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Seafood’s high degree of tradability also suggests that trade policy as a
means to promote marine conservation can have significant economic
consequences. Although seafood has long been traded internationally, trade
has increased dramatically in recent decades such that fish and fishery
products now constitute the most highly traded food commodity
internationally. Many seafood markets have expanded from strictly regional
to truly global markets. Freezing and storage technology along with low
transportation costs have facilitated this globalization of the fish trade.
The seafood trade is characterized by both high degrees of segmentation and
market integration. Segmentation results from the fact that there are many
product types, most of which are not close substitutes for each other.
Still, globalization has led to more integration of certain product types
such as the whitefish market, which includes species caught in multiple
regions around the globe. The trend is toward further integration. Another
important consideration for the seafood trade is that production from
capture fisheries has leveled off and even declined in some countries. The
increase in seafood trade is thus attributable to growth in aquaculture
production and increased exports from developing countries. Developing
countries, in turn, may be most affected by trade policies that restrict
seafood imports failing to meet environmental standards.
Two features of seafood production complicate the application of standard
trade theory to seafood trade restrictions or liberalization. First, seafood
production, whether from capture fisheries or aquaculture, has an unusually
close connection to the environment. In capture fisheries, producing fish
directly feeds back on the ability of the environment to sustain fish
production in the future. This feature distinguishes fisheries from most
other natural resources. The higher degree of control with the production
process in aquaculture makes aquaculture more like traditional industries.
Second, many fisheries are open access, an institutional arrangement in
which fishermen cannot be excluded from fishing. Open access (or management
systems that do little to exclude access) is considered to be the root cause
of overexploitation in fisheries, leading to economic waste from excess
capacity and environmental harm through degradation of biological stocks and
alteration of ecosystems. Biological growth of a fish stock combined with
open access or poor management systems can lead to a backward-bending supply
curve for fish along which the long-run supply of fish is less when price
increases. This characteristic of open access fisheries theoretically can
lead to unconventional outcomes from trade liberalization, including the
possibility that increased trade may not benefit both parties in the long
run.
When a fishery is well managed, standard trade theory applies. Optimally or
well managed fisheries will typically operate on the conventional portion of
the supply curve that is not backward-bending and also with a larger fish
stock than under open access. The literature on policy instruments to
achieve optimal outcomes in fisheries focuses mostly on rights-based tools
such as individually transferable quotas, which break the non-excludability
problem of open access. A complementary literature on regulated open access
suggests that biological stocks in many fisheries are maintained at safe
levels through input controls and season closures, but failure to exclude
access leads to economic losses. Under trade liberalization, regulated open
access many not lead to changes in the long-run supply of fish. There is
still much debate about the effectiveness of different management types and
the resulting impacts on biological and economic outcomes.
The quality of management systems varies substantially across and within
countries from poor management systems close to open access to well
developed systems close to optimal management. As a result, predicting the
effects of trade restrictions or trade liberalization on fisheries must be
done on a case by case basis. In addition, there are a number of fish stocks
that are subject to Illegal, Unregulated and Unreported (IUU) fishing—some
in international waters and some within jurisdictions of individual nations.
Fishing practices also differ substantially across countries, and in many
developing countries—and for industrial fleets fishing in international
waters—the overfishing problem is often exacerbated by subsidies. In
contrast to other industries, such subsidies, while wasteful, are unlikely
to convey long-run competitive advantages for subsidizing countries.
Many common-pool fisheries problems occur in international waters or involve
straddling or shared fish stocks. Regional Fishery Management Organizations
(RFMOs) work to establish multilateral agreements on fishing levels and
practices and seek to enforce these agreements with the assistance of member
countries. In some cases, as with IUU fishing, trade restrictions can be the
only way to regulate environmentally problematic practices. At the same
time, such measures can also discriminate between countries, and
particularly be detrimental to developing countries with limited capacity to
manage fish stocks or to document the management.
There is significant momentum in industrialized countries toward
rights-based management of fisheries that break the non-excludability
problem of open access. But there is also momentum toward more
ecosystem-based management of the marine environment that considers a
broader set of issues such as spatial characteristics of fisheries. These
trends may influence the international fish trade, as they have the
potential to alter production of capture fisheries and aquaculture
operations and thus can affect demand for imports. Moreover, management
trends may influence international environmental norms, which could lead to
increased pressure for trade restrictions to promote marine conservation.
Trade actions of individual countries or groups of countries have the
potential to fall under the jurisdiction of, and possibly conflict with, a
wide range of WTO rules, including sanitary and phytosanitary measures,
anti-dumping, subsidies and countervailing measures, and technical barriers
to trade and rules of origin. Depending on how broadly protection of human
health and the environment are interpreted, efforts to promote marine
conservation could lead to a proliferation of trade restrictions that are
allowable under WTO rules.
No: ERSD-2010-03
Authors:
Frank Asche — Professor of Industrial Economics at the University
of Stavanger, Norway.
Webpage (Opens in a new window)
Martin D. Smith — Associate
Professor of Environmental Economics at the Nicholas School of the
Environment and the Department of Economics, Duke University
Webpage (Opens in a new window)
Manuscript date:
December 2009
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This is a working paper, and hence
it represents research in progress. This paper represents the opinions of
the author, and is the product of professional research. It is not meant
to represent the position or opinions of the WTO or its Members, nor the
official position of any staff members. Any errors are the fault of the
author. Copies of working papers can be requested from the divisional
secretariat by writing to: Economic Research and Statistics Division,
World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21,
Switzerland. Please request papers by number and title.
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