Chair's Summary Report
"Globalisation" is a key context underlying most current policy discussions in fisheries including both capture and aquaculture fisheries. Globalisation is a concept that implies a "system" of complex linkages among international participants, including states -- a system that needs to work effectively and responsibly. The challenges, opportunities and expectations accompanying increased globalisation are at the root of some of the most heated policy discussions taking place in fisheries.
Opening of the Workshop and Keynote Addresses
The Minister of Fisheries for Iceland, Mr. Einar Gudfinnsson, opened the workshop providing an overview of the importance of globalisation to Iceland and also highlighting the increasing consumer demand for fisheries sustainability and Iceland’s experience on the use of market measures in fisheries management. The fishing industry is facing certain risks, such as declining fish stocks and the effects of overcapacity. Concurrently value systems across the globe are converging, a process that is furthered through the globalisation process; this has resulted in increased awareness among consumers of the problems faced by natural resources. Traditional controls to achieve sustainability in the industry are still warranted but can usefully be complemented by new approaches, including labelling. In capture fisheries, rights-based systems and the use of transferable quotas can help align the incentives of stakeholders with those of fisheries policy makers and managers, for example, by devolving user rights and responsibilities to communities. Aquaculture is increasingly an important source of seafood and has the potential to meet increasing consumer demand, particularly from developing countries. However, this sector must also be managed in a sustainable way. Two trends of globalisation were highlighted: outsourcing along the fisheries value chain, and the rise of eco-labels and resulting consequences for developing countries. The Minister also noted that the benefits from globalisation will only accrue when countries do not concurrently raise new barriers to trade.
Retailing and Distribution of Fish: Trends and Issues
Darden restaurants source seafood from over 30 countries and seafood comprises 70% of their protein purchase. Darden’s strategic focus is to shorten supply chains by contracting directly with the producer. The company’s Quality standards are more stringent than national regulations and overseen by the employment of 50 employees in Darden’s Quality Assurance Department alone, 10 of whom are based at the point of origin of seafood purchases. Darden is proactive in addressing social and environmental laws in addition to implementing food safety measures: By contract, all suppliers must adhere to all laws in the country where they operate. If the sustainability of species is questioned, Darden will remove it from its List of Approved Species.
Processing Fish: Where, Why and How?
Alda Möller introduced a number of case studies showing changes that have taken place in the fish processing industry. Demographic and lifestyle trends, consumer sophistication, knowledge and changing consumer preferences have all driven seafood consumption, hence trade and processing. Meanwhile, key considerations include seafood safety and hygiene, which are non-negotiable in the seafood business. Demand for safe food is bound to augment partly due to better detection techniques that are becoming more and more sophisticated. The case studies considered include the Pangasius fish species in Vietnam, Cape hake from Namibia and the Chinese re-processing industry. Each of the cases suggests different challenges in terms of how they have benefited and dealt with the globalisation of the international fisheries markets. One of the key issues to be dealt with in the near future is the emergence of labour shortages and wage increases in China. Further consolidation in the fishing and seafood processing industries is likely to take place to balance the influence of the large retail chains, which presently are powerful players.
Identifying the Parameters with which We Are Working in the Harvesting Sector
Michael Lodge presented the legal framework governing access to high seas fish stocks. He explained that sub-optimal utilization of high seas fish stocks is an economic problem, caused by the common property nature of the fisheries and the open access regime on the high seas. Inefficient utilisation of shared stocks could be costing the global economy an estimated USD 50 billion per annum. The United Nations Law of the Sea (LOS) and the UN Fish Stocks Agreement form the basis for a legal framework governing access to high seas resources. A fundamental condition arising from LOS is the duty for states to co-operate in managing shared fish stocks and high seas resources. The paradigm for co-operation is the Regional Fisheries Management Organisation (RFMO). There is no possibility for unilateral action and members have a duty to cooperate even when they fail to agree. Non-members who do not agree with RFMO members are not discharged from the duty to cooperate. Where no RFMO exists, states are under a duty to cooperate to establish one or, at least, apply conservation measures consistent with the LOS. Michael Lodge highlighted the major threats to the stability of RFMOs. They include free riding; IUU fishing; the failure to heed the special requirements of developing countries; failure to deal with new members; and failure to agree on allocation. This last point is made more difficult by the dual role of States who act in a capacity of both allocating and managing. In addition, developing countries form the bulk of RFMO participation, but not the bulk of allocation rights. Other challenges include a greater role for industry and overlapping areas with national management. Conditions for success include effective conservation and management practices (such as adopting ecosystem and precautionary approaches), emphasis on better implementation, RFMO performance assessment and review, guidelines on best practice, and global standards for RFMOs accompanied by more transparent accountability.
Identifying the Parameters With Which We Are Working in the Aquaculture Sector
Mr. Kumar explained how India is coping with the pressures of globalisation and how frameworks have been adjusted to facilitate its response. India is the world’s second largest aquaculture producer, with shrimp a major export item from aquaculture. Shrimp provides 58% of the total value and 28% of the total quantity of India’s aquaculture production. Major markets for shrimp are the EU (one third of production), USA and Japan. However, India has a large number of small farms that practise extensive farming with limited stocking densities; 90% of farmers have ponds smaller than two hectares. This means that farming is highly fragmented and traceability can be challenging and certification prohibitively expensive. Uncertainty in the international trading system has been a large problem for Indian shrimp farmers, particularly as a result of anti-dumping measures; for example the number of Indian exporters to the United States fell from 169 in 2002-03 to 77 in 2006. For Mr. Kumar other concerns include disease, lower prices on the international market, increasing cost of production, rising quality requirements, lack of insurance and financial support and exploitation by middlemen. Indian shrimp farmers also experience difficulties in international trade, including market access issues due to tariff escalation. The increased dominance of supermarkets that raise entry barriers through the use of brands creates difficulties in supply logistics and raises costs for shelf space and market promotions. Many producers are forced to pack for private labels, thereby heavily foregoing margins. Food safety issues and non-tariff barriers such as SPS measures and EU directives for residue levels also raise production costs. To help mitigate some of these costs, aquaculture is now regulated by the Coastal Aquaculture Authority Act, which includes Code of Practices for shrimp hatcheries, farms and their registration. A comprehensive database is also under preparation that will cover 150 000 farms. A programme to introduce participatory farming through the formation of Aqua Clubs is also under way. Finally, clustering in groups of farms is likely to pool resources and allow synergies and economies of scale to be realised.
Linkages Along the Value Chain
In his presentation Kristjan Davidsson stated that the global fisheries sector is of great interest to investors, be it fisheries, aquaculture, processing or distribution. This interest is growing; especially the aquaculture sector has great future potential. The estimated total value of the seafood value chain is approximately USD 400 billion. He reminded participants of the rewards that can accrue through carefully designed measures to ensure sustainability, stability and continuity in regulations and rules that form the management system a country develops for its seafood industry. Such rules include industry fundamentals like clear and secure ownership rights and investment regulations. In addition to this regulatory regime, which is of crucial importance to an investor investing in industries using natural resources regulated on national level, conditions investors evaluate are the normal conditions set for any business case; structure, cash-flows, management team etc. Growing emphasis is put on sustainable management of the fisheries resource base and it is to be noted that increased knowledge coming from science adds a more secure investment environment. Consequently scientific basis and advice for management regulations and decisions is a necessity, not to be underestimated. The growing interest from investors in the seafood sector has lead to increasing professionalism and growing skepticism towards looking at the fisheries sector as a part of the political toolset to be used in e.g. rural policies. Increasing demands from the market for sustainability, security and continuity of deliveries has both supported growth in aquaculture and it also explains the increasing mergers and acquisitions, an industry consolidation that has taken place recently in the fishing industry and will continue to grow in the foreseeable future. Mr. Davidsson presented the Icelandic fisheries sector as a case study. The introduction of the current system, which is based on individual transferable quotas, has meant more professional operations and better economic result, with less need for political intervention in times of crisis, which was a feature of the Olympic race system applied earlier. Through improved operational results, increasing strength and better negotiation position of the participants, the consolidation of fishing quotas and increased harvesting and processing revenues are clearly a benefit from the investor’s point of view, as well as being important for the viability of the industry.
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