Analyzing the Resource Impacts of Fisheries Subsidies: A Matrix Approach

1. Analyzing the Resource Impacts of Fisheries Subsidies: A Matrix Approach Gareth Porter Porter Consultants Washington, D.C. UNEP Workshop on Fisheries Subsidies and Sustainable Fisheries Management Geneva April 26-27, 2004

2. Purpose of the Paper • To analyze the impacts of eight major categories of fisheries subsidies on fisheries resources using a matrix approach • To provide an analytical tool to assist in the design of new or improved disciplines on fisheries subsidies that will help protect fishery resources.

3. What is the “Matrix approach”? • A systematic analysis of the resource implications of combinations of subsidy type and the two main parameters of the fishery: degree of exploitation and management system.

4. Parameter 1: Degree of Exploitation • Overcapacity: greater fleet capacity than sustainable catch level • Full capacity: fleet capacity equal to sustainable catch level • Less than full capacity: fleet capacity less than sustainable catch level

5. But the reality in the vast majority of commercial fisheries is… • Significant fleet overcapacity leading to overexploitation • If the fishery is regulated, much of the overcapacity is idle • If it is unregulated, all the excess capacity contributes to overexploitation

6. Parameter 2: Management System Effectiveness • Effective Management= appropriate quotas, adequate enforcement and incentives (ITQs or CBM) for sustainable fisheries • Catch Controls = appropriate quotas, adequate enforcement but no incentives • Open Access = no quotas, enforcement or incentives

7. But the reality in the vast majority of fisheries is… Catch control systems + overcapacity = systematic overexploitation, because: • Enforcement is only partially effective • In the absence of individual tradable quotas, cheating on quotas is rampant

8. Using the matrix to show all combinations for a category of subsidies

9. Major Categories of Fisheries Subsidies Analyzed • Fisheries infrastructure • Management services • Subsidies for access to foreign countries’ waters • Decommissioning of vessels and license retirement • Subsidies to capital costs • Subsidies to variable costs • Income support and unemployment insurance • Price support subsidies

10. Subsidiesto Fisheries Infrastructure • Definition: government spending on infrastructure specifically for the fishing industry that is not offset by user fees • How they impacts resources: regardless of management system, no effect on decisions on capacity and effort, but marginal effects on entrance into and exit from the industry.

11. Subsidies to Fisheries Infrastructure

12. Management Services • Are they subsidies? The issue is a matter of debate in OECD countries. • Are they harmful? Most government-funded services probably restrain exploitation of fisheries more than if those same services were financed by the industry.

13. Subsidies to Access to Foreign Countries’ Waters • Definition: Payments to a foreign country covering a significant part of the costs of a distant water fleet’s access to that foreign country’s fish • How they impacts resources: Foreign fleets fish in waters which would otherwise be unprofitable and which are less regulated than home waters

14. Subsidies to Access to Foreign Countries’ Waters

15. Decommissioning Subsidies Generally viewed as “good” subsidies, but have unintended consequences: • Vessel owners remaining in the fishery try to capture more of the catch through “capital stuffing” • Incentives for exit and entry are altered • Vessel replacement programs are particularly dangerous

16. Decommissioning Subsidies

17. Subsidies to Capital Costs • Definition: subsidies to vessel construction or modernization and fishing gear • How they impact on resources: Overall fleet capacity increases, even when combined with decommissioning schemes

18. Subsidies to Capital Costs

19. Subsidies to Variable Costs • Definition: Subsidies for all recurrent or operational costs • How they impact resources: Each fishing trip is less expensive, providing an incentive to increase fishing effort, and stimulating leaps in adoption of new fishing technology

20. Subsidies to Variable Costs

21. Subsidies to Income • Definition: Unemployment insurance, income support and payments to owners for temporary cessation of fishing • Unemployment assistance probably has no impact on resources, but might increase pressure on managers • Payments to owners inhibit exit but do not affect fishing effort

22. Subsidies to Income

23. Price Support Subsidies • Definition: policy mechanisms that artificially raise the price of fish, increasing the profit to the industry • How they impact resources: Direct incentive to increase effort

24. Price Support Subsidies

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