Opening Address by the Minister for Foreign Affairs Mr. Halldór Ásgrímsson


Ocean of Opportunities

International conference, Akureyri, 8 September 2004

Ladies and Gentlemen,


Introduction

It is a good idea to discuss international financing and marketing of fish products - as well as the future of North Atlantic fisheries - in Akureyri. Akureyri is a community that shows that the fishing industry is not yesterday’s industry but an industry for today and for the future.

I want to do three things in my address today. First to demonstrate why fisheries around the world must move away from what I call the hunters mentality to a business mentality. The success of the Icelandic fisheries management serves as an example of this. Secondly, I want to discuss the main challenges for fisheries in the world. Thirdly, I will explain why the Common Fisheries Policy of the European Union makes it difficult for the nations in the North West Atlantic to see themselves inside the Union.

The revolution of the system of transferable quotas

Let me explain the importance of fisheries to the Icelandic economy.

The financial experts in this room may not know this but dried fish was legal tender in Iceland for at least 400 years, well into the 20th century. It was and still is the Icelandic gold. Even now, the coins have engravings of fish. It makes perfect sense because marine products account for 60 per cent of the total value of exported goods.

From hunting mentality to business mentality

Icelandic fisheries have changed totally in the last 20 years. We have stability and profitable businesses instead of instability and weak businesses. We transformed fisheries from a hunting mentality to a business mentality. This change was not easy. It was certainly not without sacrifice. But it was necessary.

Our hunting mentality meant that we would hunt as much as possible in the good times. In the bad times, when there was no fish, we would take the economy into a recession.

There are few industries in the world where there is a greater need for stability and quality than in fisheries. In the times of the hunting mentality it was impossible to guarantee stable supply or quality. When there was fish, people around the country would work around the clock and the fish had to be sold where markets were found. When there was no fish, there was no work. There was over-investment and over-fishing in the good times and in the bad times the Icelandic currency was devalued time and time again in order to safe the industry. As a result the banks were vulnerable with small reserves and little chance to look into the future. On top of this, the society would be thrown into turmoil of wage disputes with regular intervals.

Today we have a stable economy with a strong financial sector and strong companies in the fishing industry. There are many elements that contributed to this change but the key was in the establishment of the system of total allowable catches and quotas in 1984, which was put into law in 1990. The system of quotas changed the hunting mentality to a business mentality. The fishing companies could plan into the future. They could conduct the fishing effort with much more efficiency. They could introduce greater rationality into the processing and provide a stable supply of a quality product. Before 1984 the prospects of all the main fishing stocks were bleak. The strict application of scientific advice changed all that.

The British Minister for Fisheries, Mr. Ben Bradshaw, said in an interview in the Financial Times recently that he was shocked to walk into a meeting with Icelandic fishermen to hear them saying they were catching too much cod. Mr. Bradshaw said and I quote:

“We have a lot to learn from Iceland. Twenty years ago its fisheries were in a terrible state but they did something about it. They have done a heck of a lot better than us.”

The new approach to fishing management made the fishermen responsible for sustainable fisheries. This is a great change.

The introduction of the transferable quotas in 1990 took us one step further. The system has had a remarkable effect on the economy. Before 1984 the fishing firms had to struggle day by day for survival. Today we look at strong companies, for example here in Akureyri, which are positioning themselves in foreign markets. These companies have the necessary strength to look into the future and develop what will surely be the future of the fishing industry - that is aquaculture and fish farming.

The future of fisheries - fish farming

Traditional fisheries if carefully managed will continue to produce value but the future growth in fisheries is in fish farming.

Let me tell you why.

In the future, consumers will not be content with a stable supply of quality fish products. They will demand much more than that. Among the speakers today is a representative from Marks & Spencer. I imagine that in the foreseeable future he will be calling his Icelandic suppliers and ask for 5 tons of cod where each fish weighs 5 kilograms, cut into certain pieces caught on Friday afternoon area and delivered on Saturday at 15.30 in downtown London.

Some 10 thousand years ago people settled down on the fields of Mesopotamia and started farming. Before that hunters and gatherers would roam the land in search for food. In the last few years the same revolution has entered fisheries. More and more we will farm cod and other species and apply business logic to decision making. Thanks to strong and entrepreneural fishing companies, Iceland will not be left behind in this revolution. We aim to increase fish farming so that the value of products from that industry will be 35 times greater in 2012 than it was in 2001. There are no limits on foreign investment in this industry. Cooperation across border is essential in order to share experience and knowledge in this field.


Fishing industry in the 21st century - threats and possibilities

Let me now turn to the second issue: The main challenges for fisheries in the world as I see them.

In order to develop the fishing industry so that it may be successful in the 21st century we need to tackle a number of issues. We need to do so not only to create wealth for the people that work in the industry but because the world needs a sustainable supply of healthy food.

Misinformation
Recently one of the biggest retailers in Europe advertised that they only bought bacalao from Iceland, because the fisheries in Icelandic waters are sustainable. At the same time cod fished off Iceland was listed by an environmental organisation as an endangered species. They did not have any data to back this false statement. Still, they encouraged consumers to avoid cod in shops and restaurants. Although cod is being over-fished in many places the species is not at all endangered in Icelandic waters. Scare campaigns based on misleading or no information can do great harm to the market.

Ecolabelling

Ecolabelling that has international recognition can bring us a long way towards solving this problem. Everybody, including the consumer has a right to expect responsible fishing and sustainable utilisation of the fish stocks.

Tariffs
Tariffs on fish are harmful because they make this healthy food more expensive. Iceland produces much more fish than Icelanders could possibly consume. According to the logic of trade barriers, Iceland should have tariffs and quotas on imports. This is not the case. Iceland has no tariffs on fish at all. We see opportunities in importing fish and selling it elsewhere. Processing in foreign countries is not a threat but an opportunity. Processing where labour may be less expensive and the customs and tastes are different can increase the value of the catch. This may bring some difficulties to some areas. But we must look beyond that and see the opportunities.

The World Trade Organisation views fish products as industrial products. A handful of states still have to overcome a psychological barrier towards fisheries and start to look at fish as an industrial product as well. Restrictive trade practices are a part of the mentality that lumps fisheries together with social policy or with agricultural policy. Free trade will bring benefits to all and in particular to the poorer countries. Fish is among the healthiest feedstuffs available. We must look beyond our borders and make fish products widely available.

Subsidises

Subsidies in fisheries are the main cause for over-fishing. They also lead to weak companies and they distort competition. Therefore, the Icelandic government is against them. Subsidies create waste, not wealth and should be abolished.

Investments
Now I want to say something on investment in fisheries. As I mentioned earlier, fish farming has great potential. There are no restrictions on foreign investment in fish farming. We acknowledge that international cooperation and finance is necessary for the development of the industry.

However, when it comes to fisheries and processing of fish products the situation is different. We encourage foreign investment in Icelandic fisheries and processing but foreign firms cannot have a controlling share in Icelandic fisheries.

I am aware that there is a contradiction here. Iceland wants the principles of free trade to govern in fisheries, but there are limitations to foreign investments.

One can argue that Icelandic companies in the fishing sector need greater room in order to cooperate and merge with foreign firms and to be on the receiving end of investment. Even though it may not happen in the foreseeable future I am convinced that the circumstances will arrive when these limitations on foreign investments are no longer necessary.

Fisheries in Europe

Ladies and Gentlemen,

Let me now turn to the third issue.

That is to explain why the Common Fisheries Policy of the European Union makes it difficult for the nations in the North West Atlantic to see themselves inside the Union.

European fisheries in crisis

Fishermen around the world are known for telling it as it is. In that spirit I must say that the Common Fisheries Policy of the European Union simply does not work. European fisheries are an industry in crisis. Fisheries are still conducted on the basis of the hunting mentality and not business mentality.

I recently appointed a working group to look into the similarities and differences between the Icelandic fisheries management and the Common Fisheries Policy. The objectives of the Common Fisheries Policy are not the problem. Some aspects of the Common Fisheries Policy are sensible. However, the Common Fisheries Policy has not delivered its promise. The main reason why it does not work is that the policy is based on outdated views on fisheries. Fisheries are regarded as an agricultural activity closely related to social policy and regional policy.

The Common Fisheries Policy is far from the main principles of the European Union, that is the principles of free trade and level playing field for competition. The root of the problem is that the European Union does not regard fisheries processes as industrial processes but rather link them with agriculture.

We have seen how the Council of Ministers in the European Union decides upon total allowable catches that are far above the scientific advice.

The result is over-fishing. The effect is that the very sustainability of a high number of stocks is brought under threat.

State subsidies in the European Union have encouraged investments that will not and cannot pay off. The result of state subsidies is an inefficient fishing industry.

The fishing fleet in the European Union is too large and too expensive. State subsidies have aggravated the situation and damaged natural competition. State subsidies that encourage investment should be abolished.

On top of this, everybody agrees that monitoring and enforcement is poor. The authorities simply don’t know how much fish is caught or if the rules are upheld or not. Discards of fish are also a huge problem.

Let me quote another British politician. The leader of the Conservative Party in Britain, Mr. Michael Howard, said in a speech this summer:

“The Common Fisheries Policy has been a failure: it has led simultaneously to the dwindling of fish stocks and the near-destruction of the British fishing industry. ... Its rules have turned good men into liars.”

These words speak for themselves.

The question of EU Membership and control over fisheries

The question of EU Membership is a difficult one for all the countries in the North Atlantic. Greenland and the Faroe Islands are the first and only countries to opt out of the European Union. Iceland has never applied for membership of the European Union. Norway has applied twice but not achieved an agreement that the nation could accept.

Why is that?

Norway and Iceland are eager participants in all kinds of international cooperation and few countries in the world have greater share of imports and exports.

I’d like to look closer at our good friends in Norway.

Norway is an active contributor in all-international cooperation. Norway donates more to development aid around the world than any other country. You may argue that Norway gives greater funds for cohesion in the new Member States of the European Union than any of the European Union countries themselves.

Still, Norway is sometimes referred to as a “free rider” in the debate in Europe.

The reason given is that Norway has twice negotiated with the European Union on EU Membership and twice the Norwegian people have rejected the resulting draft agreements in a referendum. The Norwegians have skilled negotiators and the agreements were the best that the European Union had to offer at the time. The overriding reasons for the rejection were the European Union demands for control over the fishing resource. The guarantees that were offered to Norway for the future management of the resource were not good enough.

It is my view that neither Iceland nor Norway are free riders. Both countries participate in Schengen although some of the Member States of the European Union do not participate. Both countries contribute to solidarity in the European Union through the Financial Mechanism and are net contributors to the European Union. There are only eleven other countries in Europe net contributors to the European Union. Iceland and Norway take part in political cooperation with the European Union where it is possible and EFTA has a policy to negotiate free trade agreements with the same countries as the European Union.

No. Iceland and Norway are not free riders.

Moreover, I want to go as far as saying that Norway did not reject EU membership. One can say, and I am of that view myself, that it was the European Union that rejected Norway with unacceptable terms for membership. They made Norway an offer that it could only refuse.

The North Atlantic States depend upon fisheries for a living. They have managed, not without sacrifice, to build sustainable fisheries with an efficient industry.
It is impossible for them to give up control over the fisheries resource to enter into a system that does not work.

Why did the European Union not demand control over the British oil resources, the steel in Sweden, the forests in Finland or the vineyards in France? There is no fundamental difference between these properties and the fisheries resource within the exclusive economic zone.

There may be aspirations to join the European Union. There is certainly support for the ideal of a peaceful and prosperous Europe based on cooperation and solidarity. This has been proved time and time again through action.

But the fact is that it may not be possible for fishing nations to become Member States of the European Union. Can anyone honestly look me in the eye and say that Iceland, a country that gets 60 per cent of its export value from fisheries, should give away control over its fisheries? Is it reasonable to demand that a country that depends on fisheries hands over the management of the resource to a body, which has proven itself unable to manage its own resources? We have been told time again that this is the price of membership. I will go as far as saying that the policies of the European Union towards the fishing states in Northern Europe resemble neo-colonialism in this respect.

The European Union is based on using economic tools to reach political goals. The Common Fisheries Policy turns these principles around when it is used to gain control over the resources of new entrants.

The demand from the European Union that the countries in the North Atlantic should give up control over their fisheries resources upon joining the Union is a demand for them to go back into the past. It is a step backwards into the hunting mentality. It is a step backwards into a policy based on outdated views on fisheries as a part of agricultural and social policy.

The European Union has shown political will and flexibility in order to open the door for the countries in Central and Eastern Europe. Their accession on the 1st of May this year was of major importance. It now looks as if a momentum may be growing for the accession of Turkey.

When it comes to the fishing nations of the North Atlantic there have been few signs of flexibility. The European Union has not yet at least indicated that it will be willing to show the flexibility that is necessary in order to safeguard the fundamental interests of the fishing nations in the Northern part of Europe. In a way, this part of Europe has been neglected by the European Union.

I call upon the European Union to change this and to show the necessary flexibility towards the Northern part of Europe.

The fishing industry must have a future, not only for those who depend upon it for a living but also for the consumers that deserve a stable supply of healthy fisheries products.

In order to secure the future of fisheries not only Iceland but also the whole of Europe and in fact the international economy must look the challenges in the eye and deal with them successfully.

Here as in other industries free trade, sound competition, free of subsidies and sustainable utilisation must prevail.