Globalisation – Overview

Alastair Macfarlane

1 Seafood - Globalised for Two Millennia

ƒ Fish products have been traded for thousands of years; ƒ Food preservation technology was a key for trading; ƒ Preservation enabled transportation of goods and enabled fishing at greater distance from markets; ƒ Eventually fishing technology and refrigeration enabled catching to extend globally; ƒ UNCLOS and 200 mile EEZs reduced distant water fishing opportunities in favour of coastal State fishers; ƒ As distant water fishing opportunities reduced, international trade from erstwhile distant water, now coastal, fisheries tookover.

2 Current Trade Relationships

(Fig. 1) Average Annual Import Export Trade by Region Other 2002 - 04 (Source: FAO) Oceania

$30,000.0 Africa

$25,000.0 Latin America

$20,000.0 Sth & S.E.Asia

$15,000.0 China

US$ millionUS$ North Asia $10,000.0

North America $5,000.0 Transition Econs $0.0 Other Europe

EU EU Ot her Ot her Nort h Nort h Nort h Nort h China China St h & Sth & Lat in Lat in Africa Africa OceaniaOceania Europe Europe AmericaAmerica Asia Asia S.E.AsiaS.E.AsiaAmericaAmerica EU

3 Current Trade Relationships – Net Imports

(Figure 2) Average Annual Global Import Market Shares of Fish and Fish Products 2002 - 04 (Excl intra-EU) (USD 56 billion c.i.f.) (Source: FAO) S A sia E & SE Asia China 0.2% 7.6% 8.7% Dev. Oceania Middle East 0.1% 0.9% North America 22.9% Caribbean S America 0.2% 1. 0 % Central America East A frica 0.6% 0.4% Central Africa NZ, Australia W A f ric a 0.1% 1. 2 % 1. 3 % NW Africa 0.1%

Other econs in transitio n 1. 6 % EU East Euro pe 25.6% 0.5% Other West Europe Japan, Korea & Other 2.0% 24.9%

4 Current Trade Relationships – Net Exports

(Figure 3) Average Annual Global Export Market Shares of Fish and Fish Products 2002 - 04 (excl intra-EU trade) USD 47.4 Billion f.o.b. (Source: FAO)

Dev. Oceania North America 0.4% 14 . 4 % China NZ, Australia 15 . 2 % 3.5%

EU 6.7% E & SE Asia 16 . 5 % Other West Europe 13 . 3 % Japan, Ko rea & o ther 2.8%

S Asia 4.3% East Euro pe 0.3% Middle East Other econs in transition 0.9% 1. 1% S America NW Africa 12 . 1% 2.2% Caribbean Sthn AfricaEast Africa W A frica 0.1% Central America 0.7% 1. 6 % 1. 0 % 2.8%

5 Developed Country Trade Relations

(Figure 4) Annual Average Developed Regions' Fish Market Trade Flows 2002 - 04 (Source: FAO)

$14,000.0 From Region $12,000.0 To Region $10,000.0 From $8,000.0 Developed To Developed $6,000.0 From US$ millionUS$ fob $4,000.0 Developing To Developing $2,000.0

$0.0 North America NZ, Australia EU Other West Europe Japan, Korea & other

6 Developing Country Trade Relations

(Figure 5) Developing Regions' Trade Flows 2002 - 04 (Source: FAO)

$7,000.0

$6,000.0

$5,000.0 From Region To Region $4,000.0 From Developed

$3,000.0 To Developed From Developing US$million fob $2,000.0 To Developing

$1,000.0

$0.0 China Dev. S Asia Africa Central Central Oceania W Africa America NW AfricaNW Caribbean S America East AfricaEast Sthn Africa E & SE Asia & SE E Middle East

7 M. Cap Fish Ten Largest Companies: Americas Country US$m Fishing A'culture Feed Processing Trading Retail Multi-national Diversification

Retail Shelf stable meat Connor Bros Income Fund Canada $504 √ Global brands products

Sociedad Pesquera Coloso SA Chile $329 √ √ Global

Pesquera Itata SA Chile $254 √ √ √ Export

Pesquera Iquique-Guanaye SA Chile $180 √ √ Export

Clearwater Seafoods Income Fund Canada $124 √ √ Global

Omega Protein Corp USA $107 √ √ Global Shipyard

USA, Europe, Fishery Products International (FPI) Japan, China Ltd Canada $96 √ √ Export SE Asia

Copeinca SA Peru $90 √ √ √ Export Norway

Nth High Liner Foods Ltd Canada $87 √ America

Nth Honey, processed Vita Food Products Inc. USA $9 √ America foods

Source: Intrafish, Vol 5, No 2, February 2007, Wright Investor Services, Glitner Bank

8 Ten Largest Companies M. Cap

Fish Europe Country US$m Fishing A'culture Feed Processing Trading Retail Multi-national Diversification

Marine Harvest ASA (former Europe, North Pan Fish) Norway $3,712 √ √ Global America, Japan

Europe, North Cermaq ASA Norway $1,470 √ √ √ Global America, Chile Byproducts processing

Austevoll Seafood ASA Norway $1,299 √ √ √ Global Chile, Peru

Europe, North Leroy Seafood Group ASA Norway $778 √ Global America

Chile, North America, Pescanova, S.A. Spain $526 √ √ √ Global Australia, Europe

Biomar Holding A/S Denmark $477 √ Global Europe, Chile Pharmaceuticals

Retail Alfesca HF Iceland $420 √ Global brands Europe Processed foods

Europe, North America. Korea, Icelandic Group HF Iceland $305 √ √ Global Thailand, Japan Food services

Aker Seafoods ASA Norway $241 √ √ Export Europe

Dairy and confectionary Retail products, fish farming Nireus Aquaculture S.A. Greece $232 √ √ Europe brands equipment

Source: Intrafish, Vol 5, No 2, February 2007, Wright Investor Services, Glitner Bank

9 Ten Largest M. Companies Cap

Fishi Fish Multi- Asia Country US$m ng A`culture Feed Processing Trading Retail national Diversification

Nippon Suisan Retail Pharmaceuticals, Marine engineering cold Kaisha Ltd Japan $1,591 √ √ √ Global brands Global storage and transportation

China Fishery Group Ltd China $989 √ √ Global

Meat, byproducts, pharmaceuticals, storage Maruha Corp Japan $740 √ √ Global Global and logistics

Thai Union Frozen Foods Group Thailand $553 √ Global

North America, China, China (Hong Japan, Shipping services, cultivation & processing of Pacific Andes Kong) $359 √ Global Europe vegetables, property

Nichiro Corp. Japan $303 √ Global Global Hotels, packaging machinery

Sea Horse PLC Thailand $276 √ Global

USA, Panama, Thailand, Other processed foods, storage and transport, Kyokuyo Co Ltd Japan $239 √ √ Global China insurance

Domestic Uoriki Co Ltd Japan $171 √ Japan √ Restaurants

Chuo Gyorui Co Domestic Ltd Japan $129 Japan Storage, transport, property

Source: Intrafish, Vol 5, No 2, February 2007, Wright Investor Services, Glitner Bank

10 Types of Distant Foreign Domestic % of rights Rights water vessel processo Offshore Company Name sector owned Trader Own fleet fisher Charterer A'culture r processor quota, Sanford Sustainable Seafood Ltd 19% a'culture √ √ √ √ √ √ √ quota, Sealord Group Ltd 14% a'culture √ √ √ √ √ √ √

quota, Talley's Fisheries Ltd 10% a'culture √ √ √ √ √

Te Ohu Kai Moana Trustee Ltd 8% quota √ √

quota, Aotearoa Fisheries Ltd 5% a'culture √ √ √

Vela Fisheries Ltd 3% quota √ √

quota, United Fisheries Ltd 2% a'culture √ √ √ √ √

NZ King Salmon Ltd 2% a'culture √ √

Independent Fisheries Ltd 2% quota √ √ √

Ngai Tahu Seafood Resources Ltd 1% quota √ √ √ √ √

11 Own offshore Seafood Supplies Established Marketing Off shore Diversi- Company Name Trader brokers Agents structure Ownership investment fication

Sanford Sustainable Seafood Ltd √ √ Public √

Private, Sealord Group Ltd √ √ √ 50% foreign √ Meat, Dairy, Private, Vegetable Talley's Fisheries Ltd √ √ √ family processing

Te Ohu Kai Moana Trustee Ltd Tribal

Aotearoa Fisheries Ltd √ √ √ Tribal

Private, Vela Fisheries Ltd √ √ √ family

Private, United Fisheries Ltd √ √ √ family Private, 100% NZ King Salmon Ltd √ √ foreign

Private, Independent Fisheries Ltd √ √ √ family √

Private, Ngai Tahu Seafood Resources Ltd √ √ Tribal

12 Conditions for Globalising the Catch Sector

ƒ UNCLOS and EEZs provided pre-conditions; ƒ Exclusion of DWFNs encouraged trade development from coastal States; ƒ Licensed access arrangements can hinder coastal State fisheries development; ƒ Abundant stocks (e.g. pelagics) and/or secure access rights encourages integration forward through the value chain; ƒ The opposite discourages processors to “secure” insecure raw material access through investment in catching.

13 Conditions for Globalising Aquaculture

ƒ Large scale, publicly listed corporates are invested in salmonid aquaculture and in seabream/seabass; ƒ Conservative investment in successful product lines, mass marketing formerly luxury fish species; ƒ Opportunities yet to be taken by them in lower cost, mass marketable species capable of competing head to head with other animal proteins – e.g. chicken. ƒ Finfish aquaculture has to address constraint of fish protein use.

14 Conditions for Globalising Processing

ƒ Few examples of fishing companies becoming food companies, many examples of food companies having fish products as part of their product lines; ƒ Fish processors in developed countries are moving processing offshore – earlier to Thailand and now to China – reducing labour costs and (sometimes) improving yields; ƒ The WTO Uruguay Round assisted globalisation by providing a science-based rules to address food safety; ƒ No obvious consumer resistance.

15 Demand for Coherence in Branding

ƒ Socially responsible market positioning is increasingly the norm for consumer brand owners; ƒ In food, safe food and organics have been strongly promoted and met a strong consumer response; ƒ Bad press related to fishstock status causes concern for brand owners, threatening condemnation of a strong growth segment; ƒ Risk management and competitive positioning are drivers for retailers to seek independent verification of fisheries sustainability; ƒ Tension between credentials for wild and aquaculture

16 Fisheries Governance and Globalisation

ƒ Strong connection between abundance and/or secure access rights and forward or backwards linkages to and from the global value chain already noted; ƒ Costs of compliance for legal fishing require reward; ƒ Failure to tackle fisheries governance will encourage “racing to the bottom” from less scrupulous investors, while complying companies based in complying jurisdictions will be excluded from markets. ƒ OECD has noted that most illegal fishing is in EEZs, but global focus is on high seas – is this avoidance?

17 Aquaculture Governance and Globalisation

ƒ Secure access to water space is essential; ƒ Aquaculture proposals can be opposed on grounds of impact on “amenity value”; ƒ Risks of introduction of alien species will restrict location of future development; ƒ Future development will locate where investment is welcomed and where concerns related to amenity value or alien species risks are less developed.

18 Regulators’ contribution to Globalisation

ƒ Noted that WTO SPS and TBT agreements are catalysts for relocation of processing to developing countries; ƒ Concentration of import demand in EU, Japan and USA means no compromise in food safety expectations for imports from developing countries; ƒ HACCP based food safety encourages the sector to take responsibility and provides market rewards; ƒ Food safety regulators enable trade to take place through “outcomes based” policy settings.

19 Civil Society and Globalised Businesses

ƒ Environmental NGOs purport to represent civil society concerns; ƒ Frequently perceived by business as anti-business – the new socialists; ƒ E NGOs have had particular impact when they work cooperatively with business to generate political climates that favour regulatory change – the demand for independent verification of sustainable fisheries is a potential example.

20 Conclusion (1)

ƒ Fish products have been traded for thousands of years; ƒ The modern trade is strongly directed to developed countries markets; ƒ Corporate investors in the sector are predominantly located in the processing sector; ƒ Integrated investment linking primary production and processing is risk averse, concentrating in abundant fisheries with secure access and in established aquaculture systems; ƒ Otherwise business relationships are traditionally based on trading;

21 Conclusion (2)

ƒ One can contrast the role of regulators for food safety and technical concerns related to the trade in fish and fisheries regulators in relation to management; ƒ On food regulatory matters, regulators encourage the trade to take responsibility. Fisheries management is still predominantly “top-down” – even in rights-based systems; ƒ Capital will concentrate where risks are lowest and rewards highest.

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