Salmon exports, processing, and local economic impacts

Norway is a globally leading seafood producer. Especially the aquaculture industry has experienced a remarkable development in technology, and market development in recent decades. Most of the production is exposed to international trade. The sector is important for coastal communities where the production takes place. The main objective of this project is to investigate domestic processing in relation to the Norwegian salmon aquaculture sector, how it interacts with and supports the Norwegian seafood processing industry and to what extent third country processing poses a challenge. A common concern is that little value adding activities beyond production and marketing takes place domestically. It is an objective of the authorities to increase domestic seafood processing in support of jobs and development in coastal communities. This has been a challenge as the seafood processing industry for several years has struggled with low profitability. Many products are exported as whole fresh and further processed in third countries before reaching the consumer markets, but the extent of third-country processing and its development over time is not clear. High Norwegian costs make competing with the international processing industry challenging. In addition, the processing industry faces challenges with unpredictable access to raw materials and market access. There are also potential advantages related to proximity to the production process and potential for economies of scope including the exploitation of trimmings and cut-offs. The main component of our project will focus on the challenges related to international trade: international competition and market access. Our findings aim to inform policymakers by giving an overview over third-country processing in seafood export and its development over time and provide guidance on how to better foster a competitive domestic processing industry beneficial both to the local communities and for the overall Norwegian economy.

The seafood industry, with aquaculture making up more than 70% of the value, is important for Norway and its coastal communities. In 2022, the seafood industry contributed more than 120 billion NOK to the Norwegian GDP, employing around 106 000 employees divided between the industry itself and the associated supplier and services industries. While aquaculture production and marketing has been highly successful, a common concern is that little value adding activities in the sector takes place at home. The purpose of this project is to investigate how the success of the Norwegian aquaculture industry interacts with and can support the domestic processing industry. The project will focus on the role of trade, primarily in salmon, for the domestic processing industry. Specifically, we investigate aquaculture and processing along four dimensions. First, we will investigate the characteristics and trends in foreign processing of salmon and trout, with a particular focus on third country processing. This will provide information on the competitiveness of domestically processed seafood. Second, we will investigate how trade networks and product portfolios of aquaculture exporting firms support the growth and quality selection of processed seafood in international markets. Third, we quantify the economic impact of differential tariffs for domestically processed seafood. This will inform on how tariffs affect the competitiveness of the domestic processing sector. Finally, we will investigate the benefits of industrial clusters in aquaculture and seafood processing, as well as industry consolidation in domestic processing. This will provide insights with respect to the role of domestic processing clusters and its impact on local labor markets. Our hypothesis is that lessons learned from aquaculture can have broader application for the processing industry. In this project we aim to reveal how the aquaculture success might benefit the domestic seafood sector and communities.