Fisheries Subsidies Negotiations and the World Trade Organization

Impacts of Fisheries Subsidies

It may not be commonly known but fish is one of the most internationally trade commodities in the world. As seafood is traded across national borders and jurisdictions, creation of global standards, from pricing to food safety, becomes unavoidable.

Marine fisheries depend on wild fish stocks and are quite possibly the last direct exploitation of wildlife conducted on commercial scale. However, for many fisheries, the profit driven by the biological productivity of the targeted stocks are increasingly become insufficient to make them commercially viable. From cost of fuel fishing vessels require to large port infrastructure, continuation of fishing activities is increasingly dependent of financial support from governments. Subsidies, in return, aim to support coastal communities by protecting its core industry.

To be specific, subsidies can be defined as provisions of financial support, both direct and indirect, to specific companies and industries. These can take multiple forms from direct transfer of public funds to tax exemptions to price and income support. These programs are generally perceived to be a part of public welfare policies with generation of employment, food security and provision of essential public services as their ultimate goals.

However, from the perspective of resource economics, fisheries subsidies not only distort the global seafood market but also have negative impact on the production end by stimulating excess investment in fishing effort and reducing the stock productivity. In effect, fisheries subsidies are using public financing to reduce the productivity of public natural resources.

Unlike other industries where productivity is a function of investment (i.e. more you invest, more you produce, albeit the efficiency may vary at different levels of investment), the productivity in fisheries is highly dependent on the intrinsic productivity of fish stocks that they target. Given that the stock productivity (i.e. rate of recruitment) is dependent on stock density, reduction in the stock size via fisheries tends to increase the stock productivity at first (hence "sustainable") but excessive fishing and depletion of stock size beyond a certain point (generally speaking, at about half of the pre-fishing size) results in reduced productivity, i.e. reduced fisheries yield. Such reduction implies economic losses for all fleets engaged in the fishery. If one group of vessels is to receive subsidies, their negative impacts on stock productivity would be shared by all non-subsidized vessels.

Currently, over 35 billion USD of fisheries subsidies are estimated to be provided by the national governments worldwide (Fig 1). Given that the total landed value of world's marine fisheries is about 90 billion USD, the subsidies account for about 40% of fisheries revenue. While the impacts of subsidies differ by types, types of fisheries and management framework in place, about 20 billion USD of subsidies are to be contributing to overcapacity in fisheries and production distortion via overexploitation of targeted stocks.

From 10 to 13 December 2017, the World Trade Organization (WTO) 11th Ministerial Conference was held in Buenos Aires. On the agenda was the new rules on fisheries subsidies, mandated under the Doha Development Agenda since 2001. Recognizing the limitations of the existing Agreement on Subsidies and Countervailing Measures (ASCM), the ongoing negotiation aims to mitigate production distorting effects and environmental impacts of fisheries subsidies.

Fisheries Negotiations at WTO

The launch of the Doha Development Agenda in 2001 and the Hong Kong Declaration following the 2005 Ministerial Conference mandated the World Trade Organization to regulate subsidies that contribute to overfishing and overcapacity. Subsequent negotiations yielded various proposals from the member countries and some progresses were made; however, with the impasse of the Doha Round in 2011, the negotiation for fisheries subsidies was also stalled. Though fisheries subsidy was raised as a potential issue to be included in the 2003 Bali Ministerial Declaration, a packaged agreement on small sub-sections of Doha, the negotiation never reached a level where a consensus could be attained.

The main driver that put fisheries subsidies back on the agenda for the 11th Ministerial Conference last December was the 2030 Agenda for Sustainable Development adopted by the United Nations General Assembly in 2015. Amongst 169 targets included in its 17 Goals was Target 14.6, which calls for prohibition of fisheries subsidies that contribute to overcapacity and overfishing as well as those contributing to illegal, unreported and unregulated (IUU) fishing by 2020. With this renewed mandate, the negotiation at the World Trade Organization was revived, yielding a series of revised proposals from the EU, Africa-Caribbean-Pacific (ACP) countries and others. And while the 11th Ministerial Conference failed to result in an agreement, the negotiation is expected to continue onto the next Ministerial Conference (2019) in order to meet the SDG target date.

Key Issues of Subsidies Negotiations

The current trajectory of the negotiation gives an impression of progress towards a conclusion of a meaningful international regulation of fisheries subsidies. Yet, this 'progress' is more likely a consequence of over 15 years of difficult negotiation eroding both the ambition and scope of the intended regulation. With the WTO requirement that any amendments to its rules be unanimously agreed by its 164 member countries, it is natural to expect some degree of compromises; however, the regulation that was put forward to the Ministerial Conference last December had been watered down to the point no meaning impact on mitigating overcapacity or improving stock status should be expected had it passed.

Emphasis on subsidies to IUU fisheries, as explicitly stated in SDG14.6, has also diverted the focus of the negotiation from addressing the environmental impacts of subsidies. Elimination of subsidies to IUU fisheries was not a main factor in the Doha Round, given that the public financing of IUU, more specifically, illegal fisheries was seen as obviously undesirable and, therefore, no country would intentionally implement such subsidy program. Yet, after SDG, the negotiation at WTO moved to technical discussion on defining and certifying IUU vessels, away for more comprehensive discussion. Again, on the issue of illegal fishing, the existing ASCM is likely be adequate and questions remain as to whether any of the proposal currently put being discussed improve its effectiveness.

Moreover, the appropriateness of WTO as the organization to enforce any regulations on fisheries subsidies must be re-evaluated. While WTO has a strong enforcement mechanism for its rules, it is trade-based, allowing countries to implement countervailing measures against a country deemed in violation of the WTO rules by the dispute settlement panel. Such dispute requires evidences of harmful effects of the disputed subsidy program and it is hard to see how such mechanism would be applied when dealing with production distorting effects of fisheries subsidies, given the inherent uncertainties involved with fisheries management.

The Ministerial Conference at the Buenos Aires ended with the renewed call for the continuation of the international negotiation on fisheries subsidies. Yet, for most of world's fisheries, subsidies are a domestic issue, impacting vessels operating and exploiting resources within their Exclusive Economic Zones. Thus, any meaningful reform of fisheries subsidies must happen on the national and local level. Perhaps it is time that we move on from a global target and think and act at more appropriate scales.