feed prices. There is certainly an expectation that terrestrial farmers will suffer increased feed prices. Pig farmers are already suffering from significant price increases however these are related to the price of grain which is increasingly in short supply. World grain prices have been affected by increased demand from China, the effects of drought and the conversion to biofuel production. This may have some impact of fishmeal prices but probably not as much as expected. This is because fishmeal is not a substitute for grain. It helps push up the protein levels in feeds but terrestrial animals need more than straight protein. Fishmeal prices may escape the worst of the rises and thus may not impact on production costs. Only time will tell if they do. However, if feed prices do rise then they will be in line with the price of other foods. It is unlikely that salmon prices will not be excluded from such general rises thus reducing the likelihood of any dumping charges.
The salmon industry should have been freed from these dumping complaints long ago. The fact that they have been allowed to continue has been due to an inability to adequately defend each case. Mr Paulsen told IntraFish that his experience in dealing with the EU is that it is not uncommon for the unexpected to happen and when it does it is usually disadvantageous to Norway. Yet, is not the point of a legal team to ensure that the unexpected does not happen? It seems that the European Commission are not only holding all the cards but also all the trumps!
From one extreme..: Whilst the salmon industry may benefit from some investment in marketing, the administrator for ‘No Catch’ has said that its costly marketing campaign boasting that it would save the planet contributed to what had been a financial disaster. The Guardian newspaper reports that Daniel Smith, the administrator, said that organic cod was too costly to produce and the company’s insistence that it would only sell branded product meant that the consumer product was just too expensive.
We wouldn’t necessarily agree as we think that this assessment is to simplistic. It is clear that some consumers are prepared to pay a much higher price for ethical cod since there are stores that already charge higher prices than that charged for No Catch cod. The real problem was not the price per se, but rather that the cod was being sold in the wrong stores. Effective marketing should have identified this deficiency form the outset but the marketing gloss overrode all else to the extent that the company won numerous marketing awards in a clear case of style over substance.
Marketing is about getting the right product, at the right price to the right place at the right time and making a profit in doing so. We think that it was the place where No Catch really fell down and as a result expected profits turned into a financial disaster. We only hope that this failure does not deter future investment in cod farming.
Skrei?: A quote in caterersearch.com caught our eye. Pascal Tierman, Managing Director of James Knight fishmongers said that ‘people in London (and presumably the rest of the UK) have never heard of the word “Skrei” so you immediately have an uphill struggle in trying to educate them’. He is not wrong for we at Callander McDowell, have never previously heard of the term ‘Skrei’ that is until a recent visit to Selfridges on London’s Oxford Street. The fresh fish counter in the Food Hall is now a concession belonging to James Knight fishmongers and this week they are running a promotion of Norwegian Seafood. This was mainly apparent because the counter was adorned by a couple of pennants bearing the symbol of the Norwegian Seafood Export Council. The various fish included in the promotion were haddock, pollack, monkfish, mussels, scallops, crab legs, salmon, Arctic charr, redfish, salt cod and ‘Skrei cod’. As we had never heard of Skrei cod previously, the question was asked as to what is was. Despite a number of assistants milling around the counter, they eventually found a member of staff who could answer the question. He said that the cod were caught in a specific area of Norwegian waters. The impression he gave was that this area was called ‘Skrei’.
Having heard this explanation we can only conclude that Mr Teirnan is totally correct in suggesting that it will be an uphill struggle to educate the British about Skrei cod. This is especially so when his own staff can’t really explain what Skrei cod is and why consumers will have to pay £20/kg in Selfridges to buy it.
For the uneducated, the Norwegian Seafood Export Council describes Skrei as an annual miracle. Between January and March, during the spawning season, Arctic cod migrate south from the Barents Sea into the spawning grounds along the Norwegian coastline around the Lofoten Islands. During this migration, they become known as Skrei cod from the old Norse word meaning wanderer. These fish are said to develop a firm snow white flesh which is prized for its incomparable flavour and the gastronomic qualities of its tongue and roe.
The Norwegian Seafood Export Council has now developed a quality standard for Skrei cod which is attached to the fish and is used to aid promotion in the European market. The label, like the fishmongers in Selfridges, does little to explain what is special about Skrei cod. One such label was attached to a fish on the Selfridges fish counter and the reverse just carries the NSEC symbol.
What really puzzles us, at Callander McDowell, is why Skrei cod is being promoted in the UK at all. It is clearly a Norwegian speciality but at a time when the consumption of wild caught cod is being questioned, let alone spawning wild caught cod, it would make more sense if this promotion focused on farmed cod..
This is a question which has been already asked. Geir Dahle, a scientist at Norway’s Institute of Marine Research told Caterersearch.com that the attitude to cod is convoluted at best. He said that among some diners that eating cod is tantamount to snacking on a panda meat burger such is the furore surrounding North Sea cod. He said that the answer is to close those fisheries that are threatened yet continue to fish those stocks which are still healthy (such as those involving Skrei).
Mr Dahle responded to questions about the ethics of catching spawning cod by saying that they only school when they are spawning and this makes them easier to catch. He compares this to returning salmon but we think that there are key differences. He added that the tradition of Skrei fishing has continued for many hundred of years and stocks remain sustainable. This may be very well the case as long as demand for the fish is in line with the harvest. The key question to be asked is what will happen if promotions, such as that in Selfridges, creates a bigger demand for Skrei cod than the fishery can sustain. Surely, NSEC has made a major error in developing a Skrei brand for export markets. In the interests of sustainability, it would make more sense to keep this miracle as a Norwegian miracle and one which is not shared with the rest of Europe. That way, stocks of this special fish can be protected for future generations of Norwegians.
Meanwhile, Europe can share Norway’s bounty of farmed cod which is just as special and even more sustainable. At least Norwegian cod farmers don’t have to worry about complaints that they are dumping their fish on the European market!