A fish called subsidy

Promotes inequality between fishers and hampers sustainable development

By U R Sumaila
Published: Saturday 15 November 2003

A fish called subsidy

-- Subsidies are recognised worldwide as a serious threat to sustainable fisheries management. They distort international fish trade and penalise developing country fishers whose governments cannot afford to provide them subsidies. The debate on the size and impacts of subsidies intensified after the Food and Agricultural Organization reported in 1992 that global fisheries subsidies were about us $ 54 billion per year. A more conservative estimate of us $14-20 billion per year as global fisheries subsidies was reported in 1998 by M J Milazzo in his paper Subsidies in Fisheries. Even this estimate is about 17-25 per cent of the industry's annual revenues, implying that fishers can keep fishing even if their total revenues are up to 25 per cent below their total fishing costs.

The fisheries economics literature is clear that open access fishery, or fishery not 'owned' or controlled by anybody, leads to resource depletion and economic waste. On the other hand, maximum benefits are said to accrue from privatised fishery or one owned and managed by a single entity. Are subsidies, then, a threat to the resource when the 'open access' aspects of fishery are removed? If the answer is yes, then subsidies are intrinsically damaging. On the other hand, if the answer is no, then subsidies will have a negative impact only if fisheries are managed under open access situations. The fisheries literature shows that subsidising open access fishery, by reducing operational costs or by raising prices of harvested fish, leads to overexploitation of the resource. On the other hand it is widely believed that providing subsidies to privatised fishery has negligible negative resource consequences. But C W Clark, G R Munro and I differ. In our paper, Subsidies, Buybacks and Sustainable Fisheries , we demonstrate that the perverse incentives created by subsidies undermine the stewardship qualities of privatised fishery. We argue that under certain circumstances, some kinds of subsidies can drive a private fishing corporation to resource-extinction. One can therefore conclude subsidies are intrinsically damaging for sustainability -- even under a fully privatised, sole-owner fishery.

But, subsidies are not always damaging. For example, Milazzo argues that a conservationist subsidy in fact enhances resource utilisation. His prime example of such a subsidy is that used for vessel decommissioning (buyback). Milazzo's view has broad support among fisheries scholars. A build-up of excess fleet capacity generally results in economic waste and undermines the capacity of resource managers to manage fish resources sustainably. But, decommissioning subsidies can relieve this pressure if resource managers prevent a re-emergence of excess capacity after the buyback. For decommissioning to be effective, the buyback programme has to be entirely unanticipated by vessel owners. This is because anticipated buyback subsidies will make vessel owners intensify fishing operations at the cost of resource sustainability.

It is predominantly governments in the North that can afford to subsidise fisheries. There at least three impacts of this on fish and fishers in countries in the South. First, they serve to distort prices and/or costs of fishing in favour of fishers in the North. Consequently fisheries operations in the South become uncompetitive in the world market. Second, decommissioning of vessels in the North results, in many instances, in the transfer of fishing efforts to the South. This causes overexploitation of fishing resources and poses threats to the livelihoods of the coastal fishing communities in the South. Third, the purchase of access rights by governments in the North for their vessels to fish in the South is a subsidy that has negative consequences on the resource biomass and biodiversity and the food security of people in coastal areas in the South.

This is where the World Trade Organization (wto) can step in. Even though the outcome of the 2003 wto ministerial meeting in Cancun, Mexico was not encouraging, the fact that the fisheries' subsidies issue received much attention augurs well for the future.

U R Sumaila is with the Fisheries Economics Research Unit, UBC Fisheries Centre, Vancouver, Canada

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