Ziel
The overall research started with a question addressed by the French fishermen during the market crisis of 1993 and 1994: are the imports of fish products responsible for the falling prices under the domestic fish auction markets? Behind this simple issue lies a request for better understanding the level of integration between domestic and foreign fish markets due to international trade of seafood products.
Various aspects of the problem were envisaged in order to highlight the main features of trade patterns within the European Union. Since the issue had been poorly addressed at the European level, we had first to characterize the determinants of seafood trade, secondly to estimate the reciprocal relationship between prices and foreign trade, and finally to simulate the impact of several expected scenarios of economic policy on the level of trade in Europe.
A common methodological framework was designed for all country case studies (France, Spain, United Kingdom, Norway, and Europe as a whole), resulting in five country reports (technical supporting annex - Vol. 1). Two econometric reports were also achieved on both issues of trade determinants and market integration, as well as another report on legislative aspects of the EU trade policy for fishery products, covering the period 1988-1994. In addition, a market model was designed to simulate some effects of changes in production, prices, tariffs, etc (technical supporting annex - Vol. 2).
All reports represent significant inputs to the research in seafood international economics, both from a theoretical and empirical point of view. Besides the political or industrial aspects of the research (impact of trade policy, role of prices), this piece of work should contribute to the improvement of theoretical findings on the international integration of markets. An original approach (panel data, co-integration) was developed in that connection.
Basically, the results show that the European trade faces a structural deficit for seafood products, accounting for some 6 billion ECU. This deficit is differentiated among the member-states: the northern countries are rather producers-exporters whereas the southern countries are consumers-importers. Sectorally, the European trade is more and more designed by imports of fish fillets. Regionally, the traffic coming into Europe is diverted from the north American or African countries to new partners such as south America, Asia or Eastern Europe.
Relative prices and nominal exchange rates appeared to be the key determinants of seafood imports in Europe. For instance, a 10% decrease of price competitiveness (i.e. international over domestic prices converted in the same currency) since 1991-92 has pushed up imports in all observed countries, and particularly in France with an increase by 25%, amplified by the 6.5% appreciation of French Franc vis-a-vis ECU between 1988 and 1994. Since the domestic markets have proved to be inter-related with international markets, we can answer the initial question addressed by this research: the imports may be somewhat responsible for the decline in French prices, but only because of the combination with other price effects due to the changes in nominal exchange rates.
Other variables have been identified as influential on the European imports, but to a lesser degree (e.g. consumption expenditure, distance, trade barriers). Looking at trade barriers was of particular interest and showed a rather limited impact on trade: a complete removal would increase imports by only 2 or 3%. However, the traffic creation would be much bigger for some specific flows, such as prepared fish from Norway (+66% in the long run), other things being equal and provided that the Norwegian production capacity can positively respond to such an increase of demand.
These results and a few others were extended by the cointegration analysis of price time series. Some evidence of integration was found out between several European markets (UK, France, Germany, Belgium and Denmark) for fresh cod, although the price levels are fairly different between the cited countries. In overall, markets for whitefish are globally integrated, as if foreign trade of seafood commodities had turned the national markets for fish into one single worldwide market, proving the reciprocal influence between trade and prices. Interestingly, domestic prices of cod and sai the appeared to be correlated with international prices on the French market. However, no relationship could be discovered between the whitefish market and meat markets.
Because of this single global market for whitefish, some elements of price formation could be further analysed through a market model. The demand-oriented model gave very consistent results with respect to theoretical expectations, and to the results of the panel model. The aggregate demand of France, Germany, the United Kingdom and the United States seemed to explain price formation fairly well, when seasonality is taken out of the data series. Such a result brings further evidence of the great reciprocal sensitiveness of demand to changes in price. All these results have several implications with regard to the Common Fisheries Policy:
- The implementation of the EURO by 01.01.1999 will prevent unexpected shocks on seafood imports in the EU caused by moves in exchange rates. This should benefit to EU fishermen, and particularly on the French market undermined by the dramatic consequences of the appreciation of the FF vis-a-vis other EU currencies.
- Some comparative advantages may be found in the development of the processing industry. Indeed, the increase of product differentiation in processed goods may initiate the development of intra-industry trade in the seafood industry.
- In the context of globalisation, import protection is no longer efficient to protect fish imports in most of the product categories. The full liberalisation of EU fish imports should not have tremendous effects in overall. However, for some very sensitive categories like processed fish from Norway, it may increase imports substantially.
- The potential of trade with Asia and South America, though limited by the high distance from Europe, may increase because of joint ventures with European firms. On the other hand, the reduction of EU import barriers may also encourage EU producers to specialize in some market segments (with a high level of processing), and help intra-industry trade to develop.
DESCRIPTION OF WORK
The description follows the three objectives above mentioned.
1) To analyse the main features of trade patterns
This first part of the work aimed at providing better empirical knowledge of trade patterns in Europe. Although fairly descriptive, this phase had a strong analytical content too due to the selected indicators used for a quantitative analysis of foreign trade in seafood products. Different dimensions of trade have been highlighted: sectoral and regional patterns of trade, internationalisation, specialisation and competitiveness. Some very recent indicators have been used together with original indicators taken from the literature in industrial economics (concentration of regional partnership, stability of market shares).
In addition, some industrial determinants of trade have been searched through the main features of domestic market structures in each participating country (the United Kingdom, Spain, Norway and France). Indeed, the harvesting capacity, the development of aquaculture, the processing industry, the retailing and catering sectors, the size and features of consumption markets, have undoubtedly affected the levels and evolution of seafood trade in Europe. These aspects were dealt with both in quantitative and qualitative terms.
2) To model the relationship between foreign trade and market prices
More conventional economics was used for this second phase. Basically, two different econometric models were developed in order to assess both the impact of relative prices on seafood trade and the integration between European and worldwide fish markets.
The first issue was answered by a panel data model combining for each country at the bilateral level a great deal of products, many trade partner countries within several years (1988-1994). Amongst various determinants of seafood trade, particular attention was paid to the role of prices (foreign and domestic prices), exchange rates, tariff and non-tariff barriers, the distance between countries, etc.
The second issue on price formation referred to very recent econometric techniques on time series processing (co-integration approach), and to market models. The emphasis was put on whitefish markets in Europe in relation to international markets. Basically, fish markets are likely to be integrated both across national boundaries and across fish species or product types. Looking at time series of prices gave some insight to the question of market integration.
3) To simulate the impact of various policy decisions on seafood trade levels
From the results obtained in the first two phases, some implications of several policy decisions were simulated by the models. For example, the trend of decreasing tariff and non-tariff barriers (GATT, WTO) was taken into consideration so as to forecast the levels of the European seafood imports. In the same way, the implementation of the single currency on 01.01.1999 by eliminating the changes in nominal exchange rates within the European Union, will affect the levels of fish imports for some countries whose trade is particularly sensitive to price competitiveness.
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