Fisheries Subsidies Negotiations: The Real Catch on Market Access

Discussion 2: Fisheries Subsidies disciplines as a Market Access Issue

 The 11^th Ministerial Conference was held from the 10-13 December, 2017 in Bueno Aires, Argentina. In relation to fisheries, the WTO members decided to:

1.  “Build on the progress made since the 10th Ministerial Conference as reflected in documents TN/RL/W/274/Rev.2, RD/TN/RL/29/Rev.3, Members agree to continue to engage constructively in the fisheries subsidies negotiations, with a view to adopting, by the Ministerial Conference in 2019, an agreement on comprehensive and effective disciplines that prohibit certain forms of fisheries subsidies that contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU-fishing recognizing that appropriate and effective special and differential treatment for developing country Members and least developed country Members should be an integral part of these negotiations.” And

2. “Members re-commit to implementation of existing notification obligations under Article 25.3 of the Agreement on Subsidies and Countervailing Measures thus strengthening transparency with respect to fisheries subsidies.”

Subsequent to the Ministerial Conference, there had been several debates (some members blaming others for not achieving an outcome). As such this excerpt aims to enlighten members on the specific issues that has made the Negotiations on Fisheries Subsidies resulting in such a decision.  This article  will discuss the linkage between Fisheries Subsidies Disciplines and Market Access Issues.

Please see http://wtocentre.iift.ac.in/workingpaper.asp

The developed country members have shown a strong concern on the depletion of the fisheries resources and thus are advocating sustainability of the resources at the WTO. On the other hand, the membership at the WTO shares the common view that sustainability of the fisheries resources is critical to the food security and livelihood of the developing and least developed countries. However, there are also concerns with respect to the economic growth and development of the fisheries sector in relation to the disciplines on fisheries subsidies. These concerns of the developing countries are also enshrined in the existing fisheries instruments under the “special requirements of developing countries”.

Grynberg 2003 further reveals the motives of the developed countries in the fisheries subsidies negotiation. “In the case of the fisheries, proponents are a mixed collection of countries with commercial interest and those which believe that fisheries subsidies disciplines will constitute an important step towards environmental sustainability. With the friends of fish group, substantial and clearly demonstrable commercial interest is at stake for Iceland and New Zealand. Both the nations have a highly efficient and competitive fishing fleet but neither carry significant bargaining power. Iceland fisheries constitutes 75% of export earnings and hence the government simply cannot compete with other WTO members on subsidies i.e., the Icelandic economy cannot subsidies. In the case of New Zealand, which has pursued a policy of aggressive unilateral liberalization, there is no opposition to such subsidies.

In other words New Zealand and Iceland will both benefit from the exit of other players, which are currently subsidizing from the fisheries market. The EU has reduced its subsidies over time and has achieved the required level of fleet capacity. It is therefore advocating for an even stronger position in relation to the elimination of subsidies, as it will also benefit from less players in the fisheries market. The issue of sustainability is used as a disguise for enhancing market access in the sector. If the EU and the other so called friends of fish were genuinely interested in fish stock depletion, fisheries would have been a component of the disciplines on Agreement on Agriculture. However “during the Uruguay round, political opposition to the inclusion of fisheries under the reduction on Agreement on Agriculture came from the EU and countries called the “friends of fish”. (Grynberg, 2003,505).

The application of the disciplines on fisheries subsidies is therefore an application of the LET fisheries policy that will provide a competitive advantage and increase the market share of the developed countries such as the EU, Iceland and New Zealand. If caution is not exercised in the fisheries negotiations, the resultant disciplines would mirror the loss of policy space of the developing countries and asymmetric outcomes as seen in the context of the agriculture negotiations in the Uruguay Round.

The developed countries held high levels of agricultural support during the Uruguay round agreement in 1994. Even though ceilings on some type of subsidies were applied under the agreement, most of the developed countries have retained the high level of support through “box shifting” i.e. moving most of their subsidies into the “Green Box” under which unlimited subsidies can be provided. Even though the Green Box entitlements are available to the developing countries, however, due to resource constraints (fiscal budgetary restraints), they are unable to utilize them fully. As a result, imbalances exist in the context of agriculture to date.

Under the WTO negotiations, the existing proposals on the table from the European Union, New Zealand, Pakistan and Iceland and Latin America focus on disciplines on fisheries subsidies in relation to specific subsidies as opposed to horizontal subsidies. This is a replication of the agriculture subsidies negotiations. According to the OECD database on subsidies, the EU member countries have progressively, over the years, moved their specific subsidies into budgetary support. The EU provides approximately 3.4 billion of annual subsidies to the EU fisheries sector, nearly 1 billion of which is from the EU budget in the form of structural aid. At the national level aid is estimated at 975 million and this is in addition to the lost revenue resulting from fuel tax exemptions. Few EU fleets are profitable with no public support. (Reforming EU Subsidies, 2011, np). For small economies the fisheries sector is unorganized and small, thus government support is required. Developed countries have managed shift to non-specific fisheries subsidies from specific subsidies. As a result, under the current disciplines on fisheries negotiations, the developed countries will not be making any major substantial commitments. On the other hand, the developing countries which still provide specific subsidies would be “caught in the net” i.e. required to discipline subsidies by 2020, which is a span of three years. For countries such as the EU, it took more than 20 years to undertake their fisheries sector reforms.

At present there are several world marine producers in the fisheries market. The major worlds marine catch producers are China (17.7%), Indonesia (6.54%), Peru (6.28%), USA (5.6%), EU-28 (5.17%), India (4.92%), Russia (4.65%), Myanmar (4.05%), Japan (4%), Vietnam (3%), Philippines (2.5%), Chile (2.45%), Norway (2.38%), Thailand (1.97%) and the rest of the world (28.75%). The data clearly shows the market share in fisheries from the top 14 countries. Out of these 9 economies are developing countries. The major competing developed countries are USA, Japan and Norway.

Please see for tabulation of the Major World Marine Catch Producers: http://wtocentre.iift.ac.in/workingpaper.asp

                          

The removal of subsidies will translate into some of the dominant players exiting the fisheries market. As previously mentioned, given that the EU and the “friends of the fish” have shifted most of their specific subsidies to non-specific categories, the removal of specific subsidies by others will benefit the developed countries. It will boost their competitive edge in the global fisheries market.

The disciplines on fisheries subsidies will act as a deterrent to the entry of vessel owners from developing countries, to access the fisheries resources. For small developing coastal states the fisheries activities include (i) revenue generation from access fees from distant water fleets, and

(ii)   domestic and foreign fishers operating for export in the EEZ and territorial sea to supply canneries, loining facilities and domestic processing facility and (iii) artisanal fishers within the territorial sea for domestic and export markets. Further, in the fisheries sector many small vulnerable coastal states governments have been attempting to localise the distant water fisheries as well as developing linkages between inshore fishing in the territorial sea and other sectors of their economies, which includes tourism. (Grynberg, 2003, 504).

As a result, the disciplines on fisheries subsidies will impede the development of the fisheries sector for small coastal states within the large EEZ. For low income poor resource fishers, the disciplines on subsidies will increase their cost of operations. Most of the fishing vessels for low income resource poor fishers are traditional and not motorized. These low income resource poor fishers will further be marginalized due to elimination of subsidies. It will prevent the small fishers from engaging in economical fisheries activities for their livelihood and food security purposes.

The Government would not be in a position to assist the small commercial fisheries sector to fully utilize its own fisheries resources - even though under the UNCLOS coastal States have the right to manage and exploit the fisheries resources within their EEZ. Independent of the disciplines on fisheries subsidies, coastal states apply management measures as per the national legislation in their territorial waters and in co-operation with sub-regional fisheries organizations in their EEZ.

Even in the event that small scale fishers are carved out from the application on fisheries subsidies disciplines, the scale and magnitude of small scale fisheries differ from that of a developed country. As a result, the small scale fisheries of small coastal States will be marginalised and market access of fisheries captured by developed countries will remain unaffected.

Consequently, the inability of the coastal States to utilize their own fisheries resources will translate into a greater share of the fish stock resources being available for the distant water fishing nations (DWFN). The DWFNs who will remain efficient in the market will be the EU and the countries composed of the “friends of fish”. This group of countries (including EU, Iceland and New Zealand) have already shifted most of their specific subsidies to non-specific category. Initially with other players in the fish access market including the developing countries, there would be competition to bid for the access rights. However, if subsidies are eliminated and should most of the developing countries exit the fisheries market, these few developed countries will remain as dominant players and will bid for fish access rights. The developed countries will have greater bargaining power to determine the price of the access rights.

In other words, the elimination of fisheries subsidies will accord to the developed nations (EU and the Friends of Fish) a greater share of the existing fish quota rights of fish. Given that the elimination of fisheries subsidies will drive the developing countries out of the market. On the demand side of fishing access rights, due to the reduction of specific subsidies in forms of fuels, vessel modernization and other related subsidies, the developing nations that were once competitors may be compelled to move out of the market, and those that may aspire to enter the commercial fishing sector may never be able to reach that level. This reduction in the market demand for fish access rights would lead to a surplus supply of fish access rights.

The ultimate result will be that a few distant water fishing nations that have already developed their fishing vessels and have shifted most of their specific subsidies to non-specific category for example the EU and New Zealand, (prior to the negotiations on disciplines on fisheries subsidies) will dominate the demand side of fishing access rights. Developed countries such as the United States may also be affected by the fisheries disciplines due to their inability to provide specific subsidies. The few developing distant water fishing nations including the EU would therefore be pure profit maximisers and gain economic rent would be created in their favour. The bargaining power of small coastal States would decline and the few Distant Water Fishing Nations would dictate the price at which the access rights would be purchased. This would create a monopoly or oligopoly over access rights and lead to market domination by developed countries.