1 Political Economy and the Choice of Fishery Management Strategies Robert T. Deacon University of California, Santa Barbara Resources for the Future World Bank Workshop on Fishery Reform Dhaka, Bangladesh July 2011

2 Introduction Trends in world fisheries Widespread biological decline –Prediction that all world’s capture fisheries will be ‘collapsed’ by –Increases in fraction of fisheries FAO has declared over-exploited Dismal economic performance –Potential rent in capture fisheries $80B/year; –Actual ‘rent’ is -$30B/year (loss).

3 Introduction Reasons for both ‘tragedies’: Lack of property rights Access to fish stocks traditionally based on rule of capture –Encourages wasteful race to fish. –Eliminates any incentive to protect or steward the resource. Sharp contrast to owned biological resources –Stocks of owned animals (cattle, sheep, etc.) not in danger; –Aquaculture is expanding exponentially; –Both types of owned resources are generating rents; –Other unowned natural resources (common pool oil, forests, groundwater) suffering same fate as ‘wild’ fish stocks.

4 Introduction Glimmer of hope: Spread of rights-based management Principle: Manage resource by assigning secure rights to use it Rights-based approaches: –Quantitative catch rights assigned to individuals (ITQs). –Spatially delineated rights (TURFs). –Management rights assigned to user groups (Coops and harvester assns.)

5 Introduction Evidence of impact Biological status –Fisheries managed with ‘catch shares’ show no sign of collapse; stock status becomes stable or improves. –Case studies show that bycatch diminishes when ITQs are established. Economic status –Individual transferable quotas (ITQs) generate rents visible in quota prices. –Experience with management by coops indicates generation of profits. –ITQ and coop management improves product quality for consumers. –Rights-based management reduces hazards in fishing and excess costs in processing.

6 Introduction Applying rights-based strategies Choice can depend on ecology of species –TURFs vs. ITQs for sedentary vs. mobile species. Strategies can be combined to achieve full potential –Individual transferable quotas (ITQs) combined with marine protected area to avoid habitat damage or protect critical nursery habitat. –Coops may use internal ITQs to allocate effort among members. –TURFs may form coops to organize effort, monitor and enforce, etc. Choice depends critically on host country political institutions –Focus of this presentation.

7 General objective Identify politically viable approaches to management reform Find pathways to reform that are promising in specific political / institutional contexts. Draw on examples of successful approaches in fisheries, e.g., coops, harvester assns., TURFs, ITQs, … No presumption that a single approach is best in all contexts. Different instruments can be combined to achieve objectives.

8 Steps toward objective Link fishery reform strategies to political / governance institutions Identify dimensions of the fishery management problem. Describe current theories of political institutions and governance. Find a strategy for each management dimension that is well suited to a given political context. Emphasize fishery cooperatives

9 Essential features of a fishery cooperative / harvester association From REEP

10 Ingredients Dimensions of management policy (and property rights) Management tasks: –Delineate exclusive rights to harvest; –Limit catch; –Monitor and enforce resource use rights; sanction violators; –Specify who decides how, where, when harvesting occurs. Different tasks may be assigned to different parties –Government agency vs. coop, vs individual fishers, … Principle: Assign tasks to align incentives for rent capture.

11 Ingredients Governance theories focused on distribution of political power If political power is broadly distributed, government’s coercive power likely to be used to provide public goods: –Economies of scale in providing public goods to large populations; –Public goods include courts, police; general rule of law; If political power is concentrated, government’s coercive power likely to be used to enrich political elites: –Transfers include transfer of resources to political friends; –Corruption likely when rule of law is absent. References: Acemoglu and Johnson, JPE, 2001; Bueno de Mesquita, et al, Cambridge Univ. Press, 2003; LaPorta, et al, JLEO, 1998; Lizzeri and Persico, AER, 2001; Milesi-Ferretti, et al, QJE, 2002; Putnam, Princeton Univ. Press, 1993.

12 Assigning tasks Delineating exclusive access If one relies on government’s coercive power for exclusion: –Outcome depends on government’s orientation: broad-based rule of law vs. rent transfer to elites; –Essential role for government: authorize & legitimize exclusive rights; –Rely on users for mechanics of exclusion. Evidence from case studies –User-based exclusion generally ineffective in developing and developed countries; –User-implemented catch limits rare in developing countries; –User-implemented catch limits fairly prominent and often effective in developed countries. –May be due to difference in security of claims to future rents.

13 Assigning tasks Monitoring, enforcing, sanctioning State vs. user enforcement results in different incentives: –User enforcement: collective incentive, but face free-rider problem; –Gov’t. enforcement: enforcers may have little stake in effective enforcement, may use authority for rent-seeking; Evidence from case studies of fisheries, forests, irrigation: –User-based enforcement generally more effective, particularly when government legitimizes; –Mixed evidence on users’ ability to overcome free-riding; User-adopted sanctions more effective than gov’t. (irrigation) Limitation: Studies do not control for political systems.

14 Assigning tasks Allocating catch, coordinating effort to avoid conflicts Consistent evidence that user-groups can solve these problems: –Case studies from numerous developing and developed country fisheries; –Experimental evidence: subjects can coordinate when allowed to communicate even without commitment mechanism. Systems examined amount to coops or harvester associations.

15 Examples User-based management in a weak rule of law state: Mexico’s lobster cooperatives Harvester coops in Baja California, formed in 1930s. –Authoritarian national government; apparently uninterested in fishery. –State authority legitimizes coops’ right of exclusion. Performance of fishery and cooperatives: –Stocks and catches stable since 1980s; –Coops manage effort limits; enforce compliance with regulations; –Fishery certified as ‘sustainable’ by MSC in Possible key to success: Benign neglect by central government.

16 Examples Namibia’s approach: Enabling rent capture by broad stakeholder groups Namibian independence in 1990 –Pre-independence: fishing largely uncontrolled, exploited by foreigners. –New government strongly democratic. Independent Namibia’s fishery policy –Declare and defend 200 mile limit; –Design management to broadly distribute rents among population; –Some short run inefficiency, but prevents capture by political elites. Fisheries performing well biologically and economically.

17 Examples Modifying top-down policy is strong rule of law state to enable innovation by users: Chignik (U.S.) coop Prior management regime –Limited entry, TAC limit, season closure; –Race to fish, inefficient use of effort, poor economic performance. Chignik harvesters’ coop formed in 2002 –Membership voluntary; profits shared equally; –State assigned share of TAC, depending on membership; –Coop eliminated race to fish, rationalized effort, coordinated fishing, generated rents. Violated regulations; declared illegal after 3 years.

18 Examples Overcoming regulatory rigidity by empowering users in strong rule of law countries. Yaquina Bay (U.S.) herring roe fishery –Originally limited entry with TAC; allowed permit holders to divide TAC among themselves. –Ended race to fish, encouraged user-support research on stocks. Challenger Scallop Enhancement Co. (New Zealand) –38 catch quota owners formed a company to manage fishery collectively; –CSEC now sets catch limits, coordinates harvest areas, reseeds depleted areas, invests in research. Paua management by user groups (New Zealand) –Quota owners formed association to coordinate actions. –Share information on stock locations, impose size limits, reseed depleted areas, reduce incidental mortality.

19 Conclusions What can we recommend? Recognize government’s motivation when choosing policy –Motives depend on underlying political institutions: broad-based vs. narrowly- focused political power. –Government is not a generic entity; consider different levels of government. –Assign greater management responsibility to users when governments are unreliable. Assigning rents to users encourages stewardship and rent generation –Evidence of stewardship by ITQ quota owners and coops. Research on performance should account for institutional differences. –Important for assessing performance of user-based vs. government monitoring, enforcement, sanctioning. –Case study and experimental work should be designed to include these factors.

20 Examples Contracting to achieve environmental objectives in weak rule of law states: Debt-for-nature swaps Goal: overcome lax or nonexistent enforcement of property rights. Conservation NGOs fund enforcement of laws on ‘paper parks’ in Latin America and elsewhere. Assets are nominally owned by host government. Swaps are structured to: –Avoid including host government as party (due to sovereignty); –Make it costly for host government to reneg; –Minimize possibility host government can seize conservation assets.