The International Seafood Trade

The international seafood trade

The international seafood trade JAMES L. ANDERSON With contributions by JOSUÉ MARTÍNEZ-GARMENDIA JONATHAN R. KING CATHY A. ROHEIM MICHAEL J. BUSH

Cambridge England

Published by Woodhead Publishing Limited, Abington Hall, Abington Cambridge CB1 6AH, England www.woodhead-publishing.com Published in North America by CRC Press LLC, 2000 Corporate Blvd, NW Boca Raton FL 33431, USA First published 2003, Woodhead Publishing Ltd and CRC Press LLC © 2003, Woodhead Publishing Ltd The author has asserted his moral rights. This book contains information obtained from authentic and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. Reasonable efforts have been made to publish reliable data and information, but the author and the publishers cannot assume responsibility for the validity of all materials. Neither the author nor the publishers, nor anyone else associated with this publication, shall be liable for any loss, damage or liability directly or indirectly caused or alleged to be caused by this book. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming and recording, or by any information storage or retrieval system, without permission in writing from the publishers. The consent of Woodhead Publishing and CRC Press does not extend to copying for general distribution, for promotion, for creating new works, or for resale. Specific permission must be obtained in writing from Woodhead Publishing or CRC Press for such copying. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation, without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library. Library of Congress Cataloging in Publication Data A catalog record for this book is available from the Library of Congress. Woodhead Publishing ISBN 1 85573 456 7 CRC Press ISBN 0-8493-2085-2 CRC Press order number: WP2085 Typeset by SNP Best-set Typesetter Ltd., Hong Kong Printed by TJ International, Cornwall, England

Contents

1

2

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ix

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xii

About the author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xiv

Contributing authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xv

List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xvii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

James L. Anderson The diversity and importance of the international seafood trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Origins and development of seafood trade . . . . . . . . . . . . . . .

5

The role of exclusive economic zones (EEZs) . . . . . . . . . . . .

10

Wild fisheries management and the emerging role of aquaculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

Trends in capture and aquaculture production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

James L. Anderson, Jonathan R. King and Josué Martínez-Garmendia v

CONTENTS

3

4

5

World fisheries production . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Capture production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20

Aquaculture production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22

World shrimp aquaculture and capture production . . . . . . . .

25

World salmon and trout production . . . . . . . . . . . . . . . . . . . .

30

World cod, hake, pollock, and haddock production . . . . . . .

32

World tuna and bonito production . . . . . . . . . . . . . . . . . . . . .

34

World tilapia and cichlid production . . . . . . . . . . . . . . . . . . . .

35

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

Trends in international seafood trade . . . . . . . . .

39

James L. Anderson and Josué Martínez-Garmendia Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

Factors influencing seafood trade . . . . . . . . . . . . . . . . . . . . . .

39

Net trade flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54

Trade by major seafood group . . . . . . . . . . . . . . . . .

55

James L. Anderson, Josué Martínez-Garmendia and Jonathan R. King Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

Shrimp and prawns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56

Salmon and trout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

Tuna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67

Groundfish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

Crab and lobster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

Cephalopods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83

Appendix 4.1: Definition of major groups in seafood trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85

Fundamental principles of international trade applied to fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93

James L. Anderson Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93

Conventional approach to international trade analysis . . . . .

94

vi

CONTENTS

6

7

8

The bioeconomics of fishery supply . . . . . . . . . . . . . . . . . . . .

96

Fisheries and international trade . . . . . . . . . . . . . . . . . . . . . . .

98

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106

Price discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 James L. Anderson and Josué Martínez-Garmendia Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107

Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107

Individual negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113

Bargaining by fishermen’s groups . . . . . . . . . . . . . . . . . . . . . .

113

Consignment sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114

Long-term contracts and vertical integration . . . . . . . . . . . . .

114

Price transparency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115

Futures and options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116

Futures and options at work. . . . . . . . . . . . . . . . . . . . . . . . . .

118

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127

Appendix 6.1: Minneapolis Grain Exchange: Shrimp futures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128

Appendix 6.2: Kansai Commodities Exchange, Osaka, Japan: Frozen shrimp futures . . . . . . . . . . . . . . . . . . . . . . . . . .

134

Seafood market research . . . . . . . . . . . . . . . . . . . . . . 136 James L. Anderson and Josué Martínez-Garmendia Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136

Empirical methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136

Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

148

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

148

Aquaculture, fisheries, and evolution of the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 James L. Anderson Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151

Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

153

Market factors influencing competitiveness . . . . . . . . . . . . . .

160

The difference between aquaculture and traditional vii

CONTENTS

9

fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

163

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

165

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

165

Institutions and measures of importance to international trade in seafood . . . . . . . . . . . . . . 167 Jonathan R. King and James L. Anderson

10

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

167

The General Agreement on Tariffs and Trade and the World Trade Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . .

167

The Convention on the International Trade of Endangered Species. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

174

The US Pelly Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179

Additional US trade measures. . . . . . . . . . . . . . . . . . . . . . . . . .

181

Trade and environment conflicts . . . . . . . . . . . . . . . . . . . . . . .

187

The US Pelly Amendment and trade disputes . . . . . . . . . . . . .

190

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191

The seafood consumer, trade, and the environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Cathy A. Roheim Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

193

The economics of labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . .

194

Demand and supply of attributes. . . . . . . . . . . . . . . . . . . . . . .

195

Ecolabeling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

202

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

203

Appendix International trade in shrimp: A case study . . . . . . . . . . Michael J. Bush

205

...................................................

214

Index

viii

Preface

eculiar as it may seem, there is no single word that adequately defines the multitude of products addressed in this book. ‘Seafood’ was finally chosen after considerable debate, but this means different things to different people.To some, it means edible fisheries products derived solely from the sea. To others, it also includes freshwater fish, such as catfish, tilapia and carp. But, should the term seafood include fisheries products that may end up in pet food? After all, the US used bluefin tuna as pet food in the 1970s; however, by the 1980s it had evolved into one of the most valued species consumed in sushi restaurants. For the purposes of this book, seafood is defined as all edible fisheries and aquaculture products harvested from any aquatic environment, excluding seaweeds. The international seafood trade is, to my knowledge, the first attempt to assemble an account of the events, policies and institutions that have shaped the international seafood trade; the fundamentals of trade theory and seafood market research; emerging issues, such as aquaculture and rightsbased fisheries management; and market innovations, such as seafood futures and ecolabeling. It is written for those who have a desire to comprehend the business of international seafood trade, such as those involved in the importing, exporting, distributing, wholesaling, retailing and food service industries. It should serve as a valuable reference for serious seafood traders, seafood pro-

P

ix

PREFACE

curement managers, managers of fishing companies or aquaculture firms, strategic planners and investors. This text targets another important audience: public sector fisheries and aquaculture managers and regulators, environmentalists and ecologists. Professionals in this group often have a limited appreciation of economic incentives and international trade in undermining (or facilitating) efforts to conserve fish stocks and protect the environment. The many examples of failed fisheries management programs suggest that effective fisheries management requires a better understanding of the complex behavior and international linkages of the ‘apex predator’ (humans) in the global ecosystem. This text should help to broaden appreciation of the role of international trade and economic behavior. Parts of this text are written for those with some background in economics or natural resource economics; however, much of the material will be valuable to non-economist readers. It may prove to be a useful resource for economics or business courses related to international trade in natural resources. The book’s first four chapters highlight the trends and forces shaping international trade in fish, shellfish and seafood products. Chapter 5 presents some fundamentals of international trade theory applied to the seafood sector. An important aspect of this chapter is to show how the dependence of the seafood industry on a renewable natural resource changes how one needs to conceptualize international trade in fish. Chapter 6 provides an overview of some of the many price discovery mechanisms found in the seafood business. They range from individual negotiation to various forms of auctions and contracting. It devotes special attention to the potential role of futures and options markets for seafood. Some of the basic tools for conducting demand analysis and market research are found in Chapter 7. Chapter 8 takes a look at the emerging aquaculture sector and the dramatic growth potential for this area of the seafood industry. The complex system of international institutions and their impact on international fisheries trade is the focus of Chapter 9. Featured topics within this chapter include the tuna–dolphin/shrimp–turtle disputes and antidumping cases. Chapter 10 considers the recent trends in ecolabeling and how these efforts are likely to influence trade and the health of the underlying natural resource. The final section, the Appendix, presents a departure from the character and style of the rest of the text. In this section, an experienced international shrimp trader presents his perspective through a thought-provoking example of a typical, real-world dilemma traders may face today. It realistically reflects the nature of the problems and questions faced by the current-day practitioner. The seafood sector is complex and dynamic, and developing a comprehensive understanding of every aspect of it is an intractable task. However, I hope this text will assist readers in appreciating the breadth and x

PREFACE

depth of this vast, ever-evolving industry. International trade in seafood provides income for some of the very poorest of nations; influences the health of the oceans and, in some cases, survival of endangered species; and is essential to satisfy the demanding appetite of consumers of some of the most exclusive, exotic foods. Seafood harvest and production spans from primitive methods to highly advanced biotechnology. The seafood industry is a giant that is not well understood. I hope this book will help contribute to a better understanding of seafood trade, leading to a more efficient, profitable and sustainable seafood sector. James L. Anderson Potter Pond, East Matunuck Rhode Island

xi

Acknowledgements

his book would not have been possible without the assistance and influence of many people to whom I owe great thanks. The contributions of Josué Martínez-Garmendia, Jonathan King, Cathy Roheim and Michael Bush were essential. In particular, Josué and Jonathan helped move the process along immeasurably. The many students I have taught at the University of Rhode Island, especially those who are still active in fisheries economics or business, helped to define it. They include Gil Sylvia, Oregon State University; Tomislav Vukina, North Carolina State University; Quentin Fong, University of Alaska; Yuko Kusakabe, seafood market consultant; Todd Clark, Endeavor Seafood; Michael Carroll, Ahold USA; Rachel Hopkins, Sea Web; Priscilla Brooks, Conservation Law Foundation; and Michael Horowitz, futures trader. Professors Robert Firch, University of Arizona; and Alex McCalla, University of California at Davis, introduced me to market and international trade analysis, starting me down the path which ultimately led to the creation of this text. My friends and colleagues, Jim Wilen, University of California at Davis; and the late Tom Weaver, University of Rhode Island, have been highly valued through the years for their creativity, motivation, advice, and ideas. Over the years I have had the opportunity to meet many professionals in the seafood business, such as George Souza, Endeavor Seafood; Casey Todd, Metompkin Bay Oyster Co.; Ron Rogness, Long John Silver’s Inc.; Ken

T

xii

ACKNOWLEDGEMENTS

Hirtle, Heritage Salmon Co.; and Rodrigo Infante, the Association of Chilean Salmon Farmers. They have had a significant impact on this work, although they are probably unaware of it. In addition, I must recognize the intangible influence of the ancestral entrepreneurs, traders and merchants whose pictures patiently watched me through the process. They include George Kerr Anderson, Samuel Mosby Anderson, Joaquim Bishop, David Anderson and Mathew Morris Kerr. There is one person I cannot thank enough. Without her insightful and expert editing, professional assistance and loyalty, there is no possibility that this work would have been completed. That person is Barbara Harrison. She does not receive nearly enough recognition for her considerable talents. Finally, all major endeavors cause the family to bear considerable, hardto-define costs. Therefore, I gratefully thank my wife, Joan, and my children, Amy, Alyssa and James, for their support, patience and encouragement.

xiii

About the author

ames L. Anderson is a professor and chair of the Department of Environmental and Natural Resource Economics at the University of Rhode Island, Kingston, RI, USA. His research in the area of fisheries and aquacultural economics began in 1980 with a study on the bioeconomics of salmon ranching in the Pacific Northwest. Since that time, he has been involved with numerous research projects related to fisheries and aquaculture management, seafood marketing and international trade, and seafood price forecasting. Recent work has focused on analysis of salmon and shrimp markets, and evaluating how aquaculture development and rights-based fisheries management are changing the global seafood sector. He is the Editor of Marine Resource Economics and SeafoodReport.com and has served on the Editorial Council of the Journal of Environmental Economics and Management. Currently, he serves as a Director of the International Institute of Fisheries Economics and Trade (IIFET). He was presented with the Outstanding Ph.D. Thesis Award by the American Agricultural Economics Association in 1984, Research Scientist of the Year Award by the University of Rhode Island in 1994 and the Article of the Year Award from the Editorial Board of Agricultural and Resource Economics Review in 1995. He holds degrees from the College of William and Mary (B.S.), the University of Arizona (M.S.) and the University of California, Davis (Ph.D.).

J

xiv

Contributing authors

osué Martínez-Garmendia is an economic consultant at Information Resources, Inc., in Fairfield, New Jersey, where he specializes in commodity market and consumer-good marketing research. He received his Ph.D. in Environmental and Natural Resource Economics from the University of Rhode Island and his M.S. in Marine Biology and Fisheries from the University of Miami. He has published numerous papers in peer-reviewed journals on fisheries biology and seafood markets and trade.

J

Jonathan R. King is as a project consultant for Northern Economics, Inc., Anchorage, Alaska. He holds an M.S. in Environmental and Natural Resource Economics from the University of Rhode Island. His research has focused on property tax effects of conservation easements, assessing the economic effects of pollution on recreational fisheries and analysis of Alaskan salmon prices. Cathy A. Roheim is a professor of Environmental and Natural Resource Economics and Associate Dean for Research and Outreach in the College of the Environment and Life Sciences at the University of Rhode Island. She received her Ph.D. in Agricultural Economics from the University of California, Davis. Her most recent research has focused on determining market demand for ecolabeled seafood and the effectiveness of this market-based xv

CONTRIBUTING AUTHORS

incentive on promoting sustainable fisheries. Dr. Roheim serves on the Stakeholders Council of the Marine Stewardship Council and served on the U.S. National Advisory Committee to the Commission for Environmental Cooperation. She has published in numerous journals, and has presented keynote addresses at many international fisheries conferences. Michael J. Bush is a principal with Endeavor Seafood, an importer and marketer of seafood, based in Newport, RI. He joined Endeavor from the Global Food Exchange, a provider of supply-chain management technology, where he was director of seafood. Previously, he was senior manager of seafood procurement with Darden Restaurants, responsible for their $200 million shrimp-sourcing and importing program. He also worked as a purchasing manager for Long John Silver’s Restaurants, Inc. He is a former director of the National Fisheries Institute and chairman of its Technology Solutions Committee. He received his M.S. in Environmental and Natural Resource Economics from the University of Rhode Island.

xvi

Abbreviations

ABT ARF ARIMA models CBT cif CITES CMI CME cpp CSCE CTE DSU EEZ EU FAO FDA GAA GATT H&G IIFET IISD

Atlantic bluefin tuna aquaculture, ranching, fishing autoregressive, integrated moving average models Chicago Board of Trade cost, insurance, freight Convention on International Trade of Endangered Species Car Manufacturers Institute Chicago Mercantile Exchange count per pound Coffee, Sugar and Cocoa Exchange Committee on Trade and Environment Dispute Settlement Understanding exclusive economic zone European Union Food and Agriculture Organization Food and Drug Administration Global Aquaculture Alliance General Agreement on Tariffs and Trade headed and gutted International Institute of Fisheries Economies and Trade International Institute of Sustainable Development xvii

ABBREVIATIONS

IMF IQF IRI ITO ITQ IUCN IWC JTSA MAC MAPE MEA MGE MMPA MSC MSY MT NASS nei NFI NGO NMFS NOAA NOK NYMEX OECD PBO PPM RAP TAC TBT TED TRIPS UFAWU UNEP USDA USDC USEPA USITC WTO WWF

International Monetary Fund individually quick frozen Information Resources, Inc. International Trade Organization Individual Transferable Quota International Union for Conservation of Nature and Natural Resources International Whaling Commission Japanese Tuna and Skipjack Association Marine Aquarium Council mean average percent error Multilateral Environmental Agreement Minneapolis Grain Exchange Marine Mammal Protection Act Marine Stewardship Council maximum sustainable yield metric tons National Agricultural Statistics Service not elsewhere indicated National Fisheries Institute non-government organization National Marine Fisheries Service National Oceanic and Atmospheric Administration Norwegian kroner New York Mercantile Exchange Organization for Economic Co-operation and Development pinbone-out process and production methods Responsible Aquaculture Alliance total allowable catch Technical Barriers to Trade turtle-excluder device Council for Trade-related Aspects of Intellectual Property Rights United Fishermen and Allied Workers’ Union United Nations Environmental Programme United States Department of Agriculture United States Department of Commerce United States Environmental Protection Agency United States International Trade Commission World Trade Organization World Wildlife Fund xviii

CHAPTER

1 Introduction James L. Anderson

The diversity and importance of the international seafood trade he vast majority of consumers, retailers, and restaurateurs have limited appreciation for and understanding of the complexity and global nature of seafood supply. Few know that over 4000 species of aquatic organisms and plants are harvested worldwide or that there are over 800 commercially important fish, crustaceans, and mollusks. For shrimp alone, there are more than 30 species actively traded. Contrast this with the mere 10–15 species of commercially important birds and mammals, which account for virtually all other animal protein sources. Furthermore, there are hundreds of product forms ranging from canned tuna to fresh, boneless salmon fillets to salted herring roe, dried shark fins, frozen pollock block, individually quick frozen (IQF) breaded cod portions, smoked mackerel, clam juice, live lobster, fish meals and oils, and so on. In addition, there are over 190 countries supplying fish to the global marketplace. The technology used in primary production includes ancient techniques, simple nets, rakes, spears and harpoons, or pond-based fish farming systems. Even in the US, the Rhode Island commercial clam fishery still uses hand rakes, and some tuna and swordfish are still captured by harpoon. However, the technologies used in other parts of the industry are some of

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1

THE INTERN ATION AL SEAFOOD TRADE

the most sophisticated of any used in biologically based production. Many fishing vessels use extremely advanced navigation and fish finding equipment; some vessels have on-board processing systems. Some aquaculture producers employ state-of-the-art biotechnology, breeding programs, disease management programs, water quality systems, and feed formulations. The complexity of seafood trade is further complicated by the enormous number of firms, fish farms, and fishing vessels that trade fish. In 1999, there were 23 014 large fishing vessels (over 100 MT) registered in Lloyd’s database worldwide (FAO 2000). In addition, there are hundreds of thousands of other fishing vessels and other types of fishing units. For example, the US had an estimated 77 398 fishing vessels in 1998, and Japan had over 300 000 fishing units and over 50 000 marine and inland aquaculture establishments. The seafood industry is not highly concentrated; there are thousands of processors and tens of thousands of wholesalers and brokers. In the US alone, there were an estimated 1073 processing plants and 3334 wholesalers in 1998 (USDC 2002). Many extremely small companies (i.e., one employee) participate in international trade as well. The scale of the international seafood trade is generally underappreciated, even by the experts in fisheries economics. In 2000, international trade in fish and fish products accounted for approximately 1% of the value of all world trade and 14% of world trade in all agricultural, food, animal, and fish products (FAO 2002). Consider Fig. 1.1 and Table 1.1, which present data for world trade in agricultural commodity categories compared to world trade in fish products. In 2000, world trade in fish totaled nearly 80 000 000

Value ($ thousands)

70 000 000 60 000 000 50 000 000 40 000 000 30 000 000 20 000 000

All

fru it, ve and nuts ge , tab All les fis hp rod uc ts All ce rea ls All (in me c. po ats ult ry) All be ve rag es All co an ffee dc ,t oc ea All oa da iry an pro d e du gg cts s All t pro obac du co cts Su ga ho r an ne d y Wi n ve e a rm nd ou th

10 000 000

1.1

World trade: selected agricultural and fish imports, 2000 (source: FAO 2002). 2

3 3 843 024 4 843 133 2 736 158 1 596 741 171 995 490

10 793 742 10 410 349 6 209 662 5 050 250 430 799 729

Source: FAO 2002. Fishstat Database, Rome, Italy

35 597 619 19 834 970 13 686 961 18 724 822 14 986 475 12 993 376 14 834 605 8 009 343 4 775 724 7 245 595

European Union (15)

74 039 357 60 925 650 56 627 407 44 548 692 34 459 590 29 288 464 26 194 740 21 102 029 15 879 288 13 120 386

World

2 218 210 1 270 081 1 115 062 470 018 121 561 395

14 214 862 23 543 812 20 992 489 14 715 289 5 184 613 5 183 032 5 447 311 8 202 962 4 519 223 1 160 291

Asia

3 032 534 2 635 276 1 409 037 2 349 890 44 949 426

10 633 646 10 556 372 2 862 622 4 011 915 8 566 560 5 022 213 1 011 467 1 169 917 1 688 746 2 363 888

USA

824 982 811 706 551 287 31 428 36 153 814

6 230 360 15 742 561 4 588 838 8 548 803 1 995 645 1 779 378 744 254 2 903 917 497 562 810 728

Japan

675 182 1 519 650 622 478 151 992 34 488 729

9 106 731 2 282 399 1 790 477 3 609 021 2 967 359 3 142 430 2 746 344 1 550 505 759 635 1 693 585

Germany

World and selected countries, imports of selected agricultural and fish products, 2000 (US$ thousands)

All fruit, nuts, and vegetables All fish products All cereals All meats (incl. poultry) All beverages All coffee, tea and cocoa All dairy products and eggs All tobacco products Sugar and honey Wine and vermouth All dist. alcoholic beverages (excl. wine) Coffees (roasted and green) All bananas and plantains Beer Total agricultural trade

Table 1.1

618 222 285 148 492 359 429 195 25 877 168

5 830 315 2 209 877 1 836 697 3 555 567 4 085 829 1 655 544 1 633 453 605 842 1 048 297 2 583 854

UK

485 007 655 233 168 909 237 684 23 224 627

5 221 279 3 018 121 1 813 395 2 827 769 1 481 084 2 134 798 1 941 336 1 454 665 537 790 458 780

France

INTRODUCTION

THE INTERN ATION AL SEAFOOD TRADE

$61 billion behind the number one category, all fruits, nuts, and vegetables combined. In 2000, world fish trade exceeded world trade in all cereals (rice, wheat, corn, etc.) combined for the first time. Fish trade also exceeds world trade in all nonfish meats and meat preparations, combined. It is more than twice the world trade in all tea, coffee, and cocoa, combined, and more than four times the wine trade. Among these categories, fish has been one of the fastest growing over the past decade (an increase of 52% from 1990 to 2000). This growth in international trade has occurred despite the overfishing of many wild fish stocks around the world, largely the result of increasing aquaculture production. The all beverage category, tobacco products, and the wine and vermouth groups have realized similar growth rates. However, in actual value, fish trade increased by over $20 billion during the decade, more than any other major food group. In Asia, fish imports account for the largest trade volume compared to all other agricultural groupings (Fig. 1.2). In Japan, imports of fish products represent nearly double the next closest category, all meat and meat products (Fig. 1.3). In the US, imports of fish in 2000 were virtually the same as the largest category, all fruit, nuts, and vegetables (Fig. 1.4). In the EU (15 countries) fish is the second largest import category (Fig. 1.5). Looking at some of the larger trading nations within the EU, we find that in France fish imports are the second largest food import category (Fig. 1.6). However, in countries such as Germany and England other groupings such as all fruits, nuts, and vegetables; all meats; all beverages; coffee, tea, and cocoa (Germany); wine and vermouth; and all cereal grains are similar to or greater in value than fish imports (Fig. 1.7 and 1.8).

20 000 000 15 000 000 10 000 000 5 000 000

A an ll fru d v it, eg nut eta s, ble All s fis hp rod uc ts All ce rea ls All (in me c. po ats ult ry) All be ve rag es All c an offee dc ,t All oc ea oa da iry an pro d e du gg cts s All t pro obac du co cts Su ga ho r an ne d y Wi n ve e a rm nd ou th

Value ($ thousands)

25 000 000

1.2

Asian trade: selected agricultural and fish imports, 2000 (source: FAO 2002). 4

INTRODUCTION 18 000 000 Value ($ thousands)

16 000 000 14 000 000 12 000 000 10 000 000 8 000 000 6 000 000 4 000 000

1.3

ere als All me po ats ult (in ry) c. All be ve rag es All co f an fee dc ,t oc ea All oa da iry an pro d e du gg cts s All tob pro ac du co Su cts ga ra nd ho ne y Wi n ve e a rm nd ou th

All c

All fru ve it, nu ge tab ts, a les nd All fis hp rod uc ts

2 000 000

Japanese trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

Value ($ thousands)

12 000 000 10 000 000 8 000 000 6 000 000 4 000 000

A an ll fru d v it, eg nut eta s, ble All s fis hp rod uc ts All ce rea ls All me a po ts ult (in ry) c. All be ve rag es All c an offee dc ,t oc ea oa pro A du ll da cts iry an de gg s All tob pro ac du co Su cts ga ra nd ho ne y Wi ve ne a rm nd ou th

2 000 000

1.4

US trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

Origins and development of seafood trade The basic methods of harvesting fish by trap, spear, or net (all still in use) are thousands of years old. Basic aquaculture methods were used in China before 1500 B.C. Methods of preparing and preserving fish such as drying, salting, and fermentation processes are ancient as well. As a result, trade in fish, and even the international trade in fish products, predates recorded history. 5

40 000 000 35 000 000 30 000 000 25 000 000 20 000 000 15 000 000 10 000 000 5 000 000 All fru ve it, nu ge tab ts, a les nd All fis hp rod uc ts All ce rea ls All (in me c. po ats ult ry) All be ve rag es All co an ffee dc ,t oc ea All oa da iry an pro d e du gg cts s All tob pro ac du co c Su ts ga r ho an ne d y Wi n ve e a rm nd ou th

Value ($ thousands)

THE INTERN ATION AL SEAFOOD TRADE

1.5 EU (15 countries) trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

5 000 000 4 000 000 3 000 000 2 000 000

1.6

All t pro obac du co cts Su ga ho r an ne d y Wi n ve e a rm nd ou th

1 000 000

A an ll fru d v it, eg nut eta s, ble All s fis hp rod uc ts All ce rea ls A (in ll me c. po ats ult ry) All be ve rag es All co f an fee dc ,t oc ea All oa da iry an pro d e du gg cts s

Value ($ thousands)

6 000 000

French trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

Bekker-Neilsen’s research on ancient fish trade finds that fermented fish sauce, garum,1 was highly valued by the ancient Romans. Garum, stored in amphora, could be shipped great distances. Bekker-Neilsen notes that garum amphora fragments from the period between 10 B.C. and A.D. 90 have been found in the Roman colony of Augusta Raurica near present day Basel, Switzerland. The origin of the fragments suggests that the Roman colony 1 Garum is a fermented fish sauce made by placing whole, ungutted fish in a heavy brine solution and exposing the mixture to sunlight. Fermentation results, creating a strongly flavored sauce (McClane 1977). 6

10 000 000 9 000 000 8 000 000 7 000 000 6 000 000 5 000 000 4 000 000 3 000 000 2 000 000 1 000 000 All fru ve it, nu ge tab ts, a les nd All fis hp rod uc ts All ce rea ls A (in ll me c. po ats ult ry) All be ve rag es All co an ffee dc ,t oc ea All oa da iry an pro d e du gg cts s All t pro obac du co cts Su ga ho r an ne d y Wi n ve e a rm nd ou th

Value ($ thousands)

INTRODUCTION

1.7

German trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

7 000 000

Value ($ thousands)

6 000 000 5 000 000 4 000 000 3 000 000 2 000 000

All

fru ve it, nu ge tab ts, a les nd All fis hp rod uc ts All ce rea ls All (in me c. po ats ult ry) All be ve rag es All co f an fee dc ,t oc ea All oa da iry an pro d e du gg cts s All t pro obac du co cts Su ga ho r an ne d y Wi n e ve rm and ou th

1 000 000

1.8

UK trade: selected agricultural and fish imports, 2000 (source: FAO 2002).

imported a considerable amount of the fish sauce from Gaul and Spain. Based on this and other archeological evidence, he concludes that fish sauce was likely to have played a role in the first-century Roman economy comparable to that of olive oil (Bekker-Neilsen 2002). According to Kurlansky (1997), by the ninth century the Vikings traded dried cod between Iceland and Norway, with surpluses going to northern 7

THE INTERN ATION AL SEAFOOD TRADE

Europe. Kurlansky further suggests that by A.D. 1000 the Basques were trading dried, salted cod in Europe that was harvested from the north Atlantic. The international trade in cod played an essential role in the economies of northern Europe by the thirteenth century. This trade was further enhanced by Catholic religious observances, which increased the demand for dried cod in Europe during the Middle Ages. The Hanseatic League emerged in the thirteenth century as an amorphous mercantile group of medieval low German towns engaged in foreign trade. By the mid-1300s, the Hanseatic League included most large German towns (notably Lübeck, Bremen, and Hamburg) in the region of the North and Baltic Seas. Although it had no formal constitution, it came to dominate trade through commercial boycott and monopoly. The League gained control of the international cod trade through its operations based in Bergen, Norway. The League also controlled trade in smoked and pickled herring harvested by Danish fishermen. It had considerable economic importance throughout the fourteenth and fifteenth centuries, but it then declined until its final meeting in 1669. The exploration of Giovanni Caboto (aka John Cabot), leaving from Bristol, England, to the coast of North America in 1497, ultimately led to the development of cod fisheries off the coast of Newfoundland. During the first half of the sixteeth century, the French, English, and Portuguese were fishing off the coast of North America, harvesting cod for European markets. By the seventeeth and early eighteenth centuries, trade in salted and dried cod grew to be one of the most important industries in colonial New England and the Maritime Provinces. It is considered the first industry in colonial New England, and cod was the first product exported from colonial Massachusetts. The industry became a considerable source of wealth and power (Martin and Flick 1990).

Canning While trade in various forms of dried, salted, smoked, and otherwise cured fish products was growing, the introduction of canning technology had a major influence on the evolution of international fish trade. Napoleon offered a cash prize of 12 000 francs for the discovery of a new process to preserve foods for the military. In response, Nicholas Appert invented the process of canning using glass containers in 1795. Glass containers were not particularly durable for military use, and by 1810 Peter Durand had patented a process using metal cans. By 1812, the first canning of seafood in the United States was accomplished by Ezra Daggert and Thomas Kensett in New York City, NY. They canned oysters, meats, fruits, and vegetables (Can Manufacturers Institute 2000). In 1844, Kensett started the first large-scale 8

INTRODUCTION

oyster canning operation in Baltimore, MD. Canned oysters are considered to be the first canned seafood to receive broad distribution. Although Atlantic salmon was first canned in New Brunswick, Canada, in 1839, the first economically significant venture began in Sacramento, CA, by the Hume brothers and A. S. Hapgood. In 1866, they moved their salmon canning operation to Eagle Cliff, Washington (Martin and Flick 1990). The canned salmon industry grew rapidly in the late nineteenth century, and in 1871, Pelling Stanley and Company in Liverpool, England, was the first to import canned salmon from America into the UK. The UK continues to be the dominant export market for US and Canadian canned salmon. Matsuda (2000) states that in 1910, the first canned salmon in Japan was packed in west Kamchatka by Tsuzumi Shokai, primarily to serve the export markets in the US and Europe. During the latter half of the nineteenth century there were many other seafoods canned, including sardines, turtle, menhaden, mackerel, clams, crabs, and lobsters. However, the major canned fish found in international trade, namely tuna, was first canned in 1903 in southern California. Japan started canning tuna primarily for export in 1910. This industry grew throughout most of the twentieth century. The majority of the global tuna harvest is still canned, and it is one of the most widely traded seafood products. For example, National Fisheries Institute (NFI) estimates (2002) indicate that up until 2001, tuna (primarily canned) was the most heavily consumed seafood product in the US on a per capita basis.

Refrigeration and freezing The innovation of canning broadened the market for many seafood species, such as oysters, mackerel, and crab. More importantly, canning was the primary technological change sparking the development of the international markets for sardines, tuna, and salmon. However, increased growth in international trade of high-value seafood required development of another type of technology, refrigeration and freezing. The value of using natural ice and insulated containers to keep foods fresher for longer has been appreciated since the seventeenth century. Throughout the latter half of the nineteenth and in the beginning of the twentieth centuries, the ice box, using natural ice for cooling, grew in usage. By the 1860s, refrigerated railroad cars were being used to transport seafood. Carré launched the first ice block machine in 1859. In 1877, the first intercontinental shipment of frozen food (mutton) using mechanical refrigeration was shipped from France to Argentina. The first frozen fish was produced in the US in 1865 by placing fish in pans surrounded by ice and salt. By the end of the nineteenth century the US was exporting mechanically frozen 9

THE INTERN ATION AL SEAFOOD TRADE

salmon to Europe (Zugarramurdi et al. 1995). The first quick freezing was accomplished by Clarence Birdseye in 1923. This quick-freezing technology and related innovations were essential developments for the production of high-quality frozen seafood. The first quick-frozen seafoods (fish and oysters) were produced in Springfield, MA, by the Birdseye Frozen Food Co. in 1930. After the end of World War II, freezing and refrigeration technology began to have significant impact on the international trade in seafood. By the 1950s, most retail stores and consumers had refrigerators and freezers, and refrigerated trucks had been introduced. The first full-scale factory stern trawler utilizing on-board plate and blast freezers was the ‘Fairtry’, built in Aberdeen, Scotland, in 1953 (Zugarramurdi et al. 1995). By the 1970s, the growth in international trade in frozen and chilled seafood was poised to increase rapidly. As a result of the development of the factory ship, several countries, such as Spain, Japan, and the USSR, invested in distant-water fleets to pursue fish resources off foreign coasts. Fish harvested in this manner was not included in the international trade statistics; however, this development represented a new level of globalization in fisheries. Innovations in shipping, preservation, and product technology are continuing to have a positive impact on seafood trade. Refinements in leak-proof, styrofoam packaging, which was developed in the early 1980s primarily for the farmed salmon industry, allowed for rapid growth in the shipping of unfrozen, fresh fish by air. This innovation has contributed to making Chile the number two fresh seafood exporter to the US, behind Canada. Many new product forms have also been introduced. One example is the conversion of minced Alaska pollock into surimi (an intermediate product of refined, stabilized fish protein concentrate developed in Japan). It is further processed into analog seafood products, such as artificial crab legs, scallops, or shrimp. Other innovations such as irradiation of seafood, ‘flexible’ can (foil pouch) technology, advances in cryogenic freezing, and live shipping systems will likely facilitate trade growth.

The role of exclusive economic zones (EEZs) In addition to the changes in shipping and processing technology since the end of World War II, there has been a general trend to reduce barriers to international trade. The General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) policies toward reduced tariffs and related agreements have contributed to growth in international fish and 10

INTRODUCTION

seafood trade. (These will be discussed more fully in Chapter 9.) The emergence of China, Russia, and other Eastern Bloc countries into the global economic community during the latter part of the twentieth century further increased international trade in seafood. An important factor explaining the rapid growth in trade in recent decades was the imposition of 200-mile exclusive economic zones (EEZs) by coastal nations (see Chapter 3 for more discussion). Peru, Ecuador, and Chile implemented EEZs as early as 1952 in response to their claim of abusive foreign harvest of their coastal resources. By the time the US declared its 200-mile EEZ in 1976, 37 nations had already extended their jurisdiction, and by the mid-1980s, nearly all coastal nations had imposed EEZs. Countries with considerable distant-water fishing fleets, such as Spain and Japan, have been negatively impacted, as coastal nations expanded their domestic fleets to exploit the fisheries within their 200-mile EEZ. As a result, countries that relied on harvesting within the 200-mile EEZ of foreign nations had to increase their imports to meet domestic demand.

Wild fisheries management and the emerging role of aquaculture There are two other general themes that are changing the face of the fish industry and international trade. One is the steady and apparently increasing trend toward managing fisheries using rights-based systems in place of the inefficient and failed ‘command and control’ systems (such as gear controls, days-at-sea limitations, and seasonal closures) used in most fisheries in the latter half of the twentieth century. Rights-based systems assign property rights (e.g., fish harvest quota shares) to individuals, groups, or communities that depend on the fisheries resource. Various forms of rights-based (individual, cooperative, or community) management systems are now the dominant approaches used in Iceland, New Zealand, Australia, Japan, Norway, and in some US fisheries. The important feature of these systems is that they tend to orient the industry away from trying to influence bureaucratic fisheries management institutions, overcapitalizing the fleet, and racing for the fish. In rights-based fisheries, the industry tends to focus on efficient, profit-maximizing harvest systems and to consider the fishery resource as an asset to be managed for a sustainable future. The industry is also inclined to become more concerned about effective marketing. The fish harvested under rightsbased management systems are often of higher quality and receive better handling than the fish from the regulated, open-access command and control fisheries. The adoption of rights-based systems will tend to increase international trade in fish for two reasons: first, the fish stocks are likely to be 11

THE INTERN ATION AL SEAFOOD TRADE

efficiently and sustainably managed and, second, profit incentives motivate the industry to seek out the best markets. The other major theme is the rapid growth of aquaculture. In fact, much of the growth in value of the international fish trade has come from aquaculture systems of one type or another. International trade in shrimp, salmon, trout, tilapia, oysters and carp is now dominated by aquacultured products. With innovations in aquaculture management systems, disease control, feed development, and biotechnology still largely in their infancy, the potential for growth in aquaculture is tremendous. Much of the growth will target the international market. Chapter 8 will provide considerable discussion on this subject. Both rights-based fishing and aquaculture development will increase globalization of the fisheries industry and will also tend to move the industry towards increased consolidation. Aquaculture has contributed to consolidation in the seafood industry. Some firms are vertically integrated, owning feed, aquaculture, and processing plants. This is typical in shrimp and salmon aquaculture. The introduction of rights-based fisheries management systems has also contributed to concentration. It has reduced some of the uncertainty in the supply of fish, attracting larger investment. In some cases, consolidation has led major seafood producers and traders to become vertically integrated into multinational companies. Such corporate organizations have created greater coordination between production and marketing of seafood.

Looking forward International trade in seafood is complex, dynamic, and diverse. Technological innovations in harvesting, shipping, processing, and, more recently, innovations in aquaculture systems have had a remarkable influence on trade. Innovations in fisheries management systems; efforts to reduce international trade restraints; the increasing presence of China, Russia and other countries in seafood trade; and the imposition of 200-mile EEZs have all tended to increase seafood trade. Looking forward and barring war, general economic malaise, or a reversal of the trend toward freer trade, it is expected that international seafood trade should continue to experience growth for the foreseeable future.

References Bekker-Nielsen T, ‘Fish in the ancient economy’. In Ascani K. et al. (eds), Ancient History Matter: Studies Presented to Jens Erik Skydsgaard on His Seventieth Birthday, Rome, Analecta Romana Suppl. XXX, 2002. 12

INTRODUCTION Can Manufacturers Institute (CMI), ‘History of the can’, http://www.cancentral.com/history.html, 2000. FAO, The State of World Fisheries and Aquaculture: 2000, Rome, Italy, 2000. FAO, Fishstat Database, Rome, Italy, 2002. Kurlansky M, Cod: A Biography of the Fish that Changed the World, New York, NY, Walker and Co., 1997. Martin R E and Flick G J, The Seafood Industry, New York, NY, Van Nostrand Reinhold, 1990. Matsuda Y, ‘History of fish marketing and trade with particular reference to Japan’, Proceedings of the International Institute of Fisheries Economics and Trade Conference. Wellington, New Zealand, 2000. McClane A J, The Encyclopedia of Seafood Cookery, New York, NY, Holt, Reinhart & Winston Publishers, 1977. National Fisheries Institute (NFI), ‘Seafood top ten per capita consumption by species’, www.nfi.org, 2002. USDC, Fisheries Statistics of the United States 2002, Silver Spring, MD, National Marine Fisheries Service, Office of Science and Technology, Fisheries Statistics Div. 2002. Zugarramurdi A, Parin M A and Lupin H M, Economic Engineering Applied to the Fishery Industry, FAO Fisheries Technical Paper 351, Rome, Italy, FAO, 1995.

13

CHAPTER

2 Trends in capture and aquaculture production James L. Anderson, Jonathan R. King and Josué Martínez-Garmendia

World fisheries production his chapter outlines trends in world seafood production. From 1970 to 2000, world production of seafood products, excluding seaweeds, doubled from 65.5 million metric tons (MT) live weight equivalent, to 130.4 million MT. World production is composed of two components: capture fisheries and aquaculture. Capture fisheries encompass the traditional fishing methods that rely on wild fisheries stocks or, in some cases, released hatchery fish. Aquaculture relies on various techniques to control the organism’s reproduction, growth, and harvest. Since 1970, capture production has increased by roughly 50% from 63 million MT in 1970 to 95 million MT in 2000. However, much of the growth in capture fisheries over the last 30 years occurred prior to 1990. Since 1990, capture production has leveled out and fluctuated between 85 and 95 million MT (see Table 2.1; Fig. 2.1). Aquaculture production increased more than 13-fold from 2.6 million MT in 1970 to 35.6 million MT in 2000. The growth in aquaculture production has resulted in it accounting for a steadily increasing share of overall fisheries production. Aquaculture represented 27% of total production in 2000, up from just four per cent of total production in 1970 (Table 2.1). Aquacultured products can have certain benefits over capture fisheries.

T

14

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION Table 2.1 World capture fisheries and aquaculture production (MT: live weight equivalent)

Year

Total production

Capture production

Aquaculture production

Aquaculture as % of total production

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

65 466 515 65 886 497 61 895 598 62 567 585 65 968 816 65 956 502 69 432 666 68 421 765 70 469 812 71 193 267 72 445 829 75 097 288 77 284 155 78 088 985 84 526 954 87 132 820 93 807 130 95 629 069 100 392 428 101 637 425 98 639 113 98 293 769 100 855 459 104 432 797 112 362 504 116 380 746 120 293 993 122 510 107 117 741 708 126 192 621 130 433 785

62 896 933 63 144 959 58 937 865 59 483 100 62 705 347 62 333 801 65 700 090 64 296 747 66 262 243 66 848 339 67 735 338 69 849 099 71 606 957 71 857 990 77 575 138 79 099 747 84 635 023 85 057 944 88 703 590 89 316 560 85 564 785 84 553 731 85 428 180 86 597 885 91 598 635 91 887 702 93 546 635 93 781 942 86 948 207 92 882 272 94 848 674

2 569 582 2 741 538 2 957 733 3 084 485 3 263 469 3 622 701 3 732 576 4 125 018 4 207 569 4 344 928 4 710 491 5 248 189 5 677 198 6 230 995 6 951 816 8 033 073 9 172 107 10 571 125 11 688 838 12 320 865 13 074 328 13 740 038 15 427 279 17 834 912 20 763 869 24 493 044 26 747 358 28 728 165 30 793 501 33 310 349 35 585 111

3.9 4.2 4.8 4.9 5.0 5.5 5.4 6.0 6.0 6.1 6.5 7.0 7.4 8.0 8.2 9.2 9.8 11.1 11.6 12.1 13.3 14.0 15.3 17.1 18.5 21.1 22.2 23.5 26.2 26.4 27.3

Source: FAO 2002. Fishstat Database, Rome, Italy

These benefits can include increased stability of production and product supply, lowered consumer cost and increased product availability, and greater quality control. However, the methods may also lead to environmental pollution, be susceptible to supply fluctuation caused by disease, and not work equally well across all species. Over 60% of the world’s aquaculture and capture production occurs in Asia, followed by Europe, South America, and North America (Fig. 2.2). The growth in Asian production has outstripped growth in other regions. Much 15

THE INTERN ATION AL SEAFOOD TRADE 140 000

MT (thousands)

120 000 100 000 80 000 60 000 40 000

19 7 19 0 19 71 7 19 2 73 19 19 74 7 19 5 19 76 7 19 7 19 78 7 19 9 8 19 0 19 81 19 82 1983 8 19 4 8 19 5 8 19 6 8 19 7 1988 8 19 9 9 19 0 19 91 9 19 2 9 19 3 9 19 4 1995 9 19 6 1997 9 19 8 9 20 9 00

20 000

Total production

2.1

Capture production

Aquaculture production

World capture fisheries and aquaculture production (live weight equivalent).

MT (thousands)

140 000 120 000 100 000 80 000 60 000 40 000 20 000

19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 9 20 8 00

0

Other Oceania

2.2

Africa America, North

America, South Europe

China Asia (excl. China)

Production by continent, including China (live weight equivalent).

of this growth can be attributed to increasing aquaculture production and utilization of Pacific Ocean capture fisheries. Currently, Pacific Ocean production represents 50% of capture harvest. In 1950, the Pacific Ocean represented 33% of total production, while the Atlantic Ocean represented 51%. However, over time, yields from the Atlantic Ocean have flattened, while Pacific yields have increased greatly. In 2000, the Atlantic represented just 19% of total production, while the Pacific represented 50%. Much of the growth in Pacific production occurred between 1950 and 1965. As Asian Pacific nations rebuilt from World War II, nations developed distant-water fleets, and America increased its exploitation of US Pacific Coast resources. Consequently, Pacific production has increased 16

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION

12-fold since 1950 and continues to grow, while Atlantic production has increased less than threefold and has not increased substantially since the early-1970s. The Indian Ocean and ‘other waters’ (including inland seas and freshwater) have seen considerable growth in overall production (Fig. 2.3). However, the Indian Ocean still represents less than ten percent of total world production. The importance of production from ‘other waters’ has doubled in relative terms. In 1950, these waters represented only 11% of total world production. This number stayed relatively constant until the mid1980s. However, since 1984 this number has doubled, largely because of increasing aquaculture production, to 22% of total production. China, Peru, Japan, India, the US, Indonesia, Chile, the Russian Federation, Thailand, and Norway lead the world in total seafood production (see Table 2.2; Fig. 2.4a, 2.4b, and 2.4c). However, the production of the firstplace nation (China) exceeds that of the second-place nation (Peru) nearly fourfold. In fact, China’s reported production in 2000 is greater than the production of the next seven countries combined. China has led world production since 1988. Production has increased significantly in both aquaculture and traditional capture techniques; however, more than half of China’s production comes from aquaculture. The reader should be cautioned that data for China are considered to be systematically biased upward (Watson and Pauly 2001). Anchoveta (Engraulis ringens) dominates Peruvian capture production. The fish is primarily used in the production of fishmeal. The Peruvian harvest of anchoveta is highly variable and subject to influence from climatic events, such as El Niño. For example, in 1997 Peru produced 6 million MT of anchoveta, but in 1998 the fishery collapsed and produced only 1.2 million MT of product. The production of the third-place country, Japan, increased slowly from 1970 until 1988, but has declined since that year. Japanese production

MT (thousands)

140 000 120 000 100 000 80 000 60 000 40 000 20 000 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Pacific Ocean

2.3

Atlantic Ocean

Other (incl. freshwater)

Indian Ocean

World capture and aquaculture production by area (live weight equivalent). 17

THE INTERN ATION AL SEAFOOD TRADE Table 2.2 World aquaculture harvests and commercial catches by country (MT: live weight equivalent) Rank

1970

Quantity

2000

Quantity

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Peru Japan USSR China Norway US India Spain Thailand Canada Denmark Indonesia South Africa Chile Philippines UK Germany France Republic of Korea Iceland Bangladesh Vietnam Taiwan Brazil Dem. People’s Rep of Korea Poland Portugal Myanmar Italy Faeroe Islands Other TOTAL

12 483 240 8 825 247 7 208 628 3 254 400 2 909 035 2 845 879 1 758 500 1 575 672 1 437 637 1 341 589 1 226 500 1 225 200 1 218 950 1 202 515 1 100 297 1 077 367 939 091 776 282 754 007 733 800 689 857 617 400 610 102 572 940

China Peru Japan India US Indonesia Chile Russian Federation Thailand Norway Philippines S. Korea Iceland Vietnam Bangladesh Denmark Malaysia Mexico Taiwan Spain Myanmar Canada Argentina UK Morocco

41 567 996 10 665 421 5 753 958 5 689 518 5 173 887 4 929 745 4 691 747 4 047 659 3 630 578 3 191 335 2 280 520 2 146 393 1 986 145 1 952 145 1 661 385 1 577 698 1 445 018 1 368 022 1 337 767 1 289 089 1 168 638 1 116 902 919 509 898 776 898 471

26 27 28 29 30

470 000 469 383 462 828 432 400 403 493 97 500 6 746 776 65 466 515

France Brazil Egypt Ecuador South Africa Other TOTAL

864 680 847 268 724 408 654 658 647 763 15 306 687 130 433 786

Source: FAO 2002. Fishstat Database, Rome, Italy

is falling because the 200-mile extended jurisdictions in countries where Japan’s distant-water fleet fished were enforced and joint ventures were discontinued. Yesso scallop (Pecten yessoensis), Japanese anchovy (Engraulis japonicus), chub mackerel (Scomber japonicus), and skipjack tuna (Katsuwonus pelamis) were Japan’s top species in 2000. This contrasts with Alaska pollock (Theragra chalcogramma), chub mackerel, Japanese flying squid, and Japanese anchovy in 1970. 18

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 45 000 000 40 000 000 MT (thousands)

35 000 000 30 000 000 25 000 000 20 000 000 15 000 000 10 000 000

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

5 000 000

2.4a

China’s capture and aquaculture production (live weight equivalent).

14 000 000

MT (thousands)

12 000 000 10 000 000 8 000 000 6 000 000 4 000 000

Japan

India

Indonesia

19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

80 82 19

78

19

76

19

74

19

72

19

70

19

68

19

66

19

64

19

62

19

60

19

58

19

56

19

54

19

52

19

19

19

50

2 000 000

Thailand

2.4b Top countries in world capture and aquaculture production, Asia – excluding China (live weight equivalent).

The primary species harvested in the remaining countries of the top ten span a broad range. For example, India produces carps, shrimp, cyprinids, and croakers; the US harvests Alaska pollock, menhaden (Brevoortia tyrannis), farm-raised channel catfish (Ictalurus punctatus), and several species of salmon; Indonesia supplies tuna and prawns; Chile produces anchoveta, farm-raised salmon and trout, mackerel, and herring; the Russian Federation focuses on groundfish, crabs, and pink salmon (Oncorhynchus gorbuscha); Thailand produces shrimp, sardines, cichlids, and tuna; while Norway provides traditional species such as herring, Atlantic cod (Gadus morhua), and farm-raised Atlantic salmon and trout. 19

THE INTERN ATION AL SEAFOOD TRADE 14 000 000

MT (thousands)

12 000 000 10 000 000 8 000 000 6 000 000 4 000 000

19

50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

2 000 000

Peru

US

Chile

Russian Federation (USSR pre-1988)

Norway

2.4c Top countries in world capture and aquaculture production, non-Asia (live weight equivalent).

Capture production Throughout the 1970s and 1980s, world capture fisheries production increased at a rate of approximately two percent per year. As noted earlier, world capture production ranged from 85 to 95 million MT during the 1990s. External environmental factors and fishing practices explain much of the yearly fluctuation in capture fisheries production. For example, the noticeable decline in capture harvest in 1998 has been attributed to the climate anomaly, El Niño, which occurred in 1997–98 and severely affected harvests in Peru and Chile (FAO 2001). However, systemic overfishing is also an important factor. Approximately 47–50% of global fish stocks are considered fully exploited, and 15–18% are considered overexploited. No (or limited) production increases can be expected from these stocks in the near term. Another nine to ten percent of fish stocks are considered depleted or recovering (FAO 2001). Over the long run and with improved management, these stocks may contribute to increases in capture fisheries. However, for the near term, this improvement is unlikely to occur. FAO estimates that 25–26% of the world’s fish stocks are underexploited to moderately exploited and, therefore, may contribute to future increases in capture harvest. However, any increase from these stocks would be temporary unless they are harvested under a sustainable management system (FAO 2001). In 2000, the top capture fish producers were China, Peru, Japan, the US, and Chile (see Fig. 2.5). With the exception of China, these nations have real20

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 20 000 18 000 MT (thousands)

16 000 14 000 12 000 10 000 8 000 6 000 4 000

19 7 19 0 7 19 1 72 19 7 19 3 7 19 4 75 19 7 19 6 7 19 7 7 19 8 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 88 19 8 19 9 90 19 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 97 19 9 19 8 9 20 9 00

2 000

China

2.5

Japan

Peru

US

Chile

Top five capture harvest countries (live weight equivalent) (source: FAO 2002).

12 000

MT (thousands)

10 000 8 000 6 000 4 000 2 000

ac ke ge re he l ad ha irt C ai hu l b m ac ke re l C ap el in Bl ue w hi tin g

La r

C

hi

le

Ja

an

pa

ja

ne

ck

se

m

an

ch

ov

y

tu na

ng

ja ck ip

he rri

Sk

nt ic At la

ka as Al

An

ch

ov

et

po llo ck

a

0

2.6

Top ten capture species in 2000 (live weight equivalent) (source: FAO 2002).

ized generally stable or declining capture harvest since the mid-1980s.The top species harvested are anchoveta (primarily used for fishmeal and oil), Alaska pollock (primarily used for a variety of products that were traditionally supplied by cod and as the main component of surimi), Atlantic herring, skipjack tuna, Japanese anchovy, Chilean jack mackerel (Trachurus murphyi ), largehead hairtail (Trichiurus lepturus), chub mackerel, capelin (Mallotus villosus), and blue whiting (Micromesistius poutassou) (see Fig. 2.6). 21

THE INTERN ATION AL SEAFOOD TRADE

Aquaculture production Aquaculture drove the growth in world production in the 1990s and will probably continue to be the main growth force for the foreseeable future. Since 1970, world aquaculture production has increased by approximately nine per cent per year (13% per year in the 1990s) and reached 35.6 million MT in 2000. China is the leading producer of aquaculture products (see Fig. 2.7a). Its production is dominated by carp, which is used primarily for domestic consumption. India has also shown rapid growth in aquaculture production, 30 000

MT (thousands)

25 000 20 000 15 000 10 000

19 7 19 0 7 19 1 7 19 2 7 19 3 74 19 7 19 5 7 19 6 77 19 7 19 8 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 87 19 8 19 8 8 19 9 9 19 0 91 19 9 19 2 9 19 3 94 19 9 19 5 9 19 6 9 19 7 98 19 9 20 9 00

5 000

2.7a

China’s aquaculture production (live weight equivalent) (source: FAO 2002).

MT (thousands)

2 500

2 000

1 500

1 000

19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

500

India

Indonesia

Japan

Thailand

Bangladesh

Vietnam

2.7b Top aquaculture producing countries, Asia – excluding China (live weight equivalent) (source: FAO 2002). 22

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 2 500

MT (thousands)

2 000 1 500 1 000

19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

500

Norway

Chile

USA

2.7c Top aquaculture producing countries, non-Asia – excluding China (live weight equivalent).

which is dominated by freshwater carps, barbels, and cyprinids (barbs and loaches). High-value fresh and marine shrimp raised for export are also important products. Japanese production during the above period also rose, but not at the rate experienced by China, India, and other Asian producers such as Indonesia, Thailand, Bangladesh, and Vietnam. In fact, Japanese production has declined slightly since 1995 (see Fig. 2.7b). Japan’s aquaculture production is dominated by yesso scallops, Pacific cupped oysters (Crassostrea gigas), and Japanese amberjack, or yellowjack (Seriola quinqueradiata). Indonesia (milkfish (Chanos chanos), carp, and tiger prawn (Penaeus monodon)), Bangladesh (carps, barbels, cyprinids, and shrimp), Thailand (tiger prawn and tilapia), and Vietnam (freshwater fish and tiger prawn) all have growing aquaculture industries. The leading aquaculture producers outside Asia are Norway (salmon and trout), Chile (salmon and trout), and the US (freshwater channel catfish and oysters). Production in these countries has increased significantly, but production levels are still far below those of leading Asian nations (see Fig. 2.7c). Freshwater culture methods produced over 20 million MT in 2000, or approximately 58% of all production. Mariculture accounted for nearly 13 million MT of product, or 36% of total production. Brackish water culture accounted for the remaining six percent, or two million MT of production (see Fig. 2.8). The top ten aquacultured species in the world in 2000 were Pacific cupped oyster (C. gigas), silver carp (Hypophthalimichthys molitrix), grass carp (Ctenopharyngodon idellus), common carp (Cyprinus carpio), Japanese carpet shell (Ruditapes phillpinarum), bighead carp (Aristichthys 23

THE INTERN ATION AL SEAFOOD TRADE Brackish water culture 6% 2 091 956 MT Mariculture 36% 12 861 611 MT

Freshwater culture 58% 20 631 534 MT Brackish water culture

Freshwater culture

Mariculture

2.8 World aquaculture production by environment, 2000 (live weight equivalent) (source: FAO 2002). 4 500 4 000 MT (thousands)

3 500 3 000 2 500 2 000 1 500 1 000

sa lm

on

a At

la

nt ic

til a

lo N

ile

al sc ss

o

an Ye

ru ci C

pi

p

rp ca

rp ca

l el

gh ea d Bi

ca e

pa ne s Ja

C

om

m

rp

et

on

sh

ca

rp ca

rp

ra ss G

er

ca

er lv Si

oy st ed pp cu fic ci Pa

rp

500

2.9 Top ten aquacultured species, 2000 (live weight equivalent) (source: FAO 2002).

nobilis), crucian carp (Carassius carassius), yesso scallop, Nile tilapia (Oreochromis niloticus), and Atlantic salmon (see Fig. 2.9). Together, the five major carp species make up one-half of the top ten aquacultured species and represent almost one-third of the world’s total aquaculture production. Other leading species come primarily from the mollusk family. These include the Pacific cupped oyster, the Japanese carpet shell, and the yesso scallop. Many of these species, while significant in production, are not major factors in international trade. Carps and mollusks dominate the top ten aquacultured 24

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION Table 2.3

Top ten species in aquaculture production (2000)

Rank

Species

1 2 3 4 5 6 7 8 9 10

Tiger prawn Pacific cupped oyster Silver carp Grass carp Common carp Japanese kelp Atlantic salmon Japanese carpet shell Freshwater fishes nei Yesso scallop

Value (US$ thousand) 4 046 751 3 404 277 3 046 534 2 887 529 2 836 022 2 811 440 2 749 136 2 129 698 2 022 715 1 529 089

Quantity (MT: live weight equivalent)

Species Pacific cupped oyster Silver carp Grass carp Common carp Japanese carpet shell Bighead carp Crucian carp Yesso scallop Nile tilapia Atlantic salmon

3 944 042 3 473 051 3 447 474 2 718 277 1 693 012 1 636 623 1 379 304 1 132 866 1 045 100 883 558

5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 19 7 19 0 71 19 7 19 2 7 19 3 7 19 4 7 19 5 7 19 6 7 19 7 78 19 7 19 9 80 19 8 19 1 8 19 2 8 19 3 84 19 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 90 19 9 19 1 9 19 2 93 19 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 00

MT (thousands)

Source: FAO 2002. Fishstat Database, Rome, Italy

Total production

2.10

Capture production

Aquaculture production

World shrimp aquaculture and capture fisheries (live weight equivalent).

species by live weight, but a species not included in the top ten in live weight tops the value chart. This species is the tiger prawn; production equaled $US4 billion in 2000 (see Table 2.3). The total value of the three most harvested carp species exceeds US$8.7 billion.

World shrimp aquaculture and capture production World shrimp production has grown steadily since 1970, quadrupling from 1.1 million MT to 4.3 million MT in 2000 (see Fig. 2.10). In 2000, China, India, Indonesia, Thailand, the US, and Vietnam led combined total shrimp (capture and aquaculture) production (see Table 2.4; Fig. 2.11a, 2.11b). 25

THE INTERN ATION AL SEAFOOD TRADE Table 2.4 Top shrimp producing countries: capture and aquaculture (live weight equivalent)

Rank

1970

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

US India China Mexico Thailand Indonesia Japan Malaysia Brazil West Germany Vietnam Taiwan Philippines Pakistan Australia Hong Kong Panama Spain Republic of Korea Netherlands Chile Venezuela Greenland Norway Ecuador Nicaragua Italy El Salvador Cuba Guyana Other TOTAL

Quantity (MT) 166 700 121 700 107 100 69 100 61 100 53 600 53 500 48 700 43 700 37 900 33 300 30 720 27 400 19 600 13 400 12 400 12 300 11 700 10 700 10 300 9 700 8 700 8 429 7 600 6 200 6 100 5 700 5 600 5 500 5 300 78 970 1 092 719

2000 China India Indonesia Thailand US Vietnam Canada Malaysia Mexico Greenland Philippines Norway Bangladesh Brazil Ecuador S. Korea Russian Federation Argentina Myanmar Iceland Japan Taiwan Province of China Pakistan Australia Spain Nigeria Guyana Colombia Venezuela Germany Other TOTAL

Quantity (MT) 1 241 871 405 656 402 326 398 467 152 975 151 133 130 621 111 870 95 077 81 500 79 351 66 208 58 183 56 560 51 375 37 193 36 926 36 860 34 964 33 539 29 228 27 905 25 975 25 307 21 622 20 446 19 491 18 659 18 081 17 423 303 992 4 190 784

Source: FAO 2002. Fishstat Database, Rome, Italy

China led capture production, which has grown threefold worldwide since 1970. The next five countries leading capture production are India, Indonesia, the US, Canada, and Thailand (see Fig. 2.12a, 2.12b). Thailand, China, Indonesia, Vietnam, Bangladesh, India, and Ecuador led aquaculture production in 2000 (see Fig 2.13; Table 2.5), which has grown from relatively minute quantities in 1970 to 1.2 million MT in 2000. Aquaculture’s share of shrimp production now represents 27% of total production. Shrimp production is perhaps the most dynamic of the sub-groups 26

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 1 400

MT (thousands)

1 200 1 000 800 600 400

19 7 19 0 71 19 7 19 2 7 19 3 7 19 4 75 19 7 19 6 7 19 7 78 19 7 19 9 80 19 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 91 19 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 00

200

2.11a China’s capture and aquaculture shrimp production (live weight equivalent) (source: FAO 2002). 500 450

MT (thousands)

400 350 300 250 200 150 100

19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

50

India

Indonesia

Thailand

US

Vietnam

2.11b Top five capture and aquaculture shrimp-producing countries, excluding China (live weight equivalent) (source: FAO 2002).

covered in this chapter. Production, particularly aquaculture production, is subject to the vagaries of weather and disease. For example, the growth of shrimp aquaculture was slowed considerably (but did not stop) in the late 1990s by diseases such as ‘white spot’ (Asia, Ecuador, the US) and ‘Taura Syndrome’ (Ecuador), which took their toll on nascent aquaculture producers (Anderson 2002). This vulnerability, combined with the fact that many developing countries are pushing shrimp aquaculture as an expeditious means of producing export income, means that countries can come and go 27

THE INTERN ATION AL SEAFOOD TRADE 1 200

MT (thousands)

1 000 800 600 400

19 7 19 0 7 19 1 7 19 2 73 19 7 19 4 7 19 5 76 19 7 19 7 7 19 8 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 00

200

2.12a China’s capture shrimp production (live weight equivalent) (source: FAO 2002). 400 350

MT (thousands)

300 250 200 150 100 50

00

98

20

96

19

19

94

92

Canada

19

90

19

88

19

86

US

19

84

Indonesia

19

82

19

80

19

78

India

19

19

76

74

19

19

72 19

19

70

0

Thailand

2.12b Top five capture shrimp producing countries, excluding China (live weight equivalent) (source: FAO 2002).

from the top five within the space of a few years. For example, the top five aquaculture shrimp producers in 1990 were China, Thailand, Indonesia, Ecuador, and the Philippines. By 1995, China was out of the top five, having been replaced by India. The top five producers in 1995 were Thailand, 28

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 350 300

MT (thousands)

250 200 150 100 50

19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

0

Thailand China

2.13

Bangladesh India

Indonesia Vietnam

Ecuador

Top seven aquaculture shrimp producing countries (live weight equivalent).

Table 2.5 Top weight equivalent)

ten

Rank

1970

1 2 3 4 5 6 7 8 9 10

Indonesia Bangladesh Thailand Philippines Taiwan Japan Vietnam China Ecuador India Other TOTAL

aquacultured

shrimp

Quantity 3353 1850 1600 960 509 301 280 79 50 20 20 9022

producing

2000 Thailand China Indonesia Vietnam Bangladesh India Ecuador Philippines Mexico Brazil Other TOTAL

countries

(live

Quantity 299 700 217 994 138 023 69 433 58 183 52 771 50 110 41 811 33 480 25 000 100 606 1 087 111

Source: FAO 2002. Fishstat Database, Rome, Italy

Indonesia, Ecuador, India, and the Philippines. In 2000, China was back on the list and had reclaimed the second spot. Vietnam also joined the list, while Ecuador, recovering from disease, and the Philippines, fell off. Aquaculture shrimp production is also dynamic is terms of what species of shrimp is produced. For example, in 1990, China’s shrimp aquaculture industry relied on P. chinensis, while in 2000 it started to switch to the introduced species P. vannamei in an effort to reduce disease risk. 29

THE INTERN ATION AL SEAFOOD TRADE 3 000

MT (thousands)

2 500 2 000 1 500 1 000

19 7 19 0 71 19 7 19 2 7 19 3 7 19 4 7 19 5 7 19 6 7 19 7 78 19 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 84 19 8 19 5 8 19 6 87 19 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 93 19 9 19 4 9 19 5 96 19 9 19 7 9 19 8 9 20 9 00

500

Total production

Capture production

Aquaculture production

2.14 World salmon and trout: capture fisheries and aquaculture (live weight equivalent) (source: FAO 2002).

Shrimp production is growing steadily, primarily through shrimp aquaculture, but it remains a dynamic moving target. Unfortunately, forecasting changes and trends in shrimp production for more than a short period is nearly impossible. The one thing that is clear is that shrimp production will probably increase for the foreseeable future. However, who will be the sustainable producers of that shrimp is a question that only time will answer.

World salmon and trout production Between 1970 and 2000, world salmon and trout production increased by almost 300% from 600 thousand MT to 2.45 million MT (see Fig. 2.14). The big story in salmon and trout production is the explosion in aquaculture. Aquaculture, salmon, and trout have a long history. Many of the world’s first fish hatcheries were set up to produce salmon and trout for restocking overfished natural populations and for introducing new salmonid species to anglers. The techniques developed at these hatcheries formed the basis of modern methods. Consequently, as lessons from this long history were applied to the commercial rearing of salmon and trout, aquaculture’s share of these species’ production rose significantly. In fact, aquaculture’s share of salmon and trout production rose five-fold, from about 12% in 1970 to over 63% in 2000. Norway, Chile, the United Kingdom (primarily Scotland), and Canada have led the remarkable growth in salmon and trout aquaculture. The dominant species that producers cultivate is Atlantic salmon; however, they also produce large quantities of saltwater-raised 30

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 600

MT (thousands)

500 400 300 200 100

19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

0

Norway

US

Chile

Japan

Russian Federation (USSR pre-1988)

2.15 Salmon and trout producing countries: capture fisheries and aquaculture (live weight equivalent) (source: FAO 2002).

rainbow trout (Oncorhynchus mykiss), or steelhead. In addition to Atlantic salmon and rainbow trout, Chile raises considerable amounts of coho salmon (O. kisutch), and Canada produces substantial amounts of chinook salmon (O. tshawytscha). In contrast, capture salmon is dominated by pink, chum (O. keta) and sockeye (O. nerka). Since 1970, aquaculture production saw a nearly 20-fold increase, from 75 thousand MT to 1.5 million MT. Capture production increased by 75% from 519 thousand MT to 913 thousand MT (see Fig. 2.14), peaking in 1995 at 1.15 million MT. The leading world producers (aquaculture and capture) are Norway, the US, Chile, Japan, and Russia (see Fig. 2.15). The US was the world’s largest producer of salmon and trout between 1976 and 1996. However, this production is based mostly on the capture fishery, which harvests wild and hatchery-released salmon. As indicated in Fig. 2.15, Norway passed the US in the mid-1990s. Norwegian production reached 486 thousand MT in 2000 (see Fig. 2.16). It has virtually no capture salmon fishery. The Norwegians surpassed the US because of their focus on aquaculture techniques.They are able to produce a steadily increasing supply of high-quality product, while US producers are subject to the whims of natural production. Chile’s aquaculture production of non-native Atlantic salmon and rainbow trout is increasing rapidly. Production in 2000 of 350 thousand MT demonstrated nearly a 50% increase over 1999 production levels. Chile is expected to continue to experience rapid growth and has the capacity to surpass Norwegian production sometime within the next few years. 31

THE INTERN ATION AL SEAFOOD TRADE 600

MT (thousands)

500 400 300 200 100

19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

0

Norway

2.16

Chile

UK

Canada

US

Aquacultured salmon and trout producers (source: FAO 2002).

16 000 14 000 MT (thousands)

12 000 10 000 8 000 6 000 4 000

19 5 19 0 5 19 2 5 19 4 5 19 6 5 19 8 6 19 0 6 19 2 6 19 4 6 19 6 6 19 8 7 19 0 7 19 2 7 19 4 7 19 6 7 19 8 8 19 0 8 19 2 8 19 4 8 19 6 8 19 8 9 19 0 9 19 2 9 19 4 9 19 6 9 20 8 00

2 000

2.17 World cod, hake, and haddock production (live weight equivalent) (source: FAO 2002).

World cod, hake, pollock, and haddock production Between 1950 and 1987 world production of groundfish such as cod (Gadus spp.), hake (Merluccius spp.), pollock, and haddock (Melangrammus aeglefinnus) roughly tripled, from just under 4 million MT to 14 million MT (see Fig. 2.17). However, since 1987, production has declined. The year 2000 harvest was about 60% of the 1987 peak and less than the total production of 1970. Based on capture fisheries, cod, hake, and haddock are subject to both environmental and management uncertainties (see Table 2.6; Fig. 2.18). Russia, and the former USSR, dominated world production of cod, hake, and haddock from 1974 to 1998. Soviet and Russian production increased 32

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 5 000 4 500

MT (thousands)

4 000 3 500 3 000 2 500 2 000 1 500 1 000

19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

500

Russian Federation (USSR pre-1988)

US Norway

Iceland Argentina

Japan

2.18 Top six cod, hake, and haddock producing countries (live weight equivalent) (source: FAO 2002).

from 1950 to 1986, obtaining its highest level of 4.7 million MT in 1986, but has fallen significantly since that time. Production equaled 1.8 million MT in 2000, an amount equivalent to production in 1966. US production levels increased rapidly from the early 1980s until 1990 and have remained relatively constant since that time. The growth is largely explained by the development of a domestic Alaska pollock fishery in 1976 after the implementation of 200-mile exclusive economic zones. The implementation of these zones also affected Japanese production. Japan was a dominant player in this fishery until the mid-1970s, when the introduction of 200-mile EEZs by coastal nations reduced its distant-water fleet. Japan in 2000 is the sixth leading producer of cod, haddock, and hake, having fallen from the number two position in 1970. Production is now only about 20% of what is was in 1970 (see Table 2.6). Norway and Iceland are two of the few bright spots in groundfish production. Their production levels are up significantly from 1970. Consequently, they have maintained or slightly increased their position in the rankings. Norway has maintained the third spot, while Iceland has risen from seventh in 1970 to fourth in 2000. Improved fisheries management and favorable environmental conditions have contributed to improved harvests. Heretofore, aquaculture production has played a minimal role in groundfish production. However, that role may change in the decades ahead. As this book goes to print, the first large-scale commercial facilities for the produc33

THE INTERN ATION AL SEAFOOD TRADE Table 2.6 Top ten cod, hake, and haddock producing countries (live weight equivalent) Rank

1970

Quantity (MT)

1 2 3 4 5 6 7 8 9 10

USSR Japan Norway UK Spain Denmark Iceland Germany Canada France Other TOTAL

2000

2 757 541 2 521 500 836 886 718 971 587 129 548 900 420 200 357 400 317 500 310 831 1 074 562 10 451 420

Russian Federation USA Norway Iceland Argentina Japan New Zealand Denmark Chile Faeroe Islands Other TOTAL

Quantity (MT) 1 848 410 1 665 097 1 086 989 583 137 405 821 398 973 282 733 279 965 258 709 214 928 1 692 551 8 717 313

Source: FAO 2002. Fishstat Database, Rome, Italy

tion of farmed cod and haddock are coming online. Aquacultured cod and haddock could be a significant factor in the future.

World tuna and bonito production World production of tuna (Thunnus spp.) and bonito (Sarda spp.) increased from a production level of 1.7 million MT in 1970 to 5.8 million MT in 2000 (see Fig. 2.19). Unlike some of the other major species outlined in this chapter, tuna and bonito production relies almost solely on capture methods. There are, however, forms of aquaculture for tuna and bonito in countries such as Australia and Spain. In these operations, bluefin tuna (Thunnus thynnus and T. maccoyii ) are held and fed in ocean cages until they are sold, primarily to Japan. There have also been experiments with bluefin tuna ranching in Japan. As with the groundfish species, professional researchers and commercial producers are working on methods to improve the potential of these species for aquaculture production. Japan led production of tuna and bonito from 1950 until 1998 when Indonesia passed Japan as the world-leading producer of tuna and bonito products. In 2000, Indonesia produced 776 thousand MT, while Japan produced 710 thousand MT (see Table 2.7). The US was the second-largest producer of tuna and bonito worldwide from 1951 to 1987. However, by 2000 the US dropped to ninth position behind Indonesia, Japan, China, Taiwan, the Philippines, S. Korea, Spain, and Ecuador (see Fig. 2.20a, 2.20b). A combination of several factors led to the decline in US production and the rise in production by other countries between 1970 and 2000. The factors that most affected US production were the creation of the 200-mile 34

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION 7 000

MT (thousands)

6 000 5 000 4 000 3 000 2 000

19 5 19 0 5 19 2 5 19 4 5 19 6 5 19 8 6 19 0 6 19 2 6 19 4 66 19 6 19 8 7 19 0 7 19 2 7 19 4 76 19 7 19 8 80 19 8 19 2 8 19 4 8 19 6 88 19 9 19 0 9 19 2 9 19 4 9 19 6 9 20 8 00

1 000

2.19 World tuna, bonito, and billfish producing countries (live weight equivalent). Table 2.7 Top ten tuna, bonito, and billfish producing countries (live weight equivalent) Rank

1970

1 2 3 4 5 6 7 8 9 10

Japan US Taiwan Philippines Peru Indonesia Spain France S. Korea Maldives Other TOTAL

Quantity (MT) 616 400 227 900 115 834 111 100 76 300 69 900 57 417 47 091 33 485 33 340 301 176 1 689 943

2000

Quantity (MT)

Indonesia Japan China Taiwan Philippines S. Korea Spain Ecuador US France Other TOTAL

776 504 709 776 551 153 510 771 366 424 256 290 236 684 181 147 164 980 152 693 1 830 340 5 736 762

Source: FAO 2002. Fishstat Database, Rome, Italy

EEZs, the increase in cost associated with US environmental regulations (i.e., dolphin-safe tuna), and the higher cost of processing product in the US relative to other countries. The number of days fished by the US fleet and the number of US boats in the skipjack and yellowfin tuna fisheries dropped by roughly 40% and 50%, respectively, between 1984 and 1993 (USDC 1996).

World tilapia and cichlid production Tilapia and cichlids (Cichlidae spp.) have an incredible potential for growth as farmed species.Tilapia, a native of Africa, has been described as the perfect farm fish. It is easy to raise, disease-resistant, and efficiently converts food to 35

THE INTERN ATION AL SEAFOOD TRADE 1000 900 MT (thousands)

800 700 600 500 400 300 200 100 19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

0

Indonesia

Japan

China

Taiwan

Philippines

S. Korea

2.20a Top tuna, bonito, and billfish producing countries, Asia (live weight equivalent). 400

MT (thousands)

350 300 250 200 150 100 50 19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

0

Spain

Ecuador

US

Mexico

2.20b Top tuna, bonito, and billfish producing countries, non-Asia (live weight equivalent).

protein. This potential has radically changed the distribution of tilapia perhaps more than any other fish. In 1970, eight of the top ten tilapia producers were located in Africa. Since then, the species has been introduced from Africa to virtually every tropical and semi-tropical country in the world. In 2000, there were only two countries in the top ten producers that were located in Africa, and they held the sixth and ninth positions. By 2010, there may not be a single African country in the top ten. Table 2.8 shows the species transition from a primarily African product to a worldwide phenomenon. This transition illustrates two important points: the adaptability 36

TRENDS IN C APTURE AND AQUACULTURE PRODUCTION Table 2.8

Top ten tilapia producing countries (live weight equivalent)

Rank

1970

1 2 3 4 5 6 7 8 9 10

Tanzania Uganda Mali Madagascar Senegal Indonesia Taiwan Nigeria Malawi Sri Lanka Other TOTAL

Quantity (MT) 75 000 52 800 33 000 20 000 18 000 16 300 11 362 10 700 10 000 8 300 34 953 290 415

2000 China Egypt Thailand Philippines Indonesia Uganda Mexico Taiwan Tanzania Brazil Other TOTAL

Quantity (MT) 629 182 288 701 125 859 121 207 107 071 97 645 75 498 49 314 49 210 42 619 357 083 1 943 389

Source: FAO 2002. Fishstat Database, Rome, Italy 2500

MT (thousands)

2000 1500 1000

19 5 19 0 5 19 2 5 19 4 5 19 6 5 19 8 6 19 0 6 19 2 64 19 6 19 6 6 19 8 7 19 0 7 19 2 7 19 4 7 19 6 7 19 8 80 19 8 19 2 8 19 4 86 19 8 19 8 9 19 0 9 19 2 9 19 4 9 19 6 9 20 8 00

500

2.21 World tilapia and cichlid production (live weight equivalent) (source: FAO 2002).

and reliability of tilapia and the failure of African nations to take advantage of this indigenous resource. Driven by the demand for inexpensive protein and the inherent versatility of tilapia itself, world tilapia production increased over 28 times from 68 thousand MT in 1950 to over 1.94 million MT in 2000. Much of the growth occurred in the 1990s (see Table 2.8; Fig. 2.21). China produces about one-third of the world’s tilapia (see Fig. 2.22a). Egypt, Thailand, the Philippines and Indonesia all have increasing production trends (see Fig. 2.22b). Considerable growth is emerging from Latin and South America, notably in Mexico, Brazil, Costa Rica, Ecuador, and Honduras. It is difficult to say what tilapia production will be like in the future, but it is a near certainty that it will have grown significantly. 37

THE INTERN ATION AL SEAFOOD TRADE 700

MT (thousands)

600 500 400 300 200 100 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

2.22a China’s tilapia production (live weight equivalent) (source: FAO 2002). 350

MT (thousands)

300 250 200 150 100 50

19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

0

Egypt

Thailand

Philippines

Indonesia

Uganda

2.22b Top tilapia producing countries, excluding China (live weight equivalent) (source: FAO 2002).

References Anderson J, ‘Aquaculture and the future: why fisheries economists should care’, Marine Resource Economics, 2002 17(2), 133–51. FAO (Food and Agriculture Organization), Fishstat Database, Rome, Italy, 2002. FAO, ‘The state of world fisheries and aquaculture’, Rome, Italy, http://www.fao.org/docrep/003/X8002e24.htm, 2001. USDC (United States Department of Commerce), The Economic Status of the US Fisheries, 1996, NOAA, NMFS, Washington, DC, 1996. Watson R and Pauly D, ‘Systematic distortions in world fisheries catch trends’, Nature, 2001 414, 335–62. 38

CHAPTER

3 Trends in international seafood trade James L. Anderson and Josué Martínez-Garmendia

Introduction nternational seafood trade has increased remarkably since the 1970s. The total value of internationally traded seafood products has risen nearly every year, increasing more than five-fold since 1976 (Fig. 3.1), amounting to US$ 55 billion in exports and US$ 61 billion in imports in 2000 (FAO 2002). In 2000, the dominant exporters (by value) were Thailand, China, Norway, the US, Canada, and Denmark. The dominant importers were Japan, the US, Spain, France, Italy, Germany, and the UK (Tables 3.1 and 3.2). The FAO (2001) estimated that approximately 33% of the global fish harvest (live weight equivalent) was exported in 1998. In contrast, during the mid1970s it is estimated that less than 20% of fish harvested entered international trade.

I

Factors influencing seafood trade As we have seen, a key factor explaining this expansion is the implementation of the 200-mile exclusive economic zones (EEZs) off the coast of 39

THE INTERN ATION AL SEAFOOD TRADE 70 60

$US (billions)

50 40 30 20

19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

10

Imports

3.1

Exports

Imports and exports.

ocean-bordering nations. Peru, Ecuador, and Chile implemented this international milestone as early as 1952 as a response to their claim of abusive foreign harvest of their coastal resources. These unilateral implementations of 200-mile territorial limits were initially met with international disapproval. Gradually, however, other countries began to declare extended jurisdictions. By the time the US declared its 200-mile EEZ in 1976, 37 nations had already extended their jurisdiction beyond the 12-mile limits recognized by international law. By the mid-1980s, virtually all coastal nations had adopted this measure. The EEZs were recognized in the UN Law of the Sea Treaty, signed in 1982, which came into force in 1994. The seafood industry was impacted by limitations on nations with distant-water fleets that previously could harvest fish freely in these areas. As a result, countries (such as Spain) that relied on harvesting within the 200-mile EEZ of foreign nations had to begin to satisfy domestic demand by importing from producing countries (Table 3.1). Countries whose 200-mile EEZs included productive fishing grounds tended to increase their domestic fishing, restrict foreign fishing and, in some cases, increase their exports of seafood. The US is one example of a country that increased its seafood exports partially as a result of extended jurisdiction and the phasing out of foreign fishing throughout the 1980s (Table 3.2). A number of other reasons have contributed to the tremendous increase in seafood trade. Some are associated with environmental factors and fisheries management. For example, the collapse of many traditional North Atlantic fish stocks, such as the Atlantic cod, haddock, redfish, and hake fisheries on Georges Bank is due to changes in environmental conditions and 40

Country

Norway Denmark Peru Japan USSR Canada Iceland Korea Rep. Netherlands Spain Chile US Germany Taiwan UK Thailand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1976

865 927 704 461 651 093 647 114 527 000 352 984 325 177 285 822 273 405 232 009 230 529 220 080 190 225 165 882 165 291 131 774

Quantity Peru Norway China Denmark US Thailand Chile Russia Spain Iceland Netherlands Taiwan UK Germany Korea Rep. Canada

Country

2000

2 915 833 2 081 263 1 516 784 1 265 033 1 181 589 1 162 099 1 109 534 1 057 760 802 244 730 975 720 774 697 851 674 751 660 162 530 870 527 284

Quantity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rank

1976

Japan Norway Canada Denmark Taiwan US Korea Rep. Iceland Netherlands Spain Peru Mexico USSR India France Germany

Country

Top seafood exporting countries by quantity (MT) and value (US$ thousands)

Rank

Table 3.1

662 469 654 703 604 232 520 935 431 893 371 899 329 114 290 338 267 130 244 969 214 666 205 220 198 774 192 600 180 999 173 367

Value

Thailand China Norway US Canada Denmark Chile Taiwan Spain Indonesia Korea Rep. Vietnam India Russia Netherlands UK

Country

2000

4 384 437 3 709 339 3 550 369 3 118 839 2 835 295 2 765 888 1 849 191 1 762 576 1 617 457 1 610 291 1 489 803 1 480 110 1 417 617 1 390 494 1 351 828 1 269 848

Value

TRENDS IN INTERN ATION AL SEAFOOD TRADE

41

42

130 009 125 050 118 550 105 437 103 027 99 751 98 305 92 139 80 098 72 000 65 271 58 864 49 391 48 813 658 326 7 873 804

Quantity

Source: FAO 2002. Fishstat Database, Rome, Italy

France South Africa Faeroe Islands Argentina Malaysia Poland Morocco Sweden Italy China Ecuador India Bulgaria Portugal Other TOTAL

17 18 19 20 21 22 23 24 25 26 27 28 29 30

1976

Country

(Cont.)

Rank

Table 3.1

India Argentina Sweden Indonesia France Morocco Vietnam New Zealand Ireland Ecuador Namibia Faeroe Islands Japan Philippines

Country

2000

502 576 493 808 492 990 490 416 480 708 328 858 295 923 287 045 284 210 264 238 242 868 239 879 221 868 213 839 3 214 664 25 688 696

Quantity 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Rank UK Thailand China Indonesia South Africa Malaysia Australia Chile Faeroe Islands Cuba Morocco Hong Kong Portugal Brazil Other TOTAL

Country

1976

153 471 150 378 126 500 124 224 121 500 106 819 104 998 100 761 94 067 85 493 80 045 76 225 65 010 53 888 911 248 7 897 935

Value

Iceland Peru Germany France Australia Morocco Japan Argentina Mexico New Zealand Ecuador Sweden Belgium Singapore

Country

2000

1 236 230 1 129 350 1 113 878 1 108 596 1 006 136 976 427 832 088 747 922 710 428 666 947 588 020 505 434 478 577 457 274 7 661 499 54 822 188

Value

THE INTERN ATION AL SEAFOOD TRADE

Country

US Germany Japan UK France Italy Netherlands Denmark Nigeria Belgium Poland Sweden Spain Czechoslovakia Singapore Switzerland

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1976

1 106 578 825 369 784 037 691 955 401 753 358 893 313 980 284 533 226 382 181 545 176 705 161 698 136 713 133 337 131 630 119 627

Quantity Japan China US Spain Denmark Germany France Norway UK Italy Thailand Korea Rep. Netherlands Nigeria Russia Canada

Country

2000

3 540 479 2 514 491 1 826 546 1 373 416 1 301 456 1 154 010 1 013 696 884 423 867 868 827 095 813 789 755 301 687 266 650 610 586 246 522 570

Quantity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rank

1976

US Japan France Germany UK Italy Belgium Netherlands Sweden Canada China Taiwan Nigeria Spain Denmark Portugal

Country

Top seafood importing countries by quantity (MT) and value (US$ thousands)

Rank

Table 3.2

1 890 921 1 850 360 575 159 540 102 518 737 397 425 216 298 200 825 194 589 183 631 182 459 180 479 157 543 151 876 117 133 110 269

Value

Japan US Spain France Italy Germany UK China, Hong Kong Denmark China Canada Korea Rep. Netherlands Belgium Portugal Thailand

Country

2000

15 742 561 10 556 372 3 372 480 3 018 121 2 555 491 2 282 399 2 209 877 1 970 395 1 860 058 1 820 699 1 409 101 1 398 606 1 172 233 1 038 537 863 407 826 699

Value

TRENDS IN INTERN ATION AL SEAFOOD TRADE

43

44

115 501 113 509 102 561 95 323 90 877 88 121 86 724 81 814 78 899 75 700 73 400 71 945 67 540 66 074 799 601 8 042 324

Quantity

Source: FAO 2002. Fishstat Database, Rome, Italy

Malaysia Portugal Ghana Taiwan Yugoslavia Côte d’Ivoire Hong Kong Finland Brazil Cuba Romania Canada Austria Egypt Other TOTAL

17 18 19 20 21 22 23 24 25 26 27 28 29 30

1976

Country

(Cont.)

Rank

Table 3.2

Taiwan China, Hong Kong Malaysia Portugal Belgium Australia Poland Egypt Philippines Côte d’Ivoire Ukraine Sweden Brazil Singapore

Country

2000

454 496 330 764 322 923 320 125 286 845 277 906 275 850 261 154 248 407 235 771 234 720 212 999 203 601 182 349 3 204 003 26 371 175

Quantity 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Rank Switzerland Australia Czech. Rep. Poland Singapore Austria Finland Brazil Cuba Malaysia Philippines Yugoslavia Congo Greece Other TOTAL

Country

1976

107 974 93 913 81 649 71 260 68 016 57 458 53 237 52 141 44 448 38 570 35 779 35 042 31 363 29 759 389 701 8 658 116

Value

Sweden Norway Taiwan Singapore Australia Switzerland Brazil Malaysia Poland Greece Nigeria Russia Egypt Austria

Country

2000

711 688 612 390 578 932 566 286 563 482 357 029 328 132 307 340 297 715 288 249 253 770 226 293 171 061 162 213 2 909 745 60 431 361

Value

THE INTERN ATION AL SEAFOOD TRADE

TRENDS IN INTERN ATION AL SEAFOOD TRADE

mismanagement (Northeast Fisheries Science Center 2000). This overexploitation caused a need for Atlantic countries to source seafood from less exploited areas of the world, most significantly the Pacific Ocean. Another example is trade disruption caused by severe El Niño events that affected harvests in South America during 1982–83 and 1997–98. We have also seen how aquaculture has been a revolutionary development for the seafood industry, and has resulted in the increased presence of several countries in the international seafood trade arena. This is the case with Norway and Chile (salmon), and Thailand (shrimp). Several developing countries, in particular those in southeast Asia and South America, have launched into relatively sophisticated forms of aquaculture of high-valued products such as shrimp and salmon, seeking developed-country markets. The year-round availability, consistent quality, and relatively predictable supply of aquacultured products has expanded the market and reduced some of the volatility associated with seafood trade. Species formerly characterized by limited acceptance have become widely consumed as aquaculture production has grown. Such is the case for channel catfish and tilapia. Consumption of channel catfish, which is indigenous to the southern US, has grown from essentially nothing to the fifth most consumed species in the US. Tilapia, native to Africa, has become a familiar product throughout much of the world as a result of the introduction of aquaculture production to most tropical regions. Another significant phenomenon influencing international seafood trade is the expansion of value-added seafood production, resulting in an increased variety and number of items traded. For example, China imports large quantities of raw product from places such as the US. It is processed there and then exported as a number of value-added products. Specifically, some roe herring harvested in Alaska is exported to China where the roe is extracted, processed, and exported to Japan. The carcass is retained and utilized in China. There is also a more complete utilization of fisheries products. Technology that allows the transformation of raw materials into more stable, quality products has come a long way. In the past, the only ways to extend shelflife were through canning, drying, salting, or smoking. Freezing technology, packaging technology, and other new product forms have been introduced. An example is the conversion of minced Alaska pollock into surimi (an intermediate product of refined, stabilized fish protein concentrate developed in Japan). It is further processed into analog seafood products, such as artificial crab legs, scallops, or shrimp. Technological advances in refrigeration technology and packing have created new opportunities for marketing seafood. Packing, in particular, was revolutionized with the introduction of more rugged, insulated boxes that prevent leaks during air transportation and allow for shipping of fresh fish around the world. The Norwegian salmon industry was one of the leaders 45

THE INTERN ATION AL SEAFOOD TRADE

in introducing this innovation to successfully export its top-quality, fresh salmon. Also, diminishing air freight costs have made fresh product a viable and more prevalent product form in consumer markets. Fresh seafood is highly regarded by consumers, and its trade is further benefiting from a rising demand for raw fish used in sashimi and sushi. Shifts in diet habits in many western societies have also impacted international seafood trade. Decline in red meat consumption, in the US for example, has been replaced with an increase in chicken, and, to a lesser degree, seafood consumption (USDC 2000). It can be gathered that frequent reporting on the health benefits of seafood consumption relative to other protein sources and the declining real price of some species, such as salmon and catfish, has largely contributed to a greater acceptance of seafood. In contrast, in places such as Japan, consumption of seafood has been stable or declining (Japanese Statistics Bureau, various years). This is particularly true for some traditional items, such as salted fish and fish roes. The consumption of red meat and other western-style food items increased throughout much of the 1980s and 1990s. There has been a trend toward consolidation in the seafood industry, although it is still highly fragmented. This phenomenon started after World War II with the distant-water fishing fleets. These large, powerful fleets could move around the world and process and store product in their industrial vessels until it was unloaded for market. Now, many nations are using large, sophisticated catcher/processor vessels in many domestic offshore fisheries. Aquaculture has also contributed to consolidation in the seafood industry. Some firms are vertically integrated, owning feed, aquaculture, and processing plants. This is typical in shrimp and salmon aquaculture. Further, some salmon aquaculture companies have been able to absorb firms involved in the processing and marketing of wild salmon as a way to diversify products offered to consumers. As we have noted, another significant factor in recent years, which has in several cases contributed to consolidation in the seafood industry, has been the introduction of rights-based fisheries management systems, such as individual transferable fishing quotas. This fishery management approach has resulted in a few agents accumulating large shares of the allowable catch of particular species in specific regions. It also has reduced some of the uncertainty in the supply of fish, attracting larger investment. Sometimes, the consolidation has led major seafood producers and traders to become vertically integrated into multinational companies, such as Tyson Foods, Nippon Suisan Kaisha, Unilever, ConAgra, and Nicherei. Such corporate organizations have created greater coordination between production and marketing and a strategic commercialization of seafood. Despite rapid growth since the 1970s, international seafood trade showed some stabilization in the late 1990s. One of the main reasons was the Asian economic weakness in the late 1990s and Japan’s continued inabil46

TRENDS IN INTERN ATION AL SEAFOOD TRADE

ity to overcome its already long-lived crisis. Currencies in this area suffered significant devaluation, which limited their purchasing power for foreign goods, including seafood. Given the fact that these countries are some of the leading seafood-consuming economies of the world, the stabilization of seafood trade is understandable. Despite the Asian economic turmoil of the late 1990s, seafood trade globally has not declined. This is a result of the strength of the US and European economic systems throughout much of the 1980s and 1990s, as well as the continued reduction of barriers to trade.

Net trade flows International trade in seafood products generally flows from less developed countries to more developed countries. Asia (excluding Japan), Africa, South America, and the Caribbean, the countries of Oceania, Canada, and Eastern Europe, all have seafood trade surpluses, while the US, the European Union, and Japan are net importers (Fig. 3.2–3.12). As can be seen in Fig. 3.2, Asia is a net importing region primarily as a result of Japan’s importation of large quantities of seafood products. However, when Japan is not included Asia is a significant net exporter with a seafood trade surplus of $US 10 billion in 2000 (Fig. 3.3). Japan has been

30

25

$US (billions)

20

15

10

5

19 7 19 6 7 19 7 7 19 8 7 19 9 8 19 0 81 19 8 19 2 83 19 8 19 4 8 19 5 86 19 8 19 7 8 19 8 89 19 9 19 0 9 19 1 92 19 9 19 3 9 19 4 9 19 5 96 19 9 19 7 98 19 9 20 9 00

0

Imports

3.2

Exports

Asia – imports and exports (source: FAO 2002). 47

THE INTERN ATION AL SEAFOOD TRADE 20 18 16

$US (billions)

14 12 10 8 6 4 2

19 7 19 6 7 19 7 7 19 8 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 00

0

Imports

3.3

Exports

Asia (excluding Japan) – imports and exports (source: FAO 2002).

a net importer since before 1976. In 2000, the country ran a $US 14.77 billion trade deficit in seafood products. However, in recent years the value of Japanese imports has dropped along with overall consumption (Fig. 3.4). The weak Japanese economy has led to a reduction in imports. Primary imports include prawns and shrimp, tuna (albacore, yellowfin, bluefin, and big-eye), salmon, crab, eel, squid, and octopus. The primary exports are mollusk products, scallop meat, and frozen albacore (FAO 2002). In 2000, China had a trade surplus of $US 1.9 billion (Fig. 3.5). Some of China’s exports are processed fish from other areas of the world. Frozen fish fillets, value-added canned products, and frozen and packaged shrimp are the largest products exported, by value. Primary imports include frozen cod and fish oil/fishmeal. For example, China imports whole squid from the US and then exports value-added squid rings to the US. As noted earlier, China imports roe-herring from Alaska and sells the extracted roe to Japan. The developing regions of the world (Africa, Fig. 3.6; South America and the Caribbean, Fig. 3.7; and Oceania, Fig. 3.8) are all net exporters, shipping their products to the more developed regions of the European Union, Japan, and the US. African exports increased steadily through the 1980s before leveling off in the 1990s. The region is a minor player with $US 1.75 billion per year of net exports. Africa’s top exports are frozen octopus, frozen shrimp and prawns, and canned tuna. This region’s top imports are frozen marine fish, mackerel, and pilchards. South America and the Caribbean had 48

TRENDS IN INTERN ATION AL SEAFOOD TRADE 20

$US (billions)

15

10

5

19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00

0

Imports

Exports

Japan – imports and exports (source: FAO 2002).

3.4

4

$US (billions)

3

2

1

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Imports

3.5

Exports

China – imports and exports (source: FAO 2002).

a $US 4.47 billion trade surplus in 2000. However, this amount is less than the $US 5.45 billion surplus the region experienced in 1995. Primary exports are frozen shrimp and prawns, fish oil/fishmeal, frozen marine fish fillets, and salmon. The decline in export value from 1995 to 2000 is primarily due 49

THE INTERN ATION AL SEAFOOD TRADE 10

$US (billions)

8

6

4

2

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Imports

3.6

Exports

Africa – imports and exports (source: FAO 2002). 10

$US (billions)

8

6

4

2

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Imports

Exports

3.7 South American and the Caribbean – imports and exports (source: FAO 2002).

to a decrease in production of fish oil and fishmeal brought on by the collapse of anchoveta stocks associated with climate change. Shrimp and prawn exports also declined between 1997 and 2000. This is largely the result of reduced harvest of shrimp in Ecuador through ‘white spot’ disease, which was introduced from Asia. The area’s primary imports include canned tuna and salted Atlantic cod. 50

TRENDS IN INTERN ATION AL SEAFOOD TRADE 10

$US (billions)

8

6

4

2

Imports

3.8

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

0

Exports

Oceania – imports and exports (source: FAO 2002).

As is shown in Fig. 3.8, in 2000 the Oceania region had a trade surplus of $US 1.12 billion. Primary exports included rock lobsters (frozen and fresh) and frozen shrimps and prawns. Primary imports included frozen shrimps and prawns and frozen marine fish fillets. In this case, the less-developed areas of Oceania exported shrimp and prawns, while the more developed countries, such as Australia and New Zealand, imported these products. Canada and Eastern Europe (including Russia) are both net exporters (Figs. 3.9 and 3.10, respectively). The value of both Canadian exports and imports grew steadily throughout the 1970s and 1980s. In the 1990s, the collapse of major groundfish species in the North Atlantic caused Canada’s surplus to decline. For example, total harvest of Atlantic cod declined from 482 800 MT in 1989 to 23 900 MT in 1994 (Grafton 1996). By 1997, the country’s surplus had declined to $US 1 billion before increasing to $US 1.4 billion in 2000. Primary exports include frozen crabs, lobsters, and farmed Atlantic salmon. Primary imports include shrimp and prawns and canned tuna. Eastern Europe had a small ($US 0.91 billion) surplus in 2000. Eastern European nations are relatively new participants in international trade, significantly entering the market after the collapse of the Soviet Union in 1991. Primary exports include frozen marine fish fillets and frozen cod. Primary imports are fish oil/fishmeal, frozen herring, and minced fish meat. Besides Japan, the two major seafood-importing regions are the US and the European Union (Figs. 3.11 and 3.12, respectively). Strong 51

THE INTERN ATION AL SEAFOOD TRADE 10

$US (billions)

8

6

4

2

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Imports

3.9

Exports

Canada – imports and exports (source: FAO 2002). 10

$US (billions)

8

6

4

2

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

Imports

Exports

3.10 Eastern Europe (including Russia) – imports and exports (source: FAO 2002).

economies in the 1990s allowed these two regions to import more seafood products. In 2000, the US exported $US 3.1 billion of edible fish products, and imports totaled $US 10.5 billion. Primary imports included shrimp and prawns, fresh Atlantic salmon, canned tuna, cod, and snow crab. The major suppliers to the US included Canada, Thailand, China, Mexico, and Chile. Shrimp and prawns represent $US 3.8 billion of the $10.5 billion dollars 52

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

$US (billions) 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

$US (billions)

TRENDS IN INTERN ATION AL SEAFOOD TRADE

12

10

8

6

4

2

0

Imports

3.11

Imports

3.12

53 Exports

US – imports and exports (source: FAO 2002).

25

20

15

10

5

0

Exports

European Union – imports and exports (source: FAO 2002).

THE INTERN ATION AL SEAFOOD TRADE

worth of seafood products imported in 2000. The most valuable exports include Alaska pollock, surimi, lobster, cod, sockeye salmon (canned and frozen), sablefish, salmon, and sea urchin roe. The major buyers of US exports are Japan, Canada, Korea, China, and France. In 2000, the countries within the European Union ran a $US 8.3 billion trade deficit in seafood products. Primary imports (by value) include frozen shrimp and prawn; fresh, farmed Atlantic salmon; canned tuna; canned shrimp and prawn; and Atlantic cod. The largest importers are France, Spain, Italy, Germany, the UK, and Denmark. Europe imports considerable amounts of shrimp from Asia and South America. Most of its fresh Atlantic salmon originates in Norway. The largest exports are in the same categories with the addition of several value-added products, such as smoked salmon and breaded/battered fish fillets. The largest exporters are Denmark, the Netherlands, the UK, France, and Germany.

References FAO, ‘The state of world fisheries and aquaculture’, Rome, Italy, http://www.fao.org/docrep/003/X8002e24.htm, 2001. FAO, Fishstat Database, Rome, Italy, 2002. Grafton Q, ‘Performance of and prospects for rights-based fisheries management in Canada’, in: Taking Ownership: Property Rights and Fishery Management of the Atlantic Coast, B Crowley (ed.), Halifax, NS, Canada, AIMS, 1996: 145–181. Japanese Statistics Bureau, Annual Report on the Family Income and Expenditure Survey, Tokyo, Japan, Management and Coordination Agency, Government of Japan, various years. Northeast Fisheries Science Center, Status of Fishery Resources off the Northeastern United States, Woods Hole, MA, USA, USDC, NOAA, NMFS, 2000. USDC (United States Department of Commerce), Fisheries Statistics of the United States, 1999. Silver Spring, MD, USA, NMFS, Office of Science and Technology, Fisheries Statistics Div., 2000.

54

CHAPTER

4 Trade by major seafood group James L. Anderson, Josué Martínez-Garmendia and Jonathan R. King

Introduction eafood includes a large number of heterogeneous products with the only common characteristic being their aquatic origin. In this chapter, trends in the trade of important commercial seafood groups are considered.1 This chapter focuses on six seafood groups: shrimp, salmon and trout, tuna, groundfish, crab and lobster, and cephalopods. While they are not the only seafood products traded in the realm of global seafood markets, they accounted for roughly 60% of the international seafood trade value in 2000. Although composing only six per cent in terms of total seafood trade volume, shrimp commerce is the most valuable item of international seafood trade. It amounted to 19% of total seafood trade value in 2000. Shrimp is followed by salmon and trout, tuna, groundfish, crab and lobster, mollusks and cephalopods in total export value (Table 4.1).

S

1 Trade and production information for this chapter is based on statistics provided by FAO (2002). 55

THE INTERN ATION AL SEAFOOD TRADE Table 4.1

Seafood trade breakdown, 2000 Exports MT $US (000s)

Shrimp1 1 476 725 Salmon and trout1 1 278 693 Tuna1 2 150 103 Groundfish1 1 683 191 Crabs and lobsters1 445 445 Mollusks (clams, oysters, scallops, mussels, etc.) 786 176 Cephalopods1 1 378 243 Fishmeal 4 956 704 Small pelagics (sardines, anchovies, pilchards, herrings) 2 346 504 Large pelagics (mullets, mackerel, jacks, capelin) 1 509 878 Flatfish (flounders, halibuts, soles, etc.) 388 390 Caviar and caviar substitutes 19 467 Sharks and skates 73 601 Oils 870 215 Eels 37 212 Sea urchin, sea cucumber 26 740 Swordfish 37 562 Fish waste 503 951 Catfish, perch, carp, and pike 33 577 Miscellaneous seafood 5 723 804 TOTAL 25 726 181

Imports MT $US (000s)

10 787 445 5 236 060 4 718 863 4 406 608 3 769 918

1 578 232 1 278 571 2 277 908 2 375 881 499 337

12 135 816 5 341 562 5 232 202 6 404 780 4 697 298

2 782 627 2 705 148 2 097 208

740 062 1 300 733 5 532 234

2 811 237 2 696 890 2 493 188

1 615 703

2 074 024

1 645 248

1 106 505

1 742 653

1 137 185

1 058 127 430 828 296 057 25 927 254 096 74 823 252 281 840 741 246 725 48 523 193 291 41 043 184 257 51 458 178 221 1 069 831 71 516 47 089 12 861 532 4 757 098 54 822 188 26 786 996

1 115 935 480 663 175 834 293 363 282 592 377 484 273 161 334 705 89 443 12 354 337 60 372 923

Source: FAO 2002. Fishstat Database, Rome, Italy 1 See Appendix 4.1 for species and product make-up

Shrimp and prawns To minimize confusion, it is important to note that the terms ‘shrimp’ and ‘prawn’ have different meanings depending on the market. Frequently the terms are used interchangeably. In many markets ‘prawns’ refers to large marine shrimp. In most cases, freshwater shrimp (or prawns) (Macrobrachium spp.) are normally sold as ‘prawns’. In some cases, the Norway lobster (Nephrops norvegicus) is referred to as a ‘prawn’. However, this is more appropriately grouped with lobster. Shrimp and prawn trade is the largest by value and probably the most dynamic seafood in the international market. It represents 20% of global seafood imports, with new players continuously being added to the list of exporting countries. Dramatic boom and bust harvests regularly alter trading 56

TRADE BY MAJOR SEAFOOD GROUP

patterns. Production has tripled since the 1970s. Currently, trade in shrimp is strongly influenced by aquaculture; however, it lacks the stability of other aquaculture-based products, such as salmon or catfish. Shrimp aquaculture technology, nutrition, production management, and disease control are still rapidly evolving. Shrimp operations are spreading throughout the developing world, where disease outbreaks impact shrimp ponds that often result in the loss of entire crops. In recent history, two main suppliers, Ecuador and China, have suffered diseases that have affected global supply and price. In Ecuador, Taura syndrome and white-spot disease led to supply shortages and shifts in trading partners. Despite shrimp’s vulnerability to disease, in less than 30 years, 29% of production has been farmed. Aquaculture, in fact, has contributed significantly to boost international trade of shrimp, and there is the belief that this trend will continue. Over 80% of farmed shrimp are exported and, therefore, are estimated to account for approximately 60% of total value of international shrimp trade. About 90% of cultured shrimp come from Asia, in particular, from China, India, Indonesia, Thailand, and Vietnam. Main importing regions are Japan, the US, and Europe. There are subcategories of shrimp: coldwater and warmwater. Warmwater shrimp are captured and cultured throughout the world and tend to be larger than coldwater shrimp. Coldwater shrimp are generally small. For example, a typical product is whole, cooked 40–55 shrimp count per pound (cpp). In contrast, warmwater shrimp have a wider size range. Some are sold at less than five per pound. Coldwater shrimp trade is composed fundamentally of northern prawn or pink shrimp (Pandalus borealis) from the North Atlantic and North Pacific, and common shrimp (Crangon crangon) from the Northeast Atlantic. It is primarily captured in Canada, Greenland, Norway, and the US. In 2000, Canada, Greenland, and Norway captured 130, 82, and 66 thousand MT, respectively, of coldwater shrimp (FAO 2002). The US, with its wild northern brown and northern white shrimp fisheries, is also an important player, although harvests have been on the decline. Coldwater shrimp are normally marketed as cooked and peeled, but considerable trading is also done with whole, head-on, raw shrimp, for which Japan is a major market. Some Asian markets, such as China, process small shrimp into paste and dried product. Coldwater shrimp supply is not expected to change significantly in the future, due mainly to its capture-based nature. In fact, coldwater shrimp fisheries in the North Pacific and North Atlantic appear to be close to their productive ceiling. In 2000, dominant coldwater shrimp exporters of northern prawn exported were Denmark (67 thousand MT), Greenland (37 thousand MT), and Canada (27 thousand MT). The combined export value of these three players was US$ 419 million (FAO 2002). A dramatic event in the trade of warmwater shrimp was the advent of aquaculture. As a result, the production of warmwater shrimp has increased 57

THE INTERN ATION AL SEAFOOD TRADE

at a much faster rate than that of coldwater shrimp. In the 1950s, the production levels of warmwater and coldwater shrimp were similar, around 200 thousand MT each; yet in 1998 more than 3 million MT of warmwater shrimp were produced, as compared to less than 700 thousand MT of coldwater shrimp (Fig. 4.1). Industry observers believe that the increasing trend in warmwater shrimp aquaculture will continue in the foreseeable future. It should be noted that, although China is reported as the world’s leading producer of shrimp products, with roughly one million MT in 2000, most of its production is marketed domestically in the form of pastes. Additionally, Chinese product figures are generally considered to be inaccurate. In 2000, Thailand, India, and Ecuador followed China with more than a combined 500 thousand MT.These countries, in contrast to China, are dominant players in international shrimp trade (FAO 2002). Size is a critical aspect of shrimp trade. Larger shrimp generally attain higher prices. Northern Europe, a traditional market for small, coldwater shrimp, is becoming a growing outlet for the larger shrimp from southeast Asia and Latin America. The growth of the market for larger-size shrimp in Japan, the US, and Europe has, in part, fueled Asian aquaculture. Southeast Asian countries have developed a successful culture industry of black tiger shrimp (Penaeus monodon). This species is generally harvested at larger sizes (typically 20–30 head-off, shell-on shrimp per pound) than its main competitor, the white shrimp (P. vannamei), which is produced typically in

4 000 3 500

MT (thousands)

3 000 2 500 2 000 1 500 1 000

COLD

4.1

Shrimp production (1950–2000). 58

WARM

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

1950

500

TRADE BY MAJOR SEAFOOD GROUP

Ecuador and Mexico (generally, 40–50 head-off, shell-on shrimp per pound). However, a very recent trend is for Asian farmers to produce P. vannamei. Thailand is the dominant source of warmwater shrimp. In 2000 alone, it exported 250 thousand MT of frozen and canned shrimp. The value of these exports amounted to US$ 2.7 billion. To realize the importance of Thailand in shrimp trade, we would need to combine the exports of Indonesia, India, and Vietnam (the second, third and fourth highest value exporters) to match the value of Thailand’s exports in 2000. It produces around 20% of all farm-raised shrimp. Further, it has a well-established valueadded industry. These two factors have given Thailand the reputation of a reliable source among many importers throughout the world. India and Vietnam, however, have made significant investments in shrimp aquaculture and are starting to have a major impact in the markets (Table 4.2) (FAO 2002). Value-added products are gaining importance in the shrimp industry. Although frozen shrimp is the most common product form, with around 65% of total production, canned shrimp is slowly growing. It has grown from 4 to 12% in less than 25 years. The main markets for canned shrimp are Japan and the UK. For prepared products, the US is by far the leading importer, with 49 thousand MT. The growing demand for value-added shrimp in the US and Japan is being satisfied by Thailand and China (FAO 2002). In the case of shrimp, prices are largely influenced by global fluctuations related to the outbreak of diseases in different producing countries. A relatively consistent downward trend in prices, however, is related to the continued increase in production from shrimp farming. As a result, a continued decline in prices is expected to continue in the near future. One of the major challenges exporting countries face is the perception importing countries have on the environmental impact of wild and cultured Table 4.2

Top ten shrimp exporting countries, 2000

Country Thailand India Indonesia Denmark China Vietnam Netherlands Greenland Canada Norway Other TOTAL

MT

Country

249 638 128 827 104 793 98 389 93 881 67 341 57 362 51 008 43 459 42 944 497 339 1 434 981

Thailand Indonesia India Vietnam Mexico Denmark China Bangladesh Netherlands Ecuador Other TOTAL

Source: FAO 2002. Fishstat Database, Rome, Italy

59

$US (000s) 2 698 077 948 877 899 632 656 760 456 857 411 633 375 452 335 792 279 817 274 518 3 346 285 10 683 700

THE INTERN ATION AL SEAFOOD TRADE

shrimp harvest. US and European environmental pressure is likely to lead to the implementation of trade barriers on producing countries that do not enforce environmental controls. Widespread, unintentional mortality of fish and protected species, like turtles, in shrimp fisheries has received considerable attention. In 1996, the US banned imports from those countries that did not employ turtle-excluder devices (TEDs) in their wild shrimp harvesting operations. This ban resulted in the filing of a complaint against the US before the World Trade Organization (WTO) by several wild shrimp harvesting Asian nations including India and Thailand. The filing countries argued that the US gave preferential treatment to other countries by allowing them a longer time to comply with the new US import requirements regarding TEDs. The WTO, as with the dolphin–tuna conflict, ruled in favor of the plaintiffs in 1999. Further, mangrove and other habitat destruction, blamed on the rapid shrimp pond expansion in tropical countries, may limit the growth of aquaculture there. Pollution from the use of fertilizers and therapeutants is another factor that will play a central role in the constraints faced by shrimp aquaculture in the future. In fact, an EU ban on shrimp imports from China was imposed in 2002 owing to the presence of a residue from the antibiotic chloramphenicol. The US is the largest consumer and leading importer of shrimp. In 2000, it imported 152, 129, and 61 thousand MT of whole frozen, peeled frozen, and prepared products, respectively, worth US$ 3.8 billion.Thailand, Mexico, India, and Ecuador are its main suppliers. Their ranking varies widely according to supply shocks resulting from disease or other environmental factors (Table 4.3) (FAO 2002). In Japan, shrimp is the second most consumed seafood after tuna, in terms of expenditure value. In 2000, Japan imported 247 thousand MT of Table 4.3

Top ten shrimp importing countries, 2000

Country US Japan Spain Denmark UK France Canada China Italy Netherlands Other TOTAL

MT

Country

345 703 282 962 114 709 94 846 77 869 67 718 66 370 57 423 49 602 40 325 706 136 1 903 663

US Japan Spain UK France Canada Italy Denmark Belgium Netherlands Other TOTAL

Source: FAO 2002. Fishstat Database, Rome, Italy

60

$US (000s) 3 848 737 3 166 979 767 641 539 858 495 177 377 811 344 790 332 556 268 388 258 631 1 653 105 10 053 673

TRADE BY MAJOR SEAFOOD GROUP

frozen shrimp, 32 thousand MT of canned shrimp, and 3 thousand MT of fresh shrimp. Overall, Japanese imports for that year reached just over US$ 3.1 billion. Indonesia, Thailand, India, and China are the traditional suppliers of frozen, live, fresh, and other shrimp forms. Greenland, on the other hand, provides Japan with the majority of its coldwater shrimp (FAO 2002). European countries are more heterogeneous in their imports. As is the case for finfish, Europe can be separated into north and south when it comes to shrimp. Northern countries purchase small, coldwater shrimp. Germany, the Netherlands, and Belgium purchase native brown Crangon shrimp, while the UK and France tend to purchase northern shrimp of the Pandalus genus. Coldwater shrimp are largely captured for the domestic market, but Greenland and the Faeroe Islands export to northern Europe, and Argentina to southern Europe. Southern or Mediterranean countries prefer larger, warmwater shrimp. Ecuador is one of the main suppliers to southern Europe. Spain, for example, imported 112 thousand MT of frozen shrimp worth US$ 751 million in 1999. France, the second largest European importer, by value, for the same year, imported 51 thousand MT worth US$ 400 million. Europe and Japan tend to demand whole, head-on, shrimp and are considered more quality-conscious than US buyers. If supplies can meet the quality standards, greater yields are achieved by selling head-on shrimp to Europe and Japan (FAO 2002).

Salmon and trout By 2000, salmon and trout imports and exports amounted to approximately five percent of seafood volume traded and nearly ten percent of its value. As in the shrimp sector, the trout and salmon world markets were shaken by the growth of salmon farming. The indications are that it will remain the dominant force for the foreseeable future. Although farmed trout production in freshwater has been established for many decades, salmon production relied almost entirely on capture fisheries until the 1980s. At that time, Norway, followed by Scotland, Chile, Canada, and the US, began a period of rapid growth in commercial-scale, pen-raised salmon production. Salmon aquaculture started in 1857 in Canada, but it was not until the 1960s that fenced fjords in Norway were used to raise salmon. This created an awareness of the possibility of developing large-scale ocean pen-raised salmon aquaculture operations. In the 1970s, improvements to ocean pens took place in various parts of the world. This period coincided with the decline of cod stocks in the North Sea. That, together with the social objectives of maintaining rural population in northern parts of Norway and to re-employ farmers and fishermen, led the Norwegian government to encourage and support salmon aquaculture in the 1980s. However, much of this early devel61

THE INTERN ATION AL SEAFOOD TRADE

opment of salmon aquaculture in Norway was subject to many regulations and production limits. These constraints to growth encouraged technical labor and capital to find other areas where aquaculture could grow less fettered by regulation. Canada, the US, and Chile were the beneficiaries of this investment outside Norway (Weber 1997). Once the Norwegian government recognized the implications of these countries developing a large salmon production infrastructure, it lifted some of its restrictions on production. Norway is the leading pen-raised salmon producer in the world by virtue of its advanced technology, nutrition and farm management, quality stocks, disease control, appropriate environment, and facilitating regulations. Salmon and trout farming are more technologically advanced than shrimp culture. Unlike the boom and bust production pattern of the farmraised shrimp industry, salmon and trout farming countries have generally recovered quickly from production shortfalls and have resumed upward trends. Pen-raised salmon comprised only 1.2 per cent of total world salmon production in 1980 (Anderson and Fong 1997), but grew to approximately 60% of global production by 2000. Currently, most (about 85%) farmed salmon is Atlantic salmon (Salmo salar). Other farmed species include coho (Oncorhynchus kisutch), mostly in Chile, and small amounts of chinook (king) (O. tshawytscha) primarily in Canada, Australia, and New Zealand. In fact, Atlantic salmon production is larger than the sum of the harvest of all Pacific salmons combined. Atlantic salmon was originally found in the wild in the North Atlantic Ocean and associated rivers. The species was not a significant factor in international trade prior to salmon farming. In the twentieth century, the most commercially important species were the Pacific salmons. Their trade is based on wild and hatchery-enhanced captures in the North Pacific. This group encompasses sockeye or red (O. nerka), coho or silver chum or dog (O. keta), chinook and pink or humpie (O. gorbuscha) salmon, and to a minor degree masu (O. masou) in Asia. In contrast to pen-raised farm-salmon, which is sold primarily in fresh/chilled form, the different types of wild-caught salmon enter the market in varying product forms depending on the species and the target market. Some species are sold primarily in a fresh/frozen state while others are almost entirely canned. For example, coho and chinook are largely sold fresh and frozen in the US, Canada, Japan, and Europe. Very little of this harvest is canned. Some 75–80% of Alaskan sockeye is sent to Japan as frozen product. The remainder is canned and sold in primarily the UK, the US, Canada, and Australia. Chum production splits between fresh/frozen (80%) and canned products (20%). Fresh/frozen chum is shipped to the US, Europe, and Japan. Pink salmon is mostly canned, with producers canning between 60 and 80% of the harvest. This species accounts for a large share of canned salmon production destined primarily for the UK, Canada, the US, and

62

TRADE BY MAJOR SEAFOOD GROUP

Australia. A much smaller amount is exported frozen. A large portion of the revenue received for pink and chum salmon comes from the sale of roe, primarily to Japan. A significant portion of the harvest of all the Pacific salmon species is ultimately smoked, especially salmon sold in Europe. Exports and imports of salmon and trout almost doubled between 1985 and 1990 (Fig. 4.2). Accompanying the increase in supply, a precipitous drop in prices began in the 1990s. On average, between 1990 and 2000, the price for salmon dropped by 60% from US$ 10.00/kg to US$ 3.50/kg (Anderson 1997). This turn of events has transformed a traditional gourmet luxury into a commodity competing with more traditional fish, such as cod. The most significant sources of wild and hatchery-based ocean harvest salmon are the US, Russia, and Japan. In 2000, the three countries combined captured roughly 600 thousand MT (FAO 2002).Their harvest comes from the North Pacific. The supply from these fisheries is very volatile owing to the uncertainty associated with salmon runs. Further, the fishery is highly seasonal, which means that all harvest occurs within a few months, inundating the market with product. Aquaculture has severely impacted the salmon capture fishing sector. In Alaska, for example, the low prices resulting from the farmed product, as a result of competition, along with Alaska’s quality problems have contributed to a reduction in value of its salmon fishery by 50%, crippling its traditionally rich salmon fishing sector (Knapp 2001). Norway is the predominant exporter of trout and salmon (Table 4.4). In 2000, it exported 372 thousand MT, worth more than US$ 1.5 billion (FAO 2002). Norway’s exports go mainly to the EU countries, since the US imposed an average 26% anti-dumping duty on Norwegian, farm-raised, fresh, whole Atlantic salmon imports in 1990. Other Norwegian salmon products do not receive this tariff. Chile is the second-largest exporter of salmon products with over 202 thousand MT in 2000. Despite not being a leading salmon 1 400 MT (thousands)

1 200 1 000 800 600 400 200 0 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Export quantity

4.2

Import quantity

International salmon and trout trade (source: FAO 2002).

63

THE INTERN ATION AL SEAFOOD TRADE Table 4.4

Top exporters of salmon and trout, 2000

Country Norway Chile Denmark US Canada Germany UK Sweden Russian Federation Faeroe Islands Other TOTAL

MT

Country

372 091 202 617 170 757 115 914 68 746 53 511 52 617 50 691 37 483 27 280 126 986 1 278 693

Norway Chile Denmark US Canada UK Germany Sweden Faeroe Islands France Other TOTAL

$US (000s) 1 507 780 875 376 795 815 488 590 324 182 251 753 229 392 211 296 92 065 61 340 5 949 856 10 787 445

Source: FAO 2002. Fishstat Database, Rome, Italy

farming country, Denmark is the third-largest exporter of salmon products, with over 170 thousand MT in 2002 (FAO 2002). Denmark depends mostly on Norwegian product to feed its processing and distribution industry. Virtually all the salmon and trout entering Denmark comes fresh from Norway. More than 90% of it tends to be re-exported fresh or smoked. In fact, 58% was exported fresh and ten per cent smoked in 2000. The explanation for the re-exportation of Norwegian product by Danish traders is the longestablished relations the latter has with continental Europe, together with their wide range of products offered. Since the largest share of Norwegian exports are directed primarily toward EU markets, part of this integration is related to the trade relationship that Denmark, an EU country, has with the importing EU countries relative to Norway, a non-EU country (Lem and Di Marzio 1996). In addition to Norwegian product, EU processors also attempt to procure Alaskan and Canadian salmon. In recent years, Norway has been actively expanding its exports to Japan, directly competing with the US, Canada, Russia, and Chile for this market. Far behind Norway is the US, with 116 thousand MT of exports in 2000 worth US$ 448 million, primarily from its Alaska fishery. In 1980, prior to the production of farmed salmon, the US accounted for 40% of world production and about 43% of international trade. Today, the US only accounts for 12% of exported value, relative to Norway with 29%. Alaska never adopted pen-raised salmon farming that extended throughout the world in the 1980s and 1990s. In fact, a permanent moratorium was placed on for-profit salmon farming by the State of Alaska in 1987 (Anderson 1997), despite it having one of the most suitable natural settings for salmon farming in the world. The moratorium was rationalized because of environmental concerns and, more importantly, the risk of negative economic impacts on the Alaskan salmon industry. Arguments regarding year64

TRADE BY MAJOR SEAFOOD GROUP

round supply, diversification, and improved market opportunities were not considered significant enough to offset concerns of fishermen and environmentalists. The result of such regulation was the loss of the worldwide domination the US once held on salmon production and exports. Another interesting case among salmon exporters is Chile. Chile developed salmon farming in the late 1970s, and it grew rapidly, reaching a prominent international position as the second-largest producer of farm-raised salmon by the end of the 1990s. Unlike Norway, Chile has not focused solely on Atlantic salmon, but also coho and sea-run rainbow, or steelhead trout (O. mykiss). In 2000, Chile produced 166 thousand MT of Atlantic salmon, 93 thousand MT of coho, and 78 thousand MT of rainbow trout (FAO 2002). Its markets are diversified between Japan, the US, and Europe, in that order of importance. Virtually all the coho and trout production goes to Japan, while most of the Atlantic salmon is sold in the US, and to smaller scale, Europe. Japan is the leading importer of salmon and trout. It has held that position since 200-mile EEZs were enacted in the 1970s. Its 235 thousand MT are followed closely by the 169 and 159 thousand MT imported by Denmark and the US, respectively, in 2000 (Table 4.5) (FAO 2002). Of the five Pacific salmons mentioned above, sockeye is the preferred. Japan relies on US, Canadian, and Russian catches as major suppliers. Coho and chum follow sockeye in the preference ranking of Japanese consumers (Kusakabe 1992). However, farmed Atlantic salmon and sea run rainbow trout are gaining market share. Farm-raised sea run rainbow trout competes directly with sockeye salmon in Japan because the degree of flesh color is similar. Overall, the principal sources to Japan are US, Russian, and Canadian exports of sockeye; Chilean farmed coho salmon, Norwegian farmed Atlantic salmon; and rainbow trout

Table 4.5

Top importers of salmon and trout, 2000

Country

MT

Country

$US (000s)

Japan Denmark US France Germany Sweden UK Canada Spain China Other TOTAL

235 153 168 824 158 715 114 147 105 104 66 835 50 229 40 326 29 140 25 401 284 697 1 278 571

Japan US Denmark Germany France Sweden UK Italy Canada Belgium Other TOTAL

1 098 090 961 534 655 506 489 623 461 705 269 345 203 105 143 030 131 140 125 873 802 611 5 341 562

Source: FAO 2002. Fishstat Database, Rome, Italy

65

THE INTERN ATION AL SEAFOOD TRADE

from Chile and Norway. Japanese hatchery-based salmon fisheries are able to supply more than half of its domestic demand. The vast majority of its production is centered on hatchery-based chum salmon. In 2000, the Japanese chum harvest amounted to 165 thousand MT, or 69% of its salmon and trout production in that year. Trout and salmon are traded in a number of forms. The most important are whole fresh Atlantic salmon and frozen Pacific salmon. In 2000, exports of the former amounted to 218 thousand MT or US$ 2 billion, while frozen Pacific salmon exports were 191 thousand MT or US$ 612 million. Other forms commonly traded are fresh and frozen fillets and steaks, smoked, and canned. Farmed, fresh and frozen Atlantic salmon pinbone-out (PBO) fillets are rapidly gaining market share in the US. Traditional product forms before the farming boom were canned and frozen. However, since aquaculture has been able to provide a consistent supply of high-quality fresh salmon, it is now the most widely traded salmon form. There is also a growing market for smoked salmon in Europe. Germany and Italy imported 15 thousand MT in 2000, as opposed to 400 MT in 1976. Denmark, with a traditional smoked fish processing industry, is the leading exporter. Its smoked salmon imports amounted to 15 thousand MT, also in 2000 (FAO 2002). A growing demand for organically produced salmon is also developing in Europe, which seems to attain higher prices than conventionally grown salmon (Abbors 2000). Salmon has been the center of a number of international trade conflicts. At the beginning of the 1990s, Scottish and Irish farmers managed to encourage the EU to impose minimum import prices for all Atlantic salmon, but with their aim focused at Norwegian (a non-EU country) product (Asche 1997). The Norwegian government, however, eased the situation by imposing production restrictions on its farmers. Although attempts by Irish and Scottish farmers have been made on several occasions, dumping complaints against Norway have never been successful. US farmers, on the other hand, were successful in their claim that Norway was dumping salmon in the US. In 1991, the US International Trade Commission (USITC) determined that Norway was dumping product. The Commission imposed an average duty of 26% on whole, fresh, Atlantic salmon, which is still in place. Implicitly, the aim of US farmers was to limit supply, so that prices in the US would rise. However, they had limited success. While the presence of Norwegian product in the US market was virtually eliminated, the ensuing US demand was rapidly quenched by Chilean and Canadian suppliers. Not surprisingly, prices continued to decline. Then, in 1997, the Maine and Washington salmon industry, owned largely by Norwegian and Canadian interests, filed an antidumping and countervailing suit against Chilean salmon producers. This time, however, the suit was not as successful. The countervailing suit, claiming unfair subsidies to the Chilean salmon farming industry, was largely dismissed. However, a small antidumping duty of only five percent was 66

TRADE BY MAJOR SEAFOOD GROUP

imposed on Chilean imports. This tariff has had minimal effects on salmon trade between the two countries.

Tuna Tuna accounts for about nine percent of global seafood trade. They include yellowfin (Thunnus albacares), bigeye (T. obesus), bluefin (T. thynnus), skipjack (Katsuwonus pelamis), albacore (T. alalunga), and bonito (Sarda sarda) (see Appendix 4.1 for a complete product listing). Yellowfin and albacore are tropical, warmwater tuna that can be found throughout the world’s oceans. Skipjack, together with bonito, are the smallest of all tuna, ranging between 40 and 80 centimeters at harvest. Bonito is found in the tropical and subtropical Atlantic, the Mediterranean, the Black Sea, and even the North Sea. Skipjack is confined to warm and tropical waters. Bigeye tuna is an intermediate-size tuna found worldwide in warm waters, with the exception of the Mediterranean Sea. Bluefin tuna is, without doubt, the most highly valued of all tuna. Prices at the Tokyo Central Wholesale Market (Tsukiji) often exceed US$ 40 per kilo for fresh North Atlantic bluefin tuna. Bluefin tuna are separated into two groups: North Atlantic bluefin (T. thynnus) and the southern bluefin (T. maccoyli) in the South Pacific. The North Atlantic species is the higher valued of the two. Together with yellowfin, bluefin is the largest of all tuna and has a characteristic, dark, red flesh, similar in color to beef. The largest contribution to tuna production is made by skipjack and yellowfin tuna: 1.9 million MT of skipjack and 1.0 million MT of yellowfin tuna, or 43% and 22% of all tuna, respectively, in 2000. The relative market share of each species has not changed much since the 1950s. Only albacore catches have lost significant ground relative to the other tuna, from 21% in 1950 to five per cent in 2000 (FAO 2002). A total of 4.9 million MT of tuna were captured in 2000. Japan is the leader with 694 thousand MT, followed by Indonesia with 672 thousand MT, Taiwan with 494 thousand MT, the Philippines with 357 thousand MT, and Spain with 236 thousand MT (Table 4.6). Of all tuna, 40% is captured in the Western Central Pacific. The entire Atlantic only accounts for 12%. In 1950, 55% was captured in the Pacific Northeast and Central Eastern Pacific. At that time, the US was the dominant harvester in the world with around 180 thousand MT harvested a year, or almost 40% of global catches (FAO 2002). These catches supplied the cannery industry of the US West Coast. Today, the US accounts for only five per cent of total world catch partly due to the 200mile EEZ restrictions and the comparative advantage of labor cost in Asian canneries. 67

THE INTERN ATION AL SEAFOOD TRADE Table 4.6 Country Japan Indonesia Taiwan Philippines Spain S. Korea Ecuador Other nei US France Other TOTAL

Top ten tuna producing countries, MT (1950–2000) 1950

1960

1970

1980

1990

2000

139 100 4 400 12 000 18 900 36 003 200 2 900 0 181 239 17 056 131 313 543 111

528 800 29 700 26 000 18 400 47 656 0 19 100 0 140 421 29 450 291 038 1 130 565

588 900 41 100 111 382 101 500 57 417 28 185 16 020 1 810 224 800 47 126 360 461 1 578 701

792 469 149 513 157 586 204 163 116 168 118 760 18 600 25 403 243 555 69 138 574 508 2 469 863

719 784 342 801 353 871 320 662 276 103 242 748 58 707 125 816 249 541 160 596 1 158 545 4 009 174

694 021 672 490 494 761 357 501 236 652 228 403 181 147 178 756 162 653 152 693 1 545 519 4 904 596

The implementation of 200-mile EEZs in the 1970s forced southeast Asian countries to focus on their own territorial resources. This altered the sources of tuna supply to the world. Japan became the leading harvester in the 1960s in order to satisfy the consumption boom associated with its economic recovery from World War II. At that time, Japan harvested close to 50% of all world tuna. Currently, although still the largest harvester in the world, Japan accounts for just 14% of the world catch (FAO 2002). Total imports realized a significant increase from the beginning of the 1980s. While imports in 1980 amounted to 689 thousand MT, by 2000 they had reached 2.2 million MT, worth US$ 5.2 billion. Japan is the largest market for tuna in the world, by value and quantity. Its imports amounted to 439 thousand MT and US$ 2.1 billion in value in 2000, followed by Thailand at 360 thousand MT and the US with 218 thousand MT, 58% of which was canned. The UK, France, and Italy are also traditional importers of canned tuna. These three countries imported a combined total of over 366 thousand MT of canned tuna in 2000 (Table 4.7). The highest-quality tuna is shipped to Japan. In 2000, Japanese imports were worth US$ 2.1 billion, relative to the US$ 638 thousand paid by the US. Therefore, while the US paid US$ 2.92/kg of tuna imported, Japan spent US$ 4.78/kg, on average. Frozen bigeye, skipjack, and yellowfin tuna are imported in the largest amounts by Japan. In 2000, 112, 100, and 77 thousand MT were imported, respectively (FAO 2002). The Japanese have a significant market for raw fish – sashimi – which includes tuna. This style of consumption is now spreading throughout the developed world.The sashimi market has demanding quality standards. Tuna for the sashimi market is graded for a number of characteristics including freshness, fat content, flesh color, and shape (Martínez-Garmendia, Anderson, and Carroll 2000). Although most sashimi-grade tuna comes from South Korea and Taiwan, the 68

TRADE BY MAJOR SEAFOOD GROUP Table 4.7

Top ten tuna importing countries, 2000

Country Japan Thailand US Spain Italy France UK Germany Côte d’Ivoire Ghana Other TOTAL

MT

Country

$US (000s)

439 387 359 744 217 965 195 915 133 658 125 508 107 624 78 862 69 634 45 913 503 698 2 277 908

Japan USA Italy France Thailand UK Spain Germany Canada Singapore Other TOTAL

2 102 781 637 750 353 733 293 626 262 971 240 770 238 086 155 899 73 948 71 296 801 342 5 232 202

Source: FAO 2002. Fishstat Database, Rome, Italy

premium sashimi tuna is the North Atlantic bluefin tuna, which is typically sold in high-end sushi restaurants. Japan imported 65 thousand MT of fresh bluefin tuna in 2000. Although this amount was far from bigeye and yellowfin imports, it was certainly the most expensive. In 2000, bluefin sold, on average, for US$ 27/kg, while bigeye traded for slightly more than US$ 8/kg. The tuna pricing system followed by Japanese traders relies on careful inspection of each fish. The level of scrutiny applied to tuna is highly unusual in seafood markets (Carroll, Martínez-Garmendia, and Anderson 2001; McConnell and Strand 2000). Tuna flesh has several characteristics. The more fat the flesh has, the more valuable it is, in general. Tuna meat that is richest in fat is called otoro, which tends to display a pink color. These cuts, with about 25% fat content, are from the area in the center of or bordering the belly. Cuts from the inner loin muscles, with around 14% fat content, are called akami. Besides Japan, Thailand grew to become the sixth largest importer in terms of value and second in terms of quantity since its active participation in the international tuna trade in the 1980s. Its imports are composed of frozen albacore and yellowfin tuna, directed to its processing plants, in particular canneries, which are then exported in a value-added form. In 2000, total global tuna exports equaled 2.1 million MT, worth US$ 4.6 billion. Taiwan and Thailand were the leading exporters with 452 and 251 thousand MT, respectively. They differ largely in the type of product they export, however, and while 96% of Thai exports are canned, most Taiwanese exports are frozen. This, in fact, is reflected in the value of their exports. Taiwanese exports were valued at US$ 1.2 billion, while Thailand accounted for less than half as much, or US$ 477 million in 2000 (FAO 2002) (Table 4.8). 69

THE INTERN ATION AL SEAFOOD TRADE Table 4.8

Top ten tuna exporting countries, 2000

Country

MT

Taiwan Thailand Spain France S. Korea Indonesia Philippines Colombia Ecuador Côte d’Ivoire Other TOTAL

Country

452 172 251 372 231 245 208 732 100 169 92 958 88 934 80 094 66 412 58 053 519 962 2 150 103

Taiwan Spain Thailand S. Korea France Indonesia Australia Côte d’Ivoire Philippines Ecuador Other TOTAL

$US (000s) 1 231 909 531 103 477 332 294 615 266 511 223 917 177 657 120 499 118 265 117 945 846 885 4 406 638

Source: FAO 2002. Fishstat Database, Rome, Italy

In the 1980s and 1990s, the incidental mortality of dolphins in tuna fisheries created a highly publicized conflict that had significant effects on international trade, industry behavior, and marketing. Purse-seine fisheries of yellowfin tuna in the eastern tropical Pacific involving the US and Latin American countries, together with driftnet fisheries of albacore tuna in the North Pacific involving Japan, South Korea, and Taiwan, were responsible for high dolphin mortality. Pressure from environmental groups in the US to curtail dolphin mortality engaged the government and created a world trade conflict. Purse-seine (a large net that is closed like a drawstring purse once set) tuna fisheries were known to encircle dolphins swimming at the surface, since yellowfin tuna often swim under dolphins to free-ride on the sonar prey detection system dolphins have and tuna lack. Driftnets, on the other hand, are passive gears that hang in the ocean, capturing tuna and other species, often including dolphins. The magnitude of the problem was estimated to be an annual two percent death rate among the eastern tropical Pacific dolphin stock. The mortality reached its highest point in the 1960s, when up to 707 000 dolphins were reportedly killed by the eastern tropical Pacific yellowfin tuna fishery. However, as a result of regulations based on the US Marine Mammal Protection Act (MMPA) of 1972, mortality levels dropped by the mid-1980s and remained around 25 000 a year. At this time, such levels of mortality were deemed sustainable by the US National Marine Fisheries Service (NMFS) (USITC 1992). The MMPA was designed to ban the capture and trade of marine mammals, such as dolphins. In terms of incidental takings by tuna fisheries, it implied that mortality should be minimized by applying the best safety techniques and using equipment that was economically available (USITC 1992). As of 1977, the US lowered the incidental

70

TRADE BY MAJOR SEAFOOD GROUP

catch rate of dolphins to 20 500 a year in the US yellowfin tuna fishery, at which point the fishery would be closed for the year. The MMPA, however, also included a statute that allowed the imposition of trade restrictions with countries in which tuna was harvested in ways that did not meet US standards on dolphin safety. Originally, this statute provided the Secretary of Commerce great latitude in the enforcement of such embargoes. Peru, Senegal, the Congo, Mexico, and the USSR suffered some of these embargoes between 1977 and 1984. In 1984, an amendment to the MMPA was made to require information from all tuna-exporting countries to the US about their measures to minimize dolphin mortality in yellowfin purse-seine fisheries. This amendment was not fully enforced. Most of the embargoes that took place after 1984 were in retaliation to the seizure of US vessels by Mexico resulting from the Mexican territorial water claims related to the 200-mile EEZs (USITC 1992). In 1988, further amendments provided criteria for determining whether a country had dolphin-safe regulations comparable to the US. It also allowed the imposition of embargoes on countries that traded with fishing countries that did not meet US standards. The US largely ignored these regulations until 1990 when environmental groups successfully went to court to make the US enforce the 1988 amendments. The result was a flurry of embargoes on tuna imports from Latin American, Asian, and European countries. In 1991, Mexico, one of the embargoed countries, requested that a General Agreement on Tariffs and Trade (GATT) panel determine whether the US ban of Mexican tuna was consistent with US obligations under the GATT. The panel determined that the US was in violation of the GATT. By the end of the 1980s, however, major US canners of tuna, sensing the effect the environmental movement could have on consumers, started to assure the public that they bought product from only dolphin-safe harvesters. In fact, to further reassure consumers, the US canning industry began to market canned tuna with a ‘dolphin-safe’ label. This was probably the first ‘ecolabel’ in the seafood industry’s history.

Groundfish Groundfish includes species groups such as cod, haddock, pollock, and hake (see Appendix 4.1 for detailed listings). Groundfish are harvested virtually wholly from ocean capture fisheries. There are only small-scale, experimental aquaculture operations for these species at present. However, some believe farmed cod may be a significant factor in the market sometime in the future and commercial operations have started in countries such as Scotland and Norway. In 2000, groundfish represented about eight per cent of

71

THE INTERN ATION AL SEAFOOD TRADE

the international seafood trade in value and seven per cent by volume or 1.6 million MT and US$ 4.4 billion in annual exports (FAO 2002). World groundfish landings increased four-fold, from about 3 million MT in the early 1950s to nearly 14 million MT in the mid-1980s. By 2000, they had declined closer to nine million MT. This period witnessed a shift in captures from the North Atlantic to the Pacific and southern Atlantic oceans. The main reasons for the declining stocks of the North Atlantic are overfishing and environmental factors. As these declines occurred, effort shifted to newly discovered fishing grounds in areas not previously accessible to fishing technology (such as deepwater fisheries, capturing orange roughy (Hoplostethus atlanticus) in New Zealand and increased fishing of stocks in the North Pacific (such as Alaska pollock (Theragra chalcogramma)). Although, Atlantic cod (Gadus morhua) represented almost 64% of all groundfish catches up until the end of World War II, it has gradually lost ground to other fish, accounting for only slightly more than 12% of groundfish today. Nevertheless, Atlantic cod is still a leading groundfish in the international markets. The key species taking the dominant position once held by Atlantic cod is Alaska pollock, which amounted to 36% of global groundfish trade at the end of the 1990s. Haddock (Melanogrammus aeglefinus), another traditional product of the North Atlantic fisheries, has also lost its former predominance. An illustrative example of the geographic shift in groundfish supply is the displacement of European hake (Merluccius merluccius) witnessed in its traditional southern European markets. These markets substituted the European hake for Cape hake (M. capensis) in the 1970s, and then for Argentinean hake (M. hubbsi) since the 1980s. In 2000, the top groundfish exporters in terms of quantity were Namibia, Norway, and Russia, with more than 183, 177, and 175 thousand MT, respectively. However, in terms of export value Iceland topped them all with US$ 603 million. Although the third global supplier of groundfish in terms of quantity, questionable quality control and processing standards relegate Russia to sixth position in export value behind Nordic countries, such as Norway, and even the US. In 2000, the main importer was China, with 398 thousand MT. Spain, Germany, the UK, and the US followed with 223, 222, 198, and 196 thousand MT, respectively. In terms of value, however, Japan, the US, the UK, and Spain are the main international buyers of groundfish with over US$ 797, US$ 685, US$ 664, and US$ 592 million, respectively, that same year. In contrast, Chinese imports were worth only US$ 344 million (FAO 2002) (Tables 4.9 and 4.10). Cod dominated international trade in 2000, followed by hake and Alaska pollock (Tables 4.11 and 4.12). Cod accounted for 53% of the groundfish import quantity and as much as 65% in value. Among groundfish, the most valuable per kilo groups are cod and haddock, followed by hake, saithe (Pollachius virens), and Alaska pollock. 72

TRADE BY MAJOR SEAFOOD GROUP Table 4.9

Top ten groundfish exporters, 2000

Country

MT

Namibia Norway Russian Federation Denmark US Iceland Germany Netherlands Spain New Zealand Other TOTAL

Country

183 770 177 016 175 144 148 363 139 163 131 418 112 356 73 757 66 542 64 568 411 094 1 683 191

Iceland Norway Denmark US Germany Russian Federation Namibia Spain Faeroe Islands Netherlands Other TOTAL

$US (000s) 603 001 601 674 537 600 418 606 291 659 272 157 230 846 162 901 145 644 137 191 1 005 329 4 406 608

Source: FAO 2002. Fishstat Database, Rome, Italy

Table 4.10

Top ten groundfish importers, 2000

Country

MT

Country

$US (000s)

China Spain Germany UK US France Denmark Portugal Norway S. Korea Other TOTAL

398 072 223 874 222 815 198 394 196 865 147 158 143 901 129 969 96 363 95 149 523 321 2 375 881

Japan US UK Spain Germany Portugal France Denmark China Italy Other TOTAL

797 489 685 493 664 893 592 088 481 591 449 167 393 020 380 103 344 575 236 402 1 379 959 6 404 780

Source: FAO 2002. Fishstat Database, Rome, Italy

Table 4.11

Groundfish exports, 2000

Species

MT

$US (000s)

Cod Hake Pollock Saithe Haddock Other TOTAL

771 989 388 497 788 677 128 371 83 272 232 395 1 683 191

2 669 360 625 408 306 944 202 983 256 398 345 515 4 406 608

Source: FAO 2002. Fishstat Database, Rome, Italy

73

THE INTERN ATION AL SEAFOOD TRADE Table 4.12

Cod Hake Pollock Saithe Haddock Other TOTAL

Groundfish imports, 2000 MT

$US (000s)

1 248 372 378 740 430 807 131 897 115 390 70 675 2 375 881

4 143 258 798 672 775 262 226 602 323 285 137 701 6 404 780

Source: FAO 2002. Fishstat Database, Rome, Italy

Historically, groundfish, and in particular Atlantic cod, have had more influence than any other fish in the development of western civilization in the beginning of the second half of the second millennium. Cod is being likened to the beef of the medieval and the beginning of modern periods (Ragnow 2002). Cod became a popular fish owing to its abundance and ease of preservation as dried and salted product. Besides its white flesh, the roe, tongue, air bladder, and cheeks are still considered delicacies, and its liver medicinal (McClane and deZanger 1977). The relevance of cod in international markets dates back to the thirteenth century. Norway, Denmark, and the Hanseatic League captured and traded cod from Iceland and Greenland. This dominance lasted until the late eighteenth century, interrupted only by the English intrusion of Icelandic and Greenland waters during the late 1300s and early 1400s as a result of the bubonic plague (Seaver 1996). The North American Atlantic cod stock started to be exploited in the late 1400s as a result of the reports of the English envoy and Venetian sailor Giovanni Caboto (aka John Cabot) to Newfoundland in 1497. Caboto claimed a sea filled with cod. In fact, this stock was orders of magnitude larger than the ones in Iceland, Greenland, and the North Sea. This led to the establishment of English, French, Portuguese, and Basque cod fisheries from Newfoundland to New England in the 1500s. Cod became a vital item in the ‘golden triangle’ of trade between Europe and the American colonies. This trade involved ships full of salted cod sailing from New England to Europe, which would then be filled with slaves in western Africa destined to the Caribbean, where finally they would load sugar cane and molasses bound for New England. Salted cod of lower quality would also be used to feed slaves (Kurlansky 1997). To this day, Caribbean and western African consumers have a preference for salted whitefish products (McClane and deZanger 1977). Dried and salted saithe had the third highest amount of product imported by Caribbean countries in 2000, with ten thousand MT (FAO 2002). Atlantic cod distribution extends throughout the North Atlantic from Cape Hatteras and the Gulf of Biscay as far North as Greenland and 74

TRADE BY MAJOR SEAFOOD GROUP

Spitzbergen, Norway. From an economic standpoint, cod is still the most important groundfish in Europe. The Norwegian Arctic stock in the Barents Sea and the Icelandic stock are the predominant sources of Atlantic cod. Up to 50% of the Norwegian capture of 400 thousand MT in the late 1990s was destined to produce salted cod. About 15% of Norwegian captures was used to produce frozen fillets destined for North America, while 25% was used to produce fillets for the European Union. The remaining 20% was used domestically as fresh cod. About 50% of the Russian harvest of 300 thousand MT was directed towards the European Union as headed and gutted (H&G), while only five per cent was destined for the US as H&G (Clark 1998). The remaining 15 and 30% were utilized internally to produce salted and fresh cod, respectively. In addition to Atlantic cod, Russia has recently been capturing around 80 thousand MT of Pacific cod a year. Of the 200 thousand MT of Icelandic catch, 45% was used domestically to produce mostly salted cod, while 40 and 15% were destined to Europe and North America, respectively. Once the leading suppliers, Greenland and Newfoundland Atlantic cod stocks have been decimated from centuries of fishing. As a result, the US, Canada, and the Faeroe Islands, combined, only captured around 100 thousand MT of Atlantic cod a year at the end of the 1990s. From this catch, 50% was used to produce salted cod or was sold within these countries as fresh cod. The rest was destined for fillets supplied to Europe (30%) and North America (20%) (Clark 1998). The bulk of cod exports are frozen, followed by fresh, and lastly dried and/or salted and in brine. Russia is by far the largest exporter of frozen cod, mostly from the Pacific. In 2000, Russia exported more than 144 thousand MT, worth US$ 214 million. Denmark, Russia, and Norway are the main exporters of fresh cod with 32, 27, and 20 thousand MT in 2000, with a value of US$ 111, US$ 50, and US$ 49 million, respectively. One reason behind the fact that the Danish per kilo cod export value is twice that of Russian cod exports is the poor-quality product offered by the Russians. Frozen Atlantic cod fillets of high quality are exported by Iceland (34 thousand MT) and Denmark (24 thousand MT). This amounted to US$ 184 and US$ 114 million, respectively, in 2000. Norway is the leading producer of salted and/or dried, and in brine, cod. In 2000, the 57 thousand MT exported by Norway in these forms were worth US$ 302 million (FAO 2002). Norway, Denmark, and France, on the other hand, are the main importers of fresh Atlantic cod with 33, 26, and 22 thousand MT or US$ 71, US$ 61, and US$ 60 million, respectively. In 2000, China absorbed more than half of the global frozen imports, with more than 392 thousand MT worth US$ 339 million. One of the reasons for China’s prominence in imports is that it has an important processing industry for re-exports. Norway followed China with 56 thousand MT of frozen Atlantic cod imports (excluding fillets), or US$ 125 million. In the frozen fillet category the UK bought 75 thousand 75

THE INTERN ATION AL SEAFOOD TRADE

MT of frozen fillets in 2000 worth US$ 341 million. Salted cod is a fixture of Portuguese cuisine. Therefore, it is not surprising that, for the same year, Portugal was the leading importer of salted and in-brine cod imports with 46 thousand MT valued at US$ 200 million. Interestingly, Japan imported 40 thousand MT of frozen cod roes in 2000. Japan has a niche market for this product. The appreciation Japanese consumers have for cod roe is reflected in the US$ 712 million paid for those imports. This means that, on average, Japan paid US$ 18 per kilo for cod roe imports in 2000 (FAO 2002). Similar to cod, but even more highly valued by consumers, is haddock. In the Northeast Atlantic, it is caught from the Bay of Biscay, Spain, to Spitzbergen, Norway, the Barents Sea, and Iceland, while in the Northwest Atlantic it is usually fished from Cape May, New Jersey, to the Strait of Belle Isle. It is sold mostly in fresh and frozen forms. Smoked haddock is particularly important in countries like the UK. Haddock’s flesh is similar to that of cod but it tends to be priced higher. Its trade is mostly localized in northern European countries with traditional haddock fisheries, such as the UK and Denmark. From the global 330 thousand MT captured in 1997, Europe absorbed 129 thousand MT in the form of frozen H&G and frozen fillets. North America, on the other hand, took 38 thousand MT, also in frozen fillets and H&G. Most of the remaining haddock, around 163 thousand MT, was destined as fresh product (Clark 1998). In 2000, fresh haddock exports were dominated by Norway and Denmark, with 25 thousand MT comprised of frozen and fresh forms, worth US$ 56 million, and followed in a distance by Iceland, and Denmark. The UK is by far the leading importer of haddock in the world. Fresh, frozen, whole, and frozen fillets are the most important forms in which haddock is imported by the UK. In 2000, the imports amounted to 37 thousand MT, worth US$ 117 million (FAO 2002). The two most important pollock species are Alaska pollock and Atlantic pollock or saithe. The saithe fishery is smaller than the Alaska pollock fishery. In 2000, saithe landings reached only 311 thousand MT, while the Alaska pollock fishery yielded more than 3 million MT. Saithe is found throughout the North Atlantic and is traded mostly as fresh product. The international trade of saithe concentrates almost entirely in northern Europe. In 2000, Norway was the main exporter of saithe with 27 thousand MT of dried, salted, and in brine and also 20 thousand MT of fresh product. Denmark is both a leading importer and exporter. It exported 13 thousand MT of frozen fillets and 10 thousand MT of fresh product in 2000, while at the same time it imported 22 thousand MT of fresh saithe (FAO 2002). Compared to saithe, the Alaska pollock fishery is significantly larger. Although initially harvested by the Japanese, it is now mostly exploited by the US and Russia. With the implementation of 200-mile EEZs, the US made a transition from a period of joint venture fishing with Japan to sole US fleets in the early 1990s. US harvest is processed at sea or in land-based plants to 76

TRADE BY MAJOR SEAFOOD GROUP

produce primarily fillets, blocks, and surimi. Approximately half of the production is then exported to Japan and South Korea, while the other half is marketed domestically and in Europe. A significant portion of Russian catches is exported to Chinese processors that make lower quality, ‘twicefrozen’ fillets that are then re-exported to international markets (Clark 1998). About one-quarter of the Russian catches are also sold directly as fillets to North America and Europe.The Alaska pollock, with a lean, white, flaky flesh, was initially considered a ‘trash’ fish owing to its low yield and parasite infestation. As a result, since the beginning of its exploitation in the 1960s, most of the Alaska pollock harvest was transformed into surimi and fishmeal in Japanese factory-trawlers in the North Pacific. Since then, surimi and analog products from surimi, have become an international phenomenon. Today, much of the surimi is produced on factory trawlers and shore-based plants from washed Alaska pollock flesh. After flavors, spices, and sugars are added, it is shaped into various forms, such as imitation crab legs. In many countries, surimi is marketed as a cheap, protein-rich crabmeat substitute that can be used in many different ways. Many European consumers regard it as a dubious product. Japanese markets, however, show a great deal of appreciation for surimi, going as far as to having a grading system according to a number of its attributes. Although surimi can be produced from a number of fish, Alaska pollock-based surimi is one of the most highly graded. The size of the surimi markets worldwide is impressive. Japan consumed 800 thousand MT, while Korea, Europe, the US, and China absorbed 110, 75, 65, and 45 thousand MT, respectively, in 1998 (Sasao 1998). Overall, world production of pollock is directed to whole and H&G (46%), block and fillets (24%), surimi (28%), and mince (2%). Disposition of Alaska pollock varies between countries, however. Russia, China, and South Korea split their production into whole and H&G (70%), fillets and block (20%), and mince and surimi the remaining 10%. In contrast, Japan directs 64% of its Alaska pollock production to surimi, and 36% to whole and H&G. The US also transforms most of its production into surimi (70%), and the rest into fillets and block (30%). Recently, US production has been shifting away from surimi and more toward fillets. Another important product from Alaska pollock is roe, a valuable product sold primarily in Japan. An important market for frozen fillets exists in Europe. Germany and France imported 134 and 37 thousand MT valued at US$ 214 million and US$ 68 million, respectively, in 2000.The US is also an important market for frozen and frozen block Alaska pollock. In 2000, it imported 84 thousand MT valued at US$ 54 million (FAO 2002). Hake and similar species encompass a number of fish, including whiting, pout, ling, hoki, and true hake. These fish are found not only in North Atlantic and North Pacific waters, but also off western African coasts and in South American and Australian waters. Most of these fish are consid77

THE INTERN ATION AL SEAFOOD TRADE

ered the bottom end of the groundfish group in terms of quality. This ranking of groundfish preferences, however, does not hold across the cultural spectrum of seafood markets. For example, pout (Trisopterous luscus) is considered a gourmet dish in France, while hake of the Merluccius genus (true hake) displaces cod and haddock as the preferred groundfish in southern and southwestern European markets. Hake, in general, tends to be more fragile and less tolerant to freezing than most groundfish. Also, large differences in the composition and characteristics of its flesh between different species make it difficult to market successfully. While distributed worldwide, Spain is the main market. The wide distribution of hake is illustrated by the geographic dispersion of its leading exporters: the UK, Namibia, South Africa, and Argentina. The preferred hake is the European hake (Merluccius merluccius), which is sold mostly fresh. Cape hake (M. capensis and M. paradoxus) from the South Atlantic are also considered high quality, although most of the supply is marketed frozen. South American (M. hubbsi) and West African (M. senegalensis) hake rank lower in terms of consumer appreciation, and a significant portion of the captures is generally sold frozen. At the low end, there is the Pacific hake (M. productus), considered as such because of the pink color of its flesh. Currently, Argentina and Namibia are the main sources of hake to southern Europe. The appeal hake has among the southern European consumers, and overwhelmingly Spain, is manifested by the US$ 190 million of fresh and frozen hake imported by Spain alone in 2000. Portugal, Italy, and France follow Spain, albeit at a distance, with a combined US$ 162 million in imports in the same year.

Crab and lobster Although less than two percent in quantity, crab and lobster account for approximately seven percent of the international seafood trade value (see Appendix 4.1 for a complete listing of products) (FAO 2002). Clawed lobsters are harvested in the North Atlantic. These are the American (Homarus americanus) and European (H. gammarus) lobsters. The European lobster is found in the eastern Atlantic and is smaller and darker than the American. American lobster landings are the greater of the two, with 81 thousand MT harvested in 2000, as opposed to only 26 hundred MT of European lobster in the same year. The Norwegian lobster (Nephrops norvegicus) is also important although morphologically rather different from the previous two. In 2000, the UK, Ireland, France, and Denmark harvested the majority of the year’s 47 thousand MT. Most of its international trade occurs within the European market. Another lobster of international commercial value is 78

TRADE BY MAJOR SEAFOOD GROUP

the Caribbean spiny lobster (Panulirus argus), found in warm and tropical waters of the western Atlantic. Close to 30 thousand MT of this species are harvested each year by Cuba, the Bahamas, Brazil, Nicaragua, and the US. Among the Pacific lobsters, the Australian spiny lobster (Panulirus cygnus) is harvested in largest quantities, 17 thousand MT in 2000 (FAO 2002). Among crab, swimming, king, and tanner crabs are of particular commercial importance. Blue crab (Callinectes sapidus) is included among the swimming crabs. Swimming crabs are harvested (a large number of them in Asia) and generally sold as unspecified, pasteurized crabmeat. King crab (Paralithodes camtschaticus) is harvested in the North Pacific and can reach up to ten kilos. They are marketed mostly frozen. In 2000, kings were harvested almost exclusively by the US (seven thousand MT) and Russia (36 thousand MT). Russia and the US are the only exporters of red and king crabs, shipping 16 and three thousand MT, respectively, in 2000. Japan, with 25 thousand MT and the US with 11 thousand MT, are the only significant importers of these two crabs (FAO 2002). The international market for king crab, in particular, is highly seasonal. This is due, in part, to a competitive rush in its harvest among fishermen before harvest quotas are met. This seasonality is also supported by seasonal demand in Japan. The Japanese retail market for king crab is targeted primarily for the end-of-year holiday season, since it is considered a prestigious year-end gift item (Greenberg et al. 1994). China, the US, Canada, Thailand, and Russia are the leading producers of crustaceans (Fig. 4.3). China did not report crab harvest numbers until the mid-1980s, at which time the US was the leading world producer. Then, in the mid-1990s, China’s production exploded and took the first world producer position from the US (FAO 2002). China harvests a number of crabs, including swimming crabs. The total production claimed by China was 516 thousand MT in 2000. The US followed China, with a total production of 176 thousand MT of crab and lobster in the same year. The US harvests

MT (thousands)

600 500 400 300 200 100 0

1980 China

4.3

1990 Canada

Russian Federation

2000 US

Top five crab and lobster producers (source: FAO 2002). 79

Thailand

THE INTERN ATION AL SEAFOOD TRADE

blue crab (83 thousand MT), snow crab (Chionoecetes opilio) (15 thousand MT), American lobster (38 thousand MT), Dungeness crab (Cancer magister) (17 thousand MT), and king crab (seven thousand MT). Blue crabs are harvested in estuarine environments on the Atlantic and Gulf coasts, and American lobsters are captured in the North Atlantic Ocean, while snow, dungeness, and king crabs are harvested in the northeast Pacific. In 2000, Canada split its harvest between 44 thousand MT of American lobster and 93 thousand MT of snow crab. Russian crab fisheries concentrate on king crab (36 thousand MT) and snow/tanner crab (C. bairdi) (22 thousand MT) from the northeast Pacific. In general, international markets are seeing a explosive growth of crabmeat (mostly from processed swimming crabs) coming from Asian countries. Besides China, Thailand, and Indonesia have become strong international suppliers of this form of crab. For example, the US market saw crabmeat imports, primarily from Asia, increase from four to twelve thousand MT between 1994 and 2000 (FAO 2002). As a result of this increase in the Asian supply of crabmeat, US producers of blue crab submitted a petition to the United States International Trade Commission (USITC) to impose quotas and tariffs to imports from Asia in 1999. The claim by the blue crab producers was ruled on by the USITC and rejected in July 2000. Canada is the leading exporter in this category. In 2000, it exported 100 thousand MT of frozen crab, frozen American lobster, and live American lobster, at a value of over US$ 1 billion. In the US, fresh and live American lobster and frozen snow crab comprise the bulk of the 48 thousand MT exports. Canada exports 90% of its lobster harvest, primarily to the US. The main international market for the US lobster is Canada (mostly for reexports), followed by Italy, Spain, and France. Crabs, on the other hand, are shipped to Japan for the most part. China, despite being a leading producer, is only the fourth exporter in the world in quantity and sixth in value (Table 4.13). Japan and the US are the prominent importers of crab and lobster. Japan’s imports are comprised of fresh, frozen, and canned crab, including tanner and king. Japan’s total crab imports reached over 149 thousand MT in 2000. Despite its dominant role in the trade and consumption of many other fishery products, Japan does not import significant quantities of lobster. Lobster only accounted for 13 thousand MT of its total crab and lobster imports in that year. US imports are more balanced between crab and lobster. The US imported 50 thousand MT of crabs, roughly 20% of them red king crabs from Russia. Frozen and canned are the most commonly traded product forms. The US is the most important international market for lobster. US lobster imports reached 150 thousand MT in 2000, 30% of the imports in the crab and lobster category. Lobster imports enter the US market live (50%) and frozen (50%). The overwhelming majority of the lobster flowing 80

TRADE BY MAJOR SEAFOOD GROUP Table 4.13

Top ten exporters of crab and lobster, 2000

Country

MT

Canada US UK China Russian Federation Netherlands Australia Thailand Indonesia Denmark Other TOTAL

Country

99 011 48 436 32 638 28 006 23 711 20 413 18 494 15 961 15 292 13 612 129 871 445 445

Canada US Australia UK Russian Federation China Thailand Denmark Bahamas Indonesia Other TOTAL

$US (000s) 1 099 010 428 979 373 491 186 434 179 893 138 346 105 845 97 413 88 765 76 562 995 180 3 769 918

Source: FAO 2002. Fishstat Database, Rome, Italy

Table 4.14

Top ten importers of crab and lobster, 2000

Country

MT

Japan US France Canada Spain China China, Hong Kong Italy S. Korea Taiwan Other TOTAL

Country

149 814 122 154 34 733 27 762 25 043 22 962 19 163 17 820 15 117 8 482 56 287 499 337

US Japan France China Canada Spain Italy China Taiwan Belgium Other TOTAL

$US (000s) 1 638 739 1 424 963 271 961 215 245 187 744 186 673 155 272 80 499 78 035 69 154 447 451 4 755 736

Source: FAO 2002. Fishstat Database, Rome, Italy

into the US comes from its northern neighbor, Canada (FAO 2002) (Table 4.14).

Cephalopods The 3.6 million MT of squid and octopus captured in 2000 accounted for approximately five per cent of seafood international trade (FAO 2002). This product group (see Appendix 4.1 for detailed listing) relies entirely on 81

THE INTERN ATION AL SEAFOOD TRADE

capture fisheries. It is composed of a large number of species that are spread throughout the world. The southwest Atlantic and northwest Pacific, however, supply 61% of the world harvest, with 1.2 and 1.0 million MT, respectively. The catches in the southwest Atlantic are the Argentine shortfin squid (Illex argentinus), while in the northwest Pacific, the Japanese flying squid (Todarodes spp. and Ommastrephes spp.) are the leading species. In 2000, the main harvesters of the Argentine shortfin squid were Argentina (279 thousand MT), Taiwan (278 thousand MT), and Korea (150 thousand MT). The Argentinean fishery was virtually nonexistent until the 1980s. Until then, the northwest Pacific contributed to the bulk of world catches. Today, the northwest Pacific catches are composed mostly of Japanese flying squid harvested by South Korea and Japan (with around 337 and 226 thousand MT, respectively, in 2000), and cuttlefish (Sepia spp.) harvested by China, with 261 thousand MT. Octopuses are less commercially important than squid. Their world harvest generally exceeds 321 thousand MT. The leading producers are Morocco, Senegal, and Spain in the eastern central Atlantic, with around 125 thousand MT in 2000, and Japan and South Korea in the northwest Pacific with almost 67 thousand MT in the same year. In 2000, global exports of cephalopods amounted 1.4 million MT worth US$ 2.7 billion. For that year, in terms of volume exported, Argentina, Morocco, S. Korea, and Spain were the leaders with 224, 154, 119, and 105 thousand MT, respectively (Table 4.15). In terms of value, however, Morocco and Thailand with US$ 572 million and US$ 336 million, respectively, were the leading exporters. Argentinean exports are comprised almost entirely of frozen squid. Taiwan and Thailand tend to export frozen squid,

Table 4.15

Top ten exporters of cephalopods, 2000

Country Argentina Morocco S. Korea Spain US Thailand Taiwan Province of China China Vietnam Falkland Is. (Malvinas) Other TOTAL

MT 224 056 154 571 119 004 105 325 97 761 93 198 90 561 87 268 61 087 50 986 294 426 1 378 243

Source: FAO 2002. Fishstat Database, Rome, Italy

82

Country Morocco Thailand Vietnam Spain China Argentina US S. Korea India Mauritania Other TOTAL

$US (000s) 572 057 335 850 320 206 211 215 200 209 151 153 97 948 96 832 96 359 64 393 558 926 2 705 148

TRADE BY MAJOR SEAFOOD GROUP Table 4.16 Country Spain Japan China Italy US S. Korea Greece Thailand Portugal France Other TOTAL

Top ten importers of cephalopods, 2000 MT

Country

249 319 242 440 234 312 167 074 62 241 56 776 26 721 26 418 26 288 26 043 183 101 1 300 733

Japan Spain Italy China US S. Korea Thailand China, Hong Kong France Greece Other TOTAL

$US (000s) 937 339 472 408 362 467 151 980 148 821 101 394 65 943 53 509 53 332 51 112 298 585 2 696 890

Source: FAO 2002. Fishstat Database, Rome, Italy

cuttlefish, and octopus. Moroccan trade is dominated by fresh squid and frozen octopus exports. In 2000, about 31% of its exports were fresh squid, while the remaining 69% were frozen octopus (FAO 2002). With respect to imports, in 2000 they amounted to 1.3 million MT worth US$ 2.7 billion. Traditionally, Japan has been the leading market for cephalopods (Table 4.16). It is probably the most important market for octopus. Spain, Italy, and fast-growing China have been catching up in recent years, however. In fact, Spanish imports were ahead of Japan in 2000 (by volume). Spain imported 249 thousand MT worth US$ 472 million. Spain is the leading importer of frozen squid of the Illex genus and of cuttlefish, while it is the third leading importer of frozen octopus. The Italian market, on the other hand, splits cephalopod imports evenly between squid, octopus, and cuttlefish. Japan was slightly behind with 242 thousand MT, but overall the Japanese market bought the higher-valued product in the international markets by spending US$ 937 million. However, China tends to buy lowervalue cephalopods. The country is third in imports by volume but a distant fourth in value. Total Chinese imports are only two percent more in value than US imports in spite of the US importing only one-quarter as much product.

References Abbors T, ‘The structure and development of the world salmon market’, Department of Fisheries and Game at the Ministry of Agriculture and Forestry in Finland, 46/2000. 83

THE INTERN ATION AL SEAFOOD TRADE Anderson J L, ‘The growth of salmon aquaculture and the emerging new world order of the salmon industry’, Global Trends: Fisheries Management, Eds. Pikitch E K, Huppert D D and Sissenwine M P, Bethesda, MD, American Fisheries Society, 1997. Anderson J L and Fong Q S W, ‘Aquaculture and international trade’, Aquaculture Economics and Management, 1997 1 29–44. Asche F, ‘Trade disputes and productivity gains: the curse of farmed salmon production?’, Marine Resource Economics, 1997 12 67–73. Carroll M T, Martínez-Garmendia J and Anderson J L, ‘Pricing US bluefin tuna and implications for management’, Agribusiness: An International Journal, 2001 17 243–54. Clark T, ‘Global groundfish disposition’, Proceedings of the Groundfish Forum, London, 1998. FAO, Fishstat Database, Rome, Italy, 2002. Greenberg J A, Matulich S C, Mittelhammer R C and Herrmann M, ‘New directions for the Alaska king crab industry’, Agribusiness, 1994 10(2) 167–78. Knapp G, ‘The wild salmon industry: five predictions for the future’, Fisheries Economics Newsletter, 2001 51. Kurlansky M, Cod: A Biography of the Fish that Changed the World, New York, NY, Walker and Company, 1997. Kusakabe Y, ‘A Conjoint Analysis of the Japanese Salmon Market’, PhD Dissertation, Kingston, RI, University of Rhode Island, 1992. Lem A and Di Marzio M, ‘The world market for salmon’, FAO/Globefish Research Programme, Rome, 1996 44, 71 pp. Martínez-Garmendia J, Anderson J L and Carroll M T, ‘Effect of harvesting alternatives on the quality of US North Atlantic tuna’, North American Journal of Fisheries Management, 2000 20(4) 908–22. McClane A J and deZanger A, The Encyclopedia of Fish Cookery, New York, NY, Holt, Rinehart and Winston, 1977. McConnell K E and Strand I E, ‘Hedonic prices for fish: tuna prices in Hawaii’, American Journal of Agricultural Economics, 2000 82 133–44. Ragnow M, Cod. Regents of the University of Minnesota, Twin Cities, University Libraries. URL: http://www.lib.umn.edu/Products/cod.html, 2002. Sasao K, ‘Surimi and roe production and markets’, Proceedings of the Groundfish Forum, London, 1998. Seaver, K A, The Frozen Echo. Greenland and the Exploration of North America, ca. A.D. 1000–1500, Stanford, CA, 1996. USITC, ‘Tuna: current issues affecting the US industry’, Report to the Committee on Finance, Washington, DC, USITC Publication 2547, 1992. Weber M L, Farming Salmon: A Briefing Book. San Francisco, CA, Consultative Group on Biological Diversity, 1997.

84

Appendix 4.1 Definition of major groups in seafood trade

Below are the commercial categories referred to in the trade statistics presented throughout this chapter. They are based on the FAO Fishstat Database.

Shrimp and prawns Common (= Crangon) shrimp, fresh, chilled or boiled Shrimp (= Crangon spp.), frozen Shrimp paste, fermented Shrimp paste, not elsewhere indicated Shrimp tails, fresh or chilled Shrimp and prawn (Pandalidae spp.), fresh or chilled Shrimp and prawn peeled, deveined, breaded, frozen Shrimp and prawn, canned Shrimp and prawn, fan tails, frozen Shrimp and prawn, fresh or chilled Shrimp and prawn, frozen Shrimp and prawn, peeled, fresh or chilled Shrimp and prawn, peeled, frozen 85

THE INTERN ATION AL SEAFOOD TRADE

Shrimp and prawn, prepared, not in airtight containers Shrimp and prawn, tails, shell on, frozen Shrimp and prawn, whole, cooked, frozen Shrimp and prawn, whole, not cooked, frozen Shrimp, breaded, raw and cooked, canned Shrimp, peeled, cooked, canned

Salmon and trout Atlantic salmon, fresh or chilled Pacific salmon, frozen Trout and char, frozen Salmon fillets, fresh or chilled Atlantic salmon, frozen Salmons, fresh or chilled, not elsewhere indicated Salmons, smoked Salmon fillets, frozen Salmons, salted or in brine Pink salmon, canned Salmons not elsewhere indicated, canned Salmonoids, frozen Sockeye salmon, canned Pacific salmon, fresh or chilled Trout and char, fresh or chilled Trout and char, live Salmonoids, fresh or chilled, not elsewhere indicated Pacific salmon not elsewhere indicated, canned Trout and char, smoked Salmon roes, cured Salmon preparations Salmonoids fillets, frozen Salmonoids fillets, fresh or chilled Salmons not elsewhere indicated, frozen Salmon roes, frozen Atlantic salmon, canned Chum salmon, canned Salmonoids, canned Coho salmon, canned Salmon sides, salted or in brine Trout, dried, salted Salmonoids fillets in blocks, frozen 86

TRADE BY MAJOR SEAFOOD GROUP

Salmon steaks, frozen Salmon steaks, fresh or chilled Chinook salmon, canned Salmonoids, smoked Salmonoids, dried, salted or in brine Salmon sides, frozen Salmon substitutes

Tuna Albacore, in oil, canned Bonito, dried, salted, or in brine Tuna, flakes and grated, canned Tuna not elsewhere indicated, canned Skipjack tuna, frozen Yellowfin tuna, frozen Tuna not elsewhere indicated, frozen Skipjack tuna, canned Albacore (= Longfin tuna), frozen Bigeye tuna, frozen Albacore, canned Tuna, fresh or chilled, not elsewhere indicated Yellowfin tuna, fresh or chilled Tuna not elsewhere indicated, salted or in brine Swordfish, frozen Tuna meal Tuna, solid pack, in oil, canned Bluefin tuna, fresh or chilled Tuna not elsewhere indicated, smoked Bigeye tuna, fresh or chilled Swordfish, fresh or chilled Albacore (= Longfin tuna), fresh or chilled Bluefin tuna, frozen Tuna loins and fillets, frozen Marlins, frozen Bonitos, canned Tuna not elsewhere indicated, dried, unsalted Skipjack tuna, fresh or chilled Tuna, chunk pack, canned Yellowfin tuna, heads-off, etc., frozen Tuna loins and fillets, fresh or chilled 87

THE INTERN ATION AL SEAFOOD TRADE

Bonito, frozen Tuna, chunk pack, in oil, canned Skipjack tuna, smoked Yellowfin tuna, gilled, gutted, frozen Tuna, solid pack, canned Albacore (= Longfin tuna), gilled, gutted, frozen Tuna, heads-off, etc., frozen, not elsewhere indicated Albacore (= Longfin tuna), heads-off, etc., frozen Tuna, gilled, gutted, frozen, not elsewhere indicated Skipjack tuna, in oil, canned

Groundfish Alaska pollock fillets, frozen Alaska pollock oil Alaska pollock roes, frozen Alaska pollock roes, pickled Alaska pollock, dried, unsalted Alaska pollock, fresh or chilled Alaska pollock, frozen Argentine hake, fresh or chilled Argentine hake fillets, fresh or chilled Argentine hake fillets, frozen Argentine hake, frozen Atlantic cod fillets, dried, salted or in brine Atlantic cod fillets, fresh or chilled Atlantic cod fillets, frozen Atlantic cod, dried, unsalted (stockfish) Atlantic cod, fresh or chilled Atlantic cod, frozen Atlantic cod, salted and dried (klipfish) Atlantic cod, salted or in brine Blue whiting fillets, frozen Blue whiting meal Blue whiting, frozen Cape hake, frozen Cod liver oil Cod meal Cod not elsewhere indicated, fillets, frozen Cod portions and sticks, frozen Cod roes, frozen 88

TRADE BY MAJOR SEAFOOD GROUP

Cod roes, salted or sugar salted Cod, minced, frozen Cod not elsewhere indicated, dried whether or not salted Cod not elsewhere indicated, dried, salted or in brine Cod not elsewhere indicated, fillets, fresh or chilled Cod not elsewhere indicated, frozen Cod, smoked European hake, frozen Gadiformes fillets, fresh or chilled Gadiformes fillets, frozen Gadiformes not elsewhere indicated, dried, unsalted Gadiformes not elsewhere indicated, frozen Gadiformes, canned Gadiformes, salted and dried Gadiformes, salted or in brine Gadiformes, smoked Gadoid fish meal Grenadiers, frozen Haddock fillets, fresh or chilled Haddock fillets, frozen Haddock, frozen Haddock, minced, frozen Haddock, smoked Hake fillets, fresh or chilled Hake fillets, frozen Hake meal Hake not elsewhere indicated, frozen Hake, canned Hake, minced, frozen Hake, dried, salted or in brine Hake, dried, unsalted Hake, fresh or chilled Hake, frozen Ling fillets, frozen Ling, dried, salted or in brine Pacific cod fillets, fresh or chilled Pacific cod fillets, frozen Pacific cod, frozen Saithe (= Pollock) fillets in blocks, frozen Saithe (= Pollock) fillets, fresh or chilled Saithe (= Pollock) fillets, frozen Saithe (= Pollock), canned Saithe (= Pollock), frozen 89

THE INTERN ATION AL SEAFOOD TRADE

Saithe (= Pollock), minced, frozen Saithe, dried, salted or in brine Silver hake, frozen South Pacific hake, frozen Southern blue whiting fillets, frozen Southern blue whiting, frozen Whiting fillets, frozen Whiting, frozen

Crab and lobster Spiny lobster (Panulirus spp.), meat or tails, fresh or chilled King crab meat, frozen Rock lobster ( Jasus spp.), meat or tails, fresh or chilled Squat-lobster, fresh or chilled Crab not elsewhere indicated, frozen Crab, peeled or not, fresh or chilled Crab meat not elsewhere indicated, canned Crab meat, frozen Lobster, live King crab, frozen Tanner crab, frozen Norway lobster (Nephrops spp.), whole, frozen Lobster not elsewhere indicated, frozen American/European lobster (Homarus spp.), not elsewhere indicated, fresh or chilled Lobster tails or meat, canned American/European lobster (Homarus spp.), not elsewhere indicated, frozen American/European lobster (Homarus spp.), whole, frozen Rock lobster ( Jasus spp.), not elsewhere indicated, frozen Spiny lobster (Panulirus spp.), whole, frozen Norway lobster (Nephrops spp.), not elsewhere indicated, frozen Norway lobster (Nephrops spp.), not elsewhere indicated, fresh or chilled Rock lobster ( Jasus spp.), whole, frozen Norway lobster (Nephrops spp.), whole, fresh or chilled Spiny lobster (Panulirus spp.), meat or tails, frozen Lobster not elsewhere indicated, fresh or chilled Rock lobster ( Jasus spp.), whole, fresh or chilled Crayfish, frozen Spiny lobster (Panulirus spp.), not elsewhere indicated, frozen 90

TRADE BY MAJOR SEAFOOD GROUP

Rock lobster ( Jasus spp.), not elsewhere indicated, fresh or chilled Crab, salted, in brine or dried Squat-lobster, frozen Crab meal Crayfishes, fresh or chilled Lobster not elsewhere indicated, whole, frozen Spiny lobster (Panulirus spp.), not elsewhere indicated, fresh or chilled American/European lobster (Homarus spp.), meat or tails, frozen Lobster not elsewhere indicated, meat or tails, frozen Spiny lobster (Panulirus spp.), whole, fresh or chilled Lobster not elsewhere indicated, whole, fresh or chilled King crab meat, canned Rock lobster ( Jasus spp.), meat or tails, frozen American/European lobster (Homarus spp.), whole, fresh or chilled Spiny-rock lobster, canned Crab, salted American/European lobster (Homarus spp.), meat or tails, fresh or chilled Lobster not elsewhere indicated, meat or tails, fresh or chilled

Cephalopods Cephalopods not elsewhere indicated, canned Cephalopods not elsewhere indicated, dried, salted or in brine Cephalopods not elsewhere indicated, frozen Cephalopods preparations Cephalopods, fresh or chilled, not elsewhere indicated Cuttlefish (Sepia off., Rossia macrosoma, Sepiola rondeleti), fresh or chilled Cuttlefish (Sepia off., Rossia macrosoma, Sepiola rondeleti), frozen Cuttlefish, dried Cuttlefish, fresh or chilled, not elsewhere indicated Cuttlefish, frozen Octopus, dried Octopus, fresh or chilled Octopus, frozen Squid oil Squid rings, frozen Squid (Illex spp.), fresh or chilled Squid (Illex spp.), frozen Squid (Ommastrephes sagittatus, Loligo spp.), fresh or chilled Squid (Ommastrephes sagittatus, Loligo spp.), frozen Squid not elsewhere indicated, frozen 91

THE INTERN ATION AL SEAFOOD TRADE

Squid, Squid, Squid, Squid, Squid,

dried fresh or chilled, not elsewhere indicated salted or pickled seasoned smoked

Fish meals Blue whiting meal Capelin meal Clupeoid fish meal, not elsewhere indicated Crustacean meal, not elsewhere indicated Fish crustacean and mollusc products, unfit for human consumption, not elsewhere indicated Fish meal fit for human consumption Fish meals, not elsewhere indicated Fish solubles, silages, etc. Fish waste Flours and meals of fish, crustaceans or mollusks, unfit for human consumption Freshwater fish meal, not elsewhere indicated Gadoid fish meal Herring meal Oily-fish meal, not elsewhere indicated Redfish meal Shrimp meal Solubles from fish Solubles from fish and marine mammals Solubles from marine mammals Tuna meal White-fish meal, not elsewhere indicated

92

CHAPTER

5 Fundamental principles of international trade applied to fisheries James L. Anderson

Introduction n order to develop a more thorough understanding of international seafood trade beyond the descriptive facts presented in the previous chapters, it is necessary to consider some basic principles of international trade. This is particularly important for the analysis of seafood trade, because unlike almost any other highly traded product, the majority of fish come from a regulated, open-access, wild fish stock. This fact, plus the variety of complex management schemes implemented by governing bodies around the world, create conditions that are not incorporated into traditional trade theory. Most notably, traditional trade theory assumes an upward sloping supply relationship (i.e., when price increases, quantity supplied increases). However, this may not be the case for many fisheries. There are numerous fisheries in which as price increases, fishing effort increases, the fish stock declines, and ultimately supply declines. As we shall see, erroneous conclusions will result if this phenomenon is not taken into account. The impact of policy decisions, such as the use of tariff and non-tariff trade barriers, direct fisheries subsidies, fisheries regulations, and fisheries

I

93

THE INTERN ATION AL SEAFOOD TRADE

management, on both trade and the natural environment, have sparked heated debates. This chapter attempts to formally address the effects of various policies on trade and fisheries. Two distinct approaches, trade theory and bioeconomics, need to be merged to evaluate the impact policies have on world fisheries and trade. The first section demonstrates the approach frequently used by international trade economists to analyze the impact of policies. This analysis frequently focuses on the implications of a policy on export and import levels, prices, and employment, while generally assuming an upward-sloping supply curve. In the second section, a brief discussion of simple bioeconomics of a fishery is considered. Then, the two concepts are merged to analyze their collective impact on specific examples: cost-reducing technologies and/or subsidies, import tariffs, and fish stock enhancement.

Conventional approach to international trade analysis An objective of conventional international trade analysis is to determine the implications of policies that affect trade for producers and consumers in all countries involved. More recently, the focus of trade analysis has been expanded to include implications for the health of natural resources. In the interest of simplicity, this analysis has been restricted to a two-country trade scenario. The graphs in Fig. 5.1 represent the trade relationship between two countries, country A and country B (Tweeten 1992). Under free trade, a country will import where domestic demand exceeds domestic supply and

World market

Exporting country (A) $

S¢A $

SA

P

ES

$

Importing country (B) SB

ES¢

P

P

P¢ P¢

M

P¢

M¢

DB ED Exp

Imp DA

5.1

Imp¢

Trade¢

Exp¢ QAC Q¢AC

Trade

Q¢A

Q¢

Q¢B QB QBC

Traditional trade model: cost-reducing technology or subsidy.

94

Q¢BC

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES

export where domestic supply exceeds domestic demand. In this scenario, country A is the exporter, since its excess supply is greater than excess supply in country B. Therefore, country B is the importer. The center panel illustrates world trade. In this panel, excess supply to the world market from the exporter (A) is determined by the difference between domestic supply and domestic demand for prices above the price, which just clears A’s domestic market with no international trade. Excess demand from the importer (B) is determined by the difference between domestic demand and domestic supply for prices below the price, which just clears B’s domestic market with no international trade. Price and quantity traded are determined by the intersection of excess supply (ES) of country A and excess demand (ED) of country B assuming free trade and no transfer costs. The level of exports from country A is calculated by subtracting QA from QAC. Imports in country B equal the difference between QBC and QB. Consider a subsidy or technological change that decreases the marginal cost of production for the exporter, country A. This will cause a downward shift in both the domestic supply curve and the excess supply curve of country A. From graphical analysis, it is clear that price (P¢) decreases and trade (Q¢) increases owing to the change in country A (see Table 5.1). The fundamental implications of the change are presented in Fig. 5.1. Country A consumers increase domestic consumption from QAC to QAC¢ while facing a lower price per unit (P¢). Country B consumers also face a reduced price per unit (P¢) and increased consumption of imports. What are the implications for the industry in countries A and B? The world price declines: country A’s production increases as exports increase and country B’s production decreases as imports increase. However,

Table 5.1 Summary of Fig. 5.1: conventional analysis of technology and/or subsidy that lowers marginal cost

Consumers Industry

State of the natural resource

Exporting country

Importing country

Consumption increases and price decreases Domestic supply increases. Change in employment depends on the nature of the cost-reducing technology of the subsidy. Exports increase. Lower price per unit Depends on the relationship between supply and natural resource exploitation

Consumption increases and price decreases Domestic production decreases.

95

Employment will probably decline

Depends on the relationship between supply and natural resource exploitation

THE INTERN ATION AL SEAFOOD TRADE

increased production does not necessarily imply a proportional increase in country A’s employment. Changes in employment depend upon the type of subsidy or technological change implemented. For instance, if country A’s cost of extracting or harvesting a natural resource decreases following the adoption of more efficient machinery or extraction method, this may decrease the need for physical labor. In this case, employment will decrease in the subsidized industry. However, if the subsidy does not change technology, employment should decrease in the importing country and increase in the exporting country.

The bioeconomics of fishery supply As noted, some of the general assumptions of conventional trade analysis, specifically upward sloping supply, do not hold for fisheries in many cases. In particular, a backward bending supply will result when a fishery is open access (Anderson 1977). This section describes the transformation of a biological model of harvest–effort relationship into an economic model of open-access fishery supply. Understanding the basic harvest–effort model is the first step in understanding how a backward bending supply curve is derived. This curve (Fig. 5.2) is a derivation of the basic logistic growth model that is used to model $/u P4

$

TRP4 (total revenue given price, P4)

Open-access supply TRP3

P3

TRP2

P2 P1

TRP1 Harvest

MSY Harvest

Harvest

MSY

5.2

Total cost

Open-access fishery supply relationship. 96

Effort

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES

the growth rate of many biological populations. The logistic growth model assumes that growth rate increases at low stock levels until maximum sustainable yield (MSY) is reached. (Maximum sustainable yield is also referred to as maximum sustainable harvest.) Growth rate then declines, as environmental carrying capacity becomes more limiting than the standing stock effect. The maximum standing stock (population) is reached at the environmental carrying capacity and the growth rate is zero. At any point above environmental carrying capacity, the growth rate becomes negative and population declines. If there is a direct relationship between fishing effort and fish stock, the yield–stock curve can be directly transformed into a fishing yield–effort relationship (Anderson 1977; Hannesson 1993). This relationship is illustrated in Fig. 5.2. Fishing effort is generally measured using fishing days, number of nets or traps, and so on. The next step in the transformation to an economic model of fishery supply is to convert the yield–effort relationship into a revenue–effort relationship. This is demonstrated in the upper right-hand graph of Fig. 5.2. Note the X-axis still represents fishing effort, but the Y-axis now represents dollars. This is accomplished by calculating total revenue (TR) and total cost (TC) curves. Total revenue equals harvest multiplied by a price. In this case, TC is equal to a constant cost per unit effort multiplied by the level of fishing effort. For a given output price and effort cost, equilibrium in this openaccess fishery is reached where TR equals TC. Any increase in effort beyond this equilibrium is not sustainable, since cost outweighs revenue, and fishermen are forced out of the fishery. Similarly, effort below equilibrium is not sustainable, since effort will increase as long as fishermen incur profits. Note that for incremental increases in TR, effort increases, but at a decreasing rate. In Fig. 5.2, we arrive at backward bending supply by linking price to effort and effort to harvest, as shown in the upper left-hand graph. The logic of the curve is as follows. As price increases, equilibrium effort increases, creating an upward sloping curve until MSY is reached. Continued price increases result in additional effort, which decreases the fish stock and the corresponding sustainable harvests (Anderson 1977). Open-access fisheries will result in a long-run supply curve that has this characteristic backward bending shape. Fishery managers, however, are increasing their use of total allowable catch (TAC) systems to curb the threat of overfishing and decreased harvests. These systems fundamentally change the supply relationship. If successful, the TAC restricts production to the upward sloping portion of the fishery supply curve and ensures that the fish stock will not be depleted. Beyond a certain price, supply becomes unresponsive to output price, or perfectly price inelastic.

97

THE INTERN ATION AL SEAFOOD TRADE

Fisheries and international trade Cost-reducing technology and/or cost-reducing subsidies Now consider the effect of the exporting country adopting a new costreducing technology or direct subsidy with reduced fishing input costs. In contrast to the traditional model, the upward sloping supply is replaced by a bioeconomic supply relationship that reflects the open-access fishery discussed in the previous section. The supply from the fishery is illustrated as SA in the exporting country (A) and SB in the importing country (B). The excess supply (ES) from the exporter and the excess demand from the importer (ED) are calculated and shown in the center panel of Fig. 5.3 labeled world market. As illustrated, the initial equilibrium is at Pw and total supply from the exporter is now MSYA at QA. The exporter’s domestic consumption is given by QAC and exports are (QA minus QAC ). The importer’s domestic supply (QB) is from a somewhat overexploited fishery. Imports are given by QBC minus QB. When a cost-reducing change occurs in the exporting country, the supply curve SA shifts downward to SA¢. Note that MSYA will now be reached at a lower price. Under conditions of open access, the reduced cost will result in increased fishing effort (increasing short-run supply). This, in turn, will drive down fish stocks reducing equilibrium (long-run) supply from its fishery. While there may be a short-run increase in supply, without effort controls or an effective quota management system in place to prevent overfishing, the long-run stock will decline. This type of response to technological change and/or cost-reducing subsidies has occurred in almost all major fisheries on the North American East Coast, as well as in countless fisheries throughout the world. With stocks declining, the world price increases to Pw¢, and export quantity declines.

$

SA

Export country (A)

World market

$

SA¢ lower cost

Import country (B)

$

ES

PW¢

PW¢

M¢

PW

PW

M DA

DB ES/Lower cost

ED

SB

Exp Exp¢ 0

5.3

QAC¢ QAC QA QA MSYA

Quantity

Trade

Imp

Trade¢

Imp¢

0

Quantity

0

Q¢ QB MSYB Q¢BC QBC Quantity

International fish trade: cost-reducing technology or subsidy. 98

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES Table 5.2 Summary of Fig. 5.3: equilibrium analysis of a technology and/or subsidy that lowers marginal cost

Consumers Industry

State of the natural resource

Exporting country

Importing country

Consumption decreases and price increases Domestic supply decreases. Fishing effort (likely employment) increases. Exports decrease. Higher price per unit Fish stock declines

Consumption decreases and price increases Domestic production decreases. Fishing effort (likely employment) increases Fish stock declines

Note: fisheries are harvested beyond MSY in both countries

As the level of trade drops, the increased price also influences the domestic harvest in the importing nation. Even without the cost-reducing change in the importing country, the increased world price stimulates fishing effort in the importing country, which ultimately reduces the fish stock and the corresponding equilibrium harvest. These results from the open-access fishery harvested beyond MSY are the opposite of conclusions based on the traditional trade model. Note that if both fisheries were harvested such that the standing fish stock is greater than MSY, the results would be qualitative, as in the traditional model. However, there are few major fisheries harvested at such conservative levels. The results may also more closely reflect the traditional model if there are management institutions in place, such as transferable quota systems (see Table 5.2).

Import tariffs This section considers the effect of an import tariff on seafood trade. The basic model is set up as in the previous example. As shown in Fig. 5.4, the initial free trade equilibrium is where price is Pw, domestic consumption in the exporting country is QAC, the level of exports is QA minus QAC, the domestic supply in the importing country is QB, and the level of imports is QBC minus QB. Both countries are initially harvesting their fish stocks beyond MSY. Now consider the effect of an import tariff. This type of tariff is common in fish trade, especially if the objective is to protect the domestic industry. In the conventional trade case, import tariffs raise the price to the importing consumer and lower the price received by the exporter. In the 99

THE INTERN ATION AL SEAFOOD TRADE World market

Export country (A) $

SA

$

SA¢

PWB PW

PW

PW

T PWA

PWA

DB ED

Exp¢ Exp

DA

ED-T

Trad

5.4

QAC QA QAC¢ QA

Quantity

SB Imp Imp¢

Trade¢ 0

Import country (B) $ PWB

ES

0

Quantity

0 Q¢ QB Q¢BC QBC

Quantity

International fish trade: import tariff – case I.

conventional case, this stimulates domestic production in the importing country and inhibits production in the exporting country. These would be incorrect conclusions for fish trade. In the fish trade example shown in Fig. 5.4, an import tariff reduces the demand on the world market from the importer’s excess demand (ED) to excess demand minus the tariff (ED - T ). As in the traditional case, the import tariff drives up the price in the importing country from PW to PWB and drives down price in the exporting nation from PW to PWA. In the importing country, the increased price results in increased fishing effort, which reduces fish stock and harvest in the long-run. In the exporting nation, the depressed price reduces fishing effort, increases fish stock, and, as long as fish stock does not exceed MSY, the equilibrium harvest will increase. In this example, domestic consumption in the exporting nation will increase and exports will decrease (see Table 5.3). However, there could be a case where fish stock and the corresponding harvest increase such that excess supply from the exporter actually increases in the long-run (Fig. 5.5). If this occurs, prices could be driven down in the importing nation, even with the import tariff in place. This decline in price would cause reduced effort in the importer’s domestic fishery, increased fish stocks, and increased equilibrium harvest (see Table 5.4). What should now be clear is that the use of simplistic, traditional international trade models is inadequate to understand the results that may occur in fisheries trade. In this example, depending on the state of the stock, the relative curvature of the fish supply curve of the open-access fishery may react to policies in ways that are counterintuitive at first. In case II, the import tariff did not even result in increased prices in the importing nation, but did result in increased conservation of fish stocks in both countries as effort declined in both countries. 100

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES Table 5.3 Summary of Fig. 5.4: equilibrium analysis of an import tariff, case I

Consumers Industry

State of the natural resource

Exporting country

Importing country

Consumption increases and price decreases Domestic supply increases. Fishing effort (likely harvest employment) decreases. Exports decrease Fish stock increases

Consumption decreases and price increases Domestic supply decreases. Fishing effort (likely harvest employment) increases. Imports decrease Fish stock declines

Note: fisheries are harvested beyond MSY in both countries

Export country (A)

$

SA

World market $

SA¢

PW

Import country (B)

$

ES

PW

PW PWB

PWB T PWA

DB

PWA ED

SB

Exp Trade

DA

5.5

QAC QA

QAC¢

QA Quantity

Imp

Trade¢

Exp¢ 0

ED-T

Imp¢

0

Quantity

0

Q¢ Q¢BC QB

QBC Quantity

International fish trade: import tariff – case II.

Table 5.4 Summary of Fig. 5.5: equilibrium analysis of an import tariff, case II

Consumers Industry

State of the natural resource

Exporting country

Importing country

Consumption increases and price decreases Domestic supply increases. Fishing effort (likely harvest employment) decreases. Exports increase Fish stock increases

Consumption decreases and price decreases Domestic supply increases. Fishing effort (likely harvest employment) decreases. Imports increase Fish stock increases

Note: fisheries are harvested beyond MSY in both countries

101

THE INTERN ATION AL SEAFOOD TRADE

It should be reiterated that if both nations’ fish stocks were exploited at rates less than MSY (before and after the tariff), the results will correspond qualitatively with those derived from the traditional model. Furthermore in the short run, the fish trade will behave more like the traditional model. The length of short-run period depends on the rate at which the changes influence fishing effort and the rate at which the fish stocks recover or decline.

Fish stock enhancement As a solution to declining fish stocks, many nations have embarked on a program of fish stock enhancement. Enhancement has been most widely used in the Pacific salmon fisheries of the US, Canada, Japan, and Russia. Other enhancement programs have been implemented (with varying degrees of success) in fisheries including flounder, cod, lobster, striped bass, and clam. This section provides a basic analysis of stock enhancement programs in an isolated country. It is then followed by a more detailed analysis of the implications of fishery enhancement on international trade.

Fishery enhancement without international trade Fishery stock enhancement, such as salmon enhancement, is an example of what some would consider potentially beneficial. Much of the decline in fish populations, such as salmon, is due in large part to degraded or lost habitat that is directly linked to economic activity. One cause of habitat destruction and declining stock was the construction of large, multipurpose dams. These dams changed the flow of water in order to provide hydroelectric power, flood control, and irrigation to surrounding areas. This disrupted the migration and reproductive cycle of salmon. Dams, coupled with deforestation and other factors, also contributed to the salmon decline. To mitigate these losses, hatchery operations have been developed to enhance salmon stocks. Enhancement has also been used to help increase fishery income and employment (see Table 5.5). The impact of enhancement programs on the state of wild salmon stocks is of interest in this analysis. In earlier studies, the author concluded that if hatchery stock is allowed to intermix with wild stock, it can have detrimental effects on the wild stock (Anderson 1985, 1986). One reason is that the wild stock must now compete with the enhanced stock for habitat and feed. In addition, fishing effort will most likely increase with increased availability of fish. In an intermixed fishery, fishermen generally cannot distinguish between wild and hatchery fish. This places additional harvest pressure on both the wild and hatchery-based fish stocks. 102

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES Table 5.5 Summary of Fig. 5.6: implications of enhancement programs Exporting country

Importing country

Consumers

Consumption increases and price decreases

Government expenditure Industry

Depends on efficiency of the enhancement program Harvest increases. Employment increases. Exports increase. Lower price per unit If stocks do not intermix, increased wild stock; but with intermixing, wild stock may decline

Consumption increases and price decreases due to increased imports Not directly affected

Natural resource

Lower effort will lead to increased fish stock and likely increase in harvest Lower effort increases wild fish stocks

$

$

Swild no intermixing

P0

Swild & Senhanced

P0

P¢

Demand

P¢

Swild & Senhanced

Demand Swild w/intermixing

Swild

0

Q0

0

Q¢

(a)

5.6

Q0

Q¢

(b)

Fish stock enhancement.

A basic model of the implications of fishery enhancement in an isolated market appears in Fig. 5.6. The model shows that total supply of fish (wild and enhanced) will increase. The graph on the left side (Fig. 5.6a) illustrates the case with biological independence between the enhanced and wild stocks. In this case, total harvest will increase, prices will go down, and wild harvest will probably increase if the fishery was originally harvested beyond MSY. In contrast, the graph on the right (Fig. 5.6b) indicates that if stocks intermix, wild harvests do not necessarily improve, although total harvest improves from Q0 to Q¢. 103

THE INTERN ATION AL SEAFOOD TRADE

Analysis of fishery enhancement in international trade This section contains analysis of the impact of enhancement in an exporting country (A) on international trade. For simplicity, this analysis considers a two-country scenario where both fisheries exhibit a backward bending supply relationship. As seen in Fig. 5.7, country A’s supply shifts to the right owing to an increase in enhanced fish stock. Consumers in Country A increase consumption from QAC to QAC¢ at a lower price, Pw¢. The harvests in country A also increase from QA to QA¢. Increased harvests lead to increased employment and increased exports. The impact on the state of country A’s fishery depends on where and how the enhanced stocks are released and how the fishery is managed. If enhanced stocks do not intermix with wild stocks, wild stocks will probably increase, as price and effort targeted at wild stocks decrease, as shown in Fig. 5.6. If intermixing occurs, wild stocks may decline, since increased effort and increased competition among the enhanced and wild stocks raise the likelihood of wild stock being harvested beyond MSY. However, total fish supply may increase with intermixing, since the increase in hatchery-raised fish offsets wild stock losses. After enhancement in country A, country B’s consumption increases and the price of fish decreases to Pw¢ as a result of increased imports. As prices decrease, effort decreases. This will eventually lead to increased fish stock and an increased harvest. The enhancement in the exporting country (A) tends to undermine its own wild fish stocks (if the stocks intermix) and, in contrast, tends to create market incentives that improve the importing nation’s wild fish stock.

$

$ P

Exporting country

P

ES

ES¢

P¢W SA

Importing country

P

S¢A P¢W

$

World market

P¢W

DA

DB SB

ED

Trade Exp Exp

0

5.7

QAC

QA

Q¢AC

Q¢A Quantity

Imp

Trade¢ 0

Qw Q¢w

Quantity

0

Imp

QB QBC Q¢B Q¢BC

Quantity

International fish trade: fish stock enhancement in the exporting country.

104

PRINCIPLES OF INTERN ATION AL TRADE APPLIED TO FISHERIES

Conclusion The objective of this chapter is to familiarize the reader with how basic international trade theory and bioeconomics can be merged to gain insights regarding how changes in policies and industry practices influence international trade, prices, and the state of fisheries resources. The chapter only begins to address the complex relationships and dynamics in actual fish trade systems. However, even the two-country model explored here reveals interesting counterintuitive implications when fisheries and international trade interact. Given that many fisheries are currently overfished and managed under open access, changes in policies and practice may have long-run effects that are the opposite of what is predicted by traditional trade models. Naïve policies that are implemented without appropriate fisheries management regimes in place are often self-defeating. Subsidies for the purchase of fishing vessels on the US East Coast in the 1970s have contributed to the overfishing of cod and related stocks, and ill-conceived salmon enhancement programs in the Pacific Northwest have contributed to the decline of the salmon fisheries. These efforts, which were partly designed to help improve the US position in terms of trade, have not resulted in a stronger fisheries sector, but instead contributed to greater reliance on imports of both cod and salmon. As we have noted, fisheries are gradually becoming managed by rightsbased systems. In these systems, established harvest quotas are assigned or sold to individuals or groups of individuals. In these systems, owners of the secure rights to harvest the quota can respond to market conditions because the need to race to catch the fish before someone else does (as in openaccess systems) is removed. The removal of the open-access race for the fish will eliminate the backward bending supply relationship. Variants of these systems, prevalent in New Zealand, Iceland, and Australia are gaining ground in the US. As rights-based systems become more commonplace, international fish trade will respond to changes more in line with the way traditional trade theory suggests. However most fisheries, especially in developing nations, are still regulated and open-access. Another change that will probably cause fish trade to respond more as international trade principles suggest is aquaculture. Aquaculture systems with secure property rights and well-understood production technologies and practices are much more similar to agriculture. Examples include salmon farming in Norway, Chile, and elsewhere; catfish farming in the US; and tilapia and carp farming in Asia and elsewhere. Fish trade based on farmed fish is also more likely to conform to the traditional international trade model.

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THE INTERN ATION AL SEAFOOD TRADE

References Anderson J L, ‘Private aquaculture and commercial fisheries: bioeconomics of salmon ranching’, Journal of Environmental Economics and Management, 1985 12(1) 353–70. Anderson J L, ‘Implications of private salmon aquaculture on prices, production, and management of salmon resources’, American Journal of Agricultural Economics, 1986 68(4) 866–79. Anderson L G, The Economics of Fisheries Management, Baltimore, MD, The Johns Hopkins University Press, 1977. Hannesson R, Bioeconomic Analysis of Fisheries, New York, NY, Halsted Press (an imprint of John Wiley & Sons), 1993. Tweeten L, Agricultural Trade: Principles and Policies, Boulder, CO, Westview Press, Inc., 1992.

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CHAPTER

6 Price discovery James L. Anderson and Josué Martínez-Garmendia

Introduction his chapter explores some of the many seafood pricing systems around the world. The systems considered are: auctions, individual negotiation, bargaining groups, and consignment sales. It also explores the potential role of futures and options in seafood markets. The primary means by which the price for most raw seafood products is determined is by auction systems or individual negotiations between buyers and sellers. Most of the pricing is spot (cash) pricing, subject to daily market conditions. Forward contracting is still relatively uncommon; however, it is becoming more accepted. This is especially true in the case of farmed products, where harvest can be anticipated with relative ease and when the buyers are large food service or retail operations.

T

Auctions Auctions are the most prevalent form of pricing for wild-caught seafood in Japan, much of Europe, and many developing nations. However, in North America auctions are used only to a limited degree. In the US, prices are 107

THE INTERN ATION AL SEAFOOD TRADE

often negotiated on a boat-by-boat basis at the time of landing. Fish are also sold through short-term agreements with fishermen’s groups or on a consignment basis into wholesale or export markets.

Japan Producer area auctions are the main pricing mechanism for fisheries in Japan. Fish offloaded from fishing boats is sold daily on the harvest area auctions. The product is evaluated by buyers prior to sale and, in general, a progressive auction of one form or another is used. Once the price is determined and the product changes hands, most of the fish is sent to consumer area auctions, such as the Tsukiji Wholesale Fish Market in Tokyo. The Tsukiji Market is the largest fish market in the world, handling over 780 000 MT per year, or about 2900 MT per day, comprised of over 450 types of fish (Tsukiji Market 2002). It is one of 86 consumer area wholesale markets in Japan (Osaka Markets 2002). Fish from the producer area auctions and imported fish are sold at Tsukiji and other consumer area auctions. The method of auction depends on the species of fish and the specific traditions and procedures in the particular market. Some is sold by a sealed bid. These are usually unique items, such as giant squid. Others are sold in lots or as individual fish. Bluefin tuna destined for the premium sashimi market is an example of a fish that is auctioned on a fish-by-fish basis.

Marketing system for US Atlantic bluefin tuna sold in Japan The marketing system for US-caught bluefin tuna to Japan is an interesting example. This description is drawn largely from Carroll (1998). The market distribution system starts with US fishermen landing Atlantic bluefin tuna (ABT) at ports ranging from Maine to North Carolina, USA (Fig. 6.1). The primary landing areas are around Cape Cod, MA, USA. Bluefin tuna are harvested primarily by rod and reel (harpoon, longline, and seine nets are also used in the US). They range in size from 50 kg to over 400 kg. The fish is usually processed and iced at sea, emphasizing quality and preserving freshness. The US broker/exporter then takes control of the fish at the landing port, where it is graded. Then, the fishermen and broker determine the type of sale: consignment or dock price. Before the fish is shipped to the airport, the broker completes any remaining processing to improve appearance and grades the fish for the last time before it is exported. The fish is shipped airfreight to Japan and is usually received at the principal port of entry, Narita Airport outside Tokyo, where it is accepted by the Japanese importer or auction company and market destinations are finalized. The accepting party in Japan will grade the fish before it goes to the wholesale 108

PRICE DISCOVERY 1 US FISHERMEN LAND ATLANTIC BLUEFIN TUNA (ABT)

2 US BROKER/DEALERS HANDLE ABT SALE AS CONSIGNMENT OR DOCK PRICE

3 ABT IS SHIPPED AIR FREIGHT TO JAPAN (NARITA AIRPORT PRINCIPAL PORT OF ENTRY)

3 ABT SHIPPED TO US DOMESTIC MARKET

4 JAPANESE IMPORTER DETERMINES FINAL SALES FOR ALL AUCTION COMPANIES AND ALL CITIES

4 ABT IS CONSUMED AT US SUSHI RESTAURANTS (NY & CA)

5 ABT IS TRANSPORTED TO OUTSIDE MARKETS

5 ABT IS TRANSPORTED TO TSUKIJI MARKET, TOKYO

6 CONSIGNMENT OR OUTRIGHT SALE TO RESPECTIVE AUCTION COMPANIES

6 CONSIGNMENT OR OUTRIGHT SALE TO RESPECTIVE AUCTION COMPANIES

6.1 Market distribution system for US bluefin tuna (source: Crocker and Sons, Inc. 1998 (as cited in Carroll 1998)).

market. On average, the fish will go on auction in the designated city by the selected auction house four days after the initial landing date. Depending on the city of auction, the inspection may be as rigorous as cutting the fish wide open to a basic tail steak cut (Crocker and Sons 1998). After close inspection, the wholesale buyers will determine the fish for which they will bid. During the auction, bidding is limited to 30 seconds per fish to improve speed and discourage collusion (Yoshikawa 1998). In the latter half of the 1990s, prices on the Tsukiji auction typically ranged from 2500 yen/kg to over 6000 yen/kg (Tokyo Central Wholesale Market, various years). After the 109

THE INTERN ATION AL SEAFOOD TRADE

fish is purchased, it is transported to the wholesale market where it is portioned and sold to a number of intermediate wholesale buyers. The buyers then transport the sashimi product to mass marketing superstores, supermarkets, Japanese restaurants, sushi shops, and fish retailers where it is purchased by the sashimi or sushi consumer ( JTSA 1998). The intermediate wholesale buyers determine price by individual negotiations. The US brokers will only send the highest-quality fresh bluefin tuna to the Tsukiji market. Seven auction companies are licensed to sell products on Tsukiji market, five of which handle tuna products (Fig. 6.2). Each US broker does business with a specific auction company, and is encouraged to continue that relationship in view of the unique Japanese respect for ‘relational or obligational contracting’ (Bestor 1992). Although market share changes frequently, the two largest companies in bluefin tuna volume are Touichi and Tousui (Balhor 1997). Fresh bluefin tuna of lower quality are shipped either to a market outside Tokyo or consumed domestically in major US cities with higher-end sushi restaurants, such as New York and those in California. The basic struc-

TSUKIJI

Touto Suisan Co., Ltd (TOUSUI)

Tsukiji Uo-ichiba Co., Ltd (TOUICHI)

Daito Gyorui Co., Ltd (DAITO)

Chuo Suisan Co., Ltd (MARU-NAKA)

Dai-ichi Suisan Co., Ltd (DAI-ICHI)

TUNA AUCTION COMPANIES

CENTRAL WHOLESALE MARKET (WHOLESALERS)

INTERMEDIATE WHOLESALERS, TRADE PARTICIPANTS, ETC.

MASS MARKETING STORES, SUPERSTORES, SUPERMARKETS

JAPANESE RESTAURANTS

SUSHI SHOPS

FISH RETAILERS

JAPANESE CONSUMERS

6.2 Bluefin tuna transported to Tsukiji Market (Tokyo Central Wholesale Market) (source: Maguro America, Inc. 1997; JTSA 1998 (as cited in Carroll 1998)). 110

PRICE DISCOVERY

ture of the market distribution system within potential outside auction markets in Japan is similar to Tsukiji (Fig. 6.3). The potential Japanese outside market will be selected according to the broker’s contacts and the unique match of fish traits and market requirements (Crocker and Sons 1997).

The marketing margin for US Atlantic bluefin tuna Ex-vessel price is derived from the first wholesale price received in Japan. The difference between the ex-vessel price and the first wholesale price is the marketing margin. The marketing margin consists of four basic costs: Japan costs, US broker commissions, domestic charges, and airfreight charges, all of which are included in a consignment sale. Japanese costs include a 5.5% commission paid to the auction company, trucking charges, import duties, and miscellaneous charges (Sonu 1994). Japanese charges are subtracted from the wholesale value (in yen) received in Japan, averaging between 12 and 24% of the total value of the sale for a competitive broker. The remaining revenue is exchanged for US

Funabashi

Senju

Ishikawa

Kawasaki

Yamagata

Kyoto

Nagoya

Osaka

Kawago

Kanezawa

Sapporo

Yokohama

Sendai

Kobe

COMMISSIONING OF AUCTION

CENTRAL WHOLESALE MARKET (WHOLESALERS)

INTERMEDIATE WHOLESALERS, TRADE PARTICIPANTS, ETC.

MASS MARKETING STORES, SUPERSTORES, SUPERMARKETS

JAPANESE RESTAURANTS

SUSHI SHOPS

FISH RETAILERS

JAPANESE CONSUMERS

6.3 Bluefin tuna transported to outside markets (source: Maguro America, Inc. 1997; JTSA 1998 (as cited in Carroll 1998)). 111

THE INTERN ATION AL SEAFOOD TRADE

dollars, and a five per cent standard commission fee for the US broker is subtracted from this amount. Exporting fees in the US are around $3.10/kg, and charges for airfreight are around $4.00/kg. Charges are subtracted for bait and ice to determine the final return to the fishermen. During the years 1994–96, monthly ex-vessel prices ranged from US$10/kg to US$45/kg. In rare cases, ex-vessel prices for exceptional fish have exceeded US$90/kg. All charges are relatively standard, except for Japanese costs that may differ between shipments and cities. The US brokers must carefully consider the traits of the fish and conditions of the markets when sending fish to the Japanese market. Preferences and populations differ among cities and regions. Transportation costs and inspection procedures of the market must also be assessed. There has been a trend in the last few years to send more fish directly to outside markets because of excess supply in Tokyo and excessive transportation time leaving the city with purchased product (Godfrey and Abrams 1998). As the market distribution system matures, US brokers can more easily and securely send their product to these outside markets. Because the Japanese market functions largely through personal relationships, ease of entry into outside markets can be enabled by further interfacing with established relational networks. In addition, these personal relationships give US brokers access to vital day-to-day outside market information.

United States In contrast to Japan, there are just a few relatively small auctions in the US, such as those in New Bedford, MA (groundfish), Gloucester, MA (groundfish), Portland, ME (groundfish), Seattle, WA (primarily halibut), Honolulu, HI, and Hilo, HI. Although it is very small by Japanese standards, the display auction of the Portland Fish Exchange handles approximately 10 000–15 000 MT of seafood products per year, and it is the most significant auction for groundfish in New England (Portland Fish Exchange 2002). The system is simple. Fish are off-loaded from boats into lots ranging in size from 1 to 545 kg (1200 pounds), depending on the size of the vessel’s catch. The fish are held in a refrigerated warehouse where the auction takes place. Approved buyers may inspect the fish up until the time the auction starts. It is then bid on in a progressive auction led by an auctioneer. Each species (and size category within the species group) is auctioned separately. When the bidding for a particular species has reached its maximum, the winning buyer may choose from many lots at the bid price. After the lots have been claimed, the bidding process begins again until all lots are sold. The auctioneer then moves to the next species. The idea behind this system 112

PRICE DISCOVERY

is to speed up the auction and help ensure higher quality lots receive higher prices. Fishermen can elect to pull their product from the auction if they are not satisfied with the bid price (Portland Fish Exchange 2002). Although there are emerging attempts to move toward electronic auctions in the US and elsewhere, most have been relatively unsuccessful. Reasons range from the desire of buyers to actually inspect the products, to lack of technological knowledge at both the buyer and seller levels, to issues of credit and payment assurances, to resistance to change the traditional way of conducting business. Of course, if electronic auctions from remote sites are successfully introduced, market efficiency will increase, as more buyers and sellers will participate. The primary barrier in the long run is most likely the heterogeneity of the fresh product. However, in the long run, electronic trading of seafood will probably become a reality for a significant portion of seafood trade.

Individual negotiation In the US, as well as in many other nations, tons of fish are priced daily using simple one-on-one negotiation. Although loyal relationships may develop between buyers and sellers, often these relationships will change over a few cents difference. This type of one-on-one price negotiation is common in the East Coast US lobster, blue crab, and groundfish (cod, flounder, etc.) fisheries. It is also the primary means of price determination in major wholesale markets, such as the Fulton Fish Market in New York City; the Rungis Wholesale Market near Paris, France; and the many wholesale markets in Japan.

Bargaining by fishermen’s groups Often, fishermen’s groups, such as bargaining associations and co-operatives, bargain as a unit with primary buyers and processors. In the US, there are voluntary organizations, which tend to be relatively weak. In Canada, organizations such as the United Fishermen and Allied Workers’ Union (UFAWU) represent seine and gillnet salmon fishermen. In the case of salmon fisheries in the Pacific Northwest, bargaining groups and fishermen’s co-operatives negotiate with buyers prior to the opening of the salmon season to determine such things as an initial price or minimum price. This price is generally not fixed for more than a short time and is renegotiated as supply and demand conditions change. However, in 113

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Canada, the UFAWU works to obtain multi-year agreements for minimum prices. In most Alaskan salmon fisheries, price may be further adjusted on an individual basis after the season closes until the beginning of the next season. This ‘post-season adjustment’ is determined by many factors, such as actual price received by wholesalers/processors in markets, such as Japan, and sometimes as an effort to retain the loyalty of fishermen, particularly if the forecasted harvest for the upcoming season is expected to be weak.

Consignment sales Many species are sold on consignment. In these cases, after the secondary wholesale price is determined in consumer area markets, the primary producer/wholesaler/exporter receives a price net expenses and commissions. Bluefin tuna from the US, Europe, and Australia sold at Tsukiji Market; New England whiting; and Thai shrimp are examples of fish that are regularly sold by this method. This approach shifts price discovery to the secondary wholesale market. The focus of the negotiation between primary harvester and the first handler is commission rate and handling procedures. This approach shifts some of the short-term price risk to the primary seller and away from the distributor/exporter.

Long-term contracts and vertical integration The seafood industry at all levels (production, distribution, retail, and food service, etc.) is becoming increasingly more concentrated and international in scope. With this change comes greater incentive for long-term contracts. Companies, such as Darden Restaurants, Inc. (Red Lobster, Olive Garden, Bahama Breeze, and Smokey Bones restaurants) in the US, need to secure relatively stable supplies and prices for several months at a time. These largescale buyers (often multinational companies) are moving toward contracts of up to a year in advance in an effort to stabilize (or at least anticipate in advance) prices. To date, these contracts are more likely to be for farmed product, such as salmon and shrimp, and processed product, such as fish block. Another direction in which the industry is heading is toward increased vertical integration. The farmed salmon and shrimp industries are becoming increasingly more integrated – from hatchery operations to packaging prod114

PRICE DISCOVERY

ucts for retail or food service distribution. In contrast, much of the wildbased fishery is less concentrated and vertically integrated. In many cases, this is the result of the regulated, open-access nature of many fisheries around the world combined with the relatively uncertain nature of the harvest. Rights-based fisheries management in places such as New Zealand, Iceland, and Australia have tended to increase vertical integration and concentration. For example, in Iceland virtually all of the fisheries have been managed by Individual Transferable Quotas (ITQs) since the beginning of the 1990s. Fish quotas are actively traded primarily through brokers. Most of the large fishing companies are vertically integrated, from fishing vessel through processing. Processed fish is exported through marketing companies in which the fishing companies hold shares (Arnason 2002). In the Alaska pollock (US) fishery, large factory ships harvest and process Alaska pollock from the Bering Sea into surimi, IQF fillets, and block on board. With the passage of the American Fisheries Act, factory-trawlers were allowed to form a co-operative to harvest their quota, and the number of boats needed to harvest the co-ops’ quota shrunk from 20 to 14 in 1999. With more secure rights to the fish, this segment of Alaska pollock became more efficient and more oriented toward the product mix that would meet market needs. The traditional race for the fish was gone.

Price transparency The price discovery system in fisheries involves nearly all basic pricing institutions in one form or another, from auctions to individual negotiation. The variety and fragmented nature of the different systems is enormous. This heterogeneity in the pricing systems results in relatively poor price information, inconsistent/insufficient data collection, and a high degree of uncertainty regarding market information. Price transparency in the seafood industry is generally poor. The business is still one of insiders with highly specialized and often highly protected market information. However, with the development of aquaculture and trends toward rights-based fisheries management, such as individual quotas or community quotas, producers and marketers are becoming more forward looking. Products (especially those derived from aquaculture) are becoming more standardized, and industry concentration is increasing. Therefore, it is expected that the role of the traditional wholesale market systems will tend to decline in volume. Vertical integration, contracted supply, and pricing arrangements are more likely, and in some cases, successful internet trading may emerge. 115

THE INTERN ATION AL SEAFOOD TRADE

Perhaps futures and options may become successful, as the next section will explore.

Futures and options Markets for futures and options contracts exist for many commodities akin to seafood, such as: grain, cattle, cotton, and orange juice. Seafood has intermittently been present in these markets as well. In the mid-1960s, two futures contracts for frozen brown, pink, and white shrimp were traded on the Chicago Mercantile Exchange (CME). They were closed after only two years in 1966 as a result of low trading volume. Almost 30 years later, in July 1993, the Minneapolis Grain Exchange (MGE) launched frozen white shrimp futures and options contracts. Futures and options contracts dealing with frozen black tiger shrimp opened in November 1994, also at the MGE. Unfortunately, the seafood sector has shown little interest in the MGE shrimp derivatives, and trading has been discontinued. However, in June 2002, the Kansai Commodities Exchange in Osaka, Japan, started trading a new futures contract for frozen black tiger shrimp.

What are futures and options? Futures and options are both derivatives. Derivatives are contracts that derive their value from assets that trade in primary cash markets, such as commodities or equities. It is important to note that futures are, in fact, contracts that specify the exchange of a certain amount of an asset between two parties, in a particular place and at a determined point in time. They are standardized contracts that are generally traded in centralized auction markets. The dominant derivative markets in order of trading volume are the Chicago Board of Trade (CBT), the Chicago Mercantile Exchange (CME), the New York Mercantile Exchange (NYMEX), and the Coffee, Sugar and Cocoa Exchange (CSCE). Futures contracts are valued by the forces of supply and demand resulting from expectations about prices of a particular asset in the future. Futures contracts are standardized agreements where traders make or take delivery of a specified commodity at a specified date and place. These contracts are bought or sold in organized exchanges. The value of a futures contract is revised continuously as new information is assimilated by the markets regarding expectations about the underlying asset at the future transaction date specified by the contract. The main advantage of futures con-

116

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tracts over forward contracts is that standardization allows them to be traded in exchanges, which enhances liquidity. This allows traders to actively trade futures usually in seconds. When the market is highly liquid, traders can easily offset their position, and they rarely make or take delivery of the actual asset through the futures market. As we will see later, this feature can be remarkably helpful to manage price risk. A futures option is a contract that gives a trader the right, but not the obligation, to buy (sell) futures contracts at a specific price (strike price) prior to a specified expiration date. The price of an option is called an options premium. As is the case for futures contracts, the options premium changes through time as market conditions change. As a result, the buyer (seller) of an option can sell (buy) it back before the expiration date specified by the option. An option to buy an asset at a given strike price on or before the expiration date is referred to as a ‘call’. The person who sells this right has an obligation to deliver the asset if the option is exercised. This is referred to as writing a call option. Options where the buyer purchases an option to sell an asset at a strike price on or before an expiration date are referred to as ‘puts’.

Why futures? Derivatives, in one form or another, have existed for centuries. They present a wide range of beneficial results, but are frequently misunderstood by many, including those in the seafood industry. Here, we present the two most important roles of futures: price discovery and risk management. Futures contracts traded on public exchanges help to make traders’ expectations about the price of an asset in the future more transparent. An efficiently functioning price discovery system, such as the commodities futures market, can play an essential role in the decisions made by investors, processors, harvesters, and even public resource managers. For example, in the case of shrimp, if the futures and spot markets were transparent and efficient, there would be considerable use for this information. Shrimp farmers could use the spot and futures prices to help determine when to harvest ponds or how much shrimp to stock in their ponds. Also, restaurant chains and large retailers could use the information to help plan retail promotional events and timing of shrimp purchases. Even shrimp resource managers could potentially use the information as a indicator of the buyers’ and sellers’ expectations on the health of the fishery stock. If futures prices are exceptionally high relative to spot prices, this may suggest that the traders believe future harvests will be lower than normal, perhaps indicating weak shrimp stocks. If futures prices are lower than spot prices, it may indicate

117

THE INTERN ATION AL SEAFOOD TRADE

expectations of higher harvest and perhaps healthier shrimp stocks. All this information helps improve efficiency of the markets, which is believed to have a positive effect on the economic welfare of society as a whole. The other important use of derivatives is price risk management. Producers of primary products, such as grains, meats, lumber, oil, and fish encounter considerable price risk between the time they begin production and actual sale of their product. Buyers, such as processors, international traders, and retailers face similar price risk. They often must make processing decisions and sales arrangements prior to purchasing the products. For example, an exporter incurs risk of price increases between the time the price agreement is entered into with the importing company to the time he actually purchases the product for export shipment. Price risk, however, can be reduced by trading futures. This can be accomplished by hedging, taking the opposite position in the futures and cash markets. An agent who intends to sell (buy) an actual asset in the future can buy (sell) a futures contract for the same asset. Owing to the parallel movement of cash and associated futures prices, the transactions offset. The hedge offsets declines (increases) in the price of the actual asset through increases (declines) in the futures market. Since traders have different beliefs about the future movement of prices and different attitudes toward risk, derivative markets are an effective medium to transfer risk between investors with different expectations. Hedgers (who wish to avoid risk) transfer risk to speculators.

Futures and options at work In this section, we focus on the basic operational details of futures and options. First, we focus on the structural characteristics of each contract and their respective markets, then we provide examples of how to take advantage of them to attain certain investment goals.

Futures Futures contracts specifications are determined by the exchange in which they trade. Contract size, grade, quotation unit, date, and place of delivery are data that define a contract. See Appendices 6.1 and 6.2 for specifications of the former MGE and current Kansai Commodities Exchange frozen shrimp contracts. Futures contracts are priced based on the expected value of the asset at the date of delivery. The difference between the spot and futures prices is referred to as the basis. In principle, it reflects the carrying costs, such as 118

PRICE DISCOVERY

storage cost, insurance, opportunity cost of money, transportation cost between the cash and futures market, and expectations regarding future supply and demand. Therefore, basis is equal to: b t = Pt - f t ,

[1]

where bt is the basis at time t, Pt is the spot (cash) price at time t, and ft is the futures price at time t. As t gets closer to the delivery date, the basis becomes smaller, all else constant. Most storable commodities have a positive carrying cost. This means that the futures price will tend to be greater than the cash price. The basis changes with market conditions, but generally it fluctuates less than either the actual cash or futures price because cash and futures prices are positively correlated. This fact plays a central role in the use of futures contracts for risk management. A futures contract seller is said to be ‘short’, while a buyer is said to be ‘long’. By selling (shorting) the contract, the trader agrees to deliver the asset at a future time, although it may not be in his possession at the time the agreement is made. If the trader buys the contract back prior to the delivery date, he can be involved in trading the future without owning the asset. The same concept applies for the long trader. The principal mechanism of reducing risk using futures markets is hedging. Although trades can be designed to meet different goals, in general traders that hedge are trying to eliminate the negative effects of price changes in cash markets. Sellers in the cash market, such as grain or shrimp farmers, would tend to want to hedge against price declines. They are short hedgers. Processors who need the commodity as an input would want to hedge against price increases, and they would be long hedgers. As mentioned earlier, price risk can be reduced by taking the opposite position in the futures market to that in the cash market. Since the cash and futures prices move in a parallel way, the decreases in the value of an asset in one market are offset by the increases on the other market. In a simple short hedge, a trader who holds an asset today and intends to sell it at time T, will also sell a futures contract today and buy a futures contract back in time T. As a result, the value of this transaction, Vs, should theoretically equal zero if the cash and futures market move perfectly together. This can be expressed as: Vs = ( PT - Pt ) - ( fT - f t ).

[2]

The changes in cash price between time t and time T given by (PT - Pt) is offset by the change in the future price (fT - ft).This is a short hedge. Suppose now that a hedger needs to buy an asset at a future date and is concerned 119

THE INTERN ATION AL SEAFOOD TRADE

about the price of the asset moving up. The hedger will buy futures contracts at the time of the initial decision, and will sell them when he is ready to purchase the asset in the cash market. In this case, the result of this hedge, Vl, will again be equal to zero if cash and futures prices move perfectly together: Vt = (- PT + Pt ) - (- fT + f t ).

[3]

This is a long hedge. Both trade values can be represented in terms of basis, Vs = ( PT - fT ) - ( Pt - f t ) = basisT - basist

[4]

Vt = ( Pt - f t ) - ( PT - fT ) = basist - basisT .

[5]

and

This representation suggests that as long as the basis does not change, the value of the hedge will equal zero. However, if the basis changes between t and T, the trader will make or lose money. This means that hedging is subject to basis risk. However, as we mentioned before, this risk tends to be smaller than the cash price risk. An important decision that must be made when hedging is the number of futures contracts to acquire relative to the exposure in the cash market. This is usually referred to as the hedge ratio. If the objective of the trader is to minimize risk, the choice of hedge ratio should minimize expected variance of the value, V. That is, the losses in the cash (futures) market are offset by the gains in the futures (cash) market, owing to unexpected changes in price. Provided that the basis stays constant in the time interval T–t, the choice is clear: the trader should trade the number of futures contracts that exactly matches the amount of asset exposed in the cash market. In other words, the hedge ratio should be equal to one. In reality, however, the basis is not constant throughout a hedge period. The challenge is to find the right number of futures contracts the trader should buy or sell. Therefore, our hedge equation, V, becomes: Vs = ( PT - Pt ) - hs ( fT - f t )

[6]

Vt = (- PT + Pt ) - ht (- fT + f t )

[7]

for the short hedger and

for the long hedger, where h is the hedge ratio. Since we have assumed that the hedger’s objective is to minimize risk, the short hedger’s objective can be expressed as: 120

PRICE DISCOVERY

Minimize varVs = var ( Pt - PT ) + hs2 var ( f t - fT ) - 2hs cov[( Pt - PT ), ( f t - fT )], hs

[8] where varVs is the variance of the outcome of the short hedge, var(Pt - PT) is the variance of the change in cash prices, var(f1 - fT) is the variance in the change in futures prices and cov[(Pt - PT),(ft - fT)] is the covariance (Leuthold, Junkus and Cordier 1989 or Carter 2003). By taking the first derivative with respect to the short-term hedge ratio, hs, we can solve for the risk minimizing futures market position relative to the cash position, hs: hs =

cov[( pt - pT ), ( f t - fT )] . var ( f t - fT )

[9]

Therefore, to calculate the minimum variance hedge ratio, we have to estimate the variance of change in the futures prices between t and T, as well as the covariance between the change in futures and cash prices between t and T. The values for these measures of risk are empirically estimated using data from the cash and futures price history. This estimation assumes that the past conduct of cash and futures markets is consistent with future behavior. Now, let us consider a hypothetical hedge using shrimp futures contracts (Table 6.1). Imagine a shrimp producer in the southeastern US finds that the current cash price for shrimp is $3.00/lb and he thinks it is an acceptable price. Based on his farm’s production expectations, he believes he can deliver 20 000 pounds of shrimp in a cash fish exchange in one month. As a result, he would expect to make $60 000. However, in a month, prices may have changed considerably. Therefore, he decides to use the MGE white shrimp futures market to hedge his position. Since he intends to sell shrimp in the cash market at a future date, he should sell (short) futures contracts. In order to determine the size of his position in the futures market, he needs to estimate the hedge ratio, hs. This requires the estimation of the variance of the futures price change over the month and the covariance of the futures and cash price change relationship over the month. Let us assume that such computation leads to a value for the hedge ratio, hs, equal to 0.75. This means that the producer should hold a short position in the futures market equal to 75% of his position in the cash market. That is, he should short 15 000 pounds in the futures market. Since each futures contract is 5000 pounds, the producer will sell 3 white shrimp futures contracts at the current price, $3.25/lb. The idea is that a month later, the producer will buy the futures contracts back and sell the shrimp in the cash market. Assume that a month later, the price for white shrimp in the cash market has declined to $2.50/lb. and the white shrimp futures contracts trade at 121

THE INTERN ATION AL SEAFOOD TRADE

$2.60/lb. His trading in the futures market results in revenue of $9750, while the sale of the 20 000 pounds of shrimp in the cash market has earned $50 000. The revenue obtained in the cash market is $10 000 less than what the trader was expecting one month earlier. However, this loss is largely covered by the gains in the futures market, $9750 (ignoring brokerage commissions). Therefore, even though the cash price went down by $0.50/lb. during the month, the producer who hedges will make $59 750, only $250 less than his initial expectation (instead of $10 000 less if he did not hedge). Hedging can also be helpful for shrimp buyers. Imagine a manager of a restaurant chain who is planning to advertise a special on black tiger shrimp in a month (Table 6.2). The manager estimates that if he can be assured of paying $5.00/lb. for shrimp in the cash market one month from now, he can make a profit through a promotion he is planning. However, he will need to purchase the shrimp one month from now, which could result in significant price risk exposure. The restaurant expects to sell 100 000 pounds under this special offer. The current cash price for black tiger shrimp is $5.00/lb. This means that a month from now, the restaurant chain is planning to spend $500 000 for the purchase of 100 000 pounds of black tiger shrimp. However, an unexpected price increase would reduce or eliminate the expected profit margin. To avoid this contingency, the manager decides to use a long hedge in the black tiger shrimp futures market. Using equation [9], he determines that the hedge ratio, hl, is equal to 0.80. Therefore, he needs to hedge 80% of his future cash market purchase, which is equal to 80 000 pounds, or 16 black tiger shrimp futures contracts. Assume the price for the 16 black tiger shrimp futures contracts he buys is $5.20/lb. One month later, the price of shrimp in the cash market has gone up to $5.80/lb., while the futures contract price is $5.90/lb. He then buys 100 000 pounds of shrimp in the cash market and sells 16 contracts in the futures market. As a result, the restaurant chain spends $580 000 for the purchase of shrimp rather than the expected $500 000 a month before. However, the transactions in the futures market lead to a profit of $56 000 (ignoring brokerage commissions). Therefore, instead of spending $80 000 over the expected purchase cost owing to cash price change, the restaurant chain will only need to spend an additional $24 000.

Options An option is a contract that gives the buyer the right to buy or sell a certain amount of asset, for a predetermined price prior to a designated expiration time. The seller of an option (an option writer) has the obligation to sell (buy) the specified asset should the contract buyer choose to exercise the option prior to the expiration date. An option to buy an asset is referred to 122

3.25 2.60

3.00 2.50

Cash price ($/lb.)

20 000 20 000

Quantity (lb.) 0.75 -0.75

hs 0 2.50 ¥ 20 000 = 50 000 50 000

0.75 ¥ 20 000 = 15 000 -0.75 ¥ 20 000 = -15 000

123

April May

5.20 5.90

Futures price ($/lb.)

5.00 5.80

Cash price ($/lb.)

100 000 100 000

Quantity (lb.)

Hedged amount (lb.) -0.80 ¥ 100 000 = -80 000 0.80 ¥ 100 000 = 80 000

hs -0.80 0.80

0 -5.80 ¥ 100 000 = -580 000 -580 000

Cash market ($)

Cash market ($)

Hedged amount (lb.)

Table 6.2 Shrimp producer: an example of a long hedge

May June

Futures price ($/lb.)

Table 6.1 Shrimp producer: an example of a short hedge

-0.80 ¥ 100 000 ¥ 5.20 = -416 000 0.80 ¥ 100 000 ¥ 5.90 = 472 000 56 000

Futures market ($)

0.75 ¥ 20 000 ¥ 3.25 = 48 750 -0.75 ¥ 20 000 ¥ 2.60 = -39 000 9 750

Futures market ($)

-416 000 -108 000 -524 000

Total ($)

48 750 11 000 59 750

Total ($) PRICE DISCOVERY

THE INTERN ATION AL SEAFOOD TRADE

as a call, while the option to sell an asset is a put. The options price is called a premium. These prices are determined by auction in the exchange. Option contracts specify whether they are calls or puts, the amount of asset, the price of the asset for which the option can be exercised (strike price), and the date until which the option is valid (expiration date). The strike prices and expiration dates are defined by the exchange. For shrimp futures traded on the MGE, expiration dates were monthly. In the case of the white shrimp futures options, the futures option could be exercised any day before the expiration date (see Appendix 6.1). These options are called American options (options that can be exercised only at the expiration date are called European options). Options are not traded on margin; therefore, the maximum loss is the premium paid plus commissions. As is the case for futures, options can also be used to hedge cash positions. There are several ways to hedge using options. In the simplest case, an options hedge is analogous to purchasing price insurance. For example, consider the following situation: • • •

In June, 21–25 count tiger shrimp are trading for $5.00/lb. in the cash market. The August futures are trading for $5.50/lb., and the August call option with a strike price of $5.00 is trading for a premium of $0.75/lb. The trader needs to buy 21–25 count tiger shrimp in the cash market on the same date of the option expiration in August.

If the buyer does nothing in the options market, he is subject to the uncertainties of price change over the two-month period. However, if the trader buys a call option, two results are possible. If the price of shrimp drops to $4.00/lb. at the expiration date in August, the value of the call option with a strike price of $5.00/lb. will be zero. The trader buys shrimp in the cash market for $4.00/lb. and incurs the cost of $0.75/lb. he paid for the option premium. So, the total cost of the transaction is $4.75/lb. If he speculated and did not purchase a call, he would have obtained the shrimp for the cash price of $4.00/lb. and been $0.75/lb. better off. The other possibility is that the cash price goes up to $6.00/lb. at the expiration date. At the expiration date, the value (premium) of the shrimp call option with an exercise price of $5.00/lb. will be $1.00/lb. (This assumes that at the expiration date in August, the August futures price equals the August cash price. If this is not the case, the premium will not equal the cash price minus the strike price.) In this situation, the trader will buy shrimp in the cash market for $6.00/lb., sell the call option for $1.00 and, as before, incur the $0.75 premium he paid when the option was purchased. The net result of the transaction is that he acquires the shrimp for $5.75/lb. 124

PRICE DISCOVERY

In fact, no matter how high the price of shrimp moves, the net cost of the transactions will not exceed $5.75/lb. He ends up paying $0.75/lb. more than the initial price of $5.00/lb. If the trader speculated that the cost of the shrimp would have been $6.00/lb., he would have had to pay $1.00/lb. over his initial price of $5.00/lb. Therefore, by speculating, he would be $0.25/lb. worse off. In this example, for the cost of the option premium, the trader has put a ceiling on the price of $5.75/lb. he will pay for shrimp in the future, but will still have the opportunity to gain partially from future price declines.

Experience with shrimp futures When white shrimp futures contracts were inaugurated by the MGE in 1993, frozen shrimp was regarded as a commodity well suited to meet the requirements for successful derivatives trading. First, it was a multibillion dollar industry with high price volatility and numerous traders, distributors, producers, and wholesalers. Second, following dramatic increases in US shrimp consumption and momentous growth in aquaculture production, there was considerable change facing traders, producers, and end-users, which indicated it may have been the right time for a shrimp derivatives market. The introduction of shrimp futures and options was supposed to bring seafood into the world of mature protein commodities with a highly liquid and transparent futures market providing objective price information. Success of the shrimp derivatives contracts in the MGE could have significant implications for the seafood industry, as it could open the doors of this sophisticated commodity market system to other seafood products. Lack of product homogeneity is one of the greatest challenges facing shrimp derivatives contracts, as different species of various origins and sizes were traded in the MGE within the same contracts. Three black tiger shrimp size categories were traded in the MGE: 21–25 count per pound (cpp) is the par size category, and 16–20 cpp and 26–30 cpp are the deliverable non-par size categories. White shrimp were traded in four size categories: 41–50 cpp (par size), and 31–35 cpp, 36–40 cpp and 51–60 cpp are the deliverable nonpar size categories. Although different size categories were traded at different prices in the cash markets, they tended to be correlated. In order to standardize the trade of shrimp within each contract, premiums and discounts were introduced by the MGE for shrimp that deviate from par size categories and species. A main concern in establishing the criteria for premiums and discounts was that if price relationships between the different varieties change, they may be subject to constant update for adequate standardization of the various deliverable categories. Premiums and discounts were changed twice for the white shrimp contract and once for the black 125

THE INTERN ATION AL SEAFOOD TRADE

tiger contract. When premiums and discounts are not well calibrated with respect to corresponding cash prices for non-par shrimp size categories, they could result in perverse incentives for traders holding short positions to deliver non-par product. Delivery of non-par shrimp size categories by shorthedgers can result in non-marketable product for traders holding long positions, such as seafood restaurants. Unlike wheat or gold, frozen shrimp is essentially a near-final product whose individual size is a determinant characteristic for successful marketing. Commodities such as wheat or gold traded in derivative markets are not final products. These commodities can be transformed or mixed to achieve the quality or purity required to produce their final products, such as bread or jewelry. This limiting condition of shrimp as a commodity could make systematic opportunities for non-par delivery especially damaging for the survival of black tiger and white shrimp derivatives contracts. Traders holding long positions could become discouraged and abandon trading. In fact, after an initial positive response in the white shrimp contracts, traders became disenchanted with shrimp futures markets. Martínez-Garmendia and Anderson (1999) illustrated the low hedging effectiveness of both MGE shrimp futures contracts. Part of this was due to the aforementioned unstable association between the different deliverable size categories. Fixed premiums/discounts used in the futures contracts can be of little help if that is the case. The relative lack of correlation of the price movements between the futures and cash markets was also a problem. Poor liquidity in the futures and options market and a lack of transparency in the cash market exacerbated this problem. Futures liquidity problems contributed to the lack of hedging effectiveness throughout the life of these two contracts. The problems with the futures contracts also affected the success of the options market. Another major challenge for seafood derivatives contracts is that seafood cash markets are characterized by a significant lack of transparency. This, however, is also bound to change owing to the establishment of electronic seafood trading via the internet. Public trading on a global scale could become a significant step forward toward greater seafood cash market transparency. Generally speaking, details on seafood production are rarely unveiled by timely data on factors such as landings or expected crops. This is relevant information that will influence future cash prices and current derivative prices. In its absence, however, it cannot be efficiently incorporated by traders in their decisions to buy and sell futures contracts. Timely governmental and private reports on production and market outlook help to create expectations that can be channeled into futures price formation. In fact, a greater number of sources and more sophisticated analyses are becoming available. 126

PRICE DISCOVERY

Therefore, although seafood derivatives markets experienced a discouraging start with the shrimp contracts in the MGE, there is hope for the future. In fact, a new frozen shrimp futures contract began trading in the Kansai Commodities Exchange, Osaka, Japan in June 2002. Furthermore, the advent of aquaculture and the internet may lead to considerable change in the way seafood is traded. As a result, the seafood industry is evolving towards market characteristics favorable for derivatives trading.

References Arnason R, ‘Icelandic ITQ system’, presented at University of Rhode Island, Kingston, RI, USA, 22 November, 2002. Balhor A, Business Manager, Cape Quality Bluefin Inc., South Dennis, MA, personal communication, 1997 (as cited in Carroll 1998). Bestor T C, ‘Visible hands: auctions and institutions integration in the Tsukiji Wholesale Fish Market, Tokyo’, Center on Japanese Economy and Business, Working Paper no. 63, Columbia University, Graduate School of Business, 1992. Carroll M T, ‘An Assessment of the Atlantic Bluefin Tuna Market: The Economic Implications for Management’, Master’s thesis, University of Rhode Island, Kingston, RI, USA, Department of Environmental and Natural Resource Economics, 1998. Carter C A, Futures and Options Markets: An Introduction, Upper Saddle River, NJ, Prentice Hall, 2003. Crocker D, President, Crocker and Sons, Inc., Brewster, MA, personal communication, 1995, 1997, 1998 (as cited in Carroll 1998). Godfrey M and Abrams M, President and Owner, F.W.F. Inc., Gloucester, MA, personal communication, 1998 (as cited in Carroll 1998). Japanese Tuna and Skipjack Association (JTSA), Trends of Tuna for ‘Sashimi’, Tokyo, Japan, Tsukiji Uoichiba Co., Ltd., 1998. Leuthold, R M, Junkus J C and Cordier J E, The Theory and Practice of Futures Markets, Lexington, MA, Lexington Books, 1989. Maguro America Inc., Robert Fitzpatrick, P.O. Box 219, South Chatham, MA, USA 1997, 1998 (as cited in Carroll 1998). Martínez-Garmendia J and Anderson J L, ‘Hedging performance of shrimp futures contracts with multiple deliverable grades’, Journal of Futures Markets, 1999 19(8) 957–90. Osaka Markets, www.shijou.city.osaka.jp/english/english.html, 2002. Portland Fish Exchange, www.portlandfishexchange.com, 2002. Sonu S C, Japan’s Tuna Market. NOAA Technical Memorandum: NMFS, NOAA-TMNMFS-SWR-029, Southwest Regional Office, Long Beach, California, 1994. Tokyo Central Wholesale Market (Tsukiji), Annual Report of the Tokyo Central Wholesale Market, Tokyo, Japan, 1995–1999. Tsukiji Market, www.tsukiji-market.or.jp/youkoso/medemi_e/fish.htm, 2002. Yoshikawa T, President, Sirius Ocean Inc., Tokyo, Japan, personal communication, 1998 (as cited in Carroll 1998). 127

Appendix 6.1 Minneapolis Grain Exchange (MGE): Shrimp futures

White shrimp futures contract specifications TRADING HOURS: 9:40 a.m.–1:30 p.m. (Central Time) CONTRACT UNIT: 5000 pounds TICKER SYMBOL: SH DELIVERY MONTHS: All calendar months MINIMUM PRICE FLUCTUATION: 1/4 cent per pound or $12.50 per contract DAILY PRICE LIMIT: $.20 per pound or $1000 per contract. Subject to variable price fluctuation limits 128

PRICE DISCOVERY

SPECULATIVE POSITION LIMITS: 600 contracts all months combined 300 contracts any single month 150 contracts spot month as of the business day preceding First Notice Day. DELIVERABLE GRADES: Raw, frozen blocks of headless, shell-on white shrimp that are of a single brand produced and packed by a single packer in the Western Hemisphere of size count 41–50 per pound deliverable at par. All delivered shrimp must meet the technical standards for MGE Class 1 Shrimp (US Grade A shrimp). DEVIATIONS FROM 41–50 PAR DISCOUNT AND For W. Hemisphere For W. Hemisphere Par species: Non-par species: P. vannamei, P. P. setiferus and P. occidentalis, P. schmitti stylirostris Premium/Discount: 31–35 $.35 36–40 $.10 51–60 -$.90

Premium/Discount: 31–35 $.35 36–40 -$.05 41–50 -$.20 51–60 $1.15

PREMIUM CHANGES: For E. Hemisphere Non-par species: P. chinensis, P. penicillatus, and P. merguinensis Premium/Discount: 31–40 -$.05 41–50 -$.35 51–60 -$1.25

DELIVERY POINTS: Exchange approved facilities in regions of Jacksonville and Miami, FL; Tampa, FL; Brownsville, TX; or New York City at par. A discount applies to the non-par Exchange approved facilities in the Los Angeles area. LAST TRADING DAY: No trading may take place during the last nine business days of the month in which the contract matures. FIRST NOTICE DAY: Last business day of the month preceding the delivery month. FIRST DELIVERY DAY: First business day of the delivery month. LAST NOTICE DAY: The second to the last business day of the delivery month. LAST DELIVERY DAY: The last business day of the delivery month. 129

THE INTERN ATION AL SEAFOOD TRADE

White shrimp options contract specifications TRADING HOURS: 9:45 a.m.–1:40 p.m. (Central Time) UNDERLYING ASSET: One Minneapolis Grain Exchange white shrimp futures contract (5000 pounds) TICKER SYMBOL: SH(p)–puts SH(c)–calls DELIVERY MONTHS: All calendar months MINIMUM PRICE FLUCTUATION: 1/8 cent per pound or $6.25 per contract DAILY PRICE LIMIT: $.20 per pound or $1000 per contract. Subject to variable price limits SPECULATIVE POSITION: 600 futures equivalent contracts all contract months 300 futures equivalent contracts any contract month 1200 option contracts any contract month LAST TRADING DAY: The last day of trading will be the last Friday preceded by at least five business days, the First Notice Day of the underlying futures contract. If such Friday is not an Exchange business day, then trading shall terminate on the preceding business day. AUTOMATIC EXERCISE: Based upon the settlement price for white shrimp futures on the last day of trading for White Shrimp options, the Clearing House shall automatically exercise all in-the-money options unless notice to cancel automatic exercise is given to the Clearing House

Black tiger shrimp futures contract specifications TRADING HOURS: 9:40 a.m.–1:30 p.m. (Central Time) 130

PRICE DISCOVERY

CONTRACT UNIT: 5000 pounds TICKER SYMBOL: BT DELIVERY MONTHS: All calendar months MINIMUM PRICE FLUCTUATION: 1/4 cent per pound or $12.50 per contract DAILY PRICE LIMIT: $.20 per pound or $1000 per contract. Subject to variable price fluctuation limits. SPECULATIVE POSITION: 600 contracts all months combined 300 contracts any single month 150 contracts spot month as of the business day preceding First Notice Day. DELIVERABLE GRADES: Raw, frozen blocks of headless, shell-on black tiger shrimp that are of a single brand produced and packed by a single packer in Thailand, the Philippines or Indonesia of size count 21–25 per pound deliverable at par. All delivered shrimp must meet the technical standards for MGE Class 1 Shrimp (US Grade A Shrimp). DEVIATIONS FROM 21–25 PAR DISCOUNT AND PREMIUM CHANGES: Packed/Produced: Packed/Produced: Thailand, Philippines, or Indonesia Par. eligible non-par country. Species: P. monodon Species: P. monodon Premium/Discount: Premium/Discount: 16–20 $.20 16–20 $.40 26–30 -$1.10 21–25 -$.60 26–30 -$1.70 DELIVERY POINTS: Exchange approved facilities in Los Angeles at par. A $0.07 per pound premium applies to non-par delivery in Exchange approved warehouses in New York City and Jacksonville and Miami, FL. 131

THE INTERN ATION AL SEAFOOD TRADE

LAST TRADING DAY: No trading may take place during the last nine business days of the month in which the contract matures. FIRST NOTICE DAY: Last business day of the month preceding the delivery month. FIRST DELIVERY DAY: First business day of the delivery month. LAST NOTICE DAY: The second to the last business day of the delivery month. LAST DELIVERY DAY: The last business day of the delivery month.

Black tiger shrimp options contract specifications TRADING HOURS: 9:45 a.m.–1:40 p.m. (Central Time) UNDERLYING ASSET: One Minneapolis Grain Exchange black tiger shrimp futures contract (5000 pounds) TICKER SYMBOL: BT(p)–puts BT(c)–calls DELIVERY MONTHS: All calendar months MINIMUM PRICE FLUCTUATION: 1/8 cent per pound or $6.25 per contract DAILY PRICE LIMIT: $.20 per pound or $1000 per contract. Subject to variable price limits. SPECULATIVE POSITION: 600 futures equivalent contracts all contract months 300 futures equivalent contracts any contract month 1200 option contracts any contract month. 132

PRICE DISCOVERY

LAST TRADING DAY: The last day of trading will be the last Friday preceded by at least five business days, the First Notice Day of the underlying futures contract. If such Friday is not an Exchange business day, then trading shall terminate on the preceding business day. AUTOMATIC EXERCISE: Based upon the settlement price for black tiger shrimp futures on the last day of trading for black tiger shrimp options, the Clearing House shall automatically exercise all in-the-money options unless notice to cancel automatic exercise is given to the Clearing House.

133

Appendix 6.2 Kansai Commodities Exchange, Osaka, Japan: Frozen shrimp futures Frozen shrimp futures Launched June 2002

Standard grade

Price quotation Contract grade (for the delivery)

Delivery method Delivery points Minimum price fluctuation

Frozen blocks of raw, headless, shell-on black tiger shrimp of a single brand produced and packed by a single packer in India with a size count of 16–20 that meets the standards stipulated by the Exchange (and is of normal distribution standards or better) is deliverable at par. 1.8 kg (1 block) Black tiger shrimp of a single brand produced and packed by a single packer in the producing country that meets the standards stipulated by the Exchange is deliverable at par. India (21–25, 26–30), Indonesia (16–20, 21–25, 26–30), Vietnam (16–20, 21–25, 26–30). Physical delivery by warehouse receipt Designated cold storage warehouse in Osaka or Kobe One yen

134

PRICE DISCOVERY Frozen shrimp futures Launched June 2002

Contract size Delivery size Delivery months Delivery day Last trading day

Position limits Trading hours Initial margin and maximum price fluctuation

One size (54 kg) 10 size (540 kg) Six consecutive months Fifth business day following the last trading day Tenth of the delivery month (if the last trading day falls on a holiday, it shall be moved forward to the preceding business day) First month 500, second month 2000, third to sixth 6000 (unit) AM 10:00, 11:00; PM 14:00, 15:00 Standard price

Initial margin

Maximum price fluctuation

Less than 3000 yen More than 3000 yen; less than 4000 yen More than 4000 yen

5000 yen 6000 yen

80 yen 100 yen

7000 yen

120 yen

135

CHAPTER

7 Seafood market research James L. Anderson and Josué Martínez-Garmendia

Introduction n this chapter, we look at the fundamentals of seafood market research. The intent is to bring the reader up to speed on current work and provide a basic overview of the elements and challenges of seafood market research. The chapter is divided into several sections that outline the data needed for seafood market research and the types of empirical methods used. Each section provides examples of recent research.1

I

Empirical methods In this section, we introduce the methods most frequently used to answer commonly asked questions about seafood markets. We emphasize conceptual understanding and avoid too much technical detail. Researchers use these techniques to distill the data into a useable form. Seafood demand and 1 This chapter focuses on research conducted since 1990. For a thorough review of work prior to 1990, please see Wessells and Anderson (1992). 136

SEAFOOD MARKET RESEARCH

marketing research focuses on relating variables such as price, quantity demanded, product quality, consumer preferences, geographic, demographic, and temporal characteristics. The questions being asked and the nature and availability of the data determine which analytical method should be used. Demand models Traditional demand models attempt to explain how the quantity demanded of a product varies depending on a chosen set of factors. In these analyses, quantity demanded is the dependent variable, because its value depends on a chosen set of factors, or independent variables. Examples of independent variables include the product’s own price, the price of competing products, and consumers’ incomes. Regression techniques help us ascertain how much each independent variable affects the quantity demanded.2 For example, in Fig. 7.1, we present a scatterplot of price and import quantity for shrimp in the US market. 18 1979

US$/kg (2000 base year)

16

1980 1982 1977 1981 1976 1978

14

12

1983 1984

1986 1987

1985

1988

1995 1994 2000 1997 1996 1998 1993 1991 1999 1992

1989

10 1990 8

6

4 50

7.1

100

150 200 US imports (MT thousands)

250

300

Import quantities vs. real price of shrimp.

2 Regression analysis is a statistical technique that estimates a relationship between independent and dependent variables while minimizing the squared error between the estimated relationship and the actual observations. 137

THE INTERN ATION AL SEAFOOD TRADE

If analysts are interested in determining how import quantity might affect price, they may use simple linear regression to analyze what impact quantity has on price. In the process of developing the model, they are likely to include not just import quantity, but other relevant variables such as income, domestic harvest, etc. The actual structure from the model can be quite complex, incorporating several equations dependent on the availability of data, skill of the analyst, and intended use of the results. Figure 7.2 illustrates an example of a typical estimated equation. The actual choice of functional form (linear, quadratic, logarithmic, etc.), explanatory variables to include, and the estimated techniques (ordinary least squares, generalized least squares, maximum likelihood, etc.) are beyond the scope of this text, and the reader should refer to examples in the literature, such as: Greene (2000), Green, Tull and Albaum (1988), and Kennedy (1998). In the simple example illustrated in Fig. 7.2, the real unit values of imported shrimp (P) were estimated as a linear function of annual import quantity (Q) resulting in the inverse demand equation P = 16.5 0.024 Q.3 This equation suggests that with an increase of 10 MT in shrimp

18 1979

US$/kg (2000 base year)

16

1980 1982 1977

14

1981 1976 1978

12

1983 1984

1986 1987

1985

1989

1988

1995

97

96

10 1990

1991

1994

93 1992

2000 98 1999

8

6

4 50

100

150

200

250

300

US imports (MT thousands)

7.2

Import quantities vs. real unit value of shrimp with an estimated equation.

3 Note: This is not a fully developed model and is only presented to illustrate basic terms and principles. 138

SEAFOOD MARKET RESEARCH

imports, real unit value will decline 24 cents. The coefficient of determination, R2, is a measure of the degree of the model. In this simple example, the R2 was 0.73, indicating that 73% of the variation in real import unit value was explained by import quantity. Often researchers use demand models to measure the sensitivity of quantity demanded to price changes or consumer income changes. After estimating the model relationship between the quantity demanded as a function of the independent explanatory variables, researchers utilize the model’s coefficient estimates to develop elasticity measures. Elasticity measures tell us the percentage change in the dependent variable in response to a one percent change in an independent variable. The most commonly estimated elasticities are price elasticities. Price elasticity measures the percentage change in quantity demanded resulting from a one percent change in price. This measure provides suppliers with an idea of how sales might be affected by changing prices. Own-price elasticity4 can be expressed as: Own- price elasticity =

percentage change in quantity demanded . percentage change in price

If the elasticity is less than zero, quantity declines as price increases. Also, the greater the elasticity, the higher the sensitivity of quantity demanded to price changes. If elasticity is less than negative one, the product is said to be price-elastic, and the buyer reacts such that the percentage change in quantity demanded is more than the percent change in price. For example, if a product had an elasticity of negative four, then quantity demanded would decrease four percent for every one percent increase in price. Price-elastic goods tend to be those for which buyers can find many substitutes. If, on the other hand, the elasticity is between negative one and zero, the good is considered price-inelastic; consumers react such that a one percent change in quantity demanded declines less than the percentage change in price. A good example of an inelastic product is cigarettes. Cross-price elasticity is another important measure. It estimates the expected percentage change in the quantity demanded of a product from a one percent change in the price of a different, but related, product. This measure provides managers with information on how price changes of competing products affect the quantity demanded of their product. It is expressed as:

Qo - Q1 Po , where Po and Qo are the initial Po - P1 Qo price and quantity, and P1 and Q1 are the new price and quantity.

4 Elasticity can be approximated by e =

139

THE INTERN ATION AL SEAFOOD TRADE

Cross- price elasticity =

percentage change in own quantity demanded 5 . percentage change in price of another product

If the cross-price elasticity is positive, the two products compared are substitutes and compete with each other. If, on the other hand, the cross-price elasticity is negative, the two products are complements. In this case, consumers view the products as complementary, such as fishing rods and reels. Analogously, income elasticity measures the expected percentage change in quantity demanded from a one percent change in consumer income. Demand models can also be used to examine the impact of seasonality and advertising on quantity demanded. Many studies on seafood price and income elasticity have been conducted. Table 7.1 provides examples of the estimated own-price elasticity for some of the world’s most important fish species.

Table 7.1 Examples of estimated own-price demand elasticities

Product

Price elasticity

Market level

Region Year

Cod

-2.03

Retail

US, MA

Cod

-1.30

Retail

US, RI

Shrimp

-0.78

Import

US

Three times/ week 1991 Three times/ week 1965–89 Year

Flounder

-1.40

Retail

US

1991

Flounder Salmon

-1.24 -0.26 to -1.38 -1.35

Retail Retail

Japan France

Ex-vessel US

1982–88 Quarter

-1.28 -2.22 to -2.80 -0.93

Retail Retail

Japan US

1980–89 Month 1987–88 Weekly

Retail

Japan

1980–89 Month

Salmon Salmon Catfish Tuna

Time unit

1991

Three times/ week 1979–86 Month 1988–98 Month

Source Brooks & Anderson (1991) Brooks & Anderson (1991) Keithly, Roberts & Ward (1993) Brooks & Anderson (1991) Wessells & Wilen (1994) Kinnucan & Myrland (2002) Herrmann, Mittelhammer & Lin (1993) Wessells & Wilen (1994) Lambregts, Capps & Griffin (1993) Wessells & Wilen (1994)1

1

Wessells & Wilen (1994) provide an in-depth analysis of Japanese household demand for 14 seafood products.Their analysis is a fine example of demand analysis using secondary data.

Qo - Q1 Po¢ , where P¢o and Qo are the Po¢ - P1¢ Qo initial price of another product and own quantity, and P¢1 and Q1 are the new price of another product and own quantity.

5 Cross-price elasticity is approximated by f =

140

SEAFOOD MARKET RESEARCH

A useful example of demand estimation comes from Brooks and Anderson (1991). In this analysis, demand models were estimated for cod fillets, flounder fillets, and bay scallops. Retail data used from two US supermarkets: one in Rhode Island and one in Massachusetts. The objective of the study was to estimate price and cross-price elasticities, as well as effects of advertising, seasonality, and Lent. The data included fish substitutes of cod, flounder, and bay scallops. A zero-one dummy variable was used for the ownadvertising variable reflecting the presence (1) or absence (0) of advertising. A cumulative variable was created to capture the effects of advertising on substitute species on the sales of the dependent species and was equal to the number of fresh substitute species advertised. Advertising data was gathered from supermarket circulars and regional newspapers. A dummy variable for Lent was also included in the model to determine whether sales of fish increased during that period. The data was logarithmically transformed before the coefficients were estimated. Since the data was transformed logarithmically, price elasticities were equal to the regression coefficients.6 In the Rhode Island supermarket, expected percentage change in quantity of cod demanded declined 2.03% with a one percent increase in price. With the same increase in cod price, cod sales in the Massachusetts supermarket declined only 1.30%. This result means that the demand for cod is more price-elastic in the Rhode Island supermarket than in the Massachusetts supermarket. This trend is consistent for flounder fillets and bay scallops. Brooks and Anderson interpret this trend as a result of the geographic location of the stores. The supermarket in Rhode Island is located on the coast, while the one in Massachusetts is further inland. Alternative sources of seafood are easier to obtain in coastal Rhode Island than inland Massachusetts. As a result, consumers react to price increases more negatively in coastal Rhode Island than in Massachusetts. Since consumers in the Massachusetts supermarket do not have the choice of seafood outlets that Rhode Island consumers do, they are not as likely to be as sensitive to the price at one seafood outlet. We notice that cod fillets and bay scallops are elastic in both markets, while founder fillets are elastic in the Rhode Island market, but inelastic in the Massachusetts market. Cross-price effects are also evident in the Brooks and Anderson study. For example, they estimated the cross-price elasticity between bay scallops and flounder fillets at 0.8. This estimate means that a one percent rise in the price of flounder would lead to a 0.8% increase in the quantity demanded of bay scallops. 6 Note that the definition of own-price elasticity can be stated e = p/q*dq/dp. If we have a logarithmic equation q = apb and take the log of both sides, we get ln(q) = a + b ln (p). Taking the derivative we obtain 1/q*dq/dp = b/p. If we rearrange the equation then b = p/q*dp/dq. Hence, in the logarithmic form, e ∫ b. 141

THE INTERN ATION AL SEAFOOD TRADE

Price flexibility models Price flexibility, or inverse demand models, assume that price is explained by factors such as quantity produced, quantity of imports, and income. These models are often used when the supply of an item is considered to be independent of price, such as when a fishery is subject to a harvest quota, or in the case where the fishery harvest is largely the result of uncontrolled environmental conditions. In these cases, prices are determined by a demand factor relative to supply. The analog of own-price demand elasticity analysis in inverse demand models is price flexibility. Price flexibility is defined as the percentage change in the price of a good in response to a one percent increase in quantity marketed. When cross-price flexibility is negative, the goods are substitutes; if the cross-price flexibility is positive, the goods are complements. Own-price flexibility can be expressed as: Own- price flexibility =

percentage change in price . percentage change in quantity demanded

There are several good examples of price flexibility studies. Table 7.2 lists the results of some of them.

Hedonic price models Often, products that are considered homogeneous by the casual observer are viewed as heterogeneous across their characteristics by consumers, processors, and traders. This perception is very much the case for seafood, especially when it is wild-caught. For example, shrimp attains different prices according to size, species, country of origin, pack characteristics,

Table 7.2 Examples of estimated own-price flexibilities

Product

Price flexibility

Market level

Region

Year

Time unit

Cod

-0.27

Ex-vessel

UK

1976–85

Month

Hake Hake Salmon Haddock

-0.23 -0.36 -0.94 -0.27

Ex-vessel Ex-vessel Ex-vessel Ex-vessel

France Spain Spain UK

1984–92 1981–90 1985–89 1988–92

Month Month Year Month

Shrimp Shrimp

-0.77 -0.84

Import Import

US Japan

1976–2001 1976–2001

Year Year

142

Source Ioannidis & Whitmarsh (1987) Spagnolo (1996) Millan & Aldaz (1998) Bjørndal et al. (1992) Ioannidis & Matthews (1995) Anderson (2001) Anderson (2001)

SEAFOOD MARKET RESEARCH

quality, and other factors. Therefore, in many cases seafood can be considered a multi-attribute product. Each fish attribute contributes to price formation. Price models try to capture the precise extent of the influence of these attributes during pricing. These models are called hedonic price models. Hedonic price theory is based on the hypothesis that goods are valued for their utility-bearing attributes or characteristics. In these models, price is the dependent variable and the independent variables are usually dummy variables that represent different levels of attributes considered important to product pricing. Pricing models offer the opportunity to identify which types of seafood attributes (freshness, species, cut, color, size, fat content, etc.) are most important to buyers. Producers can then focus on improving the characteristics of those attributes in order to attain higher prices for their product. In 2001, Carroll, Anderson and Martínez-Garmendia developed a price model for US North Atlantic bluefin tuna. The study formally related market price to a defined set of individual fish attributes using a hedonic price model. The majority of the US catch of bluefin tuna is shipped to Japan for consumption as sashimi. Each fish is graded for several quality attributes. The five main attributes on which traders of fresh bluefin tuna traders rely to gauge product quality are cut, freshness, fat content, color, and shape of the individual fish. Freshness, color, fat content, and shape are graded in discrete increments. The model included additional variables: fish weight, mode of shipment (consigned or not), whether the fish was exported or domestically sold, the US$/yen exchange rate at the time of sale, quantities of bluefin from various origins, and availability of other tunas at the time of sale in the Japanese market. The study found that increasing freshness from the lowest grade to the highest would increase price by 17%. The most important attribute is fat content. Increasing fat content from the lowest grade to the highest is likely to increase price by 76%. This study showed that consumers ranked their attribute preferences in the following order: fat content, shape, color, and freshness. Not only is there a rank of their preferences, but also a measure of how those preferences are translated into expected willingness to pay for bluefin tuna with different characteristics. With this type of information, bluefin tuna harvesters and traders are aware of how particular characteristics will affect their bottom line. Although price models provide detailed information on the advantages of producing seafood with particular characteristics, the data requirements are such that few studies have been carried out. Other seafood hedonic price models include an analysis of the Philippine prawn and shrimp market by Salayo, Voon and Selvanathan (1999), an analysis of factors affecting the price of US-produced surimi by Larkin and Sylvia (1999), and an analysis of tuna in Hawaii by McConnell and Strand (2000). 143

THE INTERN ATION AL SEAFOOD TRADE

Discrete choice models Choice models are an alternative approach when market information related to a multi-attribute product is not available. Choice analysis involves collection of information on multi-attribute products through use of consumer surveys. The survey questions elicit consumer preferences for product attributes by asking respondents to choose between hypothetical or actual products that are described as a bundle of attributes, including price. Choice analysis may take several approaches. Respondents may be asked to choose one product over another or rank a set of products from first to last. This type of data is usually collected to answer specific questions in an experiment. Using responses in a choice experiment allows the market researcher to disaggregate the degree to which species, product form, flesh color, and price influence consumer choice. A critical aspect is developing a valid survey that will provide valuable answers. In designing an experiment, several issues must be addressed. First, the survey designer needs to identify product attributes and their levels. For example, an attribute can be salmon species, and its levels Atlantic, sockeye, coho, chinook, and pink. While many attributes and levels may be relevant, the number of attributes the survey can use is constrained by the expected number of respondents, the number of questions each respondent can reasonably answer, and the knowledge and experience of the respondents. It is reasonable to expect that salmon traders can evaluate more complex salmon products than the general salmon consumer. It is important not to overwhelm a respondent with too many similar combinations. Researchers should give respondents some easily differentiable choices so they can get a feel for the survey and move quickly through the learning curve. The survey designer also needs to choose between (1) a choice design or (2) a rank design. Finally, the survey designer selects an appropriate method for data collection. Answers can be collected by mail, phone, in person, or by observing choice in-store. The researcher collects the data, then regresses the choices or rankings against the attribute levels and interprets the results. Work by Johnston, Wessells, Donath, and Asche (2001) is an example of this type of study applied to the seafood industry. They explored how different factors affected consumer likelihood of purchasing ecolabeled seafood. The study asked respondents a series of questions. Each question asked the respondent to choose between a certified and uncertified seafood product. The researchers found that consumer preferences differed by the amount of certification premium, the species presented, demographic group, and which agency certified the seafood. For example, they found that if there were no price premium charged for certification, 88% of US con-

144

SEAFOOD MARKET RESEARCH

sumers would select certified seafood over uncertified. However, if the price premium charged was 50% over the original purchase price, then only 68% of US consumers would select the certified seafood. Similar studies using conjoint analysis have been performed for seafood in other markets. Fong (1999) studied the shark fin market in Hong Kong. Using the conjoint approach, he concluded that larger fins were preferred over small. He also showed that the preferred fins were the caudal, dorsal, and pectoral, in that order. Lombardi and Anderson (1999) studied the catfish market in Germany. Anderson and Bettencourt (1993) focused on salmon in the US New England region. Zucker and Anderson (1998) used conjoint analysis to determine the preferences for individual attributes of summer flounder among wholesalers and sushi restaurants in the US.

Co-integration models Researchers use co-integration to determine whether prices for different products move together through time. Many studies on seafood are being carried out on price relationships across markets and products. When prices of the same product across different markets are linked, it reveals a degree of market integration. An example of a study on seafood price relationships is that by Gordon, Salvanes, and Atkins (1993). They studied the price relationships between cod, salmon, and turbot at the Paris Rungis fish market. They concluded that their price dynamics were, in fact, not closely related to each other. Asche, Bremmes, and Wessells (1999) showed that Atlantic and four Pacific species of salmon were related in the world markets. Using monthly prices extending from 1980 to 1992, Gordon and Hannesson (1996) showed that the market for cod within European countries was highly integrated. Further, their analysis indicated that European and US markets for frozen cod are also linked, but not so for fresh cod. Bene, Cadren, and Lantz (2000) used co-integration methods to demonstrate that prices for wild shrimp from the French Guyana fishery and cultured Thai shrimp are related in the French market. In fact, they argue that the price of Thai shrimp imports acts as a market leader for French Guyana shrimp.

Time-series models Researchers use time-series analysis to model market response behavior over time based on the concept that market processes are related. Given their nature, time-series models are particularly useful for forecasting. Time-series methods include exponential smoothing, autoregressive and moving average

145

THE INTERN ATION AL SEAFOOD TRADE

processes, and state-space modeling.7 The models can include one or more series. Vukina and Anderson (1994a) used state-space models to forecast prices for the Japanese salmon market. The same technique was applied to forecast prices of salmon in the US market (Gu and Anderson 1995). The benefit of forecasting seafood inventories to develop an optimal marketing strategy has been shown using the US salmon market (Vukina and Anderson 1994b). These works form the basis for SeafoodReport.com forecast reports. The focus is on world salmon markets, US seafood imports, and US seafood exports. The quality of the forecasts is variable. For example, in the SeafoodReport.com US Imports Edition, 31 price series (ranging from frozen shrimp to orange roughy) were evaluated for their out-of-sample forecast accuracy for issues published between December 1996 and June 2000. Looking one month ahead, the average directional accuracy (US import prices) was 72.5% (fresh, farmed Atlantic salmon has the highest direction accuracy with 89%). Looking 12 months ahead, the average directional accuracy was 60.3% (the fresh seafood import price index performed with the highest directional accuracy of 76.3%). In terms of mean absolute percent error (MAPE), the average for the 31 price series was 4.7% for one month ahead and 11.3% for 12 months ahead. The lowest MAPE was for fresh, farmed Atlantic salmon which was 2% for one month ahead and 4.6% for 12 months ahead (Martínez-Garmendia 2002). In general, it was determined that aquaculture-based seafood quantities and prices were easier to forecast than those of wild-caught seafood. This result was particularly true in the case of salmon. Salmon is one of the most successful and reliable farmed products. This is a factor of the more predictable patterns that salmon quantities and prices follow. However, this does not hold as well for shrimp. Global shrimp trade is dominated by farmed production, but, as opposed to salmon farming, shrimp farming practices are far less controlled. This results in a reduced capacity to accurately forecast shrimp price and quantities. More recently, Guttormsen (1999) has used more traditional forecasting time-series models to forecast weekly Norwegian salmon prices in conjunction with exponential smoothing and ARIMA models. His conclusions encouraged the use of forecasts in the salmon industry.

7 State-space modeling is a multivariate approach similar to autoregressive, integrated moving average (ARIMA) models. Under certain circumstances the two approaches provide identical estimates. For advanced definitions of ARIMA processes see Greene (2000). 146

147

Seafood Business Seafood International SeafoodReport.com – US Imports & Exports Editions Seafood Trend Urner Barry’s Seafood Price Current

Ken Tally, Editor Urner Barry Publications, Inc.

Bill Atkinson USDA Food and Agriculture Organization (FAO) National Marine Fisheries Service Ministry of Public Management, Japan Ministere de I’Agriculture et de la Peche Diversified Business Communications Heighway JL Anderson Associates, Inc.

Bill Atkinson’s News Report Catfish Report Fishstat/fishery Statistics

Foreign Trade Information Japanese Expenditure Survey Rungis Note Hebdo Maree

Publisher

Publication

Table 7.3 Selected sources of data and market news for market research

Seafood prices and trends (weekly) Catfish production and price (monthly) Catches, landings, and fishery production by country Import and export quantity and values (monthly) Household expenditure data (monthly) Prices and quantities for the Rungis fish market (weekly) Market news journal (monthly) Market news journal (10 times/year) Seafood import/export quantities/prices and forecast (monthly) Market news report (monthly) Seafood prices (biweekly)

Data

US US

US Europe US

US Japan France

Japan/US US Global

Country SEAFOOD MARKET RESEARCH

THE INTERN ATION AL SEAFOOD TRADE

Data The heart of any market research is data. The best statistical methods will not fully compensate for poor-quality data. Market researchers often use primary data they gather from consumers and industry wholesalers. For example, in 1992, Kusakabe measured the responses of Japanese consumers to different salmon characteristics, and in 1998 Zucker and Anderson developed a survey to determine the preferred characteristics of summer flounder among US wholesalers and sushi chefs. In addition, Anderson and Bettencourt (1993) collected primary data to determine preferences in the New England market for fresh and frozen salmon. Brooks and Anderson (1991) used primary data to study retail cod, flounder, and scallop sales in the US. Researchers have also used ex-vessel prices in market research. For example, Carroll, Anderson, and Martínez-Garmendia (2001) looked at bluefin tuna in Japan, and Gillig, Capps, and Griffin (1998) researched the shrimp fishery in the Gulf of Mexico. Researchers usually prefer primary data because they can control quality and collection measures. However, primary data is generally more costly to obtain than secondary data. Consequently, secondary data is often used when time and money are an issue. Researchers can easily obtain secondary data on seafood markets, as several commercial outlets sell this type of data to the public, and government agencies often provide some data for free. For example, Urner Barry’s Seafood Price Current, by Urner Barry Publications, Inc., publishes US price data on a biweekly basis, while Bill Atkinson’s News Report publishes Japanese price and inventory data. The US Department of Commerce (USDC) provides monthly US export and import value and quantity data. In addition, companies such as Information Resources, Inc. (IRI) and AC Nielsen collect panel and scanner data and perform market research for many of the top food companies. Table 7.3 documents some of those sources.

References Anderson J L, ‘Economic Analysis: Shrimp 2005’, Paper Presented at Global Shrimp Outlook 2001, Singapore, 2001. Anderson J L and Bettencourt S U, ‘A conjoint approach to model product preferences: the New England market for fresh and frozen salmon’, Marine Resource Economics, 1993 8:31–49. Asche F, Bremmes H and Wessells C R, ‘Product aggregation, market integration and relationships between prices: an application to world salmon markets’, American Journal of Agricultural Economics, 1999 81:568–81. Bene C, Cadren M and Lantz F, ‘Impact of cultured shrimp industry on wild shrimp 148

SEAFOOD MARKET RESEARCH fisheries: analysis of price determination mechanisms and market dynamics’, Agricultural Economics, 2000 23:55–68. Bjørndal T, Gordon D V and Salvanes K G, ‘Markets for salmon in Spain and Italy’, Marine Policy, 1992 16:338–44. Brooks P M and Anderson J L, ‘Effects of retail pricing, seasonality and advertising on fresh seafood sales’, The Journal of Business and Economic Studies, 1991 1(1) 77–90. Carroll M T, Anderson J L and Martínez-Garmendia J, ‘Pricing US North Atlantic bluefin tuna and implications for management’, Agribusiness:An International Journal, 2001 17:243–54. Fong Q S W, ‘Assessment of Hong Kong shark fin market: implication for fishery management’, Ph.D. Dissertation, University of Rhode Island, Kingston, RI, USA, 1999. Gillig D, Capps O Jr and Griffin W, ‘Shrimp ex-vessel prices landed from the Gulf of Mexico’, Marine Resource Economics, 1998 13(2) 89–102. Gordon D V and Hannesson R, ‘On prices of fresh and frozen cod fish in European and US markets’, Marine Resource Economics, 1996 11:223–38. Gordon D V, Salvanes K G and Atkins F, ‘A fish is a fish is a fish? Testing for market linkages on the Paris fish market’, Marine Resource Economics, 1993 8:331–43. Green P, Tull D and Albaum G, Research for Marketing Decisions, Upper Saddle River, NJ, Prentice Hall, 1988. Greene W, Econometric Analysis (4th edn), Upper Saddle River, NJ, Prentice Hall, 2000. Gu G and Anderson J L, ‘Deseasonalized state-space time series forecasting with application to the US salmon market’, Marine Resource Economics, 1995 10:171–85. Guttormsen A G,‘Forecasting weekly salmon prices: risk management in fish farming’, Aquaculture Economics and Management, 1999 3(2) 159–66. Herrmann M, Mittelhammer R and Lin B H, ‘An international econometric model for wild and pen-reared salmon’, in Aquaculture: Models and Economics, Eds Hatch U and Kinnucan H, Boulder, CO, Westview Press, 1993. Ioannidis C and Matthews K, ‘Determination of fresh cod and haddock margins in the UK, 1988–1992’, Seafish Report 3007, SFIA, Edinburgh, Scotland, 1995. Ioannidis C and Whitmarsh D, ‘Price formation in fisheries’, Marine Policy, 1987:143–45. Johnston R J, Wessells C R, Donath H and Asche F, ‘A contingent choice analysis of ecolabeled seafood: comparing consumer preferences in the United States and Norway’, Journal of Agricultural and Resource Economics, 2001 26(1) 20–39. Keithly W R, Roberts K J and Ward J M, ‘Effects of shrimp aquaculture on the US market: an econometric analysis’, in Aquaculture: Models and Economics, Eds Hatch U and Kinnucan H, Boulder, CO, Westview Press, 1993. Kennedy P, A Guide to Econometrics, Boston, MA, MIT Press, 1998. Kinnucan H and Myrland O, ‘Optimal seasonal allocation of generic advertising expenditures with product substitution: salmon in France’, Marine Resource Economics, 2002 7(2) 103–20. Kusakabe Y, ‘A conjoint analysis of the Japanese salmon market’, Ph.D. Dissertation, University of Rhode Island, Kingston, RI, USA, 1992. Lambregts J, Capps O and Griffin W, ‘Seasonal demand characteristics for U.S. farm-raised catfish’, in Aquaculture: Models and Economics, Eds Hatch U and Kinnucan H, Boulder, CO, Westview Press, 1993. Larkin S and Sylvia G, ‘Firm-level hedonic analysis of us produced surimi: implications 149

THE INTERN ATION AL SEAFOOD TRADE for processors and resource managers’, Marine Resource Economics, 1999 14(3) 1–19. Lombardi W M and Anderson J L, ‘The market potential for farmed freshwater finfish in Germany: a focus on catfish’, Aquaculture Economics and Management, 1999 2(2) 43–8. Martínez-Garmendia J, ‘Improving seafood market information based on advanced forecasting techniques’, Final report for USDA Award No. 00-33610-8871. USDA, CSREES, Washington, DC, USA, 2002. McConnell K E and Strand I E, ‘Hedonic prices for fish: tuna prices in Hawaii’, American Journal of Agricultural Economics, 2000 82:133–44. Millan J A and Aldaz N, ‘An analysis of demand for fresh and frozen fish species in Spain’, Paper presented to IIFET 9th Conference, 1998. Salayo N D, Voon T J P and Selvanathan S, ‘Implicit prices of prawn and shrimp attributes in the Philippine domestic market’, Marine Resource Economics, 1999 14:65–78. Spagnolo M, ‘A model of fish price formation in the North Sea and Mediterranean’, Salerno University, Italy, 1996. Vukina T and Anderson J L, ‘Price forecasting with state-space models of nonstationary time series: case of the Japanese salmon market’, Computers and Mathematics with Applications, 1994a 27(5) 45–62. Vukina T and Anderson J L, ‘An adaptive model of perishable inventory dissipation in a nonstationary price environment’, Agricultural and Resource Economics Review, 1994b 23(1) 1–10. Wessells C R and Anderson J L, ‘Innovations and progress in seafood demand and market analysis’, Marine Resource Economics, 1992 17:209–28. Wessells C R and Wilen J E, ‘Seasonal patterns and regional preferences in Japanese household demand for seafood’, Canadian Journal of Agricultural Economics, 1994 42:87–103. Zucker D A and Anderson J L, ‘Implications of choice behavior and preferences in niche markets’, Aquaculture Economics and Management, 1998 2(2) 61–70.

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CHAPTER

8 Aquaculture, fisheries, and evolution of the market James L. Anderson

Introduction ne of the most significant trends influencing the marketing and international trade of fisheries products is the growth of aquaculture. This chapter explores some of the issues and changes that may be forthcoming as the role of aquaculture and rights-based fisheries management increases. As seen in Chapter 2, Table 2.1, aquaculture’s share of world fisheries supply has increased steadily since the 1980s. Species such as salmon, shrimp, tilapia, and catfish have all experienced great growth in aquaculture supply. More than half of the world’s salmon is supplied from the harvest of ocean, pen-raised salmon. The salmon industry is unlikely to ever again see the traditional fishery as the dominant supplier. Farmed catfish production in the US has grown steadily for three decades, making Mississippi one of the largest fish-producing states (Fig. 8.1). The growth of aquaculture is also evidenced in changes in US consumption trends. As shown in Table 8.1, although per capita consumption has remained essentially unchanged, salmon, catfish, shrimp, and crab have experienced considerable increases in consumption since 1990. For salmon, shrimp, and catfish, the growth is explained almost entirely by aquaculture. The current growth in crab harvest is realized by utilizing catch from the

O

151

THE INTERN ATION AL SEAFOOD TRADE 300 000 250 000

MT

200 000 150 000 100 000 50 000

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

0

8.1

US farmed catfish production (source: USDA, NASS, various years).

Table 8.1 Top ten seafoods consumed in the US (edible kg per capita) 2001 and percent change 1990–2001

Seafood

Kg per capita

Percent change 1990–2001

Shrimp Tuna Salmon Pollock Catfish Cod Clams Crabs Flatfish Tilapia Other TOTAL

1.54 1.32 0.92 0.55 0.52 0.25 0.21 0.20 0.18 0.16 0.86 6.71

+55 -22 +177 -5 +64 -59 -29 +52 -32 N/A -41 -1

Source: NFI (1991, 2002)

waters in Thailand, Indonesia, and Venezuela, which were sparsely used previously, and from increased imports from Canada, Russia, and China. Note that the species based on traditional fisheries, such as cod, Alaska pollock, flatfish, clams, and scallops, have experienced decreased consumption. Although there is considerable growth in aquaculture of low-valued species such as carp in places like China, much of the growth in aquaculture is in high-valued species, which are destined for international trade. This 152

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET

is particularly true of shrimp and salmon. Anderson and Fong (1997) estimated that over three-quarters of the salmon and two-thirds of the shrimp entering international trade are from aquaculture. So, what explains this growth? Will it continue? How are regulators influencing aquaculture? What advantage does aquaculture have over traditional fisheries? What advantage does the traditional fishery have over aquaculture?

Production costs First, consider the cost structure and trends for fishery products.

Aquaculture Estimated production costs (round weight) for Atlantic salmon grown in Norway (farm cost US$ 2.43/kg) and Chile (farm cost US$ 1.91/kg), the dominant producers, are shown in Table 8.2. Clearly, feed is the most significant component of production at 52% (±4%) of costs in Norway and 48% (±4%) in Chile. This is followed by the cost of smolts, 15% (±3%) in Norway and 12% (±3%) in Chile; and labor, which is 9% (±3%) in Norway and 4% (±2%) in Chile. When processing costs are added, the estimated cost for fresh, headon, dressed Atlantic salmon is US$ 2.98/kg in Norway and US$ 2.71/kg in Chile. What is more remarkable is how costs for farm-raised Atlantic salmon declined in the 1990s, as shown in Table 8.3 and Fig. 8.2. For example, in Norway, direct production costs (in real terms, base year 1997) declined by 68%, from 47.43 NOK/kg (US$ 5.52/kg) in 1985, to an estimated 15.39 NOK/kg (US$ 1.97/kg) in 1999. Many factors explain this decline, including: (1) better feed and feed management; (2) economies of scale; (3) reduced smolt costs; (4) improved genetic stock; and (5) reduced mortality and incidence of disease through use of vaccines and better veterinary practices. These cost-reducing factors are being used around the world in the farmed salmon industry, explaining much of the price decline. For more detail on the evolution of the salmon industry, see Anderson (1997). The estimated costs for US channel catfish are presented in Table 8.4. Compared to salmon, costs are noticeably lower and more stable, in the range US$ 1.15–1.60/kg live weight (the lowest cost producers are in Mississippi), but the distribution of cost factors is similar (Engle and Killian 1997). Feed cost comprises 45% (±5%) of total production cost, followed by labor nine per cent (± three per cent), and the cost of fingerlings seven per 153

Table 8.2

Cost of farmed Atlantic salmon production Chilean

Item Feed Smolts Pigments Vitamins Medication and fish health Labor Insurance Maintenance Finance/interest charges Others Total direct production cost Operation/overhead Depreciation Transportation of harvest to plant Farm cost (round weight) Head-on yield 91% Processing Packaging Processed cost (whole, dressed, head-on)

Norwegian

$/kg

Cost share

$/kg

Cost share

0.909 0.237 0.272 0.008 0.021 0.083 0.030 0.048 0.065 0.025 1.698 0.120 0.093 0.074 1.985 2.183 0.330 0.200

45.8% 11.9% 13.7% 0.4% 1.1% 4.2% 1.5% 2.4% 5.3% 1.3% 85.5% 6.0% 4.7% 3.7% 100.0%

1.263 0.373

51.9% 15.3%

0.224 0.032

9.2% 1.3%

0.103 0.355 2.350

4.2% 14.6% 96.6%

0.082 0.025 2.432 2.673

3.4% 1.0% 100.0%

2.713

0.309 2.982

Source: Bjørndal and Aarland (1998)

60 50

NOK/kg

40 30 20 10

86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99

19

19

85

0

Smolt

Feed

Operating cost

8.2 Norwegian salmon operating costs (1997 NOK/kg) (source: Norwegian Directorate of Fisheries 2000). 154

155

$7.36

$5.52

$6.90

46.46

5.78 12.44% 1.87 4.02% 6.42 13.82%

12.28 26.43% 13.87 29.85% 6.24 13.43%

1987

1988

$5.84

38.07

4.20 11.03% 1.28 3.36% 4.69 12.32%

9.72 25.53% 13.89 36.49% 4.29 11.27%

Source: Norwegian Directorate of Fisheries (2000)

54.45

6.58 12.08% 2.42 4.44% 7.27 13.35%

13.90 25.53% 16.80 30.85% 7.48 13.74%

1986

47.43

4.32 9.11% 1.77 3.73% 5.52 11.64%

12.38 26.10% 17.10 36.05% 6.34 13.37%

1985

$5.29

36.54

4.22 11.55% 1.30 3.56% 5.27 14.42%

6.44 17.62% 15.45 42.28% 3.86 10.56%

1989

$5.43

33.96

3.85 11.34% 1.31 3.86% 3.87 11.40%

5.90 17.37% 15.16 44.64% 3.87 11.40%

1990

$4.92

31.87

3.72 11.67% 1.06 3.33% 4.78 15.00%

5.41 16.98% 13.31 41.76% 3.59 11.26%

1991

$4.89

30.36

2.42 7.97% 0.90 2.96% 5.02 16.53%

5.30 17.46% 13.20 43.48% 3.52 11.59%

1992

$3.53

25.10

2.01 8.01% 0.67 2.67% 3.78 15.06%

4.66 18.57% 11.22 44.70% 2.76 11.00%

1993

$3.04

21.44

1.27 5.92% 0.52 2.43% 2.71 12.64%

4.07 18.98% 10.50 48.97% 2.37 11.05%

1994

$3.07

19.47

1.01 5.19% 0.42 2.16% 2.65 13.61%

3.91 20.08% 9.55 49.05% 1.93 9.91%

1995

Costs in Norwegian salmon farming 1985–99 per kg salmon produced (values in NOK and US$)

Operating cost (NOK/kg) Operating cost (US$/kg)

Other costs

Insurance

Net capital cost

Wages

Feed

Smolt

Type of Cost

Table 8.3

$2.73

17.65

0.90 5.10% 0.36 2.04% 2.79 15.81%

3.08 17.45% 8.82 49.97% 1.70 9.63%

1996

$2.35

16.63

0.73 4.39% 0.23 1.38% 2.51 15.09%

2.64 15.87% 8.94 53.76% 1.58 9.50%

1997

$2.23

16.80

0.75 4.46% 0.24 1.43% 2.55 15.18%

2.18 12.98% 9.50 56.55% 1.57 9.35%

1998

$1.97

15.39

0.77 5.00% 0.26 1.69% 2.50 16.24%

2.33 15.14% 8.11 52.70% 1.42 9.23%

1999

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET

THE INTERN ATION AL SEAFOOD TRADE Table 8.4

Costs of catfish production

Type of cost

$/kg (live weight) % of farm cost

Variable costs Repairs and maintenance Fuel (electricity, diesel, gas, oil) Chemicals Telephone Water quality Fingerlings Feed Labor Management Harvesting and hauling Accounting/legal Bird scaring ammunition Interest on operating cost Total operating costs Fixed costs Depreciation Ponds Water supply Office building Feed storage Equipment Interest on investment Land Pond construction Water supply Equipment Taxes and insurance Total ownership costs Farm cost (round weight)

0.046 0.059 0.002 0.002 0.002 0.106 0.678 0.141 0.046 0.066 0.003 0.003 0.095 1.248

3.0 3.9 0.1 0.2 0.1 6.9 44.5 9.3 3.0 4.3 0.2 0.2 6.2 82.0

0.040 0.015 0.002 0.001 0.092

2.6 1.0 0.1 0.1 6.0

0.055 0.022 0.009 0.034 0.005 0.275 1.523 Range in US ($1.15–$1.60) Yield: Live to head-off: 60% 2.538 Processing/packaging 0.800 Processed cost (whole, dressed, head-off) 3.338 Range in US ($3.15–$3.70)

3.6 1.5 0.6 2.2 0.3 18.0 100.0

Source: Engle & Killian (1997)

cent (± two percent). In recent years, the cost of catfish has not dropped noticeably, but production and demand continues to grow (Fig. 8.1). Finally, consider tilapia. This relative newcomer in the market outside of Asia has become a minor, but noticeable, factor in the US market. Tilapia is generally raised in warm regions around the world, primarily in Asia, but the industry is growing rapidly in places such as Costa Rica and Ecuador, as indicated by exports to the US (Fig. 8.3). 156

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET 60 000

50 000

MT

40 000

30 000

20 000

10 000

0 1992

1993

Tilapia fresh fillets

8.3

1994

1995

1996

1997

Tilapia frozen fillets

1998

1999

2000

Frozen tilapia (ex. fillets)

2001 Total

US imports of tilapia (source: USDC 2002).

Cost estimates for this species are more uncertain. Estimates for Honduras suggest that costs are about US$ 1.70/kg live weight (Table 8.5) (Green and Engle 1999). However, industry sources indicate costs in Central and South America are generally lower, ranging between US$ 1.20 and 1.80/kg. The estimates show that the dominant cost for producers in warmer climates is feed (65% in the systems in Honduras), as is the case with catfish and salmon. However, in intensive recirculating systems, feed costs are only 21–34%, owing to the high cost of system inputs, such as oxygen, electricity, depreciation, and interest (Timmons 2000; O’Rourke 1999). It should also be noted that no sizable intensive recirculating systems for finfish as food have proven successful over the long term in the US. Experience with recirculating systems for trout, salmon, hybrid striped bass, shrimp, and summer flounder is replete with failure. Recent cost estimates for recirculating system summer flounder aquaculture indicate breakeven prices in the range of US$ 14.00/kg for live fish (Zucker and Anderson 1999). Tilapia growers and others raising alternative species will benefit from cost reduction owing to improved technology, feeds, economies of scale, genetics, and better management, just as the salmon and catfish industries did in the 1980s and 1990s. Therefore, costs will probably decline. 157

THE INTERN ATION AL SEAFOOD TRADE Table 8.5

Costs of tilapia production in Honduras US$/kg (live weight)

Variable cost Fingerlings Feed Labor Other variable costs Total variable costs Fixed costs (15% of total costs) Total costs Range in South & Central America Range in US

0.02 1.10 0.11 0.22 1.45 0.25 1.70 ($1.20–$1.80) ($1.60–$5.00)

% of total cost 1.4 64.6 6.2 12.7 85.0 15.0 100.0

Source: Green & Engle (1999)

Poultry The poultry industry is often considered a model of how the aquaculture industry is likely to evolve. In fact, in many ways, the catfish and salmon industries are mirroring several aspects of poultry’s development. As a somewhat analogous industry and competitor in the market, it is interesting to see that the distribution of costs is quite similar (Table 8.6). Poultry feed accounts for about 58% of production cost; chicks, 15%; and labor, 2.2% (US$). Although the distribution of the cost factors is similar, costs per pound are substantially less (total farm cost US$ 0.54/kg) than salmon, catfish, or tilapia, as most of the production cost gains from technological changes, improved management, economies of scale, and vertical integration have already been attained in the poultry industry. Therefore, costs will fluctuate primarily with the cost of feed.

Ocean-based fisheries Turning now to the ocean-based fisheries, consider the representative cost shares (Table 8.7). Although the figures are for different areas and different fisheries, and are not necessarily directly comparable to each other or to aquaculture costs, some important conclusions can be drawn. First, as summarized in Table 8.8, the cost factors are substantially different from those of aquaculture. In the typical fishery, labor costs range between 25 and 45% of harvest cost, while for aquaculture the range is 4–10%. The lower cost shares for labor are associated with large factory-trawlers, and the higher values with traditional groundfish trawlers. Other important input cost factors are fuel (4–11%) and maintenance/repair (9–23%). In contrast, the 158

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET Table 8.6

Costs of broiler production

Item Chicks Feed Labor Energy Vet./med. Insurance House & equip. Other (incl. catch & haul) Total farm cost (live CIF processor) Yield live to whole (76%) Processing, equip., labor, shipping RTC whole CIF 12-city wholesale mkt. Interest, overhead, profit RTC whole CIF 12-city wholesale mkt. Markup, distrib., retail package, profit etc. Retail price (whole) Yield whole to boneless/skinless (61%) Markup, distrib., retail package, profit, etc. Retail price (boneless breast)

$/kg

Cost share (%)

0.082 0.313 0.012 0.007 0.011 0.004 0.070 0.041 0.54 0.71 0.310 1.021 0.247 1.268 1.020 2.288 2.079 1.661 3.740

15.2 57.9 2.2 1.2 2.0 0.8 13.0 7.5 100.0

Source: Leland et al. (1999); Madison, USDA (1999)

Table 8.7

Fishery cost shares

Fuel/lubricants Repair/maintenance Packaging Transportation Storage Insurance Interest Depreciation Labor Other

Bering Sea, Alaska Large factorytrawler Fillet, H&G, mince

Bering Sea, Alaska Large factorytrawler Surimi, fillet, H&G, mince

North Pacific, Japanese Large factorytrawler Surimi, fillet, H&G, mince

Newport, Oregon Trawler Whiting

6.8% 8.9% 4.0% 9.0% 3.0% 2.5% 5.0% 4.0% 38.3% 18.5%

8.2% 11.2% 3.1% 6.2% 1.8% 4.3% 9.6% 8.8% 26.6% 20.2%

9.9% 11.7%

10.4% 23.4%

Source: Ministry of Agriculture, Forestry and Fisheries (1997); Sylvia (1999)

159

0.8%

6.2% 28.7% 43.5%

7.9% 2.3% 0.0% 43.9% 11.3%

THE INTERN ATION AL SEAFOOD TRADE Table 8.8

Cost share: aquaculture vs. fishery

Item Labor Maintenance Fuel Fingerlings Feed

Aquaculture

Fishery

4–10% 2–4% 1–4% 2–15% 40–60%

25–45% 9–23% 4–11% – –

Source: Anderson (1999)

dominant factors in aquaculture are feed (40–60%) and input animals, such as fingerlings (2–15%). Fuel (1–4%) and maintenance/repair (2–4%) comprise notably lower shares. Although farmed fish products may be viewed by consumers as the same as wild fish, the cost structure is radically different. This has substantial implications for the relative competitiveness of the products from the two sectors. The fishery costs are sensitive to stock of fish, crew share changes, insurance rates, the price of diesel, the cost of meeting regulatory requirements, and the cost of maintenance/repairs. In contrast, in the aquaculture sector, technological change, better farm management, biotechnology, and improved feed at lower cost have a strong impact on its economic viability. In addition, the relative security of property rights in aquaculture creates an incentive for innovation and investment in cost-reducing technology and management practices. So, in general, we can expect continued declines in the costs associated with aquaculture.

Market factors influencing competitiveness Although harvesting costs of many fish species, such as Alaskan pollock, or salmon in Alaska, are well below the costs of farmed fish, the costs of many other species, such as halibut, haddock, and Atlantic cod are well within the range of farmed fish, such as farmed catfish and farmed salmon. It is particularly important to note that when buyers view products as identical, or near-identical, cost is the defining issue. However, if the products are not viewed the same by the buyer, the cost of producing the protein is not all that matters. Marketing and market management matter. Consider Alaskan salmon. In 2000, the ex-vessel price for Alaskan pink salmon was about US$ 0.31/kg, and Alaskan chum had an ex-vessel price of US$ 0.59/kg. Yet, farmed Atlantic salmon, at a much higher cost and corresponding ex-farm price, 160

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET

generally outcompetes these products in supply consistency, uniformity, better quality, and handling.These products are much more than just protein. They embody service, quality, packaging, and reputation, as well as other attributes. What really gives aquaculture an edge is the ability to manage production and the market. In contrast, the traditional fishery focuses on today’s uncertain catch, and when not fishing, a morass of political issues linked to the fisheries management processes. Aquaculturists must plan ahead, anticipate harvest, target markets, and improve efficiency. This is not to say that aquaculture is not limited by regulation. Aquaculture faces many regulations, but there is generally more autonomy to anticipate and manage production and to make marketing decisions. The aquaculturist’s relatively greater ability to manage the market and plan is derived from the capability to reduce uncertainty. To illustrate, consider Tables 8.9 and 8.10, which provide an indication of the relative uncertainty faced by aquaculturists in growing: (1) pond-raised catfish; (2) pen-raised salmon; and (3) semi-intensive pond-raised shrimp, compared to the traditional wild fishery.

Table 8.9

Risk and uncertainty: environment and growth processes Aquaculture

Storms Disease Seasonality Growth Predators

Table 8.10

Catfish

Salmon

Shrimp

Capture fisheries

Very low Very low Moderate Very low Low

Moderate Moderate Moderate Low Low

Moderate High Low High Moderate

High Moderate High High High

Risk and uncertainty: government policy and regulation Aquaculture

Location regs Operation regs Property rights Trade barriers Endangered species regs

Catfish

Salmon

Shrimp

Capture fisheries

Very low Low Very low Low Moderate

High Moderate Moderate Moderate Moderate

Moderate Low Moderate Low Moderate

High High High Low Moderate

161

THE INTERN ATION AL SEAFOOD TRADE

Through the adoption of technology and farm management practices, we see that, in general, pond-raised catfish faces much less uncertainty regarding environmental issues and stock growth processes than semiintensive shrimp or harvest from a wild fishery (Table 8.9). This also holds for regulatory uncertainty (Table 8.10). When these uncertainties are reduced, there is a greater orientation toward production and market planning, resulting in increased efficiency. As has been shown, this planning has led to consistent cost declines for salmon and catfish and increased market share. We can also see the results of reduced uncertainty by observing supply volatility. Compare farmed salmon supplies to the US versus US coho exports based on a wild fishery (Fig. 8.4). There is clearly a relatively stable trend for the farmed salmon, in contrast to a highly uncertain cycle for the wild coho salmon fishery. Thus, it is obvious that it is much easier to develop a marketing plan for farmed salmon than wild coho. Even more uncertainty is observed with imports of Alaska pollock fillets (skinned). The hypothesis that aquaculture costs will tend to decline and uncertainty will be reduced is also manifest in prices paid at the wholesale level. Figure 8.5 illustrates the price trends for selected farmed and wild fish products. Several observations stand out. Most remarkable is that in 1990, 8–12 oz frozen cod fillets sold for about one-half the price of whole, fresh salmon. In recent years, they have sold for about ten percent more than

10 000 9 000 8 000 7 000

MT

6 000 5 000 4 000 3 000 2 000 1 000 0 1/1/91

1/1/92

1/1/93 1/1/94

1/1/95

1/1/96

1/1/97 1/1/98

1/1/99

1/1/00

Farmed Atlantic salmon imp. Fresh coho salmon exp. AK pollock fillets (skinned) imp.

8.4 Supply volatility (MT) (source: USDC, various years; SeafoodReport.com, various years). 162

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET 7.00

Salmon, 2–3lb, fillet, fresh

US$/lb (1987 base year)

6.00

5.00 Salmon, 8–10lb, whole, fresh 4.00 Catfish, fillet, frozen 3.00 Cod, 8–12oz, fillet, frozen

2.00

Pollock block, single, frozen 1.00 Catfish, producer 0.00 1990

8.5

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Real price trends (base year 1987).

fresh, whole salmon.They also sell for more than frozen catfish fillets. Exploring these figures further, a price index for selected products was created (base year 1990) (Fig. 8.6). Note the relatively greater decline in farmed product prices and lower volatility compared to the wild counterpart. It is conceivable that farmed fish, like catfish, will eventually move toward this level of stability.

The difference between aquaculture and traditional fisheries Throughout this chapter, traditional fisheries and aquaculture have been compared as two clearly distinct production systems. Of course, a closed system, land-based salmon farm is distinct from an open-access, gillnet salmon fishery; however, in reality, there is a continuum. As Fig. 8.7 illustrates, the continuum ranges from open-access fisheries; to regulated open access; to fisheries with enhancement (salmon, oysters, clams); to fisheries with marine reserves; to fisheries providing limited husbandry (protection and feed), such as lobster; to individual transferable quota fisheries; to aquaculture that is dependent on fisheries (such as wild, seeded mussel or oyster 163

THE INTERN ATION AL SEAFOOD TRADE 2.00 1.80

Index (base = 1990)

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1990

1991

1992

1993

1994

Salmon 2–3lb, fillet

Aquaculture, ranching, fishing (ARF) index

8.6

1995 1996 Year

1997

Catfish fillet, fz

1998

1999

2000

Pollock block, single freeze

Real price index (base year 1990).

5.0 4.5 Aquaculture 4.0 3.5 3.0

CATFISH: POND, MISSISSIPPI, US TROUT: RACEWAY, US HYBRID STRIPED BASS: CLOSED SYSTEM SALMON: CAGE SYSTEM, NORWAY SALMON: CAGE SYSTEM, CHILE SALMON: CAGE SYSTEM-MAINE, US SCALLOP: HANGING NET AQUACULTURE, JAPAN

SPORT TROUT: PUBLIC SHRIMP: SEMI INTENSIVE, ECUADOR HATCHERY BASED, US SCALLOP: SOWING CULTURE W/DREDGE HARVEST, JAPAN

Ranching

CLAM FARM: SC, US CHUM SALMON: HATCHERY-BASED, JAPAN

2.5

SHRIMP: EXTENSIVE, ECUADOR

SALMON: COOP HATCHERY-BASED, ALASKA, US

LOBSTER, NEW ENGLAND

2.0

COASTAL ARTISANAL FISHERY, GUYANA

OYSTER AQUA: CONNECTICUT, US HALIBUT, US INDIVID. QUOTA

1.5 Fishing

RED SNAPPER: QUOTA MGT, GULF OF MEXICO, US SALMON: SOCKEYE, ALASKA, US CLAM FISHERY, RI, US (1990s) BLUEFIN TUNA, US NW ATLANTIC

Weak 1.0 1.0 1.5

8.7

2.0

SCALLOP FISHERY, US NW ATLANTIC

2.5 3.0 3.5 Property rights (PR) index

Strong 4.0

4.5

5.0

Farming, fishing, and property rights (source: Anderson 2002).

farms, or shrimp farming based on wild post-larvae and wild brood stock); to pen-raised salmon; to pond-raised catfish; to closed-system, land-based hybrid striped bass farms. The essential difference is not technology or the species being harvested. What really is different is the degree of control through the presence of property rights or ownership. With open access (no well-defined property rights), the traditional fishery deals with all the problems of overcapitalization, overfishing, and poor marketing. As ownership 164

AQUACULTURE, FISHERIES , AND EVOLUTION OF THE MARKET

rights develop, either through regulation, quota systems, community action, or new technology developed to exclude competitors, the nature of the fishery changes. Harvest methods and harvest levels begin to change reflecting market conditions, handling tends to improve, and fishermen start to become stewards of the resource. As rights become better defined by providing more exclusivity, transferability, durability, and security, the more fisheries managers become like ranchers or, ultimately, farmers. Farming (agriculture and aquaculture) would never develop without some degree of property rights. In order to manage production and marketing, plan for the future, develop new technology and feeding systems, and generate stocks, farmers need to have exclusive ownership rights of the animals, have secure rights, be able to sell or buy products (fish) and assets (fish farms), and have rights that are durable over time. One might argue that the recent global tendency toward rights-based fisheries management is simply a trend toward placing greater responsibility in the hands of stakeholders, who will then manage the resource to maximize returns (not too unlike ranchers or shepherds), so they can compete for market share with the growing fish farming industry. Without the competitive threat from aquaculture, much of the improvement seen in fisheries production and market management, such as indicated by Alaskan salmon, would probably not have occurred.

Conclusion The trend toward increasing aquaculture and rights-based fishing is changing the way fish is sold. It is expected that these systems will reduce waste and production uncertainty and improve marketing. This will result in a tendency toward increasing market share controlled by the aquaculture and rights-based fisheries. This will make the overall seafood sector more responsive to international trade and market conditions, resulting in less waste, better utilization, improved product forms, tighter quality control, and increased efficiency.

References Anderson J L, ‘The growth of salmon aquaculture and the emerging new world order of the salmon industry’, Global Trends: Fisheries Management, Eds. Pikitch E K, Huppert D and Sissenwine M P, Bethesda, MD, American Fisheries Society, 1997. 165

THE INTERN ATION AL SEAFOOD TRADE Anderson J L, ‘Fish in a competitive environment’, in Proceedings: Groundfish Forum, Ed. Moller, A, London, UK, 1999. Anderson J L, ‘Aquaculture and the future: why fisheries economists should care’, Marine Resource Economics, 2002 17(2):133–51. Anderson J L and Fong Q S W, ‘Aquaculture and international trade’, Aquaculture Economics and Management, 1997 1:29–44. Bjørndal T and Aarland K, Salmon Aquaculture in Chile. Foundation for Research in Economics and Business Administration, Working Paper No. 47/1998, Bergen, Norway, 1998. Engle C R and Killian H S, Costs of Producing Catfish on Commercial Farms in Levee Ponds in Arkansas, Cooperative Extension Program, University of Arkansas at Pine Bluff, USA, 1997. Green B W and Engle C R, ‘Commercial tilapia aquaculture in Honduras’, in Tilapia Aquaculture in the Americas Vol. 2, Eds. Rakocy J and Costa-Pierce B A, World Baton Rouge, LA, Aquaculture Society, 1999. Leland S, Madison M, Harvey D, Gustafson R, Leuck D, Haley M, Miller J, and Williams L, Livestock, Dairy and Poultry Situation and Outlook, USDA, Economic Research Service LDP-M-63, 1999. Madison M, USDA, Economic Research Service, Personal communication, October 1999. Ministry of Agriculture, Forestry and Fisheries, The 72nd Statistical Yearbook, Tokyo, Japan, Statistics and Information Department, 1997. National Fisheries Institute, www.nfi.org, Arlington, VA, 1991, 2002. Norwegian Directorate of Fisheries, Salmon aquaculture cost data, provided by Frank Asche, 1999, 2000. O’Rourke P D, ‘The economics of recirculating aquaculture systems’, Department of Agriculture, Illinois State University, Unpublished manuscript, 1999. SeafoodReport.com, Salmon Edition, Narragansett, RI, www.seafoodreport.com, 2000. SeafoodReport.com, U.S.Imports Edition, Narragansett, RI, www.seafoodreport.com, 2002. Sylvia G, Hatfield Marine Science Center, Oregon State University, Newport, OR, Personal communication, September 1999. Timmons M B, Proceedings from the Third International Conference on Recirculating Aquaculture, Roanoke, VA, July 1999. Agricultural and Biological Engineering, Cornell University, Ithaca, NY, 2000. United States Department of Agriculture (USDA), National Agricultural Statistics Service (NASS), Catfish Production, http://usda.mannlib.cornell.edu/reports/ nassr/other/pcf-bbc/1999/cfpd0799.txt, 1999. United States Department of Commerce (USDC), US Census Bureau, U.S. Imports and Exports of Merchandise (CD-ROM), Washington, DC, various years. Zucker D A and Anderson J L, ‘A dynamic, stochastic model of a land-based summer flounder aquaculture firm’, Journal of the World Aquaculture Society, 1999 30(2):219–35.

166

CHAPTER

9 Institutions and measures of importance to international trade in seafood Jonathan R. King and James L. Anderson

Introduction his chapter provides an overview of the functioning of some of the international institutions and agreements that are relevant to international seafood trade. They include: the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), the Convention on International Trade of Endangered Species (CITES), and the US Pelly Amendment.

T

The General Agreement on Tariffs and Trade and the World Trade Organization In 1947, approximately 20 nations took a significant step towards an international economic community with the creation of the Bretton Woods Agreement. This agreement called for the development of three international 167

THE INTERN ATION AL SEAFOOD TRADE

organizations: the International Trade Organization (ITO), the International Monetary Fund (IMF), and the World Bank. Of these three institutions, only the IMF and World Bank became a reality. The US Congress opposed the creation of the ITO, fearing that the organization’s broad mandate covering trade, business practices, and employment would threaten national sovereignty (IISD 2002). Even though the US opposed the creation of the ITO, one of the key components, the General Agreement on Tariffs and Trade (GATT) survived. GATT’s primary goal is to reduce or eliminate tariff and non-tariff barriers to trade and eliminate trade discrimination (GATT 1947). While the signatory nations never ratified the Havana Charter, they agreed to uphold the provisions of GATT (WTO 2002a). GATT was the first truly international trade agreement, but not the last. Some 48 years after many nations, including the US, refused to support an ITO for fear of losing national sovereignty, the Marrakech Agreement established the World Trade Organization (WTO) in January 1995 (Krueger 1998). The goal of the WTO is to reduce tariff and non-tariff barriers to trade. The WTO did not replace GATT, instead it implemented all GATT articles, applying a free trade approach and having greater enforcement powers than GATT. The WTO differs from GATT in that it is a binding treaty. The 26 000page treaty arose from years of negotiations of GATT’s eighth round, which occurred between 1986 and 1994. The WTO corrects some of GATT’s limitations, such as its ineffective dispute mechanism and lack of institutional provisions (Krueger 1998). Today, the WTO is composed of 144 parties, comprising 90% of all world trade (Krueger 1998; WTO 2002a).

WTO’s structure The WTO’s multi-tiered structure is comprised of several bodies and committees with varying degrees of influence.

The Ministerial Conference The Ministerial Conference is the major branch of the WTO. It is responsible for defining organization objectives and finalizing all decisions. This branch meets at least every two years, but is not the sole decision-making body of the organization. In fact, the conference makes final decisions based on consensus. Sometimes this method makes decision-making difficult, given the large number of WTO members. This same element, however, ensures that each decision represents the desires of most parties to the WTO (IISD/UNEP 2000). 168

INSTITUTIONS IN INTERN ATION AL TRADE IN SEAFOOD

The General Council The General Council is the main governing body of the WTO. The council is comprised of ambassador-level representatives from each member party and handles the day-to-day functions of the organization. All other branches of the organization, such as the Council for Trade in Goods, the Council for Trade-related Aspects of Intellectual Property Rights, and the Council for Trade in Services, report to the General Council, not the Ministerial Conference. The General Council has two sub-branches – the Dispute Settlement Body and the Trade Policy Review Body (WTO 2002a).

The Secretariat (and Director General) The Secretariat and the elected chairperson, the Director General, are solely responsible for all administrative duties related to the organization. Other responsibilities of the Secretariat include: • • •

providing technical support to developing countries; educating the public and media about the WTO; providing legal assistance in dispute settlements and counseling prospective WTO member nations (WTO 2002a).

The Secretariat has no authority to interpret GATT rules or chair WTO committees, and its Director General has no ability to initiate a dispute settlement (Krueger 1998).

The Committee on Trade and Environment The lower echelons of the WTO are comprised of various committees, subcommittees, and parties designed for more specific tasks. The committee most relevant to this discussion is the Committee on Trade and Environment (CTE). The WTO creators, anticipating a fair degree of conflict between trade objectives and environmental conservation objectives, formed the CTE. The original responsibilities of the CTE were defined in the Marrakech Agreement. They are: • •

identifying the relationship between trade measures and environmental measures in order to promote sustainable development; recommending modification of the provisions of the multilateral trading system as required, compatible with the open, equitable, and nondiscriminatory nature of the system (WTO 2002b).

These broad responsibilities were narrowed to the following agenda items (IISD/UNEP 2000): 169

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1 The relationship between trade rules and measures used for environmental purposes. 2 The relationship between trade rules and environmental policies with a specific trade impact. 3 The relationship between (a) trade rules and environmental charges/taxes and (b) trade rules and other environmental requirements. 4 The transparency of trade measures used for environmental purposes and of environmental policies with a trade impact. 5 The relationship between dispute settlement of the WTO and Multilateral Environmental Agreements (MEAs). 6 The potential for environmental measures to hinder market access for developing countries. 7 The export of domestically prohibited goods. 8 The relationship between the environment and the Agreement on Trade – Council for Trade-related Aspects of Intellectual Property Rights (TRIPS). 9 The relationship between the environment and trade in services. WTO trade ministers and environmental NGOs agree that the WTO should not be used as a tool for environmental conservation. In fact, the WTO stresses the CTE is ‘not an environmental protection agency . . . nor is there any intention for it to become one’ (WTO 2002b). As a result, the CTE has been virtually absent from past trade-environment issues. However, this absence may not persist if the WTO continues its trend toward greater interaction with the environmental movement and environmental policies using trade measures. Dispute settlement understanding A major limitation of GATT and a concern of the WTO is the lack of an effective dispute resolution procedure in cases where one or more parties accuse a party of not upholding the dictates of the GATT articles. GATT dispute resolution was ineffective, in large part, because one nation was able to block the decision of the dispute settlement body. The architects of the WTO were aware of this shortcoming in the GATT dispute mechanism and resolved it by creating the WTO Dispute Settlement Understanding (DSU) (Berger 1999). The DSU imposes stricter time limits on the implementation and finalization of panel decisions. If a nation feels that a panel decision is unjustified, it can appeal to the Appellate Body, which can accept, modify, or refute the panel’s decision. As with the GATT dispute system, the DSU requires certain steps in the dispute settlement process. These steps are: 170

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• •

•

A consultation between the two disputing nations is the first step of any dispute settlement. If the consultation fails to resolve the dispute within 60 days, either nation can request the formation of a Dispute Settlement Panel.The threemember panel creates a report detailing its final decision. The report is then provided to all members within nine months of the panel’s formation (Krueger 1998).

Unlike GATT, all appeals are accepted and heard by a three-member Appellate Body. The Appellate Panel is given between 60 and 90 days to respond to the DSU’s decision. It is important to note that the DSU cannot force any nation to change its national law, even when the law contradicts the WTO agreement. The DSU does not need a consensus to adopt a settlement report. Instead, the DSU uses a ‘reverse consensus’, in which all reports are adopted unless a contrary consensus exists (IISD/UNEP 2000). If a member is found in violation and is intent on not changing its practices, the disputing countries enter into negotiation for compensation. If this fails, the prevailing party may be permitted to impose trade sanctions (IISD/UNEP 2000). Unlike any other international economic organizations, the WTO does not divide its members into smaller decision-making bodies with only a few representative individuals. Instead, representatives for all WTO members meet in the Ministerial Conference and General Council, and all committees and subcommittees are open to every member nation. This structure ensures that decisions made by the WTO represent the desires of all member nations. When a consensus cannot be reached, voting is allowed. Unlike other economic treaties that weight each member’s vote by their monetary contribution to the organization, the WTO does not weight votes based on funding contributions (Krueger 1998). Instead, it has a ‘one country, one vote’ policy that provides each member nation equal representation, no matter what its size or contribution (WTO 2002a). Although the WTO requires each member to contribute funding in proportion to its level of trade, it does not give more power to those countries contributing greater funding.

WTO provisions (or GATT articles) The requirement that the WTO follow the previously established GATT Articles is found in Article XVI: 1 of the WTO. This article states that the WTO should be guided by the articles and 47 years of precedence established by GATT (Krueger 1998). In turn, GATT provides the core of the WTO. The GATT preamble indicates the thrust of the WTO’s objectives. It states that GATT signatories agree to enter: 171

THE INTERN ATION AL SEAFOOD TRADE into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce . . . with the view of raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of these goods (GATT 1994).

Article I The GATT Articles that are key to the environment and trade are Articles I, III, VI, XI, XX(b), and XX(g). Article I, ‘the most-favored nation rule’, requires that no contracting party play favorites. For example, if a contracting nation bestows any ‘advantage, favor, privilege, or immunity’ to one nation’s product, it must provide the same treatment to ‘like’ products of all contracting nations (GATT 1947). This rule attempts to eliminate existing tariff differentials in each contracting nation. Preferential tariffs are allowed in the case of regional trade agreements and products originating from developing and, especially, less developed countries. The goal here is to promote economic development ‘where it is most needed’ (IISD/UNEP 2000). Article III Article III, the ‘National Treatment Rule’ or ‘Non-discrimination Rule’, establishes that imported products be treated no less favorably than ‘like’ domestic products. In recent years, the WTO has defined ‘like’ products as those indicating high levels of commercial substitutability or those that appear similar ‘on the shelf’ (IISD/UNEP 2000). GATT does not allow for products of same content or quality, but differing production processes, to be treated differently. The method of production has not been used as a factor in deciding whether two products are ‘like’ (IISD/UNEP 2000). The inability of contracting nations to discriminate based on the level of production-related environmental damage has led to several disputes and criticism that GATT threatens sustainable development efforts (IISD 1996). This criticism of GATT was prominent during the well-documented tuna–dolphin and the shrimp–turtle disputes.1 Article VI Article VI on Anti-Dumping and Countervailing Duties states that dumping by any contracting nation is not allowed if it threatens the domestic

1 See Berger (1999) and Simmons (1999) for details on these disputes and GATT panel rulings on environmentally related trade bans. 172

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industry of the targeted nation.2 An introduced product is one where the price of the exported product is: 1 ‘less than the comparable price for the like product when destined for consumption in the exporting country’, or 2 in the absence of a domestic price, the export price is less than (a) the highest price for the like product for export to any third country or (b) the cost of production of the country of origin plus some additional selling cost and ‘reasonable’ profit (GATT 1947). Antidumping and countervailing duty cases are common in seafood trade. In the US, cases have involved farmed salmon from Norway and Chile, Chinese crawfish, and Indonesian swimming crab. Article XI The eight GATT rounds focused on tariff reductions. However during these negotiating rounds, non-tariff barriers started to rise as tariffs fell under greater restrictions and elimination. Article XI restricts these non-tariff barriers, such as quotas, import licenses, or export licenses (with the exception of agricultural products). Non-tariff barrier restrictions can conflict with multilateral environmental agreements, such as the Convention on International Trade of Endangered Species (CITES), which require licenses for the trade of certain species. However, these conflicts ‘have never been challenged under trade law’ (IISD/UNEP 2000). Article XX(b) and XX(g) Articles XX(b) and (g), the ‘Environmental Exceptions’, have proven highly controversial. These sections require that nothing in the WTO treaty should prevent measures by any nation that: (b) are necessary to protect human, animal, or plant life or health; (g) relate to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption (GATT 1994). Sections (b) and (g) of this article are preceded by a preamble, which reads: Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on 2 Dumping is defined as the introduction of a product into the market of another country at less than its normal or market value (WTO 2002a). 173

THE INTERN ATION AL SEAFOOD TRADE international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: [follow (a) and (g)]

These rules ensure that a contracting nation must prove that (b) or (g) applies to the situation in which they request an exemption from GATT regulations. After the contracting nation proves that its barrier(s) to trade exists for one or both of these reasons, it is required to prove that such measures are not arbitrary or any form of ‘disguised’ trade restriction (in line with Article XX’s preamble). Past incidences in which countries have required exemptions to GATT based on Article XX have proved that this is no easy task. This subject matter has been discussed in great detail by other authors.3

The Convention on the International Trade of Endangered Species The Convention on the International Trade of Endangered Species (CITES) protects species threatened by international trade. In 1963, when the CITES was first drafted, using trade measures to meet conservation objectives was a novel idea. Some 80 countries adopted CITES on 3 March 1973. The treaty entered into force on 1 July 1975. Today, CITES lists over 30 000 plant and animal species and is backed by 154 members (CITES 2001a).

CITES structure CITES is much more specific than the WTO, and as a result, its structure is much less complex. Its aim is simple, ‘to ensure that international trade in specimens of wild animals and plants does not threaten their survival’ (CITES 2001a). The convention has a Secretariat, a Conference of Parties, and several permanent committees.

The Secretariat The Secretariat is fundamental in the functioning of the CITES body. The CITES’ Secretariat’s role is more active than the role of the WTO Secretariat. The CITES’ Secretariat:

3 For detailed discussion of these disputes, see Berger (1999) and Simmons (1999). 174

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• •

•

collects reports and serves as the coordinator and advisor of the Convention; distributes information and annual reports on its progress to all members, performs occasional scientific studies, and issues new species additions to Appendices I–III (CITES 2001b); makes recommendations about the implementation of the policy (CITES 2001a).

The Conference of Parties The CITES Conference of Parties is very similar to the WTO Ministerial Conference. It is simply a group of representatives from each member nation. Like the Ministerial Conference, this conference meets every two to three years for two weeks, reviews major issues and progress, and looks at proposals to amend Appendices I–III. The meetings are not confined to conference members, but also include United Nations employees and other members of international governmental organizations. While the WTO has been highly criticized for lacking transparency and openness in its meetings, the CITES goes as far as inviting non-governmental agencies and interest groups, at the discretion of the member parties.

The permanent committees The Convention has also set up four permanent committees. They are: •

•

Standing Committee – This committee is comprised of voting members from Africa, Asia, Europe, North America, Central and South America, the Caribbean, and Oceania (CITES 2001a). The number of representatives is weighted by the number of members from each region. A few additional representatives are assigned from regions hosting past and future meetings of the conference and one from the ‘Depository Government’, Switzerland. The members then vote on a chairperson and vicechairperson. It is essentially the behind-the-scenes support of the Convention. Its main responsibilities include providing policy guidance for the Secretariat, managing the Secretariat’s budget, and overseeing the other three permanent committees. Animals and Plants Committees – These committees are comprised of groups of experts on animal and plant species. These committees provide detailed species information that may be needed in order to make informed decisions. Within this role, they may recommend the listing of new species or suggest a downgrading or upgrading of 175

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•

protective measures. They report to the conference at its meetings, and representatives are chosen in the same manner as the Standing Committee. Nomenclature Committee – This committee is the least formal. Its membership is purely voluntary, and its sole responsibility is to standardize the nomenclature used to refer to species, subspecies, and botanical variety within the convention species listings.

The CITES permit system Each signatory to CITES has agreed to the basic aim of ensuring that international trade does not threaten the survival of animal and plant species. Each nation voluntarily adheres to the CITES, but this does not mean that the agreement is not legally binding. Each member is required to implement the CITES at a national level by assigning both a management authority and a scientific authority. The level of protection for each species listed in the convention is determined by the threat of extinction, regardless if trade affects it. Based on this type of criteria, species are classified as Appendix I, II, or III. Appendix I Appendix I concerns those species threatened by extinction regardless if trade affects them. In this most severe case, trade is permitted only in the most exceptional circumstances. Unlike the other Appendices, Appendix I requires both an export permit for the exporting nation and an import permit from the importing nation. CITES permits trade if the respective management authorities in both nations award the appropriate permits. Even in this rare instance, permits are only valid for six months after they are granted (CITES 2001a). One example where both import and export permits may be awarded for trade in an Appendix I species is trade among zoological societies, with the primary purpose of using the animals for reproductive and educational purposes. In this case, the zoo must be registered with the National Management Authority, and the managing authority must approve and issue the specimen a label (Australia Department of Environment and Heritage 2001). The requirements for export and import permits are very specific. There are four requirements for an export permit. They are: • • •

the scientific authority of the exporting nation must find that export is not harmful to the survival of the species; the management authority must then find that the species intended for export was not obtained through illegal measures; it must also verify that the species will be shipped in a way that reduces the risk of injury, cruelty, and other harm; 176

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•

the exporting nation’s management authority has verified that an import permit has been granted by the importing nation.

Like export permits, re-export permits have all of the same requirements, except they do not require a scientific authority to assure that export is not detrimental to the species. In requiring an exporting nation to base its trade decision on characteristics external to the product, Appendix I may be found in violation of GATT Article III, which prohibits discrimination based on any factors but the characteristics of the finished product (Sand 1992). The requirements of an import license are just as stringent. CITES requires that scientific authorities in the importing state verify that the purpose of import is not harmful to species survival. The scientific authority must also validate that the recipient of the exported species has proper means to care for it. Proof that the species will not be used for ‘commercial purposes’ must also be given to the importing nation’s management authority (CITES 2001a). The fact that import permits are required before a nation exports the species could be seen as ‘extrajurisdictional’. The WTO DSU could find a nation in violation of GATT if it required an import permit for trade in an Appendix I species. However, WTO and CITES have many of the same member nations, and the WTO has respect for this agreement and other multilateral environmental agreements (IISD/UNEP 2000). The CITES requires a permit for taking an Appendix I species from the sea. It is similar to an import license, since the recipient of the species is essentially importing the species, not from another country, but from the sea. In fact, the requirements for the ‘from the sea’ permits are the same as the requirements for import licenses. Appendix II According to the CITES document, Appendix II listings include: (a)

All species which although not necessarily now threatened with extinction may become so unless trade in specimens of such species is subject to strict regulation in order to avoid utilization incompatible with their survival; (b) Other species which must be subject to regulation in order that trade in specimens of certain species referred to in sub-paragraph (a) of this paragraph may be brought under effective control (CITES 2001b). As with Appendix I species, trade in Appendix II species requires an export permit. Export and re-export permits have the same requirements when dealing with Appendix II species as those dealing with Appendix I species. 177

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The difference in the level of protection for Appendix II versus Appendix I species is that trade in Appendix II species does not require an import permit (CITES 2001b). Instead, the importing nation must show an export or reexport permit to authorities when obtaining the species. Unlike Appendix I, the importing nation does not have to demonstrate that the species will not be used for commercial purposes. Part (b) of the Appendix II definition mentions ‘other species which may be subject to regulation’. This regulation could protect threatened species from being passed off as unprotected species with a close physical resemblance. By including this section, CITES secures the right to restrict trade in non-threatened species in cases where these species may look similar to the threatened species. Appendix III In cases where a region or nation feels that some sort of regional or national regulation is needed to prevent exploitation of a native species, the nation(s) may request that the species be listed in Appendix III. Appendix III provides a more limited form of international protection for those species. In this case, an export permit is required, but obtaining this type of export permit is less difficult. A management authority in the exporting region must only prove that the species was not obtained illegally and that it is shipped in a way that minimizes injury or any other harm (CITES 2001b). The exporter is neither required to obtain validation by a scientific authority that its sale of the species will not be detrimental to the survival of the species, nor is it required to provide an import permit. In importing an Appendix III species, the importer must only present a certificate of origin or an export permit. It should be noted that with every Appendix listing, trade by a CITES party with a non-CITES party is allowed as long as the importer and exporter can provide documentation comparable to the required import and export permits.

CITES Strategic Vision 2005 At its eleventh meeting in April 2000 in Gigiri, Kenya, the Conference of Parties ratified its first Strategic Plan (CITES 2001c). It is referred to as Strategic Vision through 2005. The plan details the specific means of meeting its proposed objectives. The 2005 Plan lists seven major objectives that may be potentially important to those concerned with seafood trade. By no coincidence, these goals directly correlate with past problems and criticisms of CITES. The listed objectives are:

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Objective 1 – Increase the ability of each party to comply with the treaty (CITES 2001c). This requires improvement in organizational cooperation, policy creation, and enforcement capabilities. This objective targets those situations where nations may find difficulty complying with the agreement through lack of funding, poor understanding of the requirements of the agreement, lack of a scientific or management authority, and so on (CITES 2001c). Objective 2 – Greater use of science in Convention decision-making. In ensuring that the Convention collects all pertinent information on listed and potential species, this goal would ensure that the CITES is operating in an effective and scientifically sound manner. Objective 3 – Reduce and eliminate illegal trade through international cooperation among law enforcement agencies, the development of paper trails detailing the origins and trade of a species, and the creation of an incentive system for turning illegal trade into legal trade. This is an important goal, since illegal trade has been a major obstacle in the effectiveness of the CITES in particular cases. It also proves to be a major concern in the international trade of sturgeon caviar, as an Appendix II (likely to be Appendix I in the future) species. As is the case with several highly valued, endangered species, illegal trade in caviar has been estimated at 6–10 times legal trade (Speer et al. 2000). Objectives 4 and 5 – propose both greater understanding and even greater cooperation between the convention and outside communities, NGOs, media, government, and individuals (CITES 2001c). In order to appear unbiased and open to suggestion, this is essential to acceptance of the CITES by other groups, such as the WTO. Objective 6 – Improve global membership. Increasing global membership will make CITES a more effective agreement. Objective 7 – Increase the program financial base. Currently, most programs aimed at meeting the goals of the convention depend on voluntary contributions. The Conference of Parties states that a more secure form of income is necessary if the CITES is to continue as a major player in environmental policy. In order to aid poorer nations in maintaining reputable management and scientific authorities, it appears necessary for the convention to lend support in terms of funding and enforcement measures.

The US Pelly Amendment The Pelly Amendment of 1971 (also known as Section 8 of the Fisherman’s Protective Act, 22 USC 1978) was originally enacted after the failure of US

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attempts to encourage Denmark, Norway, and West Germany to follow the ban on high-seas salmon fishing imposed by the International Commission for the Northwest Atlantic Fisheries (Charnovitz 1994). After Pelly became law, all three nations chose to phase out their fishing of high-seas salmon (Charnovitz 1994). The Pelly Amendment states that if a nation decides not to comply with international fisheries conservation measures, the US Secretary of Commerce may notify the US President who, within 60 days of notification, may ask the Secretary of the Treasury to place trade sanctions on all seafood products (as opposed to a trade ban on one fish product) of the member nation in noncompliance. In order to avoid a conflict with GATT, the amendment states the President should uphold this sanction as long as GATT approves it. Congress added a second branch to the Pelly Amendment in 1978 in an effort to include all wildlife. This amendment follows in the footsteps of the original branch, but gives more power to the amendment by allowing the President to request sanctions on all wildlife trade with an offending nation when that nation is found guilty of diminishing ‘the effectiveness of an international endangered species program’ (Charnovitz 1994). A nation can be found guilty of diminishing the effectiveness of the particular conservation agreement if it does not ratify an agreement, does not comply with an agreement, or sells the species of concern domestically. The history of Pelly involvement related to fisheries indicates that unilateral threats of sanctions are sometimes an adequate means of forcing other nations to comply with international conservation efforts, whether or not it violates GATT. In 1974, the US Secretary of Commerce employed the Pelly Amendment and determined that Japan and the Soviet Union violated the quota of minke whales set in 1973–74 by the International Whaling Commission (IWC). Japan and the USSR, however, were not considered legally obligated to uphold the quota, as they had objected to the quota level prior to its adoption. In light of the threats of US sanctions, both countries agreed to the new quotas set in 1974–75, and in consideration of the economic impacts of a trade sanction on these countries, President Ford determined not to follow through with the sanctions. A similar situation occurred in 1986, when Norway decided not to uphold the commercial whaling moratorium imposed by the IWC. Shortly after the US Secretary of Commerce determined that Norway was violating the IWC, Norway declared it would comply at the end of the 1987. President Reagan chose not to enforce a sanction, since the threat of action was enough for Norway to comply (Charnovitz 1994). In both 1990 and 1993, the US determined Norway violated the IWC moratorium on minke whales. In 1990, President Bush deemed that Norway was making efforts towards better conservation and chose not to sanction the country. However, Norway did not make efforts to reduce its taking of 180

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minke whales. In 1993, President Clinton chose not to impose sanctions, and Norway, once again, chose not to change its pattern of minke whale harvesting (Charnovitz 1994). The US has never imposed a Pelly-related trade sanction. If accused of being in violation of the WTO agreements, the US may argue that the Pelly Amendment is covered by the larger CITES agreement, since the CITES allows for stricter domestic environmental policy than is required by its agreement. The WTO dispute mechanism has not yet tested this argument.

Additional US trade measures As in other countries, the US has several measures for the protection of domestic industries when it faces competition from imports judged to be unfair. These remedies may be employed in any industry, not just in fisheries. The three possible remedies available under the law are: 1 Countervailing duties – Used when imports into the US are receiving an unfair subsidy from a foreign government. Countervailing duties very often apply to all the producers of a given import from an entire country. 2 Antidumping duties – Used when imports are being sold, or are likely to be sold, in the US at a less than fair value.This is also known as dumping. The official definition of dumping is, ‘a price which is lower than the price for which it is sold in the home market, after adjustments for difference in the merchandise, quantities purchased, and the circumstance of the sale’ (USITC 2001). Antidumping duties often apply to various and selected producers of a given import. In an antidumping case, not all producers from the same country of a given import may be selling their product at less than fair market value. 3 Safeguard remedies – Used when rapidly increasing imports of a good injure or threaten to injure a US industry or the creation of a US industry. Countervailing and antidumping duties are both authorized by title VII of the Tariff Act of 1930, while safeguard remedies are authorized by Sections 201–204 of the Trade Act of 1974. The three sub-sections below describe these remedies in greater detail and provide a relevant and recent seafood case study. 181

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Countervailing duties Countervailing duties are authorized by Subtitle A of title VII of the Tariff Act of 1930. Two conditions must be met in order for the US Government to enact countervailing duties. They are: •

•

the US Department of Commerce (USDOC) must find that a foreign government or public entity is providing a subsidy for the manufacture, production, or export of the product in question, and; if the producing country in question is subject to the Subsidies Agreement, the US International Trade Commission (USITC) must determine that a US industry is materially injured or threatened with material injury. If the country is not part of the Subsidies Agreement, then the first condition is sufficient reason for a countervailing duty (USITC 1998). Material injury is defined as a ‘harm which is not inconsequential, immaterial, or unimportant’ (USITC 2001).

The countervailing duty process begins when the DOC and ITC receive a petition from an eligible petitioning entity. In both countervailing and antidumping cases, manufacturers, producers, product wholesalers, unions, and other workers’ groups are eligible to petition the government for relief. Upon receipt of the petition, the ITC has 20 days to determine if the petition accurately describes and alleges material injury or the threat of material injury. If the petition meets the DOC/ITC requirements, then the DOC initiates an investigation. The ITC is required to publish a preliminary determination within 45 days of the start of the DOC investigation. If the preliminary determinations find sufficient evidence of an unfair subsidy, then the DOC has 20 days within which to estimate the subsidy margin. In complicated cases, the DOC can take up to 65 days to determine this subsidy level. Final determinations are due within 75 days of the preliminary determination, or 120 days after the petition is submitted. If at any time, the DOC/ITC does not find enough evidence to proceed to the next step, the investigation is halted (USITC 1998). Affirmative findings of the need for a countervailing duty lead to the institution of that duty on the relevant products. Under US law, a countervailable subsidy is defined as one that is specific to an industry, such as a subsidy that is contingent on export performance, a subsidy that operates as an import substitution subsidy contingent on export performance, or one where the foreign country expressly limits industry or enterprise access to the subsidy (USITC 2001). Under these definitions, not all subsidies are countervailable. For example, subsidies that define specific tax breaks for an industry or subsidies of inputs, limited to

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the exporting industry, may be countervailable. However, general subsidies for infrastructure (not specific to the industry in question), such as new roads, education, and non-proprietary public research are not generally countervailable.

Antidumping duties Antidumping duties are also authorized by the Tariff Act of 1930, but in this case by Subtitle B of title VII. As with countervailing duties, antidumping duties are imposed when two conditions are met. They are: • •

the DOC must determine that imported merchandise is being sold or likely to be sold at prices less than fair value, and; the ITC determines that a US industry is materially injured, threatened with material injury, or that an establishment of the industry would be retarded by the prevailing prices of the imported merchandise (USITC 2001).

As with countervailing duties, investigations into the establishment of antidumping duties start when a party with official standing petitions the DOC or the ITC. These investigations follow roughly the same timetable as countervailing duty investigations, except that a slightly longer amount of time is allowed for investigations. In addition, antidumping cases allow for an expedited determination of injury when ‘short life cycle’ merchandise is involved. In these cases, the number of days allotted for the preliminary determination is shortened by either 40 or 60 days. Short-life cycle merchandise is any merchandise that the ITC determines is likely to become outmoded within four years, by reason of technological advances, after the product is commercially available (USITC 1998). Affirmative findings of the need for an antidumping duty lead to the institution of that duty on the relevant products. Both countervailing and antidumping duties are subject to three types of review. These are: •

•

Commerce Administrative Review – ‘If requested, DOC must review and determine, as often as every 12 months, the amount of the net, countervailable subsidy or dumping margin under an outstanding countervailing or antidumping duty order’ (USITC 1998). Changed Circumstances Review – Upon request by an interested party, or of its own accord, the DOC or ITC may review whether or not circumstances underlying the original decision have changed. The DOC

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•

may use these reviews to revoke countervailing or antidumping duties (USITC 1998). Five-Year (Sunset Review) Review – The Agreement from the Uruguay Round of Trade Negotiations requires that the DOC and ITC review countervailing and antidumping duties within five years of the issuance of the original order. The order must be revoked if the review finds that ‘revocation of the order would not likely lead to continuation or recurrence of the material injury within a reasonably foreseeable time’ (USITC 1998).

Countervailing and antidumping seafood examples Over the past few decades, there have been several countervailing duty and antidumping cases involving the seafood industry. Examples in recent years include trade in products such as catfish from Vietnam; swimming crab meat from Venezuela, Indonesia, Thailand, and Mexico; and coldwater shrimp and mussels from Canada. Two salmon cases, below, illustrate how countervailing and antidumping duties are often petitioned and investigated together.

Norwegian salmon case Few cases show the power of countervailing and antidumping duties as well as the case against fresh, farmed, whole Norwegian salmon in the early 1990s. In 1989, falling prices for salmon in the US market precipitated a petition from the Coalition for Fair Atlantic Salmon Trade, an industry group, alleging that Norwegian producers had received countervailable subsidies and were also dumping salmon in the US. The petition alleged that the subsidies and the dumping were materially damaging the domestic salmon industry. In response to the petition, the ITC opened an investigation into the practices of the Norwegian salmon producers. The commission issued its preliminary ruling on 26 September 1990, and ruled that Norwegian salmon farmers were dumping salmon and receiving a countervailable subsidy (Anderson 1997). In arguments before the ITC regarding material damages, the Norwegians claimed that all whole salmon were like product because at harvest all salmon are whole and fresh. In essence, the Norwegians argued that their product was a small slice of a much larger market and, therefore, was not likely to result in material damage. However, the Coalition for Fair Atlantic Salmon Trade used empirical market research and the examples from the Norwegian industries’ marketing campaigns to argue that the fresh, whole, farmed salmon was not a like product with other whole, fresh, non-farmed 184

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salmon. Their argument was that the Norwegians controlled a much larger share of the relevant part of the salmon market. In conclusion, the DOC enacted a countervailing duty of 2.27% and an antidumping duty that ranged from 15.65% to 31.81%, depending on the company. These duties caused Norwegian salmon products to become uncompetitive in the US market. As a result, Norway’s share of salmon imports sank from 40–45% of the US market in 1989/90 to less than 5% of the market by March 1991, and Chilean and Canadian producers rapidly took their place.

Chilean salmon case On 12 June 1997, the Coalition for Fair Atlantic Salmon Trade filed a petition with the DOC and the ITC alleging that Chilean exports of Atlantic salmon products were materially injuring the US industry because the exports were subsidized and being sold at less than fair value. Following the Tariff Act of 1930, the ITC opened an investigation into Chilean exports. On 31 July 1997, the ITC announced that it had finished its preliminary investigation and determined that there was evidence of both countervailable subsidies and product dumping (Federal Register 1997a). The Chilean salmon case showed how much the market had changed in just a few years. The focus of the Norwegian salmon case in the early 1990s was on whole, fresh salmon, but the Chilean case was broadened to include all salmon from Chile, particularly the market for pinbone-out (PBO) fillets, which is experiencing explosive growth. The Chileans argued that by introducing PBO fillets, they were expanding into areas that were not buying whole, fresh, salmon. For example, the Chileans claimed they provided product to chain restaurants and supermarkets (especially in the South and Midwest) that had not previously handled salmon. They argued that these outlets would not purchase whole salmon because they did not have the skilled labor necessary to fillet it. They also indicated that they targeted consumers who would rarely purchase whole salmon and stores that would be unlikely to carry it. In addition, they argued that US producers could not produce enough to satisfy this new and growing market. The US producers argued that all fresh, farmed salmon products were substitutes for each other and that the Chileans were dumping a like product onto the market. The Chilean salmon case ended somewhat differently than the Norwegian case. In the 19 November 1997 Federal Register, the ITC announced that it had determined that Chilean Atlantic salmon exporters and producers were not receiving countervailable subsidies from the Chilean government (Federal Register 1997b). However, in the 16 January 1998 Federal Register, the ITC announced that it had determined that three of the five largest Chilean producers and exporters of salmon were selling their product 185

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in the US at less than fair market value (Federal Register 1998). These companies were hit with duties ranging between 2.24% and 10.91%. Smaller companies not among the top five producers were hit with a duty of 5.19% (Salmon Trade Alliance 1998). These duties were much smaller than were enacted against the Norwegians six years earlier, and they had little effect on the growth of US imports of Chilean salmon, especially fresh fillets.

Safeguard remedies Section 201 of the Trade Act of 1974 provides for safeguard remedies. Under this section, domestic industries that are threatened by increased imports may petition the ITC for relief. The job of the ITC is to determine if the industry faces serious injury from the increased importation of the product in question. If the ITC determines that the industry does face serious injury, then it can make a recommendation to the President indicating what relief would protect the industry from the competition. In order for the ITC to recommend relief under Section 201, it must find that the industry faces serious injury from increased imports, not necessarily lower prices. The criteria for import relief are based on Article XIX of GATT and the WTO Agreement on Safeguards. As with countervailing and antidumping duties, the ITC is required to work on a strict timetable. The commission must respond to any petition within 180 days (USITC 2002). There are many recent examples of industry asking for protection under Section 201. Industries ranging from extruded rubber thread to wheat gluten producers asked for protection in the three years from 2000 to 2002. A notable, recent example of action taken under Section 201 occurred in 2001 and 2002 when the US steel industry asked for relief from increased steel imports. The ITC and the President responded with a variety of relief measures ranging from 40% to 8% tariffs. These tariffs declined over three years (USITC 2002). In 2000, the fishing industry requested protection from increased importation of swimming crab meat. Species such as Atlantic blue crab (Callinectes sapidus), Indo-Pacific swimming crab (Charybdis hellerii), and blue swimmer crab (Portunus pelagicus) are all examples of swimming crabs. However, the industry specifically expressed concern about imports of meat from the family Portunidae. In this case, the industry argued that increased importation of swimming crab meat from countries such as Venezuela, Indonesia, Thailand, and Mexico threatened to injure the US industry by driving down prices and reducing US producer market share. However, the USITC found that increased imports of swimming crab meat did not constitute a serious threat to US producers because the increased imports were not idling US productive capacity, increasing industry underemployment or 186

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employment, or causing injury as measured by other economic factors (USITC 2000).

Trade and environment conflicts There have been numerous publications concerning the likelihood of disputes between the WTO and major international environmental policies, such as the CITES. While a detailed analysis of such potential disputes is not crucial in this discussion, it is noteworthy to mention some of the major indicators of such likelihood. One of the most clear-cut indicators that the chance of WTO and Multilateral Environmental Agreements (MEAs) disputes is relatively limited is the simple fact that, to date, there have been no major disputes between any nations concerning trade-restricting actions taken in accordance with MEA obligations. Furthermore, the WTO dispute mechanism, ‘up to now has carefully avoided any expression of opinion about how it will react in the case where environmental measures have been taken in accordance with a MEA’ (Trachtman 1999). The WTO Committee on Trade and the Environment, however, stated, ‘if any dispute arises between WTO members, parties to an MEA, over the use of trade measures they are applying between themselves pursuant to the MEA, they should consider trying to resolve it through the dispute settlement mechanisms available under the MEA’ (OECD 1999). According to the OECD, ‘WTO Members have endorsed and supported multilateral solutions based on international co-operation and consensus as the best and most effective way for governments to tackle environmental problems of a transboundary or global nature’ (OECD 1999). The absence of any previous disputes and actual endorsement of MEAs by the WTO supports the theory of a limited likelihood of a dispute occurring. The likelihood of WTO nations initiating a dispute mechanism appears even smaller when considering the status of the younger MEAs. These MEAs are usually adopted by consensus, adopted by a significant number of countries that are often members of the WTO, and reflect global interests. This commonality ensures that the WTO must show a good deal of respect for the actions of these bodies (Koester 2001). Additionally, Article 30 of the Vienna Convention on the Law of Treaties also states that if a conflict arises between two overlapping international treaties, in general, the disputes should favor the younger agreement if the disputing nations are members to both agreements (Sand 1992). Disputes are likely when a member of the WTO and an MEA voluntarily imposes domestic environmental measures that are stricter than the 187

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obligations under the MEA because these actions do not have international support and sometimes do not represent international interests (OECD 1999; Sand 1992). Because it is less likely that a developing nation would have stricter environmental regulations than its MEA obligations, it is also less likely that a trade dispute would arise from either an importing or exporting developing nation imposing bans or sanctions on other trading nations in commitment to domestic environmental policy. The US, however, has taken unilateral action. Heavy pressure from environmental interest groups and research organizations has led the US government to impose trade bans and sanctions not required under their obligation to CITES. The two most notable trade disputes resulting from US unilateral environmental action (in accordance with the US Marine Mammal Protection Act of 1972) leading to trade bans and sanctions are the tuna–dolphin and the shrimp–turtle disputes (Simmons 1999; Barrett 1990).

The 1991 tuna–dolphin case Prior to the tuna–dolphin dispute, Mexican fleets harvesting yellowfin tuna commonly used purse-seine nets, a method proven to injure and/or kill dolphins. The US Marine Mammal Protection Act (MMPA) of 1972 set standards for yellowfin tuna harvesting that do not allow the use of purse-seine nets owing to the high levels of dolphin bycatch, a marine mammal protected by the Act (Berger 1999). More specifically, the MMPA states that the US must not import fish from any nation that is found in violation of US dolphin protection standards and also may not import from any ‘intermediary’ nation handling the tuna en route from the violating exporter (Simmons 1999). To enforce the MMPA, the US placed an embargo on all Mexican exports of yellowfin tuna and tuna from intermediary nations such as Costa Rica, Italy, Japan, Spain, France, the Netherlands Antilles, the UK, Canada, Colombia, the Republic of Korea, and a few nations within southeast Asia (Simmons 1999). In response to this unilateral action by the US in pursuance of the US MMPA, Mexico and the intermediary nations listed above filed for a dispute resolution under the GATT dispute mechanism, charging that US actions were in violation of GATT. Mexico also filed a complaint to the Tuna–Dolphin Panel regarding the use of the Pelly Amendment by the US. In the end, the Pelly Amendment was not employed, and the panel made no decision on the use of trade sanctions in environmental agreements. In September 1991, the GATT panel found the US in violation. It stated the US could not place a ban on imports based on the process used to harvest tuna. Instead, it ruled that bans could only be enacted based on the quality or content of a product, not the process of production. In a similar vein, it 188

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also ruled that the US could not act ‘extrajurisdictionally’ in attempting to impose its domestic laws on foreign countries, even if its intention was to protect the health of animals or exhaustible resources (Berger 1999). The GATT panel ruling was not well received by many environmental interest groups and individuals. The sentiment was that the GATT ruling indicated environmental standards that were higher than international norms. Therefore, they were illegal and impermissible (Berger 1999). If the GATT allowed for a ban on any import that did not meet domestic, environmental, social, or health standards, any country would be free to enact trade barriers in order to impose its own standards unilaterally. According to the WTO, ‘a possible flood of protectionist abuses’ would result (WTO 1999). However, the panel did rule that the ‘dolphin-safe’ label on tuna products was allowable, since it was only intended to prevent deceptive advertising on both domestic and foreign tuna products (WTO 1999). Interestingly, the ruling was never adopted, and the two governments settled out of court (Berger 1999). Note that under the new system, the ruling would have been adopted if the panel had not rejected it after 60 days (Krueger 1998).

The 1996 shrimp–turtle case Of the disputes resolved under the WTO DSU, the ‘shrimp–turtle case’ is one of the most publicized. The case involved a complaint filed in 1996 by India, Malaysia, Pakistan, and Thailand against the US ban on foreign shrimp imports from harvesters not employing turtle excluder devices (TEDs) in shrimp harvesting as are required in the US shrimp fishery (WTO 1999). The US argued the ban was covered under Article XX(g), which allows for nations to impose trade-restrictive measures ‘relating to the conservation of exhaustible natural resources’ (WTO 2002a). The argument was that the US ban on imports was arbitrary regarding nations targeted and the amount of time allowed for compliance with US standards. They claimed the US allowed only four months for Asian shrimp and shrimp product exporters to comply with US guidelines, but gave Caribbean Basin nations three years to comply (WTO 1999). In its final decision, the WTO DSU panel found the US in violation of GATT based on the preamble of Article XX, which subjects actions taken under this Article to the requirement that the actions are not arbitrary discrimination or disguised trade restrictions. The US appealed the panel decision, and the Appellate Body upheld the decision that the US was in violation of the WTO/GATT (WTO 2002c). However, no trade sanctions were placed on the US (WTO 1999). The approaches of the two dispute settlement bodies were distinctly 189

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different, however. The first panel chose to focus solely on US compliance with the preamble of Article XX under the presumption that no trade restriction could be accepted under Article XX(g) without initial compliance with the preamble. The Appellate Body believed the first panel ruling was overly broad, since it failed to even consider the environmental exceptions under the GATT Article XX(g). Instead, the Appellate Body chose to consider the preamble only after determining that Article XX(g) covered the import ban (Simmons 1999). The Appellate Body decision changed the direction of WTO/GATT ruling. It accepted the use of environmental protection efforts using trade bans. The Appellate Body determined that a ban on shrimp harvested with technology that may adversely affect sea turtles is in compliance with the GATT, Article XX(g). Unlike the tuna–dolphin ruling, the Appellate Body allowed trade restrictions based on process and production methods (PPM). However, the Appellate still found that the US law failed to meet the requirements of the Article XX preamble because it allowed Caribbean countries more time to adapt to the law than Asian countries. In essence, the US law complied with Article XX(g), but failed to comply with the preamble to the same section requiring that any such law be non-discriminatory (WTO 2002c). The Appellate Panel’s decision to include non-discriminatory trade bans based on production methods could have important implications in the future. Countries desiring to protect threatened resources would now have more latitude to include production methods and like protection requirements in trade bans as long as the law is non-discriminatory in any other way.

The US Pelly Amendment and trade disputes After the tuna–dolphin panel ruling, it would seem highly probable that the WTO/GATT would consider any unilateral trade sanctions in violation. The shrimp–turtle Appellate Body ruling gave some indication that this type of trade sanction may not violate a nation’s obligations to the WTO. In order to pass the preamble test, however, the sanctioning nation would have to prove that its choice of a target product for sanction, the length of the sanction, and the nation being sanctioned, were not arbitrary or discriminatory. Passing the test may prove to be very difficult. In general, it is difficult to conclude whether the unilateral actions taken by the US have been successful in increasing global environmental conservation. However, the US actions did temporarily disrupt international trade in both tuna and shrimp and resulted in the use of ‘dolphin-safe’ labels in the US canned tuna market. 190

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References Anderson J L, ‘The growth of salmon aquaculture and the emerging new world order of the salmon industry’, Global Trends: Fisheries Management, Eds. Pikitch E K, Huppert D D and Sissenwine M P, Bethesda, MD, American Fisheries Society, 1997:175–84. Australia Department of Environment and Heritage, ‘Biodiversity: Wildlife Trade & Conservation’, http://www.ea.gov.au/biodiversity, 2001. Barrett S, ‘The problem of global environmental protection’, Oxford Review of Economic Policy, 1990 6:68–79. Berger J R, ‘Conserve the world’s living resources: an environmental breakthrough for the GATT in the WTO sea turtle case’, Columbia Journal of Environmental Law, 1999 24(2):355–412. Charnovitz S, ‘Environmental trade sanctions and the GATT: an analysis of the Pelly Amendment on foreign environmental practices’, The American University Journal of International Law and Policy, 1994 9(2). Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), Discover CITES. On CITES website. Available: http://www.cites.org/ 2001a [cited 12/11/2001]. CITES, Appendix I and II Listings. On CITES website. Available: http://www.cites.org/ eng/append/I&II 2001b [cited 12/11/2001]. CITES, CITES Strategic Vision 2005. On CITES website. Available: http://www.cites. org/, 2001c [cited 12/11/2001]. Federal Register, ‘Fresh Atlantic Salmon from Chile’, 1997a 61(151):42262–3. Federal Register, ‘Preliminary Negative Countervailing Duty Determination’, 1997b 62(223):61803–4. Federal Register, ‘Preliminary Ruling on Anti-Dumping Duties’, 1998 63(223): 2664–71. General Agreement on Tariffs and Trade (1947), World Trade Organization Documents [online]. Available online: http://www.wto.org, 2000 [cited 14/10/2000]. GATT, World Trade Organization Documents [online]. Available online: http://www. wto.org, 1994 [cited 23/1/2002]. International Institute of Sustainable Development (IISD), ‘The WTO and sustainable development: an independent assessment’ (1996), by Konrad Jon Moltke. In IISDNet, http://iisd1.iisd.ca/trade/wto/wtoreport.html 2000 [cited on 15/10/ 2000]. IISD, IISD Website. IISDNet [online]. Available online: http://iisd1.iisd.ca/pdf/envirotrade_handbook.pdf, 2002 [cited on 15/10/2000]. IISD, Division of Tech., Ind., and Economics, UN Environmental Programme (UNEP), Environment and Trade: A Handbook. Winnipeg, Manitoba, Canada, 2000. Koester V, ‘A new hot spot in the trade–environment conflict’, Environmental Policy and Law, 2001 31(2):82. Krueger A O, Ed., The WTO as an International Organization, Chicago, IL, University of Chicago, 1998. Organization for Economic Co-operation and Development (OECD), Joint Working Party on Trade and Environment, Trade Measures in Multilateral Environmental Agreements: Synthesis Report of Three Case Studies, Document COM/ENV/ TD(98)127/FINAL, OECD Publications, Paris, France, 1999. Salmon Trade Alliance, US Businesses Say Duties on Chilean Salmon are Unwarranted. Press Release, 02/6/1998. 191

THE INTERN ATION AL SEAFOOD TRADE Sand P, Ed., ‘The effectiveness of international environmental agreements: a survey of existing legal instruments’, in Coordination with the United Nations Conference on Environment and Development, Cambridge, Grotius Publications, 1992. Simmons B, ‘In search of balance: an analysis of the WTO shrimp/turtle Appellate Body report’, Columbia Journal of Environmental Law, 1999 24(2):413–53. Speer, L (Natural Resource Defense Council), Lauck, L and Pikitch E, Ph.D. (Wildlife Conservation Society), and Boa S, Dropkin L and Spruill V (SeaWeb), ‘Roe to ruin: the decline of sturgeon in the Caspian Sea and the road to recovery’. ‘Caviar emptor’, http://www.caviaremptor.org/roe_to_ruin.PDF, 2000. Trachtman J, ‘The domain of WTO dispute resolution’, Harvard International Law Journal, 1999. United States International Trade Commission (USITC), Summary of Statutory Provision Related to Import Relief, USITC Publication 3125, August 1998. USITC, Crabmeat from Swimming Crabs. USITC Publication 3349, August 2000. USITC, Antidumping and Countervailing Duty Handbook, USITC Publication 3482, 9th edn. December 2001. USITC, Understanding Safeguard Investigations, USITC Information Center, http://www.usitc.gov/us201.htm, 2002. World Trade Organization, WTO Casefile, http://www.wto.org, 1999. WTO, ‘The WTO in Brief’, http://www.wto.org, 2002a. WTO, Environment: Work in the WTO, http://www.wto.org, 2002b [cited 16/10/ 2001]. WTO, Environment Disputes: India etc versus US: ‘Shrimp–Turtle’ Available online: http://www.wto.org/english/fratop_e/envir_e/edis08_e.htm, 2002c [cited 21/5/ 2002].

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10 The seafood consumer, trade, and the environment Cathy A. Roheim

Introduction ncreasingly, consumers are receiving more information about the products available to them in the marketplace. This is driven, in part, by sellers, who wish to differentiate their products from similar products. For example, while most salmon look very similar when observed as steaks, producers differentiate farmed from wild salmon because they believe there is market opportunity in differentiating. Availability of product information is also driven, in part, by a demand by consumers for more information on the products they buy. Labeling products according to the presence of genetically modified ingredients or organic production process is now commonplace. Environmental labeling has been in existence, predominately in Europe, for many years, and is defined as ‘making relevant environmental information available to appropriate consumers’ (USEPA 1998). This type of labeling is generally voluntary, but may be mandatory, and covers a wide range of product attributes, reflecting the impact of the production process, and the products’ use and/or disposal on the environment. A subset of environmental labeling is ecolabeling, which relies on third-party independent certifiers verifying that the products meet certain environmental criteria or standards (USEPA 1998). If the product is certified to meet those standards, then an

I

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ecolabel may be affixed to the product as it moves through the marketing chain. This chapter will discuss ecolabeling approaches that empower consumers to help manage fisheries by attempting to change consumer demand. It will: (1) explain the economics of information and labeling; (2) discuss specific programs and their objectives; and (3) discuss the implications of ecolabeling for international trade.

The economics of labeling The underlying economic theory for labeling products can be traced back to Stigler’s (1961) work on the economics of information. He portrays information as a valuable resource. Determining the pool of sellers, and prices demanded by each seller for a good, is a time-consuming task. Thus, there is a ‘search cost’ attributable to time and energy expended by the consumer in determining the seller with the lowest price. Of course, the higher valued the good is, the greater might be the benefit of searching. Conversely, the higher one’s income, the higher the opportunity cost of searching for the lowest-priced seller. According to Stigler, a consumer searches for information until the marginal benefit of additional information is equal to the marginal cost of obtaining it. As a result, there is a willingness to pay for information (or demand curve). Nelson (1970; 1974) contends that the problem of determining quality levels in the market is even greater than that of determining price levels, since information about quality is usually more difficult to obtain than information on prices. In addition, since it is often impossible for buyers to tell the difference between good products and bad products, there is an incentive in some markets for sellers to promise high-quality products but market poor-quality products, as pointed out by Akerlof (1970). Nelson distinguished between two types of products: search goods and experience goods. Search goods are those that one can determine the quality of by searching, where quality might be defined as price, size of package, or color. One discerns quality of experience goods by experiencing taste, durability, or maintenance needs. Darby and Karni (1973) expand this to search, experience, and credence goods. Credence goods are those for which quality cannot be determined either through search or experience, such as the production process of a good. For these goods, one must rely on a third party to provide truthful information to the consumer whether the product is highquality or not. In this climate, either a third-party certification is used, or there may be government regulations. 194

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Consumers’ acceptance of producers’ claims will vary by the nature of the characteristic advertised. Search and experience goods may be advertised by producers to provide consumers with information on the lowest prices and highest quality among stores in their area and other information. This will lower the consumer’s search costs. Search characteristics, which can be readily checked by the consumer before purchase, are hypothetically the most accurately advertised. The producer elects to undertake the advertising as long as he sees this as a means to increase market share. Thus, there is a marginal cost of production information (or supply curve). In addition, producers will generally disclose only information advantageous to them. This competitive disclosure process results in explicit claims for all positive aspects of goods and causes consumers to be suspicious of goods without claims (Aldrich 1999). Credence goods are more complicated in that consumers cannot determine the product’s quality even after they buy and consume it (Darby and Karni 1973). In this case, we truly have an imperfect market because first, there is asymmetry in possession of knowledge between producer and consumer, and second, because it is not practical for consumers to assess the quality of the product. For example, the environmental friendliness of a good is an attribute of credence goods, since it is generally infeasible for the consumer to observe the production process. According to Caswell (1998), labeling can transform credence attributes to search attributes that allow the consumer to judge the quality of the good before they purchase it.

Demand and supply of attributes Recognizing that attributes have value to consumers, Lancaster (1966) characterized consumer demand for products instead as consumer demand for a bundle of attributes, where each product has one or more attributes. The essence of Lancaster’s framework is that a good by itself does not yield utility, but it possesses characteristics (attributes) that do create utility. Lancaster’s work has been the underlying theory used as justification for much of the economic analysis that has been done evaluating consumers’ preferences for seafood safety (Wessells and Anderson 1995; Wessells, Kline and Anderson 1996), seafood ecolabeling ( Johnston, Wessells, Donath, and Asche 2001) and other seafood attributes (Holland and Wessells 1998). By viewing the characteristics of a seafood product such as quality, safety, price, production process, taste, color, etc., one can evaluate the marginal value of each of these attributes to the consumer. Hooker and Caswell (1996) created a table with examples of quality attributes of food products, which is reproduced in Table 10.1. These attributes apply to seafood as well as other types of food products. The table has 195

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2

3

4

5

Quality attributes of food products

Food safety attributes Foodborne pathogens Heavy metals Chemical residues Food additives Naturally occurring toxins Veterinary residues Nutrition attributes Fat Calories Fiber Sodium Vitamins Minerals Value attributes Purity Compositional integrity Size Appearance Taste Convenience of preparation Package attributes Package materials Labeling Other information provided (recipes, etc.) Process attributes Animal welfare Biotechnology Environmental impact Chemical use Worker safety

Source: Hooker and Caswell (1996)

a mix of search, experience, and credence goods. For example, all the food safety, nutrition, and process attributes could be labeled as credence goods, while some of the value attributes (e.g., size and appearance) are search attributes. Experience goods may include taste and convenience of preparation. As discussed above, Lancaster helped to frame economic analysis of consumers’ demand for goods instead as consumers’ demand for characteristics of goods. What the consumer is now maximizing is demand for the characteristics of a bundle of goods, rather than the actual products themselves. Therefore, we may continue to use demand and supply graphs to illustrate demand and supply of product characteristics. 196

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Ecolabeling Unlike price and other easily observable product attributes, environmental attributes related to a product’s production are often impossible for the individual consumer to assess. Nonetheless, the presence or absence of information on environmental attributes may have important welfare implications for certain consumers. To make utility-maximizing decisions, these consumers must have access to all information relevant to their decision-making, including information pertaining to environmental attributes. Ecolabeling programs offer an approach to provide consumers with just such information, while at the same time creating a market-based approach to address environmental issues. In theory, ecolabeling programs are meant to affect consumer behavior as follows: 1 An independent third party develops criteria for environmentally preferable products and then evaluates the products to determine if they meet those criteria. 2 This complex information is presented on a product label. 3 Consumers incorporate the information conveyed by the logo with the other attributes of the product, such as quality and price, to determine demand. 4 If the product label is preferred by consumers, then producers will alter their behavior such that their production processes conform to the environmental goal. There are several ecolabeling programs in place to encourage sustainable use of natural resources, based on the above logic. Organic labeling is an environmental label, in that it signals to the consumer that there have been no chemicals applied, preventing harm to the environment. There are ecolabeling programs for forestry, such as the Forest Stewardship Council, which promote certification of forest products from sustainably harvested forests around the world. Within the seafood sector, there are three programs we will highlight: the Marine Aquarium Council, the Global Aquaculture Alliance, and the Marine Stewardship Council.

The Marine Aquarium Council The Marine Aquarium Council (MAC) is an international, non-profit organization based in Hawaii. The purpose of the MAC is to conserve coral reefs by creating standards and educating and certifying those engaged in the collection and care of ornamental marine life from reef to aquarium (Wessells 197

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et al. 2001). Certification will ensure quality and sustainability in the collection, culture, and trade of marine ornamentals (www.aquariumcouncil. org). The objectives of the MAC include promoting sustainable use of coral reefs through the responsible collection of marine life and ensuring the health and quality of marine life during transport, in addition to sustainability of the marine aquarium industry, fisheries, and coral reefs.

Global Aquaculture Alliance The Global Aquaculture Alliance (GAA) developed the Responsible Aquaculture Program (RAP), based, in part, on the FAO Code of Conduct for Responsible Fisheries. The initial focus of the GAA was on responsible shrimp farming, although it is expected that elements of the RAP will be applied to other species (www.gaalliance.org). The RAP for shrimp aquaculture includes nine codes that address the following topics: mangroves, site evaluation, design and construction, feeds and feed use, shrimp health management, therapeutic agents and other chemicals, general pond operations, effluents and solid wastes, and community and employee relations. The initial goal for RAP was to establish a certification system that would allow eligible products to display an ecolabel. The GAA Board of Directors determined this approach was too costly, complex, and prone to liability. The RAP has therefore remained a voluntary and educational program. However, the Aquaculture Certification Council, Inc. is a recently formed non-profit organization that reviews the production processes of shrimp farming, based on the RAP of the GAA. It is an international organization and is focusing almost exclusively on certification with on-site inspections and effluent sampling, targeting shrimp buyers and not the ultimate consumers (www.aquaculturecertification.org).

The Marine Stewardship Council The World Wildlife Fund (WWF) teamed up with Unilever, a multinational corporation, to create the Marine Stewardship Council (MSC) in 1996 (www.msc.org). The purpose of the MSC is to accredit world fisheries that are ‘sustainable’. Those that are accredited have the right to place a label on their product informing the consumers that they were harvested in such a fashion. The goal of the MSC is to provide a market-based set of incentives for better management of the world’s fisheries to achieve sustainable seafood production, in contrast to command-and-control management of fisheries. The MSC’s mission statement is to work for sustainable marine fisheries by promoting responsible, environmentally appropriate, socially beneficial, 198

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and economically viable fisheries practices, while maintaining the biodiversity, productivity, and ecological processes of the marine environment, by: • •

• •

conserving marine fish populations and the ocean environment on which they depend; promoting responsible management of fisheries, ensuring the sustainability of global fish stocks and the general health of the marine ecosystem; establishing and promoting the application of a broad set of Principles and Criteria for Sustainable Fishing; providing certification and accreditation services.

The three principles of the MSC are: Principle 1: A fishery must be conducted in a manner that does not lead to overfishing or depletion of the exploited populations and, for those populations that are depleted, the fishery must be conducted in a manner that demonstrably leads to their recovery. Principle 2: Fishing operations should allow for the maintenance of the structure, productivity, function, and diversity of the ecosystem (including habitat and associated dependent and ecologically related species) on which the fishery depends. Principle 3: The fishery is subject to an effective management system that respects local, national, and international laws and standards and incorporates institutional and operational frameworks that require use of the resource to be responsible and sustainable. Based on this mission statement and the three principles noted above, the MSC has created a number of standards that fisheries must meet before they can become certified. Having set those standards, the MSC has accredited a number of certification firms (the third-party independent entities) that then judge the fishery against the standard. Fisheries that have been certified to date include Alaskan salmon; Western Australian rock lobster; Burry Inlet cockles in South Wales, UK; New Zealand hoki; Southwest mackerel handline fishery in southwest England; and the Thames River herring fishery in the UK.

Ecolabels as technical barriers to trade While ecolabels may correct some market imperfections (asymmetry of information between buyers and sellers), they may also be considered technical barriers to trade. Technical barriers have been defined as: ‘regulations 199

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and standards governing the sale of products into national markets that have as their prima facie objective the correction of market inefficiencies stemming from externalities associated with the production, distribution, and consumption of these products. These externalities may be regional, national, trans-national, or global’ (Roberts et al. 1999). Technical trade barriers can be characterized as a subset of ‘social regulations’ (Viscusi et al. 1995). Social regulations are all of those measures adopted by a country to achieve health, safety, quality, and environmental objectives. Regulatory policies that create technical barriers to trade are disciplined by the WTO Agreement on Technical Barriers to Trade (TBT Agreement).Technical specifications can be broadly categorized into three types of standards: packaging standards, process standards, and product standards. Economists generally agree that product standards are more efficient than process standards, since product standards allow firms to choose the technology that minimizes costs that achieves the goal, while process standards do not (Antle 1996). The preamble to the TBT Agreement contained within the WTO states that its objective is ‘. . . to ensure that technical regulations and standards, including packaging, marking and labeling requirements . . . do not create unnecessary obstacles to international trade’. Voluntary ecolabeling programs, such as those discussed in this chapter, are currently legitimate under the TBT Agreement. The TBT Agreement covers two possible technical barriers to trade: technical regulations, and standards (Tietje 1995). Labeling requirements are considered to be standards. A standard refers to a document approved by a recognized body, that provides, for common and repeated use, rules, guidelines, or characteristics for products or related process and production methods, with which compliance is not mandatory (Tietje 1995). The TBT Agreement covers only standards that refer to characteristics for products or process and production methods (PPMs) and applies only to PPMs that are connected with the characteristics of the end product. This definition has been interpreted as applying only to those PPMs that have an effect on the product characteristics such as its quality or performance (Tietje 1995).

Trade implications for ecolabeling of products from marine capture fisheries Trade implications of voluntary, non-regulatory initiatives are related to efficiency, market share, and new market opportunities. Increased efficiency stems from the ability of individual companies to make cost-effective decisions regarding methods used to achieve objectives. If the certification and 200

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subsequent label are easily recognized by consumers, then companies may protect and even enhance their market share (Mullett 1997). In Germany, for example, the environmental label criteria are being increasingly included in specifications set by the public procurement agencies of the Federation, Laender, and local authorities when tendering offers (OECD 1992). Thus, significant positive trade implications are possible under ecolabeling programs. Non-discrimination is the cornerstone of secure and predictable market access and undistorted competition: it guarantees consumer choice and it gives producers access to the full range of market opportunities. Subject to that requirement being met, WTO rules place essentially no constraints on the policy choice available to a country to protect its own environment against damage either from domestic production or from the consumption of domestically produced or imported products (WTO 1998).

Most trade concerns can be met by ensuring transparency in the preparation, adoption, and application of ecolabeling schemes. The Committee on Trade and the Environment of the WTO produced a report on ecolabeling, which endorsed the use of ecolabels as a means to encourage the development of environmentally conscious consumers (WTO/CTE 1996). It was recommended that all ecolabeling programs, even private programs, should maintain transparency. In addition, harmonization across nations is highly desirable to ensure non-discrimination. So far, there are no major initiatives to ecolabel products from marine capture fisheries, other than the MSC. As currently constructed, the MSC applies its principles equally across all nations. Thus, international harmonization is possible. In addition, the process appears to be transparent, at least as demonstrated by the test cases in Western Australian rock lobster and Alaskan salmon fisheries. As time passes, the primary danger to losing harmonization and transparency is the potential growth in the number of ecolabeling programs if stakeholders in marine capture fisheries become disenchanted with the MSC. If that were to occur, then there are additional implications for trade (Morris and Scarlett 1996): •

•

The cost of ensuring that a product meets the different criteria necessitated by different schemes would most likely be higher than the cost of meeting only one set of criteria. There may even be instances where the criteria of two or more schemes are mutually exclusive. When several ecolabels could be applied to an individual product, this would require manufacturers to either package their goods differently for each country where an ecolabel had been awarded or include an array of ecolabels on the same package. 201

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•

•

Ecolabeling programs are likely to reflect the concerns of pressure groups in the country where the label is developed. As a result, ecolabel criteria are likely to favor goods produced locally, and so discriminate against foreign-produced goods. If national governments include ecolabeling as a requirement in their procurement policies, then in the absence of an international ecolabel, the requirement may specify that only the ecolabel issued by the purchasing country’s authority is acceptable.

Larger firms in developed countries may possess an unfair advantage in the practice of ecolabeling seafood products from marine capture fisheries because they may more readily absorb the compliance costs and licensing fees associated with ecolabeling programs. Many types of costs are incurred, including the cost of certification and costs of chain-of-custody certification, as well as possibly maintaining two separate inventories of ecolabeled and non-ecolabeled products. Furthermore, developed countries may be in a position to make significant and costly changes to management systems as required by the principles. A significant concern arises for developing countries. They may not be able to meet the environmental standards other countries set for product groups, afford the costs of certification, or may find it more difficult to comply with all of the ecolabeling programs’ chain-of-custody requirements. Products originating from countries that cannot meet the labeling standards may sell their products in other developing nations where there are fewer consumers willing to pay more for environmentally friendly seafood. In addition, in developed nations where consumers have higher average incomes, and may have a willingness to pay extra for products with an ecolabel, products without an ecolabel will be de facto discriminated against.

Conclusions There is enormous potential for ecolabeling of products from marine capture fisheries to create a market incentive to manage fisheries sustainably. Several benefits accrue to the world community if the potential is realized. First, there will be significant environmental improvement in the marine ecosystem. Second, consumers will benefit as they receive more information concerning the products they purchase, and are able to make informed choices regarding the purchase of those seafood products. Producers of ecolabeled seafood benefit from being able to extract that additional willingness to pay from consumers that they would not ordinarily be able to in an undifferentiated market. Finally, the fishing industry as a whole will benefit as the move 202

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from an unsustainable to a sustainable fishery preserves production and jobs in the long run.

References Akerlof G A, ‘The market for “lemons”: Quality uncertainty and the market mechanism’, Quarterly Journal of Economics, 1970 84:488–500. Aldrich L, Consumer Use of Information: Implications for Food Policy, Food and Rural Economics Division, Economic Research Service, US Department of Agriculture. Agricultural Handbook No. 715, 1999. Antle J, ‘Efficient food safety regulation in the food manufacturing sector’, American Journal of Agricultural Economics, 1996 78:1242–7. Caswell J A, ‘How labeling of safety and process attributes affects markets for food’, Agricultural and Resource Economics Review, 1998 October:151–8. Darby M R and Karni E, ‘Free competition and the optimal amount of fraud’, Journal of Law and Economics, 1973 16:67–88. Holland D and Wessells C, ‘Predicting consumer preferences for fresh salmon: the influence of safety inspection and production method attributes’, Agricultural and Resource Economics Review, 1998 27:1–14. Hooker N H and Caswell J A, ‘Regulatory targets and regimes for food safety: A comparison of North American and European approaches’, in Caswell J A, Ed., The Economics of Reducing Health Risk from Food, Storrs, CT, Food Marketing Policy Center, pp. 1–17, 1996. Johnston R, Wessells C R, Donath H and Asche F, ‘A contingent choice analysis of ecolabeled seafood: comparing consumer preferences in the United States and Norway’, Journal of Agricultural and Resource Economics, 2001 26(1) 20–39. Lancaster K J, ‘A new approach to consumer theory’, The Journal of Political Economy, 1966 74:132–57. Morris J and Scarlett L, Buying Green: Consumers, Product Labels and the Environment, Los Angeles, CA: Reason Foundation, Policy Study No. 217, November 1996. Mullett G, ‘ISO 14000: harmonizing environmental standards and certification procedures worldwide’, Minnesota Journal of Global Trade, 1997 6:379–400. Nelson P, ‘Information and consumer behavior’, Journal of Political Economy, 1970 78:311–29. Nelson P, ‘Advertising as information’, Journal of Political Economy, 1974 81:729–54. Organization for Economic Cooperation and Development (OECD) Environmental Labelling in OECD Countries, Paris, France, 1992. Roberts D, Josling T E and Orden D, A Framework for Analyzing Technical Trade Barriers in Agricultural Markets, Market and Trade Economics Division, Economic Research Service, US Department of Agriculture, Technical Bulletin No. 1876, March 1999. Stigler G, ‘The economics of information’, Journal of Political Economy, 1961 69:213–25. Tietje C, ‘Voluntary eco-labeling programmes and questions of state responsibility in the WTO/GATT legal system’, Journal of World Trade, 1995 29:123–58. 203

THE INTERN ATION AL SEAFOOD TRADE United States Environmental Protection Agency (USEPA), Environmental Labeling: Issues, Policies, and Practices Worldwide, Office of Prevention, Pesticides, and Toxic Substances, EPA 742-R-98-009, December 1998. Viscusi W, Vernon J and Harrington Jr J, Economics of Regulation and Antitrust, 2nd edn, Cambridge, MIT Press, 1995. Wessells C R and Anderson J G, ‘Consumer willingness to pay for seafood safety assurances’, Journal of Consumer Affairs, 1995 29:85–107. Wessells C R, Kline J and Anderson J G, ‘Seafood safety perceptions and their effects on consumption choices under varying information treatments’, Agricultural and Resource Economics Review, 1996 25:12–21. Wessells C R, Cochrane K, Deere C, Wallis P and Willmann R, ‘Product certification and ecolabeling for fisheries sustainability’, FAO Fisheries Technical Paper 422, Rome, Italy, FAO, 2001. World Trade Organization, Committee on Trade and Environment, Report of the WTO Committee on Trade and Environment, Geneva, WTO, 1996. World Trade Organization, Trade and Environment in the WTO: Background to WTO Work on Trade and Environment (www.wto.org), 1998.

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Appendix International trade in shrimp: A case study Michael J. Bush

Introduction his appendix presents a case study that distills the experiences of a seasoned seafood trader. The author, Mike Bush, gained extensive experience in seafood procurement during his years at Long John Silvers, Inc. and Darden Restaurants (Red Lobster, Olive Garden, Bahama Breeze, and Smokey Bones). He is currently a partner at Endeavor Seafood. This case study presents a broad array of issues that the seafood trader must understand and manage. The study concludes by leaving the reader with the dilemma of what he/she might do if faced with the situation that unfolds throughout the following scenario. The answer depends on one’s willingness to accept risk, the degree of trust in one’s business relationships, and a complete understanding of the expected costs and benefits. This approach presents a hypothetical situation reflecting a real-world dilemma. It is significantly different from the rest of the book in style and character, but hopefully it will bring a sense of realism to the relatively academic presentation heretofore.

T

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A shrimp trader’s dilemma Bill Woodruff was driving to the Blue Star Diner for an early morning breakfast meeting with Eddie Ray, one of his old co-workers. Bill and Eddie had worked together in the purchasing department at X Food Service (XFS), a $3 billion broad-line food service distribution company based in North Carolina. Woodruff was the senior purchasing manager responsible for meat and poultry at XFS. He was considered a rising star at the company and had received a lot of recognition over the past year for some of the innovative strategies that he had implemented within his department. Eddie had been the long-time seafood purchasing manager and had retired six weeks earlier after almost 30 years of service with XFS. Eddie had just returned to North Carolina from an extended trip to the Florida Keys where he had spent days on end casting for bonefish. Bill valued Eddie’s opinion and had asked him to meet this morning to discuss an important recommendation that he was scheduled to make later the same day. Four weeks earlier, Bruce Powers, XFS’s Vice President of Purchasing, had asked Bill to step into his office. Bruce had been very pleased with the fresh ideas that Bill had brought to the purchasing group. One concept that Bill introduced was the idea of collaborative planning forecasting and replenishment. Bill’s strategy involved reducing his poultry supplier base from three companies to just one, and committing to work a lot closer with the remaining supplier. This included the sharing of proprietary inventory data and usage forecasts. Management was a little skeptical at first. However, by sharing this information Bill was able to drastically reduce inventory levels, improve quality, reduce stock-outs, and achieve improved pricing. Bruce motioned for Bill to take a seat. Bruce was a ‘no nonsense guy’ and he got right to the point. He informed Bill that he was very pleased with his results in the poultry area and that other senior-level executives were starting to take notice. Bruce said that senior management had been questioning their seafood program for years. Most didn’t understand it and were troubled by the vast array of small suppliers, the incredible volatility in pricing, and the inconsistent supply of key items. Bruce indicated that with the recent retirement of Eddie Ray, he wanted Bill to assume the added responsibility for managing XFS’s seafood purchasing program. He wanted Bill to place a special emphasis on the shrimp category. At $60 million annually, shrimp was the largest and most important component of XFS’s seafood purchases. The bulk of these purchases were farm-raised black tiger shrimp from Thailand and Vietnam. Eddie had established good relationships with several of the top seafood importing companies in the US. These companies had a lot of experience in the international trade of seafood products and had kept Eddie out of trouble many times when supplies were short. 206

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However, as Bruce spoke with Bill, he indicated that he wanted to take the shrimp program to a new level . . . ‘Bill, we are very happy with your work in poultry.We think your innovative ideas have a lot of merit for seafood as well. Basically, Bill, we want to get as close as we possibly can to the primary producers. Eddie was a good man, but he didn’t have the drive and I think he was a little too cozy with his small group of importer buddies.With our volume we shouldn’t be dealing with importers and brokers.We need to eliminate the middleman. I want you to pull together some ideas on how to achieve this and be prepared to give me your recommendation in four weeks.We want to move quickly. There’s money on the table.’

Bill was excited about his expanded role in the company and looked forward to stepping into the world of international trade; however, he did have some reservations. He recalled Eddie’s constant grumbling about exchange rate fluctuations, logistical challenges in foreign ports, FDA rejection and other quality issues, uncertain shipment dates, and a colorful assortment of exotic diseases that caused dramatic swings in supply. Bill didn’t know much about seafood, but something told him that this would not be as easy as Bruce thought. The first thing Bill set out to do was to learn as much as he possibly could about his current vendor base and the global shrimp industry. His first call went to Todd Sharpe, owner of Endeavor Seafood, a $100 million shrimp importing company with a customer base weighted towards retail supermarket chains. Bill had met Todd many times over the last few years during his visits with Eddie. Bill liked Todd. He was a ‘down-to-earth’guy and seemed to be very knowledgeable and passionate about the shrimp business. He also recalled that Eddie had leaned heavily on Todd for market information and that Todd was usually right on the mark. This allowed Eddie to focus on some of the other day-to-day logistical challenges associated with the distribution business, such as late trucks and missed deliveries, and still remain well informed on the market. Once Bill got Todd on the phone, he explained his expanded role at XFS and indicated that he wanted to revisit the structure of the shrimp program. Todd indicated that he was open to any ideas Bill might have. Todd openly stated that XFS’s food service business complemented his retail business rather well and it allowed him to buy a broader range of sizes, which helped him achieve very good pricing from his select group of core suppliers. Todd indicated that he concentrated almost all his purchasing volume with one Vietnamese and two Thai suppliers. His current customer base, including XFS, allowed him to essentially take almost all the production from these three suppliers. He said that this made him important to his suppliers and 207

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his suppliers important to him. He rarely had quality problems or missed shipments, and, when something did go wrong, it was always resolved quickly and fairly. Todd indicated that his business hadn’t always run so smoothly. He had learned the hard way. He had made a lot of mistakes and lost a fair amount of money in the early days. He indicated that he used to deal with a wide range of suppliers, and his lack of focus cost him dearly. Todd barely escaped bankruptcy back in the early 1990s when three container loads of his shrimp were rejected by the USFDA after testing positive for salmonella. He had given a new supplier a chance after receiving an exceptionally low offer price. He didn’t know the supplier well and had spent little effort in communicating his requirements. The supplier had overextended himself and was in a very weak financial position. When the FDA rejected the containers, the supplier was not in a position to pay the claim and subsequently went out of business. Todd was forced to re-export the product at a fraction of his initial cost. The financial setback forced Todd to lay off his entire staff, and it took him over two years to rebuild his business. Todd indicated that the business was all about risk management. The margins weren’t particularly high, but if you worked with quality suppliers, kept abreast of changing market conditions, continued to turn your inventory, had honorable customers, and kept a constant focus on cost containment, you could do all right. Bill felt like he could rely on Todd as a supplier. He told Todd that he wanted to contract out his entire annual shrimp volume to just a few suppliers. Todd said that he would be very happy to participate, but that he could not contract a fixed price given the volume and time frame. He explained to Bill that the industry lacked the vertical integration of the poultry industry. Shrimp farmers, particularly in Asia, were small independent operators who typically sold their production to the highest-bidding processor. It was virtually impossible to get a processor to commit to a longterm, large-volume production contract, as they didn’t own the farms. And the farmers, for the most part, were too small to contract with for any meaningful volume. If you did find a processor who was willing to provide a longterm pricing contract, you were most likely positioning yourself for disappointment. If prices went up, you might be pleased with your deal until you realized that your supplier could no longer buy the raw material and was forced to either not deliver or go into bankruptcy. If prices went down, you would be disappointed, as your competitors would have significantly lower costs than you. Bill was not particularly pleased with this feedback, but he trusted Todd and did see his point. Bill gave Todd his shrimp usage estimates for the next 12 months and asked him to get back to him with his ideas on how he would structure the program. Next on Bill’s list was to touch base with a few suppliers in Asia. It was 208

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time to ‘eliminate the middleman’, as Bruce would say. Bill had attended a major international seafood show with Eddie the year before. Eddie had introduced Bill to several Thai shrimp processors who sold product indirectly to XFS through another major importer. Bill had a very favorable impression of one these processors in particular, a Mr Potaya. Bill found Mr P’s card in his Rolodex and started to dial his number when he recalled the 12-hour time difference. Bill stuck Mr P’s card in his shirt pocket and decided that he would have to call him from home that evening. Bill knew his wife wouldn’t be too happy about this, she already thought he worked too many hours. Bill thought, ‘Oh well, I won’t need to do this too often . . . or will I?’ That evening, after Bill got his family to bed, he pulled out Mr P’s card and dialed Thailand. Finally, after speaking with three different people, Bill got through to Mr P (Bill would have to learn the correct pronunciation of Potaya). Mr P remembered meeting Bill before and was very pleased to receive his call. After exchanging pleasantries and updating Mr P on the recent changes at XFS, they began discussing a shrimp program. Mr P said he would be happy to begin quoting Bill on a regular basis. Bill once again indicated that he was interested in contracting his needs out on an annual basis. As with Todd Sharpe, Mr P said that he would be happy to guarantee the volume, but he could not fix the price. He explained that most processors, including his company, did not operate their own farms, and that most of the independent farmers were not willing to fix the price on their production. They would rather sell into the centralized market and accept the price risk with the hope of receiving higher prices. Mr P indicated that there were high expectations that the increasing demand for head-on shrimp from China would drive prices higher for the Chinese New Year. He also indicated that stricter EU importing regulations would exclude several other tiger producing countries from shipping to Europe this year, thus increasing the demand for Thai shrimp. In addition, Mr P cited continued problems with the white spot virus in South America were sure to keep prices moving up. In summary, Mr P said the Thai shrimp industry was very bullish on pricing. However, he did indicate that his uncle had a few hundred hectares of ponds and he might be willing to do a shorter three-month contract. This was not exactly what Bill wanted to hear, but he thought this might be a good place to start. Bill said ‘OK, can you get me a quote for 600 000 pounds of 16–20 count and 800 000 pounds of 41–50 count headless shrimp? I would like to take delivery of 3 containers per week over the 3-month period, and our terms are net 30 days’. Mr P replied that he could have all 36 containers shipped by the end of the 3-month period, but the size breakdown and payment would be an issue. His uncle would be harvesting a lot of 31–40 count shrimp and Bill would need to take at least 300 000 pounds of this size in order to make the deal work. He also said that, due to working capital needs, he could only 209

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accept an ‘LC at sight’. Bill was not sure exactly what this meant, but he was tired after a long day at the office and decided not to pursue it at this late hour. He would have to discuss this with his CFO tomorrow. He breathed a heavy sigh and told Mr P he would have to give this some more thought. He thanked Mr P for his time and asked him to go ahead and email a quote. Tired and frustrated, Bill flopped into bed at 12:15 a.m. Early the following morning, Bill called Emma Nichols, XFS’s Chief Financial Officer. He gave Emma a quick overview of what he was trying to do and they scheduled some time for later that morning. Prior to joining XFS, Emma had worked in finance with a large produce importer, so she had a fairly good understanding of the challenges with the international trade of perishable food products. She recalled the complexities of importing produce owing to the number of regulatory agencies involved. The highly perishable nature of produce added another level of risk, but at least the margins were good. After dealing with a few inventory challenges, Bill walked down the hall to Emma’s office. He recapped the discussion he had with Mr P the night before. Emma gave Bill a quick lesson on International Letters of Credit. She said that XFS was currently not using LCs with any of its vendors. She was willing to give it a try with the shrimp program; however, she suggested that Bill make sure the improved margins of ‘going direct’ outweighed the risks associated with international trade. She suggested that Bill work out a spreadsheet with all the associated costs of importing directly and compare this with the cost of continued business with one of their current valued suppliers. She gave Bill some estimates for the cost of opening the LC and the associated carrying costs. She also told Bill that this would most certainly drive up their inventory and have an impact on their balance sheet. Their bank and investors would no doubt want an explanation, but she was confident that she could handle them. Then she directed Bill to Ally McAffee in Risk Management. ‘Ally can help you with cost estimates for marine cargo and FDA rejection insurance.We certainly can’t afford to lose a container of shrimp at $200 000 a pop. Once you pull it all together, let’s sit down and review the numbers with Bruce. And Bill, you do realize that we don’t have an importing department?’ Have you given any thought to who is going to do all the work?’

As Bill was trudging out the door, Emma remarked, ‘By the way Bill, are you feeling OK? You look awfully tired today’. Emma was right about the lack of administrative support, Bill had already been thinking about the added workload. He spent a good part of his day dealing with operational issues and ‘putting out fires’ throughout the 210

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divisions. How would he ever have time to manage the complexities of an international sourcing program? As Bill approached Ally’s desk, the first thing he noticed was the large amount of paper scattered throughout her work area. It appeared that the XFS email directive, which stressed paper reduction and a push toward a paperless work environment had not reached Ally. Bill quickly brought Ally up to speed on his project. She immediately explained to Bill how busy she was already and clearly wanted no part of this project. She told Bill she would try to pull the information he needed together by next Friday, but she couldn’t make any promises. She stated frankly that this was outside her normal responsibilities, and she was surprised that Emma suggested he bother her with this assignment. As Bill was heading out the door he thought he heard Ally mumble, ‘Eddie never did it that way’. Bill was starting to wonder if this project was worth the trouble. After all, he was just getting his meat and poultry programs under control and he was starting to enjoy the extra time that was available for strategic planning. In fact, one afternoon last week he actually slipped out of the office early to have a ‘strategic planning session’ on the golf course with his poultry supplier. Next on Bill’s list was to check in with his Quality Assurance department. Bill headed down to the QA lab to see George Sullivan. George and Eddie had worked very well together. Between them they had over 50 years’ worth of seafood purchasing and quality assurance experience. George knew seafood. Earlier in his career he had traveled abroad extensively, setting up processing plants and providing instruction on quality inspection standards. More recently, George had gotten very involved in establishing XFS’s Hazard Analysis Critical Control Point (HACCP) programs and establishing guidelines for suppliers. Bill found George explaining a micro report to one of his new inspectors. Once George was finished, Bill asked if could spare a few minutes for a cup of coffee. Bill quickly brought George up to speed on his shrimp project. George was pleased that he might have the opportunity to get back to southeast Asia. He had some old friends there that he hadn’t seen in years. However, he cautioned Bill that if they were going to be the importer of record, they had a lot of work to do and the risks would be significant. He reminded Bill that from a quality standpoint, the FDA was the least of his worries. XFS had very demanding QA standards and George took his position very seriously. George viewed his department as the last line of defense between a substandard product and the customer. Currently, when George’s department rejected a shipment, the supplier was notified and was required to pick up the rejected product within two business days. George asked Bill if he had given much thought to what would happen if he rejected product that Bill had imported and already paid for via Letter 211

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of Credit. It would be a long and painful process to resolve a return with a supplier halfway around the world. If this wasn’t concern enough, George indicated that he would need HACCP programs, written in English, for every supplier that Bill wanted to use. George also stated that he would not feel comfortable supporting this program unless he had the opportunity to personally perform initial QA audits at each of the participating plants. Bill thanked George for his time, and, as he left the QA lab, wondered whose budget these trips would come out of. Within a couple of weeks, Bill had received all the information he had requested. Per Emma’s suggestion, Bill started a spreadsheet to compare his numbers (see Table A.1). He was sure Todd achieved better C&F pricing from his suppliers owing to his long history with them and the fact that he had greater combined purchasing power. But Bill knew he could more than make up for this by eliminating the importers’ margin. However, once he included all his associated importing costs, he realized that his savings per pound

Table A.1

Cost comparison 41–50 Count headless shell-on tiger shrimp 800 000 pounds

Product quantity

Direct (Mr P) $/lb

FOB origin cost Ocean freight C&F product cost Import costs Cold storage – in & out fees Cold storage $0.025/lb/mo for 2 months Clearance (custom brokerage, harbor maint., etc.) Drayage Letter of credit fees @ .26% Marine cargo insurance FDA insurance Subtotal Interest calcluation Days on water Avg. days in inventory Interest rate Interest cost FOB US cost Freight to individual distrubution centers Delivered cost ($/lb)

212

Indirect (Todd Sharpe) $/lb

$3.170 $0.150 $3.320 $0.025 $0.050 $0.010 $0.010 $0.009 $0.020 $0.050 $3.494 35 30 10% $0.063 $3.557 $0.06 $3.62

$3.75

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weren’t really as big as he expected. But then again, he was buying close to 15 million pounds of shrimp per year; so even a small saving per pound was significant. Just as Bill was starting to feel pretty good about his recommendation, he began recalling all the associated risks. How could he associate a cost with the risks? This was going to be tough. He decided he better call Eddie. The old guy knew the business. Bill had contacted Eddie on his mobile phone in Florida. Eddie said he would be glad to discuss the situation with Bill, but he wouldn’t be back in North Carolina until late the evening before Bill was scheduled to give his recommendation to Bruce. They agreed to meet at the Blue Star for breakfast on the morning after Eddie’s arrival. This would give Bill about three hours to finalize his thoughts before he had to report to Bruce. Bill pulled into the Blue Star Diner parking lot at 7:30 sharp. As he walked into the Diner he saw Eddie looking tanned and relaxed, laughing with one of the waitresses. As he walked toward Eddie, he wondered if Bruce had mistaken Eddie’s easy-going steady nature for ‘a lack of drive’. Based on Bill’s findings over the past several weeks, you would need nerves of steel to stay in seafood for as long as Eddie had and still maintain your sanity. Eddie greeted Bill with a big smile and a warm embrace. After settling into a booth and catching up on Eddie’s fishing success, Bill quickly laid out the situation for Eddie. Eddie had been down this path before. He told Bill that he knew management thought his seafood programs were pretty shallow. Could they have been stronger? Maybe, but much of the progress made in the international seafood arena had happened fairly recently. Communication had definitely improved, especially with the internet. It was now fairly easy to get good, timely information from your overseas suppliers. The plants themselves had also improved significantly over the years and this was reflected in product quality. Were there still risks? Absolutely. Eddie indicated that it was definitely achievable, but he wasn’t sure that management fully appreciated the commitment in terms of financial and human resources. He also questioned whether XFS should get involved in importing. ‘After all’, he said, ‘we are a distribution company. Our main function is to efficiently move product from our warehouses to our customer’s kitchen, and we are very good at it’. Eddie’s candid feedback had helped Bill bring some clarity to the issue at hand. But, as he drove out of the Blue Star parking lot, he still wasn’t sure. Did the savings of a direct importing program outweigh the costs and risks? Would sticking with his current supplier base make the most sense for a distribution company like XFS? Would Bruce respect this option, or would he think Bill was just trying to take the easy way out? Bill was definitely feeling the pressure now. He had been formulating his ideas for four weeks and here he was with less than three hours to go – and he still hadn’t decided. 213

Index

Aarland, K., 154, 166 Abbors, T., 66, 83 Aberdeen, Scotland, 9 Abrams, M., 112, 127 Africa, 36, 45, 47–8, 50, 74, 77 akami, 69 Akerlof, G.A., 194, 203 Alaska, 45, 48, 63–4 Albaum, G., 138, 149 Aldaz, N., 142, 150 Aldrich, L., 195, 203 American Fisheries Act, 115 American options, 124 anchoveta/anchovy, 17, 19, 50 anchovy, Japanese (Engraulis japonicus), 18 Anderson, J. Gray, 195, 204 Anderson, J.L., 38, 62–4, 68–9, 84, 102, 106, 126–7, 136, 140–3, 145–53, 157, 165–6, 184, 191, 195 Anderson, L.G., 96–7, 106 anti-dumping, 63, 66, 172, 181, 183–6, 200, 203 Antle, J., 200, 203 Appert, Nicholas, 8 aquaculture, 2, 4–5, 12, 14–17, 22, 25–31, 33, 45–6, 57–63, 71, 105, 115, 146, 151–65, 184–6

Argentina, 9, 61, 78, 82 Arnason, R., 115, 127 Asche, F.A., 66, 84, 144–5, 148–9, 195, 203 Asia, 4, 15, 23, 27, 46–7, 51, 54, 58, 62, 71, 79, 156 Atkins, F., 145, 149 Atkinson, B., 147 auctions, 107, 109, 111–13, 115 Augusta Raurica, 6 Australia, 11, 34, 51, 62, 78, 105, 115 autoregressive integrated moving average (ARIMA), 146 autoregressive processes, 145 backward bending supply, 96, 104–5 Bahama Breeze, 114, 205 Bahamas, 79 Balhor, A., 110, 127 Baltimore, Maryland, 9 Bangladesh, 22–3, 25 barbels, 22–3 Barents Sea, 75–6 bargaining associations, 113 bargaining groups, 107 Barrett, S., 188, 191 Basel, Switzerland, 5 basis, 119–20

214

INDEX Basque cod fisheries, 74 Basques, 8 bass, hybrid striped, 157, 164 striped, 102 Bay of Biscay, 76 Bekker-Nielsen, T., 6–7, 12 Belgium, 61 Bene, C., 145, 148 Bergen, Norway, 8, 170, 172, 188–9, 191 Best Aquaculture Practices, 198 Bestor, T., 110, 127 Bettencourt, S., 145, 148 Bill Atkinson’s News Report, 147–8 billfish, 35 bioeconomics, 94, 96, 98, 105 biotechnology, 2, 12, 160 Birdseye Frozen Food Co., 10 Birdseye, Clarence, 10 Bjørndal, T., 142, 149, 154, 166 Black Sea, 67 bonito (Sarda spp.), 34–5 brackish water culture, 23 Brazil, 37, 79 Bremen, Germany, 8 Bremmes, H., 145, 148 Bretton Woods Agreement, 167 Bristol, England, 8 Brooks, P., 140–1, 148–9 bubonic plague, 74 Burry Inlet cockles, 199 Bush, M.J., 205 Bush, President, 180 Caboto, Giovanni (John Cabot), 8, 74 Cadren, M., 145, 148 California, 9, 110 call (options), 117, 124 Can Manufacturers Institute, 13 Canada, 9–10, 26, 30, 39, 47, 51–2, 54, 57, 61–2, 64–6, 75, 79, 102, 113–14, 152, 185, 188 canning/canned/cannery, 8–9, 45, 62, 66–9 Cape Hatteras, NC, 74 Cape May, New Jersey, 76 capelin (Mallotus villosus), 20–1 Capps, O., 140, 148–9 capture fisheries/fishery, 14–16, 20, 30–2, 63, 71, 200–1 Caribbean, 47–50, 74, 189 carp, 12, 20, 23–4, 105, 152 bighead (Aristichthys nobilis), 23 common (Cyprinus carpio), 23 crucian (Carassius carassius), 23 grass (Ctenopharyngodon idellus), 23 silver (Hypophthalimichthys molitrix), 23

carpet shell, Japanese (Ruditapes phillpinarum), 23 Carroll, M., 68–9, 84, 108, 110, 127, 143, 148–9 carrying cost, 119 Carter, C., 121, 127 cash market, 119–22, 124, 126 Caswell, J.A., 195–6, 203 catcher/processor vessels, 46 catfish, 20, 46, 57, 105, 145, 147, 151–2, 156–8, 160–4, 184 catfish, channel (Ictalurus punctatus), 20, 45, 153 Catholic, 8 cattle, 116 caviar, 179 Central Eastern Pacific, 67 cephalopods, 55, 81–3, 91 Changed Circumstances Review, 183 Charnovitz, S., 180, 191 Chicago Board of Trade (CBT), 116 Chicago Mercantile Exchange (CME), 116 chicken, 46 Chile, 10–11, 17, 20, 23, 30–1, 40, 45, 52, 61–7, 105, 153 China, 5, 11–12, 17, 20, 22, 25, 27–8, 34, 37, 38–9, 45, 48–9, 52, 54, 57–60, 72, 75, 77, 79–80, 82–3, 152, 209 chloramphenicol, 60 choice models, 144 cichlids (Cichlidae spp.), 37 clams, 1, 9, 102, 152, 163 Clark, T., 75–7, 84 Clinton, President, 181 closed-system, 164 Coalition for Fair Atlantic Salmon Trade, 184–5 Cochrane, K., 204 cockles, Burry Inlet, 199 cocoa, 4 cod (Gadus spp.), 1, 7–8, 21, 32–3, 51, 52, 54, 61, 63, 71–2, 74–6, 78, 102, 105, 113, 141, 145, 148, 152, 162 cod, Atlantic (Gadus morhua), 19, 40, 51, 54, 72–5, 160 coefficient of determination, 139 coffee, 4 Coffee, Sugar and Cocoa Exchange (CSCE), 116 cointegration models, 145 community quotas, 115 ConAgra, 46 Conference of Parties, 178 Congo, 71 conjoint analysis, 145

215

INDEX conservation, 100, 180 consignment sales, 107, 108, 114 consumption, 151–2 Convention on International Trade of Endangered Species (CITES), 167, 173–4, 176–9, 187–8, 191 co-operative, 11, 113, 115 Cordier, J., 121, 127 corn, 4 cost, 155, 157 broiler production, 159 catfish production, 156 farm, 156, 159 harvest, 158 processing, 153–4, 156, 158 production, 153–4 storage, 119 transportation, 119 Costa Rica, 37, 156, 188 cotton, 116 Countervailing Duties, 172, 181–4, 186 crab, 9, 19, 48, 51, 55, 78–81, 90, 151 Atlantic blue (Callinectes sapidus), 79–80, 113, 186 blue swimmer (Portunus pelagicus), 186 Dungeness (Cancer magister), 80 Indo-Pacific swimming (Charybdis hellerii ), 186 king (P. camtschaticus), 79–80 legs, imitation, 10, 45, 77 snow, 52 snow (C. bairdi ), 80 snow (C. opilio), 80 swimming, 79, 173, 184, 186 tanner, 79 crawfish, 173 credence goods, 194–6 crew share, 160 croakers, 19 Crocker, D., 109, 111, 127 cross-price elasticity, 139–41 cross-price flexibility, 142 cryogenic freezing, 10 Cuba, 79 cuttlefish (Sepia spp.), 82 cyprinids, 19, 23 Daggert, Ezra, 8 Darby, M.R., 194–5, 203 Darden Restaurants, 114, 205 Deere, C., 204 demand, 136–41 Denmark, 39, 54, 57, 64–6, 74–6, 78, 180 derivatives, 116, 125–7 devaluation, 47

deZanger, A., 74, 84 Di Marzio, M., 64, 84 directional accuracy, 146 discounts, 125–6, 129, 131 disease, 29, 57, 62, 153 Dispute Settlement Understanding, 170 distant-water fleets, 10, 16, 46 dolphin, 70–1, 172, 188 ‘dolphin-safe’ label, 71, 189–90 Donath, H., 144, 149, 195, 203 driftnets, 70 dummy variable, 141 dumping, 66, 173, 181, 183–6 Durance, Peter, 8 Eagle Cliff, Washington, 9 Eastern Europe, 47, 51–2 ecolabel/ecolabeling, 71, 144, 193–4, 197–202 Ecuador, 11, 26–7, 34, 37, 40, 50, 57–8, 60–1, 156 eel, 48 efficiency, 11–12, 117–18, 161–2, 165 Egypt, 38 El Niño, 17, 20, 45 electronic seafood trading, 126 embargo, 71, 188 endangered species, 173–81 Endeavor Seafood, 205 England, 4, 8–9 England, Southwest handline fishery, 199 Engle, C.R., 153, 157, 166 enhancement, 94, 102, 104, 105, 163 environmental attributes, 197 environmental carrying capacity, 97 Environmental Exceptions, 173 environmental standards, 202 Europe, 8, 15, 54, 57–9, 61–6, 71, 77, 107, 145 European options, 124 European Union (EU), 4, 47–8, 51, 53–4, 60, 63–4, 66, 75 excess demand, 95, 98, 100 excess supply, 95 Exclusive Economics Zones (EEZs), 10–12, 17, 33, 35, 39–40, 65, 68, 71, 76 exercise price, 124 ex-farm price, 160 expedited determination, 183 experience goods, 194–6 expiration date, 117, 122, 124 exponential smoothing, 145 exports, 41–2 externalities, 200 ex-vessel price, 112, 148, 160

216

INDEX factory-trawlers, 10, 77, 115, 158–9 Faeroe Islands, 61, 75 fair value, 183, 186 Fairtry, 10 FAO Code of Conduct for Responsible Fisheries, 198 fat, 143 feed, 2, 12, 46, 74, 102, 153–5, 157–60, 163, 198 fermented fish, 6 final determination, 182 fish roes, 46 fish stocks, 99–102 fishing effort, 97, 99, 101–2 fishmeal, 20, 48–51, 77, 92 flexible can (foil pouch), 10 Flick, G., 8–9, 13 flounder, 102, 113, 141, 145, 148 flounder, summer, 148, 157 foil pouch, 10 Fong, Q.S.W., 62, 145, 149, 153, 166 Ford, President, 180 foreign fishing, 40 Forest Stewardship Council, 197 forward contracting, 107 France, 9, 39, 54, 61, 68, 75, 77–8, 80, 188 free trade, 95 freezing and refrigeration technology, 9–10, 45 French Guyana, 145 fruits, 4, 8 fuel, 158–60 Fulton Fish Market, 113 futures, 107, 116–35 garum, 6 Gaul, 7 General Agreement on Tariffs and Trade (GATT ), 10, 71, 167–74, 177, 186–91 genetically modified, 193 Georges Bank, 40 Germany, 4, 8, 39, 54, 61, 66, 72, 77, 180, 201 Gillig, D., 148–9 gillnet, 113, 163 Global Aquaculture Alliance (GAA), 197–8 Gloucester, MA, 112 Godfrey, M., 112, 127 gold, 126 Gordon, D.V., 145, 149 Grafton, Q., 51, 54 grain, 4, 116, 118–19 Green, B.W., 157, 166 Green, P., 138, 149 Greenberg, J., 79, 84

Greene, W., 138, 149 Greenland, 57, 60–1, 74–5 Griffin, W., 140, 148–9 groundfish, 19, 33–4, 55, 71–4, 75, 78, 88, 112–13, 158 Gu, G., 146, 149 Gulf of Biscay, 74 Gulf of Mexico, 148 Gustafson, R., 166 Guttormsen, A., 146, 149 haddock (Melanogrammus aeglefinus), 32–3, 40, 71–2, 76, 78, 160 hake (Merluccius spp.), 32–3, 40, 71–2, 77–8 Argentinean (M. hubbsi ), 72 Cape (M. capensis), 72 Cape (M. capensis and M. paradoxus), 78 European (Merluccius merluccius), 72, 78 Pacific (M. productus), 78 South American (M. hubbsi ), 78 true (Merluccius), 77–8 West African (M. senegalensis), 78 Haley, M., 166 halibut, 112, 160 Hamburg, Germany, 8 Hannesson, R., 97, 106, 145 Hanseatic League, 8, 74 Hapgood, A.S., 9 harpoon, 1, 108 Harrington, J., 204 harvest-effort relationship, 96 Harvey, D., 166 Hatchery, 62, 102–4, 114 Hatfield Marine Science Center, 166 Hawaii, 112, 143, 197 hedge ratio, 120–2 hedge/hedging, 118–24 hedonic price models, 142–3 herring, 20 roe, 1 Thames River, 199 Herrmann, M., 140, 149 Hilo, HI, 112 hoki, 77, 199 Holland, D., 195, 203 Honduras, 37, 157 Hong Kong, 145 Honolulu, HI, 112 Hooker, N.H., 195–6, 203 Hume brothers, 9 Iceland, 7, 33, 74–6, 105, 115 imitation crab legs, 77 income elasticity, 140

217

INDEX India, 17, 22, 25, 28, 57–60, 189 individual negotiations, 107, 110, 113, 115 individual transferable quotas (ITQs), 46, 115, 163 Indonesia, 17, 19, 23, 26, 28, 34, 37, 57, 59–60, 67, 80, 152, 184, 186 Information Resources Inc., 148 International Commission for the Northwest Atlantic Fisheries (ICNAF), 180 International Monetary Fund (IMF), 168 International Trade Organization (ITO), 168 International Whaling Commission (IWC), 180 internet, 115, 126–7, 213 inverse demand models, 142 Ireland, 66, 78 irradiation, 10 Italy, 39, 54, 66, 68, 78, 80, 83 Japan, 2, 4, 10–11, 17–18, 20, 23, 31, 33–4, 39, 45–9, 51, 54, 57–63, 65, 67–70, 72, 76–7, 79–80, 82–3, 102, 107–8, 111–13, 118, 127, 134, 143, 148, 180 Japanese amberjack or yellowjack (Seriola quinqueradiata), 23 Japanese consumers, 148 Japanese Tuna and Skipjack Association (JTSA), 127 Johnston, R.J., 144, 149, 195, 203 Josling, T.E., 203 Junkus, J., 121, 127 Kamchatka, 9 Kansai Commodities Exchange, Osaka, Japan, 118, 127, 134–5 Karni, E., 194–4, 203 Keithly, W., 140, 149 Kennedy, P., 138, 149 Kensett, Thomas, 8 Killian, H.S., 153, 166 King, J.R., 14, 55, 167 Kinnucan, H., 140, 149 Kline, J., 195, 204 Knapp, G., 63, 84 Koester, V., 187, 191 Korea, 54, 77, 82 Krueger, A., 168–9, 171, 189, 191 Kurlansky, M., 7–8, 13, 74, 84 Kusakabe, Y., 65, 84, 148–9 labeling, 194–202 Lambregts, J., 140, 149 Lancaster, K.J., 195–6, 203 Lantz, F., 145, 148 largehead hairtail (Trichiurus lepturus), 20

Larkin, S., 143, 149 Latin America, 58, 71 Law of the Sea Treaty, 40 Leland, S., 159, 166 Lem, A., 64, 84 Lent, 141 Leuck, D., 166 Leuthold, R., 121, 127 ‘like’ product, 172, 184–5 Lin, B., 140, 149 ling, 77 liquidity, 117, 126 Liverpool, England, 9 loaches, 23 lobster, 1, 9, 51, 54–6, 78–81, 90, 102, 113, 163, 199, 201 American (H. americanus), 78, 80 Australian spiny (Panulirus cygnus), 79 Caribbean spiny (Panulirus argus), 79 European (H. gammarus), 78 Norway (Nephrops norvegicus), 56, 78 rock, 51 Western Australian rock, 199, 201 logistic growth model, 96–7 Lombardi, W., 145, 150 long hedge, 119–23 Long John Silvers, Inc., 205 Longline, 108 Lübeck, 8 lumber, 118 mackerel, 1, 9, 21, 48, 199 Chilean jack (Trachurus murphyi ), 21 chub (Scomber japonicus), 18, 21, 36 Madagascar, 37 Maguro America, 110 Maine, 66, 108 Malaysia, 189 Mali, 37 mangroves, 198 margin, 111, 124, 183 Marine Aquarium Council (MAC), 197 marine mammal, 70, 188 marine reserves, 163 Marine Stewardship Council (MSC), 197–201 Maritime Provinces, 8 Marrakech Agreement, 168 Martin, R., 8–9, 13 MartRnez-Garmendia, J., 14, 39, 55, 68–9, 84, 107, 126–7, 136, 143, 146, 148, 150 Maryland, 9 Massachusetts, 8, 10, 112, 141 material injury, 182–4 Matsuda, Y., 9, 13 Matthews, K., 142

218

INDEX maximum sustainable yield (MSY), 97, 99–104 McClane, A., 13, 74, 84 McConnell, K., 69, 84, 143, 150 mean absolute percent error (MAPE), 146 meat, 4, 8, 118 menhaden (Brevoortia tyrannis), 9, 19 Mexico, 37, 52, 58, 60, 71, 184, 186, 188 Middle Ages, 8 milkfish (Chanos chanos), 23 Millan, J., 142, 150 Miller, J., 166 minced fish meat, 51 minimum prices, 114 minimum variance hedge ratio, 121 Minneapolis Grain Exchange (MGE), 116, 118, 125–8 Mississippi, 151 Mittelhammer, R., 140, 149 Morocco, 82–3 Morris, J., 201, 203 most-favored nation, 172 moving average, 145 Mullett, G., 201, 203 multi-attribute product, 143–4 Multilateral Environmental Agreements (MEAs), 187 mussels, 163, 184 mutton, 9 Myrland, O., 140, 149 Namibia, 72, 78 Napoleon, 8 National Fisheries Institute (NFI), 9, 13 Nelson, P., 194, 203 net exporter, 47–54 net importer, 47–54 Netherlands, 54, 61 nets, 1, 5 New Bedford, MA, 112 New Brunswick, Canada, 9 New England, 8, 145 New Jersey, 76 New York, 110 New York Mercantile Exchange (NYMEX), 116 New York, NY, 8 New Zealand, 11, 51, 62, 72, 105, 115, 199 Newfoundland, 8, 74–5 Nicaragua, 79 Nicherei, 46 Nippon Suisan Kaisha, 46 Nomenclature Committee, 176 Non-discrimination Rule, 172 non-discriminatory trade bans, 190

non-tariff barriers, 93, 173 North America, 8, 15, 75, 77 North Carolina, 108 Northern Europe, 58 Norway, 7–8, 11, 18, 20, 23, 30–1, 33, 39, 45, 54, 57, 61–6, 71–2, 74–6, 105, 153, 180, 184–5 nuts, 4 Oceania, 47–8, 51 octopus, 48, 81–3 oil, 20, 118 Olive Garden, 114, 205 olive oil, 7 on-board processing, 2 open-access (fisheries), 11, 93, 97–100, 105, 115, 163–4 options, 107, 116, 117, 122–6, 129, 131 options premium, 117, 124–6, 129, 131 options writer, 122 orange juice, 116 orange roughy (Hoplostethus atlanticus), 72 Orden, D., 203 ordinary least squares (OLS), 138 organic, 193 organic labeling, 197 O’Rourke, P.D., 157, 166 Osaka, Japan, 108, 118, 127, 134 otoro, 69 overfishing, 4, 20, 45, 98, 105, 164, 199 oysters, 8–10, 12, 23, 163 Pacific cupped (Crassostrea gigas), 23 Pakistan, 189 Parin, M., 13 Paris, France, 113 pasteurized crabmeat, 79 Pauly, D., 17, 38 Pelling Stanley and Company, 9 permanent moratorium, 64 Peru, 11, 17, 20, 40, 71 Philippines, 28, 34, 37, 67 pilchards, 48 pollock, 32, 71–2, 77 Alaska (Theragra chalcogramma), 10, 18, 19, 33, 45, 54, 76–7, 115, 152, 160, 162 Atlantic, 76 pollution, 60 Portland Fish Exchange, 112 Portland, ME, 112 Portugal, 78 post-season adjustment, 114 poultry, 158, 207 pout (Trisopterous luscus), 77–8

219

INDEX prawn, 19, 25, 48–52, 54, 56–7, 85, 143 freshwater (Macrobrachium spp.), 56 northern, 57 Philippine, 143 preliminary determination, 182 price discovery, 115, 117 price elasticity, 139–42 price flexibility, 142 price risk, 118, 120 price transparency, 115 price volatility, 125 Principles and Criteria for Sustainable Fishing, 199 property rights, 11, 105, 160, 164–5 purse-seine, 70–1 put (options), 117, 124–5 quality attributes of food products, 196 quick freezing, 10 quota, 11, 80, 98–9, 105, 115, 142, 165 Ragnow, M., 74, 84 rakes, 1 Reagan, President, 180 recirculating systems, 157 Red Lobster, 114, 205 red meat, 46 redfish, 40 refrigerated railroad cars, 9 refrigerated trucks, 10 refrigeration and freezing, 9, 10, 45 regression, 137–8, 141 Responsible Aquaculture Program (RAP), 198 revenue-effort relationship, 97 Rhode Island, 1, 141 rice, 4 rights-based (fisheries management), 11–12, 46, 105, 115, 165 risk, 118, 120–2, 161, 205, 210 risk management, 117, 208 rod and reel, 108 roe, 62, 74 roe-herring, 48 Roheim, C.A., 193 Roman, 6, 7 Rungis Wholesale Market, 113, 145 Russia, 11–12, 17, 31, 32, 51–2, 63–5, 72, 75–7, 79–80, 102, 152 sablefish, 54 Sacramento, California, 9 safeguard remedies, 181, 186 saithe (Pollachius virens), 76 Salayo, N., 143, 150

salmon, 1, 9–10, 12, 19, 23, 30–1, 45–9, 51, 54–5, 57, 61–6, 86, 102, 105, 114, 144–6, 148, 151, 153–5, 157–8, 160–5, 173, 184–5, 193, 199, 201 Alaskan, 64, 160, 165, 199, 201 Atlantic (Salmo salar), 19, 24, 30–1, 51, 54, 62–6, 144–6, 153, 154, 160 Chilean, 185 chinook (king) (O. tshawytscha), 31, 62, 144 chum or dog (O. keta), 31, 62, 65, 66, 160 coho or silver (Oncorhynchus kisutch), 31, 62, 65, 144, 162 farmed/farming, 19, 46, 54, 61–4, 146, 153, 155, 160, 162, 184–6 hatchery-based ocean harvest, 63 hatchery-released, 31 Japanese hatchery-based, 66 masu (O. masou), 62 Norwegian, 63, 65, 146, 154, 155, 184 organically produced, 66 pink or humpie (Oncorhynchus gorbuscha), 19, 31, 62, 144, 160 sockeye or red (O. nerka), 31, 54, 62, 65, 144 Salmon Trade Alliance, 7, 186, 191 salting/salted, 5, 8, 45, 46 Salvanes, K.G., 145, 149 Sand, P., 187, 191 sardines, 9, 20 Sasao, K., 84 sashimi, 46, 68–9, 108, 110, 143 scallop, 10, 45, 48,148, 152 bay, 141 yesso (Pecten yessoensis), 18, 23 Scotland, 10, 30, 61, 66 sea urchin roe, 54 seafood safety, 195 Seafood Trend, 147 SeafoodReport.com, 146–7, 166 search goods, 194–6 seasonality, 141 Seattle, WA, 112 Seaver, K., 74, 84 seaweeds, 20 seine, 108, 113 Selvanathan, S., 143, 150 Senegal, 37, 71, 82 shark fins, 1, 145 short (hedge), 119–21, 123, 126 shrimp, 1, 10, 12, 19, 23, 25, 28, 45, 48–62, 85, 114, 116–17, 119, 121–6, 138, 142–8, 151, 153, 157, 161–2, 164, 172, 184, 189, 198, 205–9 aquaculture (farming), 25–30, 46, 58–9

220

INDEX black tiger (Penaeus monodon), 23, 58, 116, 122–6 brown, 61, 116 canned, 54, 58–60 coldwater, 57–8, 60–1 common (Crangon crangon), 57 freshwater (Macrobrachium spp.), 56 futures, 121, 125, 127–35 futures contract specifications, 128–35 northern brown, 57 northern white, 57 P. chinensis, 29 Pandalus, 61 pink (Pandalus borealis), 57, 116 white (P. vannamei), 29, 58, 116, 121, 125–6 shrimp–turtle case, 188–90 Simmons, B., 172, 188, 190, 192 smoked/smoking, 8, 45, 63–4, 66 Smokey Bones, 114, 205 smolts, 153–5 Sonu, S., 111, 127 South Africa, 78 South America, 15, 37, 45, 47–8, 50, 54, 77 South Korea, 34, 69–70, 82 Spagnolo, M., 142, 150 Spain, 7, 10–11, 34, 39–40, 54, 61, 67, 72, 76, 78, 80, 82–3 spear, 1, 5 speculators/speculators, 118, 125 Speer, L., 179, 192 Spitzbergen, Norway, 75–6 Springfield, Massachusetts, 9 squid, 18, 48, 81–3 Japanese flying (Todarodes spp. and Ommastrephes spp.), 18, 82 state-space modeling, 146 steelhead, 31, 65 Stigler, G., 194, 203 Strait of Belle Isle, 76 Strand, I., 69, 84, 143, 150 strike price, 117, 124 sturgeon caviar, 179 styrofoam packaging, 10 subsidies, 66, 93, 95–6, 98, 104–5, 182–3, 185 Sunset Review, 184 surimi, 10, 21, 45–6, 54, 77, 115, 143 sushi, 69, 110, 145 sustainability, 198–9, 202–3 Switzerland, 6 swordfish, 1 Taiwan, 34, 67, 69–70, 82 Tally, K., 147

Tanzania, 37 Tariff Act of 1930, 181–2 tariffs, 63, 67, 80, 93, 99–100, 102, 180–6 Taura Syndrome, 27, 57 tea, 4 technical barriers to trade, 199–200 Thailand, 17, 23, 25, 27, 38, 39, 45, 52, 57–60, 68–9, 79–80, 82, 152, 184, 186, 189, 206 Thames River, 199 Tietje, C., 200, 203 tilapia, 12, 24, 35–7, 45, 105, 151, 156–8 Nile (Oreochromis niloticus or Tilapia nilotica), 23 time-series analysis, 145 Timmons, M.B., 157, 166 tobacco, 4 Tokyo, 108 Tokyo Central Wholesale Market (Tsukiji), 67, 108–11, 114 total allowable catch (TAC), 97 Trachtman, J., 187, 192 Trade Act of 1974, 181, 186 Trade-related Aspects of Intellectual Property Rights (TRIPS), 170 transboundary, 187 transparency, 117, 126, 201 trap, 5 trout, 12, 19, 23, 30–1, 55, 61–6, 86, 157 rainbow (O. mykiss), 31 steelhead or sea-run rainbow (O. mykiss), 31, 65 Tsukiji Wholesale Fish Market, 67, 108–11, 114 Tsuzumi Shokai, 9 Tull, D., 138, 149 tuna, 1, 9, 19, 21, 34–5, 48, 55, 67–71, 87, 143, 172, 188–9 albacore (T. alalunga), 48, 67, 69 bigeye (T. obesus), 48, 68–9 bluefin, 34, 48, 67–9, 108, 110–11, 143, 148 bluefin (Thunnus thynnus), 34, 67, 69, 108 bonito (Sarda sarda), 67 canned, 1, 48, 51–2, 54, 68, 189–90 dolphin-safe, 34 Mexican, 71 Pacific yellowfin, 70 skipjack (Katsuwonus pelamis), 18, 21, 35, 67–8 Southern bluefin (T. maccoyli), 34, 67 yellowfin (T. albacares), 35, 48, 67–71, 188 tuna–dolphin disputes, 60, 188–90

221

INDEX turtle, 9, 59, 172, 190 turtle excluder devices (TEDs), 60, 189 Tweeten, L., 94, 106 Tyson Foods, 46 Uganda, 37 Unilever, 46, 198 United Fisherman and Allied Workers’ Union (UFAWU), 113 United Kingdom (UK), 30, 39, 54, 61–2, 68, 72, 74, 76, 78, 188, 199 United States (US), 10–11, 17, 20, 23, 25–6, 31, 33, 39, 45–8, 51–3, 57–67, 75–7, 79–80, 102, 107, 112, 145, 151, 156, 179–90 United States International Trade Commission (USITC), 80 Urner Barry, 147–8 Uruguay Round, 184 US International Trade Commission (USITC), 66, 181–7, 192 US Marine Mammal Protection Act (MMPA), 70–1, 188 US Pelly Amendment, 167, 179–81, 188, 190 USSR, 10, 32, 51, 71, 180 value-added products, 59 vegetables, 4, 8 Venezuela, 152, 184, 186 Vermouth, 4 Vernon, J., 204 vertical integration/vertically integrated, 46, 114–15, 158 Vienna Convention, Article 30, 187 Vietnam, 23, 25, 57, 59, 184, 206 vikings, 7 Viscusi, W., 200, 204 volatility, 163, 206 Voon, T.J.P., 143, 150 Vukina, T., 146, 150

Wallis, P., 204 Ward, J., 140, 149 Washington, 9, 66 Watson, R., 17, 38 Weber, M., 62, 84 Wessells, C. Roheim, 136, 140, 144–5, 148–50, 195, 197–8, 203–4 Western Central Pacific, 67 whales, minke, 180–1 wheat, 4, 126 wheat gluten, 186 white spot disease, 27, 51 whiting, 21, 77 blue (Micromesistius poutassou), 21 Whitmarsh, D., 142, 149 Wilen, J., 140, 150 Williams, L., 166 Willmann, R., 204 wine, 4 World Bank, 168 World Trade Organization (WTO), 10, 60, 167–81, 186–92, 201 Agreement on Safeguards, 186 Agreement on Technical Barriers to Trade (TBT Agreement), 200 Committee on Trade and the Environment (CTE), 169, 170, 187, 201 Dispute Settlement Understanding (DSU), 170 World War II, 10, 16, 46, 68, 72 World Wildlife Fund (WWF), 198 yellowjack or Japanese amberjack (Seriola quinqueradiata), 23 yield-effort, 97 yield-stock, 97 Yoshikawa, T., 109, 127 Zucker, D.A., 145, 148, 150, 157, 166 Zugarramurdi, A., 10, 13

222