Subsidies to Global Marine Fisheries: Scope and Implications

1. Subsidies to Global Marine Fisheries: Scope and Implications Ahmed Khan, MSc Research Assistant (UBC) PhD student (MUN, Fall 2007) Co-authors: Sumaila, Teh, Watson, Munro, Tyedmers and Pauly FAME Workshop: University of Southern Denmark Esbjerg 6th - 8th June 2007

2. Outline of talk • Background Information: • Research questions; • Methodology; • Results; • Policy implications.

3. Background information Working definition: Fishery subsidies are financial payments from public entities to the fishing sector, which help the sector make more profit than it would otherwise. Justification: Subsidies are substantial and have to be paid by someone (billions of USD);

4. Background information • Global estimates: • FAO estimate: USD 54 billion annually; • World Bank (Milazzo, 1998): USD 14-20 per year; • Regional estimates: • North Atlantic (Munro and Sumaila, 2002): USD 2.5 billion per year; • Pacific Rim region (APEC, 2000): USD 12 billion annually; • OECD country estimates (OECD, 2004; 2005). Rationale: Lack of subsidy information globally for policy development

5. Background information Concern about subsidies • Fisheries subsidies have socio-economic, distributional and trade impacts on fishing communities, countries and regions (Milazzo, 1998; Munro and Sumaila, 2002); • Fisheries subsidies recognized world wide as contributing to overcapacity and overfishing (FAO, 1998; Greboval and Munro, 1998; Hatcher and Robinson, 1998; Pauly et al. 2002). • Subsidies, overcapitalization and overfishing (WSSD, 2002; FAO 1995; Doha, 2001; MEA, 2005).

6. TC1 Cost-reducing subsidies BE1 TC2 TR & TC ($) BE2 MSY Bionomic equilibrium (BE) Total cost of fishing effort (TC) MEY TR & TC ( $) TR Max. rent E3 E4 Fishing effort (E) Total Revenue (TR) E1 E2 E3 Fishing effort (E) How subsidies induce overfishing Gordon Schaefer bioeconomic model

7. Status of global fish stocks Source: Froese and Pauly (2004)

8. Research questions • What are the types and categories of fisheries subsidies? • What is the USD amount of fisheries subsidies provided by countries, regions & globally? • What proportion of the estimated subsidies contribute to an increase in fishing capacity?

9. Identifying & categorizing subsidies Guidelines and criteria: • FAO (2000, 2001, 2003); Westlund (2004); APEC (2000); Milazzo (1998); OECD (2004, 2005); etc. • Policy relevance and program types; • Sources of funds/donor agency • Annual USD amounts; • Duration, scope and coverage; • Recipients; etc. • Potential impact on fish stocks.

10. Identifying & categorizing subsidies 3 categories: the ‘Good’, ‘Bad’ and ‘Ugly’ and 12 types • Good subsidies: ‘investment’ programs in fish stocks • Fisheries management and services; • Fisheries research and development. • Bad subsidies: ‘disinvestment’ programs in fish stocks • Tax exemption; • Foreign fishing access subsidies; • Boat construction and renewal; • Fishing port construction and renovation; • Fishery development projects and support services; • Marketing, processing & storage infrastructure, and • Fuel subsidies.

11. Identifying & categorizing subsidies • Ugly subsidies: programs can be either ‘good’ or ‘bad’ • Fisher assistance packages: • Good: seasonal closure, less fishing pressure; • Bad: fishers stay in fishing instead of diversification (Shrank, 2003); • Vessel buyback programs: • Good: reduce on overcapacity (Milazzo, 1998); • Bad: (i) seepage of capacity back into the fisheries (ii) spill over effect of capacity to other fisheries (iii) anticipation of fishers (Munro and Sumaila, 2002; Clark et al. 2005); • Rural fishers’ community development programs: • Good: Sustainable fisheries livelihood programs; • Bad: e.g. Malthusian overfishing (Pauly, 1993; Teh and Sumaila, 2006) .

12. Computing subsidies • Created a database of the 12 subsidy types identified for 144 maritime countries (1995 to 2005); • Information for each country was filtered into 3 classes: • Class 1: Monetary value of subsidy available; • Class 2: No subsidy amount reported but it is known that subsidies are provided; • Class 3: Either no information, or where we know that no subsidies were provided.

13. Computing subsidies • Countries were divided into two groups – developed, and developing - based on their score on the Human Development Index (HDI) of the United Nations, for filling in the gaps in Class 2; • These two groups of countries face different economic constraints, & therefore, are likely to have different abilities to provide subsidies.

14. Computing subsidies • Non-fuel subsidies: obtain a ratio of subsidies to countries’ landed value (LV) for all 11 types; • Obtain country Group mean of this ratio for each subsidy type; • Use weighted averages to fill the gaps, i.e., computed Group mean multiplied by LV for each type by country; • Sum subsidies for all countries (known and estimated amounts) to obtain global magnitude.

15. Computing subsidies • Fuel subsidies: we multiplied each country’s per unit fuel subsidy consumed by fishing fleet (Tyedmers et al. 2005); • Obtain country Group mean for subsidized fuel consumption; • Use weighted averages to fill the gaps, i.e., group average real cost per litre of subsidized fuel by fuel consumption of fishing fleet by country; • Sum fuel subsidies for all countries (known and estimated amounts) to obtain global magnitude.

16. The results:Worldwide: 30-34 billion USD

17. Total global subsidies by types

18. Comparing subsidy estimates

19. Subsidies by category

20. Subsidies by geographical region

21. Subsidy intensity by landed value

22. Subsidies estimated for major fishing nations

23. High seas bottom trawl subsidies

24. Concluding remarks • Global fisheries subsidies were estimated at about USD 32 billion; with 55% provided by developed countries locally and 25% as fishery projects overseas; • Bad subsidies was the highest category estimated at about USD 22 billion, representing 70% of global total; • Fishing port construction/renovation and fuel subsidies were the highest type of subsidies estimated; • Japan provided the highest subsidy estimated, next to India, the EU, China, Brazil, Russia, the USA and Gabon.

25. Policy implications • Various initiatives to discipline subsidies: • WTO Doha Ministerial Declaration (WTO, 2001); • Code of Conduct for Responsible Fisheries (FAO, 1995); • World Summit on Sustainable Development (WSSD, 2002); • Millennium Ecosystem Assessment Report (MEA, 2005). • Further research: • Develop sustainability criteria to assess subsidies in different regions (developed and developing) and by fishing sectors (artisanal and industrial); • Corroborate subsidy data by country for rules on subsidy reforms (www.seaaroundus.org).

26. Thanks for your attention • Acknowledgements • The Pew Charitable Trusts for their financial support through the Sea Around Us Project; • EC Incofish Project Contract; • World University Service of Canada, UBC Chapter; • The participants at the World Bank Seminar on Fisheries Subsidies (particularly Bill Shrank and • Matteo Milazzo) Oct, 2006 for helpful comments.

27. References cited • APEC. 2000. Study into the nature and extent of subsidies in the fisheries sector of APEC member economies. PricewaterhouseCoopers Report No. CTI 07/99T. 1-228. • Millennium Ecosystem Assessment. 2005. Ecosystem and human well-being: Synthesis Report. Island Press. Washington, D.C. • Clark, C.W., Munro, G.R., Sumaila, U.R. 2005. Subsidies, buybacks, and sustainable fisheries. Journal of Environmental Economics and Management, 50: 47-58. • Doha Conference 2001. Doha Ministerial Declaration, November 20, 2001. • FAO. 1992. Marine fisheries and the law of the sea: A decade of change. FAO Fisheries Circular No.853. FAO, Rome. • FAO. 1995. Code of conduct for responsible fisheries. FAO Fisheries Technical Paper No. 350 (1). FAO, Rome. • FAO. 1998. Report of the technical working group on the management of fishing capacity. La Jolla, USA, 15-18 April 1998. FAO Fisheries Report, No. 585. FAO, Rome. • FAO. 2000. Report of the expert consultation on economic incentives and responsive fisheries. FAO Fisheries Report No. 638. FAO, Rome. • FAO. 2001. Report on the expert consultation on economic incentives and responsible fisheries. Rome, Italy, 28 November 01 December 2000. Paper presented to the Committee on Fisheries, 24th session. Fisheries FAO Fisheries Report No. 638. Suppl. Rome, Italy, FAO, Rome. • FAO. 2003. Report on the expert consultation on identifying, assessing and reporting on subsidies in the fishing industry. FAO Fisheries Report No. 698. FAO, Rome. • Froese, R., Pauly, D. 2003. Warnsignale aus Nordsee und Wattenmeer - eine aktuelle Umweltbilanz. In: J.L. JLozán, E. Rachor, K. Reise, J. Sündermann and v.H. Westernhagen (ed.) Warnsignale aus Nordsee und Wattenmeer - eine aktuelle Umweltbilanz, Hamburg: GEO. • Gréboval, D., Munro, G. 1998. Overcapitalization and excess capacity in world fisheries: Underlying economics and methods of control. Paper prepared for the FAO working group on the management of fishing capacity, FAO, La Jolla, USA. • Hatcher, A, Robinson, K. (eds). 1999. Overcapacity, overcapitalization and subsidies in European fisheries. Proceedings of the first workshop held in Portsmouth, UK, 28-30 October, 1998. CEMARE, University of Portsmouth. Portsmouth. • Milazzo, M. 1998. Subsidies in world fisheries: a re-examination. World Bank Technical Paper. No. 406. Fisheries series, The World Bank., Washington, DC. • Munro, G., Sumaila, U.R. 2002. The impact of subsidies upon fisheries management and sustainability: the case of the North Atlantic. Fish and Fisheries, 3: 233-250. • OECD. 2004. Review of fisheries in OECD countries. Country statistics 2000-2002, Organization for Economic Cooperation and Development, Paris. • OECD. 2005b. Review of fisheries in OECD countries. Country statistics 2001-2003. Organization for Economic Cooperation and Development, Paris. • Pauly, D. 1993. From growth to Malthusian overfishing: stages of fisheries resources misuse. Traditional Marine Resource Management and Knowledge Information Bulletin, South Pacific Commission, 3: 7-14. • Pauly, D., Christensen, V., Guénette, S., Pitcher, T.J., Sumaila, U.R., Walters, C.J., Watson, R. Zeller., D. 2002. Towards sustainability in world fisheries. Nature, 418: 689-695. • Teh, L., Sumaila, U.R. 2006. Malthusian overfishing in Pulau Banggi. Marine Policy (in press). • Schrank, W. 2003. Introducing fisheries subsidies. FAO Fisheries Technical Paper No. 437. FAO, Rome. 52p • Tyedmers, P., R. Watson and D. Pauly (2005), ‘Fueling Global Fishing Fleets’, Ambio, 34, 8, 635-638. • Westlund, L. 2004. Guide for identifying, assessing and reporting on subsidies in the fisheries sector. FAO Fisheries Technical Paper No. 438. FAO, Rome. • WSSD. 2002. Report of the World Summit on Sustainable Development, United Nations publication, New York., Johannesburg, South Africa: 1-173.