Economic impacts for Scottish and UK seafood industries post-Brexit: report

1 Introduction

This Final Report for the ‘Seafood Trade Modelling Research Project — Assessing the Impact of Alternative Fish Trade Agreements Post EU-Exit’ has been prepared by ABPmer Ltd, InterAnalysis Ltd at the University of Sussex and Vivid Economics on behalf of Marine Scotland. It provides the analysis of the potential impacts on prices, output, imports and exports for ten seafood species for four different scenarios for Total Allowable Catch ( TAC) or quota sharing and trade arrangements between the UK and European Union ( EU) and the rest of the world. The impacts on prices, output, imports and exports are explored for the UK and the EU through partial-equilibrium modelling for each of the ten species, using a multi-market model including the UK, the ‘ EU27’ (current EU Member States, less the UK), and other key UK trading partners for each species. The wider economic impacts of each of the scenarios on Scotland are explored in terms of the potential direct, indirect and induced GVA, employment and output changes, and identification of the main sectors of the economy likely to be indirectly affected.

1.1 Background

Fisheries is one of the sectors that has been flagged as likely to be significantly affected by the UK’s exit from the EU. It comprises both wild sea fisheries and aquaculture, which provide inputs to the fish processing industry. The aim of the project was to provide evidence on the likely impacts of different TAC or quota sharing and trade arrangements scenarios, to better understand the potential impacts on fishing, aquaculture and processing, and potential knock-on impacts on other sectors of Scotland’s economy.

The total volume of landings by UK vessels (into the UK and abroad) was 708,100 tonnes with a first sale value of £775 million in 2015 ( MMO, 2016). UK aquaculture production is dominated by Atlantic salmon, most of which is produced in Scotland, with 171,722 tonnes produced in 2015 with a value of £637 million (Marine Scotland, 2016). The fish processing industry is important in the UK, particularly in the Humberside and Grampian regions, with a total turnover of £4,395 million and £776 million GVA in 2014 (Seafish, 2016). Of this, £2,038 million turnover and £341 million GVA was in Scotland. Further detail on the fishing, aquaculture and processing industries are provided in Appendix A.

Table 1.1 Output, GVA and employment for fishing, aquaculture and processing for Scotland and the rest of UK

¹ Not possible to provide total; data are from different years.

Fish and fishery products are one of the most highly traded food commodities internationally, with fish trade representing more than 9% of total agricultural (including fish) exports (excluding forest products) and 1% of world merchandise trade in value terms in 2014. The value of global fish and fishery products exports rose from US$ 8 billion in 1976 to US$ 148 billion in 2014 ( FAO, 2016a). Supply chains are complex and globalised, with processing being increasingly outsourced to countries with comparatively low wage and production costs.

In 2016, the UK exported £1,640 million of fish and fish preparations, of which 71% went to EU countries ( MMO, 2017) (in 2015, the figure was £1,337 million). Salmon, mackerel, herring, scallops and Nephrops are particularly important species for UK seafood exports, Salmon alone represents 32% of the value of UK seafood exports (Seafish, 2017). The main species imported reflect the UK’s consumer tastes, with shrimps and prawns, cod, tuna and salmon dominating (Seafish, 2017).

The rules governing international trade of seafood are negotiated in the World Trade Organisation ( WTO) ^[1] , through a series of agreements with the aim of establishing a framework for trade and the liberalisation of international markets for goods, services and investments ( FAO, 2009). Whilst tariffs can act as a barrier to trade, increasing costs, non-tariff measures can have as great or a greater effect on trade. For fish and fishery products, these include sanitary and phytosanitary measures, restrictions on fish (e.g. size, presentation); the catch method; and labelling requirements (e.g. origin of the catch, generic marketing names). Further detail on WTO rules for trade relevant to the seafood industry is provided in Appendix B.

Shortly before the UK joined the European Economic Community in 1973, the existing six members established the principle of equal access to waters. Fishing opportunities for Member States’ fishing fleets (for species managed through TACs and quotas) are determined by the distribution or allocation of the EU’s quota to the individual Member States. This is done according to the principle of ‘Relative Stability’ which seeks to guarantee the same proportion of the EU’s quota each year for a Member State, in relation to a species in a fishing area. The Relative Stability key was established on the basis of historical reported landings over a five-year reference period (1973–1978), and was subject to intense political negotiation during the development of the first Common Fisheries Policy ( CFP). The allocation also takes into account the needs of coastal areas heavily dependent on fisheries, lost fishing opportunities arising from the declaration of 200-mile exclusive fishing zones by third countries, and national priorities in terms of target stocks ( FAO, 2000).

When the UK leaves the EU and the CFP, it will be considered a coastal state under the United Nations Convention on the Law of the Sea ( UNCLOS), responsible for the sustainable management of the resources in its Exclusive Economic Zone ( EEZ). This requires cooperation with other states (in particular the EU and Norway) for the management of shared stocks, and a key part of this will be agreeing overall catch limits and their allocation between the coastal states. Zonal attachment ^[2] , as used as the basis for allocation of shared stocks in the EU–Norway agreement, is an alternative approach to the current CFP ‘relative stability’ allocation based predominantly on historic catch levels.

1.2 Aims and objectives

The aims and objectives of the research as presented in the Invitation to Tender ( ITT) were:

a) To develop scenarios for Scotland and the rest of UK’s future fish trade and fishing access rights. This will be informed by an analysis of current international trade rules (tariffs and non-tariff measures); evidence on existing trade follows (imports and exports); global consumption and production patterns; the identification of potential new market opportunities for Scotland’s and rest of the UK’s fishing and seafood industry; and, aspirations for Scotland and different parts of the UK.

b) Adapt existing and tested fish trade analysis frameworks or models to evaluate the impacts of scenarios for alternative fish trade and fishing access rights (see objective (a)) to assess impacts across different fishing and seafood industry sectors and regions of the UK (Scotland, England, Wales and Northern Ireland).

c) For each region of the UK (England, Scotland, Northern Ireland and Wales), use the model to:
i. Assess the impacts of the alternative scenarios for UK fish trade and fishing access rights on patterns (direction of flows, volume and value) of Scotland and the UK’s trade (imports and exports) for different fishing and seafood commodities;
ii. Assess the wider economic impacts (e.g., turn over, Gross Value Added ( GVA) and employment) of changes in UK fish trade patterns and changes to fishing access rights; and
iii. Identify main sectors of each region and the wider UK economy that will be affected by changes in UK fish trade.

Due to data constraints, the project was not able to address objective c) for each region of the UK. The Steering Group agreed for the project to look at trade impacts (objective c(i)) at the UK level, and wider economic impacts (objective c(ii) and (iii)) only for Scotland. Further, rather than looking at the scenarios for fishing access rights, the Steering Group agreed that the project should focus on scenarios for TAC or quota sharing arrangements between the UK and the EU.