Injury.

Imports.

The Complainants suggest that the Community salmon industry has suffered injury as a result of subsidisation and dumping of farmed salmon into the EU since the mid 1990’s. The Community industry has regularly blamed Norwegian imports for their problems but this link is extremely tenuous. The Complainants say that whilst the market has grown substantially over the last ten years, they believe that they have gained little from that growth. They say that this is because low priced Norwegian imports have led to poor profitability and losses. However, the real reason that Community producers have performed so poorly is simply because they are not producing what the growing market wants. Their focus is on the production of superior quality fish, which they believe warrants a premium price, when what the market really wants is a value for money, everyday meal choice. This is the real issue at the heart of this dumping submission.

In addition, imports have increased because of a shortfall in total fish supply within the EU. Eurostat recently announced that European fish supply has fallen by 17% between 1995 and 2002. This means that the shortfall in European fish supply is greater than ever. Europe cannot meet its own requirement for fish and seafood products. Europe must therefore import more fish to meet consumer demand. Inevitably, our near neighbours must meet this demand. Norway and Iceland are the largest producers in the EEA with increases of 17% and 32% respectively, greater than their own domestic requirements. Europe has imported more and more fish from these two countries to meet the shortfall.

Whilst Norway and Iceland have managed to increase their production, the global trend is that increasing demand has placed more pressure on commercial stocks. It therefore makes sense to utilise supplies of fish from farming, rather than over-fish already threatened stocks. World aquaculture production is about 1.27 million tonnes but with European salmon producers only capable of supplying 180,000t tonnes, salmon imports from Norway make a commercially realistic alternative to wild caught marine species.

This is reflected in the retail outlets, where widely available, value for salmon has replaced traditional marine species such as cod and haddock as a number one choice. Retailers like salmon because it can be supplied in consistent quality, availability and price. As a result, Europe has attracted an increasing volume of imports of farmed salmon from Norway. This is not dumping but rather meeting consumer demand for fish.

Dumping margins

The Complainants state that the salmon farming industry has a long and relatively inflexible production cycle leading to harvesting. This is correct. The production cycle is also complex because of the natural life cycle of salmon. Salmon have a capability of early maturation, usually in their first year at sea. These early maturing fish are known as grilse. From the farmer’s point of view, grilse are a problem. The fish start to put all their energies into reproduction rather than growth and the longer that this is allowed to progress, the poorer the eating quality of the fish. Fortunately, it is easy to identify such grilse because these changes are accompanied by changes in skin colouration that is an indication of a return to fresh water.

When salmon start to grilse, they must be harvested even though they are still relatively small fish. In terms of profitability, it is usually best if farmers can grow salmon as large as possible. The sea cycle of the production process usually last two years, but most of the real growth appears in the last few months. Harvesting fish when they are still small is uneconomic but in the case of grilse, is essential. The relative cost of producing grilse is high, but the returns are low. In economic terms, the farmer would prefer to leave the fish to grow more but he has no choice.

As a result, dumping margins are an inevitable artifact of the combined effects of a complex life cycle, variable growth rates and early maturation. It is for these reasons, that dumping margins have always been found during dumping investigations.

The character of the spot investigations conducted by the Trade Directorate enhances the likelihood of finding these margins. In this current case, the investigation covered a period of 10 months, but the salmon life cycle can last three years. The investigators are only getting a snapshot of what is happening. This maybe perfectly acceptable in other type of trade investigations such as steel, where the production process is extremely short. In the morning, the steel works can have a set of ingredients and by the afternoon can have changed this into the finished steel product. This is very different from what happens in salmon farming.

The almost certain presence of dumping margins in farmed salmon does not mean that such dumping margins will be found in salmon from Norway. Dumping margins will undoubtedly be identified in every salmon farm including those in Scotland. The problem for the Norwegian farmers trying to defend themselves against these accusations is that whilst the investigators sample some Community producers to discover the extent of the supposed injury, they do not look for dumping margins, but we are sure that if they looked, they would find them.

Whilst it may be obvious that dumping margins do exist, it is clearly not obvious that dumping has actually occurred.

Increased volumes

The Complainants suggest that even small increases in the volume of salmon offered to the EU have an immediate and severe effect on prices. This is not true. Prices are usually presented against a time line, however, when presented against volume, it is clear that there is a direct relationship between price and volume.

Such a relationship exists in most industries and is extremely predictable. The real problem is that the Community industry wants to see prices towards the left side of the graph, whilst the market wants them at the right hand side.

Any judgement as to whether Community producers have really suffered injury is impossible whilst the detailed figures are provided on limited access.

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