Marine fishery resources are in decline. Compared to the 1950s, when
most of the catches were taken from undeveloped fisheries, by the 1990s
three-quarters of the catches were from fully exploited or overfished
fisheries, and over 10 percent from collapsed fisheries, i.e, fisheries
where current catches are less than 10% of the maximum catch ever taken.
(Worm et al., 2006) Many reasons have been ascribed to the decline of
fishery resources, including increasing demand for fish, the
globalization of markets for fish, poor management and ineffective
monitoring of open access fisheries (Gordon, 1954, Pauly et al., 2002),
overcapacity, technological innovation and illegal fishing (High Seas
Task Force, 2006), but the role of subsidies in the issue of
overcapacity and overfishing must be emphasized (Milazzo, 1998). In
contrast to most land-based resources like trees or minerals,
governments do not generally require payments for the right to access
fisheries. This failure to collect access payments has not been
considered a subsidy up to now largely because many fisheries are
treated as a common resource. In an open access or quasi-open access
system any economic rents (the difference between the revenue generated
and the cost of extraction, including a return to capital) are generally
dissipated through increased fishing effort.
Rather than collecting rents from resource exploitation, governments
have been actively subsidizing fishing, leading to even greater fishing
effort and resource depletion. Subsidies that expand fishing capacity,
including subsidies for vessel construction and modernization, operating
costs (particularly fuel), construction of fishing ports and processing
plants, payment for foreign access agreements and marketing support are
estimated to total about $16 billion globally each year (Sumaila et al.,
in press). This represents close to 20 percent of the total value of
marine catch, a level of subsidization that has trade and
competitiveness impacts given that seafood is one of the most highly
traded “agricultural” products. Asian countries lead in providing
capacity-enhancing subsidies, accounting for $11 billion of the total.
Subsidies that reduce the cost of fishing or increase revenues from a
given effort provide an incentive for fishers to increase their catch
and potential profits. Subsidies can make fishing profitable even when
fishery resources are in decline. In offsetting the economic incentives
for fishermen to exit the industry, subsidies effectively maintain
fishing capacity at levels that vastly exceed what is appropriate for
sustainable fishing (Cox, 2003).
Capacity-enhancing subsidies remain a threat to resource sustainability
even when the open access aspects of a fishery are not in place, such as
in a privatized fishery or one owned and managed by a single entity. It
is widely believed that providing subsidies to privatized fisheries or
those with well-enforced catch limits will have negligible resource
implications. However, the perverse incentives created by subsidies
undermine the stewardship qualities of even privatized or well-managed
fisheries, creating pressures on fisheries managers to increase quotas,
potentially to the point of resource extinction.
In their emphasis on economic injury from trade, the current mechanisms
of the WTO Agreement on Subsidies and Countervailing Measures are
inadequate to address the overexploitation of fish stocks from
subsidies. By directly addressing the impact of subsidies on
overcapacity and overfishing, the current Doha Round negotiations hold
great promise for promoting the sustainability of global fish stocks.
This new focus represents a significant shift for WTO members and raises
several fundamental issues, including that of specificity. The concept
of specificity was developed to identify trade-distorting subsidies, but
in the current Doha negotiations the policy objective is not just to
reduce trade distortion, but to curtail overfishing. Therefore, from a
resource-depletion perspective, it is the absolute amount of subsidies
going to enhance effort in the fishing industry that is important, even
if these same subsidies are received by other sectors such as
agriculture. This contrasts with the focus of the ASCM on
trade-distortion arising from subsidies that are specific to an
industry. Addressing this issue in the context of fuel subsidies is of
particular importance not only given their widespread use but also their
role in encouraging the wasteful consumption of fossil fuels.
Subsidies are not always harmful, for example those for fisheries
conservation management and enforcement should support healthy fish
stocks. However, many subsidies that initially appear to be beneficial
for the resource, such as subsidies to decommission fishing vessels, can
have perverse effects and actually increase fishing capacity. This is
because the anticipation of buyback subsidies will encourage vessel
owners to retain obsolete equipment and intensify fishing operations in
order to maximize their benefits from the programs. Furthermore,
decommissioned vessels have frequently been transferred to other usually
less-developed countries, leading to an increase in fishing effort in
the receiving country’s waters or the high seas. For decommissioning to
be effective, the buyback program should be entirely unanticipated by
vessel owners and the vessels themselves scrapped or permanently
redirected away from fishing (Clark et al., 2005). This example suggests
that even supposedly beneficial subsidies, such as assistance for the
purchase of new fishing gear that reduces catch of non-targeted species,
must be assessed for their potential to increase fishing capacity, with
strict conditions applied to their use.
Developing countries are concerned that their interests in poverty
reduction, livelihoods and food security be reflected in the WTO
discussions to discipline fishing subsidies. However, it is important to
ensure that subsidies for legitimate development objectives do not in
turn become the means for the overexploitation of fish stocks,
undermining not only of the stated objective of the Doha round
negotiations, to discipline subsidies that contribute to overcapacity
and overfishing, but also ultimately undermining fishers and the
availability of fish as a food source in developing countries.
Clark, C.W., Munro, G., and Sumaila, U.R. (2005). Subsidies, buybacks,
and sustainable fisheries. Journal of Environmental Economics and
Management, Pages 47-58.
Cox A. OECD Work on Defining and Measuring Subsidies in Fisheries.
(2003) OECD Publication. www.oecd.org (last accessed 20 August 2006).
Gordon, H.S. (1954). The Economic Theory of a Common-Property Resource:
The Fishery. The Journal of Political Economy 62(2): 124-142.
High Seas Task Force (2006). Closing the net: Stopping illegal fishing
on the high seas. Governments of Australia, Canada, Chile, Namibia, New
Zealand, and the United Kingdom, WWF, IUCN and the Earth Institute at
Pauly D, Christensen V, Guénette S, Pitcher TJ, Sumaila UR, Walters CJ,
Watson R, Zeller D (2002) Towards sustainability in world fisheries.
Milazzo M. Subsidies in world fisheries: a re-examination. World Bank
Technical Paper, 406. Fisheries Series. (1998) Washington, DC: The World
Sumaila, U. R., Khan, A. J., Dyck, A., Watson, R., Munro, G., Tydemers,
P. and Pauly, D. 2010. A bottom-up re-estimation of global fisheries
subsidies. Journal of Bioeconomics, in press.
Worm, B. et al (2006). Impacts of Biodiversity Loss on Ocean Ecosystem
Services. Science, 314 (5800), 787 – 790.
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