FFA FISHERIES TRADE NEWS Volume 4: Issues 8 & 9 August-September 2011

FFA FISHERIES TRADE NEWS

Volume 4: Issues 8 & 9 August-September 2011

By Amanda Hamilton, Liam Campling, Elizabeth Havice[1]

Editorial Note

Commencing with this edition, FFA Fisheries Trade News will now be published on a bi-monthly basis. 


CONTENTS

World Trade Organisation

WTO releases panel ruling on US-Mexico tuna-dolphin dispute

Preferential Trade Agreements

Update on PACER negotiations 

Fisheries Management

ISSF & Spanish industry object to PNA skipjack MSC certification

Recent developments in the PIC tuna fishery

Tuna Markets 

Fiji’s PAFCO closed for renovations

Thai canners face an increase in minimum wages

Greenpeace’s latest attacks on the tuna industry

World Trade Organisation

WTO releases panel ruling on US-Mexico tuna-dolphin dispute

A twenty-year long running dispute between the US and Mexico over Mexico’s complaint that the US ‘dolphin safe’ labelling requirement for tuna products is  discriminatory, is a step closer to being resolved.  On 15 September, 2011 the WTO’s Dispute Settlement Body panel reviewing Mexico’s complaint against the US released its report and has partially ruled in favour of Mexico.[2]  

The panel found that US dolphin-safe labelling provisions are more ‘trade-restrictive than necessary to fulfil the legitimate objectives’ of protecting dolphins and ensuring that consumers are adequately informed about whether or not dolphins were accidently harmed during fishing for tuna contained within tuna products. The ruling puts the US dolphin-safe label in conflict with Article 2.2 of the WTO agreement on Technical Barriers to Trade (TBT). 

However, the panel rejected Mexico’s claim that the labelling provisions discriminate against Mexican tuna products relative to US tuna products or those of other origins (Article 2.1 of the TBT Agreement).  Further, the panel ruled that US dolphin-safe labelling provisions are not in violation of Article 2.4 of the TBT Agreement which indicates that the WTO Dispute Settlement Body found the dolphin-safe regulation to be consisted with relevant international standards. 

The panel’s final conclusion was that that United States has acted inconsistently with provisions under Article 3.8 of the TBT Agreement and has adversely affected benefits accruing to Mexico.  In light of this conclusion, the panel has recommended that the WTO Dispute Settlement Body request that the United States bring its measures into conformity with its obligations under the TBT Agreement.[3]  

Following the release of the panel report, the US Government has 60 days to appeal the panel’s decision.  Should the US government lodge an appeal, a final ruling which would be legally binding, will likely be released in the first half of 2012.[4]  Should the final ruling be in Mexico’s favour, the volume of Mexican tuna imports into the US will potentially  increase significantly, as major retailers and the three major US tuna brands will no longer be able to refuse to purchase Mexican tuna on the grounds that it does not comply with requirements to carry the US’ ‘dolphin safe’ label.  

Preferential Trade Agreements

Update on PACER negotiations 

Progress appears to be slow in negotiations between the Pacific Forum Island Countries (FICs) and Australia and New Zealand under the Pacific Agreement on Closer Economic Relations (PACER-Plus).  

In particular, Fiji’s exclusion from PACER-Plus negotiations, following the country’s suspension from the Pacific Islands Forum in 2009 due to its military regime, has hindered PACER-Plus negotiations.  At the 42nd Pacific Islands Forum held in Auckland on 7-8 September 2011, members decided to allow Fiji to participate in PACER negotiations at officials-level only, given Fiji’s important role in the Pacific economy and in the interest of fostering broader regional economic integration.[5]  However, this decision has been met with some skepticism from Fiji Government.  Fiji’s Foreign Affairs Minister, Mr. Ratu Inoke Kubuabola has indicated that permitting Fiji to participate in negotiations at the officials-only level is a further sign of the Forum’s ‘hypocrisy’.[6] [significance? Is Fiji going along with it?]

Progress may be further hindered due to the recent resignation of Chief Trade Advisor, Dr. Chris Noonan.[7]  This position, along with the Office of the Chief Trade Advisor (OCTA), was established specifically to provide advice and support independent of Australia and New Zealand (ANZ) to the Pacific Island countries in PACER negotiations.

Further, Australia’s commitment to PACER negotiations came into question earlier this year when Australia’s new international trade policy under the Gillard Government failed to mention PACER-Plus.[8]  Australia has also been criticized for attempting to control the mandate and governance of the OCTA by making ongoing OCTA funding conditional on the provision of quarterly reports, an exclusive focus on PACER-Plus, as well as other pre-conditions.  Australia and NZ agreed to provide funding assistance for OCTA over three years, but since the first year’s grant expired in March 2011, Australia has not provided additional funding.  NZ has signed an agreement to continue funding, but Australia is yet to commit.[9]  

Despite these and other hurdles, Forum Island Leaders indicated that PACER Plus negotiations will progress as a matter of priority.[10] 

The former Chief Trade Advisor indicated that fisheries issues are yet to be discussed in any level of detail in negotiations.[11]  As mentioned in previous FFA Fisheries Trade News coverage of PACER negotiations, prospects for improving access for FIC fish and fish products to ANZ markets through PACER are limited because both countries already maintain duty free or very low tariffs on fish and fish products.  However, according to Dr. Chris Noonan, PACER-Plus could incorporate several potential fisheries-related benefits, including: 

* The extension of ‘global sourcing’ rules of origin to fish and fish products entering Australia and New Zealand from FICs. This provision would be along similar lines to PNG’s rules of origin derogation under the EU-Interim Economic Partnership Agreement, whereby fisheries products would qualify for tariff preferences, irrespective of the origin of catch, provided raw materials are ‘substantially transformed’ by FIC-based processing facilities. 

* Additional technical and financial assistance to FIC’s to meet ANZ’s strict sanitary and phytosanitary (SPS) and bio-security regulations. 

* Commitment from ANZ to invest in infrastructure in FICs, including fisheries infrastructure such as wharves, as well as support infrastructure (e.g. electricity, telecommunications). 

* Labour mobility for FIC workers in fisheries-related industries in Australa and New Zealand. 

Fisheries Management

ISSF & Spanish industry object to PNA skipjack MSC certification

As reported in the June-July 2011 edition of FFA Fisheries Trade News, Moody Marine, the MSC certifying body responsible for assessing the PNA WCPO skipjack purse seine fishery on free-swimming schools, has deemed the fishery to be MSC certifiable.   In the final stage of the assessment process, objections were lodged by three parties – the International Seafood Sustainability Foundation (ISSF), OPAGAC (association representing Spanish purse seine vessel owners) and Eurothon (association representing European purse seine vessel owners and tuna processors).  

ISSF has expressed concerns about the certification throughout the entire assessment process.  The main concerns raised in ISSF’s formal objection include - ineffectiveness of WCPFC in implementing management measures; insufficient public consultation during the assessment process; incorrect assumptions concerning the proportion of skipjack stocks within PNA waters; use of insufficient and incorrect catch data; lack of target and limit reference points, and harvest control rules; inconsistent assessments between the PNA fishery and Tosakatuso pole and line skipjack fishery (Japan) which have overlapping stocks; and, concerns about PNA’s ability to manage the entire stock.[12]  Eurothon and OPAGAC’s objections replicate concerns raised by ISSF.[13]  

In addition to the three objections, FFA, SPC, WCPFC and the PNA Office lodged submissions supporting the conclusions made by the certifying body. 

MSC appointed an independent adjudicator (Mr. Michael Lodge) to review the objections and corresponding formal response from the certifying body.  Rather than delivering an adjudication, Mr. Lodge suggested a consultation phase between the certifying body and objecting parties to explore whether differences could be resolved through a mutually acceptable adjustment to the final report and determination (which would likely include additional or amended corrective measures which would need to be implemented as conditions to the certification).  ISSF, OPAGAC and Eurothon have indicated that do not see the possibility of a settlement through consultation.  The assessment will now proceed to formal adjudication, and the adjudicator has called for an oral hearing to be conducted in the next 30 days.  Alternatively, if all parties agree to proceed without an oral hearing, the independent adjudicator will make a determination taking into account written submissions, any additional submissions and evidence.  The ongoing objections process will result in additional costs and further delays.[14] 

Recent developments in the PIC tuna fishery

Over the past several months a number of notable developments have taken place in Pacific Islands’ tuna fisheries.

* The Cook Islands has established an agreement with Chinese longline fishing interests to commence exploratory fishing of bigeye and swordfish within its waters over three years.  The Cook Islands have issues licenses to sixteen Chinese vessels which are predicted to generate aver US $660,000 in licence revenue.[15] 

* FSM and the Marshall Islands have each sold fishing days, valued at US $1 million to PNG under the Vessel Day Scheme.  Solomon Islands also plans to purchase 1,000 fishing day from Marshall Islands for US $2.5 million.[16]  

* The Kiribati and Fiji governments are calling for Expressions of Interest from development partners to establish a tuna processing facility in Fiji that would process purse seine tuna catch taken within the Kiribati EEZ and/or by Kiribati-flagged vessels in adjacent waters.[17]

* SPC and PNA have signed a Memorandum of Understanding for the management and monitoring of tuna fisheries under the control of PNA.[18]

* FFA and Fiji have established an agreement to facilitate the delivery of FFA assistance to Fiji’s Department of Fisheries over the next five years. Assistance is targeted at the execution of national fisheries and development priorities.[19]

Tuna Markets

Fiji’s PAFCO closed for renovations

In July, the Pacific Fishing Company (PAFCO) in Levuka, Fiji, temporarily shut down its canned tuna and frozen cooked tuna loin processing operations following difficulties meeting US standards set by the US Food and Drugs Administration (FDA).[20]  Albacore loin production for the US market under contract for Bumble Bee accounts for around 80 per cent of PAFCO’s production. The remaining production is canned white and light meat tuna for the Pacific Islands market (total processing capacity is around 20,000-25,000 mt per annum).[21]  Around 700 employees have reportedly been laid off while the plant is closed for renovations.  Production is expected to resume after renovations have been completed and the plant once again complies with FDA standards.

Difficulties sourcing raw materials in June also forced a week-long closure at PAFCO. The temporary closure was attributed to the poor fishing season and competition for raw materials from other tuna processors.[22] 

Thai canners face an increase in minimum wages 

Thailand’s Government has announced its intention to implement an increase in the statutory minimum wage of nearly 30 per cent to 300 Thai baht per day (around US $10). While a wage increase for civil servants and state enterprise employees is scheduled for October 2011, the Thai Government has opted to delay an across-the-board increase until at least January 2012, to enable liaison with the private sector about potential impacts.  Thai law prohibits government from unilaterally increasing the minimum wage for the private sector.  Instead, the decision rests with the tripartite ‘Central Wage Committee’ comprised of representatives from government and private sector employers and employees.[23]           

An increase in the minimum wage rate is likely to impact Thailand’s labour-intensive canned tuna processing sector.

Thailand’s average daily labour cost in the tuna canning sector is already above the current minimum wage level because of costs associated not just with wages, but also attracting labour to work in canneries.  Thai canners rely heavily on migrant labour from Burma (comprising around 50-60 per cent of the canning labour force). Transaction costs to attract and retain Burmese labourers include transport to Thailand, agency fees, local government registration, provision of housing/food.  As a result, Thai labour costs (wages plus the costs of attracting and retaining Burmese workers) are already higher than some competing processing sites (e.g. ~US $10/day compared with US $5/day in Vietnam). A minimum wage increase would further heighten labour costs.  To date, Thailand has been able to maintain its labour competitiveness, in spite of comparatively higher labour costs, due to its highly productive labour force and excellent infrastructure.  However, a minimum wage increase will reduce the high labour efficiency advantage.[24]  Further, given the minimum wage increase will be across-the-board, rather than industry/sector specific (i.e. just the food processing or manufacturing sectors), Thai canners will likely continue to experience difficulties attracting Thai nationals to work in their plants. 

A minimum wage increase is likely to most seriously affect Thailand’s small to medium-sized canning operations, which are already struggling due to high raw material prices.  Thailand’s large-scale processors (Thai Union and Sea Value) will still feel the pinch of increased labour costs, but should be in a stronger position to cope.  Thai Union has indicated that the wage increase should be a “manageable challenge” for their business and that plans to minimise the impact by increasingly mechanising operations and shifting support workers into direct production roles.[25] 

Greenpeace’s latest attacks on the tuna industry

Greenpeace recently launched an aggressive new tuna campaign targeting the ‘big three’ major US tuna brands – Starkist, Chicken of the Sea and Bumble Bee.  The campaign includes an animated video featuring the companies’ mascots which parodies the ‘Tuna the Wonderfish’ joint marketing campaign the US brands are currently running.[26]  Greenpeace’s campaign entitled ‘The Tuna Industry’s Dirty Little Secret’ highlights issues relating to by-catch associated with purse seine FAD fishing and longline fishing, unregulated fishing in the high seas and ‘stolen fish’ from the waters of Pacific Island Countries.[27]  The campaign is intended to raise consumer awareness about harmful fishing practices and to lobby the major US brands to moving towards more sustainable fishing methods.[28]  

Starkist, Chicken of the Sea and Bumble Bee have objected strongly to the campaign, particularly the misuse of their trademarked logos.  Each company’s legal representatives swiftly forwarded cease and desist letters to Greenpeace insisting the group stop broadcasting the video. In addition, Tuna for Tomorrow, a campaign established by the US canned tuna industry (sponsored by the National Fisheries Institute) created its own video in retaliation to Greenpeace’s video, which has been posted on various internet sites. The National Fisheries Institute has strongly criticised Greenpeace for ‘harassing’ industry, rather than entering into constructive partnerships and dialogues.[29] 

Greenpeace has indicated that despite legal threats from the three major US tuna brands it intends to continue broadcasting its video. 

In a further attempt to pressure San Diego-based Chicken of the Sea to reduce by-catch, Greenpeace launched an airship over La Jolla in San Diego, California, bearing two banners – “Carnage in a tuna can” and “Tunasecrets.com – What the tuna industry doesn’t want you to know”.[30] 

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

2 WTO 2011. ‘Panel report out on US-Mexico tuna dispute’, WTO News, 15 September 2011.  Available at: http://www.wto.org

3 WTO 2011. United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products:  Report of the Panel (WT/DS381/R), pp. 292-293.  Available for download at:  http://www.wto.org

4 Analia Muria (2011) ‘WTO’s ruling favours Mexico in tuna conflict’, FIS, 16 September 2011.  Available at: http://www.fis.com

5 PIFS 2011, Forum Communique – 42nd Pacific Islands Forum, 7-8 September 2011, Auckland, New Zealand.

6 PACNEWS 2011, ‘Fiji in no hurry to join Pacific Islands Forum say Ratu Inoke’, 12 September 2011. 

7 Nic Maclellan 2011. ‘PACER-Plus in trouble as trade advisor resigns.  Islands Business. 5 September 2011.  Available at:  http://www.islandsbusiness.com

8 Nic Maclellan 2011.

9 Nic Maclellan 2011. 

10 PIFS 2011.

11 Pers. comm.  Dr. Chris Noonan, former Chief Trade Advisor, OCTA. June 2011. 

12 Fish News EU 2011, ‘ISSF objects to MSC certification assessment of PNA skipjack tuna fishery’, Fish News EU, 9  August 2011.  Available at: http://www.fishnewseu.com

13 Refer to the MSC website for full details of Notice of Objections from ISSF, Eurothon and OPAGAC.  http://www.msc.org

14 MSC 2011. Directions by the Independent Adjudicator. 17 September 2011.  Available at: http://www.msc.org

15 Radio NZ 2011. ‘Chinese Will soon Begin Exploratory Fishing in the Cook Islands’, Atuna, 31 August 2011. Available at:  http://www.atuna.com

16 Radio NZ 2011. ‘Micronesia & Marshalls Sells for USD 2 Million Tuna Fishing Days’. Atuna. 12 August 2011. Available at:  http://www.atuna.com

17 Call for Expressions of Interest – Fiji-Kiribati Fisheries Bilateral Cooperation: Tuna Processing Facility. Available at: http://www.ffa.int

18 Post Courier 2011. ‘SPC and PNA Sign A Deal on Monitoring Tuna Fisheries’. Atuna. 25 August 2011.  Available at:  http://www.atuna.com

19 FIS 2011. ‘Historic agreement signed with FFA’. FIS, 15 July 2011.  Available at: http://www.fis.com

20  Fiji Times 2011. ‘PAFCO Fiji Cannery Lays Off 700 Staff Due to US Trade Restrictions’, Atuna, 1 September 2011.   Available at:  http://www.atuna.com

21  Pers. comm., Bob Gillett, July 2011. 

22  Fiji Times 2011.

23  Boris Sullivan 2011. ‘Thailand’s Minimum Wage Increase Raises Concerns’. Thai Business News. 17 July 2011.  Available at: http://www.thailand-business-news.com

24  Amanda Hamilton, Antony Lewis, Mike A. McCoy, Elizabeth Havice and Liam Campling (forthcoming), Impact of industry and market drivers on the global tuna supply chain, Honiara: FFA.

25 Seafood Source 2011, ‘Thai Union Thinks Wage Increase is a “Manageable Challenge”, Atuna, 1 September 2011.  Available at: http://www.wto.org

26 Seafood Source 2011. ‘Greenpeace attacks canned tuna industry’.  Seafood Source, 15 August 2011.  Available at:  http://www.seafoodsource.com

27 FIS 2011. ‘Greenpeace attacks three tuna multinationals in new campaign’. FIS, 17 August 2011.  Available at: http://www.fis.com

28 Fish News EU 2011. ‘Greenpeace campaign aims to stop “deadly ocean slaughter”.  Fish News EU, 16 August 2011.  Available at: http://www.fishnewseu.com

29 Seafood Source 2011. ‘Greenpeace urged to remove anti-tuna video’.  Seafood Source. 18 August 2011.  Available at: http://www.seafoodsource.com

30 SignonSanDiego 2011. ‘Greenpeace Airship Targets Chicken of the Sea in San Diego’.  Atuna, 12 September 2011.  Available at:  http://www.atuna.com