reLAKSation 40.
MIP - RIP?: When the EU salmon agreement was first negotiated, there was a significant divide between the price of salmon and the MIP. The inclusion of the Minimum Import Price in the deal was not really considered to be an issue. However, now prices have fallen, the MIP has become a major obstacle to trade for the Norwegian industry. It is therefore not really surprising that efforts are being made to either suspend or renegotiate the MIP level.
The EU Commission and the Norwegian authorities have been locked in talks to consider various options. These have concluded without agreement. However, it seems that one or two proposals are on the table. Neither it seems involves the unconditional suspension of the MIP.
This may come as a disappointment to some Norwegian exporters. According to IntraFish, Kim Broderson of Saga Lax believes that the EU will suspend the MIP soon. He hopes that this would open the door to the EU market, boosting exports and prompting a rise in price.
Whilst, exports would certainly increase, it is unlikely that prices would also rise. This is because as more and more salmon becomes available, the pressure on prices will remain. The suspension of the MIP will probably not bring any immediate relief for Norwegian farmers.
However, Norwegian salmon farmers are not alone seeking the removal of the MIP. The Danes have also requested that it be removed because a large segment of their fish processing industry is dependent on imports of Norwegian fish.
By contrast, the Scottish industry is terrified that the MIP might be removed fearing that prices would drop even further. This is what will happen, but as we at Callander McDowell have repeatedly argued, prices will continue to do so as global production increases, irrespective of the presence of the MIP or not.
These are the two sides to the MIP question, which the EU Commission must resolve. Magnor Nerheim, Norwegian Under-Secretary of State has told IntraFish that the negotiations in Brussels are a "give and take" process with Norway having to "give" something in exchange for any change to the MIP. Two suggestions have already been made. One is to introduce an interim countervailing duty whilst investigations continue into the changing cost structure of salmon farming, the other is to increase the export duty on Norwegian salmon.
However, the reality is that Norway and other exporters are already fulfilling a "give and take" role. The European Union has a deficit in fish supply. This is counteracted through the existing Common Fisheries Policy (now under review), which amongst other policies, buys fishing rights from third party countries. This enables EU fishermen to continue fishing outside EU waters, including those around Norway. Norwegian salmon farmers have extended this supply by providing the EU with a source of low cost fish to meet the growing consumer demand for fish and seafood products, which the EU is unable to supply from its own sources.
The MIP should be removed now. In fact, it should never have been imposed in the fi rst place. The EU salmon agreement of which it is part has failed all sections of the salmon industry and should not be renewed. Instead it should be consigned to the dustbin where it really belongs.
Global impediment: The ongoing discussion regarding the MIP and low prices has prompted some commentators to look beyond the EU salmon agreement. It has been suggested that one positive aspect of the agreement is that it has improved the communication between the various European producers. It is thought that extending this model to all producers would help improve the global market situation.
However, the reality is that the EU salmon agreement has had little effect on the market situation. If it had, then this discussion would not be taking place. There is a readiness to blame non European producers for the problems but whilst Chilean salmon for example, is now starting to appear in the European market, the volumes are relatively insignificant and will have exerted almost no effect on European prices.
Extending the agreement to cover the global industry would bring little benefit to international farmers. This is because any increased exchange of information cannot influence the commercial interests of individual farming businesses.
The idea of a global arrangement is not new. The Scottish industry has advocated the introduction of an international network of Producer Organisations for nearly ten years. This idea has been rejected as unworkable, (see the reports sections) but some continue to promote it regardless. This is why some of the industry representative bodies have included the title 'producer organisations' in their names.
The fact is such producer organisations or alternatively a new arrangement is totally unnecessary as the mechanisms for im proved exchanges of information already exist. This is the International Salmon Farmers Association, whose members already represent the majority of the global industry. If the members of this association cannot freely exchange information now, why should a new arrangement encourage them to do so?
Pumping up the Dumping: The global salmon industry should be worried about the breaking news that the Scottish industry may be considering the submission of yet another dumping action. This cannot benefit anyone, wherever they farm.
There have been four previous dumping actions within the international salmon industry. None have been clear-cut and none have produced the outcome desired by the complainants. This should be a lesson for any national industry contemplating bringing yet another action.
Whilst talk of a dumping case may actually be premature, it is worth mentioning that should an action progress, it is certain that the investigators will find evidence of dumping margins. They have in every other previous case. However, none have been of sufficient significance that the full weight of trade legislation has been used against the accused industry.
Yet, the presence of dumping margins is not indicative that dumping has actually occurred. This is because dumping margins are a natural artefact of a temperature dependent growing cycle. Unfortunately, trade investigators tend to take a single snapshot of the cost of production, rather than consider the whole growing cycle. This inevitably means that dumping margins will be present. The dumping enquiry should really apply the same investigative processes to the complainant industry and it is more than likely that similar dumping margins would also be uncovered.
These dumping actions are a pointless and expensive exercise, which will achieve little. They are simply another indictment of the production-led strategies, which some sections of the industry appear unwilling to let go.
This will never happen until the international industry resolves the fundamental question concerning the market expectations for farmed salmon.
The issue is simple. Salmon was selected as a candidate species for farming because it had a high value and a luxury market image. This was because salmon was relatively rare in the marketplace.
However, the very act of farming has devalued this market image so that salmon is now regarded in the marketplace as a low cost, value for money, everyday meal option.
Unfortunately, some sections of the industry still consider the salmon they produce as being superior to that produced elsewhere and that it warrants a premium price. The failure to achieve a perceived higher price is at the heart of the dumping allegations and all other attempt to impose protectionist policies, such as the MIP, Producer Organisations and the EU salmon agreement.
The international industry needs to decide does it want to retain the original market image on which salmon farming was based, or whether it wants to capitalise on the growing demand for low cost value for money seafood products. Until it resolves which avenue to follow, the international industry will continue to work under the threat of the possible imposition of further obstacles to trade.
We, at Callander McDowell, would argue that the industry should be producing their salmon to meet the market demands rather than the industry's own perceptions. This is why we continue to advocate the introduction of more market-led strategies, which will address the issues of the marketplace.
Alternatively, if the international industry w ants to retain the luxury image of salmon, then it needs to agree measures to restrict production. Consumers may be more willing to pay a higher market price if salmon should becomes less common in the market place. The industry cannot have it both ways. It cannot continue to produce mass-market volumes, but the expect prices to remain high.
This is the choice.