Analyzing the Resource Analyzing the Resource Impacts of Fisheries Impacts of Fisheries

Subsidies: Subsidies: A Matrix ApproachA Matrix Approach

Gareth Porter Gareth Porter Porter ConsultantsPorter ConsultantsWashington, D.C.Washington, D.C.

UNEP Workshop on Fisheries Subsidies and UNEP Workshop on Fisheries Subsidies and Sustainable Fisheries ManagementSustainable Fisheries Management

GenevaGenevaApril 26-27, 2004April 26-27, 2004

Purpose of the PaperPurpose of the Paper

• To analyze the impacts of eight To analyze the impacts of eight major categories of fisheries major categories of fisheries subsidies on fisheries resources subsidies on fisheries resources using a matrix approachusing a matrix approach

• To provide an analytical tool to assist To provide an analytical tool to assist in the design of new or improved in the design of new or improved disciplines on fisheries subsidies that disciplines on fisheries subsidies that will help protect fishery resources. will help protect fishery resources.

What is the “Matrix What is the “Matrix approach”?approach”?

•A systematic analysis of the A systematic analysis of the resource implications of resource implications of combinations of subsidy type combinations of subsidy type and the two main parameters of and the two main parameters of the fishery: degree of the fishery: degree of exploitation and management exploitation and management system. system.

Parameter 1: Parameter 1: Degree of ExploitationDegree of Exploitation

• Overcapacity: greater fleet capacity than Overcapacity: greater fleet capacity than sustainable catch levelsustainable catch level

• Full capacity: fleet capacity equal to Full capacity: fleet capacity equal to sustainable catch levelsustainable catch level

• Less than full capacity: fleet capacity less Less than full capacity: fleet capacity less than sustainable catch levelthan sustainable catch level

But the reality in the vast But the reality in the vast majority of commercial majority of commercial

fisheries is…fisheries is…• Significant fleet overcapacity leading Significant fleet overcapacity leading

to overexploitationto overexploitation

• If the fishery is regulated, much of If the fishery is regulated, much of the overcapacity is idlethe overcapacity is idle

• If it is unregulated, If it is unregulated, allall the excess the excess capacity contributes to capacity contributes to overexploitation overexploitation

Parameter 2: Parameter 2: Management System Management System

EffectivenessEffectiveness• Effective Management= appropriate Effective Management= appropriate

quotas, adequate enforcement and quotas, adequate enforcement and incentives (ITQs or CBM) for sustainable incentives (ITQs or CBM) for sustainable fisheriesfisheries

• Catch Controls = appropriate quotas, Catch Controls = appropriate quotas, adequate enforcement but no incentivesadequate enforcement but no incentives

• Open Access = no quotas, enforcement or Open Access = no quotas, enforcement or incentivesincentives

But the reality in the vast But the reality in the vast majority of fisheries is…majority of fisheries is…

Catch control systems + overcapacity = Catch control systems + overcapacity = systematic overexploitation, because:systematic overexploitation, because:

• Enforcement is only partially effectiveEnforcement is only partially effective

• In the absence of individual tradable In the absence of individual tradable quotas, cheating on quotas is rampantquotas, cheating on quotas is rampant

Using the matrix to show all Using the matrix to show all combinations for a category of combinations for a category of

subsidiessubsidiesEffective Effective

ManagementManagementCatch Catch

ControlsControlsOpen AccessOpen Access

OvercapacityOvercapacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Less than full Less than full CapacityCapacity

Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Major Categories of Fisheries Major Categories of Fisheries Subsidies AnalyzedSubsidies Analyzed

• Fisheries infrastructureFisheries infrastructure• Management servicesManagement services• Subsidies for access to foreign countries’ Subsidies for access to foreign countries’

waterswaters• Decommissioning of vessels and license Decommissioning of vessels and license

retirementretirement• Subsidies to capital costs Subsidies to capital costs • Subsidies to variable costsSubsidies to variable costs• Income support and unemployment Income support and unemployment

insuranceinsurance• Price support subsidiesPrice support subsidies

SubsidiesSubsidies to Fisheries to Fisheries InfrastructureInfrastructure

• Definition: government spending on Definition: government spending on infrastructure specifically for the fishing infrastructure specifically for the fishing industry that is not offset by user fees industry that is not offset by user fees

• How they impacts resources: regardless of How they impacts resources: regardless of management system, no effect on management system, no effect on decisions on capacity and effort, but decisions on capacity and effort, but marginal effects on entrance into and exit marginal effects on entrance into and exit from the industry.from the industry.

Subsidies to Fisheries Subsidies to Fisheries InfrastructureInfrastructureEffective Effective

ManagementManagementCatch Catch

ControlsControlsOpen AccessOpen Access

OvercapacityOvercapacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Less than full Less than full CapacityCapacity

Not harmfulNot harmful Not harmfulNot harmful Not harmfulNot harmful

Management ServicesManagement Services

• Are they subsidies? The issue is a Are they subsidies? The issue is a matter of debate in OECD countries.matter of debate in OECD countries.

• Are they harmful? Most government-Are they harmful? Most government-funded services probably restrain funded services probably restrain exploitation of fisheries more than if exploitation of fisheries more than if those same services were financed those same services were financed by the industry. by the industry.

Subsidies to Access to Foreign Subsidies to Access to Foreign Countries’ WatersCountries’ Waters

• Definition: PDefinition: Payments to a foreign country ayments to a foreign country covering a significant part of the costs of covering a significant part of the costs of a distant water fleet’s access to that a distant water fleet’s access to that foreign country’s fishforeign country’s fish

• How they impacts resources: Foreign How they impacts resources: Foreign fleets fish in waters which would fleets fish in waters which would otherwise be unprofitable and which are otherwise be unprofitable and which are less regulated than home watersless regulated than home waters

Subsidies to Access to Foreign Subsidies to Access to Foreign Countries’ WatersCountries’ Waters

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacityOvercapacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Less than full Less than full CapacityCapacity

Not harmfulNot harmful Not harmfulNot harmful Not harmfulNot harmful

Decommissioning SubsidiesDecommissioning Subsidies

Generally viewed as “good” subsidies, but Generally viewed as “good” subsidies, but have have unintendedunintended consequences: consequences:

– Vessel owners remaining in the fishery try to Vessel owners remaining in the fishery try to capture more of the catch through “capital capture more of the catch through “capital stuffing”stuffing”

– Incentives for exit and entry are alteredIncentives for exit and entry are altered

– Vessel replacement programs are particularly Vessel replacement programs are particularly dangerousdangerous

Decommissioning SubsidiesDecommissioning Subsidies

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacitOvercapacityy

Not HarmfulNot Harmful Probably HarmfulProbably Harmful HarmfulHarmful

Full CapacityFull Capacity Not HarmfulNot Harmful Probably HarmfulProbably Harmful HarmfulHarmful

Less than Less than full Capacityfull Capacity

Not HarmfulNot Harmful Probably HarmfulProbably Harmful HarmfulHarmful

Subsidies to Capital CostsSubsidies to Capital Costs

• Definition: subsidies to vessel Definition: subsidies to vessel construction or modernization and construction or modernization and fishing gearfishing gear

• How they impact on resources: How they impact on resources: Overall fleet capacity increases, even Overall fleet capacity increases, even when combined with when combined with decommissioning schemes decommissioning schemes

Subsidies to Capital CostsSubsidies to Capital Costs

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacitOvercapacityy

Not HarmfulNot Harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not HarmfulNot Harmful HarmfulHarmful HarmfulHarmful

Less than Less than full Capacityfull Capacity

Not HarmfulNot Harmful HarmfulHarmful HarmfulHarmful

Subsidies to Variable CostsSubsidies to Variable Costs

• Definition: Subsidies for all recurrent Definition: Subsidies for all recurrent or operational costsor operational costs

• How they impact resources: Each How they impact resources: Each fishing trip is less expensive, fishing trip is less expensive, providing providing an incentive to increase fishing effort, an incentive to increase fishing effort, and stimulating leaps in adoption of and stimulating leaps in adoption of new fishing technologynew fishing technology

Subsidies to Variable CostsSubsidies to Variable Costs

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacitOvercapacityy

Not HarmfulNot Harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not HarmfulNot Harmful HarmfulHarmful HarmfulHarmful

Less than Less than full Capacityfull Capacity

Not HarmfulNot Harmful Probably harmfulProbably harmful Probably harmfulProbably harmful

Subsidies to IncomeSubsidies to Income

• Definition: Unemployment insurance, Definition: Unemployment insurance, income support and payments to income support and payments to owners for temporary cessation of owners for temporary cessation of fishingfishing

• Unemployment assistance probably Unemployment assistance probably has no impact on resources, but might has no impact on resources, but might increase pressure on managersincrease pressure on managers

• Payments to owners inhibit exit but do Payments to owners inhibit exit but do not affect fishing effort not affect fishing effort

Subsidies to IncomeSubsidies to Income

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacitOvercapacityy Not harmfulNot harmful

UI: Possibly UI: Possibly harmfulharmful

LU: harmfulLU: harmful HarmfulHarmful

Full CapacityFull Capacity

Not harmfulNot harmful

UI: Possibly UI: Possibly harmfulharmful

LU: harmfulLU: harmfulHarmfulHarmful

Less than Less than full Capacityfull Capacity Not harmfulNot harmful Not harmfulNot harmful

UI: Not HarmfulUI: Not Harmful

LU: NALU: NA

Price Support SubsidiesPrice Support Subsidies

• Definition: policy mechanisms that Definition: policy mechanisms that artificially raise the price of fish, artificially raise the price of fish, increasing the profit to the industryincreasing the profit to the industry

• How they impact resources: Direct How they impact resources: Direct incentive to increase effortincentive to increase effort

Price Support SubsidiesPrice Support Subsidies

Effective Effective ManagementManagement

Catch Catch ControlsControls

Open AccessOpen Access

OvercapacitOvercapacityy

Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Full CapacityFull Capacity Not harmfulNot harmful HarmfulHarmful HarmfulHarmful

Less than Less than full capacityfull capacity

Not harmfulNot harmful Possibly harmfulPossibly harmful Possibly harmfulPossibly harmful

ConclusionConclusion

5 categories of fisheries subsidies 5 categories of fisheries subsidies (subsidies to fisheries infrastructure, (subsidies to fisheries infrastructure, subsidies to access to foreign waters, subsidies to access to foreign waters, subsidies to capital costs, subsidies to subsidies to capital costs, subsidies to variable costs and price support variable costs and price support subsidies) can be expected to be subsidies) can be expected to be harmful to fisheries resources under the harmful to fisheries resources under the management and bio-economic management and bio-economic conditions prevalent in the vast conditions prevalent in the vast majority of the world’s fisheriesmajority of the world’s fisheries