The effect of trade liberation on the salmon market in Finland By Jari Setälä 1), Per Mickwitz 2), Jarno Virtanen 1), Asmo Honkanen 1) and Kaija Saarni 1) 1) Finnish Game and Fisheries Research Institute 2) Finnish Environment Institute IIFET 2002 New Zealand IIFET 2002, Wellington

Aim of the study Is to find out if the prices of imported salmon and domestic wild salmon and farmed salmon trout are co-integrated, i.e. do they belong to the same market? IIFET 2002, Wellington

Growing salmon market IIFET 2002, Wellington

Prices converge in the 1990’s IIFET 2002, Wellington

Monthly real prices of domestic salmon trout and wild salmon and imported salmon in IIFET 2002, Wellington

Monthly quantities of domestic salmon trout and wild salmon and imported salmon in IIFET 2002, Wellington

Co-integration analysis Data tranformations Johansen test Co-integration Exclusion tests Weak exogenity test Stationarity Deflation (CI) Logarithms Unit root tests (ADF) Are all price series co- integrated? Causality IIFET 2002, Wellington

Studied time series Time series: Prior EU Post EU (6)Prior MIP 1997 (7) Post MIP (6) Time of radical change IIFET 2002, Wellington

Results unit root tests All the tested series were non-stationary at the levels and their first difference was stationary, and can be included in co-integration tests One exception: Rainbow trout IIFET 2002, Wellington

Results of multivariate analyses Time series:Cointegration: , prior EU , post EUYes (6), prior MIPYes 1997(7)-2000, post MIP No (6)Yes Yes Yes Yes Yes Yes Yes IIFET 2002, Wellington

Results of exclusion tests Time series: Part of the common system: Salmon trout Imported salmon Wild salmon , prior EU , post EUYes No Yes (6), prior MIPYesYesYes 1997(7)-2000, post MIP (6)YesYesYes YesNoYes YesYesYes YesYesYes YesYesYes YesYesYes YesYesYes IIFET 2002, Wellington

Results of exogeneity tests Time series: Leading price: Salmon trout Imported salmon Wild salmon , prior EU , post EU No Yes No (6), prior MIPYes Yes No 1997(7)-2000, post MIP (6) No Yes No No Yes No Yes Yes No Yes Yes No Yes Yes No Yes Yes No Yes Yes No IIFET 2002, Wellington

Adjustment speed towards equilibrium Time series: Adjustment coefficient: Salmon trout Imported salmon Wild salmon , prior EU , post EU-0,080,170, (6), prior MIP-0,11-0,110, (7)-2000, post MIP (6)-0,31-0,160, ,110,310, ,10-0,200, ,090,150, ,080,020, ,080,150, ,100,170,44 IIFET 2002, Wellington

Results of bivariate tests Time series: Cointegration: Salmon trout/ Salmon trout/ Imported salmon Imported salmon Wild salmon Wild salmon , prior EU No , post EUYesYesYes (6), prior MIP No YesYes 1997(7)-2000, post MIP NoNoNo (6)YesYesYes YesYesYes No Yes Yes No Yes Yes No Yes Yes No Yes Yes No Yes Yes IIFET 2002, Wellington

Conclusions There is a long-run relationship between the prices of domestic salmon trout, wild salmon and imported salmon Changes in prices of imported salmon and salmon trout affect quickly to the price of wild salmon The price of imported salmon influence the price of salmon trout: They are substitutes, even not perfect ones The results of imported salmon and salmon trout are sensitive to the period investigated IIFET 2002, Wellington

Conclusions Why not co-integration all the time: Not same fish species - not perfect substitutes Salmon has an effect on salmon trout - not the other way around Structural changes: changes in value chain - concentration changes in use of salmon trout from fresh to processed products EU and MIP IIFET 2002, Wellington

Monthly prices of domestic rainbow trout and imported salmon in

Monthly prices of domestic wild salmon and imported salmon in

Monthly producer prices of wild salmon and farmed rainbow trout in

Import of fresh salmon was liberated in 1990’s

The value of market collapsed in