NORWAY: monetising the benefit of compulsory supply to a coastal region

In a previous post on Norway I was discussing something called the "leveringsplikt", I.e. The obligation imposed on vessel owners to supply companies in a particular geographic area.

In the official regulations it is stated that this landing obligation is intended to guarantee a stable supply of raw material to processing companies from the cod trawlers' fleet. The fish to be delivered under this obligation has been harvested under special quotas in specific areas. Among some of the interesting features of this system we find a price setting system. It would be complicated to give a short explanation in this post, so I will leave it for now.

What I want to discuss in this post is that vessel owners that are are subject to this duty to supply a specific area can buy back, or should we say, redeem themselves from such duty. In other words, they can pay a sum of money to the local authorities and in exchange of it, land the fish in the place of their choosing.

There are examples of such redemption of the landing obligation.

In 2008 an agreement was reached between a fishing company, "Giske Havfiske", and the commune of Hasvik. The company agreed to pay NOK 17.5 million (USD 3 million) to Sorvaer Kystfiskeinvest AS. This company, owned by a holding company in which the commune of Hasvik has a 49 % stake, will administer the funds received from "Giske Havfiske".

Among other provisions of the settlement, as reported by the press, it is worth mentioning that Sorvaer Kystfiskeinvest SA will invest in vessels and in the purchase of ownership shares in vessels over 80 feet.

The above settlement was backed by the Norwegian Fisheries Directorate and Ms Pedersen, who was the Fisheries Minister at that time, expressed her satisfaction for the solution reached.

I found thus a very good example of the monetisation of this subsidy, which consists in fact of a regulatory intervention by the government but which comes down to the provision of a good to a private company.

Readers will argue that the companies in the areas benefiting from such compulsory deliveries do buy the raw material and that fishing fleets under this obligation got their quota on condition that the harvest should be landed in a particular area.

Apart from the fact that, from an international trade perspective, one can construe this obligation as an export restriction, one can also ask oneself the question whether such landing obligation constitutes a subsidy in the sense of the WTO's Subsidies and Countervailing Measures (SCM) Agreement.

Well, to begin with the government is directing a private company to supply a good to a number of companies that are located in a specific geographical area. Or put differently, the latter companies have a guaranteed supply of goods (raw material). In the absence of such landing obligation it could happen that the processing companies would have to buy this raw material at a higher price and it could even happen that no fish would be landed in the areas concerned.

The Giske Havfiske case help us to get a flavour of the amount of the subsidy that is being provided by the government to the processing industry in the Hasvik commune.

Clearly the supply obligation was considered by Giske Havfike as something that prevents it from getting the best price from the fish it harvest and it is ready to make a direct payment to the commune in other to elude this obligation.

Here is an article from FiskarenFiskeribladet (in Norwegian) on the issue:

http://fiskeribladet.no/default.asp?side=101&lesmer=7765

And here one from Finmark Dagblad (in Norwegian):

http://www.finnmarkdagblad.no/nyheter/article3595752.ece