There is a growing concern in the world
community about the state of fish stocks, ocean habitats and marine biological diversity.
This concern centers not least on the issue of overfishing. This apprehension is
understandable in the light of the importance of the oceans for the world community.
Indeed, the living resources of the oceans are the single most important source of food
for humankind, they provide for the livelihood of millions of people in coastal
communities and even of whole nations, and they are of critical importance to the
worlds biological diversity. Hence the crucial importance that these resources be
conserved and used sustainably for the benefit of both present and future generations.
The common approach to overfishing is to
attribute the cause to ineffective fisheries management. Fisheries management is certainly
a necessary condition for sustainable fisheries but it is not the only condition.
Overfishing is as much an economic problem as the fault of bad ecological management. More
specifically it is increasingly recognized that overcapacity of the worlds fishing
fleet is the driving force behind the overfishing in many regions of the world.
As soon as the problem of overfishing is
approached from this broader perspective, a linkage is made between fisheries, trade, the
environment and sustainable development. The following paper offers a look at this linkage
through the experience of one country, notably Iceland. First we will review briefly the
development of the trade and environment issue, then we will address sustainable fisheries
in the context of global market conditions.
Trade and Environment
It is a while since the world community
recognized the importance of the link between trade and environment.3 The issue emerged in
relation to the growing environmental awareness leading up to the Stockholm Conference on
the Human Environment in 1972. At first, the concern was primarily from trade experts who
were concerned that environmental policies and conventions would lead to new barriers to
trade. A special group on Environmental Measures and International Trade (EMIT) was
established in 1971 under the auspices of GATT. However, for a variety of reasons this
group remained inactive.
The trade and environment nexus received
renewed attention in the period leading up to the UN Conference on Environment and
Development, held in Rio de Janeiro in 1992. A new paradigm had emerged under the name of
sustainable development. The new direction stressed the need for integrating environmental
concerns into all sectors of society. One aspect of this new thinking was the demand that
trade and environment policies should be made mutually supportive.
In this climate, the EFTA countries (the
countries of the European Free Trade Association) pressed in 1990 for the revival of the
1971 GATT Group. Subsequently the EMIT group met from November 1991 to January 1994. The
discussions in the group helped moving the issue forward in the sense of making
governments more comfortable with this important issue, which by now was also being
addressed in other international fora such as UNEP, UNCTAD, CSD and OECD. Valuable
analytical work was conducted, but practical results were beyond the groups reach.
Building on the groups work and
recognizing the need to move beyond the analytical dimension, the Marrakesh Ministerial
Conference in April 1994 decided to take the discussions one step further and directed the
first meeting of the General Council of the WTO to establish a Committee on Trade and
Environment (CTE). The task given to the Committee was to continue the analytical work,
but with a more proactive intention, or as it is put in the decision "(a) to identify
the relationship between trade measures and environmental measures, in order to promote
sustainable development; (b) to make appropriate recommendations on whether any
modifications of the provisions of the multilateral trading system are required,
compatible with the open, equitable and non-discriminatory nature of the system..."
The Committee on Trade and Environment has
met regularly since February 1995. Cognizant of the fact that the WTO is not mandated to
carry out work in the field of the environment, the Committee has sought to focus on those
aspects of the trade and environment nexus that fall under the competence of the
organization. In other words, the task is to resolve concrete trade policy issues that
would offer what have been called "win-win" or even "win-win-win"
solutions for trade, the environment and sustainable development alike. This approach
allows for specific issues to be addressed in a more concrete manner with a view to making
the multilateral trading system more supportive of sustainable development, both in
general and what matters more, with respect to specific economic sectors.
There seems now to be an emerging consensus
within the Committee that there is no inherent contradiction between trade liberalization
on the one hand and environmental protection on the other. The two can and should proceed
in unison to maximize the benefits of the respective policies pursued in favor of
sustainable development. All available evidence suggests that policies to liberalize trade
and investment have a positive impact on the environment, when environmental polices are
set at appropriate levels.
The Economics of Sustainable Fisheries
Fisheries management is of crucial
importance to the promotion of sustainable fisheries. Such a system must be based on sound
scientific knowledge and rigid surveillance and enforcement. Yet while fisheries
management is a necessary condition for sustainable fisheries it is not sufficient all by
itself. For the system to be effective it must be accepted and supported by the fishing
industry and fishermen alike. An important way to build that support is to raise awareness
through consultation between public authorities and the fishing community. But a more
effective way is to give those who live from fisheries an economic stake in conserving the
stocks and using them in a sustainable manner. For that to happen the fisheries sector
must be made economically efficient. In short, economic efficiency is required to ensure
To offer an example, the Government of
Iceland devoted some fifteen years to developing an effective sustainable fisheries
management system. Total Allowable Catch (TAC) was introduced for all the most important
commercial fish species, based on sound scientific observations and assessments. Also, to
ensure that catch levels were not surpassed, a rigid enforcement and compliance system was
established to monitor the fishing of every fishing vessel in the country with the help of
a state-of-the-art computer system that links all ports of landings to the Directorate of
Yet despite the ever more stringent system,
there was always pressure from the industry to increase the TAC and to allow for more
fishing capacity. The underlying reason was that the system lacked the economic incentive
granting the industry and fishermen a more direct stake in the conservation and
sustainable use of the stocks. The one factor standing in the way of generating this
incentive was the overcapacity of the fleet. In other words, there were too many boats
fishing the limited amount of fish to allow for sufficient economic return for the
operations. The fleet had to be rationalized. Towards this end Individual Transferable
Quotas (ITQs) were introduced.
The advantage of ITQs is the efficiency and
flexibility offered. Fishing operations can increase or reduce their harvesting rights and
change their composition in accordance with what they feel is cost-effective. This they
can do by trading in catch quotas through a public auction market, the Quota Exchange. The
price is determined by supply and demand and payment for harvest rights is either made in
monetary form or by exchanging rights.
The cost-effectiveness of fishing in
Iceland has increased substantially due to the quota system. Many enterprises have merged
to allow for increased efficiency and to spread operating risks. Both management and
ownership of enterprises have also changed and presently most of the countrys larger
fishery enterprises are listed on the stock market. This, coupled with the flexibility of
the system, has led to results in line with the generally positive experience from the
application of ITQs in other countries, which broadly speaking means,
- there has been a decline in fishing efforts;
- the growth of the fishing fleet has stopped
and in some cases contracted;
- economically important fish stocks have
- the quality of landed catch has increased;
- profitability has increased; and
- total employment in the industry has not
contracted significantly owing to the increased emphasis on product value and quality.
The fisheries management system in Iceland
is still under development. But the experience to date has shown that the success of
sustainable fisheries management depends not only on rigid ecological requirements with
respect to science and catch levels and on active participation of stakeholders, but also
and perhaps more importantly on the fisheries sector being economically efficient.
The Global Context - How WTO can
It is difficult for any country to maintain
a sustainable fisheries management regime in a world market characterized by overcapacity.
Such circumstances provide for constant pressure on the domestic fisheries sector and
through it on the government to increase supply, notably by allowing more fishing, to the
detriment of fish stocks and marine biological diversity. This is in particular relevant
for countries that depend heavily on export of fish products, such as Iceland where fish
products constitute more than 70% of the export value of goods. Global overcapacity
creates supply distortions that place downward pressures on world seafood prices. This
situation reduces revenue which each fishing operation seeks to meet by increasing their
individual supply by intensifying fishing with subsequent negative effects on fish stocks.
According to FAO statistics the
overcapacity of the global fishing fleet was 30% in 1989. Others believe this figure to
have been an underestimation and assess the current overcapacity as high as 150%.
Government subsidies are a major cause of this overcapacity. A recent study made by Matteo
Milazzo and published by the World Bank estimates that a total of US$14 to 20 billion of
environmentally harmful subsidies are being granted to the global fisheries sector, which
amounts to 20 to 25% of world fisheries first-sale revenues. According to the study, the
OECD countries and China may be responsible for up to 75% of these subsidies.
Government subsidies encourage both
excessive fishing effort and overinvestment in fishing capacity. Gareth Porter offers a
useful summation of the effects of subsidies:
State subsidies to the fishing industry
contribute to overcapacity in three ways: First, by reducing costs and increasing profits
per unit of effort, state subsidies have attracted more entrants into the fishing
industry. Second, by reducing the cost of adopting new technologies, subsidies have
induced more of the industry to adopt those technologies than would have been the case in
an undistorted market. And, third, subsidies have encouraged producers who would have
disinvested partially or completely to remain in the industry, in spite of serious
financial difficulties caused by overfishing. Subsidies to the fishing sector have
prevented the market signals from influencing the fishing industry to stop investing in
already overcapitalized fisheries.
The single most effective way to resolve
the overfishing problem would be the removal of subsidies. It needs examining to what
extent this could be accomplished within the framework of the existing WTO Subsidies
Agreement. Certainly, many of the subsidies being granted to fisheries operations can be
deemed actionable under its provisions. However, there are numerous subsidies that clearly
do not fall under the Subsidies Agreement and coverage is questionable with regard to
others. It is for this reason that Iceland, Australia, New Zealand, the Philippines and
the United States have taken the initiative to encourage WTO Members to address in the
next round of negotiations the issue of fisheries subsidies with a view to their removal.
At the High Level Symposium on Trade and Environment held by the WTO in Geneva last March
15 and 16, these countries presented a joint statement where they urged "Governments
to make an early commitment to progressively eliminate fisheries subsidies that contribute
to fisheries overcapacity, in view of their environmentally damaging and trade distorting
effects, and to pursue work in the WTO aimed at achieving the reduction and elimination of
such subsidies. Progress in this area would represent a clear "win-win"
achievement in the area of trade, environment and sustainable development."
In general, the statement was favorably
received by other participants at the symposium. In the words of one commentator,
"this is the first time any serious effort has been made to give priority to a topic
for negotiation here [read: WTO] based largely on a concern with sustainability, rather
than a concern with the kind of traditional commercial interests that otherwise drive the
WTO agenda." There is also a growing interest in this matter as evidenced by the
increased attention fisheries subsidies have received in recent years in fora such as the
CSD, the OECD and the APEC, as well as within WTO and FAO. Indeed, in February of this
year Governments adopted in FAO an International Plan of Action for the Management of
Fishing Capacity which calls on States to "reduce and progressively eliminate all
factors, including subsidies and economic incentives and other factors which contribute,
directly or indirectly, to the build-up of excessive fishing capacity thereby undermining
the sustainability of marine living resources, giving due regard to the needs of artisanal
Experience has shown that in the best of
all circumstances, the management of natural resources is best entrusted to those living
from those resources. In the case of fisheries, the best of all circumstances include
effective and ecologically sound fisheries management systems, economically efficient
fisheries sectors and global market conditions conducive to sustainable fisheries.
At present, sustainable fisheries are being
practiced in a number of countries and regions. But the ability of the countries concerned
to maintain sustainability in their fisheries and the possibilities for others to move
towards sustainable fisheries is being seriously undermined by a global market
characterized by subsidized overcapacity and other market distortions affecting fisheries
and fish products. The good news, however, is that this fact is being widely recognized
and a window of opportunity stands open to the WTO to address this problem in substantive
and comprehensive fashion in the upcoming round of trade negotiations.
NOTES AND RESOURCES
Iceland Ministry for
Foreign Affairs, Department of Natural Resources and Environmental Affairs. The views
expressed in this article are those of the author
"Fisheries Subsidies, Overcapitalization and Economic Losses", Proceedings of
Workshop on Overcapacity, Overcapitalization and Subsidies in European Fisheries, CEMARE,
Portsmouth 28-30 October 1998 [forthcoming].
For historical review
consult WTO Trade and Environment Division "High Level Symposium on Trade and
Environment, Geneva 15-16 March 1999, Background document", and IISD Linkages: Trade
& Sustainable Development enb.iisd.org/linkages/trade.
Decision on Trade and
Environment, 14. April 1994, Marrakesh Ministerial Conference.
- Ragnar Arnason, "Rational Sustainable
Exploitation of Marine Resources", Paper Presented at a meeting of European Council
Committee on Agriculture and Rural Development, Paris February 27, 1998, pp. 6, 11-12.
- Matteo Milazzo, Subsidies in World
Fisheries: A reexamination, World Bank Technical Paper No. 406, Fisheries Series,
(Washington D.C., World Bank, 1998), p. 5.
- Gareth Porter, Too Much Fishing Fleet,
Too Few Fish. A Proposal for Eliminating Global Fishing Overcapacity, World Wildlife
Fund, 1998, pp. 8 and 12.
- Gareth Porter, op. cit., Ragnar
Arnason (Oct. 1998), op. cit.
- Matteo Milazzo, op. cit. pp. 73-74,
- Gareth Porter, op. cit. p. 14.
- David Schorr, Towards Rational
Disciplines on Subsidies to the Fisheries Sector: A Call for New International Rules and
Mechanisms. A WWF Discussion paper, September 1998.
- "Promote Sustainable Development by
Eliminating Trade Distorting and Environmentally Damaging Fisheries Subsidies", a
joint statement of Australia, Iceland, New Zealand, the Philippines and the United States
presented to the WTO High Level Symposium on Trade and Environment, Geneva 15-16 March,
- Statement of David Schorr, World Wildlife
Fund (WWF - US), WTO High Level Symposium on Trade and Environment 15-16 March 1999, Panel
2 -- Synergies.
- FAO Committee on Fisheries, International
Plan of Action for the Management of Fishing Capacity, 15-19 February 1999