FFA FISHERIES TRADE NEWS Volume 6: Issue 2 March–April 2013

CONTENTS

Preferential Trade Agreements

Fiji to lose preferential access to EU market in 2014?

World Trade Organisation

Developments at the WTO and China’s subsidies to its fishing fleet

Fisheries Development

Marine Stewardship Council Certification continues to gain traction in tuna

Tri Marine opens American Samoa cold storage facility

Study on Vessel Day Scheme environmental and economic outcomes

Tuna Markets

Price crisis for canning-grade albacore

Fiji MSC albacore retails in Europe

Dongwon boats and brand under pressure

Tuna Price Trends

Preferential Trade Agreements

 

Fiji to lose preferential access to EU market in 2014?

There is considerable anxiety among Fiji-based exporters of fish products to the EU on the future of preferential market access arrangements. Fiji and PNG were the only countries to agree to an Interim Economic Partnership Agreement (IEPA). However, unlike PNG, Fiji has not implemented the IEPA and is currently exporting to the EU under the terms of the ‘Market Access Regulation’.[2] This temporarily provides for the same non-reciprocal market access for goods as under the Cotonou Agreement for those countries that have signed and/or initialed an IEPA or a comprehensive EPA until they are fully ratified.

The controversy is around the EU’s deadline for ratifying IEPAs or completing and ratifying comprehensive EPAs. The European Commission unilaterally stated that it was withdrawing the Market Access Regulation by 1 January 2014.[3] Due to an intervention by the European Parliament, this has since been extended to 1 October 2014.[4] If an IEPA or EPA is not ratified by this date ACP states categorised as Least Developed Countries (LDC) like Solomon Islands will benefit from the EU’s Generalised System of Preferences (GSP) regime, specifically the Everything But Arms initiative (EBA) and will receive duty free access for all fish products.

However, since the reform of the EU’s GSP introduced on 1 January 2014 many countries are no longer eligible. For example, the non-LDCs that currently utilise the Market Access Regulation are not included under the standard GSP, including Fiji.[5] It is unclear whether the EU will allow these countries to shift to GSP status if an IEPA or EPA is not ratified in time. Regardless, the standard GSP preference for fish products is commercially insignificant because it is only 3.5% less than the most-favoured nation (MFN) tariff. The EU’s standard GSP applies the following rates of tariff duty: 21.5 percent for canned tuna and tuna loins for processing (HS 1604); and 14.5% for most fresh chilled and frozen tuna and ‘other’ tropical fish fillets (HS 0304).[6]

In addition, the EU GSP is subject to rules of origin and will not include ‘global sourcing’. GSP rules of origin do not currently allow for regional cumulation among PICs or other countries in the region.[7] In other words, even if it qualifies under the standard GSP, it appears that Fiji could only use fish caught by EU or Fijian boats.

World Trade Organisation

Developments at the WTO and China’s subsidies to its fishing fleet

Fisheries subsidies were set to be disciplined under the Doha Round at the WTO, as reported extensively in previous issues of FFA Fisheries Trade News. But the collapse of the Doha Round means that there are ‘no fisheries negotiations at all at the WTO’, as one official in Geneva put it. Another official noted that discussion of ‘fisheries [subsidies] is in waiting mode for now’.

The Ninth Ministerial Conference of the WTO will be held in Bali, Indonesia in December. A minor ‘Bali package’ of measures is proposed to reap an early harvest of some of the issues negotiated under the Doha Round, including on trade facilitation; agriculture, especially public stockholding for food security and domestic food aid; and special and differential treatment for Least Developed Country members. But even here, as WTO Director General Pascal Lamy pointed out in April, ‘the stark reality is that the current pace of work is largely insufficient to deliver successfully in Bali’.[8]

The parallel ongoing explosion of preferential trade agreements among countries only serves to complicate the legal architecture of the international trade regime, taking political focus and personnel away from the WTO. In the context of the ongoing global economic slump, it seems unlikely that governments will fully re-engage with multilateral liberalisation for the foreseeable future.

At the same time, subsidies by the Chinese government to expand and modernise its distant water fishing fleet (DWF) are analysed in a recent FFA Secretariat Paper.[9] Subsidies include a wide range of tax incentives to the DWF and to China’s shipyards, and direct payments in the form of fuel subsides, favourable loans and for developing fishing technologies. In 2010 it was estimated that the Chinese DWF fleet totalled 1899 vessels; by the end of the central government’s 12th five-year plan period (2012-2015), it plans to increase its fleet to 2,300 vessels.

The rapid and subsidised expansion in China’s fishing capacity, including of its tuna fleet, is a major source of concern to local fishing industry in the Pacific islands. Many claim that the subsidised Chinese longline fleet is a major contributor to the collapse of canning-grade albacore prices (see story below).

Fisheries Development

Marine Stewardship Council Certification continues to gain traction in tuna

Officials announced that the PNA has been awarded MSC Chain of Custody certification, making Pacifical branded PNA free-school skipjack product  one step closer to hitting shelves.[10] In the mean time, indications are that market demand for PNA free-school MSC certified skipjack continues to expand as North American, European and Australian retailers wait for Pacifical tuna to arrive. Norway’s largest retailer, Norges Gruppen, has announced that it is interested in co-branding canned tuna products with Pacifical’s MSC label. The firm has encouraged tuna fishing companies and processors to seize the opportunity to start supplying premium canned tuna sustainability lines.[11]

Bumble Bee foods, one of the ‘big three’ US Brands and a major player in the North American seafood market has recently announced a new product line called ‘Wild Selections’. The line will carry high quality product that has earned the Marine Stewardship Council logo. The first products will include MSC certified albacore and lightmeat tuna. Bumble Bee did not specify the sources of the MSC certified product. In addition, Bumble Bee announced that 13 cents per can sold, to a minimum of USD$ 1 million in total, will support environmental NGO (and MSC co-founder) WWF’s efforts to protect marine life, expand sustainable fishing practices globally and help build awareness of the MSC certified seafood program. Later phases will expand to MSC certified salmon, shrimp, clams and sardines.[12] Environmental NGO Greenpeace cautiously applauded the move, showing a vote of support for MSC as an arbiter of sustainability in the sector, but cautioning that introducing new product lines without replacing existing harmfully fished tuna would intensify, rather than alleviate the firm’s impact on the oceans.[13]

In the most recent in a series of moves by Papua New Guinea to promote domestic tuna processing, the National Fisheries Authority (NFA) has announced that as of 1 July 2013 all purse seine vessels will have to start landing 100% of MSC eligible free school catch to local PNG canneries. The National Fisheries Authority has made the move in order to boost sustainable fishing according to the MSC ecolabel standard, and in the process, to create more local jobs and add value to its tuna. NFA indicates that all vessels will be required to comply. Reportedly, the National Fisheries Authority is offering a discount price on their 2014 access fees as an incentive for compliance.[14]

Despite the growing momentum of MSC in the tuna market, studies continue to raise concerns over the strength of the scheme. A study recently released in the journal Biological Conservation asserts that the certification is both lax and misleading.[15] The researchers examined 19 formal objections raised mainly by environmental groups to certifications raised during the certification process. In all but one of the cases, the certification was upheld despite objections. Researchers found that 35% of the eco-labelled seafood did not really meet the MSC standards[16] In response, MSC representatives asserted that the researchers misunderstood the purpose of the objection process, and that objections have lead MSC to require that fisheries make improvements to keep their certifications.[17] PNA free-school skipjack was one of the fisheries included in the study. Objections to that certification were lodged by EU industry association Eurothon, the International Seafood Sustainability Foundation, and Spanish industry association OPAGAC.

Tri Marine opens American Samoa cold storage facility

On 12 April, Tri Marine opened its new 5,000 mt cold-storage facility at Samoa Tuna Processors (STP) in American Samoa.  This completes the first phase of TMI’s commitment to invest and operate a large-scale tuna processing facility in American Samoa.[18]  In October 2010, at the invitation of American Samoa’s former Governor Togiolo Tulafono, Tri Marine purchased Chicken of the Sea International’s plant.  The new cold storage facility forms part of Tri Marine’s plans to establish a state-of-the-art facility and will service Tri Marine-owned and affiliated vessels, plus others using American Samoa as a fishing base.  The cold storage will also play a major role in Tri Marine fulfilling its plans to establish American Samoa as a regional tuna processing hub in the Central Pacific region.[19]

The second phase will be the construction of a modern, large-scale canned tuna processing facility (250-300 mt/day), which will create employment for at least 1,000 workers.  Construction on this facility has been delayed while Tri Marine waits for a permit to be issued by the US Army Corp of Engineers to construct a new seawall and small vessel dock. The new seawall forms part of a plan to extend the STP site to accommodate the canning operations, while the small vessel dock will be constructed to service American Samoa’s local alia fleet.  Once construction commences, the project is expected to be completed within 15-18 months (currently anticipated for end-2014).  STP is already receiving, processing and exporting fresh tuna to high value markets in the US and Japan and will fully complete the construction of a fresh and frozen value-added facility later this year.[20]

Tri Marine’s senior officials recognise that cooperation from other neighbouring Pacific Island countries will be critical to the success of Samoa Tuna Processors and in establishing American Samoa as a major regional tuna hub.  American Samoa has a very limited EEZ, with less than 10,000 mt of tuna caught annually in the territory’s waters.  However, the combined raw material needs of American Samoa’s two canneries – Samoa Tuna Processors and Starkist – will be around 160,000 mt/year. Tri Marine is appealing to local and regional leaders to work together to ensure that ‘fish caught in the islands can be processed in the islands’.  Tri Marine acknowledges that regional cooperation provides a solution, given very few PICs have the necessary infrastructure to support large-scale tuna processing onshore, whereas American Samoa has a long history in tuna processing, with a ready-skilled work force.[21]

Study on Vessel Day Scheme environmental and economic outcomes

In 2007, the Parties to the Nauru implemented the Vessel Day Scheme (VDS), transitioning from permitting a total number of purse seine vessels in the region (205) to permitting a total allowable number of purse seine fishing days (44,703 for 2012). Given the volume, value and multi-jurisdictional nature of the fishery, it is arguably the most complex fishery management arrangement ever put in place. The PNA countries have sought to use the VDS to increase their economic returns, promote conservation and comply with WCPFC Conservation and Management Measures. A study recently published in the journal Marine Policy details the logic behind the VDS and the technical components of the scheme.[22] It synthesizes available data to offer an overview of the environmental and economic impacts of the scheme to date; a few of the key findings are highlighted here. Full details can be found in the report.

Economic outcomes:

* The value of a fishing day has increased dramatically since the implementation of the VDS. Available data demonstrates that the pre-VDS price of a fishing day was roughly US$1350. In July 2011, PNA countries set minimum benchmark price for fishing days of US$5000/day. Basic calculations based on average skipjack-based revenue per day suggest that PNA access fee revenues have increased by upwards of 280% from the 2006 baseline. At the most recent PNA ministerial meeting in March this year the benchmark price was pushed to US$6,000/day.[23]

* High skipjack prices have also yielded revenue increases for vessel owners. PNA countries are likely to attempt to further increase vessel day prices to tap into these increased revenues.

Environmental and management outcomes:

* The VDS has contributed to observer coverage and data collection improvements.

* The effort control (days), as opposed to an output control (quota), does not treat species individually, making it difficult to directly address bigeye and yellowfin management concerns.

* The VDS has not achieved its stated objective of limiting effort to 2004 levels of roughly 35,000 fishing days. By 2011, the PNA secretariat reported 41,591 fishing days. Proposed revised TAE for 2012 and 2013 were 44,703 and 45,703 respectively.

* Across the Pacific, fishing effort in 2011 was the highest in history.

* Capacity has dramatically increased under VDS. Between 1990 and 2006 there were between 180 and 220 vessels active in the region on average. In 2011, 283 purse seine vessels were active.

In sum, the Vessel Day Scheme has enabled the PNA countries to strengthen control over access prices and reorganized industry norms around access fees and negotiations. To date, the PNA countries have not collectively capped effort although the PNA Ministers in their meeting in Palau in February 2013, have agreed to a process to establish target reference points. Future outcomes of the scheme will continue to be tempered by the structural constraints of the effort-based approach to regulation, market conditions in the sector, and the willingness of PNA countries and firms to abide by and enforce the technical components of the scheme.

Tuna Markets

Price crisis for canning-grade albacore[24]

The recent drop in canning-grade albacore prices is hitting the Pacific island longline industry hard. The frozen albacore price declined from a three year peak of $3,300 per short ton in April through June 2012 to $2,350 per short ton in March 2013 (the lowest price since January 2011).[25] This price decline is exacerbated by a cost squeeze due to rising gasoil prices (see figures under ‘Tuna Price Trends’ below), which combines to put serious pressure on the profitability of longline fishing operations. Consequently, boats that benefit from fuel subsidies have an important competitive advantage in the current climate (see above story on China’s fuel subsidies).

The albacore price collapse can be explained by a dual dynamic of overproduction of raw material and underconsumption of finished product. Recent years have seen record albacore catches in the South Pacific Ocean. Between 1991 and 2000 these ranged from between 32,700 and 40,500 tonnes, but increased dramatically in the period 2002 and 2008 at around 60,000 tonnes and have been more than 75,000 tonnes in each of the last three years to 2011. This recent significant rise in catch corresponds with a new influx of Chinese longline fleets.[26]

At the same time, canned albacore (‘white meat’) sales in the USA are following a steady downward trajectory. In the 12 months ending March 2013, total US sales of canned white meat were US$410.8 million for around 5.18 million cases, which was a 3.3 percent decline in value compared to the prior year. But in terms of volume sales, the US market suffered a 14.3 percent decline.

This decline in consumption can be explained by multitude of reasons: the economic downturn influencing US consumers to switch from relatively higher priced white meat, a lack of advertising investment by US brands, consumer pressure from NGOs such as Greenpeace, and the ongoing debate around mercury content. However, many industry observers are hopeful that this price decline is cyclical. Around 30 foreign longliners were tied up in Suva Harbour in April, which indicates that even subsidised vessels cannot ride out the current price level, perhaps resulting in a future decline in catches and a tightening of supply.

Fiji MSC albacore retails in Europe[28]

MSC-labelled albacore tuna from Fiji will retail in European supermarkets from June, following an exclusive distribution deal established between members of Fiji’s albacore tuna longline fishery and Netherlands based, Anova Seafood, an international seafood supplier. Anova will market frozen tuna steaks under its sustainability brand ‘The Sea & We’, as well as sashimi quality tuna defrosted for the fresh market. Already, two major European retailers in Sweden (ICA) and Netherlands (Albert Hejin) have committed to purchase Fiji MSC albacore products from Anova.

Fiji’s longline albacore fishery is the first MSC-certified Pacific Islands tuna fishery with a complete chain of custody in place to supply products to Europe. Albacore from Fiji (and other Pacific Island countries) has traditionally been frozen and sold for canned tuna production for the US market.  Given the strong demand for certified sustainable seafood in European markets and growing popularity of albacore for fresh and frozen tuna products, MSC certification has opened up an alternative, higher value market for Fiji’s albacore.

Dongwon boats and brand under pressure

The South Korean corporation Dongwon – one of the largest tuna firms in the world –is under fire at each end of its vertically integrated operations.  Dongwon has a fleet of around 15 purse seiners, almost all of which fish in the WCPO.[29] However, recent reports allege that F/V Premier and F/V Solevant (Dongwon owned purse seiner) were fishing without legal licences in Liberian waters off West Africa.30 Dongwon responded by claiming that it and other firms were the victims of a scam involving forged documents and communication.[31] However, the Liberian government has fined each vessel US$ 1 million for illegal fishing activities. The South Korean firm has stated that it will seek damages against the Liberian state.[32] The International Sustainable Seafood Foundation has stated that it might investigate the incidence of illegal tuna licencing in West Africa.[33]

Meanwhile, in the US market it faces legal action, where Dongown owns the largest canned tuna brand – StarKist. At the end of February a US citizen launched a federal civil action against StarKist for systematically under filling a number of canned lightmeat and canned whitemeat products.[34] The action claims that consumers are receiving up to 17 percent less tuna than purchasers are paying for according to detailed federal regulations.35 If the action is successful, StarKist may be required to pay compensation to consumers.

1 Prepared for the FFA Fisheries Development Division by Liam Campling, Consultant Fisheries Trade Analyst, FFA and School of Business and Management, Queen Mary, University of London and Elizabeth Havice, University of North Carolina at Chapel Hill. Desktop publishing by Antony Price. The authors would like to thank Hugh Walton for his input on an earlier draft of this briefing. The contents of this briefing (including all analysis and opinions) are the responsibility of the authors and do not necessarily reflect the positions or thinking of the FFA Secretariat or its Members.

2 Council Regulation (EC) No 1528/2007 of 20 December 2007. Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:348:0001...

3 DG Trade 2011, ‘What will happen to those that opt out of EPAs?’, Brussels: European Commission. Available at: http://trade.ec.europa.eu/doclib/docs/2011/september/tradoc_148215.pdf

4 ‘MEPs extend deadline for ending free EU market access for ACP countries’, European Parliament, press release, 16 April 2014. Available at: http://www.europarl.europa.eu/news/en/pressroom/content/20130416IPR07344...

5 The withdrawal of the Market Access Regulation will only affect eight non-LDC ACP countries: Botswana, Cameroon, Côte d’Ivoire, Fiji, Ghana, Kenya, Namibia, and Swaziland. See: ‘EU publishes revised preferential import scheme for developing countries’, European Commission, 31 October 2012. Available at: http://trade.ec.europa.eu/doclib/press/index.cfm?id=840

6 For full details of the range of product types and different tariffs under HS 0304/05, see pages 375-6 of the FFA study by Hamilton, A., A. Lewis, M.A. McCoy, E. Havice and L. Campling, 2011. Market and Industry Dynamics in the Global Tuna Supply Chain. Honiara: Pacific Islands Forum Fisheries Agency. Available at: http://www.ffa.int/node/567

7 Commission Regulation (EU) No 1063/2010 of 18 November 2010. Available at: http://ec.europa.eu/taxation_customs/resources/documents/guide-annex_2_e...

8 Director-General Pascal Lamy’s statement Informal Trade Negotiations Committee meeting at the level of head of delegation, 11 April 2013. Available at: http://www.wto.org/english/news_e/news13_e/tnc_infstat_11apr13_e.htm

9 Justin Ilakini 2013, ‘Fisheries Subsidies and incentives provided by the Peoples Republic of China to its Distant Water Fishing Industry’, FFA Secretariat Paper, Honiara. Available at: http://www.ffa.int/node/737#attachments

10 ‘PNA free school skipjack achieves MSC CoC certification’, Atuna, 23 April 2013. Available at: http://www.atuna.com

11 ‘Pacifical MSC tuna to be carried by country’s main retailer’, FIS, 8 February 2013. Available at: http://www.fis.com

12 ‘Bumble Bee to launch MSC albacore and skipjack in USA’, Atuna, 24 April 2013. Available at: http://www.atuna.com

13 ‘Bumble Bee new MSC tuna line welcomed by Greenpeace’, Atuna, 26 April 2013. Available at: http://www.atuna.com

14 ‘World’s #1 tuna fishing ground relates tuna licenses to MSC catch’, Atuna, 22 March. Available at: http://atuna.com

15 C. Christian, D. Ainley, M. Bailey, P. Dayton, J. Hocevar, M. LeVine, J. Nikoloyuk, C. Nouvian, E. Velarde, R. Werner, and J. Jacquet. 2013. 'A review of formal objections to Marine Stewardship Council fisheries certifications', Biological Conservation, 161 (in progress): 10-17. Available at: http://www.journals.elsevier.com/biological-conservation/

16 Natalia Real, ‘Study challenges MSC’s sustainable seafood certification’, FIS, 16 April 2013. Available at http://www.fis.com

17 Daniel Cressey, ‘Fight over sustainable seafood labelling flares up’, Nature Newsblog, 12 April 2013. Available at: http://blogs.nature.come

18 Fili Sanapolutele 2013a, ‘Tri Marine solidifies commitment to territory with cold storage dedication, Samoa News, 14 April 2013. Available at: http://www.samoanews.com

19 Fili Sanapolutele 2013b, ‘Tri Marine official Hamby: “there’s not enough tuna….for all markets”, Samoa News, 16 April 2013.  Available at: http://www.samoanews.com

20 Tri Marine 2012, Samoa Tuna Processors (STP) Project Update, 12 March 2012.  Available at: http://www.trimarinegroup.com; TMI representative, pers. comm.

21 Sanapolutele 2013b

22 E. Havice. 2013. ‘Rights-based management in the Western and Central Pacific Ocean tuna fishery: Economic and environmental change under the Vessel Day Scheme', Marine Policy, 42: 259-67. Available at: http://www.journals.elsevier.com/marine-policy/

23 ‘Outcomes From PNA Annual Meetings 25 Feb-1 March’, PNA Secretariat, press release, 3 March 2013. Available at: http://www.pnatuna.com/outcomes-pna-annual-meetings-25-feb-1-march

24 This story is based on an email survey of representatives of seven firms engaged in the catching, trading, processing and branded marketing of albacore. These insights were supplemented by comments from several officials and consultants working on tuna fisheries in the WCPO. Liam Campling would like to thank all of those who helped for their invaluable assistance. All mistakes and opinions remain my own.

25 Industry data based on American Samoa price.

26 FFA 2013, ‘Economic Outlook and Prospects for Tuna Fisheries’ [draft], produced for the Eighty Fifth Official Forum Fisheries Committee (FFC85).

27 Industry source.

28 MSC 2013, ‘Anova Seafood brings first MSC certified tuna from Fiji to Europe, MSC Press Release, 24 April 2013.  Available at: http://www.msc.org

29 See Section 2.4, Chapter 2 in Hamilton, A., A. Lewis, M.A. McCoy, E. Havice and L. Campling, 2011. Market and Industry Dynamics in the Global Tuna Supply Chain. Honiara: Pacific Islands Forum Fisheries Agency. Available at: http://www.ffa.int/node/567

30 Neil Ramsden, ‘Starkist parent Dongwon accused of IUU fishing, fraud’, Undercurrent News, 12 March 2013. Available at: http://www.undercurrentnews.com/2013/03/12/starkist-parent-dongwon-accus...

31 ‘Dongwon On IUU: We Are Victims Of A Scam’, Atuna, 18 March 2013. ‘Also Other Tuna Fishers had Fraudulent Licenses In Liberia’, Atuna, 18 March 2013. Available at: http://www.atuna.com/

32 ‘Dongwon Pays USD 2 Million Penalty For IUU Tuna Fishing In Liberia’, Atuna, 29 April 2013. Available at: http://www.atuna.com/

33 ‘ISSF looking into fraudulent licenses in West Africa’, Undercurrent News, 25 March 2013. Available at: http://www.undercurrentnews.com/2013/03/25/issf-looking-into-fraudulent-...

34 ‘Starkist accused of ‘under filling’ products’, Undercurrent News, 13 March 2013. Available at: http://www.undercurrentnews.com/2013/03/13/starkist-accused-of-under-fil... and ‘StarKist Accused Of Consistently Under Filling Tuna Cans’, Atuna, 12 March 2013. Available at: http://www.atuna.com/

35 The relevant section of the Code of Federal Regulations on canned tuna is available here: http://www.gpo.gov/fdsys/pkg/CFR-2002-title21-vol2/xml/CFR-2002-title21-...