Capacity Reduction, Quota Trading and Productivity: A Case Study of the Australian South East Trawl Fishery Kevin J. Fox University of New South Wales R. Quentin Grafton The Australian National University Tom Kompas The Australian National University and Australian Bureau of Agricultural and Resource Economics Tuong Nhu Che Australian Bureau of Agricultural and Resource Economics International Workshop on Fishing Vessel and License Buyback Programs University of California, La Jolla, March 22-24, 2004

Research Objectives Analyse the effects of a license buyback at individual boat-level in the Australian South East Trawl Fishery by using a profit index decomposition method. Analyse the effects of the establishment a brokerage service to simulate quota trading on the profitability of vessels in the fishery.

Presentation Contents Background of the Australian South East Trawl Fishery (SEFT), quota trades and the vessel buyback program. Profit decompositions and productivity. Results: Productivity, quota trading and the vessel buyback in SETF. Concluding remarks.

Background of the Australian South East Trawl Fishery SETF is a multi-species fishery situated off the south east coast of Australia. The fishery includes over 100 species of finfish (e.g., orange roughy, flathead) and deep-water crustaceans. Number of boats: 94 (2002 Statistics) Fishing methods: otter boat, Danish seine and mid- water trawl. Total fish landed: 30,000 tones (2002 Statistics) Gross Value: A$70 million (2002 Statistics)

Past and Current Management Vessel unitisation and input controls (prior to 1992): failed to prevent an increase in effort and capacity. Since 1992: Output controls (TAC), Individual Transferable Quotas for 16 of the major species. In 1997: Industry assisted quota brokerage service; Vessel buyback program.

Quota traded (tons)

Buyback Program The Buyback Program (1997): Objective: to remedy the acrimony over initial quota allocation and to reduce perceived overcapacity in the fishery. Package: A$4 million package, including: A$2.35m targeted assistance to 18 fishers to avoid legal claims over quota allocation; $A1.65m to buyback 27 licences, 14 active and 13 latent. Result: No. of boats reduced from 108 to 96.

Profit decompositions and productivity Define Productivity index Decomposition of the profit ratio

Decomposition of profit ratios(  ), Means

Conclusions, SETF Index All vessel classes experienced productivity gains in the year immediately following the licence buyback scheme and establishment of a quota brokerage service. Large jump in productivity in 1997, continues to a lesser extent with quota trades to Productivity increases larger for small relative to large vessels.

Conclusions, SETF Index (cont) Problems: Purchase of latent licenses appear to have resulted in additional investment in the fishery for those who held active licences as well. TAC may not be set optimally (too large for most species), implying additional excess effort in the fishery since the buyback program.