WTO fisheries subsidies negotiations and Pacific Island states

4 November 2011

The problem of ‘too many boats chasing too few fish'

The recent 2010 statistics by the Food and Agriculture Organization (FAO) demonstrates that 88 percent of commercially valuable fish stocks are now either fully exploited, overexploited or depleted (1). ‘Overcapacity' and ‘overfishing' are central tenets of the WTO negotiations in this area, at the heart of which lies the mandate to discipline potentially harmful government subsidies that perpetuate excess fishing capacity. Simultaneously, the WTO mandate calls for designing appropriate exemptions for developing countries, to allow for the strategic use of subsidies to support fishers in times of need and to provide developing countries with the necessary policy space to develop their fisheries sector sustainably.

Fisheries subsidies, however, present an interesting analytical conundrum when considering complex cases involving policy incoherence. For example, fisheries subsidies can be a strategic tool for developing country governments to pursue legitimate development goals such as that of modernising domestic fisheries industries and increasing productivity. However, such subsidies can alter income structures drastically, providing fishing companies with an incentive to overfish and undermine conservation (2).

Pacific Island countries in the WTO discussions on fisheries subsidies

The fisheries sector is of significant economic and trade importance to the small island states of the Western and Central and Pacific Ocean and a key factor in the maintenance of basic livelihoods, especially in the case of small-scale and artisanal fishing (3). While the Pacific Island countries (PICs) are typical small and vulnerable economies (SVEs) with very small land areas, their waters are a source of 55 percent of global tuna catch, valued at well over two billion US dollars annually (4). A lot is at stake for these island economies in the WTO negotiations: a sound balance has to be struck between strong prohibitions with appropriately designed exemptions. To elucidate, PICs have much to lose by the destructive fishing practices of subsidized distant water fishing fleets operating in their Exclusive Economic Zones (EEZs). The high incidence of illegal, unregulated and unreported fishing in various parts of the world lends further support to this argument.

Additionally, resource-based economies such as the Pacific Islands which are hugely dependent on a single resource for their livelihood cannot afford to exploit the very basis of their existence in an unsustainable manner. For this specific reason, Pacific Island country representatives to the WTO have always been supportive of a strong level of prohibition in the fisheries subsidies negotiations in Geneva and have accepted the prohibition suggested in the November 2007 proposed agreement on fisheries, by the then Chairman of the Negotiating Group on Rules (fisheries subsidies). Simultaneously, the Group has attempted to carve out appropriate and meaningful Special and Differential Treatment (SDT) provisions suitable for SVEs, which due to their small size, miniscule share of global fisheries trade and production and low magnitude of subsidies usually have a negligible impact on ‘overcapacity' and ‘overfishing'. Creating a policy space would be an important objective to meet the development needs of PICs, given that domestic returns from harvesting resources in their EEZs currently account for only five percent of total economic value of the resources. In contrast to the domestic fleets of some larger developing countries and large industrialised nations, the domestic fleets of SVEs often suffers from severe under-capacity for harvesting fish resources available in their own EEZs. Domestic development will also help reduce the dependence of some of these islands' economies on access fees revenue obtained from foreign fleets operating in their waters under bilateral arrangements.

To ensure sustainability of fish resources, PICs have also been supportive of the idea of conditioning the use of SDT provisions on the existence and operation of effective fisheries management systems. The island states have been constructive in these discussions by proposing for a cascade approach in the design of fisheries management conditions for different types of fisheries, with zero-binding conditions on the subsistence sector, fewer conditions for the small-scale sector and higher disciplines for managing the activities of industrial fishing fleets. The proper functioning of these rules, however, will also depend on the availability of technical assistance. In regions such as the South Pacific, where fishing by distant water fleets still makes up the vast majority of fishing in their EEZs, it is unjustifiable to depend on a small, developing island country to undertake the entire burden of managing those resources, when the majority of the economic benefits still go to the distant water fleets and processors based outside of the region. Therefore, PICs, as part of the African, Caribbean and Pacific Group in Geneva have sought for mandatory technical and development cooperation from developed and large developing countries, for improving their fisheries management systems and meeting the obligations to be set out in a potential WTO agreement (5).

Another important aspect of fisheries development in the Pacific Islands is to obtain a greater share of benefits from their fisheries resources through value-added processing. On-shore processing, for example, often provides significant development benefits through great employment, especially for women, in economies where high levels of unemployment are often the norm. Appropriate exemptions designed for small vulnerable economies in encouraging and promoting onshore processing investment and capacity will greatly benefit fisheries development. Increasingly, Pacific island countries are also looking to link Distant Water Fishing Nations to commitments for onshore processing investment.

The current impasse in the negotiations at the WTO

Deeply entrenched positions continue to exist between WTO members on core substantive issues in the fisheries subsidies discussions at the WTO, making it impossible for the current Chairman to produce a new text or revise the one from November 2007. A classic example is the polarised views of the larger players on the highly controversial issue of the treatment of high seas fishing. Some developing countries are ambitious for an outcome including flexibilities for subsidizing high seas fishing activities, based on the premise that not all developing countries have had the opportunity to exploit their rights in international fisheries. These countries intend to use flexibilities for common fisheries resources in a responsible fashion, including through the acceptance of a high standard of fisheries management, involving a ‘RFMO (6)-plus approach' for managing high seas resources. Such a position has been heavily countered by many ambitious ‘Friends of the Fish' countries (7) on the other side of the spectrum, in whose view no amount of conditions would be sufficient to negate the adverse impacts of subsidized fishing effort in the high seas, where management is already a significant challenge. (8)

Another controversial area of interest to the Pacific Islands is the potential disciplines on subsidized fuel. As is widely acknowledged, fuel forms an important part of the operating cost structure of a fishing fleet and reductions in fuel costs could directly be linked with enhancing fishing effort. In the discussions at the WTO, however, countries reported vast differences in the way fuel subsidy programmes were administered and structured, making it difficult to determine direct impacts. Additionally, SVEs expressed legitimate demands for subsidizing fuel, given that operating costs are often the most affordable form of subsidies for the SVEs.

PICs have also been keen to ensure flexibility in definitional approaches to subsistence and artisanal fishing. PICs have also been actively seeking to ensure a non-prescriptive approach to defining artisanal fisheries citing the diversity of small scale fleets and fishing methods. This remains another area of impasse in the negotiations.

In his recent assessment, the Chairman of the Negotiating Group on Rules (Fisheries Subsidies) stated that failure to achieve tangible progress in the negotiations could be attributed to the fact that most WTO members, instead of focusing on solutions to the shared global problem of fish resource depletion, ‘appeared to be focusing principally on maintaining their own status quo by placing on "others" the main responsibility to implement solutions, while minimizing the impact of disciplines on their own activities'(9). This assessment underlies a much larger concern: are members' individual negotiating positions based on a genuine desire to promote sustainable development of the global fisheries sector, or are national positions simply governed by selfish short-term commercial interests, with the objective simply to outcompete subsidized players in international fisheries? If true, countries where fishing companies are traditionally rich and happen to be operating without subsidies or countries where governments manage to disguise subsidy regimes better than others; the environmental cause is simply the excuse and not the real reason. If mercantilist interests are indeed being couched behind environmental concerns, little progress can be expected in meeting the objectives of the mandate in the future.

The Pacific Islands and the EU Economic Partnership Agreement

The Pacific Islands and the European Union have been in negotiation for a Pacific-ACP EPA agreement with the EU for the past seven years. Negotiations have been difficult and drawn-out with the most contentious negotiating points being whether to include provision for fisheries access in the agreement and the potential provision for global sourcing rules of origin.

In frustration over delays in the agreement process and in order to ensure all important market access for fish (PNG) and sugar (Fiji), PNG and Fiji negotiated and signed an interim EPA which includes provision for global sourcing for canned and cooked tuna and does not include access provisions.

One of the major factors influencing PACPs decision to conclude an EPA will be favourable outcomes concerning the ongoing provision of ‘global sourcing' rules of origin for canned tuna and loins (HS 1604/1605) (as per the Interim EPA), as well as the extension of these rules to cover fresh-chilled and frozen fisheries products, such as chilled vacuum packed loins, frozen ‘steaks' or ‘fillets' (HS 0303/0304) (10)

A recent article of the FFA Fisheries Trade News reported that Pacific ACP countries are hopeful that a comprehensive EPA with the European Union can be concluded and signed by the end of December 2011. After a long gap, in early 2011, PACP Trade Ministers endorsed a Pacific ACP EPA Strategy which demonstrated an effort to reconfirm their commitment and devise a plan of action to successfully conclude a comprehensive EPA (11). Per this report (12), a series of technical working groups are planned to finalise outstanding fisheries and other legal matters, as well as a workshop on regional market access offers. Additionally, a final negotiating session between the PACP and EU is expected to take place in September. If all goes well, the final legal text would be completed in October-November, before PACPs initial the comprehensive EPA by December 2011 (13).

Conclusion

On the WTO negotiations, the current impasse in negotiations, especially the polarized differences amongst the larger Members, makes for an uncertain future in the negotiation process. The challenge of sustainable and equitable tuna fisheries in the Western and Central Pacific Ocean is pivotal to the economic future of Pacific Island countries. While the forum of the Western and Central Pacific Fisheries Commission provides the focus for fisheries management and monitoring, control and surveillance, fisheries development aspirations are more widely based on matters of trade and economic advantage. Thus, the outcomes of the WTO fisheries subsidies negotiations, whatever the scenario, will likely have a significant impact for PICs. From the perspective of fisheries alone, the lack of progress in the Doha Development Round has been disheartening. From the point of view of Pacific Island Countries, should members agree to pursue an early harvest in some areas of the Doha Round, fisheries subsidies would make an excellent candidate for a stand-alone agreement.

Authors : Manleen Dugal is Consultant, WTO Fishery Subsidy Issues, Pacific Islands Forum Fisheries Agency and has also served as Technical Advisor, Permanent Representative of the Pacific Islands Forum to the WTO in Geneva

Hugh Walton is Policy Specialist, Pacific Islands Forum Fisheries Agency and has also served as Fisheries Development Advisor on WTO Issues at the Agency

1 ‘The State of World Fisheries and Aquaculture (SOFIA), 2010', FAO Fisheries and Aquaculture Department, Rome, 2010.

2 For a more detailed explanation of the economic justification for fisheries reform, see UNEP Publication ‘Fisheries Subsidies, Sustainable Development and the WTO', 2011.

3 ‘Fisheries Subsidies and the Western and Central Pacific', Case study by Manleen Dugal, Contributory author, "Trade and Poverty Reduction in Asia-Pacific Region, Cambridge University Press, October 2009.

4 Pacific Forum Fisheries Agency, 2010.

5 See WTO proposal TN/RL/GEN/176 titled ‘Fisheries Subsidies: Articles III and V', Communication from Kenya on behalf of the ACP Group, March 2011

6  Regional Fisheries Management Organisations (RFMOs)

7 Australia, Ecuador, Iceland, New Zealand, Norway, Peru, Philippines and USA.

8  See Article by Manleen Dugal and Liam Campling titled ‘Update on fisheries subsidies discussions at the World Trade Organization', in FFA Fisheries Trade News, Volume 4:Issue 3, March 2011

9 Communication from the Chairman: Negotiating Group on Rules, TN/RL/W/254, Page 48, April 2011

10 See Amanda Hamilton, Elizabeth Havice and Liam Campling 2011, ‘Update on PACP-EPA Negotiations', FFA Fisheries Trade News' - December 2010.

11 Amanda Hamilton, Elizabeth Havice and Liam Campling 2011, ‘PACPs striving to conclude comprehensive EU-EPA by end 2011', FFA Fisheries Trade News -June/July 2011.

12 For more details see Amanda Hamilton, Elizabeth Havice and Liam Campling 2011, ‘PACPs striving to conclude comprehensive EU-EPA by end 2011', FFA Fisheries Trade News -June/July 2011.

13 Makereta Komai 2011b, ‘Renewed PACP negotiations strategy hopes to sign EPA by December 2011', PACNEWS, 3 February, 2011.

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