The Salmon-Agreement between Norway and EU - A Welfare Economic Analysis

Research PaperIn 1996 the 1 billion US dollar Norwegian salmon industry was accused for dumping and for having received subsidies in the infant phase of the industry build-up. The accusations were initiated by the Scottish and Irish salmon industry, which regard the Norwegian suppliers as aggressive competitors in their home market. The EU-Commission verified the accusations. Firstly EU wanted to use an anti-dumping duty to compensate for the negative effects from damaging dumping and subsidising. Even though diplomacy prevented this devastating\ud outcome, another solution was worked out. June 1997 Norway and EU signed a five-year agreement, and the intention was to stabilise the salmon market. The agreement contains the following six means; increased export tax on Norwegian salmon, tentative limits on export volume from Norway to EU, minimum import price on Norwegian salmon, surveillance mechanism, trilateral co-operation between the industry in Norway, Scotland and Ireland and a consultation procedure. This paper focuses on the following questions: what welfare effects does the agreement have on the salmon industry in EU and Norway, and what is the effect of the agreement on the consumers? Who will win and who will lose? To answer these questions we apply a partial equilibrium analysis