Report on the Implementation of the derogation to ... - Trade Websites

Final <strong>Report</strong>
RoO Derogation under the PACP-IEPA
As identified in Table 6.13, on the surface, the other main market interactions between PNG and EUbased
processors over the last five years have been in:
1. The UK market, mainly with processors in France and Spain
2. The German market, with processors in Italy, Spain and France
We can discount direct competition between production in PNG and France in terms of their exports
to the UK and Germany because France-based processors focus predominantly on value-added
products; a range of products that PNG does not produce and is unlikely to produce into the longterm
future, at least without investment by a major EU branded-firm willing to upgrade PNG into
value-added processing.
We can also discount Italy’s exports to Germany. Despite Germany being Italy’s most important
intra-EU export market (valued at an annual average of € 9.3mn over 2006-2010), the interaction
with PNG is not considered to be direct, or of commercial importance. This is because it is assumed
that Italy is exporting a different type of product to Germany, as the average cost per tonne is €
4,736 between 2006 and 2010 compared to an average cost for PNG product of € 2,515 on the
German market over the same period.
The average cost per tonne of Spanish exports to the UK between 2006 and 2010 was € 3,788. The
average cost of PNG exports to the UK over the same period was considerably lower at € 2,095. The
large average difference in price between Spain and PNG exports to the UK may reflect the fact that
the former is also selling higher-priced canned yellowfin and premium products such as tuna in glass
jars as part of its export portfolio. However, it is known that non-branded processors in Spain
produce standard canned tuna for UK clients (such as Jealsa for the Princes brand). 320
Given that Spanish firms need to increase their export sales in order to grow in the context of a
highly competitive domestic market, we assume that they will attempt to increase targeting of midrange
priced EU markets where their penetration is currently minimal, such as the UK. If Spanish
producers were to look to the UK ‘standard’ canned tuna market as a potential source of export
growth, 321 the derogation may generate some potential trade diversion in the medium-term.
However, the far more important dynamic contributing to any increase in PNG share of the UK
canned tuna market is the accreditation of the PNA free-school purse seine fishery as MSC certified.
Moreover, the Spanish industry has not targeted the UK market so far, so it is difficult to see how it
would suddenly become competitive there in the medium-term future.
On the surface, the Netherlands may offer another mid-range canned tuna market for increased
Spanish exports. However, given that over 80% of this market is dominated by only three brands,
Spanish firms would probably need to purchase one of these brands to gain a sufficient foot-hold in
this market.
Finally, Spanish sales to Germany are minimal, totalling only 1.4% in value of its intra-EU exports. It
is, however, worth considering potential trade diversion here given that PNG is likely to continue to
focus on the German market as an area of growth (see Section 6.7.4). A surprising finding in the data
is that the average price per tonne of Spanish exports to Germany over 2006-2010 was € 6,368,
322
which seems extraordinarily high. This may be a result of inaccuracies in the recording of data or
of Spain primarily exporting high-value product to this market. In the latter case, PNG and Spain will
320 Industry interviews and consultant’s direct observation, September 2010.
321 i.e. through non-branded processing for one of the top-5 supermarkets or for Princes (it is highly unlikely
that Thai Union would contract Spanish firms to process significant volumes of standard canned tuna for the
John West brand given that it already has two factories in Africa and three in Thailand).
322 The price per tonne of PNG canned tuna in Germany averaged over the same period was €2,515.
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