Reinserting state agency in global value chains / by Francisco Blaha

My friend Gilles sent me new paper on the PNA and MSC certification, written by someone I know, the paper called my attention and was a good reading. I’ll quote some parts only… as always read the original! Is worth.

 The resource owners (in the small boat) and the users (in the big one)

The resource owners (in the small boat) and the users (in the big one)

I have meet Steven Adolf at some of the tuna forums I been invited, and I always like when someone from outside the industry (his background in economics and journalism), as it brings a fresh approach that sometimes those who are on the inside don't really see. His latest publication (surely part of his PhD) raises some interesting points about the role of PNA and its association with the MSC.

Abstract

In the agri-food sector global sustainability partnerships play an increasing role in setting and enforcing certification standards through global value chains. Amidst perception that the capacity of states to steer sustainable transnational forms of production is diminishing, these partnerships are increasingly led by firms and non-firm actors. Using the case of the Parties to the Nauru Agreement (PNA) Marine Stewardship Council (MSC) certification of free school skipjack tuna purse seine fisheries, this paper challenges this idea of diminished state agency by exploring how these states are repositioning themselves in the global tuna value chain.  We document how PNA created the conditions for its small island member states to use the MSC certification for expanding their role as the owner of tuna resources and becoming global value chain actors themselves through a novel and disruptive public–private partnership. The results indicate that states can use market demand for certified tuna to improve their position as both producers and intermediaries in the chain, and in doing so recapture greater sovereign control over tuna resources while improving their capacity for domestic wealth generation.

The 1st part that I like is hat bring to my attention a concept that I wasn't very aware of:

Global sustainability partnerships exist in a variety of forms, but are most commonly between lead firms in GVCs and non-firm actors, such as environmental and social NGOs. And the (re) insertion of the state in market oriented forms of global sustainability governance.

They go into a good analysis of the MSC (Marine Stewardship Council) Ecolabel. My cautious views on ecolabels are not a secret… but I always admit that the only of the lot I have some respect is MSC, because it certifies a fishery and not a company like the others… and if you deal with a fishery, even if the ones paying for the certification is the industry the state (or states like in PNA) need to have a key role.

They bring this up nicely:

Empirical studies of MSC recognize that changing chain coordination depends on the interests of large retailers, food service companies and their chain-suppliers in European and US markets.  How-ever, an emerging set of studies have also examined the interaction of MSC certification with states, and in doing so have looked beyond standards as objective, technical, science-driven instruments for achieving sustainable management of marine resources .
The State has a dual position in the certification process when claiming the role of ‘producer’ in the chain. By doing so, he argues, the state is able to directly intervene in struggles over surplus value, and influence the environmental conditions of production.

The paper then focus on the MSC certification of PNA Skipjack tuna and makes a good analysis of the global value chain of skipjack and present a good table naming all of the players, and which “strangulation” points they have and a very nice illustration.

 Points of concentration of main companies in the global value chain of canned skipjack tuna caught by the purse seiner fleet in the Western and Central Pacific Ocean.

Points of concentration of main companies in the global value chain of canned skipjack tuna caught by the purse seiner fleet in the Western and Central Pacific Ocean.

The role of PNA is also made clear:

In doing so the PNA members have attempted to establish a monopoly-like control over approximately 25% of the global production of canned tuna. As outlined by leading officials, the PNA has as such sought to define itself as the ‘OPEC of Tuna’: a state driven, profit maximizing commodity cartel. By creating a cartel-like structure the PNA hope to create a new coordinating mechanism that goes beyond the ownership of the resource alone.

And the role of Pacifical:

Key to the PNA’s MSC certification strategy is the creation of Pacifical; a 50/50 public–private partnership with the Dutch trading company ‘Sustunable’. Pacifical is part of a wider strategy of the PNA to gain greater control over the production, trade and marketing of the certified skipjack tuna. Pacifical is therefore seen by the PNA as an instrumental part of both commercial and state policy objectives to promote and control the sustainable management of skipjack tuna as well as capture higher future national revenues from tuna through a price premium. Through Pacifical the PNA seeks greater agency in three ways. First, Pacifical expands the position of member states from ‘owners’ of the skipjack stock in their EEZ, and clients and holders of the MSC certification, to a central commercial role in the chain contracting fishers, traders and processors, and marketing the Pacifical brand to retailers. Second, Pacifical compliments the management systems of the PNA by feeding back information from the chain of custody traceability system and in doing so increases surveillance over vessels, crew and processing factories. Third, by branding cans of the MSC certified canned skipjack tuna, Pacifical is designed to create a direct link to consumers by promoting the PNA as a recognizable production source of sustainable tuna and social accountability.

Which is all fair enough, as the pacific island gets pathetically little form tuna revenues in comparison to the DWFN and the processors (even if they are solid reasons on why processing in smaller pacific island countries would always struggle)

Then he goes on a explanation on why there was opposition to the MSC assessment process and doubts on the success.

Notwithstanding the interest of retailers for the Pacifical canned tuna, non-cooperation to outright exclusion of the MSC-Pacifical scheme has directly influenced the success of the PNA in reaching their goals. Because conventional traders and leading brands did not want to participate, processors were also reluctant to participate. The industrial fleets of purse seine vessels contacted by Pacifical lacked interest, with the exception of Frabelle — one of the biggest Philippines fisheries in the region. Frabelle has strong long-standing strategic links with the PNA through processing plants and fishery licenses in the EEZ waters. By landing MSC certified fish, the company has supported the PNA in its aspirations of establishing an extended role in the chain. In return Frabelle has further reinforced its business relation with the PNA and strengthened its commercial interests in Papua New Guinea, the main processing hub in the PNA with tariff free entry to the EU market. Respondents outlined several reasons for the lack of cooperation by these firms. Traders and brands expressed doubts that the proposed price premium of 20%, to be divided between the fisheries, the traders, processors, retailers and Pacifical, was realistic over the long term. They also noted that this concern would become even more real if the MSC certified tuna move from a niche to mainstream consumer product given that margins in the trade and processing of canned tuna are small (Hamilton et al., 2011). The industry is convinced there is a strong negative price elasticity of demand in canned tuna, resulting in lower demand when the consumer prices rise. Econometric modelling supports this negative relation in demand for canned tuna, but not as strongly as the industry suggests, while overall demand in the US is falling and stagnating in Europe.

He does document then the change in hearth by the big players such a Trimarine and FCF.

I did always had an issue with the price premium (and form what you read above I wasn't the only one)… particularly in low cost product like canned tuna.

The ideal of that a certified product may get a price premium is not a golden rule, furthermore the logic of that assumption is flawed, in NZ we have argued that the industry should not even expect a price premium for certification noting that: “No plausible case can be made for a premium for ‘sustainable seafood’. I anything, a well managed fishery should also be a cheaper fishery to harvest as the fish should be more abundant and easier to catch!” said my friend Alastair MacFarlane.

Their discussion then bring 3 good elements

We distinguish three contingent factors that must be in place for states to play these multiple roles in the evolving processes of certification and standard-setting in global value chains.
First, in order to become the client and holder of the MSC certification, states must have some sort of ‘landed property right’ on the resource that is being certified (Campling and Havice, 2014). As they describe, state ownership of the EEZ is the basis of property in fisheries and therefore defines the role of the state in relation with the market. This enables coastal states to capture surplus value from fish stocks, as well as enforce measures to improve the environmental conditions of production. By setting harvest control rules for free-school tuna, and having them certified, the PNA member states are moving beyond capturing control back from the distant water fleets through the WCFPC (see Havice, 2013, 2010; Miller and Bush, 2014), to also taking greater control over their tuna resources by extending control over surplus value through the market. This supplementary extension of property relations in the oceans is an innovative development in industrial fishery value chains, allowing states to draw on their position as ‘landlord’ and confront the prevailing market power of transnational firms.
Second, the role of the state in the local and regional economy of control can create new forms of governance facilitated through the market, wherein producers and intermediaries offset the power of global buyers (Foley and Hébert, 2014; Gereffi, 2014). Because clients are defined based on their capacity to control and manage a specific resource territory (Foley and Hébert, 2013; Vandergeestet al., 2015), resource ownership is a pre-requisite condition. How-ever, by positioning themselves as a MSC client in the Pacifical partnership, the PNA member states are also extending their influence over the value chain through the chain of custody certification. Through this dual position, the PNA member states are able to increase their influence over multiple stages of the chain by set-ting clear conditions for cooperating with an alternative value chain than that coordinated by the prevailing lead firms in the non-MSC certified chain. By using the demand for certified tuna to strengthen their position as producer and intermediary in the chain, the PNA member states not only position themselves in the tuna GVC but also reshape the captive and hierarchical governance structures in the prevailing tuna global value chain led by traders, brands and retailers.
Third, these states are able to fulfil and combine these roles because they partner with a company in the public–private partnership Pacifical, which is legitimised by the MSC certification (Glasbergen, 2007). The participation of states in the partnership enable them to create and try out new combinations of their rules and practices with those of the private sector. Hence, they not only compete with firms but establish partnerships in order to find common ground for creating projects that link businesses to the state in a legitimate way (Evans, 1995). In doing so, the role of these state changes from a custodian regulator to a subordinate but regulatory demiurge, which facilitates competition with industry for the sake of reaching the collective end goal of sustainable fish stocks. This role can be seen as the mutual reinforcement between state and industry through partnerships, which is a fundamental characteristic of Evans ‘developmental state’. How this developmental role is organised within the state is beyond this scope of this paper, but does present a relevant set of questions for further research. As a consequence, value chain partnerships offer the conditions to combine the market based power of lead firms with the legiti-macy of states to regulate natural resource management (Vellemaand Van Wijk, 2014). By partnering in joint activities with a commercial partner, states can explore new modes of governance by coordinating the implementation of voluntary sustainability measures and in doing so increase their influence over production and trade, as well as the sustainability of fishery resources. The even broader consequence of these findings is that assessment of certification impacts needs to go beyond the technical assessment of sustainability performance, to look at the wider impacts and consequences certification holds for sustainability ‘governance’ in more general terms (Eden and Bear, 2010; Ton et al., 2014). Doing so can reveal the positive impact certification can have as a tool for influencing the political economic conditions that often under-lie persistent and complex sustainability issues in sectors such as seafood.

I like the paper, made me think... (and I like thinking!)

Now... the “issue” I still have, is that ecolabels exist because good fisheries governance and management has failed in the first place… so shouldn't we fix that first, independently of the fishery be dealing with? Ecolables only have an interest in highly traded species, as is commercially driven by retailers and paid by producers, who will only invest in a certification for the fisheries they make more money. So I feel that we are commercializing fisheries management trough a branding exercise… and those who are not part of the commercial market chain (as most subsistence fisheries or low value species) will as in many other areas, be left aside.

Please cite this article in press as: Adolf, S., et al., Reinserting state agency in global value chains: The case of MSC certified skipjack tuna.Fish. Res. (2015)