1. Analyzing the Resource Impacts of Fisheries Subsidies: A Matrix Approach Gareth Porter Porter Consultants Washington, D.C. UNEP Workshop on Fisheries Subsidies and Sustainable Fisheries Management Geneva April 26-27, 2004

2. Purpose of the Paper To analyze the impacts of eight major categories of fisheries subsidies on fisheries resources using a matrix approach To analyze the impacts of eight major categories of fisheries subsidies on fisheries resources using a matrix approach To provide an analytical tool to assist in the design of new or improved disciplines on fisheries subsidies that will help protect fishery resources. To provide an analytical tool to assist in the design of new or improved disciplines on fisheries subsidies that will help protect fishery resources.

3. What is the “Matrix approach”? A systematic analysis of the resource implications of combinations of subsidy type and the two main parameters of the fishery: degree of exploitation and management system. A systematic analysis of the resource implications of combinations of subsidy type and the two main parameters of the fishery: degree of exploitation and management system.

4. Parameter 1: Degree of Exploitation Overcapacity: greater fleet capacity than sustainable catch level Overcapacity: greater fleet capacity than sustainable catch level Full capacity: fleet capacity equal to sustainable catch level Full capacity: fleet capacity equal to sustainable catch level Less than full capacity: fleet capacity less than sustainable catch level Less than full capacity: fleet capacity less than sustainable catch level

5. But the reality in the vast majority of commercial fisheries is… Significant fleet overcapacity leading to overexploitation Significant fleet overcapacity leading to overexploitation If the fishery is regulated, much of the overcapacity is idle If the fishery is regulated, much of the overcapacity is idle If it is unregulated, all the excess capacity contributes to overexploitation If it is unregulated, all the excess capacity contributes to overexploitation

6. Parameter 2: Management System Effectiveness Effective Management= appropriate quotas, adequate enforcement and incentives (ITQs or CBM) for sustainable fisheries Effective Management= appropriate quotas, adequate enforcement and incentives (ITQs or CBM) for sustainable fisheries Catch Controls = appropriate quotas, adequate enforcement but no incentives Catch Controls = appropriate quotas, adequate enforcement but no incentives Open Access = no quotas, enforcement or incentives Open Access = no quotas, enforcement or incentives

7. But the reality in the vast majority of fisheries is… Catch control systems + overcapacity = systematic overexploitation, because: Enforcement is only partially effectiveEnforcement is only partially effective In the absence of individual tradable quotas, cheating on quotas is rampantIn the absence of individual tradable quotas, cheating on quotas is rampant

8. Using the matrix to show all combinations for a category of subsidies Effective Management Catch Controls Open Access Overcapacity Not harmful HarmfulHarmful Full Capacity Not harmful HarmfulHarmful Less than full Capacity Not harmful HarmfulHarmful

9. Major Categories of Fisheries Subsidies Analyzed Fisheries infrastructure Fisheries infrastructure Management services Management services Subsidies for access to foreign countries’ waters Subsidies for access to foreign countries’ waters Decommissioning of vessels and license retirement Decommissioning of vessels and license retirement Subsidies to capital costs Subsidies to capital costs Subsidies to variable costs Subsidies to variable costs Income support and unemployment insurance Income support and unemployment insurance Price support subsidies Price support subsidies

10. Subsidies to Fisheries Infrastructure Definition: government spending on infrastructure specifically for the fishing industry that is not offset by user fees Definition: government spending on infrastructure specifically for the fishing industry that is not offset by user fees How they impacts resources: regardless of management system, no effect on decisions on capacity and effort, but marginal effects on entrance into and exit from the industry. How they impacts resources: regardless of management system, no effect on decisions on capacity and effort, but marginal effects on entrance into and exit from the industry.

11. Subsidies to Fisheries Infrastructure Effective Management Catch Controls Open Access Overcapacity Not harmful HarmfulHarmful Full Capacity Not harmful HarmfulHarmful Less than full Capacity Not harmful

12. Management Services Are they subsidies? The issue is a matter of debate in OECD countries. Are they subsidies? The issue is a matter of debate in OECD countries. Are they harmful? Most government- funded services probably restrain exploitation of fisheries more than if those same services were financed by the industry. Are they harmful? Most government- funded services probably restrain exploitation of fisheries more than if those same services were financed by the industry.

13. Subsidies to Access to Foreign Countries’ Waters Definition: Payments to a foreign country covering a significant part of the costs of a distant water fleet’s access to that foreign country’s fish Definition: Payments to a foreign country covering a significant part of the costs of a distant water fleet’s access to that foreign country’s fish How they impacts resources: Foreign fleets fish in waters which would otherwise be unprofitable and which are less regulated than home waters How they impacts resources: Foreign fleets fish in waters which would otherwise be unprofitable and which are less regulated than home waters

14. Subsidies to Access to Foreign Countries’ Waters Effective Management Catch Controls Open Access Overcapacity Not harmful HarmfulHarmful Full Capacity Not harmful HarmfulHarmful Less than full Capacity Not harmful

15. Decommissioning Subsidies Generally viewed as “good” subsidies, but have unintended consequences: –Vessel owners remaining in the fishery try to capture more of the catch through “capital stuffing” –Incentives for exit and entry are altered –Vessel replacement programs are particularly dangerous

16. Decommissioning Subsidies Effective Management Catch Controls Open Access Overcapacity Not Harmful Probably Harmful Harmful Full Capacity Not Harmful Probably Harmful Harmful Less than full Capacity Not Harmful Probably Harmful Harmful

17. Subsidies to Capital Costs Definition: subsidies to vessel construction or modernization and fishing gear Definition: subsidies to vessel construction or modernization and fishing gear How they impact on resources: Overall fleet capacity increases, even when combined with decommissioning schemes How they impact on resources: Overall fleet capacity increases, even when combined with decommissioning schemes

18. Subsidies to Capital Costs Effective Management Catch Controls Open Access Overcapacity Not Harmful HarmfulHarmful Full Capacity Not Harmful HarmfulHarmful Less than full Capacity Not Harmful HarmfulHarmful

19. Subsidies to Variable Costs Definition: Subsidies for all recurrent or operational costs Definition: Subsidies for all recurrent or operational costs How they impact resources: Each fishing trip is less expensive, providing How they impact resources: Each fishing trip is less expensive, providing an incentive to increase fishing effort, and stimulating leaps in adoption of new fishing technology

20. Subsidies to Variable Costs Effective Management Catch Controls Open Access Overcapacity Not Harmful HarmfulHarmful Full Capacity Not Harmful HarmfulHarmful Less than full Capacity Not Harmful Probably harmful

21. Subsidies to Income Definition: Unemployment insurance, income support and payments to owners for temporary cessation of fishing Definition: Unemployment insurance, income support and payments to owners for temporary cessation of fishing Unemployment assistance probably has no impact on resources, but might increase pressure on managers Unemployment assistance probably has no impact on resources, but might increase pressure on managers Payments to owners inhibit exit but do not affect fishing effort Payments to owners inhibit exit but do not affect fishing effort

22. Subsidies to Income Effective Management Catch Controls Open Access Overcapacity Not harmful UI: Possibly harmful LU: harmful Harmful Full Capacity Not harmful UI: Possibly harmful LU: harmful Harmful Less than full Capacity Not harmful UI: Not Harmful LU: NA

23. Price Support Subsidies Definition: policy mechanisms that artificially raise the price of fish, increasing the profit to the industry Definition: policy mechanisms that artificially raise the price of fish, increasing the profit to the industry How they impact resources: Direct incentive to increase effort How they impact resources: Direct incentive to increase effort

24. Price Support Subsidies Effective Management Catch Controls Open Access Overcapacity Not harmful HarmfulHarmful Full Capacity Not harmful HarmfulHarmful Less than full capacity Not harmful Possibly harmful

25. Conclusion 5 categories of fisheries subsidies (subsidies to fisheries infrastructure, subsidies to access to foreign waters, subsidies to capital costs, subsidies to variable costs and price support subsidies) can be expected to be harmful to fisheries resources under the management and bio- economic conditions prevalent in the vast majority of the world’s fisheries