Subsidies in fisheries

Issue

In recent years there has been a growing interest in the widespread use of subsidies in the fisheries sector.

Many fishery managers see sustainability of fisheries and aquaculture as undermined when governments grant subsidies. It is commonly held that subsidies distort the conditions of trade in fish and fish products, favouring nations that provide subsidies over those that do not. And, also it is said that subsidies speed up the development of overcapacity and consequently threaten the continued well being of wild fish stocks. But little factual information on effects is available; few in-depth studies have been carried out. Some of the controversy is no more than an extension of the differences in the manner in which countries use subsidies as a tool in their respective macro-economic policies. But, the controversy over the importance and usefulness of subsidies in fisheries is fuelled also by the fact that there is no universally accepted definition of exactly what government actions (or inaction) are to be considered as subsidies.

The term subsidies can be broadly applied to a wide range of government interventions, or to the absence of correcting interventions, that reduce costs and/or increase revenues of producing and marketing of fish and fish products in the short-, medium- or long-terms. "Government interventions" include financial transfers or the provision of goods or services at a cost below market prices. "The absence of correcting interventions" includes failure by government to impose measures that correct for external costs associated with fishing.

In general, where the incentive for fishers remains one of catching available fish before others are able to do so, most subsidies appear to cause effort and fleet capacity to expand more than it would otherwise have done, which increases the pressure to overfish. And, overfishing leads ultimately to falling catches of fish through stock depletion, and perhaps even to a collapse of the stocks. Elimination of subsidies in badly managed fisheries is therefore highly desirable for reasons of conservation. However, in conditions where perfect control of effort prevails, subsidies will probably result in increased profits rather than in increased fishing effort.

The causal link between subsidies and overfishing should not be taken for granted. Overfishing and subsidies may both be symptoms of poor management of the fisheries rather than there necessarily being a causal link between them. A subsidy may also have a positive impact on the aquatic ecosystem, reduce overcapacity (e.g. a well-designed vessel decommissioning programme) and may enhance the sustainability of the resource, depending on the purpose for which it is granted, the circumstances in which is given and whether unintended impacts have been avoided.

Possible solutions

The decision over how to use of subsidies in fisheries rests ultimately with national governments. Apart from disciplines imposed by WTO agreements there are no international instruments that address this issue. While some countries argue in favour of developing an international understanding on the use of subsidies in fisheries, it is not yet clear what the nature of the agreement would be or in which fora it would be negotiated.

It is essential for governments, when considering the impact of any particular subsidy on sustainable resource use, to determine whether the subsidy actually causes the impact it is believed to have. This means tracing the effect of the subsidy on costs and revenues, then tracing the effect of the resulting profits on changes in fishing effort, and finally establishing the impact of the changes in effort on the biomass of the target stock or stocks.

Subsidies may feature as part of a social support package for poor fishing communities. While recognising the legitimacy of social support in certain circumstances, these subsidies should be designed in a way that minimises the detrimental effects on efficiency and on the sustainability of the fisheries resources on which the communities depend.

Action taken

A review of published literature shows that there are almost no documented studies of the effect that subsidies to the fisheries sector have either on wild fish stocks or on trade in fish and fish products. In the 1990's some authors attempted to estimate the value of subsidies worldwide. Recent work indicates a reduction in the use of subsidies worldwide; one notable example is the sharp reduction in the use of subsidies in the fisheries sector by Norway during the 1990s.

In July 2004, FAO convened an Expert Consultation on the use of subsidies in the fisheries sector as part of its efforts to advance an understanding of the impact of subsidies on the sustainability of fisheries resources and on trade.

Other international organizations have been studying the impact of subsidies on the fisheries sector. The Organisation for Economic Co-operation and Development's (OECD) Fisheries Committee, the WTO's Committee on Trade and Environment, the UN Environmental Programme and the World Bank have all been considering the issue in the recent past.

Outlook

Further reductions in the use of subsidies are likely. As subsidies are often a symptom of ineffective fisheries management, it is likely that reductions in the use of fisheries subsidies will coincide with a general improvement in management of fisheries.