1

Globalisation – Overview

Alastair Macfarlane

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Seafood - Globalised for Two Millennia

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

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Current Trade Relationships

(Fig. 1)Average Annual Import Export Trade by Region

2002 - 04(Source: FAO)

$0.0

$5,000.0

$10,000.0

$15,000.0

$20,000.0

$25,000.0

$30,000.0

EU EU Ot herEurope

Ot herEurope

Nort hAmerica

Nort hAmerica

Nort hAsia

Nort hAsia

China China St h &S.E.Asia

St h &S.E.Asia

Lat inAmerica

Lat inAmerica

Af r ica Af r ica Oceania Oceania

US$

mill

ion

Other

Oceania

Africa

Latin America

Sth & S.E.Asia

China

North Asia

North America

Transition Econs

Other Europe

EU

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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)

North America22.9%

NZ, Australia1.2%

EU25.6%

Other West Europe2.0%Japan, Korea & Other

24.9%

Caribbean0.2%

East A frica0.4%

Central A frica0.1%

NW Africa0.1%

S America1.0%

M iddle East0.9%

S Asia0.2%

Central America0.6%

W Africa1.3%

East Europe0.5%

Other econs in transition1.6%

E & SE Asia7.6%

China8.7% Dev. Oceania

0.1%

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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)

North America14.4%

S Asia4.3%

Japan, Korea & o ther2.8%

E & SE Asia16.5%

China15.2%

Dev. Oceania0.4%

Caribbean0.1% Central America

2.8%

Other West Europe13.3%

Other econs in transition1.1%

East Europe0.3%

NW Africa2.2%

Sthn Africa0.7%

M iddle East0.9%

S America12.1%

East Africa1.6%

W Africa1.0%

EU6.7%

NZ, Australia3.5%

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Developed Country Trade Relations

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

(Source: FAO)

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

$14,000.0

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

US$

mill

ion

fob

From Region

To Region

FromDevelopedTo Developed

FromDevelopingTo Developing

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Developing Country Trade Relations

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

(Source: FAO)

$0.0

$1,000.0

$2,000.0

$3,000.0

$4,000.0

$5,000.0

$6,000.0

$7,000.0

NW

Afr

ica

W A

fric

a

Cen

tral

Afr

ica

East

Afr

ica

Sthn

Afr

ica

Cen

tral

Am

eric

a

Car

ibbe

an

S A

mer

ica

Mid

dle

East

S A

sia

E &

SE

Asi

a

Chi

na

Dev

.O

cean

ia

US$

mill

ion

fob

From Region

To Region

From Developed

To Developed

From Developing

To Developing

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

Honey, processed foods

Nth America√$9USAVita Food Products Inc.

Nth America√$87CanadaHigh Liner Foods Ltd

NorwayExport√√√$90PeruCopeinca SA

USA, Europe, Japan, China SE AsiaExport√√$96Canada

Fishery Products International (FPI) Ltd

ShipyardGlobal√√$107USAOmega Protein Corp

Global√√$124CanadaClearwater Seafoods Income Fund

Export√√$180ChilePesquera Iquique-Guanaye SA

Export√√√$254ChilePesquera Itata SA

Global√√$329ChileSociedad Pesquera Coloso SA

Shelf stable meat products

Retail brandsGlobal√$504CanadaConnor Bros Income Fund

DiversificationMulti-nationalRetailTradingProcessingFish FeedA'cultureFishing

M. Cap US$mCountryTen Largest Companies: Americas

9

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

Dairy and confectionary products, fish farming equipment

Retail brandsEurope√√$232GreeceNireus Aquaculture S.A.

EuropeExport√√$241NorwayAker Seafoods ASA

Food services

Europe, North America. Korea, Thailand, JapanGlobal√√$305IcelandIcelandic Group HF

Processed foodsEuropeRetail brandsGlobal√$420IcelandAlfesca HF

PharmaceuticalsEurope, ChileGlobal√$477DenmarkBiomar Holding A/S

Chile, North America, Australia, EuropeGlobal√√√$526SpainPescanova, S.A.

Europe, North AmericaGlobal√$778NorwayLeroy Seafood Group ASA

Chile, PeruGlobal√√√$1,299NorwayAustevoll Seafood ASA

Byproducts processingEurope, North America, ChileGlobal√√√$1,470NorwayCermaq ASA

Europe, North America, JapanGlobal√√$3,712Norway

Marine Harvest ASA (former Pan Fish)

DiversificationMulti-nationalRetailTradingProcessingFish FeedA'cultureFishingUS$mCountryEurope

M. CapTen Largest Companies

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

Storage, transport, propertyDomestic Japan$129Japan

Chuo Gyorui Co Ltd

Restaurants√Domestic Japan√$171JapanUoriki Co Ltd

Other processed foods, storage and transport, insurance

USA, Panama, Thailand, ChinaGlobal√√$239JapanKyokuyo Co Ltd

Global√$276ThailandSea Horse PLC

Hotels, packaging machineryGlobalGlobal√$303JapanNichiro Corp.

Shipping services, cultivation & processing of vegetables, property

North America, China, Japan, EuropeGlobal√$359

China (Hong Kong)Pacific Andes

Global√$553ThailandThai Union Frozen Foods Group

Meat, byproducts, pharmaceuticals, storage and logisticsGlobalGlobal√√$740JapanMaruha Corp

Global√√$989ChinaChina Fishery Group Ltd

Pharmaceuticals, Marine engineering cold storage and transportationGlobal

Retail brandsGlobal√√√$1,591Japan

Nippon Suisan Kaisha Ltd

DiversificationMulti-

nationalRetailTradingProcessingFish FeedA`culture

FishingUS$mCountryAsia

M. Cap

Ten Largest Companies

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√√√√√quota1%Ngai Tahu Seafood Resources Ltd

√√√quota2%Independent Fisheries Ltd

√√a'culture2%NZ King Salmon Ltd

√√√√√quota, a'culture2%United Fisheries Ltd

√√quota3%Vela Fisheries Ltd

√√√quota, a'culture5%Aotearoa Fisheries Ltd

√√quota8%Te Ohu Kai Moana Trustee Ltd

√√√√√quota, a'culture10%Talley's Fisheries Ltd

√√√√√√√quota, a'culture14%Sealord Group Ltd

√√√√√√√quota, a'culture19%Sanford Sustainable Seafood Ltd

Offshore processor

Domestic processorA'culture

Foreign vessel Charterer

Distant water fisherOwn fleet

Rights Trader

Types of rights owned

% of sectorCompany Name

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Private, Tribal√√Ngai Tahu Seafood Resources Ltd

√Private, family√√√Independent Fisheries Ltd

Private, 100% foreign√√NZ King Salmon Ltd

Private, family√√√United Fisheries Ltd

Private, family√√√Vela Fisheries Ltd

Tribal√√√Aotearoa Fisheries Ltd

TribalTe Ohu Kai Moana Trustee Ltd

Meat, Dairy, Vegetable processing

Private, family√√√Talley's Fisheries Ltd

√Private, 50% foreign√√√Sealord Group Ltd

√Public√√Sanford Sustainable Seafood Ltd

Diversi-fication

Off shore investmentOwnership

Own offshore Marketing structure

Established Agents

Supplies brokers

Seafood TraderCompany Name

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Conditions for Globalising the Catch Sector

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

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Conditions for Globalising Aquaculture

Large scale, publicly listed corporates are invested in salmonid aquaculture and in seabream/seabass;Conservative investment in successful product lines, mass marketing formerly luxury fish species;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.Finfish aquaculture has to address constraint of fish protein use.

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Conditions for Globalising Processing

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

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Demand for Coherence in Branding

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

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Fisheries Governance and Globalisation

Strong connection between abundance and/or secure access rights and forward or backwards linkages to and from the global value chain already noted;Costs of compliance for legal fishing require reward;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.OECD has noted that most illegal fishing is in EEZs, but global focus is on high seas – is this avoidance?

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Aquaculture Governance and Globalisation

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

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Regulators’ contribution to Globalisation

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

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Civil Society and Globalised Businesses

Environmental NGOs purport to represent civil society concerns;Frequently perceived by business as anti-business – the new socialists;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.

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Conclusion (1)

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

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Conclusion (2)

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;On food regulatory matters, regulators encourage the trade to take responsibility. Fisheries management is still predominantly “top-down” – even in rights-based systems;Capital will concentrate where risks are lowest and rewards highest.