ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT

Trade & Agriculture Directorate

Overfishing, undermanagement and Overfishing, undermanagement and subsidies: the economic link subsidies: the economic link

Anthony Cox,Anthony Cox,Fisheries Policies Division,Fisheries Policies Division,

Directorate for Trade & Agriculture Directorate for Trade & Agriculture

1 March 2007,1 March 2007,Palais de Nations, GenevaPalais de Nations, Geneva

Trade & Agriculture Directorate2

The economics of fisheries subsidies

• Subsidies change revenue, costs and profits

• Subsidies alter incentives facing fishers

• Subsidies result in an overall loss in economic efficiency and social welfare

• Subsidies stimulate rent-seeking behaviour

• Subsidies tend to reduce industry and community flexibility, and lock in technology and production patterns

• Very limited public policy rationale for subsidies

• Specific economic effects depend on the management context

Trade & Agriculture Directorate3

The management context has three dimensions

• Status of stocks • Under-fished or over-fished?

• Is the TAC or effort level set at a sustainable level?

• Single or mixed species?

• Is the science underlying assessments well-understood?

• Highly data intensive

• Not amenable to “rules of thumb”

Trade & Agriculture Directorate4

The management context has three dimensions

• Status of stocks

• Management regime

• Open access fisheries

• Regulated open access

• Effort controlled fisheries

• Rights based regimes (catch, effort rights)

• Robustness of regimes wrt incentives

Trade & Agriculture Directorate5

The management context has three dimensions

• Status of stocks

• Management regime

• Enforcement

• At-sea surveillance

• Land-based monitoring

• Monitoring of fleet capacity

• Incentives to comply/cheat

• Penalty structure

• Probability of conviction

• Adequacy of governance structures

Trade & Agriculture Directorate6

Trade effects of fisheries subsidies

• If supply effectively constrained subsidies will:– increase profits of exporters– have no effect on trade flows or prices (if fishers are price takers)

• But there will be a supply response in the case of:– Under-exploited or developing fisheries– Aquaculture– Fisheries with ineffective management– Monopoly producer– Strategic behaviour by fishers

• Difficult to disentangle the subsidy effects from the management effects

• Long-term trade gains from effective management, esp if competing countries have ineffective management

Trade & Agriculture Directorate7

Criteria for the management context?

• Management context represents a complex dynamic system– Spatially, temporally specific– High data requirements – Not necessarily amenable to “rules of thumb” Closer to certification criteria?

• Criteria flowing from the Code of Conduct for Responsible Fisheries?– Code is normative, voluntary, aspirational– Not an appropriate foundation for developing criteria

• Criteria in WTO rules?– Pushing the envelope on the WTO mandate – Risk of creating complex rules that provide plenty of shelter for

continued provision of subsidies

• Perhaps the institutional architecture has yet to be developed?