reLAKSation 369. Callander McDowell
Costly Exercise: According to the original Strategic Framework for Scottish Aquaculture, published in March 2003, the Scottish Aquaculture industry contended that its costs are higher than those of its competitors in other countries due to direct regulatory and rental costs. It was therefore decided to commission a study to look at the costs which regulation imposes on aquaculture businesses in Scotland as well as comparing these costs with those imposed in other countries.
Of all the action priorities set by the Strategic Framework, only one was not completed by the time the consultation document for the renewed Strategic Framework was issued earlier this year. Not surprisingly, this one 'priority' was this study of comparative costs. It has been suggested several times that the delays in progressing this study might have something to do with the expectation that the findings would not support the argument submitted as part of the Scottish dumping complaint that Scottish producers were at a cost disadvantage.
We have discussed previously that a study commissioned by the now defunct Scottish Salmon Growers Association and conducted by the Scottish Agricultural College found that Scottish producers were operating with a significant cost advantage over their Norwegian counterparts. The Scottish industry subsequently refused to take part in any further comparative cost study and so any claims of a disadvantage have been largely anecdotal.
Now five years after this cost comparison was first proposed, the study has finally been published and it comes at no surprise that the Scottish industry actually has a cost advantage over Norway. The report's Executive Summary states that:
'The direct costs of regulation (including all user charges applied to production) amount to 5.6p/kg for Norway, 3.7p/kg for Scotland and 0.9p/kg for Chile. Of the regulatory costs identified, user charges amount to 80% of regulatory costs for Norwegian producers and 47% of regulatory costs for Scottish producers. No similar user charge is identified in Chile.'
(User charges cover such costs as licences in Norway and rent in Scotland.)
We have no doubt that the findings of this study will be dismissed by those Scottish producers who have argued that they are at a cost disadvantage. They will probably argue that user costs should not be included therefore proving that regulatory costs are higher in Scotland. The study also discusses the higher indirect costs in Scotland which it attributes to the disadvantage of scale.
We, at Callander McDowell, hope that this study now finally puts an end to the claims of cost disadvantage. It is time to realise the Norwegian producers have some production advantages and Scotland others. Scotland and Norway are different countries, geographically, economically, culturally and therefore there will always be some differences. Salmon companies should look to their own production and consider how their costs can be tailored to give the best profitability, rather than worry about what others are doing.
This study also considers the benefits of the Scottish regulatory system and we would like to consider this in the next issue of reLAKSation. Otherwise we very much hope that this study has finally put an end to this long-standing issue. It has been nothing but a unnecessary distraction.