Is an all-or-nothing WTO fisheries subsidies agreement achievable?

15 May 2014

To make progress towards eliminating harmful fishing subsidies world-wide there is a  need to align such effort with the interest of fishing nations.

Since a back of the envelope calculation by the Food and Agriculture Organization (FAO) revealed that the total amount of fisheries subsidies in maritime countries globally could be as high as $50 billion annually in the early 1990s, eliminating harmful fisheries subsidies has become essential in the quest to achieve sustainable fisheries globally. More recent detailed studies put this number at $15-27 billion. This is a substantial amount given that the total gross revenue from the world’s fisheries is estimated at $80-85 billion.

There is a strong connection between fisheries governance, sustainable development, and how subsidies serve as a stumbling block for meeting sustainability goals. The crucial issue is that subsidies that motivate fishermen to exert more fishing pressure make fisheries governance - and therefore the attainment of sustainability and conservation goals - difficult to achieve. The negotiation for the improved discipline on fisheries subsidies at the WTO has stalled in recent years and considerable challenges remain before a meaningful agreement can be attained.

Challenge to the WTO negotiations

A key reason for the lack of progress in these negotiations, after seven years of trying, is that the negotiations suffer from the problem of “lumpiness.” By this, I mean negotiators aim for an all-inclusive deal or no deal at all. This lumpiness takes two forms.

Firstly, the WTO negotiations are conducted as a “single undertaking,” meaning that results must be achieved in all areas of the negotiations, not only in those regarding fisheries subsidies, and must be applicable to all member countries. Any potential breakthroughs in the negotiations on fisheries subsidies are dependent on similar breakthroughs in the Doha Development Agenda (DDA). A late realisation of this implication during negotiations led to a vain attempt to separate negotiations on fisheries subsidies from the rest, which in my opinion is necessary in order to progress.

The second lumpiness, which is the focus of this contribution, relates to the goal of negotiators to arrive at a deal on subsidies that is all-inclusive. Within this all-or-nothing setting, the Chair’s Draft Report (2007) was designed to have two core elements: a broad set of prohibited subsidies and a list of general exceptions to these prohibitions, with complementary regulations guarding against circumvention; and Special & Differential treatment, giving policy flexibility to developing countries through provisions of additional exceptions based on various combinations of factors, such as types and locations of fisheries.

As with many international agreements, it is always a sticky issue when, even though there are often good reasons for doing so, developing countries are given special exemptions. I think some of the resistance to such exemptions, in the case of fisheries subsidies, is the fact that developing countries are not a homogenous group – they consist of global powers, such as China, and very small developing island states, like the Seychelles.

Response to the challenge

The starting point is to split the world’s fisheries into (i) domestic, (i.e., fisheries that operate within country’s Exclusive Economic Zones (EEZ) and target fish stocks that spend all their lives within the EEZs); and (ii) international fisheries, made up of fish stocks that do not qualify as domestic fisheries as defined herein. They consist of transboundary fish stocks, highly migratory stocks, such as tunas that straddle the EEZs of countries and the high seas and discrete high seas stocks that spend all their lives in the high seas.  

There are at least three reasons why the above split is necessary to help move WTO negotiations forward. Firstly, the incentives for countries to eliminate harmful or overfishing subsidies differs significantly, depending on whether a fishery is domestic or international; and within the latter, whether a fishery is a transboundary, highly migratory, or discrete high seas stock. Secondly, the institutional framework needed to support the elimination of harmful subsidies is different, in the case of domestic fisheries. However, in the case of highly migratory international fish stocks, a coordinated international framework is needed because unilateral action by one country is not likely to eliminate the problem of overfishing. Thirdly, by dividing fisheries into these groups, it would be easier to identify the leverage points for eliminating harmful subsidies.

If a country depletes its domestic fish stock, it would suffer the consequences.

Disciplining harmful subsidies to domestic fisheries

If a country depletes its domestic fish stock, it would suffer the consequences. Hence, the battle for eliminating or at least redirecting harmful subsidies for domestic fisheries should rightly be at home in individual countries. The key to success is to make it abundantly clear to fishing countries that it is in their best interest to divert harmful subsidies into more constructive uses. Countries could use the resources in a number of innovative ways to help their fishermen adapt to the elimination of harmful subsidies. Countries that divert their harmful subsidies to provide skills to fishermen to help them transition to more sustainable livelihood activities would see win-win benefits in the sense that they would keep the money in the fishing communities while reducing the pressure to deplete a renewable food source.   

In this framework, the international community, through institutions such as the World Trade Organisation (WTO), the Food and Agriculture Organisation (FAO), and the UN Environment Program, and regional intergovernmental bodies, such as the OECD, African Union, and APEC could provide guidelines and incentives to help countries implement home-grown plans to discipline harmful subsidies to their domestic fisheries.

   

Disciplining harmful subsidies to international fisheries

At the international level, the incentives are less clear and more complicated: If a country subsidises and over-fishes a highly migratory fish stock, the country enjoys the benefit of doing so while the negative consequences are suffered by many countries. As a result of the asymmetric nature of the distribution of cost and benefits, the battle ground for eliminating harmful subsidies is at the international level – at the level of the WTO, especially. 

The trick here is to identify the low-hanging fruit. Examples include fisheries based on high and deep seas fish stock and highly migratory high seas tuna species. Ecologically, high and deep sea fish stocks are known to have life history characteristics that make them vulnerable to overfishing. In addition, the legal and management structures are weak to say the least. These fisheries are operated by a few, mostly, developed countries, producing a small percentage of the world total fisheries catch while employing only a few people. It has been estimated that without subsidies many of the bottom trawl fleet operating in the high seas will not be economically viable. In effect, the production-distorting effects of fisheries subsidies are most pronounced in high seas fisheries. Thus, obtaining a WTO agreement on these fisheries would be a significant win for conservation and sustainability.

My suggestion then is to move the battlefront for dealing with harmful subsidies to domestic fisheries to home countries, with the international and regional communities providing guidelines and incentives to help countries transition to harmful subsidies-free fisheries.

Conclusion

In this contribution, two types of lumpiness were identified. The first relates to the fact that results must be achieved in all areas of the negotiations, not only in those regarding fisheries subsidies, and must be applicable to all member countries. There is already an effort to decouple fisheries subsidies negotiations from the others in the round. I think this decoupling is needed to make progress in the negotiations.  

The second lumpiness relates to the goal of negotiators to arrive at a deal on subsidies that is all inclusive. This approach, I argue, has limited the ability of the negotiators to make progress. I propose that we need to categorise fish stocks and fisheries into domestic and international fisheries. My suggestion then is to move the battlefront for dealing with harmful subsidies to domestic fisheries to home countries, with the international and regional communities providing guidelines and incentives to help countries transition to harmful subsidies-free fisheries.

The battlefront for dealing with harmful subsidies to international fisheries remains with the international community via institutions like the WTO. This is because of the asymmetry in the distribution of cost and benefits of providing subsidies. Focusing on international fisheries is attractive, particularly from an environmental perspective, but this does not mean that the international community should ignore what happens to harmful subsidies domestically. From the environmental perspective, the international community should be interested in disciplining domestic subsidies if only for global food security reasons. In particular, the trade distorting aspects of subsidies to domestic fisheries should still make them a matter of concern to the global community.

To implement this proposal, more details need to be worked out. For instance, how would countries be able to distinguish among subsidy programmes to target only certain species? Is this feasible in the context of groups of countries, such as those fishing in the Benguela Current large Marine Ecosystem; the Gulf of Guinea Large Marine Ecosystem or the Western Indian Ocean? Still, the principles behind my proposal are clear: in order to succeed in disciplining these subsidies, angle the efforts to discipline harmful subsidies more towards the interest of fishing nations, and deal domestically and internationally where appropriate.

Author: Rashid Sumaila is the director of the Fisheries Economics Research Unit, Fisheries Centre at the University of British Columbia, Vancouver, Canada.

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