COMMERCE A/S SPOONER VISIT ADVANCES SETTLEMENT OF

C O N F I D E N T I A L OSLO 001326

SIPDIS

SIPDIS

COMMERCE FOR A/S SPOONER

E.O. 12958: DECL: 10/13/2016
TAGS: ETRD EFIS PREL NO
SUBJECT: COMMERCE A/S SPOONER VISIT ADVANCES SETTLEMENT OF
NORWEGIAN SALMON TRADE DISPUTE


Classified By: Deputy Chief of Mission, Kevin M. Johnson
for reasons 1. 4 b and d


1. (C) SUMMARY: Norwegian and U.S. officials have moved
closer to terms of an agreement that would end one of the
USG's longest running trade disputes -- the 15-year old
antidumping and countervailing duties on fresh and chilled
Norwegian salmon. Assistant Commerce Secretary David Spooner
and Norwegian Foreign Ministry representatives agreed during
September 29 talks in Oslo that settling the case would be in
the interests of both governments. A/S Spooner outlined, for
purposes of discussion, what a possible settlement might look
like, e.g. a bilateral executive agreement under which Norway
committed to import quotas or target prices, or a combination
of both, accompanied by U.S. industry's written agreement to
withdraw its request for trade relief. The Norwegians were
somewhat reluctant to agree to quotas, insisting that the
duties were unfair as a matter of principle and should be
lifted unilaterally. A more serious sticking point is
persuading the U.S. industry, now largely owned by Cooke
Aquaculture of Canada, to go along with any
government-to-government deal. Cooke, the powerhouse of
Atlantic seaboard salmon producers, appears to have little
incentive to give up its U.S. subsidiaries' entitlement to
trade relief. Norwegian salmon industry representatives, in
a separate meeting with A/S Spooner, indicated that Cooke had
sought a cash payment in exchange for withdrawing its trade
relief petition. Norwegian industry is not willing to pay a
high price, in either legal costs or a settlement with Cooke,
to lift the duty orders because it has largely ceded the U.S.
market to Canadian and Chilean suppliers. Though success is
far from assured, the talks opened a useful dialogue for
settling the oldest extant trade irritant in the bilateral
relationship. The agreed next step is for Norwegian
officials to draft and convey a proposed settlement outline
to U.S. counterparts. END SUMMARY

Norwegian Recalcitrance at WTO Prompts Washington to Act
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2. (C) Assistant Commerce Secretary David Spooner visited
Oslo on September 28-30 to address long-standing Norwegian
complaints about U.S. countervailing and antidumping duties
on Norwegian fresh salmon. A/S Spooner's main Norwegian
interlocutors were MFA Director General Elisabeth Roderburg
and WTO Chief Negotiator Evan Kittelsen. The salmon cases
stretch back fifteen years. Much to Norway's surprise, the
third sunset review of the duties in December 2005 resulted
in confirmation of the existing 26 percent combined duty rate
on Norwegian fresh salmon. The case has been a continual
irritation in the bilateral trade relationship and, because
of it, the Norwegians have been vocal critics of many U.S.
positions in the WTO rules committee negotiations. By
settling the case, U.S. officials hope the Norwegians will
curb their strong criticisms and occasional obstruction of
U.S. goals at the WTO.

Both Governments Eager to Settle
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3. (C) The parties discussed two options for "making the
case go away," as one participant in the talks put it.
First, Norway might seek to open a changed circumstances
review with either the Department of Commerce or the
International Trade Commission. This option did not appear
particularly promising, as the threshold for demonstrating
that circumstances had changed was high and Norwegian
industry would resist incurring additional legal costs to
make the case. Norwegian industry had already spent over USD
4 million in legal fees fighting the duties and, given its
professed lack of interest in reentering the U.S. market, was
loathe to sink in more. Second, the two governments could
come to a negotiated settlement implemented by executive
order. The negotiated settlement option appeared more
attractive (and cheaper) to Norwegian officials, though they
still balked at having to commit to any voluntary quotas
since they believe continuation of the duties is not
justified. A settlement option might include a voluntary
quota or a combination of quotas and minimum target prices
for a number of years.


But Will Industry Go Along?
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4. (C) The Spooner delegation told the Norwegians that U.S.
officials were committed to seeking a resolution, but
dampened any expectations that it could occur quickly or
easily. Both sides agreed that they would have to get their
respective industries to go along. U.S. industry would be
the toughest sell. Before an agreed settlement could take
effect, U.S. salmon producers have to concede their
entitlement to trade relief. Having just succeeded in having
the duties extended for five years in the latest sunset
review, they would seem to have little incentive to settle.
To complicate matters, most of the U.S. producers have been
bought up by Canadian salmon powerhouse Cooke Aquaculture, so
Cooke would have to sign off on any deal. Commerce
Department officials said they have been in periodic contact
with Cooke's attorneys, who evince little inclination to
settle.

What Will it Take Get U.S. (Canadian) Industry on Board?
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5. (C) Though Norwegian producers say they have no real
interest in reentering the U.S. market, an expected surge in
farmed Norwegian salmon supplies could pique U.S. industry
interest in an agreed quota to minimize the risk that a new
wave of salmon could hit American shores. Aquacultured
salmon take about three years to reach maturity. Norwegian
producers reportedly have so many "eggs in the water" now
that a "salmon tsunami," as one participant in the talks
termed it, could occur in three years' time. (Note: Such an
action would involve true dumping by Norwegian producers who
presumably would pay the duty to unload their bounty. End
Note) A negotiated ceiling on Norwegian imports could thus
prove attractive to Cooke by providing some insurance that
this expected surge in Norwegian salmon would not seriously
threaten Cooke's U.S. market share.


6. (C) Norwegian producers told A/S Spooner in a separate
meeting that the expected increase in farmed salmon supplies
would be absorbed by expanding markets in Russia, elsewhere
in Europe, and Asia. Norwegian salmon could not really
compete on price with Chilean and Canadian products in the
U.S. If the future surge in Norwegian production were useful
in prompting Cooke to accept a quota deal, however, the
Norwegians were happy to let Cooke think they were a threat.
Though professing lack of interest in the U.S. market,
Norwegian producers were very interested in removing the blot
on their reputations from being tagged as unfair traders.
They were just not willing to pay very much to do so. The
Norwegian producers told A/S Spooner that Cooke had offered
last year to withdraw its trade complaint in exchange for a
cash payment, but the price was too high. They were willing
to talk to Cooke again about settling, but were not
optimistic that the company would come around without a
strong push from the USG (or more money than Norwegians are
willing to pay).

Deputy Foreign Minister Focuses on Practical Way Forward
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7. (C) In a wrap-up meeting with Deputy Foreign Minister Liv
Monica Stubholt, the parties agreed on the political
desirability of removing this long-standing irritant in the
bilateral economic relationship. They recognized that
obtaining agreement from the salmon industries of both
nations would not be easy, but pledged to continue working
with their respective industries in pursuit of a settlement.
The focus, said Stubholt, should now be on a "practical way
forward." She suggested that Norway draft and convey through
its embassy in Washington a written proposal outlining
settlement principles and language. A/S Spooner agreed.

Comment: What Price Principle?
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8. (C) The Norwegians were clearly gratified that the USG
had taken the initiative to address their leading economic

complaint against us. They sincerely believe that the
long-standing duties against Norwegian salmon are unjustified
and they are not shy about moralizing about, in their view,
the unfairness of U.S. trade remedies. No one on the
Norwegian side, however, is willing to pay very much to
vindicate a principle when the likely economic benefits are
so minimal. If Norwegian producers are to believed,
Norwegian salmon is not likely to make a comeback in the U.S.
market under any circumstances. Indeed, their protestations
about lack of interest in the U.S. market were so consistent
that some might speculate that they may have agreed,
implicitly or explicitly, with their American competitors to
keep out of each other's home turf. Seen from U.S.
industry's point of view, there is practically no incentive
to give up duty orders that not only keep potential Norwegian
competitors at bay but, in accordance with legislation that
allows protected producers to keep the duties for themselves,
generate revenues. Bilateral agreement on settlement
principles will probably be the easy part of resolving the
salmon dispute. The hard part will be bridging the gap
between what Norwegian industry is willing to pay for the
intangible benefit of restoring its good name and what U.S.
industry is willing to accept to give up the very tangible
benefit of its entitlement to trade relief.


9. (U) A/S Spooner cleared this cable.
JOHNSON