ENVIRONMENT AND NATURAL RESOURCES GLOBAL PRACTICE DISCUSSION PAPER #01 TRADE IN FISHING SERVICES Emerging Perspectives on Foreign Fishing Arrangements DECEMBER 2014 WORLD BANK REPORT NUMBER 92622-GLB ENVIRONMENT AND NATURAL RESOURCES GLOBAL PRACTICE DISCUSSION PAPERS 01 TRADE IN FISHING SERVICES Emerging Perspectives on Foreign Fishing Arrangements Addendum to Trade in Fishing Services, 2014 This note concerns Chap ter Three: Legal Issues Legal Issues — Alternative Interpretation of Article 62 UNCLOS In the World Bank discussion paper Trade in Fishing Services—Emerging Perspectives on Foreign Fishing Arrangements, published in December 2014, the World Bank undertook an analysis of the legal issues pertaining to coastal states’ rights and responsibilities toward distant-water states and the international community in general. This analysis relies on the writings of Gordon Munro (based on the work of Prof. William T. Burke). The Munro-Burke interpretation is based on sound academic and legal reasoning. While this interpretation was the main interpretation used in the discussion paper, it is not the definitive or sole interpretation on the rights and responsibilities of coastal states. In this addendum, an alternative interpretation to that put forward by Munro-Burke is discussed. According to the Munro–Burke interpretation, coastal states a) are under no obligation to determine a total allowable catch (TAC) and in turn share any surplus; and b) are not obliged to maintain or observe a particular level of utilization or even a maximum sustainable yield (MSY ). The alternative interpretation of coastal states’ rights and responsibilities proposes that: a) coastal states are obliged to — i) determine a total allowable catch of living resources within their EEZ and then grant other states access to any surplus that may exist. Article 61(1) “The coastal State shall determine the allowable catch of the living resources in its exclusive economic zone.” Markowski1 argues that while Burke suggests that this provision is to enable the coastal state, to the exclusion of other states, to determine the allowable catch in its EEZ, the language is clearly mandatory. Therefore the provisions of this clause are in fact mandatory and therefore cannot be said to be empty as suggested by the Munro-Burke interpretation. 1. Marion Markowski, The International legal standard for sustainable EEZ fisheries management, Towards Sustainable Fisheries Law: A Comparative Analysis, 2009. In addition to the mandatory wording used in Article 61(1), provisions of the Preamble2 to the UNCLOS and Article 56(2)3 make it clear that a coastal state’s sovereign rights within its EEZ are to be exercised with due regard to the spirit of mutual understanding and coopera- tion as well as the rights and duties of other states. In this regard, a reading of the provisions of Article 61(1), which finds that a coastal state is under no obligation to determine its TAC and share any surplus, could not stand in light of the rest of the provisions of the UNCLOS. ii) observe or maintain a maximum sustainable yield within its EEZ According to Article 61(2) and (3) of the UNCLOS provide that—“(2) … [t]he coastal state... shall ensure through proper conservation and management measures that the maintenance of the living resources in the exclusive economic zone is not endangered by over-exploitation… (3)… measures shall also be designed to maintain or restore populations of harvested species at levels which can produce the maximum sustainable yield…” According to the Munro-Burke interpretation there is no requirement for coastal states to maintain or observe a particular MSY. The alternative interpretation holds that the only plausible way coastal state may fulfill its duty to conserve and manage the living resources within its EEZ as contained in Article 61 is by maintaining and restoring living resources at a level which can produce a MSY, as prescribed by Article 61(3). According to Markowski Article 61(2) is concretized by paragraph 3.4 In addition to the above, the alternative interpretation is also based on UNCLOS Commentary Volume 25 (the Commentary), which deals with amongst other issues—EEZ and living resources therein, as well as the rights and duties of coastal States and non-coastal States with respect to the former. The Commentary on Article 62 specifically reflects on the various submissions by States, in the development of the UNCLOS, on the issue of the utilization of living resources both by coastal States and non-coastal States. These sub- missions we believe demonstrate States’ intentions and possible later understanding of the utilization of living recourses within EEZ and how to determine and allocate harvest capacities. In addition to the Commentary, various multi and bilateral agreements between the European Union and other States—in terms of which EU vessels are allowed to fish for surplus stocks in those other State’s EEZ—indicate an understanding and interpretation of Article 62 that differs to that put forward by Munro and Burke. 2. The Preamble to the UNCLOS—which provides for “… the desire to settle, in a spirit of mutual understanding and cooperation, all issues relating to the law of the sea and aware of the historic significance of this Convention as an important contribution to the maintenance of peace, justice and progress for all peoples of the world…” (Own emphasis). 3. Article 56(2) UNCLOS—“In exercising its rights and performing its duties under this Convention in the exclusive economic zone, the coastal State shall have due regard to the rights and duties of other States and shall act in a manner compatible with the provisions of this Con- vention.” 4. Supra note 1 at 5. 5. Myron H. Nordquist, United Nations Convention on the Law of the Sea, 1982: A Commentary, Volume 2, Martinus Nijhoff Publishers, Aug 30, 1993. © 2014 The International Bank for Reconstruction and Development 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Email: feedback@worldbank.org All rights reserved This volume is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone: 978-750-8400, fax: 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank Group, 1818 H Street NW, Washington, DC 20433, USA, fax: 202-522-2422, e-mail: pubrights@worldbank.org. Cover photo credits clockwise from top right: 1. Purse seining for tuna. Courtesy of Marc Taquet, FADIO IRD-Ifremer and Peter Sharples, SPC. 2. Small scale fishers in West Africa. Courtesy of MRAG Ltd. 3. Purse seining for tuna. Courtesy of Marc Taquet, FADIO IRD-Ifremer and Peter Sharples, SPC. 4. Trawler, Alaska Pollock. Courtesy of Gunnar Knapp. Contents Forewordsvii–viii Acknowledgmentsix List of Acronyms xi Executive Summary xiii Chapter One: Introduction 1 About this Report 2 Fisheries, Growth, and Welfare 2 Trade in Fishing Services 3 Chapter Two: Approach and Structure of the Report 5 Chapter Three: Legal Issues 7 Chapter Four: Economic Principles 9 Chapter Five: Common Forms of TIFS 15 Foreign Fisheries Access Agreements 15 Joint Ventures 18 Chartering19 Chapter Six: Lessons Learned 21 Importance of the Benefit Focus 21 Capacity Building 24 Coastal State Regional Collaboration 25 Areas Beyond National Jurisdiction 25 Small-Scale Fishers 28 Human Rights 28 Difficulty of Estimating Potential Gains from Reform 29 Sequential Nature of Foreign Fishing Arrangements 29 Chapter Seven: Conclusions 31 Summary of Background and Aims 31 FFA as Trade in Fishing Services 31 Toward Better FFA: Delivering the Benefits through TIFS 31 Chapter Eight: Recommendations 37 Chapter Nine: Report Supplement 39 Case Study Summaries 39 Foreign Fishing Agreements in the Western Pacific 39 Areas beyond National Jurisdiction (ABNJ) Fisheries 40 Report on Foreign Fishing: Morocco Case Study of the Various Arrangements in Fishing Cooperation Relations 40 Interaction between Foreign Fishing Agreements and Small-Scale Fishers 41 European Union Northern Agreements 41 Chinese Distant-Water Fishing Activities 42 The New Zealand Experience of Joint Venture Fishing Operations: 1977 to 2013 43 The Bering Sea Pollock Fishery 43 Emerging Perspectives on Foreign Fishing Arrangements iii Appendix A: The Legal and Economic Principles Underlying Foreign Fishing Arrangements 45 Appendix B: Case Study on Foreign Fishing Agreements in the Western Pacific 61 Appendix C: Areas Beyond National Jurisdiction (ABNJ) Fisheries 73 Appendix D: Report on Foreign Fishing: Morocco Case Study of the Various Arrangements in Fishing Cooperation Relations 79 Appendix E: Interaction between Foreign Fishing Agreements and Small-Scale Fishers 91 Appendix F: EU Northern Agreements 99 Appendix G: Chinese Distant Water Fishing Activities 117 Appendix H: The New Zealand Experience of Joint Venture Fishing Operations: 1977 to 2013 129 Appendix I: The Bering Sea Pollock Fishery 141 BOXES Box 4.1: Principal-Agent Analysis 11 Box F.1: Example of Negotiating Process: EU-Norway Agreement, 2013 111 Box F.2: Loss of Redfish Fishing Opportunities without Compensation 112 Box F.3: Improving Reported Catch Statistics for Cod 112 Box G.1: Are FFAs Economically Efficient for Papua New Guinea? 126 FIGURES Figure 1.1: Relationship between HDI and GDP/Capita (logged) 3 Figure 1.2: Relationship between HDI and GDP/Capita (Natural Scales) 3 Figure F.1: Quota Allocation by Norway for Cod among Different Fleet Sectors, 2012 104 Figure G.1: Composition of China’s DWF Catches (Excluding “Asia-Inland Waters” and “Pacific, Northwest”) as Reported to the FAO, 2003–10, in Tons 119 Figure G.2: High Seas and EEZ as Percentages of Total DWF Catch 122 Figure G.3: Percentage of Distant Water Catch of Major DWF Nations, 2011–13 126 Figure H.1: TACC vs. Catch from Major EEZ Species for the 2006/07 to the 2010/11 Fishing Years 130 Figure H.2: Number of FCVs and Domestic Vessels Operating in New Zealand’s EEZ by Fishing Year 131 Figure H.3: Key Steps and Parties Involved in Enabling an FCV to Operate in New Zealand’s EEZ 131 Figure H.4: The Number of Fishing Vessels Operating in New Zealand’s EEZ in the 2010/11 Fishing Year by Flag State 132 Figure H.5: Export Value of Major EEZ Species for the 2006/07 to 2010/11 Fishing Years 132 Figure H.6: Estimated Export Value by Vessel Type for the 2006/07 to 2010/11 Fishing Years 132 Figure H.7: FCVs Proportion of the Major EEZ Species Catch by Volume and Export Value for the 2006/07 to 2010/11 Fishing Years 133 Figure H.8: Percentage Catch by FCVs and New Zealand Flagged Vessels for the 2010/11 Fishing Year 135 Figure I.1: Walleye Pollock Range 142 Figure I.2: Pollock Catch Distribution: Domestic, Joint Venture, and TALFF 149 iv Trade in Fishing Services TABLES Table 2.1: The Case Studies 6 Table 5.1: Example of Hypothetical Access Agreement and Access Fee Structure 16 Table B.1: Development of Access Fee Returns to PICs since the 1980s 65 Table B.2: Fisheries Revenues for Selected PNA Members (US$ Million P.A.) 67 Table C.1: Estimated WCP Purse Seine Effort and Removals (2012) 75 Table D.1: EU-Morocco Fishing Agreements: Comparison between the Estimated Catch Value and Annual Financial Compensation 88 Table F.1: Quota Exchanges between the EU and Norway for 2012 and 2013 102 Table F.2: Cost of Fisheries Management in Norway (1996) 105 Table F.3: Comparison of the Size of the Norwegian Fleet with the Number of EU Vessels Authorized to Fish in Norwegian Waters 106 Table F.4: Value of Fishing Opportunities under the EU-Faeroes Agreement in 2010 107 Table F.5: Value of Fishing Opportunities under the EU-Iceland Agreement 108 Table F.6: Fishing Opportunities, Financial Contribution, and Ship Owner Contributions for the Current Protocol to the EU-Greenland FPA 109 Table G.1: China’s Officially Reported DWF Operations in West Africa 123 Table G.2: Japan’s Distant Water Catch by Fishing Method in Tons, 2011 126 Table G.3: Taiwan’s DWF Catch in Tons 127 Table I.1: World Walleye Pollock Catch by Country (1975–84) 142 Table I.2: Annual Whiting Catches (Tons) off Washington, Oregon, and California by Foreign Nations, 1966–85 144 Table I.3: Pacific Whiting Catch in the Joint Venture Fishery off Washington, Oregon, and California, with U.S. Catcher Vessel and Foreign Processor Vessel Effort 145 Table I.4: Foreign Catch of Walleye Pollock within 200-Mile Exclusive Economic Zone of United States, by Country and Quantities, 1980–85 148 Emerging Perspectives on Foreign Fishing Arrangements v FOREWORD Mr. James T. Movick Director general of the Pacific Islands Forum Fisheries Agency This report provides a refreshingly new analysis of foreign fishing arrangements, which are prevalent in approximately half of the national exclusive economic zones of the world’s oceans. Fisheries access arrangements have often been demonized as a license for the fleets of developed nations to “rip off” fisheries resources of the world’s poorer countries. This report illustrates how they—together with charters and joint ventures—can actually be regarded as a trade in services. As with other trade, the principles of comparative advantage apply and can, under the right circumstances, benefit all parties. As the Pacific Island countries of our region provide material for two of the eight case studies (and New Zealand, a member of our organization, provides material for a third), I would like to reiterate briefly the lessons that we have learned. As a group of newly independent nations, including the smallest in the world, our members were quick to recognize the need to work together—at first simply to assert their rights over the large areas of ocean that became their EEZs, and then to put in place systems for uniform and cooperative monitoring, control, and surveillance. The Pacific Islands Forum Fisheries Agency was established by those governments in 1979 to strengthen their national efforts and to coordinate their collective and cooperative efforts. Over time we have been able to develop systems that have increased the value of access to the resource, providing greater revenue for those who wish to grant access and greater leverage for those that use it to induce foreign investment in domestic industry and processing. This has been achieved in a complex shared fishery for highly migratory species extending over a huge area. It has not been easy. As contributor Les Clark notes, “it’s a long haul” and we have much more to do; but as he also says, “cooperation works.” I realize that every region is different and not all of what we have learned will be applicable elsewhere, but the Forum Fisheries Agency stands ready to share our experience through South-South cooperation. Emerging Perspectives on Foreign Fishing Arrangements vii FOREWORD Árni M. Mathiesen Assistant Director General Department of Fisheries and Aquaculture The Food and Agriculture Organization of the United Nations Rome, Italy The fisheries sector has become one of the most globalized of all food commodity sec- tors with about one third of production entering international markets. The increasing internationalization of its supply and value-chains has given policymakers the task of rising to new challenges concerning harvesters, aquaculture producers, processors, traders, distributers, and retailers. Consumers are also exposed to and subject to the impacts of global trends as supply chains get longer and growing urbanization and improved distribution increase the range of products available. In the international debate on fisheries issues, the impact of globalization has there- fore firmly come to the forefront. This includes a focus on how globalization manifests itself throughout the value-chain and the effect on various stakeholder groups as well as how policy decisions at the national, regional, and international level are influenced by global factors. In the debate, however, there is one issue that clearly has not received the attention it deserves from an analytical perspective, and that is the issue of fish- ing services the services offered in bunkering and other activities in ports, as well as in monitoring, control, and surveillance (MCS), research, harvesting, and processing. Fishing services are already part of many bilateral and multilateral fishing agreements, but the topic figures only sporadically in policy discussions and even more rarely in economic analysis, despite the potential for these services to generate value and eco- nomic benefits. This report is therefore all the more valuable as it provides in-depth knowledge and experience to policymakers as much through its discussion of the con- ceptual framework of fishing services as through the various case studies undertaken. Moreover, the case studies have provided critical practical caveats and important gov- ernance lessons, not the least of which is that the development of secure user rights sys- tems is essential for fish resources to deliver their full contribution to economic growth. The FAO Code of Conduct for Responsible Fisheries, which celebrates its 20th anni- versary in 2015, clearly recognizes that each country will seek solutions that best fit its own circumstances. In doing so, policymakers will build on the principles of the Code, binding international commitments, voluntary instruments, the best scientific advice, and the experience of others. In this sense, the report Trade in Fishing Services—Emerging Perspectives on Foreign Fishing Arrangements, is a timely addition to our knowledge and efforts to ensure that our fisheries resources will deliver secure optimal, equitable, and sustainable returns for economic growth, improved social welfare, and development. viii Trade in Fishing Services ACKNOWLEDGMENTS In memory of Professor William T. Burke, 1926–2014, whose legal research and writ- ings had a profound influence on the report. This report is the culmination of a global analytic and empirical study commissioned by the World Bank, which set out to improve understanding of the arrangements for, and outcomes of, allowing foreign access to the fish resources of coastal states, particu- larly developing countries. The report argues that the various forms of access arrange- ments are, in fact, mechanisms for international trade in fishing services. Within this 'TIFS' context, the authors present detailed economic, legal, and empirical analyses which provide powerful new insights on how such arrangements can increase the eco- nomic, social, and environmental benefits derived by developing-country (and other) coastal states from their valuable fish resources. In particular, the study highlights concern over the current interpretation of the so-called ‘surplus’ principle within UNCLOS, and emphasizes comparative advantage as a key determinant of increased performance. The overall review was coordinated by Stephen Cunningham (IDDRA Ltd.), a spe- cialist in fisheries economics with wide-ranging international-development experience in fisheries. Gordon Munro (University of British Columbia) was responsible for the economics and legal analyses presented under appendix A and contributed substantially to the final synthesis report. Tim Bostock (Fisheries and Oceans Specialist, World Bank) is the study’s overall task team leader. He provided overall guidance both to the study team and to the World Bank on the evolution of the study and helped compile and edit the final synthesis report. The study leaders particularly wish to thank and acknowledge the invaluable contribu- tion of the following eight case study authors: Les Clark (consultant), who reviewed the process through which Pacific Island Countries—members of the Forum Fisheries Agency—are gradually increasing the economic returns that they receive from their tuna resources. Les contributed appendix B of the report. Tom McClurg (Toroa Consulting), who discusses the particular problems associated with fishing in areas beyond national jurisdiction (ABNJ) using the Western and Cen- tral Pacific Ocean (WCPO) case as an example upon which to base the discussion. Tom contributed appendix C of the report. Emerging Perspectives on Foreign Fishing Arrangements ix Mohamed Rouchdi (consultant), who discusses Morocco’s experience with foreign fishing services over approximately 30 years. Mohamed contributed appendix D of the report. Robert Arthur (Marine Resources Assessment Group), who considers the important generic issue of how foreign fishing services may affect coastal-state small-scale fishers. Rob contributed appendix E of the report. Suzannah Walmsley (consultant), who explores and compares the European Union’s bilateral fisheries agreements in the northern hemisphere, including agreements with Norway, Iceland, Faeroe Islands, and Greenland. Suzannah contributed appendix F of the report. Tabitha Mallory (Princeton University), who presents a comprehensive review of China’s significant distant-water fishing arrangements. Tabitha contributed appendix G of the report. Phil Major (consultant), who discusses the way New Zealand has used different forms of foreign fishing services over the past few decades. Phil contributed appendix H of the report. James E. Wilen (Department of Agriculture and Resource Economics, University of California, Davis, CA) discusses the Alaskan Bering Sea pollock fishery, showing the evolution and transition from an essentially foreign fishery to a U.S. domestic fishery. James contributed appendix I of the report. A special acknowledgement goes to James Movick (director general of Pacific Islands Forum Fisheries Agency) and his team of policy advisers and fisheries specialists for their overall guidance, support, and further insights into the fisheries of the Western Central Pacific. We are particularly grateful to Food and Agriculture Organization’s (FAO’s) Lahsen Ababouch, Audun Lem, and Árni M. Mathiesen for their encourage- ment and suggestions for future partnerships to help take forward the report’s rec- ommendations. Moreover, both James Movick and Árni M. Mathiesen contributed forewords to the report. The team acknowledges all peer reviewers for their comments and suggestions, with particular thanks to Mike Batty, Mimako Kobayashi, James Anderson and Jingjie Chu. The team further acknowledges additional contributions from Sloans Chimatiro, Fisheries Adviser at New Partnership for Africa’s Development (NEPAD) and Dr. Arthur Neiland (IDDRA Ltd). Finally, the team is grateful to Valerie Hickey (World Bank) for her encouragement and technical insights during the final stages of reporting during a time of consider- able change at the World Bank, and to Piet van Hieswijk and his team at the Govern- ance Partnership Facility for their patience and support in pulling this complex study together over what was a protracted and eventful period. x Trade in Fishing Services LIST OF ACRONYMS ABNJ Areas beyond national jurisdiction MPM Ministry of Agriculture, Rural Development, AFA American Fisheries Act and Maritime Fisheries CPUE Catch per unit effort MSY Maximum sustainable yield DWF Distant water fisher (or fleet) PICs Pacific Island Countries DWFN Distant water fishing nation PNA Parties to the Nauru Agreement EC European Commission RFMO Regional fishery management organization EEZ Exclusive economic zone RSW Refrigerated sea water EITI Extractive Industries Transparency TAC Total allowable catch Initiative TAE Total allowable effort EU European Union TALFF Total allowable level of foreign fishing FAO Food and Agriculture Organization TIFS Trade in fishing services FFA1 Foreign fishing arrangement UNCLOS United Nations Convention on the Law of FPA Fisheries partnership agreement the Sea FSM Federated States of Micronesia UNFSA UN Fish Stocks Agreement GDP Gross domestic product VDS Vessel day scheme HDI Human Development Index VMS Vessel Monitoring System JV Joint venture WCPFC Western and Central Pacific Fisheries MCS Monitoring, control, and surveillance Commission MEP Member of the European Parliament WCPO Western and Central Pacific Ocean All dollar amounts are U.S. dollars unless otherwise indicated. 1 Note that the Pacific Islands Forum Fisheries Agency is referred to as such in this report. Emerging Perspectives on Foreign Fishing Arrangements xi EXECUTIVE SUMMARY Approximately half of the world’s economic exclusion zones (EEZs) are subject to some form of foreign fishing arrangement (FFA). Although the discourse on such arrangements has been heavily influenced by government-to-government “foreign fisheries access agreements,” it is important to set the discussion within a wider con- text, which includes joint ventures between coastal-state and distant-water interests and chartering of foreign fishing vessels by coastal state interests. Such arrangements represent mechanisms to allow international trade in fishing ser- vices (TIFS), offering the possibility for coastal states, especially developing countries, to increase the benefits from the exploitation of their fish resources. This report presents an analytic review of economic and legal principles supported by empirical casework to elucidate actual and potential cost and benefit flows associated with FFAs. The proposition that social welfare depends on sustained economic growth is well established both theoretically and empirically. Increasing gross domestic product (GDP) per capita is of interest not just for its own sake but because it is very strongly associated with increases in the Human Development Index (HDI), particularly for low levels of GDP. Marine fish resources represent valuable natural capital that, if managed carefully and sustainably, have the potential to make a perennial contribution to economic growth through the resource rents that they can generate. The general proposition that trade is an important driver of economic growth is also well established. However, in the case of fisheries, it is the importance of trade in fish and fish products that has dominated the policy agenda. Yet there is no a priori rea- son to believe that trade in services will be less important than trade in goods in the case of fishing. In fact, as the trend away from free and open access to fish resources toward access regimes based around use and property rights of different kinds takes hold, there is every reason to believe that there will be increasing interest in generating Emerging Perspectives on Foreign Fishing Arrangements xiii further benefits from fish resources through international In the absence of any legal requirement to enter into such trade in fishing services of all kinds, in particular harvest- arrangements, coastal states will do so only if they per- ing and processing services. ceive it to be in their economic interests. If foreign fishers have a comparative advantage, it can benefit coastal states The United Nations Convention on the Law of the Sea to import their services. Such a comparative advantage (UNCLOS), also called the Law of the Sea Convention could arise for many reasons throughout the fish value or the Law of the Sea treaty, is the international agree- chain. For instance, foreigners may have comparative ment that resulted from the third United Nations Con- advantage in the following operations: ference on the Law of the Sea (UNCLOS III), which » Fishing, due to skill or access to capital enabling took place between 1973 and 1982. The UNCLOS them to operate more efficiently in capital-intensive raises a number of issues relating to trade in fishing fisheries; services. A key question concerns the so-called surplus » Processing, due to the scale of operations; and principle: If the coastal state has surplus fish resources, » Marketing, due to market access, proximity to is it obliged to grant access to other states, including customers, and product branding. distant water fishing states, albeit subject to conditions? This report concludes that there is no such requirement. Comparative advantage does not depend only on the rela- The power of the coastal state to set the allowable catch tive efficiency of the fishing industry of the coastal state is “sovereign and non-reviewable,” and the coastal state compared with distant water fishers. Comparative advan- is authorized to determine its own harvesting capacity in tage may also arise because the coastal state has other relation to the living resources of its EEZ. Consequently, profitable sectors that can make better use of its capital a rational coastal state will only declare a surplus if it is in and labor resources than can the fishing industry, or the its interest to do so. It is not clear, however, whether this distant water nation may have few other opportunities crucial conclusion is widely understood. Indeed, it could and may be prepared to fish at very low cost. There is a be conjectured that some developing-country states need to promote understanding of comparative advan- may have established foreign-fishing access agreements tage with respect to fishery policy development. under the misapprehension that this was a requirement of UNCLOS. Comparative advantage will determine the gains that are available from trade. These gains will be shared between The study draws on the fact that EEZ fish resources are stakeholders according to the terms of trade. The report the property of the coastal state. As such, the objective analyzes how these terms of trade may be expected to of managing these resources is to optimize sustainable evolve using a combination of principal-agent and game net economics returns—broadly defined to include both theory. The difficulty for the coastal state as principal is to market and nonmarket—to benefit the coastal state as a devise a set of institutional arrangements that will give it whole rather than just those who participate in the domes- an increasing share of the gains from trade. tic fishing industry. The report identifies several important lessons emerging Given the potential importance of trade in fishing services from a set of case studies. and the likelihood that such trade may increase in the future as use rights become more firmly established and In the Pacific Island countries, a first important factor as efforts to deal with illegal fishing bear fruit, it is impor- explaining the improved returns from the exploitation tant to clarify the legal framework within which such trade of their tuna resources is regional cooperation between occurs even so many years after UNCLOS. The report coastal states. They have also developed, over a very recommends that an in-depth legal review should be long period, their fishery management institutional and undertaken, followed if appropriate by a technical work- human capacity at national, regional, and subregional lev- shop and mini-conference to produce a definitive reading els. Finally, the widespread application of effective, com- of UNCLOS on this point. petitive arrangements for distant water nations to supply xiv Trade in Fishing Services fishing services has significantly increased fees and down- coalitions of coastal states and their linkages to regional stream domestic development benefits. fisheries management organizations (RFMOs), making it more expensive for distant water fishers to fish the high The other case studies, notably those concerning Morocco, seas. High-seas performance could be taken into account the EU northern agreements, and Chinese distant water in the allocation to foreign fishers of fishing opportunities fishing, suggest how foreign fisheries access agreements in adjacent coastal states’ EEZs. might be improved. Foreign fishing frequently raises concerns over adverse As with the exploitation of other natural resources, a impacts on the domestic fishing sector, especially small- key element is transparency. An arrangement for fishing scale fishers. Rights-based systems that include all sections along the lines of the Extractive Industries Transparency of the domestic sector, including small-scale fishers, can Initiative (EITI) would be worth investigating. have an important mitigating effect in this regard. Although devising appropriate rights systems for small-scale fishers It is also important that foreign vessels’ activity be man- is a difficult challenge, experience with community-based aged as part of the coastal state’s fisheries management and communally held rights offers insights on which to framework rather than being managed by a separate legal build in situations where allocating individual rights is instrument. Ideally, distant water fishing opportunities not feasible. Whether or not small-scale fishers have such should be specified in terms of catch. rights, their concerns should be fully represented during negotiations concerning foreign fishing. The coastal state must have sufficient capacity for monitoring, control, and surveillance (MCS) to ensure The negotiation of access agreements and other forms compliance with the rules and regulations in force so of foreign fishing are likely to be very unpopular with that catch limits are observed and conservation measures domestic fishers in situations where domestic fisheries implemented. This must be complemented with flag state management arrangements are inadequate and especially control through vessel monitoring systems, verification of where fishing rights do not exist. In this case, foreign fish- catches, and timely exchange of data. ers simply become a powerful competitor for domestic fishers, who understandably react adversely. A complex area of analysis concerns subsidies to distant water fleets. The ideal solution for the coastal state would Where fishing rights exist, however, very different out- be to obtain the subsidy as a lump sum that is unrelated comes may occur because foreign fishers may now offer to the level of fishing exerted by the distant water fleet. significant advantages to domestic fishers, or, more accu- Some foreign fishing agreements seem to come close to rately, to domestic rights holders. this ideal. The development of secure rights systems is essential for Capacity-building efforts should not only target coastal fish resources to deliver their full contribution to economic states. The Chinese case study in particular points to a growth. At the same time, such systems are likely to gen- number of areas where building capacity and raising erate much greater fishing-service trade than is currently awareness among both fishers and flag state authorities the case. could contribute significantly to improving sustainable fisheries management. A basic requirement is for the international community to identify and fund an appropriate organization to develop As coastal state fisheries management becomes more and maintain statistical databases on trade in fishing effective, fishing effort might be transferred toward areas services. At the same time, there is a need to develop beyond national jurisdiction (ABNJ). This is one threat awareness and understanding that the international facing the vessel day scheme in the Western Pacific. The economic arguments, notably comparative advantage, most effective way of addressing this may be to strengthen underpinning the case for free trade apply just as much Emerging Perspectives on Foreign Fishing Arrangements xv to services as they do to products. Otherwise there is a The interesting question concerning Alaska is the extent risk that coastal states will apply protectionist policies in to which it matters that things were done in this order. If the case of fish resource exploitation to their ultimate rights-based systems had been implemented first, would disadvantage. there still have been the same interest in switching from foreign to domestic fishers? It is difficult to know, although The New Zealand case study shows how trade in ser- it does seem that it is definitely domestic fishers who now vices might be expected to develop as rights-based sys- have the comparative advantage. It will be interesting to tems become more common. New Zealand rights holders observe over the coming years whether existing national have made great use of foreign fishing services through rights holders will choose to use foreign fishing services in chartering arrangements. The biggest advantage has been the further development of this important fishery. that rights holders have been able to use the most cost- effective combinations of capital and labor for their har- In the case of rights-based fisheries, the key service trade– vesting and processing operations, thereby increasing the related policy decisions are as follows: returns obtained from their rights. In addition, the abil- 1. Can rights holders use foreign fishing services ity to use foreign-chartered vessels reduces the need for a. At the individual level (for example, employ rights holders to raise capital. This has been an advantage foreign skippers)? especially for those with only a small quantity of rights, b. At the company level (for example, charter who have been able to combine their rights with other foreign vessels)? holders in undertaking chartering operations. Finally, 2. If so, under what conditions? linking with foreign operators has generated tariff- and 3. Can foreigners hold rights? quota-free access for fishing products in the partner’s 4. If so, under what conditions can they exploit home market. them? And, in particular, how does the coastal state ensure that it continues to receive a return The main problem that New Zealand has encountered on its resources? with this system has been controlling the activities of foreign-registered fishing vessels operating under charter Overall, although trade in fishing services may raise some in its EEZ. A few foreign charter operators have oper- issues, it is likely to be a significant part of a strategy to ated in ways that have undermined the reputation of the maximize the economic benefits from the exploitation of whole sector and of New Zealand itself. As a result, all fish resources. The case studies in this report show how a foreign charter vessels will have to become New Zealand– variety of countries have made, and are making use of, registered from 2016. these services. The Alaskan case study shows a rather different expe- Finally, several recommendations are suggested: rience with trade in fishing services. In essence, joint » Give urgent legal and other consideration to the ventures were used as a way of transferring fishing downstream implications of the study’s key conclu- skills from foreign to U.S. fishers. Together with vari- sion in regard to the emptiness of the UNCLOS sur- ous legislative changes, this transfer of skills changed plus principle. comparative advantage in the fishery, which went from » Foster greater awareness and understanding of the being almost entirely foreign to completely domestic central role that trade in fishing services plays in within 10 to 12 years. However, this change in exploi- foreign fisheries arrangements. tation nationality, although having economic impact, » Reemphasize the centrality of effective coastal did not produce significant economic benefits. It was state EEZ fisheries governance and management, only when institutional changes were made leading to particularly the role of secure tenure, to capitalize a rights-based exploitation system that substantial eco- on and optimize potential benefits from TIFS. nomic benefits, in the form of resource rents, began to » Develop awareness-raising knowledge products appear. on the macroeconomic function and the means xvi Trade in Fishing Services whereby fisheries and the FFAs can enhance sec- » Facilitate South-South cooperation and the toral contributions to GDP. exchange of knowledge and experience in best » Continue discussion concerning the benefits and practice, particularly the importance of effective beneficiaries of fish resource exploitation, including cooperation and negotiating experience. from the FFAs. » Use incremental information to build human » Identify an organization capable of developing capacity and awareness to raise the profile of and maintaining databases on TIFS and using the TIFS, ideally within future donor and recipient information gathered to help position TIFS more frameworks for sustainable fisheries. centrally in fisheries policy planning. Emerging Perspectives on Foreign Fishing Arrangements xvii CHAPTER ONE INTRODUCTION Approximately half of the world’s exclusive economic zones (EEZs) are subject to some form of foreign fishing arrangement (FFA). Such arrangements are primarily estab- lished for export2 but can also be important for local and regional markets. While the discourse on such arrangements has been dominated by government-to-government foreign fisheries access agreements, it is important to set the discussion within a wider context that includes joint ventures and chartering of foreign fishing vessels by coastal state interests. FFAs also concern a variety of resources and resource management situations, including » National fish resources located entirely within one country’s EEZ; » Fish resources that straddle the EEZ of two or more countries; » Fish resources that straddle EEZ and areas beyond national jurisdiction (ABNJ); and » In some cases, resources that are caught in ABNJ. FFAs often provide access to the fish resources of developing countries for so-called distant water fleets (DWFs) from developed and middle-income countries. Some types of FFAs, particularly access agreements, can account for 50 percent of public rev- enues in some African and small-island countries. However, although FFAs offer the possibility for coastal states, especially developing countries, to increase the benefits they obtain from the exploitation of their fish resources, the context within which they are negotiated and the institutional arrangements under which they are executed may be prejudicial to long-term resource sustainability and optimal utilization. Thus, key questions might include the following: Under what conditions is it best for coastal states to use foreign fishing services? How can coastal states ensure that they optimize the benefits on a sustainable basis? Despite the substantial benefits potentially available both to coastal states and distant water fishing fleets, FFAs have tended to suffer from a negative reputation associ- ated with factors such as poor transparency, inequitable benefit sharing, conflict with 2 For example, European Union (EU) agreements are implemented under the Common Fisheries Policy, which aims to utilize existing EU harvesting and processing capacity to secure fish supplies for EU markets. Emerging Perspectives on Foreign Fishing Arrangements 1 small-scale fishers, and contributing to resource depletion. the Bank’s overarching mission to galvanize international They are further criticized where cost-reducing subsidies and national efforts to end poverty and to promote shared are allocated to the DWF. prosperity. It does this through focusing on what must be regarded as the most fundamental of requirements for sustainability and increasing productivity in any fishery— ABOUT THIS REPORT improvements in fisheries management institutions that This report is an output of a World Bank study whose aim contribute sustainably to the well-being of poorer seg- is to provide guidance to developing coastal countries in ments of society in developing countries. In this regard, identifying the means to secure optimal, equitable, and the project addresses the recommendations of the Blue sustainable returns from FFAs, particularly ensuring that Ribbon Panel (2013)3 to align ocean health and human they are underpinned by effective national management well-being. systems. It also seeks to encourage DWF or flag states to adopt responsible policies and practices with regard to the behavior and activities of their fleets. FISHERIES, GROWTH, AND WELFARE The primary aims of the report are as follows: The proposition that social welfare depends on sustained » To identify how coastal states might benefit from economic growth is well established both theoretically international trade in fishing services; and empirically (see for instance The Growth Report4). » To consider the conditions necessary for such Figures 1.1 and 1.2, taken from Gapminder,5 show the benefits to be sustained and to increase further in very strong relationship between the Human Develop- the future; and ment Index (HDI) and gross domestic product (GDP) » To discuss the implications for different stakehold- per capita using worldwide data for 2011. The same ers, especially in the coastal state. relationship also holds through time for individual countries. The report centers on an analytical review of economic and legal principles supported by empirical casework to Figure 1.1 uses a log scale for GDP per capita to make elucidate actual and potential cost and benefit flows asso- the relationship between HDI and GDP as clear as possi- ciated with FFAs. It attempts to identify a set of relevant ble. Figure 1.2 shows the relationship using a natural scale principles, particularly learning from case examples of for both variables. These figures clearly show a very rapid best practice, which could inform the development of initial increase in HDI relative to per-capita GDP, demon- guidelines for future FFAs in developing country fisheries. strating in particular the crucial importance of economic growth to social welfare in developing countries. As coun- To explore these issues, the report adopts a trade in fish- tries become wealthier, progressively larger increases in ing services (TIFS) framework. Particular emphasis is GDP are required to achieve a given percentage increase placed on harvesting services, although the post-harvest in HDI. value chain and processing aspects are also recognized as crucial. Marine fish resources represent valuable natural capital that, if exploited wisely, can provide a range of benefits in As noted, TIFS may be undertaken through several forms perpetuity to coastal states (resource owners), fishers, and of FFAs, including foreign fisheries access agreements, consumers of seafood. Because of their renewable nature, joint ventures, chartering, and foreign vessel licensing by fish resources have the potential to make a perennial the coastal state. Before moving on to a further discussion of this trade- 3 Indispensable Ocean: Aligning Ocean Health and Human Well-Being. Guidance from the Blue Ribbon Panel to the Global Partnership for Oceans, 2013. related perspective, it is prudent to set this work within 4 Commission on Growth and Development. 2008. The Growth Report: Strategies the overall context of the World Bank’s objectives related for Sustained Growth and Inclusive Development. World Bank. to sustainable fisheries. The report contributes directly to 5 www.gapminder.org. 2 Trade in Fishing Services FIGURE 1.1. RELATIONSHIP BETWEEN HDI For instance, in “Responsible Fish Trade,”6 the FAO notes AND GDP/CAPITA (LOGGED) that such guidelines are of importance for two reasons: » Fish and fish products are among the most traded agricultural and food commodities, with more than one-third of production entering international trade; and » Trade in fish and fish products is also very important for developing countries. Fifty percent of interna- tional trade in fish and fish products originates from developing countries. This is an important source of revenue, employment, and foreign exchange for these countries. According to the FAO Yearbook of Fishery Statistics, interna- tional trade in fish commodities was around $130 billion in 2011. Yet it is difficult to find any similar succinct state- FIGURE 1.2. RELATIONSHIP BETWEEN HDI ment concerning international trade in fishing services. AND GDP/CAPITA (NATURAL Indeed, the value of international trade in fishing services currently remains unpublished. FAO has no remit to col- SCALES) lect such data (Audun Lem, personal communication, 2014), nor it seems does anyone else. As with the FAO’s Code of Conduct for Responsible Fisheries, guidelines on trade focus almost exclusively on trade in fish and fish products; the only mention of fishing services is in the context that “States should not condition access to markets on access to resources.” Numerous fishing services are, or have the potential to be, traded internationally. Such services include, for instance, bunkering and other port services offered to foreign ves- sels; monitoring, control, and surveillance (MCS); and research services. Although the absence of reliable data remains a hindrance, probably the most valuable category contribution to economic growth through the resource is the provision of harvesting and processing services. rents that they can generate. This report concentrates on the role and potential of trade in fishing services in real- Worldwide there is an apparently inexorable and irrevers- izing this contribution. However, as will become apparent ible move away from free and open access to fish resources later in the report, it is difficult to discuss the role of trade and toward access regimes based around use and prop- without some mention of other critical dimensions of this erty rights of different kinds. As these rights become more problem. firmly established, there is likely to be increasing interest in generating further benefits from fish resource exploita- TRADE IN FISHING SERVICES tion through international trade in fishing services of all kinds, in particular harvesting and processing services. The general proposition that trade is an important driver of economic growth is also well established. However, in the case of fisheries, it is the importance of trade in fish 6 FAO. 2009. “Responsible Fish Trade.” FAO Technical Guidelines for Responsible and fish products that has dominated the policy agenda. Fisheries, No. 11. Rome: FAO. Emerging Perspectives on Foreign Fishing Arrangements 3 Using the standard terminology, trade in fishing services services involving industrial fishers while simultaneously will involve the coastal state importing harvesting services exporting such services through the activities of their from distant-water fishing nations. However, it seems artisanal fishers in the West Africa region. These cases important to note from the outset that a country may enter also demonstrate the point that the term “distant-water” into both categories at the same time. Countries such as may be misleading; the distant-water fishing fleet is not Senegal and Ghana, for instance, may import harvesting necessarily located very far away. 4 Trade in Fishing Services CHAPTER TWO APPROACH AND STRUCTURE OF THE REPORT The approach adopted by the study was to develop an analytical review of the legal and economic principles underpinning trade in fish harvesting and processing services. This review was supported by empirical casework to elucidate actual and potential benefits and costs associated with such services. The study focused on marine fish stocks, but many of the issues are likely to be relevant to fish stocks from large inland water bodies, such as the Great Lakes of Africa. The report is presented in two parts. The first (chapters 1 to 9) discusses and synthe- sizes the study findings and presents a set of recommendations for further action, whereas the second part comprises a set of nine contributing appendices. Appendix A (Gordon Munro) comprises a detailed legal and economic review and analysis of the background to FFAs. Legal aspects focus on the UN Convention on the Law of the Sea (UNCLOS) framework concerning access to coastal-state fish resources by distant-water fishing fleets. The economic principles important to a coastal state’s decision to use, or not use, foreign harvesting services are then discussed in detail. The following specific issues are considered in some detail: » The key area of comparative advantage; » The crucial role of coastal state governance arrangements; that is, the need for a rational set of exploitation arrangements within which FFAs can fit; » The basis on which FFAs are negotiated and agreed to; » Dealing with asymmetric bargaining power; » Dealing with principal-agent problems; » The need for MCS capability in order to assert genuine sovereignty over EEZs; and » The transition process away from FFAs with changing comparative advantage. Appendices B through I comprise a set of case studies commissioned from a range of authors with detailed knowledge of the subject (see table 2.1) to investigate different aspects of trade in fishing services around the world. The case studies were chosen Emerging Perspectives on Foreign Fishing Arrangements 5 TABLE 2.1. THE CASE STUDIES Title Author Focus Appendix Case Study on Foreign Les Clark Reviews the process through which the Pacific Island countries (that B Fishing Agreements in is, the members of the Forum Fisheries Agency) are gradually, the Western Pacific but surely, increasing the economic returns that they receive from their tuna resources. Areas Beyond National Tom McClurg Discusses the problems presented by fishing in the ABNJ. C Jurisdiction (ABNJ) It complements appendix B because it uses the Western Fisheries and Central Pacific Ocean (WCPO) case as an example on which to base the discussion. Report on Foreign Mohammed Discusses Morocco’s use of foreign fishing services over the past D Fishing: Morocco Case Rouchdi 30 or so years, both for the immediate benefit of the Moroccan Study of the Various nation and as a means to develop the national fisheries sector. Arrangements in Fishing It also highlights some difficulties that have arisen. Cooperation Relations Interaction Between Robert Arthur Does not relate to any particular country but considers the E Foreign Fishing important generic issue of how foreign fishing services may affect Agreements and coastal-state small-scale fishers. Small-Scale Fishers European Union Northern Suzannah Explores the European Union’s bilateral fisheries agreements in the F Agreements Walmsley northern hemisphere. Agreements with Norway, Iceland, and the Faeroe Islands are based on reciprocal exchange of quotas, whereas Greenland has a fisheries partnership agreement (FPA). Chinese Distant Water Tabitha Reviews the extent of China’s significant DWF fishing G Fishing Activities Mallory arrangements. These have not been immune to criticism. Some issues are reviewed and suggestions are made for improvement. The New Zealand Philip Major Discusses the way New Zealand has used different forms of foreign H Experience of Joint fishing services over the past few decades. Venture Fishing Operations: 1977 to 2013 The Bering Sea Pollock James Wilen Slightly different from the other cases in that it discusses a fishery I Fishery that is no longer exploited by foreign fishers. The interest in this case is to show the process involved in its transition from an essentially foreign fishery to a U.S. domestic fishery. to highlight a range of issues surrounding each kind of presented in chapter 6. Although the focus of these les- harvesting (and, where appropriate, processing) service sons is kept on trade in fishing services, this issue is so arrangement. intertwined with the general fish resource exploitation system that it is not always possible to avoid discussing The following part of this paper provides a summary and more general issues at the same time. further discussion of the legal (chapter 3) and economic (chapter 4) underpinnings of FFAs and draws on the case Chapters 7 and 8, respectively, present the conclusions and studies to discuss the various forms that fishing services recommendations of the study. This is followed by a sum- might take (chapter 5). Several key emerging lessons are mary of each case study (chapter 9, Report Supplement). 6 Trade in Fishing Services CHAPTER THREE LEGAL ISSUES In the immediate aftermath of the UNCLOS negotiations, legal analysts discussed extensively the issue of coastal state rights and responsibilities toward distant-water states and the international community in general. Two questions caused particular concern. First, where the total allowable catch in the coastal state exceeds its harvesting capac- ity, that is, where a surplus exists, is the coastal state obliged to grant access to other states, including distant water fishing states, albeit subject to conditions (the so-called surplus principle)? In this regard, Munro (appendix A), following Burke (1983, 1994),7 argues forcefully that the relevant articles of UNCLOS (62 in particular) are in fact empty because the coastal state alone determines the total allowable catch (TAC) or equivalent and determines its own harvesting capacity.8 Therefore, the coastal state alone determines whether there is a surplus. There is no requirement for the coastal state to prove to the international community that a surplus does or does not exist. Second, does the coastal state have a responsibility to manage the resource in an opti- mum manner, in the sense of maximum sustainable yield (MSY)? UNCLOS may also appear open to an interpretation here. In practice there is no such requirement because the relevant article (Article 61.3) states that the implementation of MSY may be “qualified by relevant environmental and economic factors.” As a result, the coastal state is under no obligation to observe or maintain a particular level of utilization above zero from a particular fishery. In summary, the power of the coastal state to set the allowable catch is “sovereign and non-reviewable” and the coastal state is authorized to determine its own harvesting capacity in relation to the living resources of its EEZ. As Munro stresses in appendix A “it cannot be overemphasized that the coastal state is called upon to give away nothing for free.” 7 Burke, W. T. 1983. 1982 Convention on the Law of the Sea Provisions on Conditions of Access to Fisheries Subject to National Jurisdiction. Report of the Expert Consultation on the Conditions of Access to the Fish Resources of the Exclusive Economic Zones. April 11–15, 1983, Rome. FAO Fisheries Report 293. Rome: Food and Agriculture Organization of the UN. 23–42; 1994. The New International Law of Fisheries: UNCLOS 1982 and Beyond. Oxford: Oxford University Press. 8 Professor Burke has confirmed this reading. Emerging Perspectives on Foreign Fishing Arrangements 7 Putting these various points together, it is clear that a responsibility, the latter seems to go beyond its remit as rational coastal state will only declare a surplus if it is in established by UNCLOS. In any event, the EU Parliament its interest to do so. may define sustainability requirements that it wishes to see respected, but it should be clear that these do not derive It is not clear, however, that this crucial conclusion is from UNCLOS. Distant-water states do not have respon- widely understood. In particular, it may be that certain sibility for the TAC or the equivalent of coastal states. coastal developing states have developed foreign fishing agreements under the misapprehension that this was a Given the potential importance of trade in fish harvesting requirement of UNCLOS. services and the likelihood that such trade may increase in the future as use rights become more firmly established and Likewise, distant-water states may interpret their role as efforts to deal with illegal fishing bear fruit, it seems essen- as going beyond the legal framework set out above. For tial to clarify, even so many years after UNCLOS came into instance, Rouchdi (appendix D) points out that the provi- force, the legal framework within which such trade occurs. sional agreement of February 28, 2011 between Morocco and the European Union had to be terminated abruptly It would be useful, therefore, to undertake an in-depth following a negative vote by the European Parliament legal review, followed if appropriate by a technical work- on the grounds of the poor benefit-cost ratio for the EU shop and mini-conference, with the aim of producing a and the excessive exploitation of Moroccan demersal definitive reading of UNCLOS using Burke’s analysis as stocks. Although the former reason is certainly the EU’s a starting point. 8 Trade in Fishing Services CHAPTER FOUR ECONOMIC PRINCIPLES Taking the position that there is no requirement for a coastal state to use foreign fishing services (harvesting or processing), Munro (appendix A) sets out the economic argu- ments that may justify their use. Notwithstanding the discussion above, UNCLOS (Article 62[1]) does provide a useful starting point for the discussion because it requires coastal states to “promote the objec- tive of optimum utilization of the living resources within the EEZ.” Unfortunately, analytical progress can only be made if the term optimum is defined, and this term can be and is interpreted differently by different people, depending in large part on how they perceive the benefits of fish resource exploitation. The issue of “benefits” and their interpretation is discussed fully in section 6 below. For the purpose of economic analysis, it is assumed that fish resources are the property in some sense of all citizens of the coastal state and that optimum utilization involves ensuring that this natural capital makes the maximum contribution to the state as a whole through time. Many national fisheries laws include an article establishing pre- cisely such ownership and identifying the state as having a stewardship or custodian role on behalf of its citizens. Under these conditions, it would seem that the decision of whether to use foreign fish harvesting services is relatively straightforward: do so if they increase the economic return from fish resource exploitation. However, the net economic returns obtained from foreign fishing, and especially the sustainability of these returns, will depend crucially on the way in which the coastal state exercises its stewardship role. If the coastal state leaves its fish resources under free and open access, or common pool, arrangements, then these resources will not produce their main economic return, which is the resource rent. Somewhat paradoxically, the Moroccan case study (appendix D) and the experience of other developing coastal states tends to show that under free and open access con- ditions, the use of foreign fishing services may be the only way to generate substantial Emerging Perspectives on Foreign Fishing Arrangements 9 financial benefits from fish resource exploitation for the out by the case studies (for example, Western Pacific citizens of the country as a whole through the payments and Morocco), is that the coastal state will be in a posi- made to the national treasury. The problem is that such tion to gradually capture an increasing proportion of the financial returns are insecure because they do not depend potential rents throughout the value chain through its on effective fisheries management. Moreover, if foreign fish-harvesting arrangements. However, the proportion of fishers have lower fishing costs or greater fishing revenues rents that the coastal state should seek to obtain is not sim- than domestic fishers, then the overall level of fishing ple to determine. The difficulty is that rents are not some effort will tend to increase, given the ineffective fisheries fixed amount awaiting collection but a dynamic amount management arrangements. that can be grown over time in various ways on both the revenue and cost side of the activity. If the coastal state For the moment assume that, as is increasingly the case seeks to take too high a share of the rents, it runs the risk around the world, the coastal state has in place a set of of stifling innovation in its fisheries and thereby missing institutional arrangements that encourage the economi- out on future rent growth. This is of course a general cally rational exploitation of the fish resources. Under problem that does not only affect foreign fishers. these conditions, why use foreign fishing services? Many coastal states include objectives in their fisheries The answer is that if foreign fishers have a compara- policy to develop, for instance, product value addition tive advantage, it will pay the coastal state to import locally because of the supposed multiplier benefits, but their services. Such a comparative advantage could arise without ever considering whether they have or can gener- for many reasons throughout the fish value chain. For ate a comparative advantage in the activity and whether instance, foreigners may have a comparative advantage the gains made will be greater than the rents that are or » In fish harvesting due to skill or access to capital could be extracted. enabling them to operate more efficiently in capital- intensive fisheries; In essence, the case for using foreign services depends » In processing, for example, due to the scale of fundamentally on a free trade vision. Various arguments operations; or can be and are raised against this vision, but on close » In marketing, for example, due to market access, examination their aim is generally to protect the domes- proximity to customers, or branding. tic fishing industry, or specific parts of it, against foreign competition. An interesting question is the extent to which rents will be extracted at the level where they originate in the value If foreign fishers have a comparative advantage, then chain. It seems likely that a substantial proportion of rents the potential exists for gains from trade to be made. The will emerge at the harvesting level because rents at other extent of the gains will depend on the extent of the com- levels will increase the demand for fish and hence the parative advantage. demand for fishing opportunities. Assuming that coastal states have rational fisheries management systems in Comparative advantage lies at the heart of international place, the increased demand for fishing opportunities will economics, which itself has been one of the key driving push up the price of rights and hence rents at that level. forces in the development of economic theory over the past However, as part of their corporate strategies, fishing few centuries (dating back to the writings of Adam Smith companies will attempt to move rents up the value chain in 1776 and even well before). One important point about toward elements over which they may have more control, comparative advantage in, say, fishing is that it depends not for instance branding of products. only on the relative performance of country A compared to country B but also on the relative performance of fish- There is a dearth of studies of comparative advantage ing in country A compared to other industries in country in fisheries, especially at the practical level, which would A (and likewise for country B). One practical problem is inform fisheries policy. However, the likelihood, borne that fishing tends to be managed by sectoral line ministries 10 Trade in Fishing Services whose main preoccupation, understandably, is to develop BOX 4.1. PRINCIPAL-AGENT ANALYSIS the sector under their charge. For this reason, arguments The principal (a person, a firm, an institution, or a state) such as “we must reserve our national resources for our wishing to see undertaken certain tasks that it is unwilling, national fishers” and “the development of national fisher- or unable, to undertake itself obtains the services of agents. ies will produce far more value-added locally than will for- The owner of farmland, for instance, may use tenant eign fishers” are commonly found. Such arguments miss, farmers. Similarly, coastal states are principals using foreign however, the key insight of comparative advantage, which fishers as their agents. is that even if country A has a fishing industry that is more Principal-agent analysis is widely used in economics. A efficient than country B, it may nonetheless still be profit- strict hierarchical relationship is assumed to exist in which able for A to import fishing services from B if A is even the principal chooses an incentive scheme (the terms and more efficient in other sectors relatively or comparatively conditions of access to the coastal state EEZ) that will apply (hence the term comparative advantage). to the agents. This scheme, along with actions taken by the agents, determines the economic returns to both the princi- pal and the agents. The principal faces the basic constraint Leaving sectoral development to line ministries is a dan- that the agents must receive some minimum return if they gerous strategy for a country, and not just for fishing. are to provide their services. There is a key need to consider how different sectors fit into the overall macroeconomic strategy of the country The “first-best” situation for the principal would occur if it could strictly minimize economic returns to the agents by given its comparative advantage. In most sectors of suppressing, contractually and enforceably, any actions of the economy, the decisions about who should produce the agents that are contrary to its best interests. The agents, what are left to the “market.” One of the problems in of course, have the opposite interests. The first best situa- fishing has been the absence of a market in fishing rights, tion provides a benchmark. which has made it difficult to tell exactly who should be In the real world, the principal will lack the power or find it producing what. too costly to achieve this first-best situation, and a second- best situation will emerge wherein the agents have some Comparative advantage then will determine the extent freedom of choice. The principal must rely on influencing to which potential gains from trade in services (and also the agents’ choices of actions indirectly through the incen- in products) are available. The realization of these gains tive scheme. The difference between the first- and second- and their distribution between parties will depend on the best outcomes is called the agency cost. It reflects the fact precise nature of the foreign services and the institutional that the principal’s incentive scheme cannot compensate fully for the principal’s inability to monitor perfectly the context in which they are used. Different economic frame- actions of the agents. Principal-agent analysis is directed works may be required to analyze the distribution of gains toward the problem of minimizing the principal’s agency depending on the institutional arrangements. cost, which in the real world can never be eliminated fully. In line with the overall aims of this study, the analysis focuses on the situation concerning developing-country which the agents operate. The aim of both parties will coastal states. In that case, a useful way to explore the be to maximize their returns. In the case of the princi- issues determining the terms of trade between partners pal, this might be to maximize its share of the resource is to use principal-agent analysis. This kind of analysis is rents. However, the precise interpretation of this objective outlined in box 4.1 and discussed more fully by Munro in is complicated. appendix A. First, as a practical matter, the principal is extremely The analysis assumes that the coastal state is the principal unlikely to be able to extract all of the resource rent. using distant-water fishers as its agents precisely because But even it could, should it attempt to do so? As men- it has a comparative advantage in some aspect of fish- tioned above, resource rent is dynamic; there is not some ing (harvesting, processing, or branding). The principal fixed amount of rent in the oceans waiting to be harvested. sets the institutional and economic framework within Instead, the rent can be increased over time as a result of Emerging Perspectives on Foreign Fishing Arrangements 11 improvements on either the revenue or the cost side of Some insights into the conditions for successful coopera- the equation. These improvements will generally origi- tion are offered by game theory (of which principal-agent nate with the private sector, including foreign fishers, and analysis may be considered to be a sub-set). Appendix A they clearly need to be given some incentive in order to presents a detailed analysis of the Western Pacific case make the investments necessary to seek out extra gains. If in terms of cooperative game theory. A number of key all gains are simply taxed away, there will be no incentive.9 lessons emerge concerning the economics. In addressing this problem, it might be useful to draw on The difficulty of ensuring sustainable cooperation incre- the managerial economics literature, especially concern- ases with the number of participants. Where more than ing so-called “satisficing” approaches, through which a few participants are involved, subcoalitions become an companies gradually improve their profit performance important part of finding a solution. According to the over time through a process of objective setting and revi- compensation principle, it is the player with the most sion. A similar approach might be useful for managing the at stake who should dominate and then be prepared exploitation of fish resources. to compensate the other players. This is in effect what happened in the Pacific Islands region through the for- Another difficulty for the coastal state as principal is that mation of the Parties to the Nauru Agreement (PNA) it will face the classic principal-agent problem of uncer- subcoalition. tainty and asymmetric information. For instance, its distant-water fisher agents will have far better knowledge Under PNA leadership, the Pacific Island countries (PICs) of their harvesting, processing, and marketing costs than agreed to Harmonized Minimum Terms and Conditions the coastal state can ever hope to have. for Foreign Fishing Vessel Access, established a foreign vessel register on which distant water vessels must be in A related problem is that many coastal states, especially good standing and otherwise risk being banned from all developing countries, do not have well-developed moni- member coastal state EEZs, implemented compliance toring, control, and surveillance systems. As a result, they provisions that required distant water governments or boat have to attempt to implement systems that will generate owners associations to police their vessels while in the PIC voluntary compliance behavior on the part of the agents. EEZs; and have now established a vessel day scheme. In Under such circumstances, agency costs can be expected this way, they have managed gradually to reduce agency to be high. costs and turn the terms of trade in their favor. It is antici- pated that this process will continue. The aim for the principal, therefore, is to find ways to reduce the agency costs. The ways in which this might be Although the leadership role played by the PNA was done depend on the particular circumstances. important, success came through the support given by all member countries of the Pacific Islands Forum Fisheries The Moroccan case study shows that a coastal state can Agency. The secretariat of that agency has played, and do this by gradually improving its negotiating strategy continues to play, a vital role in the implementation of the through experience. The Western Pacific case study shows initiatives. the benefits that developing coastal states can achieve by cooperating with one another rather than, or perhaps In summary, economic analysis is based on an objective of in addition to, improving individual coastal state per- maximizing the economic returns (broadly defined) from formance. The key feature of Pacific success over recent the fisheries natural capital for the coastal state through years has been the ability to devise and sustain effective time. Foreign fishing activities may enable the coastal state cooperative arrangements. to enhance such returns. However, a key condition is that the state has the capacity for the economic management 9 The question raised is a classic principal-agent one. of its fish resources. If it does, the coastal state as principal 12 Trade in Fishing Services may seek to import the services of distant-water fishers as will depend in part on its relative bargaining power. This its agents, provided that these fishers have a comparative may appear to place developing coastal states at a seri- advantage. ous disadvantage. However, the case studies and in par- ticular the example of the PICs demonstrate forcefully Principal-agent analysis offers some insights for foreign that such states can, in fact, develop substantial bargain- fishing arrangements, in particular that the principal ing power, provided that their resource management can seldom, if ever, monitor its agents perfectly. Some capacity is adequate. The example also demonstrates “slippage” is all but inevitable. that, where a group of coastal states share fish resources, effective resource management cooperation among them The degree of success that the coastal state can achieve is the fundamental prerequisite to achieving significant in terms of the benefits it obtains from foreign fishing bargaining power. Emerging Perspectives on Foreign Fishing Arrangements 13 CHAPTER FIVE COMMON FORMS OF TIFS Having set out in general terms the economic arguments in favor of importing fish-harvesting services, this section discusses the form that these services might take. A first case that must be mentioned, although it is not developed further in this report, is trade at the level of an individual. Fishing companies in developing countries can find it profitable to engage in international trade in fishing services by employing, for instance, a foreign skipper or engineer who may have skills unavailable in the domestic market. Similarly, they may find it attractive to utilize foreign crew members, either because of unavailability or cost on the national market. Other than such individual-based service trade, such trade occurs mainly in one of three frameworks: » Foreign fisheries access agreements (government to government); » Joint ventures; or » Chartering of foreign fishing vessels. FOREIGN FISHERIES ACCESS AGREEMENTS Much of the international debate about foreign fishing has revolved around these agreements, which have not always received a good press. Orellana (2008)10 summa- rizes some of the main issues. He points out that although these arrangements may be a significant source of income for some developing countries, nonetheless “it is clear that developing countries do not always get the best end of the access arrangement bargains.”11 He argues that the coastal state may receive only a fraction of the actual resource value and “more than a few access arrangements have led to the depletion of host country stocks.” Foreign fleets may contribute to overfishing, especially by discard- ing catches that are not part of the access agreement. Developing countries may have weak monitoring control and surveillance. Agreements may include strategic stocks, for instance due to their importance for domestic fishers or for domestic food security. 10 Orellana, M. 2008. “Towards Sustainable Fisheries Access Agreements.” Geneva: United Nations Environment Programme. 11 Ibid, p. 1. Emerging Perspectives on Foreign Fishing Arrangements 15 TABLE 5.1. EXAMPLE OF HYPOTHETICAL ACCESS AGREEMENT AND ACCESS FEE STRUCTURE For Coastal State For Distant Water State Implicit Cost/Benefit Net Return Payment Cost/Benefit Net Return Fished by CS domestic fleet –3 1 n.a. n.a. n.a. Fished by DWS under access n.a. n.a. –1 3 n.a. agreement Fee Scenario A 1 0 0 –1 2 Fee Scenario B 2 1 1 –2 1 Fee Scenario C 3 2 2 –3 0 Note: Arbitrary values; assumes revenue from fish sale = €4/kg. n.a. = not applicable. Before going further, it is important to clarify what kind fishery within a coastal state EEZ, the output of which is of trade foreign fisheries access agreements represent. It entirely exported at a world price of €4 per kilogram (see is easy to think that such agreements represent an export table 5.1). Suppose the coastal state faces harvesting costs of fishing opportunities. Orellana gives what is probably of €3 per kilogram, whereas a distant water state can har- the standard definition when he says that “Fisheries access vest the same resource at a cost of only €1 per kilogram. agreements can be described as a form of trade, where a country with fisheries resources in its Exclusive Economic If the coastal state insists on using its own harvesting Zone sells fishing rights to another country.”12 At first sight, services, then the net gain—the resource rent—from its there is much to be said for this description because of the fish resources is limited to €1 per kilogram. If, however, apparent direction of the cash flows: cash is flowing into the the coastal state decides to use (import) foreign fishing coastal state, which must therefore be exporting something. services, the resource rent would be €3 per kilogram because of the distant water state’s lower harvesting costs. In fact, however, appearances are very deceptive in this case because, as Munro argues conclusively in appendix A, However, the coastal state will not receive all of the €3 per the coastal state is actually importing fish-harvesting ser- kilogram because it must pay for the harvesting services vices from the distant-water country. The payment for the that it chooses to import. This payment is made implicitly import, however, is implicit and disguised because it is part or indirectly through the negotiated access terms. Suppose of the gains from trade that the coastal state leaves with for example that the access fee is set at €2 per kilogram. In the distant-water fishers. The failure to appreciate that this case, the gains from trade will be split equally between foreign access agreements are a form of import (coupled the two parties. with the failure to collect data on trade in fishing services) could mislead policymakers about how best to utilize the The harvester has a gain of €1 per kilogram (€4 revenue coastal state’s scarce fish resources. minus €1 fishing cost minus €2 access fee), and the coastal state also gains €1 per kilogram (it now receives €2 per In brief, Munro’s argument is as follows. Although it may kilogram access fee but must deduct the €1 per kilogram appear that the (foreign or distant water state) exporter of net return that could have been made by domestic fishers). services is paying the (coastal state) importer, it is crucial to distinguish between the explicit and implicit payments for In other words, the coastal state is implicitly paying the imported services. Consider the simplest case of a single distant water operator €1 per kilogram for its harvesting services. This is the effective cost of importing foreign fishing: it is the share of rents left with the foreign fishers 12 Ibid, p. ix. as a result of the bargaining process to set access fees. 16 Trade in Fishing Services The range of possible access fees is from €1 to €3 per address these issues so as to gradually improve the perfor- kilogram (table 5.1). At values below €1 per kilogram, the mance of agreements from their perspectives—that is, to deal is no longer of interest to the coastal state, and at turn the terms of trade in their favor. There seems little values above €3 per kilogram, it is no longer of interest to doubt that the coastal states, especially when they coop- the distant water fisher. erate, are in a strong position to achieve such improved terms of trade, as is demonstrated by the Western Pacific The access fee charged thus will determine the terms of case, although the process may be long. trade, which in turn determine how the gains from trade are divided. As outlined above, the terms of trade will The Morocco case study is particularly instructive. It is depend on the negotiating strength of the two parties in a clear (appendix D) that bilateral fishing agreements, principal-agent relationship. particularly but not only with the EU, have tended to be interpreted in the way described by Orellana above; If access agreements are just a form of import, two ques- that is, Morocco perceived that it was granting fishing tions immediately follow: Is it worth importing at all, and opportunities to foreign fishers. Perhaps as a result, there if so, what is the best form? In answering these questions, is a tension in the interpretation of the benefits. Rather coastal states need to consider fisheries access agreements than being clear that foreign fishing services were just against the alternatives. The case studies provide some one among a number of ways to exploit Moroccan fish insights for policymakers in different situations. resources and that importing them increased returns to the resource owner, there is a feeling always that national New Zealand made some use of this type of agreement fishers are being disadvantaged. Fishing opportunities are during the period immediately following the declaration being given to foreigners instead of nationals. of its EEZ, but it quickly moved toward joint-venture and charter arrangements rather than government-to- This tension comes through clearly in the case study government agreements. appendix and doubtless represents the concerns faced by policymakers. Morocco obtained substantial benefits from Morocco and the Western Pacific case studies give some its bilateral access agreements with the European Union insight into the coastal state issues surrounding bilateral over the period from 1988 to 1999, benefits that it was agreements, whereas the China and EU northern agree- able to increase gradually. During the first agreement, ments discuss things from a distant-water perspective. Morocco received an annual return of some €70 million, which represented approximately 15 percent of the value The China case study notes that, like other bilateral of the catch made under the agreement. By the time of agreements, China’s agreements have been criticized for the third agreement, which ran until 1999, Morocco had their alleged lack of transparency and association with managed to increase the annual return to €125 million, corruption, inequitable benefit sharing, poor flag-state which represented more than 34 percent of the lower control, and conflict with small-scale and artisanal fish- value of catch included in this agreement. eries. Nonetheless, it is clear that these agreements do provide benefits to the coastal states involved. The main Notwithstanding this success, Morocco decided to end the issue seems to be, therefore, how to improve their perfor- agreement in 1999 because it was believed that foreign mance, and the case study reviews some suggestions as to fishing was a major cause of overexploitation and that it how this might be achieved. was reducing the profitability of domestic fishing compa- nies. Subsequent experience in Morocco, and the experi- Most of the criticisms of bilateral agreements are mani- ence of other countries (such as Alaska), suggests that this festations of the principal-agent problem (discussed above may have been at best a partial explanation. and in more detail in appendix A). In line with the theory, the case studies here tend to show that, although there are The clear benefits available from foreign fishing were tem- genuine difficulties, nonetheless the developing countries pered by the perception that these benefits came at a cost can learn through time (and from one another) how to to the national fleet (and to resource sustainability). In the Emerging Perspectives on Foreign Fishing Arrangements 17 end, benefits in terms of the structure of fish exploitation As noted by Wilen (appendix I), “A joint venture ( JV) is systems were prioritized (implicitly at least) over those an agreement between two or more parties to combine relating purely to the exploitation of fish resources. Had equity and other resources to achieve some task. To be foreign fishing been perceived as an import of fishing ser- successful, a JV must be able to accomplish what the par- vices within the framework of an overall fishery manage- ties could not accomplish independently. . . . JVs are gen- ment system, the conclusions might have been different, erally temporary and often face difficulties determining because there is no doubt that extracting 34 percent of how to organize joint resource use and share the profits.” catch value as a pure rent is a good performance on any measure. At the very least, one might have expected sub- One influential experience relates to the failure of a joint- stantial debate about which set of exploitation arrange- venture approach used in the so-called second-generation ments best suited Moroccan national (rather than national fisheries agreement between the EU and Argentina in fishing) interests, but there seems to have been almost no the 1990s. This experience is discussed in appendix A. such debate at the time of the ending of the agreement. Although in retrospect it is clear that Argentina would have been better off had it not entered into this agree- In the Western Pacific, as the Pacific Island countries ment, the reasons for the failure seem to lie not in the declared EEZs, most adopted bilateral access agree- joint ventures themselves but in the inadequacy of the ments with governments or fishing associations as their fishery management system within which these ventures key instrument for managing foreign fishing. In addition operated. Total allowable catches were effectively uncon- to the economic gains, the PICs chose these agreements trolled, leading to the mining of the fisheries natural capi- as a way of securing the recognition of coastal state juris- tal, which for a while gave the impression of an excellent diction and rights and as a way of achieving improved economic performance until the severe overexploitation compliance. Bilateral agreements still continue, but their of both hake and blue whiting stocks revealed the truth. advantages appear to be declining. Many PICs are mov- ing, through the vessel day scheme, toward management Despite this kind of negative experience, the case stud- systems within which domestic and foreign vessels come ies show how coastal states can benefit from joint-venture under the same arrangements, although fees and other arrangements. factors may be different for foreign vessels. JVs were a key instrument in Alaska, facilitating the tran- The EU northern agreements are a particular set of bilat- sition from foreign-dominated to domestic fisheries from eral arrangements based on the reciprocal exchange of 1976–89. The early JVs were simple contractual arrange- fishing opportunities. They may be appropriate, given the ments whereby foreign floating processors purchased shared stocks in which fishers of both parties to the agree- roundfish from U.S. catcher vessels at some negotiated ment have an interest. The reciprocal nature means that prices. But as total allowable catch systems were imple- the parties have the same responsibilities and the costs are mented, JVs became important as a way to receive an equally shared between the parties. However, the benefits allocation of quota. go directly to the fishing industry involved in catching An important benefit of JVs came from Russian fishermen the quotas provided, rather than there being a financial teaching the U.S. fishermen how to tow in the midwater contribution that may or may not be used to benefit the for hake, how to offload cod ends, how to time harvest fishing sector and coastal communities or indeed make a so fish condition was optimal for processing, and how to wider contribution to the resource owner. match harvesting throughput with processing capacity. This knowledge then spread to the Alaskan pollock fisher- JOINT VENTURES ies because a number of the JVs were involved in both One option that has been widely used is to import fish- hake and pollock fisheries. harvesting services by requiring foreign harvesters to team up with domestic partners. As with foreign access agree- In New Zealand, domestic fishing capacity at the time of ments, joint ventures have not always been viewed positively. EEZ declaration was inadequate to take full advantage of 18 Trade in Fishing Services the new opportunities and joint ventures were used as a than access agreements. And even those using access way of providing the necessary capacity. agreements to obtain long-term revenue streams, such as the Federated States of Micronesia (FSM), Kiribati, and In the Western Pacific, the first joint ventures involved Tuvalu, have aimed at developing charters as one means PIC governments as a partner in processing operations to enable domestic tuna development. or vessels. The experience was systematically negative, with some governments being involved in operations that Morocco made widespread use of chartering and incurred substantial losses. However, the development believed that it was a more successful arrangement than of the vessel day scheme has encouraged some States joint ventures. It allowed national fishers to master fish- to return to joint ventures for purse seine vessel opera- ing techniques and technologies and also enabled them tion, attracted by the apparent high returns offered by to position their products on world markets. In the early some boat owners in an effort to secure stable access in days of the development of the national fleet, Soviet the face of the increasing control of the purse seine fish- motherships were also chartered to provide markets for ery. Although the results seem to have been good in some national fishers of small pelagics. Later charters of fish- cases, there is not universal support for such arrangements ing vessels were authorized in order to stabilize supplies and the Forum Fisheries Agency has been requested to to processing factories onshore. These operations also undertake a review of their benefits and costs. enabled national fishers to familiarize themselves with the different fishing vessels used in these fisheries by Morocco used joint ventures as a way for its fishers to learn foreign fishers. about fishing techniques and markets in new fisheries, especially cephalopods. There are still 64 joint ventures, In New Zealand, also, under the individual transferable mostly involving Spanish and Chinese partners. However, quota system, rights holders have made extensive use of the overall assessment is that joint ventures have been less chartering of foreign vessels almost entirely on a time successful in the Moroccan case than charters because charter basis, where the vessel and its crew are chartered the JVs have not had the expected impact in terms of as a package. knowledge transfer or local value added. Products are still mostly exported frozen whole, and most of the gains seem Some New Zealand companies currently benefit from to go to the distant water fishers. preferential access to the Korean and Japanese markets by virtue of their use of foreign charter vessels flagged to those states. Catches can be exported to those coun- CHARTERING tries as domestic product, thereby avoiding duty and Chartering may cover a number of different arrange- quota restrictions. This is particularly beneficial for New ments but generally refers to either a demise (or bareboat) Zealand companies when it comes to low-value species charter or a time charter. The difference is that a demise like jack mackerel and squid. charter involves only the vessel (including plant and fish- ing gear), whereas a time charter involves the vessel and its The evidence suggests that operating costs between charter crew as a package. The type of charter may have impor- vessels and domestic vessels are very similar except in the tant legal implications (see appendix H for a discussion in cost of labor and the benefits associated with privileged the New Zealand case). market access. Hence, this is the source of comparative advantage. Chartering is used in the Western Pacific and includes a number of arrangements, from demise charters to Having access to foreign vessels, either through a charter reflagging to simple contract arrangements with local arrangement or by selling their annual catch entitlement processors, brokers, or agents. to a New Zealand company chartering a foreign vessel, gives quota owners a range of options for maximizing Some states, such as Fiji and Tonga, see charters (and joint profits from the use of their quota. Some smaller busi- ventures) as being more effective for domestic development nesses decide to use foreign charters because they do not Emerging Perspectives on Foreign Fishing Arrangements 19 have the funds to make the capital investment needed to networks. The use of charters may provide access to these purchase a vessel. networks for New Zealand companies for catch taken not only by the chartered vessels but also by domestic ones. Foreign chartering also gives companies operational flex- And business arrangements associated with the use of ibility, including the ability to increase or reduce catching chartering have facilitated investment by New Zealand capacity without significant capital investment or incur- seafood companies in offshore processing ventures in ring the costs associated with decommissioning excess Asia. capacity. Along the same lines, some EEZ fisheries require specialist equipment and have only a relatively short Despite its advantages, chartering has also raised season when it is profitable to catch a particular species some issues in New Zealand. The most important of of fish. In these situations, chartering allows companies these concern accusations of working conditions for access to these fisheries without requiring them to pur- crew and vessel safety. As a result, New Zealand is in chase a vessel that cannot be used for the remainder of the the process of passing legislation that will require all year or in other fisheries. chartered vessels to reflag to New Zealand from May 2016. This will ensure that chartered vessels comply Some of the foreign companies that charter vessels to with New Zealand labor, safety, and fisheries rules and New Zealand companies have large global distribution standards. 20 Trade in Fishing Services CHAPTER SIX LESSONS LEARNED This section draws out the key lessons that emerge from the legal and economic analysis and from the case studies. Although the focus of these lessons is on trade in fishing services, this issue is so intertwined with the general fish resource exploitation system that it is difficult to avoid discussing more general issues at the same time. IMPORTANCE OF THE BENEFIT FOCUS Economic analysis proceeds from an assumption that the policy aim is to maximize the sustainable returns from fish resource exploitation to coastal state citizens in gen- eral. The key element of these returns is the generation of sustainable resource rents, broadly defined.13 Achieving such an aim requires the design and implementation of a set of institutional arrangements (the “management system”) that will provide the nec- essary incentives. There is no unique system, in either time or space, that will do this; each coastal state must find the solution that best suits its fisheries at different times. The case studies offer some insights into the kinds of systems that work. What is clear is that success requires that fish resource wealth, in the sense of rents throughout the value chain, be placed at the heart of fisheries policy. Such wealth is a recipe for heaven or hell in fisheries exploitation depending on the management sys- tem. Where institutional arrangements are ineffective, it is the implicit wealth of the resource that drives overexploitation, which is why it is the most valuable resources that are overfished first. On the other hand, with appropriate institutional arrangements, fish resource exploitation is capable of generating substantial amounts of wealth in perpetuity.14 13 The definition of resource rents throughout this report includes both nonmarket and market benefits 14 The discussion here focuses on fish resource wealth because this is central to understanding first why fish resources are overexploited and second what is the potential contribution that fish resources might make to economic growth. Evidently fish resource exploitation generates other benefits such as health. A key policy question is to evaluate the extent to which one set of benefits may need to be traded off against another or, indeed, whether benefits can be achieved simultaneously. Health and wealth benefits do not seem to be in competition—both depend on sustainable stocks, although tension may exist between exporting and direct food security. However, unless the potential wealth benefits are recognized and estimated, it is impossible to know what trade-offs are actually being made, a problem that seems to have afflicted the development of fisheries policy in many countries around the world. Emerging Perspectives on Foreign Fishing Arrangements 21 It must be stressed that observing the crucial role played However, although rights-based systems are developing by fish resource wealth in the exploitation of fish resources around the world, many fisheries remain under ineffective says nothing about who should receive the wealth. The management regimes. As mentioned above, some trade point is simply that if this wealth is ignored, the natural may occur at individual level, but otherwise trade is likely capital that the fish resources represent will tend to be to depend on some kind of government arrangement. mined rather than producing a sustainable contribution to economic growth. In this case, the decision of whether to make use of foreign fishing, and if so to what extent, will depend crucially on Observation of fisheries policy (and related policy docu- the way in which the coastal state policymakers perceive ments, such as poverty-reduction strategy papers) around the benefits of fish resource exploitation. the world suggests that the aim of wealth generation underpinning economic analysis is not unreasonable. Some governments may still focus on economic benefits in The intention of fisheries policy often is to maximize the financial terms, and in this case they may negotiate access wealth benefits of fish resource exploitation; it is achieving agreements with foreign governments to provide a frame- the result that is the difficulty. For instance, fisheries policy work for the importation of fishing services from foreign almost everywhere aims to improve product quality as a fishing companies. There is a big difference, however, way of increasing product value addition. The aim is to between this arrangement and financial returns resulting increase either fish prices or the return from fish landings, from effective fisheries management. In the latter case, for instance by reducing post-harvest losses. If countries the returns represent the resource rents, whereas in the are not interested in the wealth potential of their fish former case, they may have nothing to do with improved resources, why would they bother with such objectives? fisheries management. Such policy objectives are generally uncontroversial but, More frequently, it seems that governments focus on unfortunately, although they make sense taken on their the economic impacts of the fishing activity itself, with own terms, their ultimate impact depends crucially on the focus on developing domestic employment, local the nature of the fisheries management system in place. product value addition, incomes and livelihoods, and In particular, if the access regime remains free and open so on. In this case, policy will focus on those directly (or if it corresponds to “regulated open access”), then we involved in the activity (especially fishers, but also pro- enter the realm of second best. In this case, these measures cessors and related groups) as the primary beneficiaries will likely worsen outcomes in the fishery because greater rather than the coastal state populace at large as the profits will attract more effort, worsening the condition of resource owner. fish stocks. In this case, importing fish-harvesting services may be There is a need, therefore, for education concerning the perceived negatively because such services will be seen as full range of benefits potentially available under different competing with domestic alternatives. Taking an example institutional scenarios and especially the “investable sur- from outside of the case studies, within the EU fisheries plus” that fish resources are capable of generating that policy, at least until recently, benefits have been interpreted can be used to fund economic growth elsewhere in the by EU member states in terms of their fleets’ activity. The economy. United Kingdom, for instance, tried unsuccessfully and expensively to keep Spanish fishers out of U.K. waters The case studies demonstrate that where rights exist, because it perceived the benefits obtained from exploita- there is likely to be interest in trading fishing services to tion of its share of EU fish resources purely in terms of increase the benefits generated from fish resource exploi- the activities of its fishers. The arrival of Spanish fishers tation. In that case, trade will occur at the level of the was seen to undermine these benefits rather than repre- rights holder, as is the case in New Zealand, for example, senting an opportunity to generate greater returns to the with chartering. United Kingdom from its fish resources, one reason being 22 Trade in Fishing Services the lack of any mechanism by which these greater returns their benefits may involve chartering foreign fishers. In could materialize. Alaska, following a long period of domesticating the activity, it seems less probable that foreign services will be Perhaps for similar reasons, the EU has negotiated access used in the immediate future. These are both developed- agreements with northern states (see appendix F) using country examples, and developing countries may not have essentially bartering of access to different fish stocks the necessary institutions to achieve similar goals in the because the main requirement is to maintain the activity same kind of way. of fishing fleets, this being perceived as the main, if not only, benefit of fish resource exploitation. One possible approach to address this difficulty that has been suggested is to leave access to fish resources free And, as discussed in appendix D, Morocco ended its and open.16 Such an approach may perhaps be preferred fisheries agreement with the EU in 1999 despite the in certain places at certain times but does not provide a very large financial benefits going to the country at large general recipe with which to build fisheries policy. One through the financial compensation paid to the Moroccan problem is that leaving fish resources open will of course treasury because foreign fishing reduced the opportunities attract the poor, this being the aim of the policy. As for domestic fishers. pointed out by MacKenzie17 some time ago, under these arrangements fishers are not poor because they are fish- If there is to be a meaningful debate about fish resource ers, they are fishers because they are poor. An element of exploitation types, including foreign fishing, a first require- circular reasoning may then be injected because calls may ment is to be absolutely clear about the benefits upon then be made to favor small-scale fishers in policy devel- which attention is focused, distinguishing in particular opment because they are among the poorest of the poor economic benefits from economic impacts. and something must be done to alleviate their poverty. Yet this is an intended consequence of another dimension While economic analysis considers the impact of fish of policy. Care must also be taken not to underestimate resource exploitation on an economy-wide level, other the power of small-scale fishers to overexploit fish stocks, analyses may focus purely on the fisheries sector itself, and as shown by the Moroccan case study. Finally, using free yet others may look only at one subelement of the fish and open access to fish resources as a solution to poverty resource exploitation system, focusing on one subgroup clearly limits that solution to those who are involved in of fishers (and their communities). For instance, there is fishing. The decision not to maximize the value of the fish much interest at present in small-scale fishers or small- resource means that there is no way for other, nonfishing scale fishing.15 poor people to benefit from fish resources (other than as consumers). This opportunity cost needs to be taken into If the intention is to favor particular groups, the New account in fisheries policy. Zealand and Alaska case studies show how, if a use- rights system is in place, some use rights can be allocated If a coastal state decides that it wishes small-scale fish- to disadvantaged groups (Maori and native Alaskans in ers and their communities to be among the primary these cases), allowing them to benefit from fish resources beneficiaries of fish resource exploitation, it is better to without having necessarily to be fishers or part of a fisher seek to develop the institutions that would enable this to household—that is, the benefits can be shared more be achieved on a sustainable basis rather than to rely on widely. In the case of New Zealand, the realization of free and open access to the fish resource. 15 Analysis of this subgroup often refers to “small-scale fisheries.” This is a very 16 Béné C., B. Hersoug, and E. H. Allison. 2010. “Not by Rent Alone: Analyzing misleading term, however, with potentially adverse implications for fisheries the Pro-Poor Functions of Small-Scale Fisheries in Developing Countries.” policy, for instance because it gives the impression that there is a set of fish Development Policy Review 28 (3): 325–58. resources exploited on a small-scale level that can be managed independently, 17 MacKenzie, W. C. 1979. “Rational Fishery Management in a Depressed whereas in most cases small-scale fishers exploit only the fringes of fish stocks, Region: The Atlantic Groundfishery.” Journal of the Fisheries Research Board of at least in the marine context Canada 36 (7): 811–26. Emerging Perspectives on Foreign Fishing Arrangements 23 The Alaska case study is one example. In the appendix, CAPACITY BUILDING it is shown clearly that the mere fact of domesticating the The issue of human and institutional capacity develop- fishing activity did not produce much in the way of eco- ment is critical for coastal states. nomic benefits. It was only when an economically effective management system was implemented that fishers were In the Western Pacific (appendix B), when the PICs first able to generate substantial wealth from the fish resources. began negotiating with foreign fishers, in effect the only policy open to them was to legitimize fishing that was hap- The Moroccan case study also illustrates the kinds of dif- pening in their waters anyway and secure some benefit from ficulty that may arise. In 1999, Morocco decided to end it. Since then, very substantial improvements have been its access agreement with the EU. As a result, a large lump made in national, regional, and subregional capacities, of fishing capacity was removed at a stroke from the octo- both human and institutional. As a result, most PICs now pus fishery. Two unfortunate things then happened: (1) the have substantial latitude in the way they manage fishing domestic trawling sector demonstrated conclusively that it in their waters, their relations with foreign vessels, and the was capable of generating more effective fishing effort from way in which they use the various arrangements. But even its capacity once the EU capacity was gone, and (2) the with such progress, especially for smaller PIC administra- small-scale sector exploded “below the radar” because ves- tions, human resource and institutional constraints remain sels less than 2 gross registered tonnes (GRT) did not require the key factors limiting their benefits from foreign fishing licenses. Put together, these developments meant that the and the exploitation of their tuna resources more generally. octopus fishery, which had for many years produced around 50,000 tonnes per annum, suddenly produced more than The Alaska case also demonstrates the importance of 107,000 tonnes in 2000, 45,000 tonnes of which came from institutional development at two levels: first, in terms small-scale fishers. The stock crashed as a result, and by of the legal framework in order to achieve the goal of 2003, total catch had fallen to approximately 20,000 tonnes. domesticating the fishery, and second, in terms of exploi- Faced with this crisis, the Moroccan ministry then instituted tation arrangements in order for the newly domesticated a system of individual transferable quotas. industry to deliver the anticipated benefits. The outcome confirms two important lessons: (1) the need In seeking to improve returns from foreign fishing to all to design and implement appropriate institutions before parties, it is important that capacity-building efforts to making large-scale changes to fishing capacity and (2) the improve the skills should focus not only on host coun- need to adopt a holistic approach to fisheries management tries but also on DWF nations. For instance, Chinese because any part of the exploitation system that is left out- fishers may have different skill sets compared with fish- side can be guaranteed to expand (as also happened with ers from other DWF nations. They may face language small-scale fishers in Iceland, for example). barriers and other capacity challenges related to log- books and observer knowledge. Improving awareness A final important point is that it cannot be overemphasized would contribute to improving sustainable fisheries how long it takes to achieve effective fisheries reform. The management. experience of all countries that have successfully reformed their fisheries shows that the process takes decades, begin- But perhaps the most crucial element of capacity build- ning with some key fish resources and gradually moving to ing relates to the need to develop effective coastal state encompass others. The experience in the case studies here fishery management systems (in the sense of the institu- bears out this general observation. tional arrangements for fish resource exploitation). The discussion of the Argentina case mentioned above and in Returning again to the Western Pacific as a specific appendix A shows the difficulties that can arise if foreign example, the PICs have been working to improve the man- fishing is introduced into an inadequate system. Some- agement of their tuna fisheries, including their arrange- what counterintuitively, perhaps, difficulties can also arise ments with foreign vessels, for approximately 35 years, if foreign fishing is removed from an inadequate system. and the process is very far from complete. 24 Trade in Fishing Services In the early years immediately following the introduction of fleets will move elsewhere. Liberia, for instance, sought in EEZs, some easy gains were made simply by sharing and the past to ban pair trawling but did not enforce the rule, applying information and ideas. But the more substantial in part, at least, because of worries about the Chinese gains that have gradually followed have required lengthy moving out. consultations at regional and national levels, cautious implementation, and the building of national and regional A regional negotiating strategy as pursued by the Western capacities. Although the international nature of tuna fisher- Pacific coastal states seems the obvious way forward. ies certainly adds to the difficulty, capacity building in purely Linking these states with their West African counterparts domestic fisheries management is also a long-term process. would be a useful exercise in South-South cooperation. Such cooperation would need to identify not just the In addition to being a long process, it is also not a simple strategy but also all of the capacity building that occurred process. Despite the clear results available from the expe- in the Western Pacific that has made the strategy feasible. rience with the purse seine vessel day scheme, work continues to extend a similar cooperative framework into AREAS BEYOND NATIONAL the longline fisheries, so replicability is clearly not straight- forward. One important reason is that whereas the foreign JURISDICTION purse seine fleets were reliant on access to the PNA As coastal states improve the management arrangements member EEZs, the tropical longline fishers have extensive within their EEZs, there may be an increasing incentive opportunities on the high seas, greatly reducing the lever- for distant-water states to switch their fishing activity, inso- age of the coastal states. far as this is technically and economically feasible, to areas beyond national jurisdiction. In the development of internationally funded projects, it is important to recognize both the need to develop such Because host countries have restricted fishing in their capacity and the very long time that it takes. All of the waters, China (see appendix G for more discussion) is case studies show that change is at a generational level increasing its high-seas operations. Current regional fish- and not related to the typical project cycle of 3 to 5 years. ery management organization arrangements are not glob- ally comprehensive, so fishing capacity that is reduced in one region may easily move to another. After the jack COASTAL STATE REGIONAL mackerel stock showed signs of decline for several years, COLLABORATION China simply moved its fishing vessels elsewhere, to Africa The issue of negotiating strategies by coastal states also and off the coast of Russia. comes through clearly in the case studies. Morocco’s negotiators, for instance, gradually improved their nego- In the Western Pacific,18 one threat to the vessel day tiating strategies so that the principal (Morocco) made scheme is increasing fishing in the high seas as vessel day increasing gains. The Western Pacific case shows, how- prices increase (appendix C). ever, that notwithstanding improved performance that can be expected at the individual state level, coastal states can probably advance further and faster if they cooperate 18 The Western Pacific case and case study offers a number of valuable lessons with each other. that are drawn upon throughout this report. However, there is no guarantee that the RFMO experience in the Western Pacific is necessarily directly transferable to other regions. In the future, it would be of interest to extend the analysis in The Chinese case study is interesting from the distant- this report to other RFMOs. In the meanwhile, the interested reader might water perspective because the Chinese have used the wish to consult a couple of policy briefs, both of which can be downloaded strategy (as has the EU) of negotiating with individual from the internet, that address the question of tuna management in a more generic fashion: “Bellagio Framework for Sustainable Tuna Fisheries: Capac- nation states along the West African coast. ity Controls, Rights-Based Management, and Effective MCS” and “Report of ISSF Capacity Transfer Workshop: Exploring Options for Transferring Fishing These coastal states may then fail to implement their fish- Capacity to Developing Coastal States in the Context of Managing Capacity of eries management measures for fear that the distant-water the Tropical Tuna Purse Seine Fishery.” Emerging Perspectives on Foreign Fishing Arrangements 25 Wherever fish resources straddle coastal state EEZ and Article 8(4) of UNFSA stipulates that only those states ABNJ, fishing of the ABNJ part of the stock represents that are members of a RFMO, or which agree to apply a threat to intra-EEZ management of those stocks. the conservation and management measures prescribed This ABNJ issue requires additional discussion of both by the RFMO, are to have access to the fishery resources legal and economic matters (see appendix A for a fuller under the governance of the RFMO. If this article could discussion). be enforced universally, it would, of course, deal with the problem of rampant “free riding” that plagued the pre- In regard to legal aspects, there is a need to consider not UNFSA management of highly migratory or straddling only the 1982 UN Convention on the Law of the Sea but stocks. also the 1995 UN Fish Stocks Agreement. A fundamental rule in international law is that a treaty UNCLOS requires coastal and distant water states to binds only those states that are parties to the treaty, unless cooperate in the management and conservation of highly the treaty has achieved the status of customary interna- migratory or straddling fish stocks19 but offers little guid- tional law. Although UNFSA has to date been ratified by ance on how. Freedom of the Seas pertaining to fisheries 81 states,21 it is not clear that UNFSA has so far achieved is retained,20 but it is heavily circumscribed by Articles 116 customary international law status. Fishing, therefore, by through 120. Article 116 requires that distant water fishing vessels from nonratifying states in a high-seas area under nations (DWFNs) exploiting such stocks in the high seas RFMO jurisdiction, and ignoring the conservation and take into account the rights, duties, and interests of rel- management measures prescribed by the RFMO, may evant coastal states. Articles 117 and 118 require DWFNs be deemed to be unregulated, but this is a much more to cooperate with other states in the conservation of these nebulous concept than illegal fishing. stocks in the high seas and requires that they shall, as appropriate, do so through subregional or regional organ- The key legal question is whether states that have yet to izations. Legal experts maintain that Articles 116 through ratify UNFSA and that allow their vessels to fish in RFMO 120 are now a part of customary international law. waters in a manner contrary to the RFMO fisheries man- agement regime are in violation of their obligations under However, UNCLOS left unclear the rights and duties of UNCLOS Articles 116 through 120. If so, given that these states concerning the high-seas portion of highly migra- articles have achieved customary international law status, tory or straddling fish stocks. As a result, it was difficult then RFMO members would have a clear legal case for to establish effective cooperative management regimes for action against unregulated fishing. these stocks, with one important reason being the near inability of cooperating states to prevent free riding by Having outlined the legal issues, we now consider whether non-cooperating states. economics can be of some assistance in addressing the issue of ABNJ fishing threatening the intra-EEZ manage- The ineffectiveness of the management regimes in gov- ment of straddling stocks. As before, this issue is discussed erning highly migratory or straddling fish stocks led to the in detail in appendix A. 1995 UN Fish Stocks Agreement (UNFSA), which has RFMOs as its centerpiece. Although the RFMO regime As mentioned in section 4, the key insights derive from appears to apply only to ABNJ fisheries (Article 3), Article game theory (or perhaps more accurately have been for- 7 states that the management regime for a relevant stock malized in that framework). The RFMO is viewed as a in the adjacent high seas and the regime for the manage- dynamic cooperative fishery game. The central condition ment of that stock within the EEZ must be compatible so for such games to be stable is that each and every player that the stock is to be managed as whole. or agent must be convinced that its return from the game, referred to as payoff, is at least as great as it would be by 19 UN, 1982, Articles 63[2] and 64. 20 UN, 1982, Article 87. 21 UN, 2014, Office of Legal Affairs. 26 Trade in Fishing Services not cooperating. Free riding, either through unregulated these resources throughout their range, making use of the fishing or noncompliance by RFMO members, can easily negotiation facilitators that they may have. In WCPFC undermine this condition because even a responsible and negotiations, DWFSs might be offered (or denied) access cooperative RFMO member may calculate that if free to PIC EEZs as an inducement to agree to PIC resource riding is not checked, its payoff from cooperation will management proposals. In fact, the Third Implementing be less than it would be under competition. Rationality Arrangement of the PNA did use access agreements to would demand that it not cooperate. impose management measures. Nonetheless, coastal states are concerned that WCPFC measures may affect their abil- RFMOs face a difficult situation because they typically ity to collect access fee revenue. have many members and game theory concludes that if free riding is widespread, situations with more than five FFAs can thus be seen to have a role, in some cases a very players cannot expect to achieve stability. The key to suc- important role, in helping to ensure the long-term stability cess clearly lies in deterring free riding. There are signs of the cooperative fishery game that is the RFMO. The that RFMO members are recognizing this and taking game may be best understood as a multistage game, with steps against unregulated fishing, for instance by black- the PICs first bargaining among themselves, with the PNA listing vessels and introducing certification programs to subcoalition having the dominant role, and then bargain- guard against fish laundering. ing with the DWFS members of the WCPFC, using their power to establish (or not establish) FFAs. Unfortunately, free riding is not the only difficulty faced by RFMOs. Its members may also be asymmetric—that Strengthening coastal state coalitions and their linkages is, they may have different management goals. To address to RFMOs will make it more expensive for distant-water this problem, the RFMO must find some way to imple- fishers to fish the high seas in an opportunity cost sense, in ment the compensation principle, discussed in section 4, that high-seas performance could be taken into account in whereby the dominant players or subcoalition compen- the allocation of fishing rights to foreign fishers. Altering sate the other subcoalition(s). the economics of high-seas fishing in this kind of way may offer the best hope of success. In game theory, such compensations are called side pay- ments, which may or may not be monetary in form. With However, a useful supplementary approach that may respect to management of fishery resources in the ABNJ, help with this problem, and with distant-water fishing this would mean that a player’s payoff from the cooperative performance generally, is to ensure that unacceptable resource management agreement would not be determined (however that may be defined) behavior affects the inter- solely by that player’s harvests in the ABNJ. Rather than side national reputation of the states concerned. For instance, payments, the FAO22 uses the term negotiation facilitators. Chinese-language sources (appendix G) increasingly call for attention to responsible DWF, and the Chinese state One interesting possibility is for coastal states to use the is concerned about its image and reputation abroad. New legal power that they have to implement or to refuse to Zealand also is concerned that the performance of distant- implement foreign fishing arrangements as a negotiation water vessels chartered by national interests may tarnish facilitator. McClurg (appendix C) emphasizes the asymme- its international reputation and is legislating accordingly. try between Western and Central Pacific Fisheries Com- mision (WCPFC) members, with the PICs seen as placing A final interesting idea that may perhaps emerge in the a substantially greater value on the tuna resources than future is raised in the Bellagio policy brief referred to in the other members. The compensation principle suggests footnote 18. This is to transform the RFMOs into some that they, therefore, should dominate the management of kind of “tuna corporation” whose role is to manage the exploitation of the tuna stocks for which it has respon- sibility on behalf of its shareholders. Presumably such 22 FAO. 2002. Report of the Norway-FAO Expert Consultation on the Management of Shared Fish Stocks. Bergen, Norway, October 7–10. FAO Fisheries Report 695, shareholders would have to include but not necessarily be Rome. limited to the relevant coastal states. Emerging Perspectives on Foreign Fishing Arrangements 27 management initiatives. The risk is that they become mar- SMALL-SCALE FISHERS ginalized, increasing negative interactions and conflict. At A key issue in considering the use of foreign fishing the very least, this requires clearer consideration of the services is the impact on national fishers, in particular role and rights of migrant and transboundary fishers in small-scale fishers. national policy and regulations and at the local level. In many cases, coastal states may not be sufficiently aware of the role that small-scale fishers play or could play under HUMAN RIGHTS different institutional arrangements. As a result, there may Foreign vessels operating under charter arrangements be a tendency to ignore the impact that allowing foreign may derive their comparative advantage from a number access may have on such fishers. This may be addressed of sources. However, the experience in New Zealand sug- as one aspect of the general transparency issue by keep- gests that there may be two main factors: lower labor costs ing small-scale fisher representatives aware of negotia- and the benefits of better access to markets for the catch. tions and involving them as feasible. The FAO Code of Conduct for Responsible Fisheries and the new Voluntary Where comparative advantage rests on lower labor costs, Guidelines for Securing Sustainable Small-Scale Fisheries some tricky issues may be raised. In New Zealand, allega- in the Context of Food Security and Poverty Eradication tions have been made of exploitative labor practices and address this and related issues. substandard working conditions that are making it impos- sible for New Zealand—flagged vessels to compete. In addition to conflict over who is to catch the fish, conflicts may also arise over where it is to be caught and As mentioned above, to address this problem, the New with which gear. Many states have attempted to address Zealand government is in the process of developing legis- physical interactions by reserving particular areas for cer- lation that will make it a requirement for chartered vessels tain types of fishing; for instance, it is common to find to reflag to New Zealand. Once this legislation is passed, it inshore waters reserved for small-scale activities (how- will no longer be possible to charter foreign-flagged vessels. ever defined in each case). One issue is to ensure that the Although the response by the New Zealand government coastal state has the capacity to enforce such restrictions. is understandable, the difficulty with situations of this Another difficulty is that although larger-scale vessels may kind always is deciding whether the regulation will in fact be banned from entering the reserved inshore waters, become a kind of nontariff barrier to trade. It is difficult to frequently there may be nothing stopping the small-scale determine whether in effect this is a variant of the pauper fishers from fishing outside of them, with the result that labor argument for protection (or its very close relative, physical interactions between gear types may continue. the exploitation for foreign labor argument). Reserving areas for small-scale fishers does not directly Under these arguments, it is contended that foreign pro- resolve the problem of which resources and what quantity ducers with lower labor costs have an unfair advantage they may catch. There remains, therefore, a need to develop over domestic producers. The importation of goods or an overarching management system that begins from the services from low-wage foreign producers contributes to fish resource (or resources) in question and includes all fish- the exploitation of the foreign labor. ers, including small-scale fishers. Otherwise, as shown here by the Moroccan octopus case, the small-scale sector is The problem is that a domestic sector faced with a foreign capable of very fast expansion and of making a significant sector that has the comparative advantage can always put contribution to resource overexploitation. forward arguments of this type, whether the foreign com- parative advantages comes from higher productivity or A particular problem concerns migrant and transboundary from lower wages (or from some combination of the two). fishing activity. A number of countries are now attempting to decentralize fisheries management, and there is often The difficult question of the exploitation of foreign labor no clear understanding of how these fishers can be accom- can only be addressed by considering the alternatives modated within comanagement and community-based open to that labor. By refusing to import, there is every 28 Trade in Fishing Services chance that the situation facing the “exploited” foreign labor will be made worse, not better. DIFFICULTY OF ESTIMATING POTENTIAL GAINS FROM The situation facing exploited foreign labor may degener- REFORM ate into illegality. Becky Palmstrom’s article in the BBC A more general point that is confirmed in particular by the News Magazine on January 23, 2014, “Forced to Fish: Slav- experience in the Western Pacific is the difficulty of using ery on Thailand’s Trawlers,” begins, “Thailand is the bioeconomic models to predict the economic outcomes of third largest exporter of seafood in the world, supplying fishery reform in general, including issues related to trade supermarkets in Europe and America, but it’s accused of in services. It seems that the standard models tend to sys- crewing fishing boats with Burmese and Cambodian men tematically underestimate the benefits achieved in practice. who’ve been sold and forced to work as slaves.”23 Unfortu- nately, the situation is likely to be worse on vessels making The problem is that analysts cannot be expected to antici- long trips outside of Thai waters—that is, those that are pate all of the changes that will occur. Wilen26 pointed out supplying international fish-harvesting services. that the standard analysis focuses on changes in the effort and cost side of the rents equation but that in practice Although it is not easy to determine whether the fish- changes on the revenue side turn out to be as important, if ers really are slaves as that term is generally understood not more, and these are the most difficult of all to predict. or whether they are being paid “slave wages,” it seems clear that many are illegal migrants who, as a result, may In the Western Pacific, much technical advice to the find themselves in very difficult circumstances. Roberston coastal states concluded that an increase in benefits or alleges that “Fishermen who do not perform according to access fees required a reduction in effort, especially purse the expectations of the boat captain may face severe beat- seine effort, and that increases in effort would reduce rents. ings or other forms of physical maltreatment, denial of But in fact substantially greater earnings have been made medical care and, in the worst cases, maiming or killing.”24 from a purse seine fishery with effort levels at or beyond the levels at which rents were projected to fall to zero. This There are no simple solutions to this problem. Palmstrom does not invalidate the point that bioeconomic principles hopes that consumer pressure25 and improving economic will apply at some point, and sustainable rents and PICs’ conditions in Burma and Cambodia will help to address it. benefits will indeed fall if purse seine effort expands too Perhaps increased recognition of trade in fish-harvesting far. But identifying this point is very hard. services, in terms, for instance, of data on the scale of the activity, and increased formalization would also help. SEQUENTIAL NATURE OF FOREIGN FISHING ARRANGEMENTS 23 http://www.bbc.co.uk/news/magazine-25814718. 24 Robertson, P. 2011. Trafficking of Fishermen in Thailand. International Organisa- The case studies provide limited evidence at least to sug- tion for Migration. p. 7. gest a hypothesis that there may be something sequential 25 Since this was written, the issue was given extensive coverage by the Guardian. in arrangements to import foreign fish-harvesting services. On June 20, 2014, it was reported by the ATUNA network that Thailand has been pushed down to tier 3 in the U.S. State Department 2014 Trafficking of The Western Pacific and New Zealand case studies sup- Persons (TIP) report, which is likely to significantly impact the country’s tuna ported to some extent by Morocco and China suggest that trade. The president of the Thai Frozen Foods Association (TFFA) assured the press that slave labor is not encouraged among their fisheries, contrary to government-to-government foreign fishing agreements reports published by the Guardian. For the last four years, Thailand had been in may be a stepping stone toward a future that will probably the tier 2 group of countries that do not comply with the Trafficking Victims be dominated by chartering as use rights–based systems Protection Act. One consequence of the change to tier 3 is that the U.S. gov- become more common in coastal states. ernment can advise and discourage, but not permanently stop, multinational companies from trading with Thailand. Consequently, this could limit its tuna trade and financially impair the Thai tuna industry by making it harder to get 26 Wilen, J. 2005. “Property Rights and the Texture of Rents in Fisheries.” access to credit. The United States is the top importer from Thailand, so the In Evolving Property Rights in Marine Fisheries, edited by D. Leal. Lanham, MD: downgrade could have harsh consequences for Thai tuna exporters. Rowman and Littlefield. Emerging Perspectives on Foreign Fishing Arrangements 29 CHAPTER SEVEN CONCLUSIONS SUMMARY OF BACKGROUND AND AIMS Approximately half of the world’s economic exclusion zones are subject to some form of foreign fishing arrangement. FFAs often provide access to the fish resources of developing countries for so-called distant-water fleets from developed or middle- income countries. This study was commissioned to improve understanding of the actual and potential cost and benefit flows associated with these arrangements and to provide general guidance on the means to secure optimal, equitable, and sustainable returns from them. The approach adopted by the study comprises an analytical review of economic and legal principles that relate to FFAs, with supporting empirical infor- mation drawn from eight detailed case studies from around the world. FFAs AS TRADE IN FISHING SERVICES Although the discourse on FFA has tended to focus on government-to-government foreign access agreements, this report argues that such agreements are simply one particular form of a broader set of provisions for international trade in fishing services. Furthermore, whereas it is widely recognized that trade in fish and seafood products has a crucial role to play in increasing the benefits from fish resource exploitation, the importance of TIFS has largely been overlooked until now. TOWARD BETTER FFAs: DELIVERING THE BENEFITS THROUGH TIFS The study shows how TIFS can be an important mechanism for coastal states, espe- cially developing countries, to increase the benefits from the exploitation of their fish resources and enhance the sector’s contributions to economic growth and hence to social welfare. Although fish resources already contribute to growth, as renewable nat- ural capital, they have the potential to make a far greater and perennial contribution than is currently the case. Under effective management, exploitation can generate an investable surplus that can be used to fund economic growth and development. Emerging Perspectives on Foreign Fishing Arrangements 31 Although trade is an important factor in delivering this EEZ. A few of these have operated in ways that have contribution, the nature of international trade in fishing undermined the reputation of the whole sector and of services and the benefits that accrue are inextricably linked New Zealand itself. As a result, all foreign charter vessels to the institutional framework regulating the exploitation are to become New Zealand registered from 2016. of coastal state fish resources. This framework is gradually evolving worldwide, although much remains to be done. The Alaskan case study presents a rather different experi- The key issues and policy questions are to clarify who ence with TIFS. In essence, joint ventures were used as a owns the resource, who may exploit it, and under what way of transferring fishing skills from foreign to U.S. fishers. conditions it may be exploited. Together with various legislative changes, this transfer of skills changed comparative advantage in the fishery, which Experience from around the world suggests that these went from being almost entirely foreign to completely issues and questions are being addressed through policies domestic within a relatively short period of 10 to 12 years. that are gradually bringing fish resources into rights-based Although this change in exploitation nationality had eco- frameworks. A great many—perhaps most—countries nomic impact, it produced few economic benefits. It was have now adopted such systems to some extent using a only when institutional changes were made, leading to a variety of approaches: some have opted for property rights-based exploitation system, that substantial economic rights, others for use rights; some have opted for perpetual benefits began to appear in the form of resource rents. rights, others for time-delimited rights; some for individu- ally held rights, others for communally held rights; and so The interesting question concerning Alaska is the extent on. The development of secure use rights and tenure sys- to which sequencing mattered. If rights-based systems tems is essential to enable fish resources to deliver their full had been implemented first, would there still have been contribution to economic growth. At the same time, trade the same interest in switching from foreign to domestic and rights go hand in hand and rights-based systems are fishers? It is difficult to know, although it does seem that it likely to generate much greater trade in fishing services is definitely domestic fishers who now have the compara- than is currently the case. tive advantage. It will be interesting to observe over the coming years whether pressure emerges from rights hold- The New Zealand case study shows how trade in fishing ers to deploy foreign fishing services again. services might be expected to evolve as rights-based sys- tems become more common. New Zealand rights holders Overall, some specific policy questions related to both have made great use of foreign fishing services through rights-based fisheries and TIFS are chartering arrangements. The biggest advantage has been » Can rights-holders use foreign fishing services that rights holders have been able to use the most cost- » At the individual level (for example, employ effective combinations of capital and labor for their har- foreign skippers)? vesting and processing operations, thereby increasing the » At the company level (for example, charter returns obtained from their rights. In addition, the ability foreign vessels)? to use foreign-chartered vessels reduces the need for rights » If so, under what conditions? holders to raise capital. This has been an advantage, espe- » Can foreign fishers hold rights? cially for those with only a small quantity of rights who » If so, under what conditions can they exploit have been able to combine their rights with other hold- them? And, in particular, how does the coastal state ers in undertaking chartering operations. Finally, linking ensure that it continues to receive a return on its with foreign operators has generated tariff- and quota-free resources? access for fishing products into the partner’s home market. In developing answers to these questions, policymakers The main problem that New Zealand has encountered need to be clear about the nature of the benefits they with this system has been controlling the activities of expect from the exploitation of their fish resources and the foreign-registered vessels operating under charter in its importance of comparative advantage in determining the 32 Trade in Fishing Services generation of these benefits. A key requirement is to be so many years after UNCLOS, it is essential that the legal clear about the benefits upon which attention is focused, framework within which such trade occurs is clarified. distinguishing in particular economic benefits from eco- nomic impacts (see the Alaska case above). Although the As noted, in the absence of any legal requirement, a world appears to be headed toward a system of extensive, rational coastal state need only enter into FFAs if they secure fishing rights, there is still a long way to go. perceive this to be in their economic interest. If foreign fishers have a comparative advantage, it benefits coastal Many fish resources continue to operate under condi- states to import their services. Such a comparative advan- tions where fishing rights either do not exist or are too tage could arise for many reasons throughout the fish insecure to enable economic benefits to be generated value chain. For instance, foreigners may have compara- sustainably. What may be concluded about FFAs and tive advantage in the following operations: trade in fishing services in these cases? First, it should be » Fishing, due to skill or access to capital enabling mentioned that even where formal fishing rights do not them to operate more efficiently in capital-intensive exist, companies may—subject to local rules—invoke a fisheries; right to import labor if this cannot be supplied locally » Processing, due to the scale of operations; and at competitive prices. In Mauritania, for example, a sub- » Marketing, due to market access, proximity to cus- stantial number of crew on Mauritanian artisanal vessels tomers, and product branding. are Senegalese. It is important to understand that comparative advantage Where trade in fishing services cannot happen at the level is not always a function of the relative efficiency of the of individual rights holders, it has tended to occur within fishing industry of the coastal state compared with dis- the framework of government-to-government fisheries tant water fishers. Comparative advantage may also arise access agreements, a name that is somewhat unfortunate because the coastal state has other profitable sectors that because it tends to disguise the fact that these are frame- can make better use of its capital and labor resources than works through which coastal states import the services of can the fishing industry. Furthermore, distant water nations distant-water fishing companies. The UN Convention of may have few alternative labor opportunities and so may Law of the Sea is sometimes interpreted to mean that be prepared to fish at very low cost. As mentioned above, coastal states must enter into such access agreements with there is a need to promote understanding of comparative distant-water fishing nations if the coastal state has surplus advantage with respect to fishery policy development. fish resources. The legal analysis presented in this report asserts that there is in fact no such requirement. Instead, This report has mentioned changes in comparative advan- it is concluded that the power of the coastal state to set tage in passing on a number of occasions. Comparative the allowable catch is “sovereign and non-reviewable” advantage is neither fixed nor static. On the contrary, and the coastal state is authorized to determine its own comparative advantage will change through time, perhaps harvesting capacity in relation to the living resources of quite quickly in certain cases, as key economic parameters its EEZ. Consequently, a rational coastal state will only change. Indeed, many elements of coastal state fisheries declare a surplus if it is in its interest to do so. policy may best be interpreted as attempts to move the comparative advantage in their favor, for instance by pro- It is not clear, however, that this crucial conclusion is viding training programs for domestic fishers to increase widely understood, and some developing countries may their fishing skill levels. An important challenge for fisheries have developed foreign fishing agreements under the mis- policy in the future will be to design fishery management apprehension that this was a requirement of UNCLOS. instruments that provide the flexibility to deal smoothly Given the potential importance of trade in fishing ser- with dynamic changes in comparative advantage. vices and the likelihood that such trade may increase in the future as use rights become more firmly established Comparative advantage will determine the gains that are and as efforts to deal with illegal fishing bear fruit, even available from trade. These gains will be shared between Emerging Perspectives on Foreign Fishing Arrangements 33 stakeholders according to the terms of trade. This report The way in which the PICs have gone about turning the adopts a principal-agent framework to address this. In terms of trade in their favor by cooperating with one essence, the coastal state is the principal seeking to maxi- another, building capacity, and using the market offers mize returns from its fish resources and using foreign great lessons for other developing countries, especially fishers as its agents. The difficulty is for the principal to those in regional or subregional groupings. It also offers devise a set of institutional arrangements that will move a wonderful topic for South-South cooperation, and the the effective terms of trade in its favor—that is, that will funding for such cooperation should be sought as a matter provide an increasing share of the gains from trade. of urgency (see Recommendations). The various case studies throw some light on this issue. The case studies offer a wide range of suggestions as to how First, in the case the Pacific Island countries in particular, foreign fisheries access agreements, and indeed FFAs more regional cooperation between coastal states has been the generally, might be improved. Most notable are those con- key factor, explaining the improved returns that they have cerning Morocco, the EU northern agreements, and Chi- achieved from the exploitation of their tuna resources. nese distant water fishing. Some of these are outlined below. The lynchpin has been to devise harmonization arrange- ments that have created a framework of agreed measures, As with the exploitation of other natural resources, key ele- greatly reducing the extent to which one country can be ments are openness and transparency. An arrangement for played off against another, while leaving countries free to fishing along the lines of the Extractive Industries Trans- apply widely different approaches in their arrangements parency Initiative (EITI) would be worth investigating. with foreign vessels and in the development of their tuna fisheries more generally. Arguably the most crucial element revolves around build- ing states’ capacity to develop effective coastal state fish- A second important factor in the PICs success that has ery management systems—the institutional arrangements relevance to all coastal states has been the long-term under which all fish resource exploitation takes place, investment in fishery management institutional and either domestic or foreign. While the Argentina case study human capacity at national, regional, and subregional shows that difficulties may arise when FFAs are intro- levels. This capacity development has greatly increased duced under ineffective arrangements, the Alaska and the choices that most PICs now have in the way they Morocco cases both demonstrate that difficulties can also manage fishing in their waters and in their relations arise when foreign fishing is removed from an inadequate with foreign vessels. Capacity-building efforts should not management system. only target coastal states. The Chinese case study points to a number of areas where improving education and In developing internationally funded projects, it is awareness among Chinese fishers (or the Chinese flag- important not only to recognize the need to develop such state authorities) would contribute to improving sustain- capacity but also to appreciate the considerable time period able fisheries management. For instance, Chinese fishers required for reform to become established. The experi- may not be as skilled as the fishers from other distant ence of all countries that have successfully reformed their water nations, and they may face language-barrier issues fisheries shows that the process can take decades, begin- and other capacity problems, such as poor logbook and ning with some key fish resources and gradually moving to observer knowledge. As the New Zealand case study encompass others. The experience in the case studies here shows, they are not the only ones who would benefit from bears out this general observation. While undoubtedly capacity building. lessons have been learned from past transition, the case studies nevertheless show that the typical project cycle of The third factor has been the widespread adoption of three to five years is simply not long enough. effective, market-based arrangements for distant-water nations to supply fishing services to the PICs, resulting in Extending from the above, it is also important that foreign increasing fees and domestic development benefits. vessel activity be managed as an integral part of the 34 Trade in Fishing Services coastal state fisheries management framework rather than sum that is unrelated to the level of fishing exerted by the by a separate legal instrument. Ideally, distant water fish- distant water fleet, and some foreign fishing agreements do ing opportunities should be specified in terms of catch seem to come close to this ideal. (output) rather than effort (input). In any coastal state management system, there must be sufficient MCS capac- As coastal state fisheries management becomes more ity to ensure compliance with the rules and regulations to effective, there are increasing concerns over fishing effort ensure catch limits are observed and conservation meas- being transferred toward areas beyond national jurisdic- ures implemented. This must be complemented with flag tion. This is one threat facing the vessel day scheme in state control through VMS, verification of catches, and the Western Central Pacific. The most effective way of timely exchange of data. addressing this may be to reinforce coalitions of coastal states and their linkages to RFMOs to make it more In addition to focusing on coastal states, capacity-building expensive for distant-water fishers to fish the high seas in efforts should also target flag states. The Chinese case study an opportunity-cost sense, in that high-seas performance points to a number of areas where improving education could be taken into account in the allocation of fishing and awareness among Chinese fishers (or the Chinese flag rights to foreign fishers. state authorities) would contribute to improving sustain- able fisheries management. For instance, Chinese fishers Although not explicitly addressed by this study, it is easy may not be as skilled as the fishers from other distant to underestimate the influence that markets can have water nations, and they may face language-barrier issues on supply-side governance arrangements. Given the key and other capacity problems, such as poor logbook and role of FFAs in international seafood trade, demand-side observer knowledge. As the New Zealand case study arrangements such as corporate responsible procurement shows, they are not the only ones who would benefit from policies and labeling schemes (covering social, economic, capacity building. and ecological dimensions) are increasingly likely to impact the arrangements under which fish are caught and traded. A further problem that may affect some fishing agree- ments, and that is more related to controlling illegal The study has revealed the significant implications that fishing, concerns information about vessel ownership and international trade in fishing services has and could have reflagging. One option would be to require commercial in future for sustainable fisheries. In spite of this revela- fishing vessels to have permanent, nontransferable Inter- tion, the current dearth of information, combined with national Maritime Organization numbers. the lack of awareness and capacity to collect relevant sta- tistics, is a major constraint to the further consideration of One complex area to analyze concerns subsidies to distant- trade in fishing services as a key facet of effective fisheries water fleets. There is a tendency to see subsidies as bad policy and development. because they tend to increase fishing effort and are gener- ally considered to be economically inefficient. However, if Furthermore, there appears to be little awareness and a coastal state has an effective management regime in place understanding of the fact that the economic arguments (in the sense of avoiding overfishing at least), then subsidies underpinning free trade, particularly those relating to to distant-water fleets may offer an opportunity for it to comparative advantage, apply equally to trade in fish- increase the returns obtained from its fish resources. But ing services as they do to trade in, say, seafood products. such subsidies may have a negative impact on the structure Absent such awareness, there is a risk (which is borne out of the domestic fishing sector that is unwarranted by the by some of the case studies) that countries will adopt mer- fundamental economics and that will be difficult or expen- cantilist and protectionist policies in regard to fish resource sive to reverse if the subsidies are subsequently terminated. exploitation, to their ultimate disadvantage. If operated in this way, subsidies might equate to some- thing similar to predatory pricing. The ideal solution for Last but not least, there are often concerns that foreign the coastal state would be to obtain the subsidy as a lump fishing will adversely impact the domestic fishing sector, Emerging Perspectives on Foreign Fishing Arrangements 35 especially small-scale fishers. The most effective way to can be aired. The frequently proposed notion of reserving address these concerns would be to develop secure ten- or protecting areas for small-scale fishers (such as inshore ure systems and include all sections of the domestic sec- exclusion zones that are set aside for artisanal fishing) does tor, including small-scale fishers, within these. Devising not directly resolve the problem of which resources and appropriate rights systems for small-scale fishers is a com- what quantities may be caught. As shown by the Moroc- plex challenge, but experience with community-based and can octopus case, the small-scale sector is capable of rapid communally held rights offers some insights on which to expansion and resource overexploitation. What is needed is build in situations where allocating individual rights is a holistic and overarching management system that begins not feasible. Where small-scale fishers do not have such with the fish resource(s) in question (on an ecosystem basis) rights, they should at least be represented during nego- and that includes all fishers exploiting the resource(s), tiations concerning foreign fishing so that their concerns including, and perhaps especially, small-scale fishers. 36 Trade in Fishing Services CHAPTER EIGHT RECOMMENDATIONS The study reveals foreign fishing arrangements as key facets of international trade in fishing services that play a significant and increasing role in strategies to optimize the economic benefits from fish resource exploitation. The casework shows how several countries have made and are making use of trade in fishing services in a variety of ways. Given the breadth of issues presented and discussed in this report, it is difficult to distill a succinct set of recommendations. While the authors offer the following recommen- dations for immediate consideration, they recognize that readers may wish to develop them further. 1. UNCLOS and “surplus” principle. A workshop should be convened to consider the ramifications of the study’s key finding regarding the emptiness of the UNCLOS “surplus” principle. This might involve the preparation of a preliminary legal review and downstream documentation to generate a better global understanding, particularly by coastal-state policymakers. 2. Appreciation of TIFS as central to FFAs. This report, together with the output from the legal workshop, should be used to foster a great understanding of the central role that TIFS plays in foreign fisheries arrangements. Moreover, formal recognition should be given to the proposition that TIFS is as important as trade in fishing products by including the former in discussions at the FAO Sub-Committee on Fish Trade and at the FAO Committee of Fisheries. 3. Effective fisheries management. The centrality of effective fisheries governance and management frameworks in coastal states’ EEZ should be emphasized. Any potential benefits from FFAs should then be analyzed and considered within such legal frameworks. Given that effective management is increasingly likely to be underpinned by secure tenure arrangements, discus- sions should take place concerning the influence that such arrangements will have on improving the performance of international trade. 4. Small scale fishers. Following directly from the previous recommendation, immediate attention should focus on the requirement to include all partici- pants of the domestic sector—but particularly small-scale fishers—in processes to define more effective management arrangements based on secure tenure Emerging Perspectives on Foreign Fishing Arrangements 37 and use rights. Although devising appropriate statistical databases on fish service trade and to tenure and use rights systems for small-scale op- ensure this service is maintained over time. The erators may be especially challenging, experience logical intention of this would be to move trade in with community-based and communally-held fishing services into a more central position in the rights offers insights on which to build. Moreover, fisheries policy debate by building understanding whether or not small-scale fishers have such rights, of their underpinning legal and economic prin- their concerns should be fully represented during ciples. Finally, it will be important to begin raising negotiations concerning foreign fishing. the profile of trade in fishing services to highlight 5. Function and contribution of fisheries. Ef- their significance in the context of fisheries policy fort is needed to enhance awareness and under- and international development. standing in regard to the macroeconomic func- 8. South-South cooperation. South-South co- tion of fisheries. This should focus on the means operation and the exchange of knowledge and whereby fish resources, as renewable natural experience in best practice should be facilitated capital, can increase true sectoral contributions to and encouraged. This should assist coastal states GDP and represent a perennial source of wealth in learning from one another how they have to support national objectives for economic addressed the principal-agent problems that growth and welfare. Particular emphasis should be they face in order to turn the terms of trade in placed on building an international economic case their favor. The case studies bring out the impor- related to comparative advantage and how this tance of effective cooperation and of negotiating should underpin the case for TIFS and effective experience. In both of these areas and doubtless FFAs. Awareness raising should focus on coastal others, the processes by which several nations of states’ policymakers (but also flag states and donor the Western Pacific have turned the terms of trade agencies) to avoid the uninformed development in their favor through close cooperation, capacity of protectionist or mercantilist policies in the case building, and effective market-based management of fish resource exploitation. offer great lessons for other developing countries, 6. Benefits and beneficiaries of effective fish- especially those offering potential for regional or eries. As a corollary to the previous recommen- subregional groupings. dation, discussions should continue concerning 9. Invest in human capital. The development the benefits and beneficiaries of TIFS and fish of human and institutional capacity is crucial resource exploitation more broadly. Much cur- and closely linked to all of these recommenda- rent policy debate is dominated by a vision that tions. More efforts should be made to identify sees resource harvesters (fishers) as the key stake- and fund appropriate capacity strengthening. holders. However, if ownership of the resource is Such efforts are not necessarily expensive but considered to be vested in all citizens, a case can could fall foul of the typical three- to five-year be made for a beneficiary base that extends well project time scales given the protracted time beyond those exploiting the resource. period required to achieve positive outcomes. 7. Data and awareness raising on TIFS. The Space must be found within both donor and re- international community should identify an orga- cipient frameworks for such long-term capacity- nization capable of developing and maintaining building investments. 38 Trade in Fishing Services CHAPTER NINE REPORT SUPPLEMENT CASE STUDY SUMMARIES This report supplement presents short summaries of all eight case studies. While these are intended to provide a flavor of the main findings respective to each, the authors urge the reader to delve into the full appendices in order to provide the complete picture. FOREIGN FISHING AGREEMENTS IN THE WESTERN PACIFIC This case study (appendix B) was prepared by Les Clark and presents the case of foreign fishing arrangements in the Western Pacific, detailing the process through which the Pacific Island countries (which here means the members of the Forum Fisheries Agency) are gradually, but surely, increasing the economic returns that they receive from their tuna resources.27 Approximately 30 to 35 years after the establishment of their EEZs, most Pacific Island countries have a mix of arrangements in place for foreign fishing, including access agreements, charters and joint ventures, serving a mix of financial and eco- nomic objectives. Some PICs are heavily dependent on economic returns from these arrangements, which provide 40 to 50 percent of national government revenues, as well as providing jobs and private incomes. The data available indicate that access revenues grew from 3.5 to 4 percent of landed value in the early 1980s, earning $13.5 million in 1981, to 6 to 8 percent of landed value, earning $60 to $80 million in the 2000s. While much of this increase was due to the increase in the landed value of the catch, especially with the development of the purse seine fishery, there was also substantial additional growth from the early 1980s to the later 1990s, resulting from factors such as increased coordination among PICs and enhanced fishery management capacities. Indeed, as the Appendix makes clear, the process is far from finished. This is perhaps a good place to issue a general 27 warning that each of the Appendix is as up to date as possible but fisheries policy can change very quickly. Emerging Perspectives on Foreign Fishing Arrangements 39 By the mid-2000s, there was a growing feeling that returns progress and faces a number of threats, an important one from foreign fishing arrangements had reached a ceiling of which is the freedom to fish ABNJ at no cost. Fish- and that further economic gains would be more likely from ing these areas has traditionally not been very profitable, domestic and shore-based development rather than access but as day prices increase, their relative attractiveness revenues. However, institutional innovation by the coastal will increase and effort can be expected to migrate there states through the introduction of a purse-seine Vessel day where it would not face any effective constraint given scheme (VDS) has been a game changer for the eight PICs the RFMO conservation and management measures that are Parties to the Nauru Agreement, with access rev- currently in place. enues for some parties reported as doubling and more. The expectation is that this increase in revenues will increase This external threat to the VDS and its adverse economic further in the future. consequences for developing states must be a primary focus for efforts to sustain and increase coastal state bene- fits. Ultimately, it may require a review of the current Fish AREAS BEYOND NATIONAL Stocks Agreement and the RFMO framework. Before JURISDICTION (ABNJ) going that far, however, coastal states may be able to profit by ensuring that ABNJ fishing is not costless for distant- FISHERIES water vessels. One option would be for the coastal states to This case study (appendix C), written by Tom McClurg, refuse licenses to such vessels to fish within their respective discusses the problems presented by fishing in the ABNJ. EEZs (as happens to some extent already). Second, in the It complements the previous case study because it uses the longer term, the RFMO may be required to restrict ABNJ Western and Central Pacific Ocean case as an example on fishing if it can be shown that such fishing undermines which to base the discussion. measures taken within areas of national jurisdiction (the VDS) or that it is contrary to the interests and aspirations This paper discusses the ABNJ implications of the shared of coastal states. tuna fisheries of the WCPO. It highlights the critical role that the design and implementation of effective frame- works for cooperation has in addressing shared fisheries REPORT ON FOREIGN management and, most importantly, the quality of gov- FISHING: MOROCCO CASE ernance exercised by participants in those frameworks. STUDY OF THE VARIOUS The challenge is to benefit coastal states through the bet- ARRANGEMENTS IN FISHING ter management of fisheries that extend well beyond their COOPERATION RELATIONS jurisdiction in situations where each individual state may This case (appendix D), prepared by Mohamed Rouchdi, have only a minor stake in those fisheries, which it shares discusses the way in which Morocco has used foreign fish- both with other coastal states and the high seas. ing services over the past 30 or so years both for the imme- diate benefit of the Moroccan nation and as a means to The paper identifies the key steps that are required for the develop the national fisheries sector. It also highlights successful management of any fishery. The first step is to some difficulties that have arisen. define the fishery management unit in terms of species to be fished, in which area, using which method. It has so far Taking its cue from the relevant articles of UNCLOS and proven elusive to define such units at the RFMO level, but with a policy that sought to maximize benefits from its fish the coastal states have made some progress through the resources, Morocco implemented plans to develop and introduction of the vessel day scheme referred to above sustain its fisheries and developed various cooperation (section 2). approaches with foreign countries. However, despite the great advances made, the VDS Arrangements used included chartering foreign vessels, remains, as is also recognized in appendix B, a work in developing joint-venture companies, and signing fishing 40 Trade in Fishing Services agreements with the EU, the Russian Federation, and try but considers the important generic issue of how for- Japan. Each of these contributed to the development of eign fishing services may affect coastal-state small-scale Moroccan fisheries and generated economic and social fishers. benefits through both their direct financial contribution and their support to the development of the sector. The impacts may be positive or negative, but there is a ten- dency for commentators to focus on the negative aspects The agreements with Russia and Japan did not generate and seek to protect small-scale fisher interests. Negative very large direct contributions, due to their limited extent interactions tend to be found in the direct targeting of the and their nature (limited exclusively to the exploitation of same species, the use of the same space, or competition small pelagics for the former and to a seasonal tuna activ- in fish product markets. Many of these interactions are ity for the latter). The same was not the case, however, similar to those that occur between small-scale fishers and with the successive agreements with the EU. The direct domestic industrial fishers, but the weakness or absence financial contribution from these agreements culminated of institutional frameworks governing foreign fishing may in a payment of some €125 million per annum from worsen the problems in this case. 1995 to 1999. Key policy initiatives to reduce interactions and strengthen Despite these advantages, the assessment in Morocco institutions include the development of international was that the presence of the foreign fleets and their very guidelines to highlight the importance of transparency high levels of exploitation were important factors in the and of considering small-scale fishers needs and aspira- decline of national fish stocks and in the fall in the prof- tions when negotiating agreements, the segregation of itability and development of the national fishing fleet. fishing activities, investment in MCS, and decentraliza- Following this, Morocco decided to reserve fishing for its tion of fisheries management. However, each of these national fleet, and there was no agreement for a number approaches can be flawed and even counterproductive in of years. practice, leading to the exclusion or marginalization of small-scale fishers from political processes or the risk of The partnership agreement of 2005 was intended to excluding and cornering the existing rights of small-scale herald a new era in international relations that took into fishers. account the requirements for sustainable fishing and the development needs of the national fisheries sector. Fish- It is also important to recognize that foreign fishers are ing opportunities are more limited, and high-value species not necessarily distant-water large-scale commercial (octopus and shrimp in particular) are excluded from the operators. They may also include both large-scale and agreement. As a result, the financial return to Morocco is small-scale foreign fishers from within the region, who now around €40 million per annum. So far the elements may be migrant fishers or engaged in transboundary of partnership and economic, technical, and scientific fishing. These fishers often gain access under regional integration that underpin these so-called “new genera- economic arrangements rather than through fisheries- tion” agreements have not made any real progress specific agreements. As a result, while they may make important contributions to landings, local economies and food supply, and technology transfer, they are not well INTERACTION BETWEEN represented in national policies and regulatory frame- FOREIGN FISHING works. AGREEMENTS AND SMALL-SCALE FISHERS EUROPEAN UNION One aspect of foreign fishing that raises particular con- NORTHERN AGREEMENTS cern is how it may impact domestic fishers and, in partic- This case study (appendix F), written by Suzannah ular, small-scale fishers. This study (appendix E), written Walmsley, explores the European Union’s bilateral fisher- by Robert Arthur, does not relate to any particular coun- ies agreements in the northern hemisphere. Agreements Emerging Perspectives on Foreign Fishing Arrangements 41 with Norway, Iceland, and the Faeroe Islands are based on reciprocal exchange of quotas, whereas Greenland CHINESE DISTANT-WATER has a fisheries partnership agreement (FPA) similar to the FISHING ACTIVITIES southern agreements, with EU vessels fishing within the This case study (appendix G), written by Tabitha Mallory, Greenlandic exclusive economic zone in exchange for a discusses China’s distant-water fishing activities. China financial contribution for access and for the support and is a significant DWF nation. Official sources reported a implementation of Greenlandic sectoral fisheries policy. total of 2,429 vessels operating in ABNJ in 2012, and it is expected that this fleet will continue to grow. Although One reason for including these agreements was to provide official sources report that China’s DWF industry pro- some insight into differences in agreements with countries duced 1.223 million tons of catch valued at $2.17 billion in the southern hemisphere. In the end, only one south- in 2012, some fisheries experts have estimated that the ern agreement case study was completed, so comparison real amount and value of DWF catch may be as high as is difficult, but the northern agreements case remains of 4.604 million tons valued at €8.93 billion per year. The interest in its own right. high-seas share of this catch has been increasing and stood at 52.8 percent of overall catch in 2012. These agreements aim to coordinate fishing activity between the EU and neighboring countries, given that China has 120 licensed DWF Chinese companies, which many of the stocks targeted by EU vessels in the Northeast employ 43,000 people, with more than 100 representa- Atlantic and North Sea are shared stocks that are jointly tive offices, joint ventures, and logistical bases around managed between the coastal states (the EU, Norway, Ice- the world. Although official sources report that China land, and the Faeroe Islands) or managed through the inter- had DWF operations in 38 countries in 2012, evidence governmental North-East Atlantic Fisheries Convention. suggests that Chinese DWF vessels are active in 93 coun- tries. China’s access fees are estimated to be between The EU-Norway agreement is the EU’s most important $21.1 million and $63.1 million total. fishing agreement, providing for shared access to nearly 750,000 tonnes of fish worth in excess of €2 billion. Estab- The DWF industry has strategic importance to China for lishing the precise value of the agreement itself is diffi- employment and business opportunities, food security, cult if not impossible since quotas are exchanged using reducing pressure on China’s resources, technological a system of cod-equivalent weights. The value is some- development, and safeguarding China’s rights and inter- where between €55 million and €125 million per annum, ests globally. depending on prices used. Chinese sources emphasize the importance of managing The reciprocal nature of the agreements means that the domestic fish stocks for long-term ecological and food- benefits go directly to the fishers involved in catching the security reasons. However, so far, DWF policies do not quotas. Quota division and swaps are based on histori- reflect this concern to the extent that domestic policies cal fishing patterns and adjusted with respect to current do. Perhaps for this reason, Chinese distant-water fish- interest, with the fishing industry involved in identifying ing arrangements have been criticized for their lack of appropriate fishing opportunities under the agreements. transparency and association with corruption, inequitable The negotiation of fishing opportunities through this cen- benefit sharing, poor flag-state control, and conflict with tralized system may limit the overall profitability of the small-scale and artisanal fisheries. Yet almost all foreign agreements but ensures the benefits are evenly distrib- arrangements have attracted similar criticism. Concerned uted between the parties. The benefits to each party are with its image, status, and reputation in the world, the affected by market prices, the cost of fishing, and asso- Chinese government has, however, begun to acknowl- ciated value-added activities and may also include the edge the need to ensure the sustainability of fish stocks in possibility to access larger, better-quality fish that may ABNJ. There remains a need to ensure policy coherence, fetch higher prices. however, because the measures that do exist in this regard 42 Trade in Fishing Services tend to be in conflict with other policies that support the There can be some market advantages for NZ companies expansion of the industry, for example fisheries subsidies, that involve themselves in charter operations. The domes- which may have been as high as $5.168 billion in 2011. tic partner gains tariff and quota-free access for their product under the name of their joint venture partner. This case study identified several lessons learned. One way to improve the terms for host countries is through Third, there are advantages to community quota holders regionally coordinated bargaining, as opposed to bilateral or small parcel holders in being able to combine char- negotiations where the Chinese side is advantaged because ter catching capacity without having to raise capital for of its size vis-à-vis the coastal state. Ownership informa- vessels of their own, particularly when their individual tion about Chinese vessels and Chinese reflagging are holdings would not support a vessel. A corollary is that an challenges to enforcing rules against illegal fishing. State- increased demand is created for annual catch entitlement owned enterprises command resources from the govern- or leased quota to the advantage of those who have small ment that give them an unfair advantage by skewing their quota holdings. This increases the value of their quota. profits in a more favorable direction. Capacity-building efforts to improve the skills not only of host countries but Fourth, foreign charter operations do not lead automati- also those of DWF nations like China would improve cally to the development of domestic processing and fisheries management. marketing arrangements. Nor do such operations on their own result in technology transfer. In fact, a high propor- tion of the New Zealand offshore catch continues with THE NEW ZEALAND foreign charter vessels in 2013. EXPERIENCE OF JOINT VENTURE FISHING Fifth, it is difficult for the coastal state to exercise control over the activity of foreign-registered fishing vessels in OPERATIONS: 1977 TO 2013 their zone without sovereignty. Some foreign charter oper- This case study (appendix H), written by Phil Major, ators place profit ahead of reputation, which, apart from discusses the way New Zealand has used different forms of its own problems, has tended to undermine the operations foreign fishing services over the past few decades. Follow- of those running legitimate operations both in the foreign ing the declaration of the New Zealand EEZ in 1977, the charter sector and in the domestic sector. As a conse- New Zealand government authorized a number of foreign quence of the damage to the New Zealand reputation, joint venture arrangements. These were reviewed in 1982, the government will require all foreign charter vessels to and the government allocated quota to a number of com- become New Zealand registered from 2016. panies based on their involvement in the fishing industry. These companies were able to choose foreign partners if they wished or to use domestic fishing capacity. Areas in THE BERING SEA POLLOCK which these companies were permitted to operate were FISHERY restricted to avoid conflict with domestic inshore vessels. This final case (appendix I), prepared by Jim Wilen, is slightly different from the others in that it discusses a A number of lessons emerge from the New Zealand expe- fishery that is no longer exploited by foreign fishers. The rience. First, using foreign-chartered vessels liberated New interest in this case is to show the process involved in its Zealand holders of quota and annual catch entitlements transition from an essentially foreign fishery into a U.S. from having to raise capital to invest in the vessels and domestic fishery. processing facilities needed to operate in the EEZ. The Bering Sea pollock fishery is the world’s second-largest Second, given a free market in fishing services, industry fishery in volume. The fishery was developed during the operators will choose the services that are the most eco- 1960s by Soviet and Japanese distant-water flotillas that nomical, using the cheapest combinations of capital and caught pollock with catcher vessels and delivered to float- labor for harvesting and transferring processing offshore. ing processors. Emerging Perspectives on Foreign Fishing Arrangements 43 With the extension of jurisdiction to 200 miles in the late race to fish among domestic participants, causing escalat- 1970s, the United States assumed control over the Bering ing conflict and waste throughout the 1990s. In 1998, the Sea fisheries and immediately initiated a process to gradu- all-important American Fisheries Act (AFA) gave offshore ally replace foreign fleets. New laws established deadlines and inshore sectors secure access to allocations and estab- to remove foreign fleets and granted priority access to lished the framework for harvester cooperatives in each countries willing to transfer know how and allow market sector. access. Under the AFA, excess effort has been removed, seasons The most common transition arrangements were simple have lengthened, and high-valued and market-responsive joint ventures whereby domestic catcher vessels deliv- products have been developed. The cooperative frame- ered to foreign floating processors under arms-length work has been instrumental in increasing operational effi- market transactions. The transition was relatively rapid ciency and resolving residual externalities such as bycatch (approximately 10 years), aided by excess catcher vessel and habitat destruction. capacity, domestic vessel construction subsidies, cheap Norwegian shipbuilding capacity, knowledge transfer The main lesson from the pollock experience is that from early whiting joint ventures on the Pacific Coast, and domestication alone does not guarantee that a host coun- entrepreneurship. try can capture a fishery’s wealth. Without secure access privileges, rents will be wasted regardless of which country But whereas the fishery became Americanized by 1990, is prosecuting the fishery. Real wealth generation that can foreign capital was essentially replaced by similarly large be captured by domestic interests only emerges if incen- amounts of domestic capacity. This excess capital fueled a tives are properly aligned with secure access privileges. 44 Trade in Fishing Services APPENDIX A THE LEGAL AND ECONOMIC PRINCIPLES UNDERLYING FOREIGN FISHING ARRANGEMENTS Gordon R. Munro become evident, without a clear understanding of the legal prin- ciples, it is not possible to comprehend the economic principles Clark, Munro and Associates underlying FFAs. West Vancouver, B.C., Canada LEGAL PRINCIPLES ABSTRACT The discussion of the legal principles underlying FFAs will be The key legal question pertaining to foreign fishing arrangements based upon the writings of Professor William T. Burke, Professor (FFAs) is whether the coastal state is obliged by the 1982 UN Emeritus of Law and Marine Affairs, University of Washington. Convention of the Law of the Sea to grant access to distant water Professor Burke is a leading world authority on international law fishing states (DWFSs) to the coastal state exclusive economic zone applied to fisheries, and is author of the book: The New International (EEZ). Article 62 of the Convention, which contains the “surplus Law of Fisheries: UNCLOS 1982 and Beyond, published in 1994 by the principle,” appears to state that the coastal state is so obliged, if Oxford University Press (Burke 1994). the coastal state’s harvesting capacity falls short of the allowable In 1983, the Food and Agricultural Organization of the United catch in a given fishery within the EEZ. That said, the “surplus Nations (FAO) mounted the Expert Consultation on the Condi- principle” is empty. A rational coastal state will, therefore, grant tions of Access to the Fish Resources of the Exclusive Economic DWFSs access to its EEZ if, and only if, it is in the economic inter- Zones (FAO 1983). Burke was invited to participate and was called est of the coastal state to do so. DWFSs that are granted access upon to prepare for the Consultation a paper entitled “1982 Con- to the coastal state EEZ should thus be viewed as agents of the vention on the Law of the Sea Provisions on Conditions of Access coastal state, providing the coastal state with harvesting, processing, to Fisheries Subject to National Jurisdiction” (Burke 1983). The or marketing services. Since the DWFSs are, by definition, foreign heart this paper is incorporated in The New International Law of Fish- to the coastal state, the coastal state is then to be seen as import- eries (Burke 1994). In the book, Burke updates and expands upon ing such services. The economic argument for importing, or not what he had written in his paper, but alters none its basic con- importing, these services rests upon the doctrine of comparative clusions. Hence, we can continue with confidence to draw upon advantage, and as such becomes a variant of the argument for free Burke’s 1983 FAO paper, which has the virtues of both thorough- trade from international economics. If the DWFSs are to be seen as ness and succinctness. agents of the coastal state, then Principal-Agent analysis, employed In the discussion to follow, we shall, for the time being, ignore widely by economists in many areas, becomes of utmost relevance. complications arising from the fact that some of the fishery A central aspect of such analysis is that the principle can never resources within the EEZ may be shared with other states.1 With expect to exert perfect control over the agents. A weak principle this in mind, it can be stated that the key question to be addressed can find itself being manipulated and abused by its agents. This in is the legal obligations of coastal states to grant DWFSs access turn means, in the context of FFAs, that the resource management to their intra-EEZ fisheries. The answer to this question can be capacity of the coastal state is of fundamental importance. It can found within the 1982 UN Convention on the Law of the Sea easily be demonstrated that a FFA, which could be of great eco- (UN 1982), arising from the Third UN Conference on the Law nomic benefit to the coastal state if the coastal state had adequate of the Sea, 1973–82. Hereafter, we shall refer to the Convention resource management capacity, could actually be damaging to the as UNCLOS. coastal state, if that state’s resource management capacity proved The primary article in UNCLOS relating to this question to to be seriously lacking. If the coastal state fishery resources extend FFAs is Article 62, followed by Articles 56, 61, and 297. Of second- beyond the coastal state EEZ into the adjacent high seas, and are ary importance are Articles 69, 70, and 300 (UN 1982). there subject to RFMO governance, additional complexities arise. Article 62(2), which reads as follows, contains within it what is Having said this, it is further argued that well designed FFAs may, popularly referred to as the “surplus principle”: in fact, serve to strengthen the RFMO, and thus strengthen the The coastal State shall determine its capacity to harvest the management of the resources. living resources of the exclusive economic zone. Where the coastal State does not have the capacity to harvest the entire allowable INTRODUCTION catch, it shall, through agreements or other arrangements and The purpose of this appendix is to explore the legal and economic principles underlying foreign fishing arrangements. By necessity, 1 At a later point, complications arising from the international sharing of such we commence with a discussion of the legal principles. As will resources will come up for discussion. Emerging Perspectives on Foreign Fishing Arrangements 45 pursuant to the terms, conditions, laws, and regulations referred by over-exploitation” (UN 1982, Article 61(2)). Even this seem- to in paragraph 4 [Article 62(4)], give other States access to the ingly reasonable constraint is not really binding. Another state surplus catch, having particular regard to the provisions of arti- (for example, a DWFS), believing that a particular coastal state is cles 69 and 70, especially in relation to the developing States endangering a given fishery resource within the coastal state EZZ, mentioned therein (UN 1982, Article 62(2)). could object. Under UNCLOS, this could lead, it would seem, to the objection being dealt with under the Disputes Settlement So there we have it. Where the total allowable catch exceeds mechanism (UN 1982, Part XV). Yet, Article 297(3(a)) would the coastal state’s harvesting capacity, that is where a surplus exists, exempt the coastal state from having to see the dispute subject to the coastal state is obliged to grant access to other states, certainly settlement, unless the perceived endangerment of the resource was including DWFSs, albeit subject to conditions laid down in Article seen to be extreme (UN 1982 Article 297(3(b))). Then, the matter 62(4), to be discussed. would be brought before a conciliation commission. If the com- The obligation of coastal states seems certainly seems straight- mission found against the coastal state, the coastal state would be forward enough. Nonetheless, it will be the conclusion of this sec- under no obligation to accept the commission’s findings and rec- tion that the “surplus principle,” set forth so clearly in Article 62(2), ommendations (UN 1982 Article 297(3(c))). In conclusion, Burke is essentially empty. sees the power of the coastal state to set the allowable catch to be There are two fundamental questions arising from Article 62(2). “sovereign and non-reviewable” (Burke 1983, p. 29). In essence, The first is how the allowable catch is to be determined in light of the coastal state can do what it wants in terms of setting the allow- Article 56(1), which states that “in the exclusive economic zone, able catch. the coastal State has sovereign rights for the purposes of exploring, The answer to the second question, the determination of the exploiting, conserving and managing the natural resource, whether coastal state’s capacity to harvest the allowable catch, is much eas- living or non-living” (UN 1982, Article 56(1)). The second key ier. The coastal state is authorized by Article 62(2) of UNCLOS question, of course, is how the coastal state capacity to harvest the to determine its own harvesting capacity in relation to the living allowable catch is to be determined. resources within its EEZ (Ibid.). With regards to the first question, the determination of the If the setting of the allowable catch is wholly within the discre- allowable catch, we commence with Article 62(1), which states that tion of the coastal state, and if the determination of the coastal the coastal state shall promote the objective of optimal utilization state’s harvesting capacity is also wholly within the discretion of of the living resources within the EEZ, and shall do so without prej- the coastal state, then it follows that a rational coastal state will udice to Article 61, which, in turn, calls upon the coastal state to not declare there to be a surplus, unless it is in the interest of the determine the allowable catch of living resources within the EEZ coastal state to do so. To quote Burke once more, “it is apparent (UN 1982, Article 62(1)). As Burke points out, it is the coastal state, that giving access [to DWFSs] is not meaningfully an obligation of and the coastal state alone, that can implement this goal of opti- the coastal State. If the coastal State decides that declaration of mum utilization (Burke 1983, p. 29). The question is then whether a surplus meets its interest, only then is it required to give access Article 61 imposes constraints upon the coastal state in setting the under terms and conditions it prescribes” (Burke 1983, p. 30). allowable catch and in determining management measures in gen- It is true that, if a coastal state flagrantly refuses to declare eral. In particular, must the coastal state, in setting the allowable both an allowable catch and its harvesting capacity, the matter can catch, apply the maximum sustainable yield (MSY) management be brought before a conciliation commission (UN 1982, Article criterion? Basically, the answer to the question is no. 297(3(b)). Once again, if the commission finds against the coastal Article 61, after stating that the coastal state is to determine the state, the coastal state is not obliged to accept the commission’s allowable catch of living resources within the EEZ, does indeed findings (UN 1982, Article 297(3(c)). state that the coastal state management measures should be such In summing up, regarding UNCLOS Burke states that “the as to maintain or restore populations of harvested species at levels short of the matter is that the treaty contains virtually no restric- that produce the maximum sustainable yield. However, the article tion on coastal State authority to forbid access to foreign fishing. goes on to state that the coastal state is to implement the MSY For practical legal purposes the treaty provides no remedy even for criterion “as qualified by relevant environmental and economic some arbitrary actions to deny foreign access” (Burke 1983, p. 30). factors” (UN 1982, Article 61(3)). The consequence of this quali- If a coastal state declares a surplus, and grants access to DWFS fication, argues Burke, is that, in seeking to promote optimal utili- fleets, it is to do so with reference to terms, conditions, laws, and zation of the living resources within the EEZ, the coastal state is regulations, referred to in Article 62(2), which are to be found in under no obligation to observe or maintain a particular level of Article 62(4). The article lists 11 such terms, conditions, and so on, utilization above zero from a particular fishery (Burke 1983, p. 29). which, inter alia, certainly allow the coastal state to demand remu- He continues, “in light of Article 62(1) [promoting the objective of neration from DWFS fleets being granted access. The coastal state optimal utilization], Article 61 authority could be exercised to set is expected to give away nothing for free. Indeed the list, although an allowable catch or permissible yield at whatever level the coastal being broad, is not meant to be exhaustive. The terms, conditions, State determines to be in the best interests of its harvesting effort or and so on are illustrative only (Burke 1983, p. 31). whatever lawful interest it seeks to enhance” (Ibid.). They are, however, to be consistent with UNCLOS, and The one apparent constraint imposed upon the coastal state is must not be in violation of Article 300, the good faith and abuse that Article 61 requires the coastal state “to ensure that the main- of rights article (UN 1982, Article 300). Thus, for example, the tenance of the living resources in the [EEZ] is not endangered coastal state must not declare a surplus and then impose terms and 46 Trade in Fishing Services conditions that effectively bar all DWFSs seeking access. Yet even efits to the coastal state fishing industry, nor on such benefits to this requirement is weak. Burke maintains that, if it is alleged that a selected regions of the coastal state. Further, we make it clear from coastal state’s terms and conditions pertaining to access for DWFS the outset that, when talking about economic benefits from fish- fleets violate Article 300 of UNCLOS, or are allegedly inconsist- ery resources, we use a broad definition of economic benefits that ent with other provisions of UNCLOS, the coastal state cannot be explicitly includes non-market, as well as market, benefits. challenged in compulsory dispute proceedings under Part XV of The World Bank, in its 2005 report Where is the Wealth of Nations? UNCLOS (disputes settlement), unless the coastal state consents to (World Bank 2005), takes the position that both the current national being challenged (Burke 1983, p. 31, n. 1). income and prospects for future development of any nation rest There remains the question of which states, if any, are to be upon that nation’s portfolio of real capital assets. Within this portfo- granted preferential access, if the coastal state declares a surplus. lio are to be found real capital assets in the form of natural resources Articles 62(3), 69, and 70 call upon the coastal state to give pref- (World Bank 2005, pp. 1–5). Among a coastal state’s sub-portfolio erential access to landlocked and geographically disadvantaged of natural capital assets are capture fishery resources within the states and to developing states in the region or sub-region (UN coastal state EEZ(s). The economic objective of managing these 1982). Burke argues persuasively that these requirements carry lit- fishery resources (optimum utilization) is to be seen as that of ensur- tle weight (Burke 1983, pp. 32–34). Article 62(3) also calls upon ing that these natural capital assets make the maximum economic the coastal state “to minimize economic dislocation in States whose contribution to the coastal state as a whole through time. Since these nationals have habitually fished in the zone or which have made natural resources are renewable, they are capable of yielding eco- substantial efforts in research and identification of stocks” (UN nomic returns to the coastal state for an indefinite period of time. 1982, Article 62(3)). In light of our discussion of the legal principles underlying The coastal state, which wishes to rid itself of DWFS presence FFAs, the rational coastal state will enter into FFAs if, and only in its zone, might agree, although legally not required to do so, to if, they further the objective of ensuring that the aforementioned establish phase out arrangements for those DWFSs with a history fishery resource assets make that maximum economic contribu- of fishing in the zone. What Article 62(3) emphatically does not tion to the coastal state through time. Thus, the establishment of mean, argues Burke, is that a DWFS can claim historical fishing FFAs is to be viewed as a component of the coastal state economic rights to an intra-EEZ fishery in which the coastal state declares management of the intra-EEZ fishery resources. A few comments there to be a surplus (Burke 1983, pp. 34–35). on the economic management of capture fishery resources are in Burke gives the following example. Suppose that a coastal state order. declares a surplus in a given intra-EEZ fishery, and decides further It has often been remarked that the management of capture to auction off access to the surplus. The only interested DWFSs are fishery resources has been, and always will be, difficult. With DWFSs A, B, C, D, and E, all of which had a long history of participat- few exceptions, capture fishery resources are mobile and are not ing in the fishery prior to the establishment of the coastal state EEZ. observable prior to capture. The relevant species interact with one DWFS D wins the auction. Legally, the coastal state would be justified another, and are in addition subject to environmental shocks, all of in denying access to DWFSs A, B, C, and E (Burke 1983, p. 35). which are not readily observable, let alone measurable or predict- To conclude, it is the coastal state, and the coastal state alone, able (Bjørndal and Munro 2012, Ch. 1). that determines whether or not there is a surplus with regards to a The fact that such resources are mobile and difficult to observe fishery within the coastal state EEZ (recall that we are not consid- prior to capture has meant in the past that it has been difficult, or ering the complications arising from shared stocks). If the coastal more to the point costly, to establish effective property rights to state declares a surplus to exist, then the coastal state is given wide these resources, be these property rights private or public in nature powers in laying down terms and conditions of access. It cannot be (Sutinen and Andersen 1985). As a consequence, these resources overemphasized that the coastal state is called upon to give away came to be seen as the quintessential “common pool” (that is, open nothing for free. to all) resources. Why then would a coastal state declare there to be a surplus, or It has, for sixty years, been clearly recognized by economists that surpluses, on more than a temporary DWFS phase out basis? Sev- the common pool nature of these resources can readily lead to over- eral coastal states have, in fact, responded by saying, “why indeed.” exploitation of the resources and economic waste (Gordon 1954). The answer to the question can be seen in terms of the admo- If we regard such resources as natural capital, it easy to demon- nition of Article 62(1) that the coastal state “shall promote the strate, for example, that no rational exploiter of the resources will objective of optimum utilization of the living resources within the have any incentive to invest in them, by reducing harvesting, under exclusive economic zone” (UN 1982, Article 62(1)). This takes us “common pool” conditions. On the contrary, the rational exploiter into the realm of economics. will be given the incentive to regard the resources as if they were non-renewable, to be depleted at all possible speed. The World Bank and the FAO, in their 2009 report, The Sunken ECONOMIC PRINCIPLES Billions, estimate that world capture fishery resources would have We commence by stating that, when we consider coastal state “opti- to be at least doubled in size, if they were to come close to making mum utilization of the living resources within the EEZ,” we view the maximum possible contribution to the world economy (World optimum utilization in terms of the economic benefits accruing Bank 2009). The required doubling reflects the excess disinvestment from the resources, loosely referred to as resource rent, to the in this form of natural capital that has occurred in the past, due to coastal state as a whole. We are not focusing on the economic ben- their common pool nature. Emerging Perspectives on Foreign Fishing Arrangements 47 Common pool conditions can lead to a whole set of perverse The Principal (coastal state) may acquire the services of Agents outcomes. For example, in any normal industry, a reduction in (DWFSs) to undertake one, two, or all three of these tasks. production costs is to be welcomed as a benefit to the industry If the Principal acquires the services of one or more Agents to and to society as a whole. In a common pool capture fishery, a undertake one or more of these tasks, the Principal faces a funda- reduction of harvesting costs due, for example, to technological mental constraint. The Agents will not perform these tasks, unless advances in fishing, will make a bad situation worse, by intensifying each receives a minimum net economic return through time. In the the resource overexploitation (Bjørndal and Munro 2012). case of DWFS Agents, these minimum net economic returns can Prior to the Third UN Conference on the Law of the Sea, be thought of in opportunity cost terms, namely the net economic referred to in the previous section, coastal state jurisdiction over return that each DWFS fleet could be expected to obtain in its next marine capture fishery resources did not extend beyond 12 nautical best form of employment (Clarke and Munro 1987). miles from shore. The remainder of the oceans constituted the high Over and above this, a strict hierarchical relationship exists in seas, where the capture fishery resources were true common pool which the Principal chooses an incentive scheme (for example, set resources. The 1982 UN Convention on the Law of the Sea, arising of regulations or terms and conditions of access) to be applied from the Conference, led to establishment of the 200 nautical mile to the Agents. The Principal’s incentive scheme, along with the coastal state EEZ regime, which drastically reduced the amount of actions taken by the Agents, determines both the economic returns capture fishery resources to be found in the high seas. to the Agents and to the Principal. As seen from the perspective of For all intents and purposes, the coastal state has property the Principal, a first best situation exists when two conditions are rights to the capture fishery resources within the EEZ (McRae and met. First the economic returns to the Agent(s) are held to the mini- Munro 1989). The common pool problem was thereby mitigated, mum. Secondly, the Principal is able, at minimal cost, to specify, but it was not eliminated. As history has demonstrated painfully, it contractually and enforceably, the actions of the Agents. Wishes, is one thing for a coastal state to be granted legal property rights urges, and desires of the Agents, contrary to the best interests of to its intra-EEZ capture fishery resources, but it is quite another the Principal, are entirely suppressed. The Agents are essentially for the coastal state to exercise these rights effectively, or to devolve robots. these rights upon individuals or groups within the state (Bjørndal In the normal second-best situation, the Principal lacks the and Munro 2012). power, or more to the point finds it too costly, to force a set of If the coastal state is ineffective in exercising these property actions upon the Agents. The Agents thus have some freedom of rights, in its management of the intra-EEZ fishery resources, then choice. The Principal can hope to influence the Agents’ choices, the capture fisheries will become de facto common pool in nature, only indirectly through the incentive scheme. This gives rise to the with all that it implies. Such an outcome has a direct bearing on concept of an agency cost, which is the difference between the actual the desirability of establishing FFAs. An FFA, which could have return to the Principal, and what it would receive under a first best a beneficial economic effect for a coastal state with well managed situation. It reflects the insufficiency of the Principal’s incentive fisheries, could, if the fisheries were mismanaged, make a bad scheme in compensating for its inability to monitor perfectly the situation worse. Agents’ actions. At the heart of the Principal-Agent problem is Let us commence by assuming for the time being that the coastal monitoring imperfection (Clarke and Munro 1987). state intra-EEZ fisheries are effectively managed. We then ask, What then are the reasons that the Principal (coastal state) might why, given the coastal state’s objective of maximizing the economic seek the services of the Agents (DWFSs)? We note that the DWFSs, returns from these resources through time, and given the fact that from the perspective of the coastal state, are, by definition, foreign. the coastal state is under no legal obligation to grant DWFSs access Thus, a coastal state, in obtaining DWFS services can be thought to its EEZ(s), the coastal state would even consider establishing one of as importing such services. or more FFAs. An approach that has been found useful by sev- To take but one example, suppose that the coastal state agrees eral authors in addressing this question is to turn from standard to the establishment of a joint venture between a domestic fishing fisheries economics to Principal-Agent analysis, accompanied by company and a DWFS fleet, in which the DWFS vessels harvest international economics (for example, Clarke and Munro 1987, the intra-EEZ resource for delivery to domestic fishing company’s 1991; Munro 1985, 1992; Queirola and Johnston 1989). Those onshore processing plants. One could, in this instance, think of the wishing a more formal approach to what follows are encouraged to coastal state as importing DWFS harvesting services (Munro 1992). turn to the annex to this appendix. If the reverse were the case, with domestic vessels delivering Principal-Agent analysis has, over the past several decades harvests to DWFS vessels with onboard processing capacity, one has come to be used very widely by economists (see, for example, could think of the coastal state “importing” processing services, Sappington 1991). We look to this analysis to provide an overarch- and marketing services. Fee fishing, in which the DWFS vessels ing framework. both harvest, process the fish, and market the finished fish product The Principal, which could be a person, a firm, or a state, wishes for a fee, or fees, could be seen as the coastal state importing the to see certain tasks undertaken. It is unable, or unwilling, to under- “complete package” of DWFS services (Munro 1985; Clarke and take these tasks itself, and so acquires the services of one or more Munro 1987). Agents. In the case at hand, the coastal state is the Principal and In the fee fishing case, the rational coastal state does not ignore the DWFSs are the Agents. We can think of the relevant “tasks” the post harvesting activities arising from the fishing operations. On as the harvesting of the fishery resource, processing of the catch the contrary, the rational coastal state will have a powerful interest and the marketing and distribution of the finished fish products. in its fish all of the way up the value chain. The DWFS are, after 48 Trade in Fishing Services all, the agents of the coastal state. In the annex, it is shown that, in a Let us consider a single fishery within a coastal state EEZ, in world of perfect information and one in which the rates of discount which the harvested fish go into the fresh market, and the fresh of the coastal state and DWFSs are equal, the net economic returns market only, with the consequence that we can abstract from pro- from the fishery (resource rent) would be maximized through time, cessing and marketing costs. All of the fish, however harvested, go from the coastal state’s perspectives. Furthermore, all of these net into the market of fishing state A, which has distant water fishing economic returns would accrue to the coastal state, except for the capabilities. We suppose further that there is an established world aforementioned DWFS minimums. price for the fish of €4.00 per kg. The coastal state is capable of Viewed in this fashion, the argument for the coastal state (Prin- harvesting the fish at a cost of €3.00 per kg. If it did so (abstracting cipal) acquiring the services of DWFS fleets (Agents) is to be seen as from all other costs), it would enjoy a net economic return of €1.00 a variant of the argument for free trade, resting upon the doctrine per kg. State A, if granted access, could harvest the resource at a of comparative advantage. The doctrine does, in essence, main- cost of €1.00 per kg—a comparative advantage once again. If A tain that states should specialize in the production of goods and were allowed to do so, obviously the global net economic returns services in which they have a comparative advantage, and through from the fishery would be increased. trade acquire the goods and services in which they have a compara- If the coastal state grants state A access to the fishery, it will in effect tive disadvantage. While the origin of the doctrine goes back to be importing the harvesting services of state A. The coastal state must the early 19th century (David Ricardo), present day international compensate (pay) A for its harvesting services. The compensation will, economists, such as Noble Laureate Paul Krugman, insist that the however, be implicit, rather that explicit. The access fee paid by A doctrine has lost none of its validity over the past two centuries must be sufficiently below €4.00 per kg to cover A’s harvesting costs. (Krugman, Obstfeld, and Melitz 2012). Thus, with respect to a par- In fact, in this simple stylized example, one can specify the ticular intra-EEZ fishery, the DWFS fleets may have a comparative range of negotiated access fees. They must lie between €1.00 and advantage in harvesting, processing, or marketing the finished fish €3.00 per kg. At €1.00, all of the gains from trade in services go products, or in all three. to A, while at €3.00 all such gains would go to the coastal state. Return to the example in which the DWFS vessels harvest the Suppose the access fees were set at €2.00 per kg. The gains from resource for delivery to onshore domestic processors. This would trade in services would then be evenly divided.2 make sense, if the DWFS fleet has a comparative advantage in Now let us return to the question of comparative advantage in harvesting, but not processing or marketing. The argument would fisheries. There are numerous reasons why a DWFS might possess a then be that, if a domestic fleet were put in place to harvest the comparative advantage in harvesting, processing, or marketing and resource, this would represent a commitment of produced capital distribution (see Munro 1985 for a full discussion). For example, so- and labor that could be used elsewhere in the economy (opportu- called factor proportions—such as relative abundance of labor and nity cost). If the coastal state has a comparative disadvantage in produced capital—can influence comparative advantage or disad- harvesting the resource, the state would be better off in seeing such vantage. Thus, suppose that a coastal state, which has a relatively capital and labor being used, not in the fishery, but rather elsewhere low abundance of produced capital, has offshore intra-EEZ fisheries in the economy. On the other hand, if the DWFS fleets possess that are capital intensive in nature. It then might well be determined a comparative advantage in neither harvesting, nor in processing, that the coastal state has a comparative disadvantage in both har- nor in marketing then there is no obvious economic case for grant- vesting and processing the relevant resources in comparison with a ing the DWFS fleet(s) access. DWFS, which has a relatively high abundance of produced capital. It is perhaps useful at this point to draw upon an analogy. The There is in addition a special form of comparative advantage, coastal state Canada is a nation heavily dependent upon inter- pertaining to the FFA issue, not found in the standard literature on national trade, particularly in goods. Much of Canada’s trade is seaborne. Canada is quite capable of building and manning deep sea merchant ships. Indeed, at the end of the World War II, Canada 2 The implicit payment to A is: €4.00 − €2.00 = €2.00 per kg. This implicit had a significant deep sea merchant fleet. That fleet has long since payment covers A’s harvesting costs of €1.00 per kg. and gives A a share of the disappeared. Virtually all of Canada’s seaborne exports and imports resource rent equal to €1.00 per kg. The coastal state gains as well. If the coastal of goods are carried in foreign vessels. Canada is in effect importing state had done the harvesting of the resource, its resource rent would have been: foreign deep sea shipping services. The economic rationale for such €4.00 − €3.00 = €1.00 per kg. By importing harvesting services from A, the importation is quite simply that Canada has a clearly revealed com- coastal state enjoys resource rent equal to €2.00 per kg. parative disadvantage in deep sea shipping. Coastal state importation In the annex, we go into this issue in greater depth. As is implied by the of DWFS harvesting, processing, and marketing services is analogous above, we think of the coastal state in a fee fishing arrangement as making two to Canada’s importation of deep sea shipping services (Munro 1992). implicit payments to the DWFS(s), which we denote simply as a(t) and b(t). The Before proceeding further, let it be acknowledged that the a(t) payment is the payment to cover the harvesting, processing, and marketing importation of fishing services plus comparative advantage argu- plus distribution costs of the DWFS(s), while the b(t) payment represents the ment is least obvious in the case of fee fishing arrangements. After DWFS(s) share of the gains from trade in fishing services. The annex dem- all, it would appear that the exporter of services is paying the onstrates, to no one’s surprise, that there are upper and lower bounds to b(t). importer, which seems completely backward. The response is that Where the b(t) will lie within these bounds will, of course, be determined by one has to distinguish between explicit and implicit payments for relative bargaining. The rational coastal state will strive to push the b(t) as close imported services. Let us illustrate with the aid of a highly simplified to the lower bound as possible; the rational DWFS(s) will strive to do precisely example. the opposite. Emerging Perspectives on Foreign Fishing Arrangements 49 international economics. This arises from the inherent uncertainty While there has been some progress toward the aforementioned in fisheries management, the importance of which is evidenced by goal, it continues some 30 years later to be long term (Clark 2014). the increasing emphasis given to the Precautionary Approach to Nonetheless, this example brings up one important aspect of the fisheries management (Bjørndal and Munro 2012). comparative advantage argument. Comparative advantage is not If a fishery is subject to unpredictable negative environmental timeless. A nation’s comparative advantage or disadvantage in vari- shocks, or management errors due to uncertainty, the required ous industries will shift over time, as any respectable textbook on adjustment is made more difficult—for obvious reasons—and the international economics will point out. In the context of fisheries, produced and human capital engaged in the fishery is less mal- the fact that DWFSs today have a comparative advantage in the leable. DWFS fleets, because of their mobility, tend to be malle- harvesting, processing, or marketing of a coastal state’s intra-EEZ able with respect to specific fisheries. Such malleability may be fishery resources does not mean that they will have that compar- absent in coastal state produced and human capital engaged in ative advantage tomorrow. If over time the FFAs cease to be of the fishery. economic benefit to the coastal state, then the rational coastal state The Northern Cod resource off Atlantic Canada provides will plan to phase the FFAs out. a case in point. Prior to Canada’s implementation of EEZs, the The PICs did, and continue to, recognize the possibility of shift- offshore Northern Cod fishery was dominated by DWFS fleets. ing comparative advantage. The access arrangements that they Following the implementation of the Canadian EEZs, 95 percent have established have been stable, but in no sense are they to be of the resource was encompassed by the Canadian Atlantic EEZ. seen as being in perpetuity (Clark 1985, 2014). We shall discuss the Within that EEZ, the malleable DWFS fleets were phased out to be PICs in further detail when we examine Principal-Agent relations replaced by an expanded Canadian fleet. The Canadian-produced and the issue of agency cost. capital and human capital committed to the fishery proved to be The second example also comes from the South Pacific, except highly non-malleable. This non-malleability of capital made it very that it involves a developed, rather than developing, coastal state— difficult for the Canadian resource managers to respond quickly namely New Zealand. We draw heavily upon Major (2014). when it was discovered in the mid-1980s that the resource had When New Zealand established what was to be the fourth been much more heavily exploited than had been realized. It is largest EEZ in the world, it found under its jurisdiction valuable argued that these difficulties contributed significantly to the crash offshore groundfish resources in which the New Zealand fishing of the resource, which forced the Canadian resource managers in industry had hitherto shown little interest. There seems little doubt 1992 to declare a temporary Northern Cod harvest moratorium, that, if New Zealand had wished it, it could have ensured in time a temporary moratorium that continues to this day (Bjørndal and that its offshore fishery resources were harvested exclusively by New Munro 2012). Zealand-owned and operated vessels and the catches processed in We now point to two examples of the relevance of compara- New Zealand vessels and New Zealand onshore plants. It did not tive advantage to FFAs. The first consists of the Pacific islands face the constraints confronting the Pacific Island Nations and their region of the western and central Pacific. The Pacific Island Coun- offshore fishery resources. tries (PICs),3 as a consequence of the implementation of the EEZ In the late 1970s, after New Zealand had established its EEZ, regime, gained sovereign rights to immense tropical tuna resources. FFAs were permitted, which were fee fishing in nature. These were, The stated aim of PIC governments in the early days of the EEZ in fact, seen at the time as temporary arrangements, to be in place regime was to develop both national tuna fishing fleets and national only until domestic fishing industry was built up sufficiently to tuna processing industries (Clark 1985). Initial attempts to achieve undertake the entire harvesting of the resources and processing of this goal did not meet with success. To quote Clark: the catches (Major 2014, p. 1). In 1983, the New Zealand government introduced the As it turned out, having an enlarged fisheries zone did not make Deepwater Allocation System (DAS) for New Zealand compa- tuna any easier to catch or to market, and did not make it any nies with an interest in deepwater species, within the New Zea- easier for small island governments to obtain capital for invest- land EEZ. This in turn was followed by the Quota Management ing in the risky business of tuna fishing (Clark 1985, p. 22). System (QMS)4 in 1986, which underwent modifications in 1990 While not losing sight of their long term goal, the PIC govern- and 1992, described in detail in the accompanying appendix ments turned to FFAs with DWFSs, the most prominent of which (Major 2014). The 1992 modification is of particular signifi- in the early days were Japan and later the United States. In this cance as it led to quota being allocated to the Maori community, case, the DWFSs had what was close to an absolute advantage in on a community basis, to be managed by a community body: Te the harvesting, processing, and marketing of tuna. In turning to Ohu Kaimoana (TOK). FFAs, the PICs have recognized that they should think in terms of In any event, under the DAS and QMS, the relevant compa- extracting resource rent, not just at the harvesting stage, but right nies, and later TOK, were given the right, if they so wished, to up the value chain (Clark 2014, p. 18). charter foreign-owned vessels for harvesting purposes. So-called foreign charter vessels (FCVs) led to New Zealand importing of fisheries harvesting and processing services through New Zealand 3 The term PIC generally refers to the 15 Pacific island states and territories companies (and TOK).5 Indeed, appendix H refers to the “free that are members of the Pacific Islands Forum Fisheries Agency, namely: Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, 4 The QMS was a system of Individual Transferable Quotas. Vanuatu, and Tokelau (a New Zealand territory) (Clark 2014). 5 But not marketing services. 50 Trade in Fishing Services trade in fisheries services” brought about by the FCV arrange- across the North Pacific and ranks number two in world capture ment (Major 2014, p. 2). fisheries, in volume terms (Wilen 2014). The supposedly temporary importation of foreign fishing ser- The United States implemented its EEZ regime in 1977. Up vices has proven to be not so temporary, after all. Appendix H to that time, the American fishing industry had shown little or no reports that, in the fishing year 2010/11, there were 56 vessels oper- interest in the immense pollock fishery off Alaska. That fishery ating in the deepwater and pelagic fisheries within the New Zea- had been the preserve of DWFSs—Japan and the Soviet Union in land EEZ. Of these, almost half (27) were FCVs (Major 2014, p. 6). particular. The United States in the 1970s, while not being quite It has been remarked that the New Zealand scheme has the as blunt as the Canadian minister, did, through legislation, make great advantage of blunting criticism from the domestic fish- explicit its “plans to ultimately replace, with domestic fleets, the ing industry, since it is the industry, which makes the decision to foreign fleets that had previously plied the rich waters off Alaska,” “import,” or not to “import,” the foreign fisheries services. The come what may (Wilen 2014, p. 4). It took the Americans a bit question of comparative advantage in the New Zealand case, let longer than the Canadians to achieve their autarkic goals, but it be at once noted, ceases to be one of academic interest alone. achieved they ultimately were. Those New Zealand fishing companies (entity), which did chose, As well as providing examples of free trade in fisheries services, or do chose, to ignore the dictates of comparative advantage were, the accompanying appendix on New Zealand fisheries provides and are, subject to swift and certain financial punishment (Munro examples of emerging protectionism. Complaints that FCVs are 1992, p. 304). creating unfair competition for domestic interests—because the for- If the argument for FFAs is basically an argument for free trade eign vessel owners pay below New Zealand wages to their crews, in fisheries services, we must immediately note that free traders, and because the crews have inferior working conditions—are imme- regardless of the goods or services involved, are continually doing diately recognizable by international trade economists as variations battle with protectionists, those who wish to impose barriers on of the closely related “pauper labor” and “exploitation” arguments imports of goods and services to protect domestic industries. Pro- against free trade (Major 2014). In particular, it claimed that by tectionism is of direct relevance to the issue of granting access to importing goods and services from low wage countries, the import- DWFS fleets by the coastal state. Many of the arguments against ing countries are contributing to the exploitation of labor in these granting DWFS access, regardless of comparative advantage, are countries. immediately recognizable by international trade economists as The response is to ask what alternatives exist for the “exploited” arguments for protection (Munro 1985, 1992). labor. Refusing to import from these low wage countries will work Protectionism can range widely. It can range from mild inter- toward further lowering the wages and exacerbating the poor ference with international trade to autarky, in which the state, for working conditions of the exploited labor (Krugman, Obstfeld, political or other reasons, attempts to be self-sufficient, to smother and Melitz 2012, Ch. 3). all trade with the rest of the world, regardless of economic cost. While there are many spurious arguments for protectionism, in Examples of the latter, in terms of fisheries, are provided by that they are really arguments for supporting certain industries at the two neighbouring North American coastal states of Canada the expense of the rest of the economy, free-trade economists do and the United States. With respect to Canada, in the mid-1970s have to make a major concession. The argument for free trade in the then Canadian federal minister responsible for fisheries stated, goods and services is essentially an argument maximizing efficiency with the Canadian EEZ regime in the offing, that: “the long term is in a world economy. Individual states may, under certain circum- for Canadians. Canada is not only going to reach out and encom- stances, benefit from protection, albeit at the expense of the rest of pass all of the living resources off its continental shelf and slope the world economy. Our perspective is that of the individual coastal [Canada still had hope at the time that the outward boundary of state, not that of the entire world. This concession causes free-trade EEZs would be the greater of 200 nautical miles and the edge of economists to agree that, from the perspective of the individual the continental shelf], we are going to make sure that they are har- state, there may be some “legitimate” arguments for protection. vested by Canadians, in Canadian owned vessels and processed in Perhaps the most famous of the “legitimate” arguments for Canada as well” (Munro 1992, p. 300). The implication was that protection is the “infant industry” argument, which is dynamic in the importation of foreign harvesting and processing services was nature. The argument is basically that a state may have a latent to be reduced to the minimum, with the hoped for minimum being comparative advantage in a particular economic activity. A domes- zero. Canada was, if possible, to become self-sufficient within its tic industry based on the economic activity cannot become suc- EEZ fisheries (marine autarky). cessfully established on its own in the face of entrenched foreign Canada was as good as the minister’s word. Canada did attempt rivals. Therefore, the “infant” should be protected, until it has gone to minimize DWFS activity in its EEZs, and attempted to do so through the necessary learning process. The state’s comparative with all possible speed. Reference has already been made to the advantage in the activity will then be revealed and the protection removal of DWFS vessels prosecuting the Northern Cod fishery can be safely removed. within the Canadian EEZ, their replacement by Canadian vessels In the case of EEZ fisheries, domestic fishing industries are and the ultimate consequences of this policy for the state of the attempting to become established in fisheries, which had hitherto resource. been dominated by DWFSs. If FFAs are permitted unhindered, the With regards to the United States, the great American prize latent comparative advantage of the domestic industry will remain under the emerging EEZ regime was the Bering Sea pollock fishery. hidden. FFAs should be discouraged or a least be discriminated The walleye pollock fishery, to give its proper name, is distributed against, until the domestic industry has gone through its learning Emerging Perspectives on Foreign Fishing Arrangements 51 process. After the learning process has been completed, the dis- uncontrolled growth in the fisheries, in which massive total allow- crimination will be unnecessary, because by then it will be clear able catch “overages” were commonplace. By the end of the 1990s, to all that the coastal state has nothing to gain economically from there was clear evidence of severe overexploitation of both hake FFAs, or so it is argued. and blue whiting stocks (Ibid.). The high economic fishery returns, While not denying the legitimacy of the argument, the great and rapid growth, had been a “fool’s paradise” type of prosperity risk in applying it is that it is very difficult to determine beforehand based, to a marked degree, on the running down, or mining, of the whether or not the infant does have genuine prospects for achieving fisheries natural capital. maturity. If the infant never matures, then the industry will go on The UNEP study estimates that the loss to future Argentinean being a permanent burden to the economy. In fisheries terms, this generations of the resource overexploitation (expressed in present would mean a permanent loss of potential resource rent. value terms and assuming no stock restoration) is equal to ten times The Bering Sea pollock fishery, discussed earlier, provides one the net economic benefits enjoyed during the “fool’s paradise” of the clearest examples of the relevance of the infant industry prosperity of the late 1980s and 1990s (UNEP 2002, pp. 90–91). argument. In 1977 with the advent of the American EEZ regime, Indeed, assuming no stock recovery, the net present value of future the American Bering Sea pollock fishing industry was, it will be returns from the resources (using a reasonable discount rate) is neg- recalled, best described as a newborn. Foreign fishing was permitted ative (Ibid.). In retrospect, Argentina would have been better off, if for a time, but on a transition basis. During the transition phase, the it had forgone the opportunity to enter into FFAs with the EU in infant was protected by discriminatory measures applied against the late 1980s. the foreign presence in the fishery. Foreign fee fishing was more The running down of the Argentinean fish stocks is not neces- heavily discriminated against than were joint venture arrange- sarily irreversible. It is quite possible that many, maybe all, can be ments. The latter were seen as having value in maturing the infant rebuilt, which would be properly seen as a program of investment by providing technology transfers (Wilen 2014). in fishery natural capital. No investment program, however, comes We return now to our overarching Principal-Agent analysis without a current cost. Moreover, the investment program might framework. The discussion of the comparative advantage argu- have to extend over a period of many years with the return, as with ment for FFAs has not given recognition to the heart of the Prin- any long-term investment, being uncertain. The point remains that cipal-Agent problem, namely that the Principal can never expect Argentina would have been better off postponing the aforemen- to monitor the Agent perfectly. We are normally confronted with tioned FFAs, until it built up greater fishery resource management second best situations, in which the Principal’s ability to monitor capacity. and control the Agent is imperfect, and the Principal is subject to Even if the coastal state’s management capacity is adequate, the an agency cost. If the agency cost is great enough, it could overwhelm coastal state as Principal will face the classic Principal-Agent prob- the gains promised by comparative advantage. lem of uncertainty and asymmetric information. There will likely The most striking examples are provided by the cases in which the be an asymmetry in the relevant information between Principal coastal state’s (Principal’s) resource management powers are weak, and Agent in the Agent’s favor. In the case of a fee fishing type so that the coastal state is ineffective in controlling either foreign or of FFA, the DWFS(s) will obviously have far better knowledge of domestic vessels within its EEZ. With ineffective management powers, its (their) harvesting, processing, and marketing costs than will the de facto common pool conditions can easily arise. We warned earlier coastal state. The DWFS(s) may also have better information about that, under such conditions, FFAs can end up making a bad situa- prices of finished fish products than will the coastal state. tion worse, even if there is an apparent strong comparative advantage The issues of monitoring and asymmetric information leads argument in favor of them. Such are the perversities arising under directly to the related questions of monitoring, surveillance, and common pool conditions.6 An example is provided to us be a study control (MSC), and relative bargaining power. A particularly thor- carried out by the UNEP on Argentinean fisheries (UNEP 2002). ough treatment of the MSC issue can be found in a paper aris- Prior to the late 1980s, the Argentinean fishing sector was ing from the FAO 1983 Expert Consultation on the Conditions deemed to have been underdeveloped. In the late 1980s, Argen- of Access to the Fish Resources of the Exclusive Economic Zones, tina entered into FFAs with the European Union (EU), with the from which we drew the Burke paper employed so extensively in objective of once again developing the fisheries, thereby importing the previous section (FAO 1983). The MSC paper is “Access Con- fishing services. The sector did begin expanding as hoped, with the ditions and Compliance Control,” by Dean Robb, a legal expert focus being on hake stocks and, to a lesser degree, on blue whiting working at the time in the Pacific islands region (Robb 1983). stocks (UNEP 2002). A key point made by Robb is that most coastal states, certainly In the late 1980s and 1990s, the fisheries sector became one developing coastal states, cannot tolerate the cost of relying solely of the most dynamic sectors of the Argentinean economy (Ibid.). upon what he refers to as “hard enforcement” (for example, exten- The management of the fisheries was, however, distinctly inade- sive use of patrol vessels and aircraft). Reliance to some degree quate. What the UNEP refers to as the “happy years” was one of has to be on self-regulation by the DWFS(s) granted access. This, in turn, requires negotiation between the coastal state and the DWFS(s). Robb refers to the agreement between the government 6 In our discussion of the comparative advantage argument for FFAs, we gave con- of the coastal state and that (those) of the DWFS(s), and the condi- siderable attention to the New Zealand example. New Zealand’s record of domes- tions of access laid down by the coastal state. He continues, “except tic fisheries management is exemplary. We have also given emphasis to the example in the agreement, access conditions are in form, though not always of the Pacific Island Countries. While very much developing in nature, they have in fact, unilaterally prescribed by the coastal state and are not per se demonstrated, as will be seen, a capacity for effective resource management. the subject of negotiation. In fact, however, many of the unilater- 52 Trade in Fishing Services ally imposed conditions are often the product of consultation, if is of interest. Cooperative games are primarily concerned with not outright negotiation and agreement” (Robb 1983, p. 157). This the conditions that must prevail for cooperative arrangements to is, of course, a pure Principal-Agent type of situation, where the achieve stability through time. Cooperative games that do sat- Principal, lacking perfect monitoring control over the Agent, must isfy these conditions degenerate into competitive games, which seek out the optimal incentive scheme to be applied to the Agent. are characterized by destructive consequences for all “players” The Principal’s ability in setting such an optimal incentive scheme (Bjørndal and Munro 2012).8 (from its point of view) will be influenced by its bargaining power As a general rule, the difficulty in achieving a stable solution to relative to that of the Agent. the cooperative game through time increases exponentially with Robb continues that, in these circumstances, the coastal state the number of “players.” The original Forum Fisheries Agency is forced to recognize the interests of the DWFS (fully in keep- game had 14 players that were (and are) geographically dispersed. ing with Principal-Agent analysis). He also points out that there is The outlook for effective cooperation among the 14 looked dismal some degree of convergence of interests of Principal and Agent. (Munro 1991). It is in the interests of both to have sustainable fisheries yielding Cooperative games with more than two players carry with them maximum economic returns through time (Robb 1983). the possibility of sub-coalitions forming among them.9 It was the He lays down some basic conditions for successful compli- emergence of sub-coalitions within the Forum Fisheries Agency ance schemes that are reasonably obvious upon being stated. The game that saved the day. schemes must be cost effective and they must be credible, mean- The “players” in the game were (and are) not identical10 by ing that the schemes must be enforceable. He cites the famous dic- virtue of the fact that the tuna resources are not spread out evenly tum that “enforcement is the crucible of law, the test of its reality.” in the region. They tend to be concentrated around the equator, Unenforceable law is paper law (Robb 1983). In any event, weak and to become thinner the farther one is away from the equator. bargaining power and accompanying ineffective MSC assure the Thus, in crude general terms, there were (and are) “haves” and coastal state Principals of very high agency costs. “have-nots” among the players. A group of the haves, becom- We return once again to the Pacific islands region. The PICs ing alarmed at the drift and lack of effective cooperation, met provide a striking example of the enhancement through time of in early 1982 on the island of Nauru and signed an agreement, coastal state bargaining power, the complementary strengthening of the Nauru Agreement,11 which came into the force in late 1982. coastal state MSC schemes, and the sharp reduction of agency costs. The signatories to the Agreement, now referred to as Parties to Some background is in order. At the dawn of the EEZ regime, the Nauru Agreement (PNA),12 invited the have-nots to join them, the PICs were seen as being collectively one of the great beneficiaries but made it clear that the PNA sub-coalition would go its own of the new regime. They had gained sovereign rights over immense way, if the have-nots did not do so. The have-nots did agree to tropical tuna resources that were in turn of immense economic join (Munro 1991). In any event, the intractable 14-player game importance to them (Kearney 1983). There were, however, great had been transformed into a tractable two sub-coalition game. doubts at the time whether the economic benefits to the PICs from A stable solution to the Forum Fisheries Agency cooperative these resources would prove to be anything other than ephemeral. game was achieved, with the consequence of greatly enhancing There were 14 independent PICs, many at low levels of develop- the bargaining power of the PICs. ment, having land mass of not more than 500,000 km2 and combined Almost by definition, the PNA sub-coalition had a greater EEZs with an area equal to that of the continent of Africa. The PICs long-term interest in the tuna resources than did the other sub- were incapable of harvesting more than a small percentage of the coalition. The theory of cooperative games, as applied to fisher- potential harvests, and were faced at the time with effectively one ies, has what amounts to a common sense solution to the problem DWFS, which was a major world power (Munro 1991). of achieving optimality, where the players have differences in per- The first step toward realizing significant economic gains from ceived appropriate resource management policies, arising from the the tuna resources was the recognition among the PICs that they differences in the perceived long-term value of the resources. The would gain the requisite bargaining power only by cooperating. solution, which goes under the name of the Compensation Principle, If they did not cooperate, relevant DWFSs would do the obvious and play one PIC off against the others. This recognition led to the establishment of the South Pacific Forum Fisheries Agency in 8 If cooperation among the PICs had collapsed, there would have been destruc- 1979 (Ibid.). tive consequences. As we shall come to see, game theory has been used extensively We must at this point bring to bear a body of economic analysis, in the analysis of the economic management of international fisheries. This is referred to as the theory of strategic interaction, and more com- particularly true of the theory of cooperative games, more commonly referred monly known as the theory of games. There are two broad classes to as coalition game theory of games: competitive and cooperative.7 It is the latter class that 9 When the number of players exceeds two, the players all cooperating together are seen to constitute the Grand Coalition. 10 To use a bit of game theory jargon, the players in the game were (and are) 7 What, if any, is the relationship between the theory of games and Principal- not symmetrical. Agent analysis, which we used so extensively at an earlier point? After all, there 11 Nauru Agreement Concerning Cooperation in the Management of Fisheries is a strategic interaction between coastal states and DWFSs seeking access to of Common Interest. the EEZs. The answer is that there is a relationship, which is close indeed. 12 The current Parties to the Agreement are: Federated States of Micronesia, Principal-Agent analysis can be seen as being very close to, if not identical to, to Kiribati, The Marshall Islands, Nauru, Palau, Papua New Guinea, Solomon a sub-class of games known as leader-follower games (Mesterton-Gibbons 1993). Islands, and Tuvalu. Emerging Perspectives on Foreign Fishing Arrangements 53 states that the resources management should be dominated by the While much of the previous discussion has focused on the lead- player, which places the greatest value on the resource, and that the ership of the PNA, it must be stressed that the leadership would dominant player should then be prepared to compensate the other have been successful if, and only if, it had succeeded in attracting player(s) (Bjørndal and Munro 2012, Ch. 7). the support of all member countries of the South Pacific Forum This is in effect what happened in the Pacific islands region. Fisheries Agency. All members of the Forum Fisheries Agency The PNA sub-coalition became the cutting edge in fishery resource have, in fact, actively supported the initiatives. Furthermore, the management, certainly including the establishment and manage- Secretariat of the Forum Fisheries Agency has played, and con- ment of FFAs (Munro 2014). This continues to be the case today tinues to play, a vital role in the implementation of the initiatives (Clark 2014). (Clark 2014). Clark, in appendix B, refers to a paper that he wrote in 1983 In summary, the PICs as Principals are not yet in a first best situ- on the rates of net economic return from the tuna fisheries to the ation. It can be argued, however, that the last 30 years have seen a PICs. The rates of return were disappointingly low. The 1983 sharp fall in the agency costs of the PIC Principals. paper cites several reasons, important among them being ineffec- tive resource management and ineffective surveillance and enforce- ment, both reflecting limited coastal state resource management AREAS BEYOND NATIONAL capacity (Clark 2014, p. 9). In Principal-Agent parlance, the agency JURISDICTION (ABNJ) AND FFAs costs to the PIC Principals were very high indeed. Recall that the Nauru Agreement did not come into force until In the case of numerous coastal states establishing FFAs, some of late 1982. The PNA leadership did in time begin to make itself the fishery resources within the coastal state EEZ will be found felt and the aforementioned returns improved greatly. The PICs, to cross the EEZ boundary into the adjacent high seas. The most under PNA leadership, established the Harmonized Minimum striking example is that of the PICs, a case that is explored in detail Terms and Conditions for Foreign Fishing Vessel Access (MTC), in appendix C (McClurg 2014). The issue introduces significant to prevent any DWFS from playing one PIC against the others. complications. Accompanying the MTC, has been the establishment of a For- It will be argued that the existence of ABNJ fisheries relevant eign Vessel Register. All DWFS vessels must be in good standing to the coastal state does stand as a threat to FFAs, and indeed as a on the Register to be granted access. A DWFS vessel in violation threat to the overall intra-EEZ management of the relevant stocks, of its terms and conditions of access in the EEZ of a particular if the ABNJ fisheries are mismanaged. It will also be argued, how- PIC, which does not settle, will find itself stricken from the Regis- ever, that, barring gross management of the ABNJ fisheries, the ter, leading to its banishment from the EEZs of all member of the existence of these fisheries can add new dimensions to the rationale Forum Fisheries Agency (Clark 2014). for establishing FFAs. Furthermore, access agreements with DWFS governments The ABNJ issue requires that we add to our discussion of both or boat owners associations, had compliance provisions, which legal and economic matters. First, with regards to legal matters, as required the flag state or boat owners association to police its ves- the McClurg appendix (2014) points out, there are two interna- sels while in the PIC EEZs (Clark 2014).13 In summary, enhanced tional instruments that are of prime relevance, namely the 1982 bargaining power carried with it greatly improved surveillance and UN Convention on the Law of the Sea (UN 1982) and the 1995 enforcement. UN Fish Stocks Agreement (UN 1995). The latest development, discussed in detail by Clark (2014), is The drafters of the 1982 UN Convention realized that the the Vessel Day Scheme (VDS), in operation with tuna seiners, and mobility of many marine capture fishery resources was going to in a trial stage with tuna longliners. Once again, this is a PNA ini- lead to an internationally “shared” fish stock problem in the pro- tiative. It can be seen as a fishing effort equivalent of an Individual posed EEZ regime. There are three major classes of such stocks: Transferable Quota (ITQ) scheme. The PNA members agree to a (i) transboundary stocks—EEZ to EEZ; (ii) highly migratory and Total Allowable Fishing Effort (TAE), which is then divided among straddling fish stocks—those crossing the EEZ boundary into the the parties on a vessel day basis. The parties can then make their adjacent high seas; and (iii) discrete high seas stocks—those to be allotted VDS available to domestic or foreign vessels. While DWFS found exclusively in the high seas beyond the EEZs (Munro, Van vessels are not directly part of the VDS, the hope is that the scheme Houtte, and Willmann 2004). It must be acknowledged that (i) and will lead to competition among DWFS vessels, with resultant higher (ii) are not mutually exclusive, as the western and central Pacific returns to PNA members.14 makes abundantly clear. The PNA, which now have their own office, are quoted by Clark UNCLOS deals effectively enough with transboundary fish as boasting that, if “the VDS were to become fully . . . effective, the stocks (UN 1982, Article 63(1)). It deals much less effectively with result should be the stripping out of rents, in terms of above market highly migratory and straddling fish stocks (UN 1982, Article 63(2); returns, throughout the value chain” (Clark 2014, p. 14). Recall Article 64; Article 87; Articles 116–120), with part of the reason that the first best situation for the Principal is to keep the return to being that the drafters of UNCLOS faced a difficult balancing act. the Agent to the minimum, and to have the Agent abide fully by the On the one hand, there remained the carryover of the Freedom wishes and desires of the Principal. of the (high) Seas doctrine, as it pertained to fisheries. This led to coastal states with highly migratory and straddling fish stocks fear- ing that their attempts to manage these stocks within their EEZs 13 Recall the discussion of Robb (1983) on MSC. would be completely undermined by unrestrained exploitation 14 See as well: McClurg (2014). of these stocks by DWFSs, exercising their Freedom of the Seas 54 Trade in Fishing Services rights in the adjacent high seas. On the other hand, DWFSs saw Ostensibly, the RFMO regime appears to apply only to ABNJ coastal states, not content with the immense gains that they had fisheries (Article 3). Article 7, however, states that the management made through the establishment of the EEZ regime, wanting to regime for a relevant stock in the adjacent high seas and the regime extend their jurisdiction further, which the DWFSs referred to as for the management of that stock within the EEZ must be compati- “creeping jurisdictionalism” (Munro et al. 2004). ble. Sensibly, the stock is to be managed as whole. UNFSA does not The result of the balancing act is that coastal states and DWFSs prevent the geographical competency of a RFMO from extending are admonished by UNCLOS to cooperate in the management to the EEZ (Örebech, Sigurjonsson, and McDorman 1988; UN and conservation of highly migratory and straddling fish stocks 1995, Article 3, Article 7). (UN 1982, Article 63(2); Article 64), but without any guidance as A key article in UNFSA is Article 8(4). The article maintains to how this cooperation is to be achieved. Freedom of the Seas that only those states, which are members of a RFMO, or which pertaining to fisheries is retained (UN 1982, Article 87), but it is agree to apply the conservation and management measures pre- heavily circumscribed by Articles 116–120 (UN 1982, Articles scribed by the RFMO, are to have access to the fishery resources 116–120). Article 116 requires that DWFSs exploiting such stocks under the governance of the RFMO (UN 1995, Article 8(4)). If this in the high seas take into account the rights, duties, and interests of article could be enforced universally, it would, of course, deal with relevant coastal states. Articles 117–118 require DWFSs to coop- the problem of rampant free riding that plagued the pre-UNFSA erate with other states in the conservation of these stocks in the management of highly migratory and straddling stocks. high seas and require that they shall, as appropriate, do so through This gives rise to the question of unregulated fishing. A funda- sub-regional or regional organizations (UN 1982). Legal experts mental rule in international law is that a treaty binds only those maintain that Articles 116–120 are now a part of customary inter- states, which are parties to the treaty, unless the treaty has achieved national law (Lodge, Anderson, Løbach, Munro, Sainsbury, and the status of customary international law. While UNFSA has to Willock 2007, pp. 5–6). date been ratified by 81 states (UN Office of Legal Affairs, 2014), This balancing act proved to have weaknesses. In particular, it is not clear that UNFSA has yet to achieve the status of cus- the balancing act left unclear the rights and duties of both coastal tomary international law. What then about non-ratifying states? states and DWFSs with respect to the high seas portion of highly It is agreed that vessels of such states, fishing in a high seas area migratory and straddling fish stocks (UN 1992; Munro et al. 2004). under RFMO jurisdiction, and ignoring the conservation and The lack of clarity made it very difficult to establish effective coop- management measures prescribed by the RFMO, are deemed erative management regimes for these stocks, with one important to be engaging in unregulated fishing. Unregulated fishing may reason being the near inability of cooperating states to prevent be seen as morally reprehensible, but it is a much more nebulous “free riding” by non-cooperating states (Munro et al. 2004). concept than illegal fishing (Munro et al. 2004). As Munro et al. The ineffectiveness of the management regimes in governing insist, unregulated fishing, nebulous or not, is free riding pure and highly migratory and straddling fish stocks was manifested in the simple (Ibid.). decade following the conclusion of the UN Third Conference on While unregulated fishing is unquestionably a serious problem, the Law of the Sea in 1982. One of the most dramatic examples Lodge, et al. argue that one can question whether states, which was provided by the Bering Sea pollock resource, referred to earlier have yet to ratify UNFSA, are in fact exempt from Article 8(4). in another context (see: Wilen 2014). The resource is a straddling It can be maintained that, if such states allow their vessels to fish stock by virtue of a high seas enclave between the American and in RFMO waters in a manner contrary to the RFMO fisheries Russian EEZs–the Doughnut Hole. In the words of the FAO, the management regime, the states can be seen in violations of their pollock resources in the Doughnut Hole were not just overexploited obligations under UNCLOS Articles 116–120. These articles have in that decade; they were plundered (FAO 1994). achieved the status of customary international law (Lodge et al. It was this manifest inadequacy that led the UN to the mount 2007, p. 6; UN 1982; UN 1995). If this is indeed the case, then a further conference in 1993 to address head on the issue of the RFMO members have a clear legal case for attempting to suppress management of highly migratory and straddling fish stocks. The unregulated fishing. conference, popularly referred to as the UN Fish Stocks Confer- In turning now to the economics of management of highly ence, concluded its deliberations in 1995. The express purpose migratory and straddling stocks, under the RFMO regime, let us of the 1993–95 Conference was not to replace UNCLOS. It was note that we have already commented on the economics of the rather to buttress UNCLOS (Munro et al. 2004). management of the first class of internationally “shared” fish The Conference gave rise to the 1995 UN Fish Stocks Agree- stocks, namely transboundary fish stocks. This was in the context ment (UNFSA) (UN 1995). Central to UNFSA is the Regional of the importance of the PICs cooperating in the management of Fisheries Management Organization (RFMO) regime, pertaining their tuna resources. These tuna resources are at once both cat- to the management of these stocks. To quote Lodge et al. 2007: egory (i) and category (ii) internationally shared fish stocks. The economics of the management of transboundary fish UNFSA accords a key role to RFMOs as the appropriate stocks rests upon the theory of strategic interaction, more com- medium through which States are to cooperate so as to achieve monly known as the theory of games. What is true of the eco- and enforce conservation objectives. . . . Its main contribution nomics of the management of transboundary fish stocks, is true of in this regards is to define the desirable characteristics of an the economics of the management of all classes of internationally effective RFMO by listing in legally binding form, the matters shared fishery resources (Bjørndal and Munro 2012, Ch. 7). upon which States are expected to agree to bring about the In our earlier discussion, we stated that an unstable cooperative sustainable management of fisheries (Lodge et al. 2007, p. 4). fishery game will degenerate into a competitive one with potentially Emerging Perspectives on Foreign Fishing Arrangements 55 destructive consequences. It will also be recalled that the theory of cooperation between and among RFMOs (Lodge et al. 2007; cooperative games (coalition games in a more advanced form) is Munro and Sumaila 2011). directed toward the question of the conditions necessary to achieve If free riding can be successfully suppressed, RFMOs may still the desired stability (Bjørndal and Munro 2012). We now need to face difficulties because players may have different views on man- enquire more closely into one of the key conditions. agement goals. To return to game theory jargon, in such a situa- A central condition that must be met for a cooperative fishery tion the players would be said to be asymmetric. We have, in fact, game to be stable through time is that now, and at each point of encountered this issue already in our discussion of the fisheries man- time in the future, each and every player, or agent, must be con- agement cooperation among the PICs, when we referred to the PNA vinced that its return from the cooperative game, referred to as and the rest, and talked in terms of two sub-coalitions (with the two payoff, is at least as great as it would be under a competitive game.15 sub-coalitions together constituting the Grand Coalition). The sub- This condition, once stated, appears to be obvious, but is often coalitions were seen to be asymmetric, with the PNA sub-coalition ignored in practice (FAO 2002; Munro et al. 2004). placing a higher value on the resources than the rest. We then made This obvious condition is of direct relevance to the question of reference to the so-called Compensation Principle, which would call for RFMOs and unregulated fishing. The RFMO is to be viewed as a the sub-coalition placing the greatest value on the fishery resource dynamic cooperative fishery game. If free riding, either through dominating the management of the resource. This would not be unregulated fishing or non-compliance by RFMO members, is possible unless the dominant sub-coalition was prepared to compen- extensive, the aforementioned condition can easily go unsatisfied. sate the other sub-coalition(s). What we did not discuss at that point A would-be responsible and cooperative RFMO member could is the question of how such compensation might be effected. calculate that, with free riding unchecked, its payoff from coopera- We can avoid this question no longer. Some more game theory tion would be less than it would be under competition. Rationality jargon is now introduced, namely “side payments.” Side payments would demand that it not cooperate. are transfers, which may or may not be monetary in form. With The difficulty in achieving a stable cooperative fishery game rises respect to management of fishery resources in the ABNJ, the exist- exponentially with the number of players. RFMOs typically have large ence of side payments would mean that a player’s payoff from the numbers, for example, Western and Central Pacific Fisheries Commis- cooperative resource management agreement would not be deter- sion (WCPFC). An extensive study on the stability of RFMOs, using mined solely by that player’s harvests in the ABNJ. The FAO has advanced game theory, concludes that, if free riding is widespread, a recognized side payments and their usefulness, but prefers to use RFMO with more than five players cannot expect to achieve stability the less provocative term “negotiation facilitators” (FAO 2002).17 (Pintassilgo, Finus, Lindroos, and Munro 2010). A RFMO with no This leads directly to the question of FFAs and fisheries in the more than five members is an exceptionally small RFMO. ABNJ. To begin, everything that we have said to this point about the This fact of life has now been accepted by policy makers. legal power of the coastal state to implement FFAs, or to refuse to The Organisation for Economic Co-operation and Develop- implement them, remains unchanged. With ABNJ fisheries now under ment (OECD) High Seas Task Force recommended the establish- consideration, FFAs can be seen as having a potential new role as ment of an independent panel to develop a model for improved negotiation facilitators. Take as an example the PICs and the WCPFC. governance by RFMOs, to be based at Chatham House, London. The McClurg appendix (2014) gives great emphasis to the The panel was duly established,16 and brought down its report in asymmetry between DWFS members of the WCPFC and the 2007. The report states that “a core conclusion is that the success coastal state members, the PICs in particular.18 The PICs are seen of international cooperation depends largely on the ability to deter as placing a substantially greater value on the tuna resources than free-riding” (Lodge et al. 2007, p. x). the PICs (Ibid.). Turn to the Compensation Principle once again. The If free riding, unregulated fishing in particular, is allowed to go Principle would dictate that the PICs should dominate the man- on unchecked, then the grave risk exists that the RFMO coopera- agement of the tuna resources, throughout their range. In order to tive fishery game will degenerate into a competitive fishery game do so, the PICs would have to be prepared to employ any and all with resultant destructive consequences. The destructive conse- negotiation facilitators that they have at hand. FFAs can be seen to quences will obviously not be confined to the high seas, but will constitute such facilitators. In WCPFC negotiations DWFSs can be feed into the EEZ, undermining the intra-EEZ management of the offered (or denied) access to PIC EEZs as an inducement to agree resources(s). We have now made the point many times that effective to PIC resource management proposals. intra-EEZ management of the fishery resources is a fundamental FFAs can thus be seen to have a role, in some cases a very pre-requisite for the establishment of stable and beneficial FFAs. important role, in helping to ensure the long term stability of the Fortunately, there are signs that RFMO members responding cooperative fishery game that is the RFMO. A breakdown of this and taking vigorous action against unregulated fishing (for exam- cooperative game brings with it the promise of resource manage- ple, blacklisting vessels or certification programs to guard against ment disaster. fish laundering) (Munro and Sumaila 2011). There is also increas- ing recognition that such action must be strengthened through 17 With respect to cooperation among the PICs, there is evidence that the PNA sub-coalition make what amounted to side payments to the other PIC 15 This condition is referred to as the Individual Rationality Condition. sub-coalition (Munro et al. 2004). 16 Independent Panel to Develop a Model for Improved Governance by Regional 18 We have to acknowledge that in the WCPFC there is a sub-coalition of other Fisheries Management Organizations. coastal states, namely Indonesia and The Philippines. 56 Trade in Fishing Services There is, in fact, evidence that such possibilities have not fisheries’ services, if the DWFS(s) has a comparative advantage in escaped the notice of policy makers. Consider the following from a providing such services. Thus, the case for FFAs is a variant of the 2006 publication on fishery harvest allocations within the WCPFC, case for free trade. If DWFSs do not have a comparative advantage authored by Anna Willock and Ian Cartwright. Willock was a mem- in any of the these fisheries’ services, then it will be contrary to the ber of the Chatham House-based independent panel to develop a interest of the coastal state to implement FFAs. model for improved governance by RFMOs. Cartwright is a former If DWFSs are to be seen as agents of the coastal state, Principal- Deputy-Director of the Pacific Islands Forum Fisheries Agency. Agent analysis warns us that the Principal will seldom, if ever, be able to monitor the Agents perfectly. Some slippage is inevitable. As A number of economists and other parties have indicated such, the analysis, when applied to the issue of FFAs, encompasses that game theory offers prospects for examining the nature the question of MSC. The coastal state will, perforce, have to take of cooperative and non-cooperative approaches to alloca- into account the economic interests of the DWFSs. tion. In particular, it has been suggested that the best way From this it follows that success of the coastal state in gaining forward is likely to go beyond simply allocating rights (for benefits from FFAs will depend in part upon the coastal state’s example, shares of a total allowable catch of a particular spe- bargaining power in relation to that of the DWFSs. This may cies or species group or the equivalent) to national fleets. A appear to place developing coastal states at a serious disadvantage. more sophisticated approach, involving “side payments” or The example of the PICs, however, demonstrates forcefully that “negotiation facilitators” may be required (Willock and Cart- such states can, in fact, develop substantial bargaining power, given wright 2006, p. 5). that their resource management capacity is adequate. The example In any event, to continue with the game theory framework, one demonstrates as well that, if a group of such coastal states share can think in terms of a multi-stage game. In the first stage, the PICs fishery resources among themselves, effective resource manage- bargain amongst themselves, with the PNA sub-coalition having ment cooperation among them is the fundamental prerequisite to the dominant role. In the following stage, the PICs bargain with the achieving significant bargaining power. DWFS members of the WCPFC, bringing to bear their power to If some, or all, of the relevant coastal state fishery resources are establish (or not establish) FFAs. highly migratory or straddling stocks, extending beyond the EEZ into the adjacent high seas, where they become subject to RFMO governance, then additional complications arise. If the manage- SOME CONCLUSIONS ment of these stocks within the high seas is seriously inadequate, Article 62(2) of UNCLOS not withstanding, the coastal state is this inadequacy will undermine the intra-EEZ management of under no legal obligation to grant access to DWFSs to the coastal the stocks and the viability of existing FFAs relevant to the stocks. state’s intra-EEZ fisheries. The “surplus principle” contained That being said, well-designed FFAs can, in fact, play a role as within Article 62(2) is inherently empty. Further, if the coastal state negotiation facilitators, serving to strengthen RFMO resource does declare one or more surpluses, and grants DWFSs access to management programs. its intra-EEZ fisheries, it is given broad legal powers in laying down terms and conditions of access. In no sense, is it required to give away anything for free. A rational coastal state will implement FFAs ANNEX if, and only if, it is in the interests of the coastal state to do so. Such In this annex, we explore further the relevance of the concept of possible interests lie within the realm of economics. Principal-Agent analysis and the doctrine of comparative advan- We view the economics of the management of coastal state fish- tage to FFAs, doing so with the aid of a formal, but simple, model. eries in terms of the coastal state as a whole. The objective is seen To begin, it will be recalled that we think of the fishing operation as that of maximizing the economic returns (broadly defined) from being divided into three stages, with the first consisting of harvest- the fisheries’ natural capital for the coastal state through time. To ing the resource, the second of processing the catch, and the final the coastal state, FFAs are of value, if they enhance these economic stage of marketing and distributing the finished fish product. returns. If the coastal state’s capacity for the economic manage- We shall focus on the case of fee fishing, where the coastal state ment of the fishery resources is seriously lacking, FFAs may be of grants access to one or more DWFNs , which harvest the resource, no value to the coastal state, and indeed could be damaging. process the catch, and market the finished fish product, in exchange Given that the coastal state does have adequate management for paying fees to the coastal state. The experience of the PICs capacity, the basic argument for considering FFAs comes from of the western and central Pacific comes immediately to mind. In Principal-Agent analysis and international economics. The DWFSs any event, as noted, the relevance of the doctrine of comparative are to be seen as agents of the coastal state, as principal. If a coastal advantage is least obvious in this case. state avails itself of the fisheries services of one, or more, of these Our formal model is drawn primarily from Clarke and Munro agents, the coastal state can be thought of as calling upon these 1987 and 1991, with additional support coming from Clark and agents to provide harvesting, processing, or marketing services. Munro 1980, and Bjørndal and Munro 2012. To simplify matters, Since by definition, these DWFS agents are foreign, a coastal state we assume from the outset that we have one coastal state entering implementing a FFA is, in effect, importing the aforementioned into an access agreement with one DWFS. Let us begin by noting fisheries services. the obvious fact that the coastal state’s willingness to entering into It is at this point that international economics becomes relevant. a fee fishing arrangement with the DWFS implies that the DWFS It will make sense for the coastal state to import the aforementioned has a comparative advantage in all three stages. Emerging Perspectives on Foreign Fishing Arrangements 57 The model rests upon the now standard issue dynamic eco- which the PICs had developed as a part of their access agreements nomic model of the fishery, which has the biological model of a for DWFSs, had the purpose of “fostering operational efficiency in single species fishery of M.B. Schaefer as its foundation (see, for the use of the resource; and providing an instrument for [coastal example, Bjørndal and Munro 2012, Ch. 3). state] governments to regulate, develop, conserve, and generally We have: manage the fishery” (Doulman 1987, p. 19). As noted, we do of necessity assume that the DWFS must dx/dt = F(x) – h(t), x(0) = x0 (1) receive some minimum net economic return from the fishery, if it is to enter into the access agreement, a return that will almost cer- h = qEaxb (2) tainly exceed the sum of its harvesting, processing, and marketing where costs. To repeat, we say this by virtue of the fact that the DWFS x(t) = fish biomass at time t may be able to deploy its fleet and processing capacity elsewhere. x0 = fish biomass at time t = 0 In other words, there is likely to be a DWFS opportunity cost to be F(x) = net natural growth rate taken into consideration. h(t) = the harvest rate at time t In our case, the coastal state is the Principal, while the DWFS E(t) = the rate of fishing effort at time t is the Agent, providing the complete package of services. In a first q = the catchability coefficient, which we shall assume to be equal best situation, as seen from the Principle’s perspective, the coastal to 1. state would be able to keep the DWFS’s aforementioned net eco- a and b are constants. It is assumed (in the Schaefer model) that nomic return to the minimum and would be able to ensure that the a = b = 1. DWFSs’s harvest program through time is identical to that desired As usual, it will be assumed that F(x) > 0 for all 0  x  x , by the coastal state. F (0)  F ( x )  0, and F ( x )  0, for all x > 0, where x denotes the We next suppose that the coastal state’s fee arrangement consists carrying capacity of the resource. To be complete, it will as well be of a per unit tax on harvest and a per unit tax on fishing effort. As assumed that: an aside, Clarke and Munro demonstrate, that, if the tax-based fee fishing arrangement is to serve as an effective incentive scheme to 0  E (t )  E max be applied to the DWFS, a single tax will not be adequate (Clarke where Emax is a prescribed upper bound on E(t) (Clarke and Munro and Munro 1987). In any event, denote the two per unit taxes as: 1991). th and tE respectively. We next introduce costs and prices, along with some highly sim- Realistically, we do not assume that the coastal state can tax the plifying assumptions. We denote the DWFS’s unit cost of fishing finished fish products directly. The coastal state must content itself effort as b1. We further denote the DWFS’s unit processing costs with the two aforementioned taxes. Clarke and Munro demon- and unit marketing plus distribution costs as b2 and b3 respectively. strate that the coastal state can, nonetheless, go so far as to achieve Finally, we denote the price of a unit of finished fish product as pm. a first best outcome, under the right conditions.20 We then introduce the heroic assumption that b1, b2, b3, and pm are At any given point in time, t, we can express the net economic all constant through time, and that the three corresponding coastal return (resource rent) from the fishery for the coastal state as: state unit costs are also constant over time. This heroic assumption,  CS  { h x   E }E (4) as it pertains to costs, implies that the DWFS comparative advan- tage in all three stages is unchanging over time. (recall our assumption that the catchability coefficient, q, is Finally, we assume that the net economic returns–resource equal to 1) rent–shared by the coastal state and DFWS involve no non-market and the net economic return from the fishery for the DWFS costs and benefits. (over and above harvesting and other costs) as: Now note that the net value of a unit of harvested fish to the  DW  {( p *   h )x  (b1   E )}E (5) DWFS, exclusive of harvesting costs and any taxes (fees), which the coastal state may impose, can be expressed simply as (Clark and We shall refer to equation (5) as the DWFS premium, which Munro 1980):19 we shall see can be regarded as the DWFS’s share of the gains from trade in fishing services at time t. The premium cannot be p *  pm  b2  b3 (3) negative; the DWFS must receive an amount at least sufficient to The fee fishing arrangement introduced by the coastal state is cover the sum of its fishing effort, processing and marketing plus designed both to extract resource rent and to serve as a device to distribution costs. manage the fishery, that is to serve as an incentive scheme to be Now observe that we can re-express equation (4) as follows: applied to the DWFS. This is not as farfetched as it may seem.  CS  { p * x  b1}E  {( p *   h )x  (b1   E )}E (6) David Doulman, when Deputy Director of the South Pacific Forum Fisheries Agency, wrote that the fee fishing arrangements, The first term of the RHS of equation (6) is the global net eco- nomic return from the fishery at time, t, given that the harvesting of 19 We could allow for the fact that probably only a fraction of each harvested fish will be recoverable as finished product, and allow for b2 and pm to be a func- 20 These conditions being perfect information and that the rate of discount tions of x. Clark and Munro (1980) do this, but we regard these as unnecessary employed by the coastal state be identical to that of the DWFS (Clarke and complications in the discussion at hand. Munro 1987, pp. 96–99). 58 Trade in Fishing Services the resource, the processing of the catch and the marketing of the where dCS is the coastal state’s rate of discount. Let us denote the finished fish products are all carried out by the DWFS, while the DWFS rate of discount as dDW. second term is the net economic return to the DWFS, the DWFS If the two rates of discount are equal in this world of perfect premium. information, then all will be well. If this highly unlikely outcome We can now go a bit further by recognizing that the first does not occur, then problems arise. Suppose, as is very possible, term on the RHS of equation (6) can be re-expressed as: that we have: dDW > dCS . Then, the coastal state will place a greater pm xE  {[ b2  b3 ]x  b1}E , where pm xE denotes the gross value of value on the future stream of payments to the DWFS than will the the processed and marketed catch, and where {[ b2  b3 ]x  b1}E DWFS itself, resulting in an agency cost, that is the Principal (coastal denotes the sum total of the DWFS fishing effort, processing and state) will not be able to achieve a first best outcome, even though marketing plus distribution costs. We can thus re-write equation the coastal state is able to limit the payment to the DWFS through (6) as: time to the minimum.22 The consequence will be that the coastal  CS  pm xE  ( D   ) state will be compelled to invest less heavily in the resource, to be (7) less conservationist, than it would, if a first best outcome were where D  {[ b2  b3 ]x  b1}E , and where   {( p *   h )x  (b1   E )}E achievable (for details see: Clarke and Munro 1991, or Bjørndal As expressed in equation (7), the net economic return to the and Munro 2012).23 coastal state is to be seen as follows. It consists of the gross value of the processed and marketed catch, minus what might be thought of as two payments to the DWFS. The first is a payment to cover REFERENCES the sum of the DWFS fishing effort, processing, and marketing plus Bjørndal, T., and G. R. Munro. 2012. The Economics and Management of World distribution costs. The second takes the form of the DWFS pre- Fisheries. Oxford: Oxford University Press. mium. The two payments combined to the DWFS are implicit in Burke, W. T. 1983. “1982 Convention on the Law of the Sea Provisions form, but they are payments nonetheless. Let us note that the mini- on Conditions of Access to Fisheries Subject to National Jurisdic- tion.” Report of the Expert Consultation on the Conditions of Access to the Fish mum two payments combined to the DWFS can be expressed as: Resources of the Exclusive Economic Zones Rome, 11–15 April 1983. FAO aD + bmin, where bmin ≥ 0. Fisheries Report No. 293. Rome: Food and Agriculture Organization Let us comment further on b. This is to be seen as a measure of of the UN, 23–42. the DWFS’s share of the gains from trade at time t, which can be ______. 1994. The New International Law of Fisheries: UNCLOS 1982 and seen as follows, recalling that the DWFS has a comparative advan- Beyond. Oxford: Clarendon Press. tage at all three stages of the fishing operation. Denote the sum Clark, L. 1985. “Fisheries Issues in the Pacific Islands, in International total of the coastal state fishing effort, processing, and marketing Institute of Fisheries Economics and Trade.” Proceedings of the Second plus distribution costs as aC. At time t, the gains from trade can be Conference of the International Institute of Fisheries Economics and Trade. 1: expressed as:  pm xE   D    pm xE  C . If C  pm xE , then we say 19–26. that the gains from trade at time t are simply equal to aC – aD, while ______. 2014. Case Study on Foreign Fishing Agreements in the Western if C  pm xE , then the gains from trade at time t are: pm xE   D . Pacific, Annex 2, Trade in Fishing Services Report. Clarke, F. H., and G. R. Munro. 1987. “Coastal States, Distant Water Fish- This gives us an upper bound on b, which cannot exceed the gains ing Nations and Extended Jurisdiction: A Principal-Agent Analysis.” from trade, given that the coastal state is rational. Natural Resource Modeling 2: 81–107. Two points are immediately forthcoming, with the first pertain- ______. 1991. “Coastal States and Distant Water Fishing Nations: Con- ing to our earlier claim that the rational coastal state will be keenly flicting Views of the Future.” Natural Resource Modeling 5: 345–69. interested in its harvested fish all the way up the value chain. It is Doulman, D. J. 1987. “Licensing Distant-Water Tuna Fleets in Papua New now made absolutely transparent that only the uninformed or irra- Guinea.” Marine Policy 11: 16–28. tional coastal state will lack this keen interest. Food and Agriculture Organization of the UN. 1983. Report of the Expert The second is the obvious potential problem of asymmetric Consultation on the Conditions of Access to the Fish Resources of the Exclusive information, given that the real world is not one of perfect infor- Economic Zones Rome, 11–15 April 1983. FAO Fisheries Report No. 293. mation. As discussed earlier, the DWFS will certainly have more Rome. knowledge about its own costs and probably about the prices ______. 1994. World Review of Highly Migratory Species and Straddling Stocks. FAO Fisheries Technical Paper 337, Rome. obtainable for the finished fish products than will the coastal state, ______. 2002. Report of the Norway-FAO Expert Consultation on the Management thus resulting in the high probability of an agency cost.21 of Shared Fish Stocks Bergen, Norway, 7–10 October 2002. FAO Fisheries A further point to note is that, even in a world of perfect infor- Report No. 695, Rome. mation, agency costs can arise. Clarke and Munro (1991) illustrate Gordon, H. S. 1954. “The Economic Theory of a Common Property this as follows. Go back to our original example and now suppose Resource: The Fishery.” Journal of Political Economy 62: 124–42. that the access arrangement is permanent. Recall the assumption that costs and prices, and hence taxes, are constant through time. We now consider the net economic return to the coastal state in net 22 Clarke and Munro (1991) do in fact demonstrate that in the situation present value terms. We have: described—perfect information, but unequal rates of discount—the Principal   (coastal state) will be able to keep the economic return to the Agent (DWFS) to N PVCS   e CS t pm x (t )E (t )dt   e CS t { D (t )   (t )}E (t )dt (8) the minimum. 0 0 23 All of this suggests that an agency cost can arise in at least two ways. First, the coastal state may be forced to deviate from its optimal harvest program through 21 In other words, a high probability that bactual >> bmin. time. Secondly, we may have bactual > bmin. Emerging Perspectives on Foreign Fishing Arrangements 59 Kearney, R. E. 1983. “The Development of Tuna Fisheries and the Future Agreement: Management, Enforcement and Dispute Settlement.” for Their Management in the Tropical, Central and Western Pacific, The International Journal of Marine and Coastal Law 15: 361–78. in E.L Miles and S. Allen (eds.).” The Law of the Sea and Ocean Development Pintassilgo, P., M. Finus, M. Lindroos, and G. Munro. 2010. “Stability Issues in the Pacific Basin. Honolulu, Law of the Sea Institute: 158–75. and Success of Regional Fisheries Management Organizations.” Krugman, P. R., M. Obstfeld, and M. J. Melitz. 2012. International Econom- Environmental and Resource Economics. 46: 377–402. ics: Theory and Policy, ninth edition, Boston, Addison-Wesley. Queirolo, L. E., and R. S. Johnston. 1989. “Distant Water Fishing Nations Lodge, M., D. Anderson, T. Løbach, G. Munro, K. Sainsbury, and and Extended Fisheries Jurisdiction.” Marine Policy 13: 16–21. A. Willock. 2007. Recommended Best Practices for Regional Fisheries Man- Robb, D. 1983. “Access Conditions and Compliance Control.” Report of agement Organizations: Report of an Independent Panel to Develop a Model the Expert Consultation on the Conditions of Access to the Fish Resources of for Improved Governance by Regional Fisheries Management Organizations. the Exclusive Economic Zones Rome, 11–15 April 1983. FAO Fisheries London: Chatham House. Report No. 293. Rome: Food and Agriculture Organization of the McClurg, T. 2014. Areas Beyond National Jurisdiction (ABNJ) Fisheries: UN, 157–73. The Western and Central Pacific Ocean Case, Appendix C, Trade in Sappington, D. E. M. 1991. “Incentives in Principal-Agent Relationships.” Fishing Services Report. Journal of Economics Perspectives 5: 45–66. McRae, D., and G. Munro. 1989. Coastal State “Rights” Within the 200 Sutinen, J., and P. Andersen. 1985. “The Economics of Fisheries Law Mile Exclusive Economic Zone, in P. A. Neher, R. Arnason and Enforcement.” Land Economics 61: 387–97. N. Mollet (eds.), Rights Based Fishing. Dordrecht: Kluwer Academic United Nations. 1982. United Nations Convention on the Law of the Sea, Publishers, 97–112. UN Doc. A/Conf. 62/122. Major, P. 2014. The New Zealand Experience of Joint Venture Fishing _______. 1992. The Law of the Sea: The Regime for High Seas Fisheries: Status Operations 1977 to 2013, Appendix H, Trade in Fishing Services and Prospects. New York: Division for Ocean Affairs and the Law of the Report. Sea, Office of Legal Affairs. Mesterton-Gibbons, M. 1993. “Game-Theoretic Resource Modeling.” ______. 1995. United Nations Conference on Straddling Fish Stocks and Natural Resource Modeling. 7: 93–147. Highly Migratory Fish Stocks, Agreement for the Implementation of Munro, G. R. 1985. “Coastal States, Distant Water Fleets and EFJ: Some the Provisions of the United Nations Convention on the Law of the Long-Run Considerations.” Marine Policy 9: 2–15. Sea of 10 December 1982 Relating to the Conservation and Manage- ______. 1991. “The Management of Migratory Fishery Resources in ment of Straddling Fish Stocks and Highly Migratory Fish Stocks, UN the Pacific: Tropical Tuna and Pacific Salmon, in R. Arnason and Doc. A/Conf. 164/27. T. Bjørndal (eds.).” Essays on the Economics of Migratory Fish Stocks. ______. 2014. Office of Legal Affairs, Division for Ocean Affairs and Law Berlin: Springer-Verlag, 85–105. of the Sea. ______. 1992. “Evolution of Canadian Fisheries Management Policy United Nations Environment Programme. 2002. Integrated Assessment of Trade Under the New Law of the Sea: International Dimensions, in A.C. Liberalization and Trade-Related Policies: A Country Study on the Fisheries Sector Cutler and M.W Zacher (eds.).” Canadian Foreign Policy and International in Argentina. New York and Geneva: UN. Economic Regimes.Vancouver: University of British Columbia Press, Wilen, J. 2014. The Bering Sea Pollock Fishery: A Case Study for the 289–310. World Bank Assessment of Foreign Fishing Arrangements, Appendix Munro, G. R., and U. R. Sumaila. 2011. “On the Curbing of I, Trade in Fishing Services Report. Illegal, Unreported and Unregulated (IUU) Fishing, in Willock, A., and I. Cartwright. 2006. Conservation Implications of Allocation L. Tubiana, P. Jacquet, and R. Pachauri (eds.).” A Planet for Life 2011– under the Western and Central Pacific Fisheries Commission. Sydney: WWF Oceans. Paris: IDDRI. Australia and TRAFFIC Oceania. Munro, G. R., A. Van Houtte, and R. Willmann. 2004. The Conservation and World Bank. 2005. Where is the Wealth of Nations? Measuring Capital for the 21st Management of Shared Fish Stocks: Legal and Economic Aspects. FAO Fisher- Century. Washington: World Bank. ies Technical Paper 465. Rome: FAO. World Bank, and the Food and Agriculture Organization of the UN. Örebech, P., K. Sigurjonsson, and T. L. McDorman. 1998. “The 1995 2009. The Sunken Billions: The Economic Justification for Fisheries Reform. United Nations Straddling and Highly Migratory Fish Stocks Washington: World Bank. 60 Trade in Fishing Services APPENDIX B CASE STUDY ON FOREIGN FISHING AGREEMENTS IN THE WESTERN PACIFIC Les Clark » ensuring that agreements concluded in the near future with distant water fishing interests are compatible with Consultant, Ray Research these principles and measures; and e-mail: les@rayfishresearch.com c) the establishment of the Pacific Islands Forum Fisheries Agency, with functions to include facilitation of a regional ap- proach to management and to licensing including agreement INTRODUCTION on generally applicable policies and measures, pooling of Typically, there are two circumstances allowing for an enduring information, and standardization of procedures and forms. role for foreign fishing agreements (FFAs1): At this point, the PICs were relative latecomers to the process of a) where there are shared resources, and cooperation is needed establishing EEZs and FFAs. Carroz and Savini analyzed around to ensure sustainable use of those shared resources; and 100 bilateral fisheries agreement entered into by other states b) where developing countries lack the capacity to fully utilize between 1975 and 1978, most of them a response to the develop- the resources of their waters and seek to secure benefits from ment of extended fisheries jurisdiction—these were government- participation in fisheries for those resources by vessels of oth- to-government agreements and didn’t include the large number of er states, including through arrangements such as charters, agreements entered into between governments and foreign busi- joint ventures, and so on, as well as formal access agreements. nesses (Carroz and Savini 1979). The tuna fisheries of the Pacific Islands region provide one of Over the next few years, PICs were to systematically put in place the clearest examples of these circumstances since the resources EEZs, and most adopted bilateral access agreements with govern- are shared among many coastal states, as well as occurring in Areas ments or fishing associations as their key instrument for managing Beyond National Jurisdiction (ABNJ), and the scale of opportu- fishing by the foreign fleets that had previously fished the waters nities in those fisheries exceeds the capacity of the Pacific Island now enclosed in their EEZs. Countries (PICs)2 domestic fleets to fully utilize them. RATIONALE FOR ACCESS BACKGROUND AGREEMENTS The use of FFAs by the PICs traces from decisions made in 1977 The major objective is broadly to assist developing countries in by regional Leaders at the South Pacific Islands Forum. Noting the identifying the means to secure equitable and sustainable returns developments in the Law of the Sea, the Leaders took a number of from FFAs. A useful starting point in analyzing returns to PICs is to decisions including: consider the PICs’ rationale for FFAs, and particularly the rationale a) the countries in the region would move quickly to establish for their use of bilateral access agreements. fishing or exclusive economic zones (EEZs); The use of bilateral access agreements was a deliberate choice b) Forum member countries would enter immediately into made by most PICs in a process that also included consideration of consultations that would include: direct licensing, charters, and joint ventures. The main reasons for » agreeing on principles and measures to be applied in the choosing bilateral access agreements included securing recognition establishment of their extended fisheries jurisdictions, of coastal state jurisdiction and rights, compliance, and economic » agreeing at least provisionally, on a common basis for gains is discussed more fully below.3 This approach was shared negotiations with distant water fishing interests in particular with Caribbean and Indian Ocean island states and territories, where the development of bilateral access agreements was supported by activities funded under the FAO/Norway EEZ 1 For the purpose of this analysis FFAs are taken as including access agreements, Programme, particularly through a series of regional workshops on joint ventures, and chartering of foreign fishing vessels. the harmonization and coordination of fisheries regimes and access 2 The term PIC here generally refers to the 15 Pacific island States and ter- agreements aimed at assisting developing countries to maximize ritories that are members of the Forum Fisheries Agency: Cook Islands, Feder- ated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu, and 3 See Clark (2006) for a more thorough discussion of the rationale for access Tokelau (a New Zealand territory). agreements. Emerging Perspectives on Foreign Fishing Arrangements 61 benefits from foreign fishing. The factors of securing recognition UNCLOS related to EEZs, including the amplification of the pro- of coastal state jurisdiction and rights, compliance and economic visions relating to highly migratory and straddling stocks under the gains were also important objectives for the use of bilateral access UN Fish Stocks Agreement. In the Western and Central Pacific agreements for developed coastal states such as Canada and New Ocean, the sovereign rights of coastal states over highly migratory Zealand. The major difference was that for most PICs, especially stocks are clearly expressed in the Convention on the Conservation those with relatively large tuna resources, access arrangements with and Management of Highly Migratory Fish Stocks in the Western foreign fleets were seen as longer term arrangements, while for and Central Pacific Ocean which establishes the Western and Cen- developed countries the agreements were generally seen as shorter tral Pacific Fisheries Commission (WCPFC). In this circumstance, term transitional arrangements while national fleets developed. there is no longer any real need for PICs to assert those rights Among PICs too, there were substantial differences, with some such explicitly through instruments such as access agreements. as Fiji and Tonga emphasizing charters and joint ventures as being more effective for domestic development rather than access agree- ments. Equally, those PICs, such as FSM, Kiribati, and Tuvalu, that THE COMPLIANCE UMBRELLA aspired to valuable long term revenue streams from access agree- The second major reason for adoption of access agreements by ments also aimed at developing charters, joint ventures, and foreign PICs and other coastal states as a key instrument in managing for- direct investment as vehicles for domestic tuna development. eign fishing after the extension of jurisdiction was the compliance “umbrella.” Broadly, the importance of this concept was based on recognition that access to fishery waters could be used to leverage SECURING RECOGNITION OF compliance across fleets through access agreements in a way that JURISDICTION AND RIGHTS could not be achieved if foreign vessels were simply licensed on a boat-by-boat basis. More precisely, an agreement for access with a UNCLOS was signed on December 10, 1982, and entered into flag state government or with an association representing a fleet of force on November 16, 1994. However, most coastal states had boat owners could be structured to include a requirement that the extended their jurisdiction out to 200 miles while the negotiations flag state or association should take measures to ensure compliance on the Convention were still not completed, and as they entered with coastal state laws that would cover all vessels in the fleet and into the initial access agreements were keen to establish through not just those that were licensed. The agreement could also include state practice the concept of the exclusive economic zone. Secur- mechanisms for the flag state and the coastal state to cooperate to ing fishing state agreement to key elements of coastal state author- ensure compliance by both licensed and unlicensed vessels covered ity though government-to-government agreements was seen as by the agreement. Beyond this, compliance could be enhanced by an important opportunity to advance the EEZ concept. This was the application of penalties for non-compliance such as forfeiture regarded as particularly important where highly migratory species of bonds or cancellation of licenses across the fleet even if non- were involved because of the differences between coastal states complying vessels could not be apprehended or made to submit to and some fishing states over the application of the relevant provi- coastal state jurisdiction. In some cases also, the access agreement sions of UNCLOS with respect to highly migratory species. Access served to provide the legal basis for the flag state to take action agreements offered the coastal states, developed and developing, an against non-complying vessels. The compliance umbrella was opportunity to secure the agreement of major fishing states to the generally regarded as the key reason for requiring access agree- key elements of UNCLOS related to EEZs, particularly the sover- ments.4 For example, Pacific Island participants in a workshop on eign rights of coastal states in relation to resources in their EEZs. access agreements noted in their workshop report that “The rea- As a result many states included a requirement in legislation sons for requiring Government to Government or Government that foreign vessels could not be licensed unless there was in place to Association umbrella access agreements include . . . —most an access agreement with the flag state in which the flag state rec- importantly—facilitation of compliance control, through placing ognized the sovereign rights and exclusive authority of the coastal more responsibility for compliance control on the flag state or fish- state. Opening sections of access agreements therefore typically ing association” (Forum Fisheries Agency 1982). included wording under which the flag state recognized the sov- In this respect, the compliance umbrella offered by access ereign rights and exclusive authority of the coastal state within its agreements with foreign fleet representatives was a central part of 200-mile zone. a broader strategy to induce compliance in a cost-effective manner The goal of advancing international acceptance of the con- that included also the Forum Fisheries Agency Regional Register as cept of the EEZ and of the extent of coastal state sovereign rights the first international vessel listing process. Now, flag state respon- was an important issue in the late 1970s and early 1980s when sibility is firmly entrenched in a number of relevant legal instru- access agreements in their current form were initiated. It was a ments, including the FAO Compliance Agreement, the UN Fish particularly important goal for developing coastal states whose Stocks agreement and the WCPFC Convention. IUU listing is a area of extended jurisdiction covered rich offshore grounds, and it standard procedure for RFMOs, and one that has proven effective was especially important for PICs whose sustainable development in the WCPO for strengthening compliance within EEZs; electronic opportunities depended substantially on the integrity of their sov- reporting and information systems, particularly satellite-based ereign rights over the tuna stocks in their waters. Now, the goal of securing recognition of coastal state sover- eign rights is far less important, both globally and for PICs. There 4 See Moore (1987) for discussion of the role of flag state and fishing association is almost complete international acceptance of the provisions of responsibility within the broader strategy of cost-effective enforcement. 62 Trade in Fishing Services vessel monitoring systems (VMS) have provided cost-effective A second disadvantage is that access agreements reduce the measures to improve compliance, and PICs national monitoring, scope to generate competition between fleets. Setting fees control, and surveillance programs are substantially stronger. As unilaterally provides coastal states with opportunities to use a result, the importance of the compliance umbrella provided by more market-oriented approaches, raising fees if demand access agreements has greatly diminished.5 for access is strong, and reducing them if demand for access is weak. These advantages of establishing fees unilaterally are likely to be stronger in a setting where there are estab- ECONOMIC RETURNS lished limits to overall foreign access in terms of vessels, For PICs, issues related to economic gains have been central to ana- licenses catch, or effort as is increasingly the case. lyzing FFAs as a form of managing foreign fishing. Both the attraction b) Flag state government grants: Cash grants from flag of bilateral access agreements as a way of promoting the concept of state governments, such as those in the European Union (EU) EEZs and the compliance umbrella had important economic ratio- and U.S. agreements, are likely to be regarded these days by nales underpinning them. Broadening and accelerating acceptance coastal states as the major advantage of a government-to- of coastal state sovereign rights in EEZs would make more secure for government access agreement, to the extent that they are PICs the economic gains that the new EEZ regime potentially offered. in addition to, rather than instead of a commercial level of The compliance umbrella aspect of access agreements was designed access fees. Cash grants are particularly valuable in the con- to create economic gains by making it more difficult for boat owners text of public expenditure because they are usually commit- to avoid paying access fees and strengthening the bargaining position ted in advance at least to some minimum level and therefore of PICs. Beyond the value of access agreements in these ways, there can be built into government recurrent expenditure budgets. were a number of other ways in which access agreements were seen By comparison, payments from boat owners can fluctuate as having advantages in securing economic gains compared to other greatly, reducing their value for budgeting purposes. The approaches such as direct licensing. They included: discussion about whether such payments should be brought a) Flexibility: The argument that access agreements should under World Trade Organization discipline might affect the generate higher levels of access fees through offering greater scope for these payments in the future, perhaps ensuring flexibility is based on the greater freedom offered by access that these grants do not contribute to over-exploitation or agreements to negotiate higher fees for vessels whose own- enable boat owners to make a fair contribution for access. ers could afford to pay more than would be the case if fees Such grants remain, however, a key feature and attraction were determined legislatively for broad classes of vessels. of government-to-government agreements. This flexibility includes the ability to differentiate fees with c) Aid: Most government-to-government access agreements in- boat owners depending on both their capacity to pay and clude provision for grant aid as a component of the financial the value of their catches. In practice, there are cases where contribution made by the fishing state. In some cases, such agreements with a Pacific Island country do have different as in agreements with Japan, the aid tied to the access agree- fee levels for fleets with essentially the same value of catches ment may be the major benefit from the access relationship. but different capacities to pay, where essentially a fleet with older vessels and lower catches pays less because it cannot afford to match the fees paid by others. In such cases, there ROLE OF ACCESS AGREEMENTS may be a benefit from working with access agreements in that a uniform fee schedule would likely either deter the less FOR FISHING STATES efficient fleet from licensing or allow the more efficient fleet There were several reasons why fishing states initially agreed to to fish for less than it would have been prepared to agree to enter into access agreements that included licensing conditions if fees were differentiated. In the same way, it is likely easier rather than leaving coastal states to license vessels directly under to provide in access agreements for differing processes for regulations and license conditions. They included the opportunity adjustments of fees with catch values than it would be in a to remind coastal states of their obligation, as they saw it, to give system of direct licensing based on published fees. There are access to any surplus in the available yields that could not be taken however some major disadvantages in setting fees in access by domestic fleets and of the requirement to take into account the agreements rather than in published schedules. The first is need to minimize economic dislocation associated with historical that the bottom line in negotiations with a whole fleet is fishing in waters now under national jurisdiction. Government-to- often set by the boat owners in the fleet with the least capac- government agreements also gave some flag states a legal basis for ity to pay. An alternative strategy that involves licensing controlling their fleets outside their waters. individual vessels means that those boat owners who can’t Over time, these goals have been largely overtaken to a point afford to pay don’t take out licenses, but have no influence where it seems likely that most of the fishing in PIC waters now over the decisions of boat owners who can afford to pay. covered by access agreements is not in fact an extension of fishing that was taking place before the extension of fisheries jurisdiction. Instead, from a fishing state point of view, bilateral access agreements 5 An exception is the Pacific Island States Treaty with the United States where the now serve more to facilitate profitable fishing opportunities for flag more detailed flag state provision, including provisions relating to imposition of fleets, secure fish supplies for processing, and serve strategic, some- fines, and the effectiveness of the U.S. Government’s flag state control programs times geo-political, goals associated with deployment of vessels in continues to maintain the usefulness of the compliance provisions in the Treaty. PIC waters. Emerging Perspectives on Foreign Fishing Arrangements 63 FFAs AND PACIFIC ISLAND THE HARMONIZATION PROCESS COUNTRIES A key element in the approach of PICs to managing foreign fishing is the concept of harmonization of management regimes among FFAs have been important to all 15 PICs at some point. How- PICs. The first formal instrument of harmonization was the 1st ever, there has been a marked change in the importance and Implementing Arrangement under the Nauru Agreement which pattern of access agreements over time, with particularly impor- established a binding obligation on PNA Members to apply agreed tant recent developments flowing from the adoption of the PNA minimum standards. This was broadened in scope and participation Vessel Day Scheme in the purse seine fishery as discussed more when the wider group of Forum Fisheries Agency members adopted fully below. a set of Harmonized Minimum Terms and Conditions for Foreign The typical pattern of use of FFAs today is that most PICs Fishing Vessel Access (MTCs). The adoption by Agency Members have in place a mix of arrangements for licensing foreign vessels at the Forum Fisheries Committee is not legally binding but it carries including: high level political commitment. Over time, the range of conditions a) bilateral access agreements for licensing foreign vessels to covered by the MTCs has been broadened to where they now cover: fish in their EEZs, including vessels from other PICs. Most of these agreements operate actively at the government- » common regional license form fishery association or government-enterprise levels, even » good standing on the Forum Fisheries Agency vessel register where there are government-to-government level agree- » control and monitoring of transshipment ments in place as with Japan and Korea. The exception is » maintenance and submission of catch logs in zones and on the agreements with the EU. The EU has negotiated agree- high seas ments with several PICs, but the only one operational at » vessel reporting requirements this point is that with Kiribati because the EU has refused » onboard observers to cooperate in the implementation of the VDS in the » appointment of an agent for service of legal process manner required by other PICs; » transit controls b) a multilateral agreement with the U.S. Government to » boarding and inspection which all PICs are Parties, and a multilateral agreement » vessel marking, providing preferential terms for domestic purse seine ves- » vessel monitoring system (VMS) sels of PNA called the FSM Arrangement; » identification of fish aggregating devices c) arrangements loosely termed charters, including arrange- » pre-fishing inspections ments ranging from full bareboat or demise charters, Increasingly, the same conditions are also applied to domestic sometimes involving reflagging to PICs, to simple contract and joint venture vessels. arrangements with local processors, brokers, or agents. In The development and extension of the MTCs is now broadly most cases, such vessels are licensed directly under regu- accepted by foreign fleets and their governments after earlier strong lations and license conditions without agreements of any opposition. Some elements of the MTCs have been subject to par- form with the PIC Government; ticularly strong opposition including the Forum Fisheries Agency d) joint ventures, including joint ventures in processing op- Regional Register, onboard observer requirements and VMS, and erations or vessels. Most of the joint ventures are between PICs have agreed to include these in PICs’ legislation to remove private foreign and national partners. Earlier experience them from fishing state pressure in negotiations. of PIC government involvement in direct ownership of The harmonization process has delivered a number of benefits. plants and vessels, either outright or through joint ventures The key benefit is that individual PICs can develop their relations was systematically negative, with some governments be- with foreign fleets in whatever way suits them, responding to their ing involved in operations that incurred substantial losses. national objectives and differing patterns of comparative advantage, A 2003 report (Gillett 2003) recorded the reaction to that but within a framework that ensures that individual PICs cannot be earlier outcome as follows: played off against each other in the application of elements that are Learning from past difficulties, most of the fisheries important for monitoring, control, surveillance, and enforcement. officers encountered expressed the sentiment that Over time, there have been proposals to move on from a harmonized the government should refrain from commercial approach to a more joint approach involving joint licensing, joint involvement and focus on improving the policy negotiations, joint surveillance programs, and so on, and while there environment. are examples of joint licensing (for U.S. Treaty and FSA Arrange- ment vessels) and combined surveillance operations, and there is However, more recently, some PNA Member Govern- current interest in VDS pooling arrangements, PICs have strongly ments have entered into joint ventures for purse seine vessel preferred management structures based on the exercise of their sov- operation, attracted by the apparent high returns offered by ereign interests and sovereign rights that “harmonization” allows for. some boat owners in an effort to secure stable access in the Other benefits from harmonization have included: face of the increasing control of the purse seine fishery by a) standardization has enabled the development over time PNA Members through the VDS, apparently with gener- of important databases, particularly of logsheet catch and ally good results. effort data, and promoted data sharing on foreign fishing; 64 Trade in Fishing Services b) standardized reporting procedures, and so on have been on catch or effort associated with existing licensing ar- valued by vessel operators; rangements. c) harmonized approaches to laws, regulations, and licenses » The small number of buyers for licenses, with the foreign have enabled more effective, more focused capacity build- fishing interests generally strongly organized into a few ing and technical support from regional agencies; buying agencies, often under strong government influence. d) the requirement for good standing on the regional register » The relative large number of sellers of licenses, which has has meant that vessels cannot evade the consequences of in the past provided scope for foreign fishing interests to IUU fishing in one zone by moving elsewhere; choose from a number of license sellers, and even at times e) the harmonized standards and programs applied by PICs to play sellers off against each other. in their EEZs have largely been adopted by the WCPFC » The currently relatively unprofitable nature of distant wa- and implemented in the high seas applying the compatibil- ter fishing operations. ity principle from the UN Fish Stocks Agreement and the » The relative weakness of surveillance and enforcement ef- WCPFC Convention. forts available to ensure compliance with agreements. From the value of fees in the table above relative to the value of ACCESS FEE RETURNS catches, it seems that most of the increase in fees from $13.5 million The table below summarizes the information available over time in 1981 to $60–80 million in the later years was due to the increase on access fee returns. This data is only approximate for reasons in the value of catches in PICs’ EEZs. In particular, there was very detailed in the source documents including differences in prac- large growth in the value of purse seine catches growing from less tice among PICs in recording revenue (some PICs record certain than 30 percent of catch values in 1981 to around 70 percent by components of the access receipts as aid not fisheries revenue), 2003. Most of the growth came from new purse seine fleets enter- differences in financial years, and differences in coverage—some ing the fishery as PICs encouraged other fleets to enter the longline include other fisheries revenue such as transshipment or observer and purse seine fisheries to compete with Japanese fleets, and the fees; others do not. However, the table broadly indicates a substan- Japanese share of access fees fell from around 90 percent in 1981 tial increase from the early 1980s to receipts of US$60–80 million to around 15 percent by 2007. On the other hand, some of the annually from around 1996–2007. By the 1990s, these earnings increase in the value of catches would have come from the growing represented an important revenue source for many PICs, contribut- domestic fleets who would have generally paid relatively low fees. ing 30–40 percent of central government revenue for several PICs. Overall however, while most of the growth in access fees may The Indicative Return Rates in the table are those reported as have been due to increased catch values there was also substantial being used as a basis for access agreements at the time. For exam- additional growth during the period from 1981 to 1996. Develop- ple, the 1983 paper reported that “foreign fishing interests have ments that could have been expected to contribute to that addi- generally accepted fee rates in the region of 3.5 to 4 percent,” while tional growth include: “a study of actual (ex post) fee receipts for the calendar year 1981 a) increased competition from new fleets as noted above; of Forum Fisheries Agency States showed actual fee rates of return b) the higher earnings in particular from the Fisheries Treaty ranging from around 2.2 percent to over 5 percent of landed mar- with the United States, which were returning 10–11 per- ket value.” The range in the ex post estimates between zones is cent of the value of U.S. catches when the Treaty entered largely due to annual variations in fishing patterns across zones. into force in 1987; The same paper noted that “the relatively low levels of these fee c) improvement in monitoring, control, and surveillance pro- rates can be traced to:” grams, particularly the development of the Forum Fisheries » The lack of any real scarcity value to the licenses pur- Agency regional register and the adoption of Harmonized chased . . . , there are almost no effective quotas or limits Minimum Terms and Conditions for Foreign Fishing Vessel TABLE B.1. DEVELOPMENT OF ACCESS FEE RETURNS TO PICs SINCE THE 1980s Value of Fees Catch Value in PICs Indicative Return Year ($ millions p.a.) Waters* ($ millions p.a.) Rates Source of Fees Data 1981 13.5 375 (1982) 3.5–4% Clark (1983) 1995 60.0 1,101.1 n.a. Swan (1997) 1996 66.3 875.4 n.a. Gillett (1997) 1999 57.8 777.4 n.a. Gillett and Lightfoot (2001) 2003 68.0 888.6 5+% ADB (2004) 2007 78.5 1,796 n.a. Gillett (2009) Note: p.a. = per annum, n.a. = not available. *The estimated catch value for 1982 is taken from the same paper referenced as the source for the fees data. The estimated catch values from 1995 are taken from Forum Fisheries Agency estimates (Forum Fisheries Agency 2013). Emerging Perspectives on Foreign Fishing Arrangements 65 Access, as well as the Australian supported regional patrol boat program and the Forum Fisheries Agency VMS; THE PNA PURSE SEINE VDS—A d) increased coordination between PICs, including sharing of GAME CHANGER information about access agreements and access negotia- Against the background set out above one recent development is tions; and bringing profound change to the management of purse seine fish- e) substantial efforts in capacity building including both train- ing generally, and purse seine fishing by foreign fleets in particular ing in the areas listed in this paragraph and institutional in the WCPO. That development is the PNA purse seine Vessel strengthening of national programs in tuna management Day Scheme (VDS). In fact, there are two PNA VDSs—the purse and monitoring, control, and surveillance. seine VDS is operational and the longline VDS is in a trial phase. However, access fee earnings flattened out from the early 1990s, But it is the purse seine VDS that has been the subject of much and there was a sense that there was little room for further growth recent attention, and since that version is generally called the PNA in access fee revenues and that PICs needed to focus again on pro- VDS, the same terminology is used here. moting domestic tuna industry development to achieve significant The development, structure and operation of the VDS is additional benefits from their tuna resources. As a major 2004 Asian described in the annex to this appendix. In brief it is a manage- Development Bank report from a project on Alternative Negotiat- ment scheme establishing tradable effort limits in fishing days in ing Arrangements to Increase Fisheries Revenue in the Pacific put it: the purse seine fishery in the PNA EEZs (and Tokelau) that are allocated among PNA Members and Tokelau. . . . agreements based solely on commercial considerations The VDS is not a FFA or arrangement, and foreign fishing (that is, exclusive of strategic or political considerations, and interests are not directly involved in any aspect of the VDS. It is based on ability to pay) seem unlikely to achieve much beyond an instrument for PNA to manage purse seine fishing in their EEZs 6–8% of the landed value of the catch. This ceiling has been in their interests and in conformity with their international obliga- the experience in most tuna fisheries, with even 6% seen as a tions, including the conservation and management measures of the significant if not burdensome “royalty payment” or “resource WCPFC. rental” in most resource sectors. The best placed PDMCs However, the VDS is centrally important to any considera- (Pacific Developing Members Countries) currently achieve a tion of FFAs in the Pacific Islands region because of the way that return of between 7 and 8% in some years. Even as competi- it is reshaping all fisheries arrangements in the Western Pacific tion for available tuna resources continues to increase, there is purse seine fishery, including FFAs. It has also been adopted by some evidence that this ceiling is a real one in economic terms, the WCPFC as part of the regional management framework and those PDMCs which have the capacity or potential to do and WCPFC Conservation and Management Measure 2013–01 so, would best focus on domestic industry development or requires Commission members to “. . . support the ongoing devel- shore-based investment as a better prospect for, or an adjunct opment and strengthening of the PNA VDS including implemen- to, increasing returns from the fishery. (ADB 2004) tation and compliance with the requirements of the VDS. . . .” An alternative point of view based on bioeconomic analyses Some of the defining features of the VDS as an economic was that rents could be increased by restructuring regional tuna instrument are: fisheries, and in particular by reducing effort, especially purse seine a) It aims to create scarcity of access to make access valuable. effort. The clearest expression of this approach was the conclusions In the first three years, from 2008 to 2010, this aim was not of a 2000 report (Bertignac et al.) that said: achieved because the total allowable effort (TAE) was set » “the Fishery rent is fully dissipated at a level of effort at levels that exceeded the demand for days, as often hap- 20–30% higher than the 1996 level” pens when an allocation process is introduced to a fishery, » “Both fishery rent and private profit are maximized at and there was a procedure for carrying over unused days. approximately 50% of the current effort level” (at around Since the TAE was tightened and the carryover provision 16,000 fishing days) removed for 2011, fishing days have become scarce and » “The results suggest that higher access fees could be sus- more valuable. As indicators: tained at lower levels of effort.” i. Havice (2013)6 reports “Since 2007, the value of a fishing day has increased In later work, with further development of this model, purse seine dramatically fisheries specialists and industry represen- catch per unit effort (CPUE) and therefore rents were less sensitive tatives suggest that the rate of return on licensing fees to purse seine effort changes, but the work still found that “reduc- has increased on average from 5–6% of catch value to tions in purse seine effort are likely to lead to an increase in the level 8–13%;” of rent in the purse seine fishery,” and that rents were maximized at ii. The terms and conditions for the Treaty with the 17,000–23,000 fishing days depending on price elasticities. United States have been renegotiated increasing fees In the same direction, Kompas and Che (2006) estimated that from $21 million annually to $63 million annually from economic profits in the regional tuna fisheries would be maximized mid-2013 for more limited access than previously; and with significant reductions in effort from 2004 values, including a reduction of purse seine effort to 68 percent of the 2004 effort levels. With these reductions, profits were projected to increase by 6 This reference provides the most comprehensive description of the VDS 30 percent p.a. or around US$50 million p.a. currently available. 66 Trade in Fishing Services TABLE B.2. FISHERIES REVENUES FOR VDS days and the values of features such as transferability, longer term contracts for days, and pooling arrangements SELECTED PNA MEMBERS that allow vessels to use VDS days more flexibly in differ- (US$ MILLION P.A.) ent zones. In time, this should make the current important Marshall minimum benchmark price redundant. Islands Nauru Tuvalu c) It allows for days to be traded between Parties: This enables Parties to take into account the wide range of annual 2007 n.a. 5.5 5.2 changes in fishing conditions between zones resulting in 2008 n.a. 7.4 10.3 particular from El Niño and La Niña phenomenon. It also allows Parties with less attractive fishing grounds to sell days 2009 n.a. 5.7 9.1 to Parties where fishing is more profitable, and for both Par- 2010 2.2 5.3 9.0 ties to share the benefits. d) It allows each Party to use their allocation to meet their own 2011 7.9 7.5 8.9 national interests. Some may choose to use their allocation 2012 8.4 11.8 10.5 wholly for domestic fleets both in their own EEZs or in waters of others through the FSM Arrangement; some may Sources: Marshall Islands: (MIMRA 2013; Nauru: PNAO). choose to focus on sales of days to foreign fleets through Note: n.a. = not available. existing bilateral frameworks; others show signs of moving to a completely competitive tendering type process—and in iii. Table B.2 shows some recent changes in the fisher- most cases there is likely to be a balance of these approaches. ies revenues of Marshall Islands, Nauru, and Tuvalu, The important principle is that Parties should be free noting that these figures do not include the returns to maximize the benefits in terms of their own national from joint ventures for Marshall Islands and Tuvalu, interests and opportunities within the agreed framework of which have been in the range of $1.5–2.5 million minimum terms and conditions for foreign vessels. p.a., nor the increased fees for the U.S. fleet. Marshall e) It can provide effective leverage for promoting domestic Islands and Nauru have both been involved in trad- development. Some Parties, including Papua New Guinea ing days. For Marshall Islands the revenue growth has and Solomon Islands, have made it clear that they intend come from selling days for fishing in its waters, as well to provide longer term opportunities for purse seine fishing as the sale of days for fishing in other zones. Nauru on from their PAE only for vessels associated with onshore in- the other hand has been a buyer of days, and its reve- vestments; others such as Kiribati have placed a priority on nue includes returns from sales of its Party Allowable joint ventures in vessel operations. Effort (PAE) supplemented by returns from additional days that it has bought for fishing in Nauru waters. iv. More recently based on 2013 earnings, the ADB has NEXT STEPS ON THE VDS reported that in terms of government revenue “it is the The VDS is still in a very early stage of development, and far from second year in a row that Kiribati, Marshall Islands, fully successful or effective, with a mix of successes, difficulties, and Nauru and Tuvalu have had done better than they ex- failings in its performance. There are a number of weaknesses to be addressed and there is scope for improvements that can be expected pected and it is all a result of the Vessel Day Scheme to improve outcomes, and reduce risks to its sustainability, including: put in place by the 8 tropical tuna countries that are a) weaknesses in the way the scheme is being implemented, Parties to the Nauru Agreement” (ADB 2013). including inconsistent handling of non-fishing days, short-term Further substantial gains can be expected to be reported decision-making on PAEs, outstanding issues in allocation; in the next few years as the increases in prices for vessel b) further development of support systems including electron- days now being put in place work through into revenue ic reporting and enhanced electronic monitoring; receipts, and as noted below, there remains substantial c) improved use of the scheme, with most administrations still scope to further improve the effectiveness of the VDS as a in early stages of learning to use the scheme effectively and management scheme. in particular of exploring new ways of managing access to b) It aims at creating competition between fleets for access. increase returns; This process is underway but is far from perfect. Days are d) strengthened management of purse seine fishing out- still made available under a bilateral framework which is side the waters covered by the VDS to avoid effort being not yet fully open to competitive processes. When the pro- diverted to alternative fishing grounds; cess becomes mature, it should lead to less efficient vessels e) improved decision-making processes, including strength- being removed from the fleet because they can’t compete ened institutional arrangements, especially for commercial for VDS days, and being replaced by more efficient vessels. decision-making; That hasn’t happened yet, but there are signs that owners f) developing new alliances with the global tuna industry: of less efficient vessels are being driven into more beneficial most distant water interests have substantially reduced their locally based ventures with PNA partners to survive. A fully opposition to the VDS and their efforts to undermine it, competitive process should also reveal the real value of except for the EU. Multinational interests have generally Emerging Perspectives on Foreign Fishing Arrangements 67 shown a more constructive interest in mutually beneficial more competitively, competitively, and efficiently in a way arrangements through the VDS than national fleets and that could increase economic rents and potentially access their governments; returns as well as providing opportunities for profitable g) effort creep needs to be taken into account in the setting joint ventures between the resource-owning governments of the PAE. Even then, the VDS will still be subject to the and those businesses. In fact, as the PNA office (PNAO) weaknesses of input controls generally as a management Business Plan (PNAO 2011) sees it, if the VDS were to instrument, including the bluntness of effort control for become fully competitive and effective, the result should be manage fishing mortality; the stripping out of rents, in terms of above market returns, h) Extension to other fisheries: a VDS for the longline fishery throughout the value chain, except at the brand owner and in PNA EEZs is in a trial phase. consumer end. Then PNA and brand owner ventures could be potentially relatively powerful. Some specific new directions that are under consideration7 g) fishery services imports model: A model that would include: most closely fit the concept of “importing fishery services” a) multi-annual arrangements: The efficiency of busi- would see PICs individually or collectively pay vessels to catch nesses throughout the tuna supply chain is generally fish, instead of having the vessels pay PICs. In this model, enhanced by longer terms for access to fish resources to harvesting would be competitively contracted. Instead of reduce uncertainty about supply, allow enhanced plan- the vessels paying PICs the current 6–10 percent of catch ning and enable producers to give assurances to customers value for catching rights, PICs would contract vessels by of a relatively smooth supply of products over time. With paying them a percentage of the catch with PICs retaining those kinds of benefit increased returns can be extracted ownership of the catch, which they could then sell or have for multi-annual access. processed. Given the increased commercial involvement and b) pooling: In the regional purse seine fishery, there are risks that would be taken on by PICs from this form of trans- potentially valuable gains to vessels from being able to roam action, it is more likely that this kind of arrangement would freely across zones as fishing conditions change. The value be implemented through a joint venture with a processor, of this flexibility will vary between vessels depending on broker, or brand owner. The partner needn’t be a processor their operating patterns. The Treaty with the United States with its own plant—the joint venture could make arrange- and the FSM Arrangement are both pooling arrangements, ments for the catch to be processed under contract wher- but currently the days for those arrangements are taken off ever the greatest value would be created, taking into account the top from the TAE before PAEs are calculated. Addition- PICs interest also in generating employment domestically. al pooling arrangements would necessarily have to draw A highly likely outcome of the kind of development discussed on contributions of days from PAEs of Parties. PNA have above is that formal foreign fishing access agreements would dimin- already raised the possibility of pooling in their 2012 report ish in importance and in many cases fall away. With sovereign rights to the WCPFC (PNA 2012), and negotiations on pooling secure and a greatly reduced need for the compliance umbrella are understood to be advanced with two other fleets. offered, the original rationales for the use of access agreements are c) transferability: An alternative to pooling is to allow days largely removed. In practice, the continued use of bilateral access purchased from a Party to have a degree of transferabil- agreements is largely: ity to some or all other Parties’ EEZs (or to the high seas) under an arrangement providing for a premium payment a) a matter of convenience, since they are already in place and for days used in that way to be shared between the Party developing alternatives such as direct licensing of vessels providing the PAE and the Party whose waters are fished. under regulations requires the development and adoption d) tendering/auctioning: It is only a matter of time before of detailed regulations on access terms and conditions; and days are tendered or auctioned, either bilaterally for access b) a reflection of their political context, with fishing states to a single zone, or more likely for pooled days to multiple and associations keen to retain the access to ministers and zones. In addition to increasing revenue, selling at least senior administrators that is implied in a process of negoti- some days through tendering or auctioning should have the ations on agreements, and potential benefits to PNA mem- very important benefit of revealing the real economic value bers where aid programs are linked to access, as is the case of a fishing day and of fishing days made available under with Japan. different conditions. e) granting more well-defined rights for access: However, concerns about the lack of transparency, the political especially for businesses with longer term investments at and commercial influences including the risk of corruption, and national level. the inevitable tendency toward compromise outcomes that attend f) selling fishing opportunities to processors or any negotiation process are increasingly likely to be seen as good brokers or brand owners instead of fleets: selling reasons for moving to replace the process of negotiations over access or days to larger businesses than the fleet owners access agreements with more open and competitive processes, as could provide opportunities for securing vessel services the PNA CEO has recently noted (Aqorau 2014). The development of the VDS has been challenging also for distant water fishing interests. Some private sector interests have 7 See Aqorau 2013 for reference to some of these approaches. welcomed its potential, while pointing to its shortcomings in limit- 68 Trade in Fishing Services ing effort and capacity. The U.S. government and industry opposed involved in FFAs, and has rejected proposals that it should be. How- or questioned it for a long period before recently agreeing to the ever, there are very large implications for the outcomes from FFAs application of the VDS in an arrangement to extend Treaty licens- from the actions of regional fishery management organizations ing arrangements for U.S. vessels. As noted above, the EU contin- (RFMOs) generally, and for PICs from the actions of the WCPFC. ues to oppose it, apparently in order to protect its vessels from the RFMOs, at least tuna RFMOs, have inherent tendencies: economic implications. a) to manage a stock down to BMSY [Maximum Sustainable Some of these reactions highlight the apparent policy incoher- Yield (MSY)] levels because of the focus on biological sus- ence in the situation where: tainability rather than optimal utilization, and because of » taxpayers in donor countries contribute valuable funding consensus-based decision-making which tends to result in for aid for the sustainable development of PICs; lowest common denominator type outcomes; and » then pay taxes for subsidies to fleets and costs of their b) to entrench existing fleets through the development of flag- national administrations who act to protect the economic based limits based on historical catches or effort, by flag, interests of their fleets operating in PICs waters in ways that become quasi-rights, reinforced by capacity limits that that undermine the potential sustainable development make it harder for developing countries to secure fair oppor- gains for PICs from the more efficient use of their tuna tunities to participate, especially in high seas tuna fisheries, resources; and or even to establish competitive arrangements for access to » then as consumers of tuna products pay higher prices their waters, since fleet capacities are largely locked down. because of tariffs to protect their national tuna fleets and These tendencies can be compounded and reinforced by devel- processors when cheaper products are available from oped fishing state domination of RFMO processes. PIC or third country producers whose operations would PICs have made a major effort to avoid those outcomes at the contribute to PIC sustainable development. WCPFC with some success, particularly in the purse seine fishery, where the WCPFC limits are set in terms of zone-based effort lim- THE VDS IN PERSPECTIVE its, including the VDS. The development of the VDS reported above needs to be kept in perspective. It is a major undertaking. Havice describes it as WHAT TO TAKE FROM PIC “arguably the largest and most complex fishery arrangement ever to be put in place,” covering a fishery with an annual landed value EXPERIENCE WITH FFAs of catches of over $3 billion, and providing up to 50 percent of What can be taken from this review of PICs’ experience with FFAs? national government revenue for some PNA Members. But there Some features and key issues are: are six PICs that don’t participate in the VDS, mostly because they » It’s a long haul: PICs have been working at improving don’t have significant purse seine catches in their waters. And all the the management of their tuna fisheries generally, includ- PICs participating in the VDS are also involved in FFAs of differ- ing their arrangements with foreign vessels, for around ent forms in the longline fisheries in their EEZs, which have a catch 35 years. There were some early easy gains in the 1980s, value of over $500 million. Despite the success of the purse seine some “low-hanging fruit” that could be picked by short- VDS, efforts to implement similar or alternative arrangements in term programs involving sharing and application of the longline fisheries have not been effective, although PNA are tri- information and ideas, but otherwise substantial gains have aling a longline VDS. There are serious management issues in the required lengthy consultations at regional and national lev- two major longline fisheries. In the tropical longline fishery, there els, cautious implementation, and the building of national is overfishing of the primary target species, bigeye tuna; and there and regional capacities. Much of this is due to the interna- has been rapid expansion of the southern longline fishery targeting tional nature of the regional tuna fisheries and the layers of mainly albacore, which has resulted in lower prices and lower catch complexity added by that feature compared to the manage- rates to a degree that threaten the viability of local fleets. ment of a fishery within a single jurisdiction. But national capacity building in fisheries management is generally a FFAs AND SUSTAINABLE long haul in any national context. » Institutional and human resources development FISHERIES, AND THE WCPFC creates beneficial choices: When PICs first entered The emphasis in this paper has been on the economic aspects of into FFAs, they had little choice than to effectively legiti- PICs’ experience with FFAs. For PICs, sustainability has always mize fishing that was going on in their waters anyway, and been an important objective of the FFAs in which they have been secure some benefit from it. That is no longer the case, and involved. The initial emphasis was on securing the data necessary for it is the very substantial improvements in national, regional, stock management, including assessments, and on improving knowl- and sub-regional capacities, both human and institutional, edge and understanding of the major target stocks. Later, limits were that have largely created the choices that most PICs now introduced for both conservation and economic purposes, particu- have in the way they manage fishing in their waters, their larly through the Palau Arrangement for the purse seine fishery. relations with foreign vessels, and the way in which they However, the establishment of the WCPFC in 2004 made con- use various forms of FFAs. At the same time, especially servation concerns and action central. The WCPFC itself is not for smaller PIC administrations, human resources and Emerging Perspectives on Foreign Fishing Arrangements 69 institutional constraints remain the key factor in constrain- greatly reduce the extent to which they can play off against ing them from securing greater benefits from FFAs and each other, while leaving them free to apply widely different management of their tuna fisheries more generally. approaches in their arrangements with foreign vessels and » The VDS outcomes contradict much analysis and in the development of their tuna fisheries more generally. advice: Much technical advice to PICs and PNA in partic- Similarly, for VDS participants, the jointness of the VDS ular was based on the conclusion that the potential for ben- secures each country’s rights, but leaves them largely free efits and access fees would be increased by reducing effort, to use their national PAEs in their interests and in response especially purse seine effort, and that increased effort would to their own comparative advantages, and they all exercise reduce rents. In practice, the PNA appear set to generate those rights differently. much greater gains in fees than projected by bioeconomic » The actions of RFMOs for shared stocks can have analyses from the opposite outcome in the purse seine fish- very large implications for FFAs: Furthermore, they ery, with substantially greater earnings from a purse seine are inherently tilted against developing country interests in fishery with effort levels at or beyond the levels at which securing benefits from FFAs. rents were projected to fall to zero. That doesn’t invalidate » Development assistance packaged in 3–5 year the principles of the bioeconomic analyses—at some point project terms isn’t a good fit with these long terms rents and PICs’ benefits will fall if purse seine effort contin- needed for real gains: For PICs, the regional organi- ues to expand, but it does indicate the difficulty of applying zations and programs, particularly FFA and SPC, have standard bioeconomic models to this purse seine fishery. been important agents in the process of merging fixed » The potential benefits from effective, competitive term, projectized packages of donor funding into coherent access arrangements are greater than generally streams of support for PICs, often with real difficulty, and realized: The scale of increases in fees and leverage of to their great credit. domestic development benefits already achieved by the » The PNA increased its independence and reduced VDS has surprised some of those involved, and there are its dependence to make the VDS work: The PNAO potentially much greater benefits to come, especially if and some commentators have ascribed some of the the scheme can be tightened to where less efficient vessels recent success of the PNA and the VDS to the increased are driven out by higher fees. self-reliance of the PNA since it established its own office » Market principles are important, especially com- and financing sources, that reduced its dependence on petitiveness and scarcity: If FFAs are to be used to donors and organizations with links to major fishing states. generate revenue in the form of access fees, returns are In fact, the initial report on the VDS was financed by the increased by competition for access, and by access being ADB, and its development was very largely supported by scarce. When there are one or few buyers for access, and the FFA. However, there was little support, and some oppo- when essentially unlimited access is available, the value of sition, from key donors, when the PNA adopted the VDS access is low. The VDS experience in increasing returns and then set up its own office, largely to implement the is largely a measure of the value of limiting access and commercial aspects of the VDS. increasing competition for it, and there is substantial addi- » It’s easier said than done: Even with the clear results, tional ground yet to be covered in these directions by the both positive and negative, from the experience with the VDS participants. Among other things, umbrella agree- purse seine VDS, the PICs have not yet been able to extend ments with foreign flag states or associations may have a similarly cooperative framework into the longline fisher- some advantages in terms of convenience and compliance, ies, so replicability is clearly not straightforward. although these are likely to be declining, but making busi- » Are fishing access agreements on their way out?: nesses and vessels compete for access, even from the same There are clearly less circumstances now in which it makes flag state, will increase returns. sense for states to enter into FFAs as Foreign Fishing Agree- » Rent creation and extraction are separate, though ments relating to access to their waters. Without the origi- related, processes and both are necessary: Increas- nal rationales for agreements of this kind of securing sover- ing profitability of a fishery may generate higher levels of eign rights and compliance, an access agreement between a economic rent, but transforming that into higher benefits coastal state and a foreign fleet, especially a foreign business extracted through FFAs or otherwise requires transformation or association of business is little more than an agreement also in terms of more competitive processes to extract rents. by the foreign fleet to comply with national laws in return » Cooperation works: Indeed, it is an imperative for PICs. for certain fishing opportunities. Why bother? That isn’t But there are limits to jointness of action, and approaches how states regulate economic activity in other sectors. that substantially retain the room for each state to use its The key requirement is clear specification of the rules that rights and resources in its own interests are more likely to apply to those wanting to engage in fishing, and preferably succeed. This is largely a matter of states being able to act transparent processes for allowing and monitoring that on their own comparative advantages, which are more dif- participation. There is no question of securing businesses ferent than is often appreciated, and in pursuit of their formal agreement to those rules, notwithstanding the value national objectives. For the PICs, harmonization works of consultation. Many PICs are already working in that because it creates a framework of agreed measures which direction which sees domestic and foreign vessels treated in 70 Trade in Fishing Services much the same process and under the same arrangements, though fees, and so on may be different for foreign vessels, ANNEX: THE PNA PURSE without agreements. The VDS is simply accelerating that process for some PICs, because of the premiums that can SEINE VESSEL DAY be earned from more competitive processes, and the addi- SCHEME (VDS)8 tional importance of transparency when there is so much THE PNA more at stake. The PNA are the Parties to the Nauru Agreement Concerning Cooperation in the Management of Fisheries of Common Interest. In the Agreement concluded in 1982, the Parties agreed to ordinate REFERENCES and harmonize the management of fisheries with regard to com- ADB. 2004. A Review of Current Access Arrangements in Pacific Devel- mon stocks within the Fisheries Zones, and in particular to establish: oping Member Countries (PDMCs). a) principles for the granting of priority to applications by ADB. 2013. http://www.radioaustralia.net.au/international/radio/program fishing vessels of the Parties to fish within the Fisheries /pacific-beat/tuna-fee-revenue-higher-than-expected-in-four-pacific Zones over other foreign fishing vessels; -countries/1228676?autoplay=1228416 b) uniform terms and conditions under which the Parties may li- Aqorau, T. 2014. “Challenges facing the region’s tuna fisheries. What sort cense foreign fishing vessels to fish within their Fisheries Zones of year will 2014 be?” Islands Business. January 2014. Bertignac, M., H. Campbell, J. Hampton, and A. Hand. 2001. “Maximiz- The eight Parties are the Federated States of Micronesia, Kiri- ing Resource Rent from the Western and Central Pacific Tuna Fisher- bati, Marshall Islands, Nauru, Palau, Papua New Guinea, Solo- ies. Marine Resource Economics 15: 151–77. mon Islands, and Tuvalu. The catch of the three main tropical Clark L. 1983. “A Study on Fees and Other Economic Benefits from For- tuna species in their waters is around 1.5 million tons, annually, eign Fishing Access to the Fisheries of Exclusive Economic Zones 95 percent of the catch in PICs’ waters, and 35–40 percent of the of the States Participating in The South Pacific Forum Fisheries global catch of these species, including a greater share of skipjack Agency.” Report of the Expert Consultation on the Conditions of Access to the Fish Resources of the Exclusive Economic Zones, 293. Annex 8. FAO. tuna, the primary tuna input for canned tuna. Clark L. 2006. “Perspectives on Fisheries Access Agreements: Developing To give effect to the Nauru Agreement, the Parties have adopted Country View.” Development Dimension, Fishing for Coherence, Proceedings of several arrangements, including: the Workshop on Policy Coherence for Development in Fisheries. OECD. a) 1st Implementing Arrangement, 1983, setting minimum Carroz J., and M. Savini. 1979. “The new international law of fisheries licensing standards, including reporting, inspection and emerging from bilateral agreements.” Marine Policy 3: 2. pp. 79–98. Forum Fisheries Agency. 2013a. WCPFC Area Catch Value Estimates (for onboard observation, vessel identification and “good stand- July 2013), found at http://www.ffa.int/node/425#attachments ing” on the FFA regional register Forum Fisheries Agency. 2013b. FFA Fisheries Trade News 6: 3. b) 2nd Implementing Arrangement, 1990, adding additional Gillett R. 1997. The Importance of Tuna to Pacific Island Countries. FFA conditions relating to VMS, high seas reporting and a pro- Report 97/15. hibition on transshipment at sea Gillett R. 2003. Domestic Tuna Industry Development in the Pacific c) 3rd Implementing Arrangement 2008, applying a FAD clo- Islands: the Current Situation and Considerations for Future Devel- sure, 100 percent observer coverage and catch retention/ opment Assistance. FFA Report 03/01. no tuna discards in PNA EEZs, and prohibition of fishing Gillett, R. 2009. Fisheries in the economies of the Pacific island countries in high seas areas for licensed vessels and territories. Asian Development Bank. d) the FSM Arrangement which provides a scheme of prefer- Geen G. 2000. Review of the Palau Arrangement for the Management of ential reciprocal access for domestic vessels to PNA EEZs. the Western Pacific Purse Seine Fishery. Havice, E. 2013. “Rights-based management in the Western and Central e) the Palau Arrangement, within which the purse seine VDS Pacific Ocean tuna fishery: Economic and environmental change is a management scheme, and a longline VDS is being under the Vessel Day Scheme.” Marine Policy 42: pp. 259–67. implemented. Kompas T., and T. N. Che 2006. “Economic profit and optimal effort in For most of its life, the PNA was serviced by the FFA, based the Western and Central Pacific tuna fisheries.” Pacific Economic Bulletin in Honiara, in the Solomon Islands, and later from a PNA Unit 21 (3): pp. 45–62. within the FFA Secretariat. In 2010, the Parties established the PNA MIMRA. 2013. Marshall Islands Marine Resources Authority. Annual report. Office (PNAO), based in Majuro, Marshall Islands, because of the Moore, G. 1987 “Enforcement Without Force: New Concepts in Compliance increased load of commercial work required for the Parties and to Control for Foreign Fishing Operations.” Law and the Sea: Essays in memory promote self-reliance. The PNAO is largely funded from revenues of Jean Carroz. FAO. received from VDS registration fees, FAD licensing charges and a PNA. 2012. Vessel Day Scheme (VDS) report to the Eighth Regular Session Conservation Levy on foreign vessels. The Papua New Guinea Gov- of the Western and Central Pacific Fisheries Commission (WCPFC8). ernment provided substantial funding for the start-up of the PNAO WCPFC8-2011-DP/23. and VDS development. Other PNA Members also provided grants. PNAO. 2011. PNAO Business Plan, based on a draft prepared by T. McClurg, Toroa Strategy. Reid, C., M. Bertignac, and J. Hampton. 2006. Further development of, 8 The material in this annex to this appendix draws on data provided by Marine and analysis using, the Western and Central Pacific Ocean Bioeco- Resources Assessment Group (MRAG Ltd) in the context of this study, with nomic Tuna Model (WCPOBTM). some restructuring and updating. Emerging Perspectives on Foreign Fishing Arrangements 71 The PNA are also engaged in other programs to support Mem- are currently made for fishing by U.S. vessels under the Treaty with bers, the most prominent of which is the certification of the PNA the United States and a pool of days for domestic vessels under free school skipjack purse seine fishery by the Marine Stewardship the FSM Arrangement. The FSMA Arrangement pool is currently Council (MSC). capped at 3,907 days. (When this is finished, Parties may put up days from their PAE for fishing in the waters of other Parties, or THE PALAU ARRANGEMENT domestic vessels may license bilaterally.) The TAE is allocated The Palau Arrangement9 was designed to establish a framework for between Parties as Party Allowable Effort (PAE) based on a formula coordinating the management of the Western Pacific tuna purse taking into account historical levels of fishing effort in EEZs and seine fishery among member states and came into force in 1995. the relative biomass of skipjack and yellowfin in each Party’s waters. The Arrangement was initially designed to implement a cap on the Parties are required to limit effort in their EEZs to their PAE number of purse seine vessels fishing on PNA EEZs. The Arrange- with penalties when PAEs are exceeded. ment sets out procedures for the coordination of the management Days are transferable between Parties within a management of the fishery including arrangements for management meetings year. and matters to be considered (for example, scientific, management, The use of fishing days varies with vessel size. Effort by vessels and compliance measures). An agreement was reached in 1994 to shorter than 50 metres Length Overall is discounted and there is a cap purse seine license numbers at 205 under the Arrangement premium attached to effort by vessels longer than 80 metres Length (although numbers in 2012 were around 280).10 overall. A Review of the Palau Arrangement in 2000 (Geen 2000) found Vessels in the fishery must be licensed by at least one Party and that the Arrangement had not been effective in limiting capacity, registered on both the VDS Register and in good standing on the promoting domestic development or increasing access fees and FFA Vessel Register. They must have an Automatic Location Com- proposed that it be replaced by s system of effort limits allocated municator reporting at all times within the management area. to Parties in fishing days. This led to the development of the purse The PNAO as Administrator of the VDS maintains all infor- seine VDS, and subsequently the design of a longline VDS. The mation systems associated with the Scheme and reports to Parties. Palau Arrangement itself was revised in 2010 to provide for the Vessels are monitored at sea through the FFA Vessel Monitoring operation of management schemes under the Arrangement. The System, from which data is transferred to a PNA Fisheries Informa- purse seine VDS now operates as a management scheme under tion and Management System (FIMS) that allows national fisheries the Palau Arrangement, and the longline VDS is in a trial phase authorities, PNAO, fishing associations, some fishing states and ves- under the Arrangement. sel operators, access to real-time data on vessel operations includ- ing effort and locations. THE PURSE SEINE VDS STRUCTURE There is a benchmark minimum fee per VDS day for foreign The purse seine VDS (called the VDS after this point, although vessels, initially set at $5,000 per day for 2012, and raised to $6,000 there is also a longline VDS) is designed to address sustainability per day for 2014. and economic gains. The objective of the VDS is to: The table below sets out the agreed PAEs and days fished by Parties as reported to the 8th session of the WCPFC by PNA in . . . enhance the management of purse seine fishing vessel March 2012. effort in the waters of the Parties by encouraging collabora- tion between all parties, and: Days 1. promoting optimal utilization and conservation of tuna Party PAEs Fished resources; Federated States of Micronesia 5,522 5,041 2. maximizing economic returns, employment generation and export earnings from sustainable harvesting of tuna Kiribati 5,450 4,376 resources; Marshal Islands 2,234 2,236 3. supporting the development of domestic locally based purse seine fishing industries; Nauru 1,653 1,697 4. promoting effective and efficient administration, manage- Palau 514 543 ment and compliance. Papua New Guinea 10,073 11,613 A Total Allowable Effort (TAE) in fishing days for the purse seine within Party EEZs is agreed annually, taking into account, Solomon Islands 2,146 1,898 the best available scientific, economic, management, and other rel- Tuvalu 877 941 evant advice and information, the provisions of the WCPFC Con- vention and the objectives of the Management Scheme—which Adjusted TAE/Total Days 28,469 28,345 brings into play the economic objectives. Provisions from the TAE Fished FSMA days 3,907 5,550 9 Palau Arrangement for the Management of Western Pacific Fishery. U.S. Treaty days 2,760* 7,696 10 Palau Arrangement for the Management of the Western Pacific Purse Seine Fishery, Annex 1. 27–29th April, 1994. Source: PNA (2012). 72 Trade in Fishing Services APPENDIX C AREAS BEYOND NATIONAL JURISDICTION (ABNJ) FISHERIES THE WESTERN AND CENTRAL PACIFIC OCEAN (WCPO) CASE Tom McClurg environmental degradation. These externalities take their most potent (or toxic) form in valuable shared fisheries such as the purse Toroa Strategy: Tom@toroastrategy.co.nz seine skipjack fishery of the WCPO because the race for fish is occurring simultaneously on five levels: INTRODUCTION i. Competition between individual harvesters using the same This paper discusses the ABNJ implications of the shared tuna fish- fishing method eries of the Western and Central Pacific Ocean (WCPO). It high- ii. Competition between harvesters using different fishing lights the critical role of design and implementation of effective methods frameworks for cooperation in addressing shared fisheries manage- iii. Competition between coastal States ment and most importantly, the quality of governance exercised by iv. Competition between Distant Water Fishing Nations participants in those frameworks. It provides some regional context v. Competition between coastal States and Distant Water that helps identify the priority areas where the greatest gains or Fishing Nations (DWFNs) fishing high seas areas within most powerful exemplars are likely to be found. the geographic footprint of the shared fishery All five forms of competition lead to the destruction of economic ABNJ ISSUES value if unconstrained but it is the search for practical solutions to The challenge is to benefit coastal states through the better man- the fifth form (coastal State versus high seas) that is discussed here. agement of fisheries that extend well beyond their jurisdiction. It follows from this analysis, however, that any solution that does Each individual state only has a minor stake in those fisheries, not simultaneously address the other forms of competition will not which are shared both with other coastal states and the high seas. deliver the potential economic benefits to the coastal states. At first sight, it appears impracticable for a small number of client In summary, ABNJ fisheries management is crucial due to the countries, who are by definition undeveloped, to influence fisher- combination of two salient facts: the importance of the stake held by ies management under the exclusive jurisdiction of other states or some coastal states in shared fisheries to their economic well-being fisheries management within areas entirely beyond any national and the fact that the value of this stake may be seriously compromised jurisdictions. Nevertheless, that ambitious objective is what ulti- if ABNJ removals from those fisheries are not effectively managed. mately must be achieved. Given the dearth of alternative economic opportunities to these A stake in shared tuna fisheries is the major natural resource and states, failure to establish an economically efficient shared fishery national asset of several small island States within the WCPO, par- management regime will predictably focus fisheries development ticularly those comprised solely of atolls such as Kiribati, Tuvalu, effort toward far more fragile inshore reef and lagoon resources. The and the Marshall Islands. This is also true in some neighboring track record of such inshore development in the region is very poor. States that contain high islands with their wider economic oppor- Indeed, it would be a fair summary to suggest that the two biggest tunities such as Nauru, Palau, and Federated States of Micronesia. manageable threats to the capacity of these complex ecosystems The performance of these economies and the welfare of their citi- to deliver food security and ecosystem services are ill-considered zens are very dependent upon their individual and collective capac- export ventures and land-based sources of pollution. Successful ity to derive value from those shared fisheries. That capacity has shared fisheries management will provide an economic climate historically been suppressed by the lack of agreed methodology for whereby people can afford to manage inshore fisheries based upon the management of shared fisheries (even at the level of theory), considerations other than potential short-term cashflow. few practical opportunities to implement effective shared fisheries management regimes, and a disappointing rate of progress from RFMOs in addressing these theoretical and practical problems. SHARED FISHERIES: All fisheries are replete with economic spill-over effects or exter- MANAGEMENT THEORY nalities. A fish taken by one person cannot be taken by anyone else. Shared fisheries are by their nature very extensive, but this is not This creates the economic imperative to race for fish and to con- what makes them unusually difficult to manage successfully. The tinue racing for fish for as long as the marginal benefit of taking process of successful shared fisheries management contains the that fish is positive to the individual concerned. This phenomenon same seven general steps as for any other well-managed fishery: lies at the heart of all fisheries management problems and if not i. Define the fishery management unit (species, area, method) addressed leads to the destruction of economic value and even ii. Identify the right holders within the fisheries management unit iii. Agree upon the allocation of rights between those right Edited from a paper prepared for the World Bank, April 2013. holders Emerging Perspectives on Foreign Fishing Arrangements 73 iv. Agree upon the collective management objectives for the According to Secretariat of the Pacific Community’s (SPC’s) fishery Division of Fisheries, Aquaculture and Marine Ecosystems, the v. Agree upon the management decision rules, management WCP purse seine catch in 2010 was 1,818,255 tonnes of which measures, and sanctions against non-compliance with 1,381,070 tonnes was skipjack. Total skipjack catch (including those measures longline and other methods) was approximately 1.7 million tonnes vi. Monitor the fishery and analyze performance against the and estimated Maximum Sustainable Yield (MSY) for that stock is collective management objectives approximately 1.5 million tonnes. The catch in 2010 was, there- vii. Review objectives, rules, and measures in the light of real fore, above the MSY level but the skipjack biomass is also above time performance the level that will produce MSY (although the SPC estimates that the stock is reducing by approximately 200,000 tonne per annum The reason shared fisheries are especially difficult to manage at current levels of effort). In comparison, the longline fisheries are is that there is no robust jurisdictional framework for the deci- smaller but in a more stressed condition. Catches of bigeye and sions required to implement the process above; everything must yellowfin tunas in 2010 in the much smaller longline fisheries were be achieved by a process of international negotiation wherein no 64,117 Mt and 82,485 Mt respectively.2 Yellowfin tuna is already meta-rules governing behavior exist other than an exhortation considered to be approaching the biomass capable of producing within the Law of the Sea to cooperate. Even where Regional Fish- MSY (bMSY) and bigeye tuna is at bMSY. eries Management Organisations have been established, their con- To summarize the fishery context for the skipjack fishery, accord- stitutional arrangements do not significantly improve this situation. ing to SPC, total annual catch is approximately 1.7 million tonnes For example, the Western and Central Pacific Fisheries Commis- of which 300,000 tonnes are taken outside of the purse seine fish- sion (WCPFC) has asserted a mandate over management of tuna ery. These catch levels will have to be reduced by approximately fisheries from the Arctic to the Antarctic but has not yet defined 200,000 tonnes per annum as the stock size approaches bMSY any practical fisheries management units for those fisheries. This over the next few years. At current skipjack prices of approximately is a very basic fisheries management omission that is unlikely to US$2,100 per tonne, total primary value of the WCP purse seine be rectified by the agreement of some voluntary conservation and skipjack fishery is US$2,940,000,000 per year (nearly US$3 billion management measures by its members. per annum). Since 2009, PNA countries that comprise the geographic core of the skipjack purse seine fishery have operated a Vessel Day SHARED FISHERIES: Scheme with a current Total Allowable Effort (TAE) of approxi- mately 35,000 days allocated to the Parties (exclusive of the Federal WCPO CONTEXT States of Micronesia (FSM) Arrangement and U.S. Treaty commit- There are arguably four major shared fisheries in the WCPO: ments). At present, each Day under the Scheme is translating into i. A northern albacore/longline and pole and line fishery roughly 30 tonnes of purse seine catch (including yellowfin, bigeye extending north to Japan from above 10o north and other bycatch). This scheme has been successful in increas- ii. A southern albacore/longline fishery extending south to ing annual license and Day revenues to the Parties from around New Zealand from below 10o south $70 million per annum to around $170 million per annum in iii. A tropical bigeye/yellowfin/longline fishery extending 2012. Vessel Day prices in 2010 were below $2,000 and in 2012 from around 20o north to 20o south were a minimum of $5,000. However, there is a large amount of iv. A tropical skipjack/purse seine fishery extending from effort outside of the TAE. Indeed, the rough estimate presented in around 20o north to 20o south table C.1 suggests that at least 47 percent of skipjack purse seine catch may be outside of the PNA TAE in 2012. These fisheries require separate management even though their The initial economic success of the VDS contains the seeds theoretical geographic boundaries overlap and the target species of of its own destruction and the overriding need is to conceive and one fishery can be a bycatch of another. For example, bigeye tuna implement the actions necessary to prevent that outcome. is a bycatch of the skipjack purse seine fishery. Currently, these four fisheries management units have not been delineated and conse- quently are not effectively managed. The discussion here focusses THE PNA VESSEL DAY SCHEME on the tropical skipjack purse seine fishery. It is by far the most From a fisheries management theory perspective, the PNA VDS valuable to coastal states in the region, is not yet overfished (and has a number of things to commend it. Indeed, it is an internation- is therefore capable of generating large fisheries rents), and has ally significant model for shared fisheries management. As it stands, an embryonic fisheries management framework in the form of a however, it is a model that contains some potentially fatal flaws and purse seine Vessel Day Scheme (VDS) operated by the Parties to there is wide agreement between its participants that it requires fix- the Nauru Agreement (PNA).1 ing. There is far less agreement about what needs fixing or how. In 2011, The World Bank provided assistance to the PNA Office 1 The Parties to the Nauru Agreement are Papua New Guinea, Palau, the Federated States of Micronesia, the Marshall Islands, the Solomon Islands, 2 Harley, S., P. Williams, S. Nicol, and J. Hampton. “Tuna Assessment Report.” Nauru, Tuvalu, and Kiribati. In 2013, the Cook Islands and Tokelau joined the The Western and Central Pacific Fishery: 2010 Overview and Status of Stocks. Secretariat VDS but are not Parties to the Nauru Agreement. of the Pacific Community (SPC): 11, page 1. 74 Trade in Fishing Services TABLE C.1. ESTIMATED WCP PURSE SEINE iii. The proposed new structure, ownership, and governance arrangements for PNAO outlined in the 2011 Business EFFORT AND REMOVALS (2012) Plan have not been implemented and an effective orga- Equivalent nization under robust governance that is capable of pre- Purse Seine Tonnes at serving the strengths and addressing the weaknesses above Effort/Catch Days 30T/Day does not exist. PNA TAE 35,000 1,050,000 U.S. Treaty 5,000 150,000 VDS: COMPETITION AT FSM Arrangement 6,0001 180,000 THE MARGIN Archipelagic Waters 8,0002* 240,000 The VDS has given a hint of its economic power and potential to benefit its developing State members, many of whom have few Other WCP Coastal 7,000* 210,000 other economic options or assets. Those economic benefits rely States upon maintaining a limited supply of Days and a high marginal High Seas 5,000* 150,000 Day price. The value (quantity x price) of fishing that occurs within the VDS will be a function of the value (quantity x price) of fish- Total 66,000 1,980,0003 ing outside the VDS. The price of a Day is not simply determined by the profit obtainable by harvesters in the VDS but by how this Source: Author's own data and PNA. 1 Estimate of actual Days used within the FSM licensing arrangement. profit compares with opportunities elsewhere. Harvesters (Day 2 * denotes a rough, but credible estimate in the absence of data. buyers) will react, not only to the Vessel Day price but also to the 3 Note that this aggregated estimate exceeds the 2010 estimate of SPC of price of substitutes. Similarly, sellers of Days, or the substitutes to 1,818,255 tonnes (above) and is therefore about 300,000 tonnes above the long Days, will also react also to the opportunities they have to maximize term level of sustainable harvest in this fishery. Given the high recent prices for their individual profits. The value of a Day is threatened by substi- skipjack tuna, it is likely that catch has expanded in the two years following 2010. tute or counterfeit Days. Collectively, the interests of sellers are to limit the total supply (PNAO) in the drafting of a Business Plan3 for that organization. of Days to sustainable numbers and to defend the integrity of those Building upon the consultation and analysis carried out in 2011, it is Days. However, while a successful collective arrangement is work- possible to summarize some strengths and weaknesses of the VDS: ing, individual sellers can “game” the VDS by issuing themselves Days above their PAE (Kiribati) or by selling better Days than their STRENGTHS colleagues through a lax Day definition where the seller, not the i. A fisheries management unit has been defined: the tropi- buyer of Days, carries the harvesting risk (Papua New Guinea). Lax cal (20 north to 20 south) purse seine skipjack fishery from enforcement of Days within the FSM Arrangement provides the Kiribati in the East to Indonesia in the West. third internal threat. The number of vessels in the FSM Arrange- ii. Right holders in the fishery are being recognized. Cur- ment is now over 60 and the number of Days used by them is rently the signatories to the Palau Arrangement include expanding also. This is not surprising given that the effective Day the eight PNA countries with Tokelau and Cook Islands price within the FSM Arrangement is only $2,500. These examples scheduled to join the VDS in 2013. There is acceptance illustrate the threats from within the VDS arising from misalign- that coastal states within the fishery can join the VDS. ments between individual and collective interests within the VDS. iii. There is a formula by which right holders establish rela- The Business Planning process for PNA Office in 2011–12 stim- tive PAEs are established under the TAE. This formula ulated some very productive discussion between participants in the is based upon a combination of EEZ size and historical VDS about the appropriate boundary between their collective and skipjack harvest data. individual freedoms and responsibilities. Parties identified that they iv. Parties have established a minimum Day price ($5,000 in had certain common interests as Day owners but unique interests 2012). This is effectively the marginal Day price within as prospective Day users. Some wished to maximize Day rents, oth- the VDS. ers preferred to trade Day rents against social objectives internally. As a result of these discussions, a one size fits all approach to eco- WEAKNESSES nomic development based upon the foundation provided by the i. The VDS is incomplete (it is possible that almost half of all VDS has been largely abandoned by PNA. harvesting in the fishery is occurring outside of the VDS). This is a step in the right direction. However, what is not yet ii. Compliance with the VDS by participants is inconsistent generally recognized is the role that the VDS (in particular the Day and arguably deteriorating. In 2012, Kiribati overfished market) must play over time in keeping the whole skipjack value its PAE by around 70 percent and Papua New Guinea chain focused on efficiency and the maximization of product value. applies its own definition of what constitutes a Day to Individual actions or trade-offs that weaken the Day market do not accommodate much higher levels of fishing than would simply affect the Party concerned but potentially de-power the be allowed under the standard definition. VDS as an efficiency driver of the entire sector. As a result, the uneasy peace over the present location of the boundary between 3 World Bank and PNAO. 2011. Business Plan PNAO Office 2011. 55 pages. individual and collective action is by no means the final word on Emerging Perspectives on Foreign Fishing Arrangements 75 the subject and that uncertainty or instability is, in itself, an internal inefficient but also confusing for the participants and the PNAO threat to the VDS. has fallen into the roles of secretariat for the three bodies above. The substantial external competitive threat to the VDS is two- That is why the draft Business Plan included the following rec- fold. The first is represented by the terms and conditions applied ommendations: to non-VDS participants to skipjack purse seine fishing within their » The core business of the PNAO was to fix and operate the respective EEZs. Their incentive is to maximize national revenues by purse seine VDS and the longline VDS should be put on setting terms and conditions that make harvesting more attractive in the back-burner while this was achieved. their EEZ than within the VDS. To the extent that their zone may » The FSM Arrangement, Archipelagic waters, and the have lower average catch rates than within the VDS, this disadvan- U.S. Treaty catch should be folded into the VDS TAE and tage can be mitigated by offering licensing discounts. The second is allocated to PAEs. represented by the freedom to fish the high seas at no cost. Fishing » Efforts should be made to expand Coastal State participa- the high seas of the WCP purse seine fishery has traditionally not tion in the purse seine VDS. been very profitable compared to the returns that could be made » Funding of PNAO should be linked to contributions from by DWFN harvesters operating inside WCP EEZs in exchange for all VDS Parties that were relative to PAE size. paying around $70 million in total license fees to coastal States per » PNAO should not be a secretariat for PNA unless under a annum. However, as Day prices increase, the relative attractiveness tightly specified service delivery agreement. of high seas fishing improves and effort can be expected to migrate » PNAO should only undertake activities that deliver benefits there. Such effort would not be under effective constraint by any to Parties in proportion to their relative PAEs and where WCPFC conservation and management measures currently in place. existing activities do not satisfy this condition, such activi- This external threat to the VDS and its adverse economic con- ties should be ring-fenced. sequences for developing States must be a primary focus for efforts to sustain and increase coastal state benefits although, as noted The overall impact of these recommendations would be to above, these efforts will be undermined if the internal threats are consolidate the core role of PNAO as the executive organization not managed as well. supporting the Palau Arrangement. As these recommendations have not been implemented, the outcome is that PNAO currently has several distinct but overlapping roles which lack clear or appro- PNA BUSINESS PLAN priate governance and funding arrangements. This is a recipe for increasing disfunctionality if the membership of the three bodies The platform for the management of internal threats and issues to above continues to diverge. the VDS is obviously the governance arrangement for the VDS. To be effective, that governance arrangement has to be linked to robust funding and service delivery processes and structures. This HIGH SEAS FISHERIES governance arrangement is currently not strong enough to effec- Table C.1 above suggests that high-seas catch in the WCP skipjack tively meet the challenges it faces. Although colloquially called the purse seine fishery is less than 10 percent of the total. This level of PNA VDS, the purse seine VDS and the proposed longline VDS catch is disproportionate to the area of the high seas in the WCP as are actually implemented under the Palau Arrangement which is would be expected from a general analysis of ABNJ catches. Glob- one of three overlapping but separate sub-regional arrangements ally, ABNJ amount to around 230 million km2 and EEZs amount or agreements: to around 130 million km2. From this combined area of ocean, the FAO estimates that annual marine capture fishery production is 1. The Nauru Agreement (a general political cooperation approximately 80 million tonnes. The FAO also admits that it can- arrangement over fisheries issues in a sub-region of the not provide an accurate breakdown of this total between aggregate WCPO. 8 members) EEZs and ABNJ. However, total ABNJ catches are small; probably 2. The Palau Arrangement (the body governing the comprising around 250,000 tonnes of demersal catches of species design of the purse seine and longline VDSs. There were such as Patagonian toothfish and orange roughy and probably no 10 members in the purse seine VDS in 2013, including more than 1,000,000 tonnes of pelagic species, mostly tunas. In a minimum of 5 signatories to initiate the longline VDS other words, ABNJ account for 63 percent of ocean area but less with the potential for both schemes to gain additional than 2 percent of fisheries production. In the case of the WCP, parties). the proportion of high seas catch is above average (perhaps up to 3. The Federated States of Micronesia Arrangement 10 percent for skipjack) because of the greater relative significance (a reciprocal purse seine access agreement effectively of tuna fisheries in the region compared to elsewhere. requiring the commitment of Days. 8 members). The explanation for this apparent discrepancy is ecological. All three arrangements necessitate separate meetings and a The most biologically productive parts of the oceans are on conti- formal meeting of one of these bodies is not subject to the con- nental shelves (mostly included within EEZs). In contrast, the high firmation or endorsement of any other. In addition, there are seas are relatively barren, containing a small number of sea mounts separate PNA and foreign fishing arrangements (FFA) ministerial and providing a transitory home for highly migratory pelagic spe- meetings and meetings negotiating a renewal of the U.S. Tuna cies. This raises the question of why such small high seas fisheries Treaty that is partially integrated with the purse seine VDS. The matter to the coastal states at all. The answer is that they matter complex relationships between these arrangements are not only very little in the case of demersal species or in open-access pelagic 76 Trade in Fishing Services fisheries. Where they become absolutely critical is in tuna fisheries on those two classes of users. Within its EEZ, the coastal State is that are managed sufficiently well to generate some fisheries rents entitled to determine what catch limit for the fishery best accords as in the case of the PNA VDS. with its particular definitions of optimum utilization and maximum sustainable yield as well as deciding what conservation and man- agement measures are proper. If these judgements lead to adverse THE LAW OF THE SEA outcomes, the coastal State and its citizens must face those con- The international legal framework for the management of fisher- sequences. In other words, under UNCLOS, coastal States face ies within EEZs and beyond (in the case of straddling stocks and sound long-term incentives. highly migratory species) is provided by the 1982 United Nations Con- In contrast, a DWFN operating on the high seas is only obliged vention on the Law of the Sea (UNCLOS) and the 1995 Agreement for the to “seek agreement” with other users about conservation and Implementation of the Provisions of the United Nations Convention on the Law management measures. Of course what is sought is not always of the Sea of 10 December 1982 Relating to the Conservation and Manage- found—or at least not quickly. Agreement is likely to prove elu- ment of Straddling Fish Stocks and Highly Migratory Fish Stocks (the “Fish sive because of the fundamentally different nature of the invest- Stocks Agreement”). UNCLOS deals with the establishment and ment in the fishery of DWFNs and coastal States. DWFNs own recognition of Territorial Seas and EEZs, definition of terms such vessels and associated infrastructure with a relatively short physical as continental shelf and archipelagic waters as well as defining the and economic life. Coastal States may also have some investments freedoms of the high seas for peaceful purposes such as navigation. of the same kind but, in addition, they collectively have a much Within an EEZ, a coastal state has “sovereign rights for the pur- larger investment in the form of fishery ownership within their pose of exploring and exploiting, conserving and managing the EEZs. The consequences of adverse fishery outcomes are therefore natural resources, whether living or non-living, of the waters super- generally much larger and more enduring for coastal States in a jacent to the seabed. . . .”4 Also, “the coastal State shall promote shared fishery than for DWFNS. the objective of optimum utilization of the living resources of the This asymmetry is recognized somewhat obliquely within exclusive economic zone. . . .”5 Optimum utilization is undefined the Implementation Provisions contained within the Fish Stocks although it is a general principle within the Fish Stocks Agreement Agreement. In determining compatible conservation and manage- that measures to promote this goal “are designed to maintain or ment measures, States shall; “(a) take into account the conserva- restore stocks at levels capable of producing maximum sustainable tion and management measures adopted and applied in respect yield, as qualified by relevant environmental and economic factors, of the same stocks by coastal States within areas under national including the special requirements of developing States. . . ”6 jurisdiction and ensure that measures established in respect of such UNCLOS makes clear that claims of sovereignty over the high stocks for the high seas do not undermine the effectiveness of such seas are invalid. “No State may validly purport to subject any part measures” and “(e) take into account the respective dependence of the high seas to its sovereignty.”7 Whereas, all States are free to of the coastal States and the States fishing on the high seas on the fish on the high seas, all States fishing shared stocks have responsibil- stocks concerned. . . .”10 This provision is also echoed within the ities to agree on conservation measures for them. “Where the same Articles of the WCPFC, where, in determining allocation of catch, stock or stocks of associated species occur both within the exclusive the Commission shall take into account, inter alia: “the needs of economic zone and in an area beyond and adjacent to the zone, the small island developing States, and territories and possessions, in coastal State and the States fishing for such stocks in the adjacent the Convention Area whose economies, food supplies and liveli- area shall seek, either directly or through appropriate subregional or hoods are overwhelmingly dependent on the exploitation of liv- regional organizations, to agree upon the measures for the conser- ing marine resources;” and “the fishing interests and aspirations vation of these stocks in the adjacent area.”8 This responsibility is of coastal States, particularly small island developing States, and reinforced by Article 118 and again with direct reference to highly territories and possessions, in whose areas of national jurisdiction migratory species where the objective of optimum utilization is re- the stocks also appear.”11 introduced. “The coastal State and other States whose nationals fish The conclusion to be drawn from this legal analysis is that in the region for the highly migratory species listed in Annex 1 shall fundamental differences between the relative responsibilities of cooperate directly or through appropriate international organiza- coastal States and DWFNs, the nature of their investments and tions with a view to ensuring conservation and promoting the objec- the consequences of sub-optimal shared fisheries management tive of optimum utilization of each species throughout the region, will present formidable barriers to attempts to improve the per- both within and beyond the exclusive economic zone.”9 formance of RFMOs. While UNCLOS encourages the use of the There is an asymmetry in the responsibilities of coastal States RFMO framework, RFMOs do not have a monopoly on shared and DWFNs who utilize a shared fishery and there is also an asym- fisheries management and coastal States can seek agreement over metry in the potential consequences of poor fisheries management shared fisheries measures directly. The PNA VDS is a leading example of such a direct process. Ultimately, the fundamental differences between the interests 4 United Nations Convention on the Law of the Sea. 1982. Article 56, 1 (a). of coastal States and DWFNs may necessitate a review of the 5 Ibid. Article 62,1. 6 United Nations. 1995. “Fish Stocks Agreement.” Article 5 (b). 7 United Nations Convention on the Law of the Sea. 1982. Article 89. United Nations. 1995. Fish Stocks Agreement. Article 7, 2. (b) and (e). 10 8 Ibid. Article 63, 2. Convention on the Conservation and Management of Highly Migratory Fish Stocks in the 11 9 Ibid. Article 64, 1. Western and Central Pacific. Article 10, 3 (d) and (j). Emerging Perspectives on Foreign Fishing Arrangements 77 current “Fish Stocks Agreement” and the RFMO framework. In opportunities to enhance the VDS and its benefits will be moot as the meantime, however, it would be useful to support the PNA it will have collapsed as an effective shared fisheries management VDS initiative while remaining entirely within the existing con- arrangement. straints of UNCLOS, in particular the prohibition against any Even if wholly successful, the opportunity would remain for attempt to extend coastal State sovereignty into ABNJ. It should DWFNs to fish ABNJ areas. However, high seas fishing would be noted that legitimate expansion of the VDS will simultane- carry two potentially significant opportunity costs for its practition- ously incentivize an expansion of high seas fishing while allowing ers. First, in the short term, VDS coastal States may refuse licenses the accurate calculation of the negative economic consequences to such vessels to fish within their respective EEZs (as is partially of high seas fishing on the developing coastal States participating implemented now). Second, in the longer term, the RFMO may be in the VDS. required to restrict ABNJ fishing if it can be shown that such fishing The PNA VDS, as it stands is not an alternative to the WCPFC; undermines measures taken within areas of national jurisdiction rather it has been the source of several conservation and manage- (the VDS) or that it is contrary to the interests and aspirations of ment initiatives that have been adopted by the Commission. The Coastal States. real test for the relationship between the VDS and the WCPFC The capacity of VDS participating coastal states (fisheries will come if and when economic analysis shows that there are sig- resource stakeholders or owners who are signatories of the Palau nificant adverse effects of high seas fishing on the livelihoods and Arrangement) must be further strengthened to increase their gov- interests of small developing coastal States in the WCP who are ernance influence in PNAO and other regional organizations. members of the VDS. Durable and effective shared fisheries solutions cannot be designed and implemented by well-meaning external parties. Rather, those solutions must comprise real and effective voluntary collective MOVING AHEAD actions by cooperating Parties. This implies three things: The key issue is to identify ways by which some otherwise weak » the existence of an effective theory of shared fisheries man- coastal States can secure and enhance the marginal price of Vessel agement, Days within the PNA VDS. This is not primarily an issue about the » a suitable framework for cooperation, and mechanics of the Day market, whether it is electronic or whether » effective governance over that framework by participants. there are multi-zone Days. The immediate issue is to close off alter- natives to the use of Days to the greatest extent consistent with The PNA, PNAO, and the VDS represent only very partial international law and to stabilize the attributes of Days as a strong expressions of these requirements. The challenge is to create the and uniform property right. If this cannot be done, all other future conditions for effective governance. 78 Trade in Fishing Services APPENDIX D REPORT ON FOREIGN FISHING: MOROCCO CASE STUDY OF THE VARIOUS ARRANGEMENTS IN FISHING COOPERATION RELATIONS Mohammed Rouchdi The information used to write this report comes from the author’s professional experience and personal expertise gained Consultant over the course of a career within the Marine Fisheries Depart- e-mail: rouchdi10@gmail.com ment, documents (agreements, protocols, and official documents), January 2014 and interviews with Maritime Fisheries Department staff. INTRODUCTION FROM HISTORIC RIGHTS In Morocco, where fishing assets are significant, foreign fishing AND ILLEGAL FISHING TO began either as illegal fishing within territorial waters and or on the basis of historic rights. It progressively developed to include other SOVEREIGNLY NEGOTIATED aspects, such as chartering foreign vessels, joint ventures, or govern- AGREEMENTS ment-to-government agreements within a policy of openness and Until the 1980s, a large part of Moroccan waters was exploited by cooperation that took into account the needs of the national fish- foreign fleets operating illicitly in the absence of any national or ing sector and the guiding principles of the 1982 United Nations international system forbidding or regulating access to third coun- Convention on the Law of the Sea. tries’ fishing zones. Maritime monitoring control and surveillance In 1973, along with the evolution of the international law of the systems were also insufficient. sea, characterized by the tendency of coastal states to claim large Beginning in the late 1970s, this illicit presence in Moroccan marine areas as their own, Morocco established a 70-mile exclusive waters developed a more conventional type of cooperation, mark- fishing zone, which was the first step toward national sovereignty ing a new stage in the progressive control of the national biological over its maritime zones, and introduced a legal framework (code) to resources and a reappropriation of maritime zones. encourage investments in the maritime domain. This attention by the government to developing the fishery sec- ILLICIT FISHING ACTIVITIES tor was boosted in 1981 with the introduction of the 200-nautical- AND HISTORIC RIGHTS mile exclusive economic zone and the creation of a Ministerial Due to insufficiently binding national regulations, insufficient Department in charge of marine fisheries. surveillance tools, and an international law of the sea still in its Developing and implementing a proactive and clearly defined infancy, dozens of fishing vessels of various nationalities operated policy for the development and management of national fisher- in Moroccan waters without any authorization, permit, or license. ies required the creation of a monitoring and surveillance system These poaching activities targeted practically all areas and for the new maritime zones, the strengthening of port infrastruc- all fish species present in Moroccan waters. They involved ves- ture and scientific research, the constitution of a modern industrial sels sailing under the flags of the former Soviet Union, Spain, fishing fleet, the promotion of maritime professional training, and Portugal, Poland, Ukraine, Japan, South Korea, Cuba, and other other steps. countries. But such development programs required substantial finan- A 1977 Food and Agriculture Organization (FAO) report,1 cor- cial and technical resources, which were lacking at the time. This roborated by official Spanish statistics, noted that, including all spe- led Morocco to promote bilateral cooperation using some of its cies, approximately 1.3 million tonnes of fish were caught off the national fishing potential as a funding source. Moroccan coast by foreign vessels. How did foreign fishing develop in waters under Moroccan sov- Soviet vessels fishing in Moroccan waters were assisted by factory ereignty? What different forms of access did it take? What was its processing vessels, a scientific research boat, and cargo ships respon- impact on national fisheries and on the sector’s development as a sible for the transport of finished goods to the Soviet market and for whole? What is the current situation concerning the arrangements their supplies of food, fuel, and fishing tools. They were also accom- signed by Morocco with its different partners? panied by a hospital ship and even war frigates to ensure their safety. This report examines the following issues: The catch level of this fleet reached its maximum with a global tonnage approaching 1 million tonnes, according to the 1979 FAO 1. Historic rights and illegal fishing to sovereignly negotiated bulletin of statistics. access rights; 2. Partnership agreements complying with sustainable fishing and national fisheries development requirements; and 1 See “Morocco and Maritime Fisheries Rights” by Abdelkader Lahlou, Paris, 3. Evaluation and impact on national fisheries. 1983. Emerging Perspectives on Foreign Fishing Arrangements 79 The presence of the Spanish fleet was closely linked to the colo- In the mid-1980s, Morocco chartered Soviet motherships that nization of a large part of Moroccan territory and to the unequal worked with national seiners in coastal fishing, collecting their treaties concluded between the two parties. On this basis, Spain catches on the fishing grounds to enhance their value and improve claimed historic rights, which it considered to be perennial, and fishers’ incomes. This operation was undertaken under the supervi- deployed a diversified fleet covering practically all fishing zones and sion of the National Fisheries Office. types. The first fishing agreements concluded between Spain and Chartering: an Approach for Small Pelagics’ Morocco as an independent state were a determining factor in the Access to International Markets package deal and limited the bilateral cooperation between the two Given the significant potential of the small pelagic catches in the countries to the fisheries sector. southern part of the Moroccan Atlantic and the underutilization The February 17, 1977 fishing agreement negotiated and con- of these resources due to the limited range of action of the national cluded with the Spanish government followed from the historical coastal fleet, in 1995, the Moroccan authorities set up a program conventional relations with Morocco and allowed Spain to deploy for chartering foreign vessels to target this fishery. an exorbitant level of fishing effort in Moroccan waters. However, The objectives of the program were the optimal exploitation of the agreement could not be implemented because of its consider- this fishery, the mastering of both the technological fishing process able dimension (in terms of fishing capacity), which was incompat- in this zone and the marketing of small pelagics in the global mar- ible with the biological capacity of the resource, and because of ket, and the smoothing of supplies to national canneries. political differences that emerged between the two countries and However, despite the large potential of this stock, the total delayed its ratification by the Moroccan parliament. allowable catch (TAC) allocated to this program was relatively The situation was not resolved until 1979, when the two par- modest. As a precautionary measure, it was set at 200,000 tons ties found a temporary solution to officially reactivate their fish- for 25 chartered fishing vessels, pending the implementation of a ing relations, given that Spanish fishing boats had continued their management plan regulating this fishery. These foreign ships came activity, completely illegally, while awaiting ratification of the 1977 essentially from Ukraine and Russia. agreement. This operation, which lasted for four years, not only had a finan- This entente between the two parties gave rise to a series of cial impact through the funds generated for the national treasury temporary agreements, lasting between three months and one year, (approximately €7.5 million) but also created direct and indirect over a total period of three years (June 1979 to June 1982). employment and helped ensure adequate supplies to the fish-canning In return for the fishing opportunities given to Spanish vessels industry, thus contributing to preventing the temporary cessation (between 1,400 and 1,600 vessels in total), the Spanish government, of their activity and to maintaining jobs and market shares. in addition to paying license fees, funded the construction of four It also led to the introduction of a system to monitor the inter- ice plants, a study into the cold chain, and grants for Moroccan national market for small pelagics and master information flows. students. Additionally, it assisted national operators to better understand Such distortion between the colossal amount of fishing effort the markets and their potential and the fishing technologies (for that was authorized and the derisory compensation illustrates the instance, refrigerated sea water (RSW) freezer pelagic trawlers and strong imbalance and unequal nature of the cooperation relations large RSW seiners). between the two countries in the fishing domain at the time. This experience was put to good use by the ministry in charge of maritime fishery management in its strategy for the exploita- tion of small pelagics in the southern Moroccan Atlantic and in CHARTERING establishing a specialized industrial fishery able to contribute to the This type of arrangement for the exploitation of fish resources was country’s economic and social development. first introduced in Morocco toward the end of the 1970s, in partic- ular in the cephalopod fishery with the aim of increasing national Chartering: A Way to Assist Struggling Freezer Plants operators’ familiarity with this new type of fishing and its interna- Following the financial difficulties encountered by owners of octo- tional market. pus freezer plants in the southern ports of the Kingdom of Morocco Despite the existence of a code for maritime investments that in 2003-04, the Department of Maritime Fisheries initiated a pro- encouraged and subsidized the direct acquisition of fishing vessels, gram to charter a foreign fleet specializing in small pelagics with Morocco chose, as a first step, to go through this initiation phase to the objective of helping these businesses pay their debts, maintain ensure that investments were based on reliable technical and eco- their activity and employment, and boost the local economy. nomic hypotheses. Operators who withdrew from octopus freezing and integrated National operators were authorized to charter Spanish and the small pelagic sector were granted the exceptional right for a Korean vessels for annual periods while waiting for the investment four-year period to charter foreign vessels to ensure a sufficient and program to be implemented. regular supply of small pelagics to their freezer units. This practice was also mentioned in the February 17, 1977 A global quota of around 290,000 tonnes per annum was ear- cooperation agreement between Morocco and Spain and gave marked for this program, whereby private Moroccan companies, joint ventures the option to “charter vessels registered with one or outside of any intergovernmental agreements, chartered foreign ves- the other contracting party.” But, in fact, only Spanish vessels could sels, 12 of which were freezer trawlers. Among the countries provid- benefit from this provision. ing these fishing vessels were Norway, Iceland, Sweden, and Belize. 80 Trade in Fishing Services Chartering authorizations were given (1) on the basis of a led to significant hard currency outflows, currency that Morocco redevelopment program submitted by the relevant factories that needed and still needs. The recruitment of an expensive foreign included a debt-rescheduling plan agreed to by the creditor (the workforce, also paid in hard currency, put a severe strain on the bank) and a commitment to maintain existing jobs and (2) on the exploitation costs of the fishing boats and on the companies that basis of specifications setting out the technical conditions for small managed them. pelagic fishing in accordance with the statutory laws governing fish- The repatriation of this fleet’s activity into the Moroccan ports ing and chartering activities. of Agadir and TanTan and the financial and technical restruc- In return for these chartering authorizations, the recipients turing of offshore fishing companies enabled the situation to be had to pay a chartering tax of DH 1 million (US $120,000) to the improved and helped the Moroccan government monitor and con- Moroccan treasury, as well as fees for their annual license and the trol these companies’ activities, in particular landings and currency use of port infrastructures. repatriation. This restructuring concerned the Moroccanization The indebted companies were able to reimburse approximately of the crews, the landings of all catch in Moroccan ports, and, at 80 percent of their bank loan debts and regained financial equilib- technical and financial levels, the recapitalization of businesses, the rium, giving them a more stable working environment. The pro- rescheduling of debts, the waiving of interests and late payment gram led to a three-fold increase in the number of jobs compared penalties, and the introduction of customs and exchange measures with the period prior to redevelopment. specific to this type of activity. Having helped to secure investment in about one third of the There are currently 64 joint ventures in national fisheries, with plants responsible for freezing fishery products in the southern approximately 149 vessels, of which 100 are fish cephalopods ports of Morocco, the chartering program is now being wound (50 percent of the active vessels in this fishery) and 36 are fish down. Most of the foreign vessels that were chartered are gradually shrimps (two thirds of the national fleet). Spain and China lead the being reflagged to Morocco. way as the foreign partners in these joint ventures. At the beginning of 2014, only 7 RSW vessels were still opera- tional within the framework of this chartering arrangement, with 14 vessels registered in Morocco. Instead of paying the chartering SOVEREIGNLY NEGOTIATED AGREEMENTS tax, these “Moroccanized” vessels are now subject to the payment Following an initial phase characterized by illicit fishing activi- of a 10 percent royalty on the value of their catch, in addition to ties, the historic rights of foreign fleets in Moroccan waters, and fees to use fish markets and port infrastructure. unbalanced and unequal agreements, Morocco launched a first series of fishing arrangements, starting in the 1980s, with a view to improving compensation for access granted to its fishing zones and JOINT VENTURES fishing potential. From the outset, Morocco showed a particular enthusiasm for the creation of this type of international cooperation arrangement (that is, joint ventures) in the maritime fishery to increase participation From the 1983 Morocco-Spain Agreement to the in the exploitation of fish resources, and cephalopods in particular. Morocco-European Union Agreements The Moroccan authorities saw this arrangement as a tool to As noted above, even though the European fleet has long been in launch a new industrial cephalopod fishery through the “Moroc- Moroccan waters through access agreements concluded with Spain canization” of part of the foreign fleet fishing inside the 70-mile and Portugal, the cooperation links with the European Union (EU) exclusive fishing zone, to attract direct foreign investments, and to were only formalized in bilateral agreements from 1988. favor technology and skill transfers in this area, which were then a The August 1, 1983 agreement initiated a new phase in the handicap for Morocco, and thereby develop its fisheries. development of fisheries relations between Morocco and Spain Beginning in 1972, joint ventures were established between the after a long period of historic and unlimited rights held by Spanish National Fisheries Office (ONP) and private Moroccan and foreign fishing companies under old agreements and transitory arrange- (Japanese, Spanish, Korean, Italian, and other) operators renowned ments. It was also the first agreement concluded in due form for a for their knowledge and competence in fisheries exploitation. relatively long period of four years. After the pilot programs in the cephalopod fisheries, numerous The main provisions of this agreement granted the Spanish joint ventures were set up that covered every existing fishery. How- fleet the possibility to fish using up to 136,602 GRT, with some ever, this development was not part of a comprehensive fisheries 1,200 vessels. For the first time, there was a 40 percent reduction policy, and few precautions were taken concerning the choice of in the fishing effort, expressed in GRT (spread over the duration of partner or the target fishery. the agreement), which enabled gradual substitution by Moroccan Furthermore, the creation of these joint ventures was neither investments and thereby the constitution of a national fishing fleet. preceded by nor accompanied by the provision of port infrastruc- In return, the Spanish government agreed to a substantial ture, cold storage facilities, repair and maintenance shipyards, or increase in fishing royalties (+70 percent over four years), to the shops selling replacement parts in Moroccan ports, which meant opening of a commercial line of credit of $400 million toward that the national fleet had to use foreign ports, Spanish in par- funding Spanish goods and equipment, and to the granting of ticular, as bases for their landing, maintenance, and refueling a concessional credit facility of $150 million, which was used to activities. finance the construction of a new port in Agadir and to extend and This situation, combined with a lack of qualified crews, had a develop the port of TanTan. The agreement also led to the crea- negative impact on the exploitation costs of these joint ventures and tion of 550 jobs onboard Spanish vessels. Emerging Perspectives on Foreign Fishing Arrangements 81 When Spain joined the European Economic Community other fishing zones through the negotiation of new access agree- in 1986, the legal nature of the cooperation links with Morocco ments or types of arrangements. changed, insofar as, from then on, only the Community institutions The midterm revision clause of the agreement made it possi- were empowered to conclude and manage new fishing agreements ble for Morocco to shorten it by one year and to negotiate a new with third countries, in accordance with Community law. arrangement that better preserved its interests and those of the The two parties agreed to extend the 1983 agreement until resource. December 31, 1987 (it should have expired on July 31, 1987) pend- ing the outcome of Morocco-EU negotiations of the first fishing Morocco-EU Agreement of November 1995 agreement with the European Commission. The fishing agreement of November 1995 concluded with the European Union, which reduced global fishing effort by 40 percent Morocco-European Economic Community compared with the tonnage granted in the previous agreement, Agreement of May 29, 1988 continuing the process of reducing Community fishing capacity The first fishing agreement concluded with the European Eco- that was thought to contribute to the intensive exploitation of fish nomic Community (EEC), dated May 26, 1988, authorized some stocks and the declining profitability of Moroccan enterprises. 100,000 GRT from 730 Community vessels to fish in Moroccan A fishing capacity of 64,720 GRT was authorized within the waters. In return, the European Commission paid the Moroccan framework of this agreement, corresponding to 590 fishing vessels government €281.5 million over the four years of the agreement across all categories. The biological rest period was maintained and and agreed to a preferential trade status for Moroccan canned sar- its duration extended to four months for cephalopod fisheries, and dines (a zero-duty quota of 17,500 tonnes). some fishing categories were transferred from one fishing zone to The agreement also included €29.5 million, as part of the another to reduce pressure on sensitive fisheries. financial return, for sectoral development projects in the form of The most significant reductions in terms of gross tonnage con- sectoral financial support and included the recruitment of approxi- cerned cephalopods (−40 percent), shrimp (−56 percent), hake mately 660 Moroccan crew members onto Community ships. trawlers (−50 percent), and northern seiners (−38 percent). How- Substantial reductions in the Community fishing effort were ever, the pelagic potential was not fully used for reasons relating to made in biologically sensitive fisheries. The negotiated reductions the technical conditions of this type of fishing or the profitability were 20 percent for cephalopods and 18 percent for the demersal of the relevant boats. fisheries in the north of the country. For the first time in the his- The financial return for this fishing potential was in the order tory of national fisheries, this agreement introduced the “biological of €500 million over the duration of the agreement (approximately rest period,” a seasonal closure designed to protect spawning and €125 million per year), excluding license, observer, and other fees. recruitment periods for the relevant species. These annual payments comprised €88.75 million as a direct finan- cial contribution and €36.25 million as sectoral support. More than Morocco-EEC Agreement of May 1, 1992 1,200 jobs were also created. Compared with the 1988 agreement, the May 1, 1992 agreement Notwithstanding the successive reductions in Community fish- with the EU for a four-year period made several changes to take ing effort in Moroccan waters, the Morocco-EU fishing agreement into account Morocco’s preoccupations with resource sustainability of November 1995 “was by far, the most important ever concluded and financial compensation for fishing access. between the EU and a third country outside the EU,”2 according to It was agreed that some 82,290 GRT from some 650 Commu- the European Commission officials. This was in terms of the fish- nity fishing boats could operate in Moroccan waters, with a 17 per- ing possibilities granted and in terms of financial compensation. cent reduction spread over the duration of the agreement. This observation is even more pertinent given that neither In return, the agreement provided for Morocco a direct finan- fishing capacity reductions nor the measures taken by Morocco cial compensation of around €302.76 million for the entire dura- to redress the situation (investment freeze, biological rest periods, tion of the agreement, of which €32.76 million was earmarked for strengthening of landing controls, and so on) had the desired sectoral support, a preferential trade status for its canned product results on the resource, which continued to show signs of weak- exports on the Community market, and 900 jobs for national crew. ness and overexploitation, illustrated by the decreasing yields and However, the implementation of this agreement did not go to shrinking distribution areas of some species. its full term because Morocco used its right to a midterm revision Wishing to prevent the total exhaustion of its fish stock and to if it were confirmed that the presence of the Community fleet was develop its national fishing sector, Morocco confirmed to the Euro- contributing to resource overexploitation. The agreement in ques- pean Commission (EC) that it did not intend to renew the agreement tion had renewed a very significant fishing capacity with a negative once it expired (on November 30, 1999). The Moroccan fisheries impact on the national fleet. minister went so far as to say that “everything is negotiable except the As a result of this clause and the discussions held between the renewal of the agreement.” two parties in June 1994, the fishing agreement of May 1992 was Morocco needed to begin preparations for the post-agreement ended one year before the date initially planned and adjustments era by developing the necessary port infrastructures, by modernizing were made to reduce the Community fishing effort in an attempt to reverse the decline of Moroccan fish stocks. The European Union had asked for a four-year agreement in 2 http://ec.europa.eu/fisheries/cfp/international/agreements/morocco/index order to launch a program to restructure its fishing fleet or find _fr.htm 82 Trade in Fishing Services its fishing fleet so that it could access zones previously out of reach, then to 120,000 tonnes of small pelagics and the number of as its range of action was insufficient, and by developing plans vessels from 43 to 28 and then to 12 units. However, an addi- for the rational management of its fish resources. An investment tional quota of 80,000 tonnes was earmarked to supply an program of approximately $900 million was implemented for that integrated complex to be built within the framework of a joint purpose by the Moroccan government. venture. Annual adjustments were decided by joint commissions At the same time, the Commission put into place significant depending on the utilization rate of the quotas in the different financial facilities to compensate Community ship owners and agreements. crews affected by the nonrenewal of the agreement, including sub- The financial compensation set in the 1992 agreement contin- sidies for scrapping vessels and socioeconomic measures in favor of ued unchanged at 17.5 percent of the total final production value fishers. and varied between $6.3 and $14 million by agreement, not includ- In any event, the 1995 fishing agreement was to mark a turning ing the annual license fees. This percentage of the catch value is the point in fishing relations between Morocco and the EU, ending the same across all fishing agreements that Russia has negotiated with longstanding presence of some EC member states’ fleets in Moroc- West African countries for small pelagic species. can waters. In addition to the controls carried out by the Royal Moroccan patrol boats, the total allowable catch is also monitored and con- trolled by observers onboard every fishing boat. Fishing Cooperation with Russia The number of Moroccan crew has increased from 6 in the Following a phase of illicit activity involving Soviet vessels that 1992 agreement to 9 and then 12 and 14 per vessel. Two per- was difficult to control, a new era began with the normalization manent observers were also taken onboard every licensed vessel of this presence within the framework of the 1992 agreement with to control the fishing gear used, catches and discards, onboard the Russian Federation after the dismantling of the Soviet Union. processing techniques and catching, and trans-shipping This agreement was followed by others that progressively estab- operations. lished a fishing cooperation framework between Morocco and Despite the improvement in the financial return of the last two Russia. agreements, because of the near-total use of the authorized quota, it should be noted that the most important benefit of the fishing cooperation relations with Russia concerns scientific research. The 1992 Morocco-Russia Fishing Agreement Acoustic prospection cruises involving Moroccan researchers from This agreement, signed on the August 28, 1992 for a period of the National Institute of Fisheries Research (INRH) were, and still three years, was the first concluded between Morocco and the Rus- are, carried out to assess small pelagic stocks using specialized Rus- sian Federation in the area of maritime fisheries; Russian vessels sian vessels. became subject to the Moroccan legislation in regards to fishing quotas, technical fishing conditions, authorized zones, periods, and species. The 1985 Morocco-Japan Fishing Agreement This agreement allowed 43 large- and medium-tonnage boats The fishing cooperation agreement between Morocco and Japan to operate in Moroccan waters, beyond 15 nautical miles, and to was concluded and signed in September 1985. It only concerns fish a quota of 400,000 tons, exclusively small pelagics (sardines, the seasonal tuna fishery and in particular bluefin and bigeye tuna sardinellas, mackerels, horse mackerels, and so on). during their migratory run through Moroccan waters. It also relies In return for these fishing opportunities, the Russian ship own- on a selective fishing method, surface longlines. ers granted fishing licenses and paid an annual financial compen- Each year, the joint commissions define the technical fishing sation corresponding to 17.5 percent of the value of the total final conditions, number of licenses, royalty rates, number of crew and production, calculated on the basis of the reference price per tonne scientific observers taken onboard, catch reports, and coopera- of finished product, set each year within the framework of the joint tion projects to be undertaken. The compensation paid by each commission. The employment of Moroccan crew was not included Japanese longliner is estimated at around $14,400, broken down in this agreement. as royalties ($2,000), license fees ($6,400), and observers’ costs ($6,000). The number of boats authorized to fish continues to fall, The 1995, 2002, and 2006 Morocco- decreasing from 30 to 15 units, of which only 8 have operated in Russia Fishing Agreements Moroccan waters in the past few years, on account of the crisis Following the 1992 agreement, these various conventions estab- encountered by this Japanese fleet segment. lished the rules and the terms of the cooperation between the two However, it must be noted that maritime cooperation with countries concerning the conservation of Moroccan fish resources Japan goes beyond this agreement with its royalties and license fees. and their development and defined “the conditions governing Rus- Within the framework of the technical cooperation and through sian vessels’ fishing activity in the Atlantic waters of the exclusive nonrefundable financial aid, Japan has funded various socioeco- economic zone of the Kingdom of Morocco” south of the 28°0N nomic, scientific, and technical projects in the fisheries area, for a parallel. total of $148 million spread over the 1981–2011 period. These agreements, which covered three-year periods, led to The first phase of the foreign fleets’ presence in Moroccan a significant reduction in the authorized fishing capacity, reduc- waters, whether illicit or based on historic rights that evolved ing the allowable catch from 400,000 to 200,000 tonnes and toward sovereignly negotiated agreement, has now been replaced Emerging Perspectives on Foreign Fishing Arrangements 83 by a cooperation based on a balanced partnership and a more » The cephalopod, shrimp, and swordfish fisheries, over- rational management of the resource where the national sector exploited with respectively 150, 170, and 50 boats in the must remain paramount. 1995 agreement, were definitively excluded from the new convention. » The Mediterranean was spared from any fishing activity, PARTNERSHIP AGREEMENTS given the fragility of its ecosystem and the scarcity of its MEETING THE REQUIREMENTS fish resources. FOR SUSTAINABLE FISHING » Despite the fishing possibilities offered by the small pelagics in the south, a quota of only 60,000 tonnes was granted to AND NATIONAL FISHERIES the Community fleet to preserve the interests of the sector DEVELOPMENT GOALS and the investment opportunities in projects involving Mo- roccans, in accordance with the national management and Once the 1995–99 agreement on fishing relations between Morocco development plan of this fishery. and the EC expired, the Moroccan fishing zone was unexploited by » Finally, the 2005 fishing agreement stipulated that the fish- Community fishing boats for the first time and for a long time. ing effort authorized could be revised or redistributed be- However, contacts were maintained with European Community tween the different fishing categories, if both parties agreed officials in the hope of reaching an agreement for the continuity of and if the state of the resource and the conclusions of fishing relations. Nonetheless, the poor condition of the resource the work undertaken by the Joint Scientific Committee so and diverging interests killed any hope of continuing bilateral fish- required. eries cooperation. This “no agreement” situation lasted until 2005, when the two parties came back to the negotiating table to conclude a four-year “NEW GENERATION” FISHING AGREEMENTS partnership agreement. Why this return to the negotiating table? These agreements include the July 28, 2005 partnership agreement What factors induced such a change? What new types of rela- with the European Community, whose protocol was renewed on tion were agreed? And what have been the consequences and the July 24, 2013 for a period of four years, and the February 14, 2013 impact on the resource? agreement with the Russian Federation. CONSIDERATIONS BEHIND THE CONCLUSION OF A NEW AGREEMENT WITH THE EU The Partnership Agreement with the European The year 2005 was noteworthy for a favorable change in the Euro- Community of July 28, 2005 pean Commission bodies, leading to a reopening of dialogue, This convention, in keeping with “the Euro-Mediterranean with the expectations and concerns of Morocco being taken into agreement establishing a relationship between the European account in terms of sustaining national fish resources and their use, Community ... and the Kingdom of Morocco” and the advanced primarily for economic and social development. status granted to Morocco states in its preamble that the two Thus, with this new momentum in the bilateral relations, a new parties are determined to “cooperate, for their mutual benefit, fishing agreement was concluded on July 28, 2005, launching a new toward responsible fishing in order to ensure the long-term con- type of cooperation based on partnership, the sustainable exploita- servation and sustainable exploitation of maritime biological tion of marine biological resources, and the right of Morocco to resources.” manage them in order to ensure the development of its fisheries. These general principles show a willingness to go beyond the This new agreement, because of its dimension and the fishing narrow vision of access to the resource against financial return. types and zones concerned, was considered by Moroccan officials Instead, the agreement sought to establish a partnership between of the time to have safeguarded the interests of the sector and as the two parties for the integrated development of the national fish- “not to represent a threat to the sustainability of the resource.”3 eries sector. In pursuing that goal, the agreement stipulates that Incidentally, this notion of sustainability emerges clearly from “the two parties seek to create the right conditions for the promo- the text of the agreement: tion of technical, economic and commercial relations between » The fishing effort authorized, expressed in GRT, not in- their enterprises, by developing a business- and investment-friendly cluding pelagic fishing in the south, represented only one environment.” quarter of the fishing potential allocated within the frame of the 1995–99 agreement. Agreement Protocol of July 28, 2005 » The vessels concerned were primarily artisanal, with a Based on the wish expressed by the two parties, the agreement gross tonnage under 100 GRT, using selective gear such stipulated a level of fishing effort compatible with the requirements as longlines, lines, poles, pots, and seines, whereas trawl- for resource renewal and conservation, that is, a total of 119 vessels ing had been the dominant type of fishing in the previ- together with a quota of 60,000 tons of small pelagics. ous agreement (cephalopod trawlers, shrimp trawlers, hake In return, the EC paid Morocco an annual financial compensa- trawlers). tion of €40.25 million, not including royalties and license fees, that is, a total of €161 million over the duration of the agreement. This 3 Statement of July 28, 2005 by the head of the Moroccan delegation. financial compensation included annual sectoral support of €13.5 84 Trade in Fishing Services million, allocated to the development and implementation of the and long-term management of fish resources. They represent the fishery sector policy in Morocco toward responsible and sustain- surplus available from Moroccan fish resources, in particular the able fishing. pelagics in the south. This support was mainly directed toward modernizing and The negotiations were also based on the general principles upgrading the fleet, the program for the withdrawal of drift nets, established to safeguard Moroccan fisheries sector interests, sustain scientific research, restructuring the artisanal fishery, upgrading fish resources, and perpetuate the spirit and momentum created by marketing networks, mechanizing landing and handling facilities, the 2005 protocol, concerning in particular the renewed authoriza- and assisting professional organizations in the Moroccan sector. tion of existing fishing categories and the exclusion of the Mediter- This protocol was also meant to promote the economic integra- ranean and sensitive fisheries, such as cephalopods and shrimps. tion of Community operators into the Moroccan fishery sector and The fishing capacity authorized through this protocol concerns investments through the creation of a think tank and an initiative to 126 Community boats, 73 percent of which are artisanal units (and raise awareness concerning commercial and industrial opportuni- tuna units), mostly benefiting Spanish ship owners, who represent ties throughout the value chain. over 90 vessels in this category. Other beneficiaries of the fishing To achieve this integration, Community vessels were required to opportunities were Portugal, the Netherlands, Germany, Scotland, land between 25 percent and 30 percent of their catches (for some Ireland, Poland, Lithuania, Latvia, France, and Italy. categories) in Moroccan ports and take onboard Moroccan crew The number of boats was reduced by 8 percent (137 to 126 (approximately 300 jobs). vessels) compared to the previous protocol. On the other hand, the This agreement was only implemented in February 2007—the small pelagic (sardines, sardinellas, mackerels, horse mackerels, and protocol expired in 2011—because of the delay in the ratification so on) quota was increased by 20,000 tons to reach 80,000 tons, process involving the competent bodies of the two parties. giving several Community countries access to this fishery, whereas At the expiry of the 2005 protocol, the two parties had engaged the demersal fishery categories were reserved exclusively for Spain in negotiating its renewal, but these discussions were tense and and Portugal. heated due to disagreements on fishing effort, financial compensa- The financial return was set at €40 million per annum, of which tion, and the very limited contribution of European funds to the €30 million comes from the European Commission and €10 mil- development of Moroccan fishery policy. lion from the relevant ship owners, in terms of royalties and license fees. The protocol earmarked €14 million per year of this amount Agreement Protocol of February 28, 2011 to support fisheries policy and to contribute to the funding and The compromise reached by the two parties was to renew the implementation of projects and objectives of the “Halieutis” strat- recently expired protocol on the same conditions as before but egy, geared toward the development and the competitiveness of for a duration of 12 rather than 48 months. The aim was for the the sector. European fleet to be able to remain in Moroccan waters against a This support gave the Moroccan Department of Maritime Fish- financial contribution of €36.1 million, of which €13.5 million was eries a budget of some €56 million over the duration of the proto- set aside for the development and the implementation of Moroc- col, sufficient to contribute to funding development projects and to can fishery policy. upgrade fishing activities all along the coast within the framework However, this protocol implemented on a provisional interim of the Halieutis plan. basis from February 28, 2011 was abruptly stopped after the nega- However, this financial support depended on the presentation tive vote of the European parliament on the grounds of the “poor by Morocco of projects that had to be approved financially within benefit-cost ratio for the European Union and the excessive exploi- the budget and on the objectives identified by the two parties with tation of demersal species. . . .”4 the framework of the joint commission and their expected impact. Members of the European Parliament (MEPs) relied on the con- The EU retained the right to monitor and control these funds, clusions of a report on “Ex-post evaluation of the current Proto- as it considered that financial support was a way for the commission col to the Fisheries Partnership Agreement between the European to promote its partnership policy and establish sustainable fishing Union and the Kingdom of Morocco, and an impact assessment of in countries with whom it had cooperation ties in the fisheries area. a possible future new agreement,” written by an external consult- For similar reasons, the introduction of provisions concerning ant for the Commission in December 2010. coordination between the two parties in terms of scientific research and experimental fisheries is intended to ensure the regular moni- toring of the state of the resource and improved knowledge of new Protocol of July 24, 2013 species or fisheries, potentially exploitable “based on the principle The Council gave a new mandate to the Commission that negoti- of non-discrimination between the existing fleets. . . .” ated a new 4-year partnership protocol for the maritime fisheries Concerning the conditions governing fishing activities, the pro- sector partnership agreement dated July 24, 2013. tocol stipulated some technical provisions accompanying access to The fishing opportunities allocated within the framework of the Moroccan fishing zone for all Community fishing boats with a this protocol, ratified by the European parliament on December fishing license, such as the obligation, for some categories, to land 10, 2013, comply with the relevant provisions of the 1982 United part of their catch in Morocco, to recruit Moroccan crew, and to Nation Convention on the Law of the Sea, in terms of sustainable respect the biological rest periods. The system monitoring and controlling the fishing activity of 4 EP press release. authorized Community vessels and the surveillance mechanisms at Emerging Perspectives on Foreign Fishing Arrangements 85 sea require, in particular, annual technical tests for fishing boats, Chartering and Joint Venture Contribution the presence of scientific observers onboard, compulsory report- Reputed to be an anti-investment formula in the sense that it con- ing of catches, permanent satellite monitoring of vessels, and the cerns temporary access to a given resource, the chartering of for- implementation of a system that will allow the electronic exchange eign vessels has been used by Morocco for various purposes. The of all information and documents relating to technical manage- Ministry of Agriculture, Rural Development, and Maritime Fish- ment (catch, Vessel Monitoring System [VMS], entrance into and eries (MPM), which is in charge of maritime fisheries, used it to exit from the zone). improve biological, economic, and commercial knowledge of the small pelagic resources in the Moroccan south Atlantic, to develop Cooperation Agreement with the Russian Federation a strategy to exploit these resources, and to develop a specialized industrial fishery capable of contributing to the economic and of February 14, 2013 social development of the country. Fishing relations between Morocco and Russia are currently gov- Moreover, chartering helped the relevant Moroccan operators erned by the provisions of the February 14, 2013 agreement that to gain experience in choosing fishing vessel technology (RSW establishes an annual quota of 100,000 tons for pelagic freezer pelagic freezer trawlers, large RSW seiners) for the processing and trawlers in the southern Atlantic zone of the country beyond value addition of small pelagic species and in their positioning on 15 nautical miles from the coast. the world market. In addition to reducing the quota and the number of fish- Compared with chartering, the contribution of joint ventures ing boats, a new feature in this agreement is the removal of the was of less interest, as they did not help achieve the objectives 80,000-tonne quota, included in all previous agreements to sup- that justified their creation, namely the transfer of technology and port the development of an integrated joint venture in the pelagic know-how in maritime fisheries and the creation of value in Moroc- fishery. can ports; the fisheries products landed by ships belonging to these Furthermore, and unlike previous agreements, the Russian societies were, and still are, exported with no value enhancement government pays Morocco an annual financial compensation of other than that they are frozen. Hence, the countries to which the $5 million for its access right to the resource, and the relevant ship exports are destined benefit far more from the added value created owners continue to pay annual royalties amounting to 17.5 per- by the products landed by these joint ventures than does Morocco. cent of the value of the finished output, calculated on the basis At best, they helped, through the import of second-hand foreign of a reference price agreed on between the two parties, which was vessels, to create a national industrial freezer fleet specialized in increased in December 2012 by 40 percent compared to previous cephalopods and shrimps and gave Morocco a place on the inter- years to take into account developments in the value of small pelag- national scene, in particular for octopus, all of which is exported to ics on the international market. the Japanese and European markets. Russian ships are also required to employ 16 Moroccan crew members per vessel and a scientific observer for monitoring fishing Contribution of Institutional Arrangements activities. The fishing agreements, in particular between Morocco and the However, it should be noted that the scientific research car- EU, have contributed significantly to the overexploitation of the ried out by Russian research vessels continues to be valued by the resource and limited the opportunities and the room for develop- Moroccan side and the INRH in particular. The latter feels that the ment of the national fisheries capacity, but their impact in terms cruises studying the pelagic ecosystem undertaken by the Russian of financial returns and sectoral support was relatively significant. vessels constitute significant support to the program for the evalu- The financial contribution brought between €280 and €500 ation of pelagic resources implemented by this research institute. million per agreement to the Moroccan treasury until 1999. Prior to that, the agreement with Spain financed the construc- Evaluation and Impact on National Fisheries tion of part of the industrial cephalopod fleet, a new port in Agadir, Having reviewed the different kinds of foreign fishing, including and the development of the port of TanTan, which helped ensure the main fishing agreements concluded between Morocco and its the repatriation of this fleet that was active in foreign ports. partners, this final section presents an evaluation of these arrange- All the agreements, and their financial compensation, concluded ments in terms of their socioeconomic consequences and impact with the EU included financial support for projects to develop the on the national fisheries and fleets. sector and strengthen the fisheries management and surveillance capacities. This support included the construction of 14 planes for maritime surveillance (approximately €155 million), the installa- Evaluation of Socio-Economic Impacts tion of semaphores along the southern coast of Morocco for the on the Fisheries Sector surveillance of fishing and maritime navigation, the construction Cooperation was used to finance programs for the equipment and of five rescue boats, the development of the ports of Dakhla and the structuring of the maritime fisheries sector and thus to cover Laayoune, and the strengthening of the programs and structures shortfalls in financial resources. However, although the study of the for scientific research. various arrangements used by Morocco over the past few decades This financial support, from agreements during the first phase clearly shows their positive impact on fisheries sector development, of cooperation (1983–99), came at a time when Morocco had it also reveals some negative impacts, both on the resource and on launched an ambitious program for the development of its fisher- the viability of the national fisheries sector. ies sector and required funds and investments to achieve it. 86 Trade in Fishing Services Over the 1992–2006 period, the agreements with the Russian the optimal effort and generated a strong pressure on fish stocks, Federation brought in some $41 million in financial return through reducing profitability margins and affecting the development of the royalties on the value of the final production by authorized Russian national fleet. boats. The development of Moroccan fishing capacity had become However, the main interest of this cooperation with the Rus- dependent on variations and reductions in foreign fishing effort, sian Federation concerns scientific research, in particular due to in particular by the EU. The country had to wait for each negotia- the research cruises undertaken by the Russian research vessel tion or renewal of a fishing agreement or protocol before initiating AtlantNiro, which provided invaluable information to the INRH a program for the development of its own fishing capacities, as a as part of its small pelagic evaluation programs. For Morocco, this substitute for the foreign effort withdrawn from Moroccan waters. significant dimension of cooperation seemed to compensate some- But the unrestrained fishing effort of foreign fleets (author- how for the relatively low financial return given the level of fishing ized on the basis of a fishing effort expressed in terms of number opportunities provided in these agreements. of boats and GRT) made a major contribution to the depletion The cooperation approach with Japan has been completely differ- of national fish stocks, and their presence threatened Moroccan ent: this country has accompanied Morocco in the development of its investments in the sector. fisheries sector by funding projects concerned with important com- In seeking to reverse the situation, the Moroccan authorities ponents, such as training, scientific research, coastal fishery develop- in charge of the sector implemented a series of measures that ment, and improving the economic and social conditions of fishers. restricted the national fishing companies, including a freeze on These projects, which covered the 1981–2011 period, were investments for the purchase of new fishing boats, biological rest funded through nonrefundable financial aid granted to Morocco periods, the systematic inspection of landings in Moroccan ports, in excess of the fishing opportunities given to Japanese vessels to and strengthened monitoring, control, and surveillance on the exploit tuna while in Moroccan waters. The total investment in fishing zones. these projects was approximately $148 million over the relevant Despite these management measures and the successive reduc- period. tions relating to the different fishing agreements, the Moroccan The ending of the agreement in 1999 marked the end of an fleet still could not reach its optimum exploitation and profitability era in Morocco-EU fisheries relations, and a new era was born and thereby maximize its economic and social benefits while safe- in 2005 with the partnership agreement in the maritime fishery guarding the fundamental equilibrium of the fisheries. sector based on sustainable fishing and the priority of meeting the This shortfall for the Moroccan fishing sector was far from being needs of the national fisheries sector. The level of fishing effort, compensated by the benefits resulting from the agreements because the nature of the fishing gear authorized, and the technical condi- the estimated value of the foreign fleet catch, in all its components, tions linked to the fishing activities of the Community vessels show was significantly higher than any Moroccan gain. clearly the concerns and preoccupations of the two parties con- For comparison purposes, the annual average value of the catch cerning the sustainability of the resource. of the authorized Community fleet during the period covering the Apart from the demersal sector (11 trawlers), the 2005 and 1988, 1992, and 1999 agreements was estimated, on the basis of 2013 protocols authorize only vessels using selective and passive the Moroccan fleet performance and assuming full utilization of fishing gear and with greatly reduced vessel numbers (23 percent the fishing possibilities, to be between €362 million for the first one and 21 percent of the number in the 1995 agreement, respectively). and €472 million for the third one. And these protocols excluded all fishing in the Mediterranean and Table D.1 shows how the level of financial compensation in sensitive fisheries such as cephalopods and shrimps. increased during this period, from €70 to €125 million a year, even The level of financial return and sectoral support is considered as the authorized fishing effort declined from 730 to 590 boats to be relatively satisfactory. The financial return provided for in the across all categories. 2005 and 2013 protocols represents 29 percent and 32 percent of This level of compensation, which may seem high compared the 1995 agreement, respectively. with other zones in the world, was justified by the quality of Moroccan fish and the nature of the species fished, sought after, Impact of Foreign Fishing on National Fisheries and valued by Community fishers, as well the geographic proximity Although the socioeconomic impact on the national maritime fish- of Morocco to its European clients. eries sector has been broadly positive, the presence of foreign fleets It is difficult to compare this situation with the 2005 and 2013 in Moroccan waters had a negative impact on resource sustainabil- protocols because these excluded the most valuable fisheries (ceph- ity, particularly in the period up until 1999. alopods and shrimps) to make the agreement compatible with a This situation had consequences for stock productivity as well sustainable biological dimension. for the profitability of fishing companies and the space for develop- The large reduction and the underutilization of fishing oppor- ment of the national fishing fleet. tunities in the 2005 protocol, together with the exclusion of high- value species, meant that the annual value of the catch is estimated, in the independent report commissioned by the EU, to be only Impact on the Resource and the Profitability of €30.2 million. Moroccan Fishing Enterprises As a result, the report concludes that from a benefit-cost per- The Community fishing effort on Moroccan fisheries before 2000 spective, this agreement is toward the bottom of the ladder com- (in addition to the developing national fleet) greatly exceeded pared with agreements with other countries. Emerging Perspectives on Foreign Fishing Arrangements 87 TABLE D.1. EU-MOROCCO FISHING AGREEMENTS: COMPARISON BETWEEN THE ESTIMATED CATCH VALUE AND ANNUAL FINANCIAL COMPENSATION Financial Percent Estimated Catch Compensation Compensation/Value Fishing Agreement Authorized Fleet Value (Million Euros) (Million Euros) of Catches 1988 EEC agreement 730 472a 70.3 15 1992 EU agreement 650 422a 100.76 23.8 1995 EU agreement 590 362a 125 34.5 2005 EU agreement 137 30.2b 36.1 119.5 Sources: Author’s data; Ministry of Agriculture, Rural Development, and Maritime Fisheries (MPM). a Estimates for the 1988 and 1995 agreements based on MPM official data (report of September 9, 1994 on the midterm review of the May 1992 agreement). b Estimate drawn from the independent “Ex-post evaluation of the current Protocol to the Fisheries Partnership Agreement between the European Union and the Kingdom of Morocco, and an impact assessment of a possible future new agreement,” December 2010. The reasons for the underutilization relate, in addition to the level (less than 2 GRT), and the decision to freeze investments did biological rest periods included in the protocol, to certain condi- not involve the artisanal fleet. tions relating to fishing, such as the GRT per vessel in the demersal This legal loophole resulted in the clandestine construction fishery and light fishing for small pelagics in the north. of artisanal boats and led to an explosion in their number, which Among the criticisms that might be made of the agreement is increased from 3,000 units to more than 7,200 in 2003–04 in the the failure of the policy to integrate the fishing sectors of the two cephalopod fishery alone, causing a biological imbalance of the parties as expected through the use of joint ventures and to ensure resource and threatening the species and therefore the long-term the use of Moroccan ports as working bases for authorized foreign future of the whole cephalopod sector. vessels. This provision remained an empty promise of the fishing The significant and uncontrolled increase in fishing capacity, agreements and protocols. related in particular to the artisanal segment, led to the inten- Little progress was also made in scientific research. It seems that sive overexploitation of cephalopod resources. Their production only research aimed at resolving the specific problems of Com- reached a peak of 107,450 tonnes in 2000 and fell drastically to munity fishers was promoted through experimental fishing trips, 20,515 tonnes in 2003, a drop of 81 percent. Artisanal landings outside of the authorized fishing capacity. reached a total of 45,000 tonnes in 2000, an 82 percent rise com- pared to the 1995 production. Faced with an unprecedented crisis, amplified by an increase in Consequences of the Nonrenewal of the fuel price and a drop in the octopus prices, a “cephalopod fishery 1995 Agreement management plan” was implemented on the basis of scientific rec- Long before the expiration of the 1995 agreement and in expecta- ommendations from the INRH and a proactive policy from the gov- tion of the European fleet departure, Morocco had put into place ernment that aimed to save this sector and focused on restructuring an ambitious program aiming to modernize its coastal fishing fleet the artisanal segment (reducing the number of boats to 2,500), insti- and to improve port infrastructure to exploit its fish resources effi- tuting an individual quota system (by license), and strengthening the ciently by accessing zones attributed that until now had been left to measures controlling landings and the traceability of catches. the Community fleet. In other fisheries, the increase in fishing capacity was less notice- This program did not intend to increase the national fishing able than in the cephalopod fishery. After the 1995 Morocco-EU effort in any way, except for the small pelagic fishery in the south fishing agreement, ships registered in Morocco were purchased Atlantic stock where fishing capacity could still be developed to replace existing fishing units, generating no additional fishing because the full catch potential remained unused. effort. This concerned in particular shrimp and longline boats; Incidentally, a freeze on investments for the purchase of new these fisheries were strengthened by ships that had previously oper- fishing boats had already been implemented in 1992 to reduce the ated in Moroccan waters under fishing agreements now appearing strong pressure exerted on national fisheries, in particular cephalo- as part of joint ventures. pod and coastal demersal fisheries. Despite the purchase of new fishing units (50 longliners and However, whereas the octopus fishery had been almost entirely 24 shrimp boats), there was no great change in total fishing effort; exploited by Moroccan and Community freezer trawlers, new fleet these ships did not take the place of foreign units but replaced exist- segments even before the 1995–99 agreement seemed to begin to ing national units that were lost or destroyed. become gradually important actors in the fishery and would partly Furthermore, it is important to stress that European vessels, and replace the European fleet at the end of the agreement. Spanish and Portuguese in particular, registered in Morocco within Unlike industrial and coastal fleets, the construction of artisanal the framework of joint ventures, benefited from compensation for fishing boats was not subject to an authorization at a regulatory the exit from the fleet granted by the European Commission. 88 Trade in Fishing Services Evaluation of the 2005 Morocco-EU agreement » The protocol efficacy relates to the fishing possibilities The 2005 fishing agreement with the EU and its protocols were given to the Community fishing boats, but the contribution a complete break from the past, in keeping with the spirit of the of the Community fleet to the market stabilization remains United Nation Convention on the Law of the Sea and taking into insignificant (annual catches seem marginal compared to account Morocco’s aspirations to exploit and manage the fish the EU requirements totaling around 13 million tonnes). resources of its exclusive economic zone in a sustainable way and » From an efficiency viewpoint, the protocol generates a to protect the interests of its fishing sector. very high cost compared with the fishing potential actually These protocols have a limited biological impact on the resource exploited. On the basis of the above, the European parlia- and the marine ecosystem given their modest and manageable ment voted against the 2011 protocol, believing that the dimension, the fishing effort authorized, the restrictive species, and benefit/cost ratio was highly unfavorable to the EU. technical conditions associated with the fishing activity of Com- » As regards relevance, the protocol fulfills the needs of the munity vessels. Community fleet, allowing redeployment into a neighbor- Although the fishing categories authorized do concern fully ing area and easing the pressure on European fish resources. exploited to overexploited species or groups of species, except for » Finally, the viability of the protocol is proven for the the small pelagic stock in the south, the level of fishing effort by EU European fleet, but its consequences on the Moroccan vessels (again other than pelagic) and the level of catch (96 percent fishery sector are relatively negligible in terms of creation concern small pelagic) has negligible impact compared with the of local value added, jobs, or investment dynamics. national production. However, the following observations may be made concern- CONCLUSION ing the partnership for the promotion of responsible fisheries and Given the abundance and diversity of fish resources, following the Moroccan investments included in the protocol: establishment of its exclusive fishing zone in 1973, Morocco inherited » As regards the definition of a sectoral policy, the EC real- a large foreign fishing presence acting either illegally or on the basis ized that Morocco could not be compared to other coun- of “historic rights” that Spain claimed to have acquired as a result of tries involved in fishing agreements because it had com- a colonial pact promoting Spanish fishing interests in this zone. petent and qualified institutions capable of formulating a As it became aware of its fisheries assets and building on the rel- national fisheries development strategy; evant provisions of the United Nation Convention on the Law of » As regards scientific research, the proposed partnership the Sea, which it interpreted as an obligation for a coastal state to has not materialized and the scientific committee intended manage its fish resources in a sustainable way, Morocco instituted for this purpose has not added any real value to efforts to a series of measures aiming to strengthen the protection and the monitor the state of Moroccan fish resources; and surveillance of its resources and to initiate programs for the devel- » As regards the partnership for economic integration, de- opment of national fishing capacities (exclusive economic zone spite the protocol arrangements, no relevant initiative has [EEZ] and maritime investments code) in order to increase its con- been undertaken despite the presence of European opera- tribution to their exploitation and their value enhancement while tors in the Moroccan fisheries sector. The clause concern- developing in parallel a cooperation policy with third countries. ing the joint control of EU vessel landings has also not The initial arrangements concerned joint ventures between been implemented. Moroccan public and private operators associated with foreign partners and the chartering of foreign-flagged boats in a process to This agreement, intended to develop a partnership between the initiate the national exploitation of fish resources. two parties, and containing provisions to facilitate the promotion However, while chartering produced benefits concerning the of economic, scientific, and technical integration, has not had the mastery of fisheries exploitation technology where it was imple- expected results. It remains grounded in the same philosophy that mented and for the positioning on the global market of the species underpinned the earlier agreements, namely to negotiate access to concerned, joint ventures did not achieve the objectives for which the resource against financial compensation with sectoral support they were created, in particular the technological and skills transfer taken as part of this compensation or coming from MEDA funds in maritime fisheries and the creation of value added, which only rather than constituting additional support. partially benefited the Moroccan fisheries sector. This type of agreement is not well adapted to the case of The fishing agreements concluded first with Spain and Portu- Morocco, which has the institutional capacities and tools to gal and then from 1988 with the European Union had a positive develop and manage its fisheries sector alone (the evaluation and economic and social impact on the fisheries sector in Morocco in monitoring of the resource is done by Moroccan scientists, the fish terms of financial returns and sectoral support having contributed resources are exploited by the national fishing fleet, and landings to projects for the development, the equipment, and the manage- are processed, enhanced, and marketed by national companies). ment of national fisheries activities. Other cooperation and partnership formulas must be sought for However, it must be noted that these agreements, and in par- the two parties’ mutual benefit. ticular those in force until the end of the second millennium, main- The 2005 protocol was also the subject of an evaluation by the tained a significant and disproportionate fishing effort compared European Commission through a study undertaken by an inde- to the natural stock renewal requirements and restricted the fish- pendent consultant. This evaluation focused on efficacy, efficiency, ing capacity development potential and the profit margins of the relevance, and viability. Moroccan fleet. Emerging Perspectives on Foreign Fishing Arrangements 89 The impact of the agreements with the Russian Federation on the resource remains limited, insofar as the fishing opportunities BIBLIOGRAPHY effort granted to Russian boats concerns a particular fish stock Fishing agreements: that remains underutilized. Financial return remains low, but these agreements make a major contribution in terms of scien- » The 1983 Morocco-Spain fishing agreement tific research enabling the monitoring and the evaluation of small » The 1985 Morocco-Japan fishing agreement pelagic species in the southern stock. » The 1988, 1992, and 1995 Morocco-EU fishing agreements The cooperation with Japan is of a different nature; the 1985 » The 1992, 1995, and 2006 Morocco-Russia fishing agree- framework agreement does not have a major impact on the tuna ments; information drawn from Europa website (http:// passing through Moroccan waters. However, thanks to this agree- ec.europa.eu/fisheries/cfp/international/agreements/ ment, Morocco benefited from important funds within the frame- index_en.htm) work of technical cooperation and nonrefundable financial aid for » The 2005 Morocco-EU fishing agreement and the 2013 projects structuring its maritime fisheries sector. protocol Following a situation of “no agreement” that lasted almost 7 » The 2013 Morocco-Russia agreement years, fisheries relations with the EU were relaunched with the new 2005 partnership agreement in the maritime fisheries sector Reports, Studies, and Websites: and its protocols, inaugurating a new era of balanced cooperation “Filière de la pêche des espèces des petits pélagiques dans le sud atlantique taking into account the imperatives of sustainable fishing and the marocain: Diagnostic et stratégie de développement,” Mémoire pour requirements for the development of the national fisheries sector. l’obtention du Diplôme du Cycle Supérieur de Gestion de l’ISCAE, However, the partnership dimension advocated by this “new M. Rouchdi, Juillet 1999. generation” agreement has not had the expected effect and no pro- “Evaluation Ex-Post du Protocole de 2005 d’accord de partenariat dans gress has been recorded concerning economic, scientific, or techni- le domaine de la Pêche Maritime entre l’Union Européenne et le cal integration pursued by this cooperation convention. Obligatory Royaume du Maroc, étude d’impact d’un possible futur protocole d’accord,” réalisée pour le compte de la Commission européenne par landings of a proportion of the catch in Moroccan ports, the use Océanic Développement (France), Octobre 14, 2010. of port infrastructure as working bases for Community ships, the “Le Maroc et le Droit de Pêches Maritimes,” par Abdelkader Lahlou, joint control of landings in the ports of both parties, and scientific 1983. research are all provisions that have not been applied. Website: ec-europa.eu/fisheries At this level, the agreement remains consistent with the spirit of MPM site: www.mpm.gov.ma earlier agreements, namely access to the resource against financial compensation. 90 Trade in Fishing Services APPENDIX E INTERACTION BETWEEN FOREIGN FISHING AGREEMENTS AND SMALL-SCALE FISHERS Robert Arthur Furthermore, the fact that the fishers are foreign creates additional challenges due to the division of responsibility for controlling their MRAG Ltd activities in national waters and lack of local institutions for deal- e-mail: r.arthur@mrag.co.uk ing with any interactions that arise. In this section we consider the interactions that can occur through global and regional fish- ing agreements and some of the steps that have been taken at the FOREIGN FISHING international and national levels to address and reduce negative AGREEMENTS: ISSUES interactions. AFFECTING SMALL-SCALE FISHERS GLOBAL AGREEMENTS Global agreements represent a set of foreign fishing agreements Within this section we consider the interactions that can occur that provide fishing opportunities for distant water fishing nation between local small-scale fishing fleets and the commercial fishing (DWFN) fleets that normally involve a cost for the access. This cost entities that gain access to fish resources under foreign fishing agree- can be financial but may also be a reciprocal trade of fishing rights, ments (FFAs). These interactions are important because small-scale for example between the European Union (EU) and Norway. The fishing1 represents an important livelihood strategy, either full time focus here is on agreements that enable fishing by large-scale fish- or as part of a portfolio of activities, for millions of people living in ing vessels in the waters of developing countries. A diverse range coastal regions in developing countries. These fishing activities play of FFAs have emerged, including multilateral arrangements (for an important role in food security and poverty alleviation. Indeed, example, U.S. arrangement with the Parties to the Nauru Agree- recent estimates suggest that over 90 percent of people employed ment [PNA] or EU Fisheries Partnership Agreements), bilateral globally in capture fisheries and related activities can be classified arrangements between governments to provide fishing companies as small-scale fishers (World Bank/Food and Agriculture Organiza- access to resources (for example, United States and Russia), and pri- tion [FAO]/WorldFish Center 2008). The fisheries on which these vate arrangements between governments and private-sector fishing fishers depend contribute to the livelihoods and well-being of over associations (for example, Seychelles arrangements with Japanese 500 million people worldwide (Béné et al. 2007; FAO 2012). Some fishing associations). Other arrangements are also possible, such researchers also suggest that these figures may be underestimates, as shared investment or joint ventures. The critical aspect of the given that official statistics often fail to capture the true extent and arrangements is that they provide fishing opportunities for large- contribution of small-scale fishing activities (for example, Jacquet scale commercial operators and access by these operators can lead et al. 2010). to a variety of interactions with local small-scale fishers. Fishing operations under FFAs have the potential to lead to interactions between fishers that can affect small-scale fishers. These interactions can include interactions related to the fish stocks INTERACTIONS but can also extend to processing, marketing, and other fisheries- Small-scale fishing operations, particularly in developing coun- related activities. These interactions can be negative, but there can tries, have been the focus of increased attention in recent years. also be positive interactions (FAO/RAP/FIPL 2004; Jacquet and In the context of global fishing agreements, it is suggested that Pauly 2008). While such interactions can occur in any case within fishing operations by foreign commercial operators can directly national waters, global agreements can bring large-scale commer- and indirectly impact local small-scale fishers. Foreign commer- cial operators into national waters and regional agreements can cial operations can affect fishing operations and also undermine facilitate migration of small-scale fishers, both affecting host nation local management, generally as a result of weak governance that small-scale fishing operations and creating new markets for fish. results in commercial encroachment and use of large-scale and/ or destructive gears, privatization of common resources, and weak 1 For the purpose of this report we are using the FAO definition of small-scale rule of law. The nature of the interactions can be both direct and fisheries as “labour intensive harvesting, processing and distribution technolo- indirect. Direct interactions between fishers include instances of gies to exploit marine and inland water fishery resources. The activities of this competition for the same resources and fishing in the same loca- sub‐sector, conducted full‐time or part time, or just seasonally, are often targeted tions (competition for space). Indirect interactions include at-sea on supplying fish and fishery products to local and domestic markets, and for effects, for example when the bycatch of one fleet is the same as subsistence consumption” (FAO 2004). the target species of another fleet, and post-harvest, where there is Emerging Perspectives on Foreign Fishing Arrangements 91 competition in the marketplace or over post-harvest processing and Center 2008). The example from Mozambique also highlights marketing capacity. another form of interaction whereby small-scale fishers supply Many of the documented interactions between foreign and the foreign industrial fleet. This has also been reported in Guinea small-scale fishers concern the more direct interactions; for exam- and, more recently, Sierra Leone and Senegal, where foreign firms ple, the Mauritanian exclusive economic zone (EEZ) octopus stocks buy fish from local fishers to supply Asian markets, organizing have been targeted by both the small-scale fishers and an EU fleet wooden canoes with ice boxes to collect fish from the local fish- fishing under a Fisheries Partnership Agreement (FPA). The octo- ers. This form of operation provides fishers with an opportunity pus stock has been described as being overexploited by the EU fleet, to get higher rates for desirable fish species than they would get affecting catch rates for the small-scale fishers (Nagel and Grey in the local markets but may have implications for local fish sup- 2012). The EU fleets have also been implicated in negative impacts ply (Environmental Justice Foundation, personal communication). on small-scale fishers’ livelihoods in Senegal (Brown 2005; Gorez Again, the issue is that the introduction of commercial large-scale 2005). Again, the cause of these impacts is through the depletion operations creates changes that local institutions have to respond of fish stocks and disruption to fishing activities (Kaczynski and to but that may prove challenging given weak governance and rule Fluharty 2002). This is, however, contested, and evidence indicat- of law. Because these interactions occur and can negatively impact ing that the EU fishing fleet had negligible impact on Senegal’s small-scale fishers, many of whom in developing countries may fisheries resources is presented by Stilwell et al. (2010). be amongst the poorer sections of society, steps have been taken Some of the disruption is due to the effect that foreign fishing to establish a framework for good governance at the international operations have on the environment. Fishers in Liberia and Sierra level through a number of agreements. Leone report that trawling operations close to shore that are target- ing croaker and shrimp tend to have high discard rates and disturb the sediment. The disturbance generally means that it is not worth- RECOGNIZING SMALL-SCALE while to fish after a foreign vessel has been spotted fishing in an area FISHERS: INTERNATIONAL and, as a result, fishing opportunities are lost.2 Similarly, the activity of foreign fishing vessels in Maldives has been identified as disrupt- AGREEMENTS ing tuna school formation in near-shore areas and affecting catch- The needs and rights of small-scale fishers have been recog- ability of tuna, impacting local small-scale fishers (De Young 2006). nized in a number of international agreements, including the The disruption of fishing activities can also endanger small- UN Fish Stocks Agreement (UNFSA), which requests states take scale fishers’ lives. In a study across seven countries in West Africa, into account the “need to avoid adverse impacts on, and ensure Gallène (1995) identified incidents with industrial vessels getting access to fisheries by subsistence, small-scale and artisanal fishers.” their trawls entangled in fishing nets and dragging them away while The voluntary FAO Code of Conduct for Responsible Fisheries canoes are fishing as among the main causes for accidents at sea. (CCRF) also requests states to protect the rights of small-scale fish- Similar concerns over competition for resources and space and ers and goes further than the UNFSA by asking that states pro- safety at sea were also reported among small-scale fishers in Congo, vide “preferential access, where appropriate, to traditional fishing Guinea, and Gabon (Njock 2007). grounds and resources.” The voluntary guidelines for securing sus- In general, the results suggest that where foreign fleets are oper- tainable small-scale fisheries in the context of food security and ating in the same space and targeting or catching the same species poverty eradication that were published in May 2013 are intended as the local small-scale fleets, the interactions are considered more to complement the CCRF and echo the statement on preferential significant. These interactions could be exacerbated by weak con- access to resources. In relation to FFAs, the guidelines request that trol over the fishing activities of the foreign fleets that can give rise states ensure that small-scale fishing communities are “given prior- to conflict. This weak control is a critical aspect and is often allied ity consideration before agreements on resource access are entered to limited opportunity for small-scale fishers to hold the state to into with third countries and third parties.” These international account for the impacts and costs that are incurred. Foreign fish- agreements have framed a number of national legal frameworks ers do also present opportunities for small-scale fishers. In some (see below) as well as the activities of the regional fisheries manage- countries, canoe fishers collect bycatch from industrial trawlers. In ment organizations (RFMOs) that address management of highly Mozambique, fishers whose fishing activities were impacted by the migratory species. With respect to the latter, it is important in the operations of shrimp trawlers developed their own agreements with calculation of the available surplus that the activities and inter- the crew and made a business of selling shrimp that they caught to ests of small-scale fishers who are targeting these stocks are more the trawler crews and receiving bycatch in return, which they were explicitly accounted for. able to sell. This was also an important source of fish for local fish processors (World Bank/FAO/WorldFish Center 2008). This sort of bycatch collection at sea by small-scale fishers has been reported GLOBAL AGREEMENTS AND in many countries, including Ghana, Mozambique, and Senegal NATIONAL LEGAL FRAMEWORKS (Clucas 1997; Béné et al. 2007; World Bank/FAO/WorldFish One of the important issues has been that FFAs have been granted on the pretext of national economic growth without any analysis 2 In general, tropical shrimp trawlfisheries have been identified as having the of the social costs and benefits or discussions regarding the nega- highest discard rates, followed by other shrimp and finfish trawlfisheries tive impact on small-scale fishers and the natural environment. (Kelleher 2005). This has often led to conflict where there are interactions, and as 92 Trade in Fishing Services a result, recognition of impacts on small-scale fishers in national Protocol on Free Movement of Peoples adopted in 1979 recognizes legal frameworks has increased. Indeed, these frameworks increas- cross-border migration as a way of life in the region and a means ingly reflect the request within the CCRF. For example, in Mar- to enhance the benefits of movement of people, goods, and ser- shall Islands, priority is given to artisanal fishers in the allocation vices. The Revised ECOWAS Treaty identifies free movement as a of licenses and reserved areas are established for artisanal fishing. key objective and an important means of establishing the common The establishment of reserved areas for small-scale fishing, inshore market. Article 59 (1) specifically addresses the right of entry and exclusion zones (IEZs), and territorial use rights in fishing (TURF) residence of community citizens and the obligations on member areas is becoming a common feature in Africa, and examples can states to recognize these rights within their territories. The situ- be found in Kenya, Sierra Leone, Liberia, Angola, Mozambique, ation in East Africa is similar, with traditional patterns of fisher Senegal, and Mauritania, among others. These areas, typically in migration and a regional body, Common Market for Eastern and the inshore areas, are designed to reduce the direct interactions Southern Africa (COMESA), that supports the free movement of and competition for space between fleets and, allied to increased peoples. monitoring and surveillance, are credited with reducing interac- These regional economic agreements can lead to fairly signifi- tions between fishing vessels. However, the introduction of reserved cant foreign fishing effort in national fisheries, such that foreign areas has been identified as reducing fishing opportunities for fishers may constitute the majority (Njock and Westlund 2010). For foreign fleets, particularly for those targeting shrimp. example, in Gambia, Everett (1991) estimated that approximately half of the canoes operating in the coastal fisheries were foreign owned, and in Liberia, data suggests that in 2013 some 25 percent REGIONAL AGREEMENTS of canoes were foreign owned and that foreign fishers made up 35 In addition to global agreements that provide DWFN fleets with percent of total canoe-based fishers.3 These fishers are present at access to fish stocks, often in developing countries, there are also most of the landing sites across the coastal counties (Kebe et al. examples of regional agreements that provide access to fish stocks 2009). It is also important to note that, unlike many of the global by small-scale fishers from other regional countries through either agreements, movement of fishers is accompanied in many cases migration or transboundary fishing. For example, significant num- by the movement of wives and other relations who can often have bers of Thai registered vessels fish in the waters of Bangladesh, important roles in the processing and marketing of fish (for exam- Malaysia, Indonesia, and Myanmar under cooperative arrange- ple, Njock and Westlund 2010). Migrant fishers are often quite well ments and joint ventures, such that some 40 percent of Thai- organized within the host country and develop local fisher associa- land’s catch is from outside Thai waters (Kadfak et al. 2012). tions both to regulate their own activities and to interact with other These agreements can arise for a number of reasons but are often fishers and local and national authorities on their behalf. a response to the fact that fishers are targeting seasonally abun- dant and often migrating stocks and that this means that fishers are migrating within and across national borders, for example in REGIONAL AGREEMENTS AND East and West Africa and South Asia. Within these regions, there NATIONAL LEGAL FRAMEWORKS is a long history of fishers migrating to follow the fish and the sug- Across East and West Africa, national legal frameworks and fisher- gestion (for example, Atta-Mills et al. 2004; Njock and Westlund ies regulations have been developed that seek to ensure that access 2010; Binet et al. 2012) that this is an increasing phenomenon, in to fisheries resources is allowed so long as fishers comply with the part due to increasing access to markets. Access agreements are resource-use rules and regulations defined by the state (for exam- also a response to a situation where small-scale fishers fishing close ple, Crona and Rosendo 2011). Often the state seeks to regulate to national borders may unintentionally find themselves fishing through licenses and permits that include reference to foreign fish- in the waters of another country. Although presented as a fish- ing. However, as Crona and Rosendo (2011) point out, the legal eries issue, unlike the global fisheries agreements, regional access texts on the authorization of foreign vessels to fish in territorial agreements may not always originate within the fisheries sector. waters generally make no distinction between types and scales of As Crona and Rosendo (2011) and Binet et al. (2012) note, the operation and tend to relate primarily to foreign fishing operations movement of fishers across administrative boundaries has received related to global agreements rather than the operation of foreign little attention to date, partly due to the fact that the extent of small-scale fishers. fisher migration remains largely unknown and there is little effort In addition to the broad frameworks and regulations, there are to monitor migration. examples where regulatory measures have been developed to deal with specific instances of interactions between small-scale fish- RECOGNIZING ers. These measures are a reaction to the arrest and detention of small-scale fishers for illegal, unreported, and unregulated (IUU) SMALL-SCALE FISHERS: fishing and entering the territorial waters of neighboring countries. REGIONAL AGREEMENTS Having said this, the initial cause of detention is often the devel- This review has identified a couple of examples of regional agree- opment of maritime laws and regulations that are derived from ments that facilitate access to resources by foreign small-scale fishers. international instruments that promote the sovereignty of the state As mentioned, these have not always originated from the fisheries sector but have implications for it. In West Africa, for example, the Economic Community of West African States’ (ECOWAS’) 3 Data from West Africa Regional Fisheries Programme (WARFP) in Liberia. Emerging Perspectives on Foreign Fishing Arrangements 93 at the expense of traditional and customary rights and of tradi- Africa, this is a role that has been identified with regard to Gha- tional migrations of fishers (for example, Atta-Mills et al. 2004; naian and Senegalese fishers operating across the region. Foreign Gupta and Sharma 2008). Examples of reciprocal bilateral agree- small-scale fishers are identified as having largely contributed to ments that address border area issues and fishing in areas where the development of the small-scale fisheries in Mauritania and in there may be disputed sovereignty include the Sino-Vietnam Fish- Liberia, for example (Diop and Thiam 1991; Kebe et al. 2009), ery Cooperation agreement (2000), Eritrea-Yemen agreement of and the effect can be a transformation in perceptions of marine 1998, and establishment of a “sea of tolerance” between Costa resources to one in which they represent a significant potential Rica and Nicaragua (Béné et al. 2007; Vivekanandan 2008). source of wealth (Diaw 1991). Furthermore, in a developing coun- Within national waters, the rhetoric of decentralized fisheries try context, there are benefits from fishing under these agreements management, community-based management, and co-manage- that can accrue to the host landing site (for example, fish supply ment has been widely adopted by fisheries departments in develop- and employment) as well as to the fishers’ home port in the form ing countries. This has led to a variety of efforts to establish local of remittances and reinvestment. management committees and management units, often associated with territorial management areas or stretches of the coast. These often have to deal with the reality of migrant fishers and their rights POLICY RESPONSES TO to fish, but there is little evidence of these rights being recognized INTERACTIONS AND LESSONS explicitly in any decentralization initiatives. LEARNED In this section, some of the policy responses that have been devel- INTERACTIONS oped to address interactions under FFAs are reviewed. The two While there are regional commitments to free movement under main efforts that have been identified are (1) efforts to increase the ECOWAS and COMESA, Béné et al. (2007) have suggested that transparency of agreements, particularly global agreements, and instability and a lack of political will have affected implementa- the accountability of the actors involved (including international tion and that migrant fishers often find themselves marginalized guidelines that recognize the need to address the interactions) and and liable to be evicted when it is politically expedient. These (2) management measures designed to reduce interactions between are typically interactions that extend beyond the sector (see also fishers operating under FFA. Haakonsen and Diaw 1991; Njock and Westlund 2010). Similarly, with national legal frameworks tending to focus on activities under TRANSPARENCY AND global fishing agreements, there is a risk that regional migrant fishers may operate outside the law and be vulnerable to exploi- ACCOUNTABILITY tation and prosecution (for example, Crona and Rosendo 2011; Transparency and accountability have been identified as impor- Kadfak et al. 2012). tant means to shed a light on the policy processes and improve Fisher migration across borders can lead to similar interactions responsiveness. At the very least, public disclosure of information as the global agreements, and Binet et al. (2012) have suggested on fishing agreements and licenses can increase the likelihood that that migration is increasingly leading to conflict between local and fishers and others can identify illegal fishing activities (for example, migrant fishers. However, Haakonsen (1991), in an earlier review Standing 2011). In relation to FFA, the fact that fisheries’ access of fisher migration in West Africa, was able to conclude that, agreements in general, and those signed with Asian countries in although not fully socially and culturally integrated, with respect to particular, lack transparency has been highlighted. Indeed, clause fishing activities, the majority of migrant fishers are usually living 7.1.9 of FAO’s CCRF (2000) recommends that mechanisms for in peaceful coexistence with local communities. He suggests that fisheries management and related decision-making processes conflicts tend to occur when the same resource is exploited by dif- should be made transparent by the management authorities. As ferent groups using the same gear or when the gear of one group it stands, knowledge of who is fishing where and for what, the affects the other. He also suggests that conflicts may occur more quantities of fish being caught, and where this fish is going is often easily if catches are not sold locally. unclear. In the context of global agreements, how much is being The interactions are again not always negative (in practice, paid for access and how this is being used by coastal state authori- the relationships tend to be beneficial to both parties but often ties are often guarded and obscured from public scrutiny. also accompanied by conflict). Foreign small-scale fishers can, for To address these issues with negotiation of agreements, the example, benefit local communities through increased supply of issue of wider access to information and calls for greater transpar- fish. In the case of West Africa, foreign fishers may be responsi- ency have become central to efforts to combat illegal fishing and ble for significant landings of fish that are not a major target of influence fisheries policies (for example, Standing 2011). However, national small-scale fishers but that make important contributions these arise from different sources with divergent motivations. For to national food security. In the case of Liberia, Ratcliffe and Lind- international agencies, the motivation is control and regulation (for ley (1988) estimate that Ghanaian fishers at the time were respon- example, EU IUU and traceability measures, FAO arrangement sible for around three quarters of total domestic catch. This is an on port state measures, and Transparent Sea analysis of donor important point. Foreign fishers may also have an important role activities). For civil society organizations, such as the Coalition for in the spread of fishing technology (including fishing gears, canoe Fair Fisheries Arrangements and Transparent Sea, it is a means to construction, and post-harvest processing). In the context of West achieve greater transparency on access arrangements. 94 Trade in Fishing Services The process of determining national fisheries policy and policy a critical constraint remains that the fisheries sector is seen as a objectives and whether (including on what terms) to enter into foreign exchange earner by the Ministry of Finance. global FFAs is, in practice, seldom transparent or inclusive. For Calls for greater transparency in relation to FFA is accompanied example, within Mauritania, civil society is not represented within by calls for greater accountability and consideration of the role and fishing agreement negotiations, but there are concerns within both contribution of small-scale fishers. Two of the main international the local industrial and small-scale fishing fleets about the effect that guidelines that address interactions are CCRF and the recent vol- agreements will have on long-term sustainability as well as more untary for securing sustainable small-scale fisheries in the context of immediate competition that might hinder the development of local food security and poverty eradication. Although both of these rec- fisheries businesses. As a result of concern over interactions, the ognize the important contributions that small-scale fishers make and EU-Mauritania FPA has four strategic priorities that were aimed their role in relation to food security, they represent voluntary agree- at mitigating negative impacts of EU fisheries exploitation. Despite ments with no legal force in international law. This fact, together this recognition of the need to address interactions between the EU with the broad scope of the CCRF, has presented challenges when fleet and domestic fishers, including small-scale fishers, implemen- it comes to implementation. For example, a review by Pitcher et al. tation of the agreement has been criticized (for example, Nagel (2008) suggested that compliance with the CCRF was relatively poor and Gray 2012). By contrast, the Ministry of Fisheries and Marine and that there is a lack of attention to the small-scale fishing sector Resources (MFMR) in Namibia routinely consults extensively with despite the fact that small-scale fishers are very important as a source stakeholders during policy or management strategy development, of food security and livelihoods in many countries. However, the and a number of consultative mechanisms are in place. guidelines do provide a reference point for civil society and a means A key challenge for any host nation is ensuring that there is the to increase accountability of national governments and others. political will to see through the negotiation and implementation of In situations where potential resources or fishing grounds are global agreements in ways that ensure that they deliver the maxi- shared between the small-scale fishers and DWFN and the existing mum benefits to the state with minimum risks. There are a number small-scale sector makes only limited contributions to government of steps that can assist with this or, alternatively, undermine it. One revenues (despite any other benefits that might be generated), these aspect that can be beneficial is simply for the objectives of enter- factors can all contribute to create high discount rates that, in turn, ing negotiations to be explicit. This provides a focus to the process can lead to rent-seeking behaviors (for example, Stilwell et al. 2010). and can also increase accountability. An example of where there In most cases, the decision to enter into a global agreement is based has been a positive outcome is with the policy of Namibianization on a simplistic assessment of the benefits that usually only considers in Namibia and the definition of social goals as part of the objec- the landed value of fish. Given the often poorly documented state tive of the policy. However, the reality in many cases is that objec- of national fisheries, there is a pressing need to understand the (full tives are likely to remain less well defined given the motivations range of) benefits from small-scale fishing activities and the way of firms and national interests discussed above. This can result in that costs and benefits of any foreign fishing agreement would be government-to-government bilateral support, and aid that is linked distributed across actors dependent on the fisheries. In particular, to fisheries agreements complicates economic considerations. For- there should be greater consideration of the nature and extent of eign governments, notably the EU and China, have been identified local economic linkages and multipliers. These need to be factored as supporting fishing interests to gain access to fisheries as a means into decision-making models so that the full range of social and to achieve wider strategic interests as well as a means to secure economic costs and benefits of policy options can be accounted for. fish supplies and employment. For example, in Mauritania, Chi- Beyond costs and benefits, it is the values, needs, and aspira- nese military aid is being provided in return for opportunities in the tions of those dependent on the fisheries that should have an active local industrial fishing fleet. influence in shaping fisheries policy, particularly because through Within the coastal state, there are internal political factors that the subsequent interactions they may be bearing some of the costs. affect the ability to negotiate. For regional agreements where the This hints at the more significant impact of foreign access agree- negotiation may be outside the sectoral remit, fisheries issues and ments on small-scale fishers. Small-scale fishers become more implications may be marginalized. Internal struggles for control vulnerable when their social cohesion and self-determination are over the resources are typical within governments with various undermined and when they are unable to counter the interactions ministries and agencies seeking to establish a role and to benefit and impacts on their way of life. Rather than seeking to extract, from agreements. The same is true of global agreements, where quantify and use information about the fisheries, there are increas- Mauritania provides an example. The main stakeholders in the ing calls, including within the CCRF, for those who may be affected Mauritanian fisheries include the Ministry of Fisheries and Mari- by decisions to have more of a role in the decision making—provide time Affairs, the Ministry of Finance (which has responsibilities for the poor with a voice in development decisions; ensure access to public accounts, customs, investment, and economic development), productive assets and a share in the development benefits. and the Central Bank (which manages foreign exchange and is therefore also influential in the negotiation of fishing agreements). AVOIDING NEGATIVE In crude terms, the Ministry of Finance is interested in short-term benefits (contributions to the balance of payments), whereas the INTERACTIONS Ministry of Fisheries has a longer-term vision, namely that of Negative interactions can be reduced if host and flag states commit sustainable development of the fisheries sector. In cases of disa- to more effective monitoring, control, and surveillance (MCS) of greement, the head of government may act as an arbitrator, but fishing activities. However, efforts to improve control should not be Emerging Perspectives on Foreign Fishing Arrangements 95 at the expense of efforts to improve accountability and representa- on small-scale fisheries is acted on to ensure “active, free, effec- tion in decision making. The lack of capacity for effective MCS tive, meaningful and informed participation of small-scale fishing and management can often represent the greatest single threat to communities [. . .] in the whole decision-making process related to the resource and to its capacity to deliver economic benefits. It can fishery resources and areas where small-scale fisheries operate as also be presented as an important prerequisite if negative interac- well as adjacent land areas, and taking existing power imbalances tions are to be avoided. Commitment to MCS can be particularly between different parties into consideration. This should include important for global agreements in a context where there can be feedback and support from those who could be affected by decisions downward pressure from retailers and buyers onto vessel own- prior to these being taken, and responding to their contributions” ers. This can be beneficial for the coastal states, as it can increase (FAO 2014). However, realizing this can be challenging for national demand for access to resources, but it can also have consequences, governments (for example, Blaikie 2006; Evans et al. 2011) because as vessel owners may be under pressure also to fish harder and there are usually a number of government departments that have faster, reduce costs, and avoid regulation where possible. some responsibility related to resource management and each may The benefits of improving control of fisheries are highlighted be drafting its own policy and legislation. The extent to which these by examples such as Namibia and, more recently, Liberia, where policies are coherent and supportive of decentralized management improvements in MCS capabilities have resulted in reduced levels can vary. Even where there is agreement on decentralization, the of illegal fishing by DWFNs in inshore waters. However, respon- difficulty in identifying what co-management or community-based sibility for control of fishing does not rest with the coastal state management is can create significant difficulties for practitioners alone. Indeed, the FAO Code of Conduct for Responsible Fisher- and provide opportunities for various actors, both within political ies states that “The right to fish carries with it the obligation to do elites and in civil society, to variously support or resist meaningful so in a responsible manner so as to ensure effective conservation transfer of power (for example, Blaikie 2006). and management of the living aquatic resources.” Furthermore, A second risk is that at the local level the establishment of “States authorizing fishing and fishing support vessels to fly their reserved areas can also represent a change in ownership and rights flags should exercise effective control over those vessels so as to over the resources that can affect the relationships between actors. ensure the proper application of this Code.” Often there are complex and dynamic relationships between boat Measures to avoid interactions have often led to the establish- owners, crew, fish buyers, and processors operating at the local ment of exclusion zones to separate small- and large-scale fishers level. Access rights to fisheries and to fish and the benefits that are and reduce some of the more direct forms of interaction. Associated derived from these result from this complex web of institutions, with exclusion zones have often been initiatives to introduce some interpersonal relationships, and human behaviors. Changing the form of decentralized management (for example, co-management nature of rights can lead to significant shifts in power and the or community-based management). These initiatives are intended nature of relationships and institutions that may have unforeseen to provide locally appropriate management strategies and increase and even undesired consequences. the role of local people in setting fisheries management priorities. Changes in institutions at the local level as a result of introduc- Although it would appear to be reducing the role of the state in ing a spatial element or granting rights to local communities can fisheries management, the granting of foreign access could also also have implications for migratory fishers (national and foreign). be seen to run in contrast to decentralized resource management. This is seen in particular in the context of decentralized manage- Demand for access instead provides an opportunity for the state ment of fisheries resources, where the simple presence of foreign to actually increase its power and control over the exploitation of fishers can create difficulties. Despite widespread enthusiasm for natural resources. decentralized forms of management for small-scale fisheries, the Although reserved areas can potentially reduce conflict, it is implications of fisher migration for these forms of management important that the process of recognizing rights over these areas or tends not to be explicitly recognized or addressed (for example, resources is not also a means to reduce or take away rights to other Njock and Westlund 2010; Crona and Rosendo 2011). Further- areas or resources. Providing areas for small-scale fishers may be more, there is often little recognition of the autonomy of custom- welcomed by local people, who may feel that they are benefitting ary law of or representation in the decision-making bodies of the from an exclusive right over marine space and the resources within state. In practice, the movement of fishers can lead to various it. However, these initiatives can also be seen as an effective tool to responses at the local level that can affect efforts at establishing effectively create state ownership of certain areas and to exclude decentralized management. The responses include motivating local people from them. Hence, the state can legitimately allocate local fishers to engage in decentralized management as a means the nonreserved areas to someone else, in this case foreign fishing to exclude foreign fishers from local waters and the undermining entities for the purpose of exploitation, usually large-scale com- of such efforts due to the difficulty of including foreign fishers mercial production. in co-management—because of cultural differences (including Granting reserved areas to small-scale fishers therefore has a language), different fishing technologies and practices that com- number of risks. In the first instance, these fishers in many devel- plicate management, and locals or foreign fishers not engaging oping countries are also developing, and therefore restricting their with the process, including undermining regulations and institu- fishing activities to “traditional” areas or reserved spaces could risk tions through their actions (for example, fishing in closed areas reducing their development potential at the expense of foreign fish- and using illegal gears). ers, who may have greater political and economic influence. This Regional movement and the activities of migrant fishers under risk may be reduced if the request within the voluntary guidelines regional agreements need to be placed in the wider context of the 96 Trade in Fishing Services historical and cultural dynamics and drivers of migration, which MCS capability could be effective. One common step to reduce often lie outside the fisheries sector (for example, Haakonsen 1991; interactions has been to establish reserved areas—territorial use Atta Mills et al. 2004). Migrant fishers face the issue that they tend rights and inshore exclusion zones. This segregation has helped to lack rights within the host country. In practice, this can lead to reduce direct interactions between large-scale and small-scale to marginalization, conflict, exploitation, and persecution. Even fishing operations, but it is critical that the process of recognizing where migrant fishers may be responsible for the majority of the small-scale fishers’ rights over certain areas or resources is not also fish landings, this may be overlooked and their needs and aspira- used as a means to reduce or take away rights to other areas or tions overlooked. There are wider developmental and social justice resources. implications, but even from a sectoral perspective, as Haakonsen Within many countries, there are examples of migrant and (1991) concludes, “On a wider scale, ignoring the importance of transboundary fishing activity. In many cases, the agreements migrant fishermen may lead to policy decisions by governments that permit access originate outside the sector but within the sec- which drastically reduce national fish production and increase tor these fishers and their activities may not be fully recognized import dependency.” For this and the wider reasons, it is therefore or considered in national regulations. Furthermore, and perhaps necessary that the rights of migrant fishers are legitimized and that more significantly in the context of efforts to decentralize fisheries fisheries management institutions are strengthened and reviewed management, there is often no clear understanding of how these to ensure that they recognize the reality of migrant fishers and fishers can be accommodated within co-management and com- include them within policies and initiatives within the sector. This munity-based management initiatives, so that the risk arises that necessity to review national management frameworks and also to they become marginalized and negative interactions and conflict ensure regional coordination has been recognized, for example, are increased. At the very least, this requires clearer consideration within ECOWAS, but implementation to date has proved prob- of the role and rights of migrant and transboundary fishers in lematic. national policy and regulations and at the local level. CONCLUSIONS REFERENCES The granting of access to national fish resources through global Atta-Mills, J., J. Alder, and U. R. Sumaila. 2004. “The Decline of a and regional access agreements can provide important benefits in Regional Fishing Nation: The Case of Ghana and West Africa.” Natu- terms of national revenues, increased landings, and employment ral Resources Forum 28: 13–21. opportunities. At the same time, there is also a range of potential Béné, C., G. Macfadyen, and E. H. Allison. 2007. “Increasing the Con- tribution of Small-Scale Fisheries to Poverty Alleviation and Food interactions (both positive and negative) between foreign fishers Security.” FAO Fisheries Technical Paper 481, Food and Agriculture and national small-scale fishers that can arise. While some of these Organization, Rome. interactions, in particular those under global agreements, can be Binet, T., P. Failler, and A. Thorpe. 2012. “Migration of Senegalese Fish- similar to the types of interactions that can occur between small- ers: A Case for Regional Approach to Management.” Maritime Studies scale fishers and commercial, industrial fishers, a critical aspect to 11 (1): 1–14. draw attention to is the institutional frameworks in these cases. In Blaikie, P. 2006. “Is Small Really Beautiful? Community-Based Natural many cases the role and significance of small-scale fishing activities Resource Management in Malawi and Botswana.” World Development (including the wider economic and social dependencies) have not 34 (11): 1942–57. been taken into account in the process of negotiating access and Brown, O. 2005. “Policy Incoherence: EU Fisheries Policy in Senegal.” calculating the costs of the agreements and who will bear these Human Development Report Office Occasional Paper 2005/29. costs. Beyond this, there is often little consideration of the potential Clucas, I. 1997. “A Study of Options for Utilisation of Bycatch and Dis- cards from Marine Capture Fisheries.” FAO Fisheries Circular C928. role of small-scale fishers as drivers of development. Furthermore, Food and Agriculture Organization, Rome. there is a transparency issue whereby small-scale fishers may be Crona, B., and S. Rosendo. 2011. “Outside the Law? Analysing Policy excluded from the negotiations and may even be unaware that they Gaps in Addressing Fishers’ Migration in East Africa.” Marine Policy are occurring. While this is often the result of poor information on 35: 379–88. the fisheries, there is also the suggestion that internal political con- De Young, C., ed. 2006. “Review of the State of World Marine Capture flict between ministries at the national level and even rent-seeking Fisheries Management: Indian Ocean.” FAO Fisheries Technical by the state can lead to the exclusion and/or marginalization of Paper 488. Food and Agriculture Organization, Rome. small-scale fishers and carries the risk of excluding and cornering Diaw, M. C. 1991. “Migrant Fishermen from Casamance and Southern the existing rights of small-scale fishers. These points are particu- River Areas.” In Fishermen’s Migrations in West Africa, edited by J. W. larly important with respect to the CCRF and voluntary guidelines Haakonsen and M. C. Diaw. Report of the Programme for Integrated on small-scale fisheries, and there is more that could be done. Development of Artisanal Fisheries in West Africa. IDAF/WP/36. Diop, H., and I. Thiam. 1991. “Some Aspects of Fishermen’s Migrations With respect to implementation, the institutions in place in in the Artisanal Maritime Sector of Mauritania.” In Fishermen’s Migra- many developing countries and the agencies responsible for enforc- tions in West Africa, edited by J. W. Haakonsen and M. C. Diaw. Report ing the terms of agreements are often weak and unable to prevent of the Programme for Integrated Development of Artisanal Fisheries negative interactions. Furthermore, while the flag state has respon- in West Africa. IDAF/WP/36. sibility for the operations of foreign vessels, they often have a weak Evans, L., N. Cherrett, and D. Pemsl. 2011. “Assessing the Impact of role in ensuring that vessels operating under an agreement are Fisheries Co-management Interventions in Developing Countries: A taking steps to avoid interactions. This is an area where improved Meta-Analysis.” Journal of Environmental Management 92 (8): 1938–49. Emerging Perspectives on Foreign Fishing Arrangements 97 FAO. 2012. “The State of World Fisheries and Aquaculture 2012.” FAO Report prepared for the Bay of Bengal Large Marine Ecosystem Fisheries and Aquaculture Department, Rome. Project, February 2012. FAO. 2014. “Voluntary Guidelines for Securing Sustainable Small-scale Kebe, M., P. Jern, R. Collins, W. Kay, and E. Kekula. 2009. “A Liveli- Fisheries in the Context of Food Security and Poverty Eradication.” hoods Analysis of Coastal Fisheries Communities in Liberia.” FAO In: FAO Fisheries and Aquaculture Department [online]. Rome. Updated 15 Fisheries and Aquaculture Circular 1043, Food and Agriculture April 2014. [Cited 25 November 2014]. http://www.fao.org/fishery/ Organization, Rome. ssf/guidelines/en Kelleher, K. 2005. “Discards in the World’s Marine Fisheries: An Update.” FAO FAO/RAP/FIPL. 2004. “A Research Agenda for Small-Scale Fisheries.” Fisheries Technical Paper 470, Food and Agriculture Organization, Rome. FAO Regional Office for Asia and Pacific (RAP) Publication 2004/21 Nagel, P., and T. Gray. 2012. “Is the EU’s Fisheries Partnership Agreement and FIPL/C 10009. FAO Regional Office for Asia and the Pacific, (FPA) with Mauritania a Genuine Partnership or Exploitation by the Bangkok. EU?” Ocean & Coastal Management 56: 26–34. Gupta, C., and M. Sharma. 2008. Contested Coastlines: Fisherfolk, Nations and Njock, J.-C. 2007. “Projet Pilote Aménagement participatif des pêches Borders in South Asia. New Delhi: Routledge. en zone côtière au Congo, au Gabon, en Guinée et en Mauritanie.” Haakonsen, J. W. 1991. “Towards a Better Understanding of Fishermen’s Rapport Terminal. May 2005. Sustainable Fisheries Livelihoods Pro- Migrations in West Africa.” In Fishermen’s Migrations in West Africa, gramme (SFLP) report. edited by J. W. Haakonsen and M. C. Diaw. Report of the Pro- Njock, J.-C., and L. Westlund. 2010. “Migration, Resource Management gramme for Integrated Development of Artisanal Fisheries in West and Global Change: Experiences from Fishing Communities in West Africa. IDAF/WP/36. and Central Africa.” Marine Policy 34: 752–60. Haakonsen, J. W., and M. C. Diaw, eds. 1991. “Fishermen’s Migrations in Pitcher, T. J., D. Kalikoski, G. Pramod, and K. Short. 2008. “Safe Conduct? West Africa.” Report of the Programme for Integrated Development Twelve Years Fishing under the UN Code.” WWF-International and of Artisanal Fisheries in West Africa. IDAF/WP/36. University of British Columbia. Gallène, J. 1995. “Data Compendium on Safety at Sea for Seven West Ratcliffe, C., and R. Lindley. 1988. “Report on Artisanal Fisheries Sector African Countries: Mauritania, Senegal, the Gambia, Guinea-Bissau, Study.” MacAlister Elliott and Partners Ltd. Lymington, UK. Guinea, Sierra-Leone and Cape Verde, 1991–94.” Programme for Standing, A. 2011. “Making Transparency Work in Africa’s Marine Fisher- Integrated Development of Artisanal Fisheries in West Africa (IDAF). ies.” U4 Issue 11, Chr. Michelsen Institute. Bergen, Norway. Technical Report 71. Danida and Food and Agriculture Organiza- Stilwell, J., A. Samba, P. Failler, and F. Laloë. 2010. “Sustainable Develop- tion, Rome. ment Consequences of European Union Participation in Senegal’s Jacquet, J., and D. Pauly. 2008. “Funding Priorities: Big Barriers to Small- Marine Fishery.” Marine Policy 34 (3): 616–23. Scale Fisheries.” Conservation Biology 22 (4): 832–35. Sumaila, U. R., and M. Vasconcellos. 2000. “Simulation of Ecological and Jacquet, J., H. Fox, H. Motta, A. Ngasuru, and D. Zeller. 2010. “Few Data Economic Impacts of Distant Water Fleets on Namibian Fisheries.” but Many Fish: Marine Small-Scale Fisheries Catches for Mozam- Ecological Economics 32 (3), 457–64. bique and Tanzania.” African Journal of Marine Science 32 (2): 197–206. Vivekanandan, V. 2008. “Whose Waters Are These Anyway? Analysis: Kaczynski, V. M., and D. Fluharty. 2002. “European Policies in West Transborder Fishing.” Samudra 51: 29–32 Africa: Who Benefits from Fisheries Agreements?” Marine Policy 26 World Bank/FAO/WorldFish Center. 2008. “Small-Scale Capture Fisher- (82): 75–93. ies: A Global Overview with Emphasis on Developing Countries. A Kadfak, A., N. Bennet, and R. Prugsamatz. 2012. “Scoping Study on Preliminary Report of the Big Numbers Project.” WorldFish Center Migrant Fishers and Transboundary Fishing in the Bay of Bengal.” Report 1885, Penang. 98 Trade in Fishing Services APPENDIX F EU NORTHERN AGREEMENTS Suzannah F. Walmsley ern agreements”). The EU also has an agreement with Greenland (the government of Denmark and the home rule government of Consultant Greenland), although this is a Fisheries Partnership Agreement e-mail: sfwalmsley@gmail.com (FPA), made on the same basis as the “southern” agreements—the provision of fishing opportunities for EU vessels within the Green- landic exclusive economic zone (EEZ) in exchange for a financial ACRONYMS contribution for access and for the support and implementation of CFP Common Fisheries Policy Greenlandic sectoral fisheries policy. CS coastal state The northern agreements aim to coordinate fishing activity DG MARE Directorate-General of Maritime Affairs and Fisheries between the EU and neighboring countries. Many of the stocks tar- (European Commission) geted by EU vessels in the Northeast Atlantic and North Sea are DWS distant water state shared stocks that are jointly managed between the coastal states (the EC European Communities EU, Norway, Iceland, and the Faeroe Islands) or managed through EEA European Economic Area the intergovernmental North East Atlantic Fisheries Convention. EEC European Economic Community The FPA with Greenland is also included in this case study to EEZ exclusive economic zone inform the analysis of the EU’s agreements with countries in the EP European Parliament northern hemisphere, in particular to compare and contrast them ERS Electronic reporting system with the agreements with countries in the southern hemisphere. EU European Union This case study aims to explore the nature of these agreements, EUR Euro the benefits obtained and how these are shared between the coastal FMC Fisheries Monitoring Centre state (CS) and the distant water state (DWS), and the implementa- FPA Fisheries Partnership Agreement tion and enforcement of the agreements, including fishers’ behav- GRE Greenland ior under the agreements. Comparisons with the EU’s FPAs with ICES International Council for the Exploration “southern” states are made where appropriate. Aspects of good of the Sea practice and lessons that may be applicable to other agreements, in IQ Individual Quota particular agreements with developing coastal states, are discussed. ITQ individual transferable quota The following hypotheses are explored: IUU Illegal, Unreported, and Unregulated fishing » For both CSs and DWSs to benefit fully from foreign fish- MCS Monitoring, Control, and Surveillance ing arrangements, it is essential for CS to have in place ef- MFCA Ministry of Fisheries and Coastal Affairs (Norway) fective fishery management arrangements; NAFO North Atlantic Fisheries Organization » Benefits will be more sustainable if foreign fishers are an in- NEAFC North-East Atlantic Fisheries Commission tegral part of CS fishery management arrangements rather NOK Norwegian Kroner than being an appendage managed by a different set of OECD Organisation for Economic Cooperation and legal instruments; and Development » The “northern” CSs are more demanding in terms of RFMO Regional Fisheries Management Organisation good behavior by the fishers, with accurate catch data, no STECF Scientific, Technical, and Economic Committee for discards, and so on, depending on the jurisdictions. Fisheries TAC Total Allowable Catch To explore these issues in more depth, this case study focuses UNCLOS United Nations Convention on the Law of the Sea on the EU’s agreements with Norway (as the most important VMS Vessel Monitoring System agreement for EU vessels) and Greenland (as the only FPA with a WGNSSK Working Group on the North Sea and Skagerrak northern country). Furthermore, at the time this report was writ- ten (December 2013), no quotas were being exchanged under the All dollar amounts are U.S. dollars unless otherwise indicated. agreements with Faeroes and Iceland due to ongoing disputes over mackerel and herring quotas. INTRODUCTION The European Union (EU) has bilateral fisheries agreements with BACKGROUND AND HISTORY neighboring countries in the northern hemisphere, which are With the establishment of 200-nautical-mile EEZs and fisher- on the basis of the reciprocal exchange of quotas. These agree- ies zones under the United Nations Convention on the Law of ments are with Norway, Iceland, and the Faeroe Islands (“north- the Sea (UNCLOS), it became necessary for the EU to establish Emerging Perspectives on Foreign Fishing Arrangements 99 agreements with coastal states to preserve access for fishing ves- on fishing opportunities. Member states can allocate quotas to the sels to fishing grounds and stocks that they were already exploit- fishing industry in the way that each one sees fit, since the manage- ing. In particular, the creation of a 200-nautical-mile fisheries ment (allocation) of fishing rights remains an exclusively national zone in Community waters with effect from January 1, 1977 led responsibility, to be decided on by individual member states the Council to agree that fishing rights for Community fishermen (MRAG et al. 2009) in accordance with national priorities. This in the waters of third countries must be obtained and preserved may therefore be based on a pool quota for a group of vessels or by appropriate Community agreements. The fisheries agreements fleet segment, through producer organizations, as individual vessel between the EU and Norway and between the EU and the Faeroe quotas (nontransferable), or as individual transferable quotas. Islands were therefore developed and signed in 1977 and came into An important aspect of the agreements is that the vessels must force in 1981. The first agreement with Greenland began in 1985, comply with the CS fishery regulations in place and therefore oper- when Greenland left the European Communities (ECs). The fisher- ate under the same management framework as the national ves- ies agreement between the EU and Iceland was signed in 1992 and sels. This is discussed in more detail in the country-specific sections came into force in 1993. below. In addition to complying with the provisions of the agreements and the quota allocations, vessels fishing under the agreements OVERVIEW OF CURRENT (both EU vessels fishing in Norwegian, Icelandic, or Faeroese AGREEMENTS waters and vessels from those countries fishing in EU waters) must The EU’s agreements with Norway, the Faeroe Islands, and Ice- have a fishing authorization, issued by the relevant authority for land have a broadly similar structure and contain similar provi- the waters in which the fishing activities take place, in accordance sions, the main ones being the following: with regulation (EC) 1006/2008. This allows for control over the total number of foreign vessels fishing in the CS’s waters. The » The parties to the agreements grant access to the fishing agreement requires foreign vessels (for example, from Norway or vessels of the other party to fish within their areas of fisher- Faeroes), when fishing in EU waters, to submit data (the “data ies jurisdiction; required under the agreement concerned”) both to their national » The parties determine the total allowable catches (TACs) authorities and to the European Commission. EU vessels must for individual stocks or complexes of stocks, based on transmit information on their catches to the national competent the best available scientific evidence, interdependence of authority of the flag state, which forwards them to the European stocks, and the work of appropriate international organiza- Commission, which then forwards them to the Norwegian authori- tions; ties. In both cases, data should be transmitted on a weekly basis, or » Each party determines allocations (subject to negotiations) on a daily basis for vessels over 15 meters. of fishing possibilities for the fishing vessels of the other The EU’s agreements with Norway, the Faeroe Islands, Iceland, party in its area of fisheries jurisdiction, with the objective and Greenland are described in more detail below. of establishing a “mutually satisfactory balance in their re- ciprocal fisheries relations”; » Vessels must comply with the conservation measures, other NORWAY terms and conditions, and all rules and regulations govern- BASIS OF THE AGREEMENT ing fishing activities in the area; The EU and Norway have extensive and long-standing coopera- » The agreements provide for monitoring, control, and sur- tion on a range of fisheries issues of common interest. The EU’s veillance of the fishing activities of the vessels of the other agreement with Norway is the most important fisheries agreement party when in their area of fisheries jurisdiction, to ensure that the EU has; the European Commission indicates that it pro- compliance with the provisions of the agreement; and vides for shared access to nearly 750,000 tonnes of fish worth in » The parties should facilitate scientific research. excess of €2 billion2 (EC 2009). It comprises three agreements—the bilateral agreement for The agreements are established on a reciprocal basis, with each stocks in the North Sea and Atlantic; the trilateral agreement for party providing fishing opportunities to the other that are deemed Denmark and Sweden covering the Kattegat and Skagerrak (for to be of equivalent worth. The parties must first agree on TACs for which a new agreement was negotiated on October 24, 2013, pro- shared stocks, which are jointly managed where appropriate. They viding for improved coastal state control [DG MARE 2013]); and then agree on the quotas to be provided to the other party in the the neighboring agreement for Swedish fisheries in Norwegian area of their fisheries jurisdiction. waters of the North Sea (DG MARE 2012), which includes fishing The quotas provided to the EU are then allocated to member opportunities transferred from Norway to Sweden in accordance states according to relative stability,1 reflecting historical fishing pat- with the fisheries agreement between the two countries of 1976. terns, with quotas per member state specified in the annual regulation The bilateral agreement with Norway is the agreement that is the subject of analysis in this case study. It provides approximately 35,000 tonnes of quota for various stocks to the EU, worth €76 mil- 1 Relative stability is the principle by which the EU’s quotas for various fish stocks lion (first sale value of landings) (see table F.1). are shared among Member States, according to a fixed allocation key based on their historic catches (reference period 1973–78). The allocation key has been adapted over the years to accommodate new Member States (EC 2009). 2 A billion is 1,000 million. 100 Trade in Fishing Services The agreement is based on a Framework Agreement (OJ L 226, under the FPA with Greenland) and sand eel, blue whiting, and 29.8.1980, p. 48), adopted by Council Regulation (EEC) 2214/80 ling (among others) in EU waters. The aim is to achieve a balanced of June 27, 1980. The original agreement was for a period of 10 exchange. years; it is now renewable for 6-year periods, with tacit renovation In 2012, the EU received 30,786 tonnes of quota for various unless expressly terminated (for which 9 months’ notice must be stocks in Norwegian waters (predominantly cod, saithe, haddock, given). anglerfish, Norway lobster, ling, plaice, whiting, and shrimps) in The agreement provides for the following: exchange for 83,017 tonnes of various species for Norway in the Community fishing zone (predominantly blue whiting, sand eel, » Cooperation on the management and protection of ma- sprat, horse mackerel, ling, and tusk) and Greenlandic waters (pre- rine resources. This is an important overarching objective dominantly shrimp, Greenland halibut, and redfish) (table F.1). of the agreement that ensures the parties work toward sus- In 2013, the EU received 32,879 tonnes of quota in exchange tainable management; for 77,927 tonnes of quota for Norway (table F.1). The main » The setting and sharing of TACs of the main joint stocks change was the loss of sand eel quota for Norway in IV, additional (allocation of quota to each party) in the North Sea and blue whiting quota for Norway, and additional cod quota in the Norwegian Sea, between the EU and Norway. The stocks Barents Sea for the EU. In March 2013, an additional exchange that are managed jointly in the North Sea are cod, had- was agreed to. Norway was granted 22,450 tonnes of sand eel in dock, plaice, saithe, whiting, herring, and mackerel. TACs EU waters, ICES Area IV. The EU was granted 1,769 tonnes of are based on advice from the International Council for the Arctic cod in the Barents Sea, 250 tonnes of plaice, and 95 tonnes Exploration of the Sea (ICES); of ling in Area IV. » The possibility to fish some of each party’s quota in other In addition to these quota exchanges, quotas are provided for party’s waters (for example, Norway can fish some of its Sweden and quotas are shared between the EU, Sweden, and Den- mackerel quota in EU waters and vice versa). This is sub- mark in the Kattegat and Skagerrak. ject to negotiations between the parties; and The value of the fishing opportunities exchanged (based on » The exchange of quotas (subject to negotiations) for the first sale value of the potential catch provided for by the quota » Jointly managed stocks, for example, the EU receives exchanged) was €55 million for Norway and €69 million for the additional quota for plaice and whiting in Area IV and EU in 2012 and €59 million and €76 million, respectively, for 2013 Norway receives additional quota for saithe in Area IV; (using 2012 average prices in Norway and the EU, respectively). » Stocks that are shared but not jointly managed, such as However, if EU prices are applied to the quotas that Norway shrimps and anglerfish in IV for the EU and blue whit- receives, the value of the opportunities for Norway would be €110 ing for Norway; and million in 2012 and €124 million in 2013. » Nonshared (exclusive) stocks, for example, the EU re- Another aspect of importance to the EU is that the agree- ceives additional Arcto-Norwegian cod and haddock ment provides not just quotas, but also access to Norwegian in the Barents Sea (among others) from Norway and waters. The EU quota for cod in the North Sea includes the provides additional quota for sand eel, ling, horse Norwegian zone, but without access to Norwegian waters, EU mackerel, sprat, and stocks in Greenlandic waters to vessels cannot fish there. Cod in Norwegian waters are generally Norway. of larger size and better quality, so there is additional value to The sharing of TACs for joint stocks is done according to an be gained by EU vessels from fishing their quota in Norwegian agreed percentage, based on “zonal attachment” (the spatial dis- waters (Gibbs 2013). tribution of the stock over time and over its various life stages) for each species (see annex to this appendix). These allocations began in 1978–79, and the percentages have not changed over the years, Achieving a Balance but it is formally an annual agreement, allowing for potential The basis for the exchange of quotas was established in 1983 when changes in the future (Ervik 2013). the EU and Norway agreed on a “balanced exchange.” The mix The exchange of quotas is subject to negotiations, and the of stocks exchanged varies each year, with the balance being main- stocks and quantities involved vary from year to year according to tained in terms of “cod equivalents.” This refers to weight and quota availability and the interests of each party and their respec- implies the relative value of different fish species compared to cod. tive fishing industries. The cod-equivalents key was established in the 1980s and has not been updated since; therefore, it does not always reflect the market situation of the prices for all species (Ervik 2013). VALUE OF THE AGREEMENT If the key were to be updated, there would inevitably be win- Instead of providing fishing opportunities in exchange for a finan- ners and losers. In the absence of an agreed-upon process and cial contribution, the EU-Norway agreement provides the EU period regarding how and when to update the key, the original key with fishing opportunities in Norwegian waters in exchange for remains in place. Over the long term, it may be that gains and fishing opportunities granted to Norway in EU waters. Quota losses for each party balance each other out. exchanges provide access for the EU to cod, haddock, and saithe In connection with the European Economic Area (EEA) nego- in Norwegian waters in the Barents Sea and access to Norway for tiations, separate negotiation sessions on the further development Greenland halibut, shrimp, Atlantic halibut, and redfish from EU of bilateral cooperation in the fisheries area were conducted. In quotas in Greenland waters (which in turn are obtained for the EU this agreement, Norway assumes obligations that have an impact Emerging Perspectives on Foreign Fishing Arrangements 101 TABLE F.1. QUOTA EXCHANGES BETWEEN THE EU AND NORWAY FOR 2012 AND 2013 102 Quotas Exchanged (tonnes) Average First Potential Value (EUR million) Sale Prices, 2012 (EUR/ 2012 2013 tonne) 2012 2013 For Norway For EU For Norway For EU To To In (Norwegian (EU (EU (Norwegian (EU (EU Species ICES Area Norway To EU Norway To EU Norway In EU prices) prices) prices) prices) prices) prices) Saithe IV, IIIa 300 n.a. n.a. n.a. 1,028 1,926 0.31 0.58 n.a. n.a. n.a. n.a. VIa 400 n.a. 500 n.a. 1,028 1,926 0.41 0.77 n.a. 0.51 0.96 n.a. I, II n.a. 2,550 n.a. 2,550 n.a. 1,926 n.a. n.a. 4.91 n.a. n.a. 4.91 Whiting IV n.a. 400 n.a. n.a. n.a. 1,125 n.a. n.a. 0.45 n.a. n.a. n.a. Blue whiting II, IVa, Via, VIb, 30,000 n.a. 45,000 n.a. 313 945 9.39 28.35 n.a. 14.08 42.52 n.a. VII Horse mackerel IVb,c 3,550 n.a. 3,550 n.a. 912 1,209 3.24 4.29 n.a. 3.24 4.29 n.a. Sprat IV 10,000 n.a. 10,000 n.a. 373 468 3.73 4.68 n.a. 3.73 4.68 n.a. Plaice IV n.a. 700 n.a. n.a. n.a. 1,429 n.a. n.a. 1.00 n.a. n.a. n.a. Sole IV 50 n.a. 30 n.a. 10,461 10,660 0.52 0.53 n.a. 0.31 0.32 n.a. Sand eel IV 20,000 n.a. n.a. n.a. 277 895 5.54 17.90 n.a. n.a. n.a. n.a. Blue ling IV, Vb, VI, VII, 150 n.a. 150 n.a. 994 1,907 0.15 0.29 n.a. 0.15 0.29 n.a. IIa Ling IV, Vb, VI, VII, 6,140 n.a. 6,140 n.a. 1,507 1,787 9.25 10.97 n.a. 9.25 10.97 n.a. IIa IV n.a. 850 n.a. 850 n.a. 1,787 n.a. n.a. 1.52 n.a. n.a. 1.52 Tusk IV, Vb, VI, VII, 2,923 n.a. 2,923 n.a. 1,048 1,460 3.06 4.27 n.a. 3.06 4.27 n.a. IIa IV, Vb, VI, VII, n.a. 170 n.a. 170 n.a. 1,460 n.a. n.a. 0.25 n.a. n.a. 0.25 IIa Anglerfish IV n.a. 1,500 n.a. 1,500 n.a. 4,208 n.a. n.a. 6.31 n.a. n.a. 6.31 Norway lobster IV n.a. 1,200 n.a. 1,000 n.a. 6,730 n.a. n.a. 8.08 n.a. n.a. 6.73 Shrimps IV n.a. 357 n.a. 357 n.a. 9,125 n.a. n.a. 3.26 n.a. n.a. 3.26 XIV, Va 2,900 n.a. 2,700 n.a. 3,637 9,125 10.55 26.46 0.00 9.82 24.64 0.00 Arcto-Norwegian I, II n.a. 1,350 n.a. 1,350 n.a. 1,497 n.a. n.a. 2.02 n.a. n.a. 2.02 haddock Arcto-Norwegian I, II n.a. 16,309 n.a. 18,202 n.a. 2,519 n.a. n.a. 41.08 n.a. n.a. 45.85 cod Cod NAFO 1, XIV, n.a. n.a. 500 n.a. 1,436 2,519 n.a. n.a. n.a. 0.72 1.26 n.a. Va Trade in Fishing Services TABLE F.1. QUOTA EXCHANGES BETWEEN THE EU AND NORWAY FOR 2012 AND 2013 Quotas Exchanged (tonnes) Average First Potential Value (EUR million) Sale Prices, 2012 (EUR/ 2012 2013 tonne) 2012 2013 For Norway For EU For Norway For EU To To In (Norwegian (EU (EU (Norwegian (EU (EU Species ICES Area Norway To EU Norway To EU Norway In EU prices) prices) prices) prices) prices) prices) Greenland halibut IIa, VI 350 n.a. 824 n.a. 3,108 3,709 1.09 1.30 n.a. 2.56 3.06 n.a. NAFO 1, XIV, 1,624 n.a. 1,150 n.a. 3,108 3,709 5.05 6.02 n.a. 3.57 4.27 n.a. Va I, II (bycatches) n.a. 50 n.a. 50 n.a. 3,709 n.a. n.a. 0.19 n.a. n.a. 0.19 Halibut NAFO 1, XIV, 150 n.a. 150 n.a. 4,869 10,716 0.73 1.61 n.a. 0.73 1.61 n.a. Va Grenadier NAFO 1, XIV, 120 n.a. 120 n.a. 471 471 0.06 0.06 n.a. 0.06 0.06 n.a. Emerging Perspectives on Foreign Fishing Arrangements (bycatches) Va Redfish XIV, Va 1,500 n.a. 800 n.a. 1,351 1,353 2.03 2.03 n.a. 1.08 1.08 n.a. Combined quota Vb, VI, VII 140 n.a. 140 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Others IV, IIa (EU zone) 2,720 5,000 3,250 6,500 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Others (bycatches) I, II n.a. 350 n.a. 350 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. SUB-TOTAL 83,017 30,786 77,927 32,879 55.10 110.10 69.06 52.89 104.27 71.03 Additional quotas exchanged in March 2013 Sand eel IV n.a. n.a. 22,450 n.a. 277 895 n.a. n.a. n.a. 6.21 20.09 n.a. Arcto-Norwegian I, II n.a. n.a. n.a. 1,769 n.a. 2,519 n.a. n.a. n.a. n.a. n.a. 4.46 cod Plaice IV n.a. n.a. n.a. 250 n.a. 1,429 n.a. n.a. n.a. n.a. n.a. 0.36 Ling IV n.a. n.a. n.a. 95 n.a. 1,787 n.a. n.a. n.a. n.a. n.a. 0.17 TOTAL 83,017 30,786 100,377 34,993 55.10 110.10 69.06 59.10 124.36 76.02 Source: Norwegian Delegation and European Union Delegation, 2011a; Norwegian Delegation and European Union Delegation, 2013. Notes: EU prices calculated from STECF (2013), for MS with quota allocated under the agreement, for each species, average 2012. Norwegian prices from Statistics Norway, except Grenadiers, for which EU price is used because Norwegian price was not available. Exchange rate used NKr 1 = €0.133725 (average for 2012) (source: www.oanda.com). 103 FIGURE F.1. QUOTA ALLOCATION BY NORWAY FOR COD AMONG DIFFERENT FLEET SECTORS, 2012 Annual TAC Conventional gear 337,057 tons 225,828 tons Trawlers 33% 77.7% Conventional 12.8% gear 9.5% 67% Closed group Open group Vessels 28 m and up 175,438 tons 21,462 tons 28,929 tons 21–28 meters 32,088 tons 15–21 meters Trawl fleet 47,965 tons 11–15 meters 46,807 tons 111,229 tons Under 11 meters 48,579 tons Source: Norwegian Ministry of Fisheries and Coastal Affairs. on the size of the reciprocal quota exchanges involved in the Integration with CS Internal Quota Allocations annual quota agreements. In keeping with the provisions of the The quotas exchanged between Norway and the EU are within agreement, the EU was granted a larger share of the overall quota each party’s overall quota allocation, from which they must also for Northeast Arctic cod in the Norwegian economic zone. How- provide quota to their national fleets and for research purposes. ever, Norway has to be compensated for this by means of quota An example is provided for Norway’s cod quota in figure F.1. The allocations from the EU to Norway within the framework of the quota provided to the EU (16,309 tonnes in 2012) is first deducted annual quota agreements. from the national allocation; quotas are then allocated to Norwe- The first sale value of potential landings (see above), based on gian trawlers (33 percent) and Norwegian “conventional” gear ves- applying EU prices to the quotas that the EU receives and Nor- sels (67 percent). The allocation to conventional gears is split into wegian prices to the quotas that Norway receives, the EU receives vessels larger than 28 meters, 15 to 28 meters, 11 to 15 meters, greater benefit from the agreement (25–29 percent more). How- and under 11 meters and an open group (vessels not allocated with ever, if EU first sale prices are applied to both EU and Norway’s individual quotas [IQs]). quotas, it appears that Norway receives greater value from the agreement due to the larger quantity of pelagic quota provided to Responding to Industry Needs Norway and the relatively greater increase in price of pelagic spe- The exchanges of quota have changed over the years in response to cies in Europe since the time when the cod equivalents were estab- availability of stocks and industry demands. EU quotas for shrimp lished. The main difference is due to the higher prices in Europe in Greenlandic waters that are provided to Norway are now a less compared to those in Norway for sand eel and blue whiting (three important part of quota exchanges than previously because it is times), and shrimp (two and a half times). now less profitable for Norwegian vessels to fish shrimp in Green- The relative value of the agreement for each party varies con- landic waters. Blue whiting was a larger part of the exchange ear- siderably depending on the metric used to assess value and the way lier, and in 1980, Norway was granted 20,000 tonnes of mackerel in which the metric is calculated (for example, first sale prices from compared to zero now (Ervik 2013). one party or both parties). A detailed assessment of the value of In Norway, the fishing industry is an integral part of the Nor- the agreement could also take into account the costs of fishing for wegian delegation for the negotiations, represented through the each party and other value-added benefits such as processing that fishing organizations. The representatives must have an overview derive from the catches made under the agreement. It is there- of the interests of the whole Norwegian fleet and be able to bal- fore important that, for non–market-based access mechanisms, ance the requirements of the pelagic fleet against the demersal fleet the metric on which exchanges are calculated is agreed upon in (Ervik 2013). advance, together with a process and periodicity with which it is In the EU, coordination with the fishing industry takes place to be updated. within individual member states. In the case of Scotland, there is 104 Trade in Fishing Services close coordination with the fishing industry prior to the negotia- TABLE F.2. COST OF FISHERIES MANAGEMENT IN tions through a series of discussions with industry representatives NORWAY (1996) (for both the pelagic and the whitefish sectors), to understand the stocks they are interested in obtaining and those that they wish Cost Percent of to retain. Industry representatives are often present at the nego- Area of Expenditure (million $) Catch Value tiations so that as negotiations progress, they can be consulted for Coast Guard, enforcement and 55.0 4.36 their opinions on various negotiating proposals (Gibbs 2013). surveillance A further level of coordination also takes place among EU Ministry of Fisheries 3.7 0.3 member states such that a single European negotiating position is obtained and the formal negotiations only involve Norway and Marine research 30.91 2.45 the EU. There are therefore various tradeoffs that must be made, Regional administration 15.1 1.19 both within member states (for example, pelagic quota for demersal TOTAL 104.71 8.3 quota) and between member states (for example, quota that one member state is interested in at the expense of quota that another Source: Arnason et al. 1999, cited in Latiff 2002. is interested in). These tradeoffs must be acceptable to all member states, as the signed agreement must be subsequently ratified by the Council of Ministers (Gibbs 2013). when fish are landed, and when they are exported. Norway places an emphasis on control at sea, and the Norwegian Coast Guard IMPLEMENTATION plays an important role, carrying out inspections of vessels at sea The implementation of the agreement is simplified in that Norway and checking their catches against their log books. More than adheres to EU fisheries conservation measures and the quota system 1,800 inspections are carried out annually (MFCA 2010b). There (Miller 2013). The allocation of quotas to the parties is included in is a program for the exchange of inspectors onboard vessels. the EU’s annual Council Regulation on fishing opportunities. It is difficult to estimate the cost of fisheries management in Norway, as there are many authorities that have competence in control and enforcement, in particular, and the tasks are heav- Enforcement of Management Measures ily integrated with other tasks. For example, a Coast Guard ves- Both parties are responsible for ensuring their own vessels comply sel may carry out both fisheries enforcement actions and rescue with the management rules and regulations, and both may take operations on the same voyage. However, a previous study indi- action, within their area of fisheries jurisdiction, to ensure compli- cated that the cost of fisheries management in Norway was $105 ance by the other party’s vessels with the provisions of the agreement. million in 1996, which represented 8.3 percent of the catch value The EU and Norway have extensive cooperation that aims to (table F.2). harmonize management measures; monitoring, control, and sur- There have been a number of instances of the Norwegian veillance (MCS); and enforcement systems. This includes stand- authorities taking action against an EU vessel. If a violation is ardized levels of control, monitoring and enforcement, certified detected, the Norwegian Coast Guard would take the vessel to port weighing scales, standardized pumping systems for pelagics, a to be investigated. The normal outcome of a confirmed violation recently introduced electronic reporting system (ERS), vessel would be the application of a fine or prosecution, which may be monitoring systems (VMS), actions under the fight against illegal, against either the vessel owner or the skipper of the vessel (Ervik unregulated, and unreported (IUU) fishing, port state control, and 2013). licensing. The total number of EU fishing authorizations (637 in EU vessels fishing in Norwegian waters must adhere to Nor- 2013) was approximately 10 percent of the size of the Norwe- wegian fisheries management regulations (and Norwegian vessels gian fleet, but with a maximum of 327 EU vessels present in fishing in EU waters must adhere to EU regulations). These cover the Norwegian fishing zone at any one time, which is approxi- a suite of measures, including an obligation to land all catches mately 50 percent the number of Norwegian vessels larger than (with certain exemptions), an obligation to change fishing ground 15 meters (table F.3). The presence of foreign vessels requires and real-time closures if the intermixture of juveniles or level of extra MCS and at-sea inspections to be carried out by the Nor- bycatches exceed the relevant criteria, gear restrictions, and mini- wegian authorities and therefore increases the costs, in par- mum fish and mesh sizes (Gullestad 2013) (the mesh size for white- ticular because control and enforcement of these vessels relies fish is 10 millimeters larger than the EU minimum mesh size). The heavily on presence at sea. main objective is to promote a harvest pattern where recruits and The system is not exempt from illegal and unreported activi- undersized fish are protected and where unwanted bycatch is mini- ties, and discrepancies exist between reported catches and official mized. Norwegian regulations also require foreign fishing vessels catch statistics used by ICES (see Analysis of Agreement: Imple- to have a license (MFCA 2010a). The costs for EU vessels to com- mentation). In the case of an infraction by an EU vessel, if it were ply with these regulations are not excessive, and the Norwegian detected in Norwegian waters, the Norwegian authorities could authorities advise in advance of any changes to the regulations take action. The normal procedure would be for the Norwegian (Gibbs 2013). Coast Guard to take the vessel to port to be investigated, and the Norwegian fisheries regulations are enforced through stringent vessel owner and/or skipper could be fined or prosecuted. If an controls in all Norwegian fishing waters. There are checks at sea, infraction were detected on landing in an EU port or at a later date, Emerging Perspectives on Foreign Fishing Arrangements 105 TABLE F.3. COMPARISON OF THE SIZE OF THE NORWEGIAN FLEET WITH THE NUMBER OF EU VESSELS AUTHORIZED TO FISH IN NORWEGIAN WATERS Number of EU Vessels Authorized to Fish in Norwegian zone (2013) Vessel Norwegian Fleet (Number of Total Number of Fishing Maximum Number of Vessels Present at Size Class Vessels) (2010) Authorizations Any One Time <15 m 5,631 n.a. n.a. 15–28 m 325 637 (herring, 77; demersal, 80; 637 (herring, 57; demersal, 50; mackerel, 70; >28 m 258 industrial species, 480) industrial species, 150) TOTAL 6,214 637 327 Source: Fiskeridirektoratet, 2012; Council Regulation (EU) No 297/2013. member state (flag state) authorities could take action through their Obligation to Land Catches legal mechanisms. There is no requirement to land catches into coastal state (Norwe- There have been EU infraction cases where evidence has come gian) ports, unlike some FPAs with southern countries. Likewise, to light that landings have exceeded declared catches; similar situ- there is no obligation for Norwegian vessels to land only into Nor- ations have also occurred in Norway. However, such occurrences wegian ports, nor for them to land only into EU ports if fishing are becoming less frequent as people realize the importance of in EU waters. However, under the North East Atlantic Fisheries accurate data, particularly where there is a commitment to follow Commission (NEAFC) Port State Control measures, vessels must scientific advice in setting TACs. provide advance notification of their intention to land fish and the flag state of the vessel must confirm that the vessel had sufficient Exclusivity quota, authorization to fish in the area where the catches were The agreement does not contain a specific exclusivity clause, but taken, and that VMS records confirm the presence of the vessel in EU vessels are only able to access Norwegian waters under the the relevant area (NEAFC 2013). agreement, and not outside of it. The respective fishing indus- tries of the two parties may be in contact with each other, but they cannot directly trade or lease quotas individually or on a Cooperation and Data Sharing company-to-company basis. Quota transfers and exchange are The agreement includes joint technical measures and cov- regarded as national issues, with negotiations taking place at the ers issues relating to control and enforcement. Norway and the government-to-government level. The national authorities (Euro- EU cooperate with respect to information and inspections, with pean Commission and member states, or Norwegian Ministry of involvement of Norwegian inspection services in the operation Fisheries and Coastal Affairs) then allocate quota to the industry of specific control and inspection programs, exchange of offi- (Ervik 2013). cials as observers in relation to control and enforcement, and Norway allocates its quotas to individual vessels as individual exchange of information on landings by vessels of either party quotas and to groups of vessels as maximum quotas. In the latter, and of third countries in their ports (Norwegian Delegation and the fishery is stopped when the total quota is reached, regardless European Union Delegation 2011a). This has helped strengthen of each vessel’s individual catch (MFCA). Because Norwegian cooperation between the parties and improved the effectiveness quotas are linked to vessels, vessels cannot be chartered to fish of enforcement activities. unused quota. Data sharing and submission of catch information by vessels is The EU’s quotas are allocated to member states under the not explicitly included in the Framework Agreement but is provided principle of relative stability. Member states then allocate quotas for in subsequent bilateral agreements between the EU and Norway. to the fishing industry according to their national priorities and Requirements for foreign vessels are specified in Norwegian fisheries policy objectives, which may include individual transferable quotas regulations, as well as in the record of annual fisheries consultations (ITQs) (within the member state or fleet segment), IQs, and pool (for example, Norwegian Delegation and European Union Delega- quotas, where groups of vessels fish against an overall quota. Inside tion, 2011a). In particular, the Norwegian “reporting obligation” the EU, there is the possibility to swap quotas between member requires foreign vessels to report what catches they have onboard states. There have been some instances of EU vessels reflagging when they enter the Norwegian zone, report weekly what catches they to Norway to access Norwegian quotas, but Norwegian rules on have made, and report when they leave the Norwegian zone and what ownership are strict and such cases are the exception rather than catches they have taken onboard since their last report (MFCA 2010a). the norm (Gibbs 2013). Monthly catch statistics are provided by the parties for catches Maintaining national control and ownership of quota is impor- made by their own vessels. No issues relating to the EU’s submission tant to the parties, and there is a concern that allowing vessels to of catch data were reported by Norway (Ervik 2013), indicating trade quota directly would result in a loss of sovereignty and loss of that the EU vessels comply with catch reporting requirements. The benefits from the catching sector. introduction of an electronic reporting system with harmonized 106 Trade in Fishing Services TABLE F.4. VALUE OF FISHING OPPORTUNITIES UNDER THE EU-FAEROES AGREEMENT IN 2010 Quotas Quotas from Value of Fishing Value of Fishing from EU to Faeroes to EU Price Opportunity for Faeroes Opportunity for EU Faeroes (t) (t) (EUR/t)a (EUR million) (EUR million) Sand eel 2,500 n.a. 895 2.24 n.a. Herring 1,110 n.a. 660 0.74 n.a. Blue whiting 9,000 2,700 945 8.51 2.55 Ling and blue ling 350 2,700 1,787 0.63 4.83 Mackerel 4,536 3,765 1,882 8.54 7.09 Sprat 9,160 n.a. 468 4.29 n.a. Horse mackerel 2,000 n.a. 1,209 2.42 n.a. Other species 150 760 n.a. n.a. n.a. Northern prawn 1,335 n.a. 9,125 12.18 n.a. Greenland halibut 225 n.a. 3,709 0.84 n.a. Redfish 385 1,600 1,353 0.52 2.16 Cod and haddock n.a. 500 2,008 n.a. 1.00 Saithe n.a. 2,425 1,926 n.a. 4.67 Flatfish n.a. 300 1,429 n.a. 0.43 TOTAL 30,751 14,750 n.a. 40.88 22.73 Note: t = tons. a Based on EU average landed values for 2012, taken from analysis for EU-Norway agreement; cod and haddock is average price for cod and haddock; herring and mackerel are the average for Belgium, Denmark, Germany, the Netherlands, United Kingdom, and Sweden. electronic logbooks mean that catches will be reported in as near of mainly industrial species in EU waters (sprat, blue whiting, real time as possible. mackerel, sand eel, horse mackerel, herring, and ling) and 1,945 tonnes of fish in Greenlandic waters (Northern prawn, Greenland halibut, and redfish via the FPA with Greenland) (table F.4). FAEROE ISLANDS The quota received by the EU was worth €22.7 million (first sale BASIS OF THE AGREEMENT value of catch). Using EU prices, the value of the quota received by The fisheries agreement with the Faeroe Islands is on the basis of a the Faeroes was €40.9 million. However, as seen with the analysis Framework Agreement signed in 1980 (Council Regulation [EEC] of the EU-Norway agreement, if Faeroese prices were used, the 2211/80 of June 27,1980, OJ L 226 p. 11). The initial agreement value would likely be less and more in line with the value of the was for 10 years, subsequently extended for 6-year periods with EU opportunities. tacit renovation unless expressly terminated (for which 9 months’ notice must be given). The agreement is based on the same principles as the agreement IMPLEMENTATION with Norway but is less extensive and covers fewer stocks. It pro- Fishing opportunities have not been exchanged under the agree- vides for the reciprocal exchange of stocks and the sharing of the ment with Faeroes since 2010, due to the ongoing dispute over Western mackerel stock. The agreement also provides for discus- mackerel and herring quotas. sions on monitoring and control and regular exchange of statistics. During coastal states’ consultations in 2009 over joint manage- ment of the Northeast Atlantic mackerel stock (between Norway, EU, Faeroe Islands, and Iceland), the Faeroe Islands requested a VALUE OF THE AGREEMENT higher share of the TAC and finally withdrew from the existing The EU receives quota for whitefish, blue whiting, and mack- international arrangement, setting a unilateral quota for its ves- erel in exchange for quotas of industrial species (mackerel, horse sels of 85,000 tonnes, about three times their previous share. Since mackerel, pout, sprat, sand eel, and so on), whitefish, and fish in 2009 there have been no internationally agreed catch limits on the Greenlandic waters. In 2010, the EU received 14,750 tonnes of Northeast Atlantic mackerel stock (Weissenberger 2013). Iceland fish (4,825 tonnes of cod, haddock, saithe, redfish, and flatfish and and Faeroes cite a shift in mackerel migration farther into their 9,925 tonnes of blue whiting, ling, blue ling, mackerel, and other waters as the reason for requesting a renegotiation in the distribu- species) in exchange for 30,751 tonnes for Faeroes—28,806 tonnes tion of the TAC among the coastal states. Emerging Perspectives on Foreign Fishing Arrangements 107 TABLE F.5. VALUE OF FISHING obliging each party to provide information to the other concerning landings of any fish caught under the agreement. This is likely to OPPORTUNITIES UNDER THE be because the Iceland agreement was developed more than a dec- EU-ICELAND AGREEMENT ade later than the Norwegian and Faeroe Islands agreements, by Quotas Quotas Value of which time there was a greater awareness of the type of provisions from from Reference Fishing needed for such agreements. EU to Iceland Price Opportunity Fishing opportunities have not been exchanged under the agree- Iceland to EU (EUR/t)a (EUR/t) ment with Iceland since 2011, due to the ongoing dispute over mack- erel quotas. During coastal states’ consultations in 2009 over joint Capelin 30,000 n.a. 190 5,700,000 management of the Northeast Atlantic mackerel stock (between Redfish n.a. 3,000 1,700 5,100,000 Norway, EU, Faeroe Islands, and Iceland), Iceland requested a higher share of the TAC and subsequently set a unilateral quota a Reference prices established in the Protocol to the EU-Greenland FPA. for its vessels of 130,000 tonnes (Iceland’s catches were around 300 tonnes in 2005 and gradually increased to 116,000 tonnes in 2009). Since 2009, there have been no internationally agreed catch lim- The Atlanto-Scandian Herring (Norwegian spring-spawning its on the Northeast Atlantic mackerel stock (Weissenberger 2013). herring) was managed through arrangements agreed to by the Iceland and Faeroes cite a shift in mackerel migration farther into five coastal states (EU, Russian Federation, Norway, Iceland, and their waters as the reason for requesting a renegotiation in the dis- the Faeroe Islands) since 2007. During consultations in 2012 for tribution of the TAC among the coastal states. 2013 fishing possibilities, the Faeroe Islands requested a revision of the existing catch allocation proportions (which accorded 5.16 percent or 31,000 tonnes to the Faeroes) and in March 2013 set a GREENLAND unilateral national catch limit of over 105,000 tonnes (Weissenberg BASIS OF THE AGREEMENT 2013). These disputes have resulted in a suspension of quota shar- The agreement between the EU and Greenland is an FPA, providing ing under the fisheries agreement. fishing opportunities to the EU in return for a financial contribution, in contrast to the other northern agreements, which are for recipro- cal fishing opportunities. The first agreement was established in 1985 ICELAND after Greenland withdrew from the then–European Communities to BASIS OF THE AGREEMENT enable the Community to retain its traditional fishing activities. The fisheries agreement with Iceland is on the basis of a Framework The current FPA runs from 2013 to 2018 (6 years), and the cur- Agreement signed in 1993 (EC 1993) for a period of 10 years. The rent protocol to the agreement was signed in 2012 for the period agreement was then renewed for two 6-year periods to 2015 and pro- of January 1, 2013 to December 31, 2015 (3 years) (OJ L 293, vides for subsequent tacit renewal unless 9 months’ notice is given. 23.10.2012). The protocol establishes indicative levels of fishing opportunities available to the EU and provides for a joint committee to establish the concrete level of fishing opportunities available for VALUE OF THE AGREEMENT the EU in Greenlandic waters each year. The allocation of quotas The fishing opportunities provided under the agreement are con- is submitted to the EU’s annual TAC and quota regulation. siderably less extensive than those with Norway and the Faeroe Islands, providing for the provision of 3,000 tonnes of redfish quota for the EU in exchange for 30,000 tonnes of capelin quota VALUE OF THE AGREEMENT to Iceland, to be fished in Greenlandic or Icelandic waters. The The agreement provides the EU with access to 85,765 tonnes of volumes of quota to be exchanged are agreed upon on an annual fish, predominantly capelin (60,000 tonnes) (part of which has been basis following bilateral consultations. provided to Iceland through the agreement with that country), but The value of the fishing opportunities provided to the EU are also significant volumes of shrimp, Greenland halibut, redfish, and €5.1 million, and the value of the fishing opportunities provided to cod (table F.6). Some of these quotas are subsequently transferred Iceland are €5.7 million (based on the value of the potential catch to Norway and the Faeroes under the agreements with those coun- using reference prices from the EU-Greenland FPA) (table F.5). tries. The value of the indicative fishing opportunities provided The distribution of the benefits from the agreement are therefore were €77.7 million (potential value of landings of the quotas, using fairly equally shared between the parties. reference prices in the protocol); average revenues from the agree- ment were €45.6 million (EP 2012). In the event of quota not being available for the EU in a par- IMPLEMENTATION ticular year, Greenland is required to compensate the EU in subse- There are various restrictions on when and where EU vessels may quent years by the equivalent corresponding fishing opportunities fish in Icelandic waters, making it difficult for them to catch their or in the same year by other fishing opportunities. If no compensa- full quota (DG MARE, no date). This therefore limits the potential tion is agreed on, the financial value of the agreement is adjusted value that the EU can obtain from the agreement. proportionately. The agreement with Iceland contains an additional clause that The financial contribution provided by the EU is €15.1 mil- is not present in the Norway and Faeroes agreements, specifically lion (including a financial reserve of €1.5 million for potential 108 Trade in Fishing Services TABLE F.6. FISHING OPPORTUNITIES, FINANCIAL CONTRIBUTION, AND SHIP OWNER CONTRIBUTIONS FOR THE CURRENT PROTOCOL TO THE EU-GREENLAND FPA Indicative Level Ship owner of Fishing Fishing EU Contribution Area: GRE Opportunities Reference Authorization Contributiona as Percent of Species Waters of . . . (tonnes) Price (EUR/t) Fee (EUR/t) (EUR/t) Totalb Snow crab NAFO 1 250 5,500 120 962.5 11.1 Cod NAFO1 and XIV 2,200 1,800 90 315 22.2 Atlantic V and XIV 200 4,100 217 717.5 23.2 halibut Atlantic NAFO1 200 4,100 217 717.5 23.2 halibut Grenadiersc V and XIV 100 2,204 n.a. 385.7 n.a. Grenadiers c NAFO1 100 2,204 n.a. 385.7 n.a. Capelin V and XIV 60,000 190 5 33.25 13.1 Northern V and XIV 7,500 2,500 90 437.5 17.1 prawn Northern NAFO1 3,400 2,300 80 402.5 16.6 prawn Greenland NAFO 1, S of 68N 2,500 3,500 129 612.5 17.4 halibut Greenland V and XIV 4,315 3,500 129 612.5 17.4 halibut Redfish NAFO 1F, V, and 3,000 1,700 53 297.5 15.1 (pelagic) XIV Redfish NAFO 1F, V, and 2,000 1,700 53 297.5 15.1 (demersal) XIV TOTAL n.a. 85,765 n.a. n.a. n.a. n.a. Source: Protocol to the EU-Greenland FPA; author’s calculations. Note: t = tons. a EU financial contribution per tonne of species = reference price × 17.5 percent. b Fishing authorization fees paid by ship owners, if authorizations for the full level of quota were taken out, expressed as a percentage of the total revenue for Greenland (fishing authorization fees plus EU contribution). c Bycatches only; therefore, there are no fishing authorization fees. additional fishing opportunities). This represents 17.5 percent of training of staff, and fisheries control, but the FPA was not effec- the reference price for the species, as set out in the protocol. Green- tive in delivering significant benefits to the local economy, such as land has full discretion regarding the use of the financial contribu- investments in joint ventures, increased onboard employment, or tion. An additional €2.7 million is provided for the support and higher numbers of landings (EP 2012). implementation of Greenlandic sectoral fisheries policy. The use EU vessel owners pay a license fee per tonne according to the of these funds is determined by a multiannual sectoral program species. This ranges from 11 percent (snow crab) to 23 percent agreed to by the joint committee, as in the southern FPAs. (Atlantic halibut) of the total financial contribution (EU contri- According to the ex-post evaluation of the previous protocol bution plus ship-owner license fees), depending on the species to the EU-Greenland FPA, approximately half of the FPA-linked (table F.6). This compares with 35 percent that is paid by EU ship financial contribution was spent on fisheries research to improve the owners under the southern tuna FPAs (Walmsley et al. 2007), but sustainability of the Greenland fisheries sector. A significant part of the average of 15 percent is in line with the ratio of ship owner to the budgetary support appeared to have been used for investments public contribution in other mixed FPAs (EP 2012). With a popula- rather than current expenditures (for example, buying a research tion of 57,000, Greenland therefore receives a minimum of €312 vessel) (EP 2012). The sector support program, implemented by the per person (financial contribution plus sectoral policy support) and Ministry of Fisheries, Hunting and Agriculture, was found to have up to €334 per person (if the maximum possible fishing authoriza- achieved positive results on measures related to fisheries research, tions are taken out by ship owners). Emerging Perspectives on Foreign Fishing Arrangements 109 The agreement with Greenland provides a benefit-to-cost ratio transfers to other third countries (Norway, Iceland, and Faeroe to the EU of 1.3, with value-added benefits (€20.3 million per year) Islands) (EP 2012). equal to approximately 45 percent of catch revenues (EP 2012). The Greenland was not able to provide all of the opportunities spec- benefits to Greenland comprise the financial contribution, payment ified in the protocol on nine occasions over the period 2007–11, in for sectoral support, and ship owner contributions (€15.8 million particular for capelin. The system of offering alternative fishing per year under the previous protocol). The benefits therefore weigh opportunities worked well for small fluctuations in quota availabil- slightly in the advantage of the EU. The cost of administration for ity but was unable to cope with the “debt” for larger quantities of the agreement is €93,000 per annum for the EU (EP 2012). capelin (EP 2012). IMPLEMENTATION Benefits from the Agreement Enforcement of Management Measures Average revenues (based on fish prices in Iceland) from the agree- EU vessels operate under the applicable laws and regulations in ment were €45.6 million per year, 70 percent of which went to Greenland and the Kingdom of Denmark when in the Greenlandic EU vessels and 30 percent to third-country vessels. Net value- EEZ (article 9 of the protocol). To facilitate this, EU fishing vessels added benefits were estimated at €20.3 million per year, giving a are provided with an English-language version of the Greenlandic benefit-to-cost ratio of 1.3, in line with other “mixed” agreements fisheries legislation concerning catch reporting, control, technical (EP 2012). conservation measures, and observer scheme. For Greenland, the agreement generates income from resources Vessels are required to use a vessel monitoring system (VMS), that might otherwise not be exploited. However, the previous pro- with transmissions to the Fisheries Monitoring Centre (FMC) tocol was not effective in delivering significant benefits to the local of the flag state on an hourly basis. The FMC of the flag state economy, such as investments in joint ventures, onboard employ- must automatically transmit the position messages of the vessel to ment, or higher amounts of local landings (EP 2012). Greenland’s FMC when the vessel is in Greenlandic waters. The Protocol provides for in-port and at-sea inspections to be carried out on EU vessels. ANALYSIS OF AGREEMENTS This section provides an analysis of the agreements in terms of Exclusivity » the negotiating procedure; The Greenland FPA includes an exclusivity clause, which means » content of the agreements; that all EU fishing vessels’ activity within Greenlandic waters must » implementation; and be carried out only under the FPA—Greenland cannot issue fishing » outcomes, including the sharing of costs and benefits be- authorizations to EU vessels other than under the protocol to the tween the parties. FPA. This means that all EU vessels are subject to the same regime and requirements when in Greenlandic waters. In the specific case of Northern prawn, quota transfers may NEGOTIATING PROCEDURE take place between EU and Greenlandic vessels on a company- to-company basis, to allow East Greenland quota to be fished in The northern agreements are based on the exchange of recipro- areas west of Greenland (protocol, article 1, paragraph 3). This is cal fishing possibilities, the objective being to establish a “mutually the only situation where company-to-company quota transfers are satisfactory balance in their reciprocal fisheries relations.” This is in provided for in the agreement. contrast to the EU’s southern FPAs and the FPA with Greenland, in which fishing possibilities are provided to the EU in exchange for a financial contribution. Obligation to Land Catches The costs of negotiating the agreements are low; they were ini- There is no obligation on EU vessels to land catches in Greenlandic tially established for 10-year periods and are subsequently renewed ports. for 6-year periods, unless notice is given. This minimizes the trans- action costs to the EU and the partner countries of regularly hav- Cooperation and Data Sharing ing to renegotiate the agreements. For the EU-Norway agreement, Chapter III of the annex to the protocol specifies reporting require- there is an annual requirement to negotiate and agree on the vol- ments. Vessels must keep a logbook of their operations indicating umes of quotas to be exchanged each year. This is done alongside all quantities of each species caught and kept on board or discarded the annual negotiations that must be carried out between the par- above 50 kilograms (live weight equivalent). The logbook must be ties for setting and sharing of joint TACs. Sharing of joint TACs completed on a haul-by-haul basis, and the information must be is based on percentage allocations, which formally are subject to transmitted daily (electronically) to the Greenlandic authorities via annual negotiations but in practice have been stable. a national competent authority of the flag member state. Two rounds of negotiations are usual (one in Bergen and one in Brussels) to set TACs and other regulations and management Use of Fishing Opportunities plans concerning shared stocks (OECD 2011). Although it does The ex-post evaluation of the previous protocol (2007–12) showed represent additional work to come to these annual agreements on that 63 percent of available fishing quota was utilized by EU ves- quota exchanges, it is not a significant additional burden over and sels; 90 percent of the available quotas were utilized when including above the negotiations that must be carried out on TACs and their 110 Trade in Fishing Services BOX F.1. EXAMPLE OF NEGOTIATING Council of Fisheries Ministers in the case of the EU). In contrast, in the southern agreements, because of the financial contribution, PROCESS: EU-NORWAY the Ministry of Finance is often involved (explicitly or implicitly) AGREEMENT, 2013 in the negotiations on the side of the CS. This can result in fisher- ies access being traded off against other concerns and agreements In-year discussions took place in Kirkwall, Orkney, for 3 days in being made that are not always based on rational exploitation of June 2012, to discuss the long-term management plans for cod, the stocks. However, the negotiation of sharing agreements is not saithe, and herring. More than 30 delegates were present, includ- exempt from politics, and it is important in all agreements to estab- ing representatives from seven EU member states. The meeting lish fundamental principles that commit both parties to sustainable followed on from a scientific seminar held in Svalbard on long- levels of exploitation and practices. term management plans for these species. Three rounds of talks followed on how shared stocks would be fished. The first took place in late 2012, the second concluded on FRAMEWORK AND CONTENT December 7, 2012, without agreement (Marine Scotland 2012), Many of the stocks for which access is provided to the EU under and the third round successfully concluded in January 2013, with the northern agreements are stocks that the EU also fishes in agreement on 2013 quota decisions for North Sea cod, haddock, its own waters, and TACs are set jointly or under international whiting, plaice, saithe, and herring and the setting of a catch coastal states arrangements. For these stocks, the EU is fishing limit for mackerel, in the absence of agreement with Iceland and against its own quota, and the important aspect of the agree- Faeroe Islands (Marine Scotland 2013). ment is to provide access to the CS waters, to be able to fish their own quota. This is similar to the access provided to CS waters under the tuna FPAs, where the EU vessels are fishing against EU quota provided by the Regional Fisheries Manage- division that are required as part of the parties’ responsibilities as ment Organisation (RFMO). coastal states under UNCLOS. In the northern agreements, both parties have the same respon- In 2010 and 2011, negotiations with Norway were concluded sibilities—that is, to determine the TACs for stocks in their fisher- in December with two rounds of negotiations. However, despite ies jurisdiction (including cooperating to determine TACs for joint the agreement being in place for over 30 years and general good stocks where appropriate) and to determine and agree on the allot- relations between the two parties, negotiations can stall. Three ments of fishing possibilities for the other party, to achieve a bal- rounds of negotiations were needed in 2012–13 (see box F.1), and ance. Both parties also determine other necessary conservation and in 2009, negotiations stalled over how much of the Norwegian management measures. mackerel quota they would be allowed to fish in the EU zone. Nor- The northern agreements and the Greenland FPA all take place way wanted 125,000 tonnes (down from 153,000 tonnes), but the within the coastal states’ national fisheries management frame- EU did not want to go beyond 80,000 tonnes. An agreement was work. Foreign fishing vessels must comply with the national legisla- not reached prior to the December Council of Ministers meeting, tion and management measures when fishing in the waters of the which meant TACs for joint North Sea stocks had to be set even other party and are therefore subject to the same rules and regula- though they may not have coincided with the final EU-Norway tions as the vessels of the CS. This is in contrast to the southern deal (Fishnewseu 2009). agreements, where technical measures, closed seasons, and so on Industry is involved in identifying the fishing opportunities of can be specified in the protocol to the FPA—and are therefore the interest to them. Coordination takes place between the CS and subject of negotiations—and do not necessarily correspond with EU and member states’ fisheries authorities and industry, but the the national fisheries regulations of the CS. This is more of a con- negotiation is centralized and takes place on a government-to-gov- cern in the “mixed” southern agreements for demersal and inshore ernment level. It is not possible for vessels to access quota directly, stocks than in the tuna agreements, for which catching activities are such as through leasing or company-to-company swaps between regulated by the appropriate RFMO. EU and Norwegian companies. This is due to a concern that allow- The reciprocal nature of the northern agreements reduces the ing direct transfers might result in a loss of the benefits that stem incentive for the CS to provide access to stocks where a surplus does from the catching sector. not exist. This is because if they cannot provide access to one stock The use of cod equivalents as the basis for achieving the bal- (for example, if the TAC has been reduced or set to zero), there ance in fishing opportunities means that the actual value of the is no financial contribution to be reduced; instead, other fishing catch, and the profit, deriving from those opportunities may not opportunities will be offered. In some cases, fishing opportunities be balanced and may not reflect current market prices. However, may be relinquished on an ad hoc basis, without compensation (see the assessment of relative value to each party varies considerably box F.2). Even in the Greenland FPA, the financial contribution is according to the metric used (for example, EU prices, CS prices). not reduced if the agreed fishing opportunities cannot be provided; The real value of the opportunities needs to take into account the instead, the EU is compensated in subsequent years or with quota prices achieved as well as the cost of fishing and other added value for other species in the same year. benefits, such as processing that may be linked to the agreements. If a similar situation arose in a southern FPA (that is, the coastal The negotiation of reciprocal fishing possibilities necessitates state denies access to a resource for the EU on the basis that the the involvement of the departments responsible for fisheries (for stock is overexploited or no surplus exists), the financial contribu- example, Ministry of Fisheries, or DG MARE on behalf of the tion paid for access would be correspondingly reduced (although Emerging Perspectives on Foreign Fishing Arrangements 111 BOX F.2. LOSS OF REDFISH FISHING BOX F.3. IMPROVING REPORTED CATCH OPPORTUNITIES WITHOUT STATISTICS FOR COD COMPENSATION The quality of the commercial landings data for cod deteriorated Norway made a commitment to facilitate the enlargement of in the 1990s following reductions in the TAC without associ- the EU in 1986 (accession of Spain and Portugal) by allocating ated control of fishing effort. ICES indicates that estimated total 1,500 tonnes of redfish north of 62oN outside the balance of the removals from the stock varied between 0.9 and 2.0 times the bilateral fisheries arrangement. ICES advice for 2012 was that recorded landings over the period 1993–2005 (average, 1.3 times). there should be no directed fishery on this stock and that only While it is assumed that these unaccounted-for removals origi- bycatches should be allowed north of 62oN. As a result, the EU nated mostly from fishing activities (discards and misreporting accepted (as an ad hoc measure for 2012) that its fishing possi- and underreporting catches), changes in natural mortality may bilities for redfish should be limited only to bycatches (Norwegian also have had an influence. Delegation and European Union Delegation 2011a). The mismatch between reported and actual landings is now This demonstrates that even where an agreement for the estimated to be decreasing. In particular, the incidence of under- exchange of certain stocks or quotas exists, it is possible for these reporting landings in the Scottish fleet fishing for cod has declined commitments not to be realized (without compensation) if this significantly since 2003 and is likely to have been extremely low runs counter to scientific advice and management measures. since 2006 (in large part due to the implementation of the Scot- tish Conservation Credits scheme); the Danish Directorate of Fisheries also estimates that the placement on the market of ille- gal fish does not occur on a large scale (ICES 2013). not the payment for the development of fisheries policy in the coastal state). This means that there is an incentive for the coastal state to provide access to stocks, even if no surplus exists (otherwise they risk reduced financial contribution), a situation that does not range of enforcement and MCS measures in place provide a strong occur in the northern agreements. disincentive against illegal fishing and misreporting of catches, The northern agreements and the FPA with Greenland do not helping ensure responsible behavior on the part of fishers, and include a requirement to land catches in the CS’s ports. Vessels are result in rational exploitation of the stocks for long-term sustain- therefore free to land their catches in the economically most favora- ability. This is backed up by a commitment to sustainability by the ble port for their fishing patterns and catches. parties, including following scientific advice in setting TACs, and The northern agreements and the FPA with Greenland all a growing realization by the fishing industry and that responsible contain an “exclusivity” principle (either explicitly or in associ- behavior and accurate reporting of catches reaps rewards. ated agreements) whereby foreign vessels can only access the CS’s Agreements are an integral part of CSs’ fisheries management waters under the agreement and not outside it. This is the same as frameworks. All stocks involved are managed through TACs and the southern FPAs. quotas, and the quotas provided to foreign vessels under the agree- The balance of exchange of quotas under the northern agree- ments are part of the CSs’ overall quotas, within which the CSs’ ments is determined according to cod equivalents, which have not fleets also fish. This applies both to national large-scale and small- been updated since the agreements were established and therefore scale fleets. may not reflect current market values. However, the metric used to Agreements are not exempt from problems of inadequate report- assess value makes a large difference to the relative value for each ing and exchange of information on catches. The minutes from the party, and it appears that the value to each side is relatively bal- meeting between the EU and Norway to agree quotas and quota anced in terms of catch value. exchanges for 2012 noted “a recurring problem in relation to dis- crepancies between reported official catches or landings and catch statistics utilized by ICES. The discrepancies are assumed to be due IMPLEMENTATION to misreporting, inadequate accounting of discards, by-catches and The northern agreements and the Greenland FPA are conducted as other factors contributing to the total out-take of the stocks” (Nor- an integral part of the fisheries management framework in the CSs. wegian Delegation and European Union Delegation 2011a). The CSs tend to have well-developed fisheries management and gov- This is a problem that is highlighted in the negotiations on an ernance systems in place, and fisheries are an important part of the annual basis and is not exclusive to the agreement but relates to the economies of all the CSs in the northern agreements. As a result, the wider fisheries context and in particular the management regime northern agreements tend to be more demanding than the southern under the EU’s common fisheries policy (CFP), which has resulted FPAs in terms of “good behavior” by fishers with respect to accurate in high levels of discards. For cod, the discrepancy was up to 100 catch data, selectivity measures, and no discarding. percent of the reported landings (see box F.3). This is a situation The effective fisheries management frameworks in place in the that is improving as a result of a suite of management and enforce- northern CS are backed up by VMS, MCS and enforcement activi- ment measures (for example, fully documented fisheries, electronic ties, and electronic catch reporting, with at-sea inspections and port reporting, improved selectivity, real-time closures, and sales notes). state controls. In Norway, fisheries management cost an estimated Such measures are not dependent on the agreement, but the coop- $105 million in 1996 (for national and foreign vessels), or 8.3 per- eration between the EU and Norway has played a role in develop- cent of catch value (Arnason et al. 1999; cited in Latiff 2002). The ing these measures, including efforts to harmonize management 112 Trade in Fishing Services measures in the North Sea and Norway’s pressure on the EU to and redfish (deep pelagic stocks) subject to unsustainable levels of eliminate discards. exploitation. However, other stocks are considered to be subject to There are extensive data exchange requirements under the sustainable management. All fisheries reported low bycatch rates agreements, including a recently introduced requirement for elec- and no known negative ecosystem impacts (EP 2012). tronic reporting systems under the agreement with Norway (with Negotiation and cooperation between the parties takes place the first agreement signed on February 23, 2010). These require- through annual negotiations on fishing possibilities, and in general ments are complied with (Ervik 2013). relations are good. However, the disputes with Iceland and the Faeroe Islands over mackerel and herring quotas demonstrate how easily seemingly effective agreements can come undone and over- OUTCOMES fishing can occur, contrary to scientific advice. Sharing of Costs and Benefits The exchange of quotas in the northern agreements provides each party with quota for stocks in which they have an interest, Profitability of Fisheries informed by the involvement of fishing industry representatives in After two consecutive years of declining profitability, the EU fleet the negotiations. The costs of negotiating and implementing the made a recovery in 2010, moving from an overall loss-making agreements are shared in a similar manner between the parties, position to one of profit, which it sustained and improved in since both parties have reciprocal responsibilities. 2011 (STECF 2012, 2013). While costs have been increasing and The exchange of quotas is balanced according to cod equiva- landings have declined in quantity, higher average prices have lents, the value of which are not updated annually and therefore ensured overall profitability, with 6 percent of income retained do not necessarily reflect current market values. As a result, the as profit. actual value of potential catches under the agreements may not As with stock status, it is not possible to attribute the economic be equally shared. The indicator with which value is assessed can situation of the EU fleet to a specific agreement, as vessels target result in large differences in apparent value to each party, but in various stocks as part of diverse fishing strategies. Profitability is practice, the value appears to be reasonably equally shared in the also dependent on the national (member state) management frame- reciprocal agreements. Greenland receives a minimum of 19.4 work and priorities within which vessels operate, including quota percent of the reference value of the fishing possibilities from the allocation and transfer mechanisms. agreement and up to 24.5 percent depending on the opportunities The agreements do not provide for an economic approach for taken out by ship owners under the agreement. vessels to manage access to quotas (for example, through ITQs or The cost of implementing the reciprocal northern agreements leasing quota), as these are governed by national quota manage- are not quantified but can be assumed to be equally shared, since ment policies, which vary from member state to member state. both parties have the same responsibilities under the agreements. In the EU-Greenland FPA, the cost of implementing the agree- ment falls predominantly on Greenland (for MCS, enforcement, CONCLUSIONS and so on), with only negotiating costs and €93,000 per year in The northern agreements are based on the reciprocal exchange of administration costs for the EU. fishing opportunities. Such sharing agreements are appropriate for neighboring states where the fishing industries have an interest in Sustainability of Stocks the stocks in each other’s waters. The reciprocal nature means that The status of a number of stocks in the North Sea is improving, the parties have the same responsibilities and the costs are equally but many are still fished beyond sustainable levels. The latest ICES shared between the parties. The first levels of benefits go directly report of the Working Group on the North Sea and Skagerrak to the fishing industry involved in catching the quotas provided, (WGNSSK) states that fishing mortality for most demersal stocks rather than a financial contribution that may or may not be used to in the North Sea has been declining significantly, leading to pro- benefit the fishing sector and coastal communities. gressive improvements of abundance for a number of stocks. Nev- The agreements are long term, providing a degree of certainty ertheless, recruitment remains poor for most stocks and there are to the fishing industry for planning purposes. However, fishing still some stocks that have low or decreasing abundance (ICES opportunities are negotiated (northern agreements) or adjusted 2013). (Greenland FPA) on an annual basis, providing the potential to The stock status is not a result of the agreements but is the result respond to the most up-to-date scientific advice. of a range of management and enforcement measures imple- The reciprocal nature of the agreements (and possibility of mented over recent years. Nevertheless, the fact that the agreement quota substitution in Greenland) means that there is not an incen- with Norway operates within the overarching management frame- tive to provide access to overexploited stocks—unlike the southern work for the stocks, that vessels fish in accordance with CS man- FPAs, for which the financial contribution is based on the fishing agement measures, and that the cooperation provided for under opportunities provided. If access to one stock is restricted due to the agreement has contributed to harmonizing and improving conservation measures or to limited or no TAC, access to other management measures in the North Sea have contributed to the stocks can be provided. Even under the Greenland FPA, fishing improving situation of the stocks that is observed today. opportunities can be reduced without loss of financial compensa- There are concerns over sustainability of some stocks in Green- tion if the fishing opportunities are compensated in future years or landic waters, with cod, Greenland halibut (in east Greenland), by access to other stocks. Emerging Perspectives on Foreign Fishing Arrangements 113 Quota division and swaps are based on historical fishing pat- this, foreign fishing vessels should be provided with a compiled terns and adjusted with respect to current interest, with the fishing version of the CS fisheries legislation in an appropriate language industry involved in identifying appropriate fishing opportunities to cover catch reporting, control, technical conservation meas- under the agreements. The negotiation of fishing opportunities ures, and observer schemes. For this to be effective, the national through this centralized system may limit the overall profitability management framework and legislation must be able to ensure sus- of the agreements but ensures the benefits are evenly distributed tainable exploitation of the stocks in question. between the parties. The benefits to each party are affected by mar- There must be sufficient MCS capacity in the CS’s waters to ket prices, the cost of fishing, and associated value-added activities ensure compliance with the rules and regulations in force, so that and may also include the possibility to access larger, better quality catch limits are observed and conservation measures implemented. fish that may fetch higher prices. This must be complemented with flag state control through VMS, Vessels fishing under the northern agreements and Greenland verification of catches, and timely exchange of data. FPA must comply with CS rules and regulations regarding fisheries. Foreign vessels therefore fish within the management framework of the CS. The quotas are allocated from within the overall quota to REFERENCES foreign, national large-scale, and national small-scale vessels. Arnason, R., R. Hannesson, and W. E. Schrank. 1999. “Costs of Fisheries The experience and capacity of the northern CS in fisher- Management: The Cases of Iceland, Norway and Newfoundland.” ies management mean that the governance and management Cited in Latiff, 2002. arrangements tend to be effective at controlling fishing effort and Council Regulation (EC) No. 1006/2008 of 29 September 2008 concern- ensuring sustainable exploitation of the stocks. This, coupled with ing authorisations for fishing activities of Community fishing vessels enforcement and control capacity (for example, through electronic outside Community waters and the access of third country vessels to catch reporting, VMS, at-sea inspections, and port state control Community waters, amending Regulations (EEC) No. 2847/93 and measures), helps to reduce the possibility for infractions and cir- (EC) No. 1627/94 and repealing Regulation (EC) No. 3317/94. cumvention of the rules. Council Regulation (EU) No 40/2013 of 21 January 2013 fixing for 2013 Compliance with the provisions of the agreements (for exam- the fishing opportunities available in EU waters and, to EU vessels, in ple, data submission) is good, and requirements are becoming more certain non-EU waters for certain fish stocks and groups of fish stocks which are subject to international negotiations or agreements. OJ L stringent and more effective at ensuring compliance with catch lim- 23, 25.1.2013, p. 54. its and technical measures, such as through electronic catch report- Council Regulation (EU) No 297/2013 of 27 March 2013 amending Reg- ing. Increasingly responsible behavior on the part of the fishing ulations (EU) No 44/2012, (EU) No 39/2013, and (EU) No 40/2013 industry also contributes to this. as regards certain fishing opportunities. DG MARE. “Fact Sheet: Northern Agreements.” http://ec.europa.eu /fisheries/documentation/publications/cfp_factsheets/northern RECOMMENDATIONS _agreements_en.pdf. DG MARE. 2012. “Norway. Northern Agreement.” http://ec.europa.eu There should be an overarching commitment to sustainability /fisheries/cfp/international/agreements/norway/index_en.htm. from both parties based on internationally agreed-upon standards DG MARE. 2013. “Negotiations Complete on New Agreement on and following scientific advice on exploitation levels. This should Reciprocal Access to Fishing in the Skagerrak.” http://ec.europa.eu be established at the beginning of any agreement and can be /information_society/newsroom/cf/mare/itemlongdetail.cfm?item particularly important for later negotiations in the event that sci- _id=12541&subweb=347&lang=en. entific advice recommends reducing TACs, which will necessitate EC. 1993. Agreement on Fisheries and the Marine Environment between sacrifices from both parties. the European Economic Community and the Republic of Iceland. Agreements should be medium- to long-term to provide a OJ L 161, February 7, 1993, pp. 2–3. EC. 2008. Council Regulation (EC) No 1006/2008, of 29 September degree of certainty for the fishing industry’s planning purposes, but 2008, concerning authorisations for fishing activities of Community with short-term flexibility to allow for adjustments based on the fishing vessels outside Community waters and the access of third most up-to-date scientific advice. country vessels to Community waters, amending Regulation (EEC) The way in which value is calculated affects the apparent value No 2847/93 and (EC) No 1627/94 and repealing Regulation (EC) of the opportunities for the parties. There should be an agreed No 3317/94. basis for valuing the fishing opportunities to be exchanged or pro- EC. 2009. The Common Fisheries Policy: A User’s Guide. Luxembourg: Office for vided and an agreed process and time scale for it to be periodically Official Publications of the European Communities. http://ec.europa updated. This avoids changes in market conditions affecting the .eu/fisheries/documentation/publications/pcp2008_en.pdf. balance of the exchanges. EP. 2012. Recommendation on the draft conclusion of the Protocol set- The CS’s fishing industry should be involved in identifying fish- ting out the fishing opportunities and financial contribution provided ing opportunities in which they have an interest and the fishing for in the Fisheries Partnership Agreement between the European Community on the one hand, and the Government of Denmark opportunities that may be provided to foreign vessels. and the Home Rule Government of Greenland, on the other hand Foreign vessels’ activity should take place within the CS fisher- (11119/2012–C7-0299/2012–2012/0130 [NLE]). Committee on ies management framework, with the same rules and regulations Fisheries. Rapporteur: Ole Christensen. 1.11.2012. A7-0358/2012 applying to national and foreign vessels and quota allocations for .http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP// foreign vessels occurring within the overall catch limits. To facilitate NONSGML+REPORT+A7-2012-0358+0+DOC+PDF+V0//EN. 114 Trade in Fishing Services Ervik, G. 2013. Telephone discussion/interview with Geir Ervik, Ministry Norwegian Delegation and European Union Delegation. 2013. Agreed of Fisheries and Coastal Affairs, Norway, regarding the EU-Norway Record of Fisheries Consultations between the European Union and agreements and cooperation. December 18. Norway for 2013. Clonakilty. January 18. Fishnewseu. 2009. “Break in Stalled EU-Norway Fisheries Talks Will Only OECD. 2011. OECD Territorial Reviews. NORA Region 2011: The Raise the Stakes Says NFFO.” http://fishnewseu.com/latest-news Faroe Islands, Greenland, Iceland and Coastal Norway. OECD Pub- /news-archive/44-latest-news/uk/2450-break-in-stalled-eu-norway- lishing. http://dx.doi.org/10.1787/9789264097629-en. fisheries-talks-will-only-raise-the-stakes-says-nffo.html. STECF. 2012. Summary of the 2012 Annual Economic Report on the Fiskeridirektoratet, 2012. Economic and biological figures from Norwegian EU Fishing Fleet. Scientific, Technical and Economic Committee for fisheries—2012. Bergen: Fiskeridirektoratet. Fisheries. Luxembourg: Publications Office of the European Union. Gibbs, A. 2013. Telephone discussion/interview with Allan Gibbs, Marine http://stecf.jrc.ec.europa.eu/documents/43805/366433/2012-08 Scotland, regarding the EU-Norway agreements and cooperation. _AER_EU+FLEET+SUMMARY+2012_JRC73372.pdf. January 7. STECF. 2013a. 2013 EU Fleet Landings by species_fleet segment level data- Gullestad, P. 2013. “The ‘Discard Ban Package’: Norwegian Experi- set. http://stecf.jrc.ec.europa.eu/documents/43805/581354/2013+ ences in Efforts to Improve Fisheries Exploitation Patterns.” http:// EU+Fleet+Landings+data+by+species_fleet+segment+level.xlsx. www.fisheries.no/PageFiles/21748/HSM/pdf_vedlegg/Norwegian STECF. 2013b. Summary of the 2013 Annual Economic Report on the percent20discard percent20policy.pdf. EU Fishing Fleet (STECF 13 18). Scientific, Technical and Economic ICES. 2013. “Report of the Working Group on the Assessment of Demer- Committee for Fisheries. Luxembourg: Publications Office of the sal Stocks in the North Sea and Skagerrak (WGNSSK).” Paper pre- European Union. http://publications.jrc.ec.europa.eu/repository sented at the International Council for the Exploration of the Sea, /bitstream/111111111/29545/1/lbar13001enn.pdf. Copenhagen, April 24–30, 2013. http://www.ices.dk/sites/pub Walmsley, S. F., C. T. Barnes, A. I. Payne, and C. A. Howard. 2007. Com- /Publication percent20Reports/Expert percent20Group percen- parative Study of the Impact of Fisheries Partnership Agreements: t20Report/acom/2013/WGNSSK/WGNSSK percent202013.pdf. Technical Report. London: MRAG, CRE, and NRI. Latiff, Z. A. 2002. Auction Market for Fisheries in Iceland: Increasing Catch Value Weissenberger, J. 2013. North-East Atlantic Fish Stock Disputes: The and Enforcement in Fisheries. The United Nations University Fisheries Mackerel and Herring Conflicts. Briefing, European Parliamentary Training Programme. http://www.unuftp.is/static/fellows/document Research Service. /zarinaprojectprfa.pdf. Marine Scotland. 2012. “EU-Norway Fish Talks.” http://www.scotland. gov.uk/News/Releases/2012/12/fish07122012. ANNEX: ZONAL ATTACHMENT Marine Scotland. 2013. “No Cut in Cod Quota in 2013.” http://www The “Zonal attachment” principle can be used to determine the .scotland.gov.uk/News/Releases/2013/01/Fish18012013. shares of an overall TAC for straddling and shared stocks that MFCA. Norwegian Comments to the Commission Green Paper on the should be allocated to various coastal states, in whose waters the Reform of the Common Fisheries Policy. http://www.fisheries.no stocks occur. It has been suggested as a way to overcome disputes /PageFiles/21748/HSM/pdf_vedlegg/Norsk_svar_paa_EUs _groennbok_om_CFP_reform.pdf. on how to share the quotas of such stocks and has been used for MFCA. Review of National Policies on Fisheries Rebuilding Programmes: the management of shared stocks between the EU and Norway Template on Economic and Institutional Aspects. Submission from (see Bjørndal and Lindroos 2004; Hannesson 2013). The zonal Norway. http://www.fisheries.no/PageFiles/423783/pdf_vedlegg attachment of a stock is the share of the stock residing within a /The_economics_of_rebuilding_fisheries_Norway_case.pdf. particular country’s EEZ, weighted by the time it spends in a coun- MFCA. 2010a. “The responsibility of foreign vessels.” Norwegian Ministry try’s zone over a year, if necessary. This then determines or influ- of Fisheries and Coastal Affairs. http://www.fisheries.no/resource_ ences the share of the TAC that each country receives for that stock management/control_monitoring_surveillance/The_responsibility (Bjørndal and Ekerhovd 2013). _of_foreign_vessels_in_Norwegian_waters/#.Uq2GDvRdWpo. Changes in fish migration patterns can be caused by changing MFCA. 2010b. “Control and Enforcement.” Norwegian Ministry of in environmental conditions and increases or decreases in spawn- Fisheries and Coastal Affairs. http://www.fisheries.no/resource ing stock biomass (among others factors) and can cause problems _management/control_monitoring_surveillance/Control_and _enforcement/#.Uq2GGfRdWpo. for agreements based on zonal attachment. The ongoing disputes Miller, V. 2013. Leaving the EU. Research Paper 13/42, edited by Vaughan over mackerel and herring in the Northeast Atlantic are exam- Miller. House of Commons Library. ples of this. For mackerel, changing migration patterns (possibly MRAG, IFM, Cefas, AZTI, and Polem. 2009. An Analysis of Existing brought about by an increase in stock size) have resulted in the Rights Based Management (RBM) Instruments and on Setting up stock expanding into Icelandic and Faeroese waters, where it was Best Practices in the EU. London: MRAG Ltd. not previously prevalent, and these coastal states thus requesting a NEAFC. 2013. NEAFC Scheme of Control and Enforcement 2013. Lon- proportionately greater share of the TAC. don: North East Atlantic Fisheries Commission. http://www.neafc Based on modeling studies, Hannesson (2013) concluded that .org/scheme. where zonal attachment varies over time and more than one stock Norwegian Delegation and European Union Delegation. 2011a. is involved, zonal attachment may not be an appropriate way of Agreed Record of Fisheries Consultations between Norway and allocating the TAC because it would give the coastal state with a the European Union for 2012. Bergen. December 2. http://www .regjeringen.no/upload/FKD/Vedlegg/Kvoteavtaler/2012/EU/ minor interest in the stock a worse outcome than if it were to pur- norgeEU.pdf. sue its own interest in the absence of cooperation. The scope for Norwegian Delegation and European Union Delegation. 2011b. Proto- cooperation is greater if more than one stock is involved. col of Fisheries Consultations between Norway and the European Specific life stages can be included (as in the Hamre model Union, on behalf of Sweden, for 2012. Bergen. December 2. [1993]) used in the 1995 work on Norwegian spring-spawning Emerging Perspectives on Foreign Fishing Arrangements 115 herring) or all life stages. Fishery-dependent (for example, catch Bjørndal, T., and N. Ekerhovd. 2013. “Management of Pelagic Fisheries data by month and by square [0.5° latitude, 1° longitude] or by in the North East Atlantic: Norwegian Spring Spawning Herring, economic zone) and fishery-independent (for example, survey data Mackerel and Blue Whiting.” SNF Working Paper 13/13. Bergen: on biomass and abundance or appropriate proxies, by age and by Institute for Research in Economics and Business Administration. http://www.snf.no/Publications/SNF-publications-2.aspx?year=201 area) data can be used (Coastal States Working Group 2013). 3&mode=detail&RowId=12&ViewPID=135&PubID=4589. Bjørndal, T., and M. Lindroos. 2004. “International Management of North Sea Herring.” Environmental and Resource Economics 29: 83–96. REFERENCES Hamre, J. 1993. “A Model of Estimating Biological Attachment of Fish Report of the 1st meeting of the Coastal States Working Group on the Dis- Stocks to Exclusive Economic Zones.” ICES C.M 193/D:43. tribution of Norwegian Spring-Spawning Herring in the Northeast Hannesson, R. 2013. “Zonal Attachment of Fish Stocks and Management Atlantic and the Barents Sea. Copenhagen, November 13 and 14, 2013. Cooperation.” Fisheries Research 140: 149–54. 116 Trade in Fishing Services APPENDIX G CHINESE DISTANT WATER FISHING ACTIVITIES Tabitha Grace Mallory, PhD engage in illegal, unreported, and unregulated (IUU) fishing in both areas governed by FFAs and outside them, vastly underre- Princeton University porting the true volume of its catch.5 e-mail: tabitham@princeton.edu This case study seeks to examine China’s fishing activities in the context of the overarching goals of the study—both assisting host countries to identify and enable means to secure equitable and China is the world’s largest producer of seafood, including sustainable returns from FFAs and encouraging flag states to adopt production from both capture fisheries and aquaculture. In the more responsible policies and practices with regard to the activities past few decades, China has increasingly engaged in trade in fish- of their fleets. The case study begins with (1) background informa- ing services, both harvesting and post-harvesting services such as tion on China’s distant water fishing industry in order to inform processing. China is a significant seafood processor of both aquatic (2) an analysis of the economic and legal principles underpinning products originating domestically for national and international China’s FFAs, then (3) places China in comparative perspective markets and products that are imported for processing and then with other Asian nations, and finally concludes with (4) a discussion re-exported. With a total processing capacity of 26.38 million tons of the costs and benefits associated with China’s FFAs and lessons annually, China’s 9,706 processing enterprises nationwide pro- that can be drawn from the China experience. cessed 19 million tons in 2012.1 Over 90 percent of U.S. seafood exports to China in the early 2000s were re-exported elsewhere.2 In line with the emphasis of this report, however, this appendix BACKGROUND will focus on China’s harvesting services in the capture fisheries VESSELS industry. Since the initial expansion of its fishing industry to areas Chinese fishing vessels are defined as those flagged to the People’s beyond its own national jurisdiction in 1985, China has become Republic of China (or Mainland China, excluding Hong Kong, a significant global fishing nation. China maintains fishing opera- Macau, and Taiwan), unless otherwise indicated. Evidence sug- tions on both the high seas and in the exclusive economic zones gests that some fishing vessels that are linked to or controlled by (EEZs) of other countries. China accesses the waters of host coun- Chinese entities are also fishing under non-Chinese flags. Chinese tries through foreign fishing arrangements (FFAs), which take the regulations generally forbid the registration to China of vessels form of bilateral fisheries access agreements, joint ventures, and owned by non-nationals. the chartering of foreign fishing vessels. Whereas distant water fishing is usually defined as fishing opera- As this report’s overview discussed, FFAs have been criticized tions taking place in areas beyond the national EEZ, China’s Dis- for contributing to unsustainable use of fisheries resources and tant Water Fishing Supervisory Provisions, promulgated by the for negatively affecting the socioeconomic development of host Ministry of Agriculture in 2003, define distant water fishing (DWF) countries.3 China’s FFAs likewise have been criticized for their as “citizens, legal entities, and other organizations of the People’s principal-agent problems, in the form of lack of transparency Republic of China engaging in marine fishing and its processing, and association with corruption, inequitable benefit sharing, supply and product transportation activities on the high seas and poor flag state control, and conflict with small-scale and arti- in the sea areas under the jurisdiction of other countries, but does sanal fisheries.4 The Chinese fishing industry is also believed to not include fishing activities in the Yellow Sea, East China Sea, or South China Sea.”6 Therefore, Chinese fishing operations that occur, for example, in the western EEZs of South Korea or Japan 1 农业部渔业局 [Ministry of Agriculture Bureau of Fisheries]. 2013. 2013 中 国渔业年鉴 [2013 China Fisheries Yearbook]. 北京: 中国 农业出版社 [Beijing: China Agriculture Publishing Company]. mental Justice Foundation, London; Environmental Justice Foundation. 2007. 2 Clarke, Shelley. 2009. Understanding China’s Fish Trade and Traceability. TRAFFIC “Pirate Fish on your Plate: Tracking Illegally-Caught Fish from West Africa into East Asia. the European Market.” Environmental Justice Foundation, London; Hanich, 3 Mwikya, Stephen Mbithi. 2006. “Fisheries Access Agreements: Trade and Quentin, and Martin Tsamenyi. 2009. “Managing Fisheries and Corruption in Development Issues.” ICTSD Natural Resources, International Trade and Sus- the Pacific Islands Region.” Marine Policy 33, 386–92; Mallory, Tabitha Grace. tainable Development Series Issue Paper 2. International Centre for Trade and 2013. “China’s Distant Water Fishing Industry: Evolving Policies and Implica- Sustainable Development, Geneva, Switzerland; Walmsley, S. F., C. T. Barnes, tions.” Marine Policy 2013, 99–108. I. A. Payne, and C. A. Howard. 2007. Comparative Study of the Impact of Fisheries 5 Pauly, Daniel, et al. 2013. “China’s Distant Water Fisheries in the 21 Century.” Partnership Agreements––Technical Report. MRAG, CRE, & NRI. Fish and Fisheries. March 23. 4 Standing, André. 2008. Corruption and Industrial Fishing in Africa, Chr. Michelsen 6 农业部 Ministry of Agriculture. 远洋渔业管理规定 [Distant Water Fishing Institute U4 Anti-Corruption Resource Centre; EJF. 2009. “Dirty Fish—How Supervisory Provisions]. April 14, 2003, entered into force June 1, 2003. See articles EU Hygiene Standards Facilitates Illegal Fishing in West Africa.” Environ- 2 and 3. www.cndwf.com/news.asp?news_id=19. Emerging Perspectives on Foreign Fishing Arrangements 117 are not considered DWF activities and China has bilateral fisher- CATCH ies agreements with South Korea, Japan, and Vietnam to manage Evidence indicates that China’s DWF capture production data shared stocks. reported by China are neither comprehensive nor accurate. The 2013 China Fisheries Statistical Yearbook reports that in 2012, of Whereas fisheries experts showed that China was overreporting its the 695,555 Chinese-flagged motorized fishing vessels, 194,240— domestic catch due to domestic political reasons, they believe that representing a total tonnage of 7.707 million and combined engine China is underreporting its DWF catch.14 Official sources report power of 17.31 million kilowatts—were marine capture vessels.7 that China’s DWF industry produced 1.223 million tons of catch Of these, 1,793 vessels with a total engine power of 1.112 mil- in 2012, valued at Y 13.21 billion (approximately $2.17 billion or lion kilowatts were DWF vessels. The 2012 China Fisheries Yearbook $1.77 per kg).15 However, fisheries experts estimated that the real reports that China had 2,230 DWF vessels in 2011. The discrep- amount and value of Chinese catch taken outside of its own EEZ ancy in the size of the fleet is because while a majority of the DWF annually to be 4,604,000 tons (with a margin of error of ±687,000) industry operates on a regular basis, a few hundred vessels operate from 2000 to 2011, for an ex-vessel landed value of €8.93 billion on a temporary basis for a few months every year in Russian and (±1.53 billion) a year.16 Excluding Japan and Korea, whose EEZs, North Korean waters.8 Therefore, sometimes the total vessel num- according to China’s definition, are not included in the DWF indus- bers account for these temporary vessels and sometimes they do try, the total is 4,498,000 tons, or over three and a half times more not. The 2013 China Fisheries Yearbook reported 1,830 permanent than China’s official statistics report. The largest source of China’s DWF vessels and 599 short-term vessels for a total of 2,429 vessels distant water catch is Africa, with an annual estimated volume operating in distant waters.9 of 3.1 million tons (±690,000), followed by Asia at 948,000 tons China’s DWF fleet is the world’s largest in terms of number and (±241,000), Oceania at 198,000 tons (±31,000), Central and South is continuing to grow, although the size and technological capacity America at 182,000 tons (±53,000), and Antarctica at 48,000 tons of its vessels lags behind the fleets of more developed countries. (±26,000).17 The Chinese government has outlined plans to expand the num- China’s high seas catch targets two main species—tuna and ber of DWF vessels.10 The 2013 China Fisheries Yearbook announced squid. A third species, jack mackerel, has been targeted in recent that the industry had built more vessels in 2012 than ever before, years. Squid accounts for about one third of China’s overall distant including China’s first domestically constructed large-scale purse- water catch—32 percent of total catch in 2012, according to Chi- seining vessel and a new saury vessel. China also imports vessels nese official statistics.18 China’s most productive fishing grounds on secondhand, including in 2012 two tuna purse-seining vessels, 17 the high seas for squid are the North Pacific, Southeast Pacific, and ultralow-temperature tuna vessels, and a krill fishing vessel with Southwest Atlantic. Squid catch in 2012 amounted to 388,000 tons processing capability. In the same year, China had 967 vessels on worth Y 2.82 billion (about $1.20 per kg), according to China’s offi- the high seas, adding 115 from the previous year; another 863 ves- cial statistics. China is adding vessels to the squid industry. In 2010, sels operated in the EEZs of other countries, with 86 new vessels 100 new squid jiggers built in Zhoushan were introduced into the added that year.11 China reported 410 tuna vessels and 546 squid industry.19 In 2011, 82 new vessels were added. The added capac- jiggers. ity meant that catch of jumbo squid (Dosidicus gigas, 茎柔鱼) in the Chinese ownership information and vessel reflagging activi- Southeast Pacific doubled between 2010 and 2011.20 ties can be challenging to trace. Of the 1,955 Chinese DWF Tuna accounted for 14 percent of total catch in 2012, accord- vessels assembled in one report, 279 had no ownership infor- ing to Chinese official statistics.21 China has both high seas and mation.12 Vessels were flagged to 24 other countries or entities, EEZ operations and is a member of four of the five tuna regional including Argentina, Belize, Brazil, Cambodia, Fiji, Georgia, fisheries management organizations (RFMOs).22 Catch of tuna, a Ghana, Honduras, India, Indonesia, Japan, Kiribati, Microne- particularly high-value species, amounted to 172,000 tons worth Y sia, Mongolia, Morocco, Myanmar, Nigeria, North Korea, Pan- 3.28 billion (about $3.14 per kg) in 2012, according to official Chi- ama, Saint Vincent and the Grenadines, Taiwan, China, Tonga, nese statistics.23 China is also adding vessels to the tuna industry, for Uruguay, and Vanuatu.13 example 30 new vessels in 2010 and 86 new vessels in 2012. 7 农业部渔业局 [Ministry of Agriculture Bureau of Fisheries]. 2013. 2013 中 国渔业年鉴 [2013 China Fisheries Statistical Yearbook]. 北京: 中国 农业出版社 14 Watson, Reg, and Daniel Pauly. 2001. “Systematic Distortions in World Fish- [Beijing: China Agriculture Publishing Company]. eries Catch Trends.” Nature 414 (29), 534–36. 8 Mallory, Tabitha. 2013. China, Global Governance, and the Making of a Distant 15 2013 China Fisheries Yearbook. Water Fishing Nation. PhD dissertation, Johns Hopkins University. 16 Pauly, 2013. 9 2013 China Fisheries Yearbook. 17 Ibid. 10 农业部 [Ministry of Agriculture]. 2011. 全国渔业发展第十二五年规 18 2013 China Fisheries Yearbook. 划 (2011–15年) [National Fisheries Development Twelfth Five-Year Plan (2011–15)], 19 2011 China Fisheries Yearbook. October 17. http://www.moa.gov.cn/zwllm/ghjh/201110/t20111017_2357716 20 2012 China Fisheries Yearbook. .htm. 21 2013 China Fisheries Yearbook. 11 2013 China Fisheries Yearbook. 22 All but the Commission for the Conservation of Southern Bluefin Tuna 12 Clarke, Shelley. 2009. Unpublished Research. p. 34. (CCSBT). 13 Ibid., p. 17. 23 2013 China Fisheries Yearbook. 118 Trade in Fishing Services FIGURE G.1. COMPOSITION OF CHINA’S DWF 中水).26 Since the CNFC website claimed at the time to operate only 250 vessels, it is likely that the remaining vessels are operated CATCHES (EXCLUDING “ASIA- by one of CNFC’s 67 (or more) subsidiary companies.27 In decreas- INLAND WATERS” AND “PACIFIC, ing order by fleet size, the largest CNFC regional affiliates are NORTHWEST”) AS REPORTED TO located in Zhejiang, Shandong, Shanghai, Liaoning, and Guang- THE FAO, 2003–10, IN TONS1 dong provinces or municipalities. One report, citing data from Other 2003, characterizes the Chinese distant water fleet as one-third Tunas, Bonitos and Billfishes government owned and suggests that the government now has less Miscellaneous Pelagic Fishes control over the fleet than it previously did.28 In this sense, DWF 600,000 Squids, Cuttlefishes, Octopuses fleets may exhibit their own internal principal-agent problem, in addition to the principal-agent problem described in appendix A, 500,000 in which the coastal state is the principal and DWF nations are the agents. Whereas the central authority (the principal) may desire to follow international or coastal state fishing regulations in order 400,000 to benefit from maximum economic returns through time from sustainable fisheries, vessels flagged to the state (the agents) may tons 300,000 violate those regulations because fishermen are acting in their own short-term interests. 200,000 100,000 ANALYSIS DWF POLICIES AND DRIVERS 0 Chinese government policies toward domestic fishing versus DWF reflect some policy incoherence with regard to long-term 03 04 05 06 07 08 09 10 20 20 20 20 20 20 20 20 global stock sustainability. Whereas China’s domestic fisheries 1 FAO, Fishstat, 2012. management tends to be strict, that of the DWF industry is less so. In this regard, China is no different than the DWF fleets that launched their operations in the 1950s and 1960s—such as the China’s jack mackerel catch is on the decline since 2007, which then Soviet Union, the now European Union, Japan, South Korea, is in line with what international observers are saying about the and Taiwan, China. Even if some of these entities have begun jack mackerel stock. After four years of steady decline, the vessels to re-evaluate their policies, their decades of unfettered fishing in the area have moved on to target Antarctic krill and resources overwhelmingly contributed to the current fisheries crisis. Further- in the EEZs of Mauritania and Russia.24 This flexibility to move more, some of the unsustainable fishing operations should not be to new fishing grounds is an example of the malleability of DWF attributed to China’s policies but rather to poor governance in host fleets that Monro discussed in appendix A of this report. countries and the principal-agent problems described by the sum- Figure G.1 depicts the catch composition of China’s DWF as mary report and in appendix A. reported to the Food and Agriculture Organization (FAO) in all Acknowledging depletion of domestic fisheries, China’s first marine areas beyond the Northwest Pacific (Area 61) and Asia- policy to mention DWF—a State Council report in 1983—calls for Inland Waters (Area 04). Catch quantities of Chilean jack mack- relieving pressure on domestic resources by encouraging the devel- erel (Trachurus murphyi, shown as “Miscellaneous pelagic fishes”) opment of DWF through preferential fiscal treatment. The state exhibited a noticeable decrease in 2010. There were increases in subsequently promulgated a series of supportive policies, including the reported catches of skipjack tuna (Katsuwonus pelamis) in 2005 income, value-added, and import tax exemptions.29 and albacore tuna (Thunnus alalunga) in 2009. Development of the DWF industry was specifically mentioned as a component of the “going out” (走出去) policy, which first DWF COMPANIES appeared in the 2001–05 Tenth Five-Year Economic and Social In 2012, the Chinese government licensed 120 Chinese compa- Development Plan and encourages Chinese companies to seek nies for DWF, and 43,000 people were working offshore in the markets and investment opportunities abroad.30 Later in 2001, the industry.25 China has 45 companies engaged in tuna fishing and State Council approved the Master Plan for Developing China’s 55 engaged in squid operations. Of the 86 percent of Chinese fishing vessels for which ownership information was available in a 26 Clarke, 2009. 2009 study, 48 percent (804 vessels) of these were associated with 27 China National Fisheries Corporation, http://www.cnfc.com.cn/. the China National Fisheries Corporation (中国水产) (CNFC, or 28 Mallory, Tabitha. 2012. “China as a Distant-Water Fishing Nation.” Tes- timony before the U.S.-China Economic and Security Review Commission, January 26. http://www.uscc.gov/hearings/2012hearings/written_testimonies /12_01_26/12_1_26_mallory_testimony.pdf. 24 2012 China Fisheries Yearbook. 29 Mallory, 2013. 25 2013 China Fisheries Yearbook. 30 Mallory, 2012. Emerging Perspectives on Foreign Fishing Arrangements 119 Distant Water Fishing Industry (2001–10). As the Chinese state EU, which has acknowledged the need for policy coherence across increasingly worked to address overcapacity and overfishing in the both domestic and international policies, China retains a gap in its domestic industry, particularly after the ratification of the United policies toward domestic and DWF.35 China has signed but not rati- Nations Convention on the Law of the Sea (UNCLOS) in 1996, it fied the UN Fish Stocks Agreement, significant for management saw DWF as a means of creating employment and business oppor- of targeted DWF stocks like tuna.36 Although China follows many tunities abroad for the Chinese fishing industry. The most recent of the stipulations in the agreement nonetheless, for example join- 2011–15 Twelfth Five-Year Plan also mentions developing DWF ing several RFMOs, the quality of China’s compliance with the catch.31 procedural requirements of those RFMOs is not high. China has The national economic Five-Year Plans have been accompa- not signed the Compliance Agreement, an important agreement nied in recent years by more detailed National Fisheries Five-Year outlining flag-state responsibilities for vessels on the high seas, and Plans. The inaugural 2006–10 National Fisheries Eleventh Five- there is little discussion of this agreement in Chinese policy discus- Year Plan called for expanding the industry to 2,200 vessels and sions or publications.37 In a 2009 study scoring countries’ compli- engagement from 34 to 38 countries by the end of the plan.32 The ance with the nonbinding UN Code of Conduct for Responsible 2011–15 National Fisheries Twelfth Five-Year Plan aimed to raise Fishing guidelines across nine indicators in six evaluation fields, total DWF catch to 1.3 million tons and expand the number of overall China ranked 22 out of 53 fishing countries, with a score DWF vessels from 1,991 to 2,300 by 2015.33 just above failing.38 China received passing scores in the areas of State policies combined with other Chinese publications, includ- evaluation that are important for domestic fishing. However, in ing academic, media, and industry reports, emphasize the strategic two areas relevant to DWF, IUU fishing and flags of convenience, importance of the DWF industry to China. A 2010 report of a China ranked 44 and 46, respectively, with failing scores on both task force composed of 12 people affiliated with the State Council, counts. Chinese DWF companies, industry associations, and universities At the same time, the Chinese state is concerned with its image, identified several reasons for such importance. DWF is a means of status, and reputation in the world. As one observer stated, “Repu- tation, both abroad and at home, [is] an intangible resource but a » Supplying high-quality food to Chinese consumers, whose highly valuable one. . . . International rules may thus be respected demands are rising with increased economic affluence; because Chinese policy makers may be eager to bolster the coun- » Reducing pressure on China’s own heavily exploited coast- try’s image. . . . ”39 Rhetoric from the government acknowledges al resources; the need to ensure the sustainability of fish stocks in distant waters, » Securing a stable supply of fish meals and oils to support especially in more recent years. Some Chinese academics also call China’s massive aquaculture and mariculture industries; for more attention to the importance of sustainability and conser- » Creating jobs for thousands of Chinese workers; vation in their writing. Until recently, IUU fishing was rarely men- » Driving development in related industries, such as vessel tioned, if at all, in Chinese literature. However, an academic article and gear construction and maintenance, fishing infrastruc- in 2009 called for China to more adequately address IUU fishing, ture (piers, cold storage), and fish product transport and and in a document issued by the Ministry of Agriculture at the end processing; of 2012 on suggestions for the sustainable and healthy develop- » Establishing a catch history in as many fisheries as possible and, thus, under some fisheries management systems, lay- ing a basis for claiming fishing rights and catch allocations; 35 For more on the EU policy coherence approach, see European Union, Policy and Coherence for Development, http://ec.europa.eu/europeaid/what/develop » Safeguarding China’s national sovereignty and interests, ment-policies/policy-coherence/index_en.htm. including improving bilateral diplomatic and economic ties 36 United Nations. The Agreement for the Implementation of the Provisions on UNCLOS and securing military supplies.34 Relating to the Conservation and Management of Straddling Stocks and Highly Migratory Whereas Chinese policy changes and publications emphasize Fish Stocks (UNFSA). Signed 1995, entered into force on December 11, 2001. the importance of managing domestic fish stocks for long-term www.un.org/depts/los/convention_agreements/convention_overview_fish ecological and food security reasons, little mention of this principle _stocks.htm. occurs with regard to distant waters, nor do DWF policies reflect 37 UN FAO. The Agreement to Promote Compliance with International Conservations this concern to the extent that domestic policies do. Unlike the and Management Measures by Fishing Vessels on the High Seas. Signed 1995, entered into force on April 24, 2003. www.fao.org/docrep/meeting/003/x3130m /X3130E00.HTM. 31 Mallory, 2013. 38 UN FAO. The Code of Conduct for Responsible Fisheries (CCRF). Adopted by 32 农业部 [Ministry of Agriculture]. 2006. 全国渔业发展第十一五年 the FAO on October 31 1995. www.fao.org/docrep/005/v9878e/v9878e00 规划 (2006–10年) [National Fisheries Development Eleventh Five-Year Plan .HTM; Pitcher, Tony, et al. 2009. “Not Honouring the Code.” Nature 457 (5), (2006–10)]. December 31. http://zhs.mofcom.gov.cn/article/zt_guihua/ 658–59. subjectcc/200612/20061204195436.shtml. 39 Mushkat, Roda. 2011. “China’s Compliance with International Law: What 33 [National Fisheries Development Twelfth Five-Year Plan (2011–15)]. Has Been Learned and the Gaps Remaining.” Pacific Rim Law and Policy Journal 34 “扶持和壮大我国远洋渔业研究”课题组 [“Supporting and Strengthening 20 (1). For similar observations, see, for example, Lampton, David M. 2008. Distant Water Fisheries” Task Force], 《把远洋渔业作为一项战略产业加以 Three Faces of Chinese Power: Might, Money, and Minds. Berkeley: University of Cali- 扶持》 [“Support Distant Water Fisheries as a Strategic Industry”]. Septem- fornia Press; and Deng, Yong. 2008. China’s Struggle for Status: The Realignment of ber 2010. www.stats.gov.cn/tjshujia/zggqgl/t20101018_402676860.htm. International Relations. New York: Cambridge University Press. p. 29. 120 Trade in Fishing Services ment of China’s DWF industry, a call is made to “strictly prohibit expenditures.46 Most of these subsidies were in the form of fuel IUU fishing activities” (严格禁止非法、不报告、不管制 [IUU] subsidies, which are direct monetary transfers from the central 的渔业活动).40 Another academic article calls for active coopera- government to fishermen to offset fuel costs. China also provides tion with other countries for sustainable use of fisheries resources, some shipbuilding subsidies to the DWF industry. Reported subsi- emphasizing the need for China to establish an image of a respon- dies do not include indirect subsidies, such as the preferential fis- sible fishing country.41 The authors warn that if China does not cal policies also granted to the DWF industry, which have similar adopt a cooperative attitude with coastal countries on protecting effects as direct subsidies. fisheries resources nor abide by their laws, then China will lose the The 2010 Task Force report called for increased government permission from many host countries to fish there. China’s national subsidies. Specific reference is made to adjusting the subsidy ratio fisheries plans, discussed above, also mention the importance of as high as 30 to 50 percent for projects involving technological cooperation in the international arena on fisheries management. modernization of fishing vessels and claims that for years devel- China has taken some steps to better control its vessels and reg- oped countries have offered their fleets surreptitious subsidies ulate the industry. In January 2012, the Ministry of Agriculture that represent 15 to 20 percent of the landed value of the catch. required all DWF vessels to have vessel monitoring systems (VMSs) Analysis by three Chinese economists of subsidies to CNFC during and to report their positions daily.42 The state has also made some 2003–08 concluded that “subsidies necessary for the company to efforts to improve the quality of logbooks for tuna operations, remain profitable rose steeply beginning in 2006, to the point that large-scale trawlers, and krill fishing vessels; started an independ- subsidies were equal to approximately half of the company’s net ent observer program; and launched a certification system for some profit in 2008.”47 high-value imports from DWF, such as bluefin and bigeye tuna, swordfish, and Patagonian toothfish.43 Yet, overall, fewer concrete measures have been taken to address issues in distant waters than AREAS OF ACTIVITY in domestic waters. The measures that do exist are in conflict with China has a number of FFAs that allow its DWF fleets access to some policies that support the expansion of the industry. resources in the EEZs of other nations. These agreements are in Perhaps the most damaging policy to long-term stock sustain- the form of state-to-state bilateral agreements and interagency- ability is the provision of subsidies to the fishing industry, although level agreements, such as among companies or fishing associations. China is certainly not alone among fishing nations in such sub- According to industry promotional material, China has signed 14 sidization. A 2010 study estimated China’s subsidies to be $4.1 state-level bilateral agreements and 7 interagency agreements.48 billion per year, which would represent 26 percent of the declared China is also a member of six regional fisheries management orga- value of all of China’s marine fisheries production for that year.44 nizations (RFMOs). China has more than 100 representative offices, China’s estimated subsidies are the second largest of any single joint ventures, and logistical bases around the world.49 The 2013 nation and are exceeded only by Japan at $4.6 billion per year.45 China Fisheries Yearbook reported that China had DWF operations in Another study calculated subsidies provided by the Chinese cen- 38 countries in 2012.50 However, a report from early 2013 showed tral government to the fishing industry in 2011 as $3.876 billion, evidence that Chinese DWF vessels were active in 93 countries.51 and possibly as high as $5.168 billion including provincial-level The uncertainty surrounding the actual number of countries in which China operated reflects the lack of transparency in FFAs and the problems with IUU fishing and vessel reflagging. The lack of 40 许浩 [Xu Hao]. 2009. 《管制 IUU 捕捞德渔业法对策》 [“Law and transparency also means that the terms of the FFA negotiations, Policy for Controlling IUU Fishing”]. 海洋开发与管理 [Ocean Development and for example how much DWF nations pay for fishing agreements Management] 26 (8), 26–29; 农业部 [Ministry of Agriculture]. 2012. 于促进 and licenses, is largely unknown. While it is estimated that EU FFAs 远洋渔业持续健康发展的意见 [Suggestions on Promoting the Sustainable Healthy pay approximately 10 to 15 percent of landed value, Japan pays 5 Development of DWF]. November 22. www.moa.gov.cn/zwllm/tzgg/tz/201211 to 6 percent of the export value of the catch, and Taiwan, China's /t20121122_3069037.htm. and South Korea’s access fees in the Pacific are estimated to be less 41 高强, 王本兵, 杨涛 [Gao Qiang, Wang Benbing, Yang Tao]. 2008. 《国际海 than 4 percent of the landed value (between 2–6 percent and 3–6 洋法规对我国远洋渔业的影响与启示》[“Impacts of International Marine Laws on Distant Water Fisheries in China”]. 中国渔业经济 [Chinese Fisheries Economics] 6 (26). 42 农业部 [Ministry of Agriculture]. 2012.《远洋渔船船位监测管理暂 46 Mallory, Tabitha. Forthcoming report. 行办法》[DWF Vessel Monitoring System Interim Measures]. Fisheries Docu- 47 Mallory, 2012. ment 4. January 19. http://www.cnfm.gov.cn/yyyyyzj/zhyyyy/201201 48 中国远洋渔业协会 [China Overseas Fisheries Association]. 2012. Promo- /t20120131_2722947.htm. tional brochure. 43 万晨 [Wan Chen]. 2013.《我国远洋渔业监管体系基本完整建立》 49 肖乐 [Xiao Yue]. 2012. 《中国远洋渔业协会在京成立:回良玉致信祝贺, [“Building a Basic Comprehensive Regulatory System for China’s DWF Indus- 农业部部长韩长赋、副部长牛盾出席会议 并为中国远洋渔业协会揭牌》 try”]. 中国水产 [China Aquatic Production] 9.. [“China Overseas Fisheries Association Established in Beijing: Hui Liangyu 44 SSumaila, Ussif Rashid, et al. 2010. “A Bottom-Up Re-estimation of Global Writes Congratulatory Letter, Agriculture Minister Han Changfu and Vice Fisheries Subsidies.” Journal of Bioeconomics 12, 201–25; FAO, 2004. Calculated Minister Niu Dun Attend Inauguration Ceremony”]. 中国水产 [China Aquatic as 4.1 billion / ($45.9 billion; that is, the value of total fisheries production in Production] 6, 3. 2004 × 0.35; the proportion of marine to total production). 50 2013 China Fisheries Yearbook. 45 Sumaila, 2010. 51 Pauly, et al., 2013. Emerging Perspectives on Foreign Fishing Arrangements 121 FIGURE G.2. HIGH SEAS AND EEZ AS Much of the information is drawn from the Chinese fisheries year- books. China does have DWF operations in Latin America and PERCENTAGES OF TOTAL DWF elsewhere, but they are smaller scale in comparison. CATCH1 High seas EEZ 100% 90% Asia 80% China’s DWF operations in Asia are significant, with larger-scale 70% operations in North Korea, Indonesia, and Myanmar. In 2012, 60% China’s Asia operations accounted for 60 percent of China’s over- 50% all DWF catch and 52.8 percent of the overall value.56 Chinese 40% vessels account for 95 percent of the vessels entering the fisher- 30% ies in Asian countries. One reason Asian countries are important 20% hosts for Chinese DWF is their proximity to China. As the Chinese 10% government works to decrease excess domestic fishing capacity 0% through programs such as vessel decommissioning, it encourages privately or collectively owned smaller Chinese fishing vessels to 01 02 03 04 05 06 07 08 09 10 11 12 fish in distant waters in lieu of domestic waters. 20 20 20 20 20 20 20 20 20 20 20 20 In 2012, China had 1,037 vessels in 10 neighboring Asian coun- 1 Based on data from the China Fisheries Yearbook series. Note that the data pro- tries—including North Korea, Indonesia, Myanmar, Malaysia, vided for the year 2011 was not as comprehensive as other years and thus is Thailand, Bangladesh, and India—and produced 367,000 tons of an estimate. catch worth Y 3.38 billion, according to official sources. This rep- resented an increase from 732 vessels in 2010 but a decrease by one percent, respectively).52 If China’s access fees are similar to those of country—the Philippines. In 2010, China had 456 vessels, predom- the other Asian countries (2–6 percent of landed value), and China’s inantly squid jiggers, operating off the east coast of North Korea. EEZ catch in 2012 amounted to $1.053 billion, then China would In 2011, production from North Korean waters was 80,000 tons have paid between $21.1 and $63.1 million total in access fees. worth Y 1.35 billion. China’s FFA with North Korea is affected by Citing increased restrictions over fishing in the EEZs of other the political instability in that host country. countries, China gradually has been trying to increase high seas China’s operations in Indonesia are steadily ramping up. catch as a percentage of overall DWF catch. In March 2000, China Although 200 vessels had exited Indonesian waters in 2006 because introduced “Efficiency First” as a new direction of DWF develop- of government changes (52 vessels with valid licenses remained), ment.53 The policy marked a shift away from an emphasis on merely 121 vessels re-entered Indonesia in 2008, producing 110,000 tons enlarging the size of the DWF fleet toward a more comprehensive worth Y 660 million. China had 133 vessels in Indonesia in 2010. economic approach that consolidated and built upon existing fisher- In 2011, China invested in some land-based facilities in Indonesia ies programs. The new policy called for increasing the competitive- to earn more fishing licenses for Chinese vessels. In 2011, produc- ness of China’s high seas fishing, aiming to bring the percentage of tion amounted to 133,000 tons worth Y 990 million. high seas catch as a percentage of overall DWF catch to 20 percent China had 72 vessels in Myanmar in 2010. In 2011, because of by the year’s end (although it appears this target was not reached). declining resources, the Myanmar government made some adjust- EEZ catch gradually fell for a few years (but then rose again in the ments to policies on foreign fishing vessels, and Chinese production late 2000s) (see figure G.2). The 2013 China Fisheries Yearbook reports declined 15.1 percent and 26 percent to 45,000 tons worth Y 280 that in 2012, of the total catch, 611,000 tons worth Y 6.4 billion54 million, respectively. came from the EEZs of other countries, whereas 613,000 tons worth China’s program in Thailand began in 2008 with 10 vessels. Y 6.77 billion was taken from the high seas.55 These figures are likely Operations began in Bangladesh in 2010. After consecutive years skewed by the fact that many coastal fishing operations backed by of decline in India, Sri Lanka, and Pakistan in 2006, 2007, and Chinese capital are conducted through joint venture operations 2008, China pulled operations out of Pakistan and Sri Lanka in flagged to the coastal state. The increased emphasis on high seas 2009 because these activities were not profitable, although Chinese fishing points to the need for better high-seas fishing governance. vessels still operate in Indian waters and recently reached another The next section discusses Chinese operations in Asia, Africa, fishing agreement with Sri Lanka.57 Malaysia’s production was up and Oceania in accordance with this study’s geographical focus. in 2006 but has mostly suffered losses since then. China historically had significant operations in Southwest Asia, 52 Gagern, Antonius, and Jeroen ven den Bergh. 2013. “A Critical Review of although Chinese fleets have pulled back because of resource scar- Fishing Agreements with Tropical Developing Countries.” Marine Policy 38, city and piracy. The 2004 Yearbook notes that operations in Yemen 375–86. 53 嗉᱕ [Long Chun]. 2000. lj᭸⳺ㅜа䘌⌻⑄ъ⺞ᇊᯠᯩੁNJ [“Efficiency First DWF Determines New Direction”]. 㓿⍾ᰕᣕ [Economic Daily Report], 56 2013 China Fisheries Yearbook. March 29. www.people.com.cn/zcxx/2000/03/032911.html. 57 “Sri Lanka Lures Foreign Fishing Companies.” 2013. Business Standard. August 54 A billion is 1,000 million. 22. http://www.business-standard.com/article/news-ians/sri-lanka-lures-foreign 55 2013 China Fisheries Yearbook. -fishing-companies-113082201003_1.html. 122 Trade in Fishing Services TABLE G.1. CHINA’S OFFICIALLY REPORTED DWF OPERATIONS IN WEST AFRICA1 2000 2001 2002 2003 2004 2005 Countries 13 16 15 — — 13 Vessels - 401 376 — — 371 Catch 147,000 tons 170,000 tons 160,000 tons — — 166,000 tons Value $200 million — — — — Y 2.07 billion 2006 2007 2008 2009 2010 2011 2012 Countries 12 — — 10 11 11 12 Vessels 365 393 393 375 394 394 389 Catch — 189,000 tons 210,000 tons 190,000 tons 166,000 tons 190,000 tons 216,000 tons Value — Y 2.28 billion Y 2.4 billion Y 1.9 billion Y 1.71 billion Y 2.41 billion Y 2.78 billion 1 2001–13 China Fisheries Yearbook series. ended in 2003, although the 2009 Yearbook mentions operations in (Poly Hon Done Pelagic Fishery).59 The deal gives the Chinese Yemen (and Oman) again in 2008. company a 25-year fishing license in exchange for a $100 mil- lion investment for building a processing center that will process 100,000 tons of fish per year, a manufacturing center for tradi- Africa tional fishing vessels, and a training center. The company obtained The 2013 China Fisheries Yearbook reports that in 2012, DWF enter- fishing licenses for 66 of its vessels.60 The deal claims it will create prises operated 389 vessels in 12 West African countries. According 2,500 jobs for Mauritanians. The firm does not face any import to the yearbook, China produced 216,000 tons of catch valued at duties and for the first five years does not have to pay taxes on prof- Y 2.78 billion (table G.1). its equivalent to 20 percent of its investments. Up to 30 percent China’s larger-scope operations are in Mauritania, Guinea, and of the company’s staff may be foreign. Whereas opponents cited Morocco, with about 60 percent of Chinese fishing vessels in Africa these exemptions as well as a lack of transparency and disregard operating in these three countries. China had 76 licensed vessels for sustainability in the deal as reprehensible, some supporters in fishing in Guinea’s waters in 2011. Operations in Guinea remained Mauritania point to Chinese involvement as boosting the overall steady in 2011, producing 26,000 tons worth Y 370 million. In economy. Success of the arrangement will depend on Maurita- Morocco, where China has 65 licensed vessels, the fishing morato- nia’s monitoring, control, and surveillance (MCS) ability. rium season was lengthened, and thus production fell by 12 percent China has also made inroads into East African fisheries. In in 2011. However, because prices increased, revenue from opera- 2010, new partnerships were reached with Madagascar and tions in Morocco increased by 50 percent; catch amounted to Mozambique.61 Operations were expanded the next year. The 15,000 tons worth Y 500 million. 2012 Yearbook stated that in 2011, “through wholly acquiring fish- The largest Chinese fishing operations in West Africa are in ing vessels and fishing quotas in Mozambique and Madagascar, Mauritania, especially because cooperation increased in the early China has filled a hole in the space for cooperation in East Africa.” 2010s. The 2011 Chinese Fisheries Yearbook reported that in 2010 Other data about Chinese operations in West Africa is gleaned several DWF companies acquired fishing licenses in Mauritania in bits and pieces from the fisheries yearbooks and other docu- “through more flexible and mature methods of cooperation like ments. A 2010 publication mentioned 202 trawling vessels in West mergers and investment.” The 2012 yearbook stated that Maurita- Africa, 110 of them over 20 years old and “in need of replacement nia had licensed 88 Chinese fishing vessels operating in its coastal in order to maintain competitiveness.”62 In 2009, China National waters in 2011. Total production in 2011 amounted to 53,000 tons Fisheries Corporation replaced 12 of its trawling ships in Africa, valued at Y 580 million, an increase of 51 percent and 66 per- “which has increased production efficiency.”63 In 2005, there cent over the previous year. The sizeable increase was attributed were approximately 70 foreign trawlers and sardine purse seiners to CNFC putting into use two large trawlers. The yearbook noted in Sierra Leone’s waters, and among them, Dalian International that because fuel prices were high, overall profit was not great. Mauritania depends heavily on fisheries license fees for its national budget—these fees accounted for 27 percent of the state budget in 2004.58 In 2011, the country agreed to a controversial 59 Prieur, Laurent. 2011. “Mauritanian Opposition Seethes at China Fish Deal.” deal with the Chinese fishing company 福州宏东远洋渔业公司 Reuters. June 8. http://af.reuters.com/article/investingNews/idAFJOE7570JS2 0110608?pageNumber=2&virtualBrandChannel=0&sp=true. 60 2012 China Fisheries Yearbook. 58 Alder, Jacqueline, and Ussif Rashid Sumaila. 2004. “Western Africa: A Fish 61 2011 China Fisheries Yearbook. Basket of Europe Past and Present,” The Journal of Environment Development 13, 62 “Supporting and Strengthening Distant Water Fisheries” Task Force, 2010. 156. 63 2010 China Fisheries Yearbook. Emerging Perspectives on Foreign Fishing Arrangements 123 Company and China Water Distant-water Fisheries Company tively.69 China had 286 longline and 13 purse seine vessels in the LLC had 20 and 16 shrimp trawling boats, respectively.64 area in 2010.70 China has longline operations in FSM, Fiji, and the China’s relationships with host countries in Africa through FFAs Marshall Islands. For the purse seine industry, the greatest catch face certain challenges. Liberian fisheries officials cite unsustainable comes from Papua New Guinea (56.91 percent),71 followed by FSM fishing methods such as pair trawling, issues with the Chinese com- (23.03 percent), the high seas (10.36 percent), Nauru (7.55 percent), mercial fishing vessels violating the 6-nautical-mile artisanal zone, and Marshall Islands (1.45 percent), Kiribati (0.45 percent), and the language problems in dealing with the Chinese.65 Officials are hesitant Solomon Islands (0.27 percent).72 to outlaw pair trawling because they worry that Chinese DWF com- China aims to continue and expand its fishing activities in the panies will leave for countries whose policies are less strict, thereby WCPFC area. In 2012, China reported that it signed an agreement losing the revenue earned from Chinese purchase of fishing licenses. with the Cook Islands to allow 17 tuna vessels to enter their waters. One article in Chinese discussed how to maximize Chinese China also negotiated a transfer of 4,000 tons of tuna quota from gains from FFAs with three African countries: Guinea, Morocco, Japan in 2011.73 Chinese fishing companies are also targeting fisheries and Cameroon.66 The author explains that Chinese fleets should that are relatively undeveloped or unregulated. For example, the 2011 take advantage of the system of issuing only temporary fishing China Fisheries Yearbook states, “The productivity of the albacore industry permits to outsiders by purchasing permits when fish stocks are is relatively good, and because albacore is not subject to international plentiful and withdrawing when resources are down. The author organizational management measures, the zeal of China’s shipbuilding then elaborates on joint-venture schemes with Morocco and industry has been fairly high, adding 30 albacore long-line vessels.”74 Cameroon that preserve the important management jobs for In the WCPFC, fisheries specialists from other countries have Chinese and the autonomy of Chinese management. In the case pointed to domestic capacity challenges in China that manifest in of Morocco, the author points out that the local partner will be a variety of areas, such as inadequate resources, education, and lan- reliant on China for parts and repair. In the case of Cameroon, guage and technical skills. These inadequacies point to a clear need for which does not allow foreign fishing, the local company becomes capacity building as a precursor for successful fisheries management. the front for the Chinese operation. According to one specialist, the Chinese delegation is not big enough, and the lack of resources affects the quality of the delegation.75 The Oceania lack of resources by the delegation reflects a larger capacity problem Oceania, home to Pacific Island Nations (PINs), is the world’s largest domestically. For example, the Chinese delegation expressed dismay tuna fishing ground. Because tuna is a highly migratory and strad- at a possible change in the vessel monitoring system (VMS) rules, stat- dling stock, the system of bilateral FFAs between DWF nations and ing that it is hard to education their fishermen about the new rules, host countries is overlaid by an international convention that gov- plus the change would entail high administrative costs.76 erns the stocks through the Western and Central Pacific Fisheries According to the guidelines of the WCPFC, China has a sci- Commission (WCPFC). Although DWF nations may have a com- entific observer program to monitor catch and bycatch and ensure parative advantage in providing harvesting services in the WCPFC that fishing is done according to WCPFC rules; however, China area, these arrangements may be stymied by corruption and other faces some challenges in carrying out this program. China began its principal-agent problems. PINs are concerned that these issues observer program in June 2009, making four observer trips in 2010, could contribute negatively to future development (see box G.1). six in 2011, and eight in 2012.77 China’s observers, often students, China has both tuna longline and purse seine fishing opera- are poorly trained, and thus their observer data is poor.78 Capacity- tions in Oceania, launching its longline tuna operations in 1988.67 building efforts would be useful in this area. China’s first purse seine vessel, from a Shandong DWF company, The data in China’s daily fishermen logbooks is also poor obtained a fishing license from the Federated States of Micronesia compared to other fishing nations since knowledge and skills are (FSM) on January 14, 2002.68 In the area covered by the WCPFC, lacking. For example, China’s logbooks have no entry of nontar- China reports that catch from the longline and purse seine get species. The WCPFC has questioned China about data on it industries in 2012 was 49,476 and 49,148 million tons, respec- albacore catch, noting that the catch was unusually concentrated 64 Ḥ⿰㣣, ⸣ᔪ儈, ⊔ᥟ᰾ [Chai Xiufang, Shi Jianggao,Tang Zhenmin]. 2006. 69 Dai, Xiaojie, et al. 2013. China Annual Report to the Commission. WCPFC-SC9- “ຎ᣹࡙ᰲⲴ⎧⌻⑄ъ⧠⣦৺ਁኅᔪ䇞” [“Status of Marine Capture Fisher- AR/CCM-03. August. ies and Recommendation of Its Development in the Sierra Leone”]. ⧠ԓ⑄ъ 70 Ibid. ؑ᚟ [Modern Fisheries Information] 21 (4). 71 See also box G.1. which examines Papua New Guinea’s policy on supporting 65 Mallory, 2013. its domestic fishing industry. 66 ੅䴘ㄩ [Lu Yuzhu]. 2007.ljѝഭ⑄ъ‫ޜ‬ਨ൘䶎⍢㇑⨶⁑ᔿⲴ⹄ウNJ 72 ᆻᶕߋ, 㣿ᲃ伎 [Song Laijun, Su Shaofeng], pp. 83–85. [“Research on Management Models of Chinese Fishing Companies in Africa”]. 73 2012 China Fisheries Yearbook. ᯠ㾯䜘 [New West China] 16, 36. Cited in Mallory, 2013. 74 2011 China Fisheries Yearbook. 67 ᕐ䶂, ⦻䭑᰼, ࡈⓀ [Zhang Qing, Wang Xichang, Liu Yuan]. 2009.ljѝ 75 Author interview. ഭ䠁ᷚ劬⑄ъ⧠⣦৺ਁኅ䎻࣯NJ [“Status and Development Trend of Tuna 76 WCPFC Ninth Annual Meeting Proceedings, December 2012. Fishery in China”]. ইᯩ≤ӗ [South China Fisheries Science] 5 (1). 77 Dai, China Annual Report to the Commission; PRC. 2011. Review of Chinese Scien- 68 ᆻᶕߋ, 㣿ᲃ伎 [Song Laijun, Su Shaofeng]. 2011. ljѝ㾯ཚᒣ⌻䠁ᷚ tific Observer Programme in the Pacific Ocean in 2010. Report WCPFC-SC7-2011/ 劬ത㖁⑄ъ৺䍴Ⓚ࠶᷀NJ [“Analysis of WCPO Tuna Purse Seining and EB-WP 12 to the Scientific Committee of the Seventh Regular Session. August. Resources”]. 䗭ᆱ㓿⍾ [Liaoning Economy] June, 83–85. 78 Author interview. 124 Trade in Fishing Services geographically, possibly because of inaccurate logbook data that of it, arrangements in which coastal countries receive develop- should have been more spatially representative.79 Conflict exists in ment aid and retain management over foreign fishing fleets may WCPFC meetings over China accurately identifying shark species, benefit both coastal and DWF countries. However, if aid is used with China arguing that shark identification requirements should as leverage to procure licenses through corrupt means, or if DWF be relaxed because of the difficulty of identifying different species countries form joint ventures in which management and opera- at the specific level of detail required by the Commission. Capacity tions are largely controlled by the DWF nation—some evidence building would improve logbook data. suggests that this has occurred on both accounts—the result will China’s catch data reporting to the WCPFC has been problem- be unsustainable management of fish stocks and little benefit to atic. In 2010, China reported its 2009 longline bigeye catch from developing countries. Increased transparency in FFA negotiations the Western and Central Pacific Ocean, excluding the portion of would improve understanding of the link between aid and FFAs. the Eastern Pacific Ocean that is covered by the WCPFC (a value China has been implicated in corruption cases involving the of 9,793 tons was reported, whereas the total was actually 11,565 procurement of fishing licenses. China’s activities in Fiji’s tuna tons).80 This was also the case for the years 2004–08 and 2010, and industry have been detrimental to closer economic relations the WCPFC has requested that China resubmit its data from those because of corruption.84 China had 54 vessels licensed to fish years to ensure that the data covers the WCPFC area. Additionally, in Fijian waters in 2000. Former Fijian Prime Minister Laisenia in 2009, the Chinese did not report 4,133 tons of Chinese bigeye Qarase created an affirmative action program to increase the per- longline catch from the Kiribati EEZ in their catch data, nor was it centage of Fijians working in the tuna industry to 50 percent by reported by Kiribati.81 This 4,133 tons is a significant amount—it the year 2020. This would be done through joint ventures with is over the total amount of bigeye that the United States is allowed outside countries, including China. On a visit by Qarase to China to catch in the entire WCPFC Convention area. in May 2002, Fiji was awarded a grant of $3.4 million. On that PINs are allocated favorable catch quotas because of their visit, Fijian and Chinese governments signed a memorandum of status as developing island countries; therefore, it is in the inter- understanding on fisheries that established a joint venture between est of DWF nations to partner with PINs so that catch data will China National Fisheries Corporation and Fiji National Fishing be attributed to the islands and not the flag state. FSM, Kiribati, Company. While the Prime Minister was there, four CNFC ves- Palau, the Marshall Islands, the Solomon Islands, and Fiji have sels set sail for Fiji from Dalian. In 2002, 44 more Chinese vessels reported that Chinese-flagged longline vessels are considered were added, raising the total to 131. Local fishermen opposed chartered to these countries and therefore their catch should be these moves, stating that these fishing vessels were unsustainable. considered as catch from these countries, not China.82 This issue In 2003, tuna catch had decreased 60 percent from previous years. has caused some uncertainty in the reported catch data from these Qarase visited China again in 2004 with Fiji’s fisheries minister in countries. Indeed, the Chinese literature, in its calls for expansion tow, and the delegation met with Premier Wen Jiabao and CNFC. of China’s DWF industry, suggests joint ventures as a strategy to The Fijian side requested a fishing vessel for training and research avoid catch limitations. One article advises utilizing the influence purposes, and the Chinese committed another $3.4 million to Fiji. of foreign aid programs to develop large-scale purse seining. For Reports emerged that Chinese vessel operators had bribed Fijian example, the piece says, “China has already successfully built the fisheries officials to obtain licenses and that the joint ventures Tuna Commission’s headquarters in FSM, and got permission to between Fiji and China were fronts for largely Chinese opera- have 25 boats in FSM EEZ in 2007. Because restrictions are about tions, neither meeting joint venture standards nor benefiting the to increase, China should seize the opportunity to develop while it Fijians. An investigation in 2004 led to the convictions of several can.” The article continues, saying that “by investing in the Pacific Fijian fisheries officials. Issuance of fishing licenses was reformed, Island nations, [China] can earn bonus points, thereby obtaining and subsequently 60 out of 84 mostly Chinese license applications fishing licenses.” The article goes on to say, “The governments of were rejected. The number of licenses decreased to 75 in 2005 the Pacific Island countries and the corresponding Tuna Com- and 63 in 2006. By 2006, Chinese vessels held 24 licenses. mission mostly control overall catch, so China should have more In another example of corrupt practices, in 2009, six Chinese joint ventures with Pacific Island countries to buy second-hand fishing vessels were caught in the EEZs of the Solomon Islands vessels. If the ship’s registry is in the Pacific Islands, or if the without fishing licenses. The vessels had apparently been issued companies employ a portion of local workers, vigorous support “Letters of Comfort” by the Solomon Islands fisheries officials of the Pacific Island governments will be earned.”83 On the face as provisional fishing licenses.85 The government of the Solomon Islands stated that these Letters of Comfort had not been obtained legally but instead “by colluding with and corrupting Solomon 79 Williams, Peter. 2011. Issues with Chinese Longline Fleet Data Submitted to the Islands fisheries officials.” The issue will be taken up by Solomon WCPFC. Report WCPFC-SC7-2011/ST IP-03 to the Scientific Committee of Island domestic courts. Increased transparency would mitigate cor- the Seventh Regular Session. August. ruption as well. 80 Williams, Issues with Chinese Longline Fleet Data. 81 Ibid. 82 Williams, Issues with Chinese Longline Fleet Data. 84 The information in this paragraph comes from Tarte, Sandra. “Fiji’s ‘Look 83 王学锋, 孙华, 卢伙胜 [Wang Xuefeng, Sun Hua, Lu Huosheng]. 2010.《中 North’ Strategy and the Role of China.” In China in Oceania, edited by Wesley- 国中西太平洋金枪鱼围网渔业的可持续发展》[“Sustainable Development Smith and Porter, pp. 122–123, 127–128. of China’s Tuna Purse Seine in the Western and Central Pacific Ocean”]. 水产 85 WCPFC. 2010. Technical and Compliance Committee Summary Report. Sixth regular 科学 [Fisheries Science] 29 (2), 120–24. session, September 30–October 5, Pohnpei, Federated States of Micronesia. Emerging Perspectives on Foreign Fishing Arrangements 125 BOX G.1. ARE FFAs ECONOMICALLY EFFICIENT FIGURE G.3. PERCENTAGE OF DISTANT FOR PAPUA NEW GUINEA? WATER CATCH OF MAJOR Papua New Guinea (PNG) is an example of a PIN that is consid- DWF NATIONS, 2011–131 ering relying solely on domestic fishing services versus importing fishing services from foreigners. In PNG, all longline operations are Japan domestic, but purse seining is conducted by DWF nations, includ- 12% ing China.1 The existing fisheries access agreements are between the Chinese DWF association China Overseas Fisheries Association China (COFA) and the PNG government. Because artisanal fishermen 34% and small and medium enterprises (SMEs) have different technol- South Korea ogy and target different species than the commercial industry, there 16% is not much competition between these two groups. However, the commercial fishery is of concern to PNG because of domestic employment issues. PNG is encouraging landing more fish locally, as the government would like to capture more of the value added in Russia the industry and eventually have no foreign fishing in their waters. 17% Because of the high capital intensity in the tuna industry, PNG does Taiwan, China not currently have the technology or processing capability needed 21% to make the industry more domestic in nature; this would require investment. PNG does require foreign fishing nations to employ a certain number of domestic workers. The Philippines is responsible Source: compiled by author from range of data sources. for 80 percent of PNG’s tuna processing domestically, and some is 1 China, Taiwan, and South Korea, 2012; Russia, 2013; Japan, processed in Malaysia. The Chinese have proposed building a tuna 2011. processor in PNG, but the proposal is still pending agreement and approval by the PNG government. Whether FFAs are more eco- nomically efficient than domestically provided services would be an TABLE G.2. JAPAN’S DISTANT WATER interesting case to study in further detail. CATCH BY FISHING METHOD IN TONS, 20111 1 Author interview. Distant water trawl 52,549 Distant water skipjack and tuna 184,210 Distant water tuna longline 105,843 CHINA IN COMPARATIVE Distant water skipjack pole and line 67,889 PERSPECTIVE Distant water squid anglings 12,223 The all-time largest DWF nations or entities are the Russian Feder- 1 Government of Japan, Ministry of Agriculture, Forestry and Fisheries. ation and Japan, followed by Spain, South Korea, Taiwan, China, http://www.maff.go.jp/e/tokei/kikaku/nenji_e/88nenji/index.html and, most recently, China. A 1998 report stated that the most #nse011. significant nations were Russia (with 32 percent of DWF catch), Japan (21 percent of the total), Spain (10 percent), South Korea (5 percent), Russia and Poland (4 percent each), Taiwan, China, Japan Portugal, Germany, and France (3 percent each), Ukraine (2 per- Japanese DWF vessels have operated globally since the end of World cent), Norway, Romania, Cuba, Bulgaria, and the United States War II, particularly since 1952, when the American occupation (1 percent each), followed by 53 countries with less than 1 percent relaxed restrictions on Japanese fishing vessels. The Japanese govern- each.86 The Soviet Bloc accounted for 50 percent of total global ment encouraged the expansion of the DWF industry with the slo- DWF catch at its height. Yet already in the early 1990s, these gan “from coastal to offshore, from offshore to distant waters.”88 Tuna nations or entities were reducing their fleet sizes, and it was pre- catch grew from 10,000 tons before 1950 to 50,000 tons in 1960. dicted that China would take over some of the effort from these Since the advent of UNCLOS, Japanese vessels have been decreasing entities.87 Today China accounts for about a third of global DWF in number rapidly as the fleet was excluded from the coastal waters of catch (see figure G.3). other countries and became less competitive in the face of other, more cost-effective fleets. The number of Japanese DWF vessels diminished threefold between 1975 and 1992, and Japan’s share of the global 86 Bonfil, Ramon, et al., eds. 1998. “Distant Water Fleets: An Ecological, Eco- nomic and Social Assessment.” Fisheries Centre Research Reports 6 (6), 17. 87 Wildman, Mark R. 1993. World Fishing Fleets: An Analysis of Distant-Water Fleet 88 Barclay, Kate. 2009. “Ocean, Empire and Nation: Japanese Fisheries Poli- Operations Past, Present, Future, Vol. 3—Asia. Silver Spring, MD: National Marine tics.” In Water, Sovereignty and Borders in Asia and Oceania, edited by D. Ghosh, Fisheries Service, National Oceanic and Atmospheric Administration. H. Goodall, and Donald S. Hemelryk, pp. 38–49. London: Routledge. 126 Trade in Fishing Services total DWF catch decreased from 20 percent in 1980 to 12 percent in TABLE G.3. TAIWAN’S DWF CATCH IN TONS1 1991.89 Japan’s total distant water catch was 458,000 tons in 2012.90 Type/Year 2011 2012 Otter trawling 37,885 36,134 Russia Fishing came under the control of a small number of large state- Purse seine (tuna) 176,109 200,958 owned enterprises during the Soviet era.91 In the mid-1950s, the Longline (tuna) 216,867 223,422 Soviet Union initiated an enormous program of shipbuilding and Jigging (squid) 104,513 98,126 fishing around the world. With the help of massive state subsidies, by the late 1950s, the USSR became a significant DWF nation, Torch light (saury) 160,531 161,514 with fleets off the coasts of Africa and South America. Total 695,905 720,154 The USSR caught less than 500,000 tons of fish in 1950. But 1 Ibid. by 1970, the annual catch was over six million tons. The Soviet Union’s fishing fleet became the largest in the world, and its total catch just second to Japan’s. After the fall of the Soviet Union, DWF operations were almost completely terminated because Rus- Taiwan, China sian vessels concentrated on catch in the Russian EEZ.92 Taiwan’s DWF fleet began in the 1960s, fishing for tuna, which The last director of Russia’s Federal Fisheries Agency, Andrey until the mid-1970s was mostly exported for tuna canning. Since Krayniy, who came into office in 2007 and resigned in January then, Taiwan shifted to production of sashimi-grade tuna, largely 2014, led efforts to reform and revive the Russian fishing industry, destined for Japan. Taiwan’s fleet has been decreasing as well, from including DWF. Krayniy set forth plans to regenerate the DWF a high of 1,800 in 1990. In 1991, Taiwan froze applications for industry initially through the activities of a state-owned enterprise, new DWF vessels, introducing a zero-growth policy, and prohibited which may then be followed by commercial ventures. Krayniy the purchase of foreign vessels.96 In 2012, Taiwan’s DWF industry stated that Russia has signed fisheries agreements with 14 Afri- landed 726,775 tons worth NT$50.14 million.97 In the same year, can countries and aims to sign agreements with all African coastal 6,037 households and a total of 15,840 fishermen were engaged states. In 2013, the Russian DWF industry caught 617,100 tons of in DWF. fish, with 446,300 tons coming from the EEZs of host countries, with 229,700 tons from Africa alone. Morocco, the West Sahara, Conclusions and Recommendations and Guinea-Bissau account for the bulk of this catch, at 36.3, 26, This case study has examined China’s DWF operations in ABNJ, and 25.7 percent, respectively.93 including through FFAs with host countries, and now turns to summarizing the key principles discussed in the analysis and South Korea identifying lessons learned. South Korea’s DWF industry began in 1957, when South Korea » Host countries benefit from the income generated through sent an exploratory catch mission to the Indian Ocean to conduct the sale of fishing licenses to China. One way to improve longline tuna operations. South Korea went from 100 vessels in the terms for host countries is through regionally coordi- the early 1960s to a high of 850 vessels in the late 1980s and then nated bargaining as opposed to bilateral negotiations where shrank to 645 vessels in 1993.94 According to official statistics, in the Chinese side is advantaged because of its size vis-à-vis 2012, South Korea’s fleet of 344 vessels caught 575,308 tons of the coastal state. While the WCPFC has been criticized fish worth 1,655,406.95 for not setting adequately strict fishing quotas, there are benefits to having a regional governance structure in place to decide on fishing practices. Within the WCPFC, a few PINs have an arrangement called the Parties to the Nauru 89 Wildman, World Fishing Fleets, p. 27. Agreement, which aids in their designation of purse seine 90 Government of Japan, Ministry of Agriculture, Forestry and Fisheries. Japan licenses to outsiders. Similar regional bargaining arrange- Fisheries Agency 2013 Annual Report. http://www.jfa.maff.go.jp/e/annual ments might benefit Africa. For example, Liberian officials _report/2013/pdf/25suisan-sankou.pdf. were hesitant to ban pair trawling because Liberia might 91 Jørgensen, Anne-Kristin. 2009. “Recent Developments in the Russian Fishery lose Chinese fishing vessels to another country in the region Sector.” In Russia and the North, edited by Elana Wilson Rowe. Ottawa: Univer- that still allows the practice. However, if all countries in the sity of Ottawa Press. region would agree to ban pair trawling, the risk of losing 92 Jørgensen, p. 89. foreign vessels is removed. » Ownership information about Chinese vessels and Chinese 93 “Глава Росрыболовства: ‘Расширение российского присутствия у берегов Африки не нравится конкурентам’” [“Head of the Federal Fisheries reflagging are challenges to enforcing rules against illegal Agency: ‘Expanding Russian Presence off the Coast of Africa and I Do Not Like Competition’”]. Interfax. January 13, 2014. http://www.interfax.ru/txt .asp?sec=1483&id=351264. 96 Waldman, pp. 121–25. 94 Waldman, pp. 88–89. 97 Fisheries Agency, Council of Agriculture, Executive Yuan. 2013. Fisheries Sta- 95 Korean Overseas Fishing Association tistical Yearbook: Taiwan, China, Kinmen and Matsu Area 2012. Taipei. Emerging Perspectives on Foreign Fishing Arrangements 127 fishing. Requiring commercial fishing vessels to have per- » Catch data accuracy remains a problem. manent, nontransferable International Maritime Orga- » Poor governance in host countries is a statistically signifi- nization (IMO) numbers would ameliorate this problem. cant predictor of IUU fishing. This problem is particularly China should be encouraged to better address the reflag- pronounced in West Africa. Strengthening governance in ging of its vessels. host countries through capacity building will enable bet- » The ownership structure of Chinese DWF companies mat- ter enforcement of fishing regulations and monitoring of ters because deep-pocketed state-owned enterprises (SOEs) arrangements like joint ventures and chartering. command resources from the government that possibly » Because host countries have restricted fishing in their wa- give them an unfair advantage by skewing their profits in ters, China is increasing its high seas operations. Gaps in a more favorable direction for the company. At the same the governance of high seas fishing need to be filled. The time, the Chinese government has less control over its fish- current patchy arrangement of RFMOs is not globally ing vessels both because of the increasing privatization of comprehensive, so fishing capacity that is reduced in one the industry and the decrease in direct management over region may easily move to another. After the jack mack- SOEs that the government once had. erel stock showed signs of decline for several years, China » The development of China’s DWF industry is partly simply moved its fishing vessels elsewhere, to Africa and off because of domestic overfishing and unemployment, and the coast of Russia. Having a global fisheries management the spillover affects China’s Asian neighbors most directly. organization that features a system of individual transfer- There is a disjoint between domestic and DWF policies rable quotas is one way to address the issue of governance and a lack of policy coherence in terms of long-term sus- gaps.98 Requiring IMO numbers of fishing vessels and cre- tainability. Whereas China has taken concrete measures to ating a global record of fishing vessels would also contrib- address fisheries depletion domestically, the lack of such ute to solving this problem. measures belies Chinese rhetoric about sustainability in » As this case study showed through numerous examples, the DWF industry. Nonetheless, Chinese-language sources capacity-building efforts to improve the skills not only of increasingly call for attention to responsible DWF, and the host countries but also of DWF nations would improve Chinese state is concerned about its image and reputation overall management. The Chinese are not as skilled as the abroad. China also exhibits a certain lack of a sense of fishermen from other more advanced DWF nations. The reality in terms of the potential expansion of DWF—other Chinese have language-barrier issues and other capacity countries are pulling out because DWF is no longer profit- problems, such as poor logbook and observer knowledge. able. This dissonance is a result of subsidies and favorable Improving education and awareness among Chinese would fiscal policies toward the industry, as well as China’s various contribute to improving sustainable fisheries management. strategic interests in having a DWF industry. » Some of the costs identified by those skeptical of FFAs » Subsidies are probably the most destructive contribu- were observed in the case study, including problems attrib- tor to overfishing. China is one of the top fishing indus- uting catch appropriately because of murky joint ventures try subsidizers. However, because subsidies are pervasive and evidence of corruption in licensing and aid being used throughout the entire fishing industry, more effort needs as leverage to obtain fishing licenses. These issues essen- to be made to address the removal of fishing subsidies in a tially stem from a lack of transparency in the negotiation multilateral fashion. of FFAs. Barkin, J. Samuel, and Elizabeth R. DeSombre. 2013. Saving Global Fisheries: 98 Reducing Fishing Capacity to Promote Sustainability. Cambridge: MIT Press. 128 Trade in Fishing Services APPENDIX H THE NEW ZEALAND EXPERIENCE OF JOINT VENTURE FISHING OPERATIONS: 1977 TO 2013 Philip J. Major trol the harvest of seven deepwater species (barracouta, hake, hoki, ling, orange roughy, oreo dory, silver warehou, and later squid). Consultant Quota was allocated to fishing companies that could demonstrate e-mail: philandmarymajor@xtra.co.nz that they had the capacity to operate in these fisheries and could process the catch. The government allowed these companies to use foreign-owned and -flagged vessels to harvest their catch entitle- Fishing of New Zealand’s inshore waters for domestic consump- ment (New Zealand Ministry of Agriculture and Forestry 2012). tion has taken place since very early days. The relative isolation An undefined competitive quota remained for domestic vessels fish- of New Zealand from the large industrialized fishing nations of ing these species. the northern hemisphere delayed the development of commercial An interesting development at the time was an application for fishing in the deep water surrounding New Zealand until the early community quota by the Federation of Commercial Fishermen, a 1960s (New Zealand Ministry of Agriculture and Forestry 2012). body of independent inshore fishermen. The government declined Foreign fishing fleets exploited resources in areas beyond the ter- this application but left a competitive quota available for individual ritorial sea: Taiwan, China, Japan, Korea, and then the Soviet small-owner operators. Republic exploited demersal fisheries while the United States and The government at the time opted for the DAS as a response Japan exploited pelagic tuna and squid resources. to a huge number of applications by both fishing companies and In the late 1970s, New Zealand passed the Territorial Sea, Contig- outside investors to import fishing vessels to secure a stake in the uous Zone, and Exclusive Economic Zone Act 1977, which extended fishery and to avoid having vessels built in New Zealand, as import New Zealand’s jurisdiction over its fisheries out to the 200-nautical- policies required. mile limit of the exclusive economic zone (EEZ). The Act defined The number of applications was so large that the catch capac- New Zealand’s territorial sea as extending from shore to 12 nautical ity exceeded the total allowable catch (TAC), and the government miles (previously it was limited to 3 miles) and defined the EEZ as foresaw a potential tragedy of the commons if the applications extending from the outer limit of the territorial sea to 200 nautical were approved and the vessels were permitted to fish under an miles (New Zealand Ministry of Agriculture and Forestry 2012). Olympic system. By the late 1970s, New Zealand still had only limited capacity to The government also saw that the regulatory framework that fish in the EEZ. Catch that domestic vessels could not harvest was existed at the time resulted in fishing companies gaming the system allocated to foreign countries under government-to-government rather than making decisions on rational economic and commercial license agreements. Under those agreements, vessels from Japan, grounds. They wanted a system that allowed firms the greatest pos- Korea, and the Soviet Republic were permitted to fish in New sible flexibility for decision making. This resulted in giving the firms Zealand and return their catch to foreign ports for processing. the flexibility to either charter or purchase vessels and to process These vessels were catching in excess of 200,000 tonnes of fish onshore or offshore, as they saw the most profitable option. The only each year from the EEZ. return government would claim was a $NZ 3 per tonne rental fee. At the time, foreign license agreements were considered to be a While it was hoped that free trade in fisheries services would temporary measure while domestic fishing capacity was built up. To lead to jobs, domestic investment, technology transfer, and mar- help expand the domestic fishing industry, New Zealand operators keting opportunities, the government set no targets or require- were encouraged to engage in joint ventures with overseas fishing ments. The government’s principle motive was to create a system companies. The nature of these joint ventures ranged from foreign that removed itself from interfering in the economic decision parties investing capital in New Zealand to the provision of addi- making of the industry with the belief that rational economic tional fishing capacity in the form of foreign-owned and -flagged decisions were better made by the private sector than by the gov- vessels chartered by New Zealand fishing companies. All joint ernment and that this would lead to a profitable industry that venture arrangements required government approval and were would not make claims on the government purse. The govern- subject to an assessment of the benefits they would deliver to the ment would, however, retain control over decisions that related New Zealand economy (New Zealand Ministry of Agriculture and to the conservation and management of the fish stocks and envi- Forestry 2012). This measure resulted in an expansion of onshore ronmental issues. processing capacity as catch from joint venture vessels was landed, The New Zealand policy move at this time was unique and bold processed, and exported from New Zealand. These arrangements in terms of international fisheries policy. Iceland was the only other were for an initial period of five years and expired in 1983. country that was opting for an individual quota-based system, but In 1983, the Deepwater Allocation System (DAS), a precursor that did not provide for free trade in catching capacity and process- to the Quota Management System (QMS), was introduced to con- ing capacity. Emerging Perspectives on Foreign Fishing Arrangements 129 No known definitive economic study appears to exist of the FIGURE H.1. TACC vs. CATCH FROM MAJOR economic benefits that have flowed to New Zealand from this approach, and there have been both failures and successes among EEZ SPECIES FOR THE 2006/07 the original fishing companies allocated quota. Nonetheless, there TO THE 2010/11 FISHING YEARS have been no calls for government subsidies to support the industry 400,000 Catch TACC or to radically change the system. 350,000 The Quota Management System was introduced in 1986. Under this system, fishing companies and other individuals were 300,000 able to own a share of each fish stock managed under the QMS. 250,000 Tonnes This quota entitled the owner to a fixed quantum of catch from 200,000 a fish stock. The initial allocation of quota was based on fishers’ catch history, and quota shares were granted in perpetuity. 150,000 In 1990, the QMS was amended so that quota shares entitled 100,000 the holder to a proportion of the annual catch levels set by the Minister of Fisheries for each fish stock (according to its assess- 50,000 ment of the state of the stock) rather than a fixed quantum. Further 0 amendments that came into force in 2001 introduced the concept 2006/07 2007/08 2008/09 2009/10 2010/11 of annual catch entitlement (ACE) as a tradable catching right gen- Fishing year erated each year from quota. Source: The Blue Book, FishServe. http://www.fishserve.co.nz/services/ The initial allocation model for the QMS did not recognize any bluebook treaty rights for native people of New Zealand (Māori). Māori chal- lenged the legality of the QMS, and in 1989, the Crown and repre- sentatives of Māori reached an interim settlement of Māori claims body that could allocate ACE to individual communities engaged to fisheries. This settlement provided for the allocation of quota (or in foreign joint ventures or put ACE on the market to the highest the cash equivalent) covering 10 percent of the total quota for each bidder, making decisions as they saw best for the interests of the fish stock in the QMS. This was in effect an allocation of commu- community as a whole. nity quota, as it was held and managed for and on behalf of Māori Te Ohu Kaimonana was also mandated to come up with a plan tribes (Iwi) on a collective basis. and allocate quotas and company shares to individual Iwi (tribes) In 1992, the Waitangi Tribunal reported on a claim by Ngai so eventually the ownership would be vested in individual com- Tahu that Māori had a right to participate in the use of all of New munities who could then use it as they wished to the benefit of the Zealand’s fisheries resources subject to the QMS. The Tribunal Iwi as a whole. found that such a development right existed, and the government Iwi have used their ACE both individually and in combination and Māori returned to negotiations. A full and final settlement was with each other to engage foreign charter vessels rather than pur- agreed that provided for chase vessels and processing capacity themselves, as they have no or limited capital for investment. This allows them to build both » The purchase of a share in Sealord Products Limited; experience in fishing and a capital base with minimal risk. The » 20 percent of any quota for fish stocks brought into the expressed wish of Iwi is to eventually conduct these activities them- QMS after the settlement date; and selves once they have built a strong capital base from the charter » The establishment of the Treaty of Waitangi Fisheries vessel arrangements. Commission to hold assets on behalf of Iwi and to allocate The scale of New Zealand fisheries is demonstrated in those assets for the benefit of all Māori. (From a commu- figure H.1. Foreign joint ventures are currently catching approxi- nity quota perspective, this is the most important aspect, mately 50 percent of the total allowable commercial catch (TACC). as it provided for the central body, which would minimize This is 35 years after the first approval of foreign joint ventures. transaction costs to either hold the quota or allocate to Iwi for the Iwi to use or to divest to individuals.) USE OF FCVs IN NEW ZEALAND’S Quota received from the Crown as part of the settlement had limi- tations placed on its tradability: it could be sold only to other Iwi EEZ FISHERIES or to the Treaty of Waitangi Fisheries Commission, now known as Foreign charter vessels (FCVs) are vessels that are owned by a for- Te Ohu Kaimoana. On the other hand, annual catch entitlement eign person and fish in New Zealand waters under contract or derived from the settlement quota could be sold on the open mar- charter to a New Zealand company. These vessels are restricted to ket (New Zealand Ministry of Agriculture and Forestry 2012). This operating in the EEZ outside the territorial sea and other defined protected a community asset from divestment, while the ACE trad- areas to avoid conflict with small inshore vessels. The fishing fleet ability allowed Iwi the flexibility to fish themselves, engage others operating in New Zealand’s EEZ is a mix of domestically owned to do so, or sell on the open market without losing their perpetual and operated fishing vessels and FCVs. FCVs have operated in property right. New Zealand since the earliest days of its EEZ fishing activity. The The significance of this provision is that it was an allocation overall number of fishing vessels and the number of FCVs operat- of Community quota. Te Ohu Kaimoana is a community-elected ing in the EEZ has fluctuated over time (see figure H.2 for levels 130 Trade in Fishing Services FIGURE H.2. NUMBER OF FCVs AND DOMESTIC for the last 15 years) (New Zealand Ministry of Agriculture and Forestry 2012). VESSELS OPERATING IN NEW New Zealand companies charter FCVs from foreign vessel own- ZEALAND’S EEZ BY FISHING YEAR ers under either a demise or a time charter arrangement. Under a demise charter (also referred to as a bareboat char- FCVs Domestic vessels ter), only the vessel (including plant and fishing gear) is chartered. The company chartering the vessel (referred to as the New Zealand 200 charter party) assumes control and possession of the vessel for the duration of the charter period, including the right to employ offic- Number of vessels 150 ers and crew to operate the vessel. This arrangement has the vessel and crew subject to all aspects of New Zealand law. 100 A time charter is where both the vessel and crew are chartered as a package. Under this arrangement, control and possession of 50 the vessel are retained by the vessel owner. The vessel and crew are only subject New Zealand fishery law and limited aspects of New 0 Zealand maritime law. 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Of the 27 FCVs operating in the EEZ in the 2010/11 fishing year, 26 operated under a time charter and 1 under a demise char- Fishing year ter. The procedures are outlined in figure H.3. All commercial vessels, including fishing vessels, are required to Source: MAF database. fly the flag of the country in which they are registered. (All vessels FIGURE H.3. KEY STEPS AND PARTIES INVOLVED IN ENABLING AN FCV TO OPERATE IN NEW ZEALAND’S EEZ New Zealand Charter Party A New Zealand fishing company that holds a fishing permit allowing the company to harvest fish in New Zealand Charter Agreement Demise Charter Time Charter • Vessel chartered without crew • Vessel and crew chartered as a • Can be either New Zealand or package foreign flagged • Foreign flagged • New Zealand charter party employs OR • Foreign owner employs crew crew • Requires New Zealand charter party • No AIP required, but foreign crew to apply for an AIP to bring in foreign need a work visa crew Registration to fish in New Zealand • FCV registration requires consent from Director-General of MAF • Conditions may be imposed upon registraton • FCV becomes a “New Zealand fishing vessel” and all legislation under the WFisheries Act applies Foreign Charter Vessel (FCV) Foreign-owned vessel chartered by a New Zealand charter party to fish in New Zealand’s EEZ Source: Secretariat Inquiry into the Operation of Foreign Charter Vessels in New Zealand, 2012. Emerging Perspectives on Foreign Fishing Arrangements 131 FIGURE H.4. THE NUMBER OF FISHING FIGURE H.5. EXPORT VALUE OF MAJOR EEZ VESSELS OPERATING IN NEW SPECIES FOR THE 2006/07 TO ZEALAND’S EEZ IN THE 2010/11 2010/11 FISHING YEARS FISHING YEAR BY FLAG STATE 700 633.4 624.2 666.7 597.7 592.7 600 2 500 $NZ (millions) 4 400 7 300 29 200 New Zealand 100 13 Korea 0 Japan 2006/07 2007/08 2008/09 2009/10 2010/11 Ukraine Fishing year Source: Seafood Industry Council Export Statistics. Dominica Source: MAF database. FIGURE H.6. ESTIMATED EXPORT VALUE BY are required to be registered in their flag state. Note that in the New VESSEL TYPE FOR THE 2006/07 Zealand context this refers to registration under the Ship Registra- TO 2010/11 FISHING YEARS tion Act 1992 and not the registration under the Fisheries Act.) Domestic vessels FCVs Vessels may fly only one flag at a time but are free to change flags 700 as long as there is a genuine link (genuine is not defined internation- 600 ally) between the vessel and the flag state and the vessel satisfies any conditions set by the flag state. Decisions on which flag state a vessel 500 324.0 370.6 $NZ (millions) operates are made for a variety of reasons, including the state in 289.5 325.3 332.8 400 which the vessel is owned and the state in which the vessel oper- ates. In some cases, a vessel may be reflagged to a state with lower 300 regulatory requirements or a less-vigorous enforcement regime to 200 reduce operating costs. These states are referred to as “flags of 308.2 267.5 309.4 291.4 296.1 convenience.” 100 Under New Zealand’s Ship Registration Act, only fishing vessels 0 chartered on a demise basis may be flagged to New Zealand. (The 2006/07 2007/08 2008/09 2009/10 2009/11 one vessel currently operating in New Zealand under a demise Fishing year charter is flagged to New Zealand). Of the time-chartered vessels currently operating in New Zealand’s EEZ, 13 are flagged to the Source: Seafood Industry Council Export Statistics. Republic of Korea, 7 to Japan, 4 to Ukraine, and 2 to Dominica (see figure H.4). The majority of FCVs operate year-round in New Zealand’s SPECIES TARGETED BY FCVs EEZ. In the 2010/11 fishing year, there were 56 deepwater vessels The main EEZ species covered by the QMS include deepwater operating in New Zealand’s deepwater and pelagic EEZ fisheries. species (orange roughy), middle-depth species (southern blue whit- Twenty-seven of these vessels were FCVs, and 29 were domestic ing), and highly migratory pelagic species (southern bluefin tuna). vessels. Six of the FCVs were seasonal vessels fishing in the EEZ The majority of species targeted by the FCV fleet are high-volume, for only part of the fishing year. These vessels operated in fisheries, low-value stocks, such as squid, barracouta, and southern blue such as the squid jig and tuna longline fisheries, that require spe- whiting. Japanese FCVs that fish in the EEZ for only a few months cialist gear or particular vessel capabilities. each year operate in seasonal fisheries, primarily the squid jig and The FCVs that remain in the EEZ year-round are all trawl ves- the tuna long-line fisheries. sels, apart from one that pots for hagfish. The export value of New Zealand’s EEZ fishery by all vessels The use of a number of foreign-flagged vessels to fish privately- has increased in recent years and currently exceeds $NZ 650 mil- owned quota under contract to a domestic permit holder within lion, as shown in figure H.5 below (New Zealand Ministry of Agri- the EEZ is unique to New Zealand. This reflects the size of the culture and Forestry 2012). New Zealand EEZ (the fourth largest in the world), the compar- Estimated export value by vessel type and the proportions of atively limited capacity of the domestic fishing industry, and the catch taken by FCVs are shown in figures H.6 and H.7 below. use of an individual transferable quota system (the QMS) (New These figures show that the export value of product taken by FCVs Zealand Ministry of Agriculture and Forestry 2012). has remained relatively stable over the past five years and that the 132 Trade in Fishing Services FIGURE H.7. FCVs PROPORTION OF THE utilization of fisheries resources in a sustainable manner. It applies to all commercial, recreational, and customary fishing in New MAJOR EEZ SPECIES CATCH BY Zealand’s marine environment. The Ministry of Agriculture and VOLUME AND EXPORT VALUE FOR Fisheries (MAF), now known as the Ministry of Primary Industries THE 2006/07 TO 2010/11 FISHING (MPI), is responsible for enforcing all fisheries legislation, including YEARS the provisions of the Act relating to the protection of New Zea- land’s marine environment. Voulme of catch Estimated value of exports Under the Fisheries Act, FCVs fishing in New Zealand waters Percentage of catch and export value 70% 62% are considered to be New Zealand fishing vessels and, as such, must 59% 60% 57% 56% comply with all relevant provisions of the Fisheries Act and regula- 51% 50% tions. Under UNCLOS, there are no jurisdictional issues regarding 52% 49% the application of New Zealand fisheries laws and regulations to 40% 47% 45% 44% FCVs operating in New Zealand’s EEZ. The situation is, however, 30% less clear in respect to safety standards and labor conditions. 20% 10% MARITIME SAFETY 0% While New Zealand, as the coastal state, has certain rights under 2006/07 2007/08 2008/09 2009/10 2010/11 UNCLOS in relation to the management of the natural resources Fishing year of its EEZ, the flag state is responsible for the health, safety, and Source: Seafood Industry Council Export Statistics. qualifications of crew onboard its fishing vessels and for the safety standards of the vessel’s construction and operation. There are currently no international conventions or standards growth in export value over this period has come primarily from in force that apply to the design and construction, seafarer certifi- domestic vessels. cation, or equipment standards for fishing vessels. Fishing vessels and crews are expressly excluded from the two major International THE INTERNATIONAL LEGAL Maritime Organization (IMO) conventions to which New Zealand is party: the International Convention for the Safety of Life at Sea FRAMEWORK (SOLAS) and the Convention on Standards of Training, Certifica- The rights and duties of flag states and coastal states within whose tion and Watchkeeping (SCTW). waters a vessel operates are set out in United Nations Conven- Two IMO conventions dealing with fishing vessels have been tion on the Law of the Sea (UNCLOS). UNCLOS represents an developed: the 1993 Torremolinos Protocol for the Safety of Fish- attempt to strike a balance between the traditional rights of flag ing Vessels (Torremolinos Protocol) and the 1995 International states under the concept of “freedom of the high seas” and the Convention on Standards of Training, Certification and Watch- notion that a coastal state should be entitled to exercise a degree of keeping for Fishing Vessel Personnel (STCW-F Convention). control over the waters off its coast. STCW-F came into force in October 2012, and it is anticipated There are limits on a coastal state’s authority over the activities that the Torremolinos Protocol will come into force in October of foreign-flagged vessels in its EEZ. The basic UNCLOS principle 2015. New Zealand is not yet a signatory to either convention. governing the activities of vessels in an EEZ is that the flag state has Maritime New Zealand (MNZ) is a Crown entity with respon- primary jurisdiction over all technical, administrative, and social sibilities under the Maritime Transport Act 1994, the Maritime matters relating to its vessels. This means there is limited control Rules and Marine Protection Rules (the Rules), and the Ship Reg- over health and safety issues, crew abuse, and wage conditions by istration Act 1992. MNZ was established in 1993 and is governed the coastal state. by an independent board appointed by the governor general on the A coastal state’s authority over foreign-flagged vessels in its EEZ recommendation of the minister of transport. stems from its “sovereign rights” with respect to the resources of MNZ is the regulatory authority responsible for ensuring the the seabed and water column, including the right to control and safety of fishing vessels and enforcing marine pollution standards. regulate fishing activity. These rights are not absolute and are care- Under the Rules, all New Zealand–flagged commercial fishing ves- fully balanced against the high-sea freedoms traditionally enjoyed sels are required to be in the oversight of a safe ship management by flag states. A key duty of coastal states is to establish conser- (SSM) organization. The actual assessment and approval of vessels vation and management measures to ensure that fisheries are not as meeting New Zealand’s requirements has been transferred to overexploited. Coastal states also have responsibility for the protec- approved SSM organizations, with MNZ retaining an audit func- tion and preservation of the marine environment in their EEZ. tion to ensure that SSM companies apply appropriate inspection and approval processes. Foreign-flagged vessels are not required to enter into the SSM FISHERIES MANAGEMENT regime until they have completed two years of continuous opera- The legislative framework for managing New Zealand fisheries tion in New Zealand. There are potential jurisdictional questions is set out in the Fisheries Act 1996 and regulations made pursu- around the application of New Zealand’s maritime safety regime ant to it. The purpose of the Fisheries Act is to provide for the to foreign-flagged FCVs. At present, there is no legal requirement Emerging Perspectives on Foreign Fishing Arrangements 133 for operators of FCVs to report incidents and mishaps in the EEZ. » Immigration authorities are satisfied that the New Zealand MNZ has no authority to investigate accidents or incidents involv- charter party has made a genuine attempt to recruit New ing FCVs in New Zealand’s EEZ unless requested to do so by the Zealanders; flag state. » Immigration authorities are satisfied that the terms and MNZ is responsible for ensuring that officers and crew working conditions of the code of practice will be adhered to; and on New Zealand–flagged fishing vessels have the necessary quali- » The New Zealand charter party provides a guarantee of fications, as specified in the Rules. The qualifications required of payment of minimum levels of crew remuneration in the officers and crew working on foreign-flagged FCVs are set by the event of default by the foreign employer. flag state. HEALTH AND SAFETY OF CREW EMPLOYMENT CONDITIONS As indicated above, two IMO conventions have been developed The International Labour Organization (ILO) is the United that set safety standards for the protection of crews of fishing ves- Nations’ specialized agency responsible for the promotion of social sels: the Torremolinos Protocol and the STCW-F Convention. justice and internationally recognized labor rights. While the ILO The health, safety, and well-being of all those onboard foreign- has, in recent years, negotiated and adopted conventions and rec- flagged vessels in the EEZ remain the responsibility of the flag state. ommendations that set standards for migrant workers and workers While coastal states have jurisdiction over artificial islands or instal- on fishing boats, New Zealand is not party to these conventions. lations (such as oil rigs) in their EEZ, they have no general jurisdic- tion over foreign-flagged vessels. New Zealand’s Health and Safety in Employment Act (HSE Act) does not currently apply to FCVs. CODE OF PRACTICE ON FOREIGN FISHING CREW (THE CODE OF CRIMINAL ACTIVITY PRACTICE) UNCLOS does not give coastal states general jurisdiction over The rights of foreign-flagged FCV crews are set out in an indus- criminal activity on foreign-flagged vessels in their EEZ. New Zea- try code of practice. In the absence of specific legal provisions, land’s criminal law extends beyond New Zealand territory and into the code of practice was introduced to impose a broad range of the EEZ only in certain circumstances. Extraterritorial jurisdiction employment requirements on the use of foreign labor on foreign- may be exercised in limited circumstances for international crimes flagged FCVs operating within the EEZ. The code of practice was and for general criminal offending in the case of vessels operating agreed on after negotiations involving the industry, the govern- out of New Zealand ports where the flag state consents to pros- ment, and the New Zealand Fishing Industry Guild. The code ecution. In either case, prosecutions require the consent of New of practice includes minimum working and living conditions Zealand’s attorney. for FCV crews (including regular reporting and provisions for onboard inspections during port visits), minimum remuneration requirements, and the right of foreign crew to access employment GENERAL dispute resolution mechanisms under the Employment Relations FOOD SAFETY Act 2000. MAF is responsible for the regulatory regime established to ensure that food is safe for human consumption. The Animal Products Act 1999 sets out New Zealand’s legal requirements for ensuring food MINIMUM WAGES safety and the suitability of animal products, including seafood. The Fisheries Act extends the application of the Minimum Wage MPI is responsible for setting and administering all food safety stan- Act and Wage Protection Act to FCV crew. It does this by con- dards under this Act and has entered into a number of intergov- ditioning the approval of the FCV. The Fisheries Act also allows ernmental agreements on the recognition of food safety standards. labor inspectors to exercise their powers under these Acts. It is the Risk management programs (RMPs) are required for all factory responsibility of the Department of Labour (DoL) to ensure that vessels (fishing vessels that fillet on board or carry out further pro- FCVs operating in the EEZ comply with these Acts. cessing). The same requirements and criteria are applied whether the vessel is New Zealand flagged or foreign flagged. Before a vessel is allowed to fish, an onsite evaluation by an independent WORK VISAS FOR FCV CREW MAF-approved evaluator and a MAF assessment of the program Under the Immigration Act 2009, New Zealand work visas for for- is required. Limited processing vessels operate under a Regulated eign crew on FCVs are approved using a two-stage process. The Control Scheme (RCS). A registered Limited Processing Fishing New Zealand–based company that is party to the charter agree- Vessel’s operation is restricted to limited processing (the wash- ment for a particular FCV (referred to as the New Zealand char- ing, scaling, gutting, deheading, tubing, tailing, chilling, freezing, ter party) must generally obtain an Approval in Principle (AIP) to storage, packing, or transport of fish material or fish product for employ foreign crew on an FCV, and the particular crew members human consumption). must apply for, and be granted, an appropriate work visa. The fol- Verification of compliance with RMP and RCS requirements lowing three conditions must be met (in addition to generic require- is undertaken in port on a performance-based frequency (New ments of health, character, and bona fides): Zealand Ministry of Agriculture and Forestry 2012). 134 Trade in Fishing Services FIGURE H.8. PERCENTAGE CATCH BY FCVs AND NEW ZEALAND FLAGGED VESSELS FOR THE 2010/11 FISHING YEAR Domestic vessel catch FCV catch 100% 90% 80% Percentage of catch 70% 60% 50% 40% 30% 20% 10% 0% Jack mackerel ($1.67/kg) Southern blue whiting ($1.50/kg) Barracouta ($1.62/kg) Squid ($3.26/kg) Oreo dory ($3.61/kg) Hoki ($3.63/kg) Warehou ($4.66/kg) Hake ($4.85/kg) Ling ($7.59/kg) Orange roughy ($17.36/kg) Other EEZ fish species Source: Seafood Industry Council Export Statistics October 2011 and MAF catch database. TRADE ACCESS THE COST DISTORTIONS ADDED UP Some New Zealand companies currently benefit from preferential The operating costs (fuel, repairs and maintenance, and cost of access to the Korean and Japanese markets by virtue of their use capital) between charter vessels and domestic vessels are very simi- of FCV’s flagged to those states. New Zealand companies using lar in most cost centers. The big variance occurs in the cost of labor Korean or Japanese vessels in charter operations can export their and the benefits associated with privileged market access. Hence, share of the catch to those countries as domestic product, thereby this is the source of comparative advantage. avoiding duty and quota restrictions. This is particularly beneficial When the added advantages of free market access are added for New Zealand companies when it comes to low-value species to the disparity in crewing costs, the level of distortion created like jack mackerel and squid. This privilege does not extend to for New Zealand crewed vessels is enormous. The distortion companies who are not operating in a FCV. arises from New Zealand vessels being constrained by New Zea- The value of fish species in figure H.8 is based on the aver- land law, which causes them to incur greater operating costs rel- age processed price. New Zealand vessels that catch hoki obtain a ative to the unrestrained foreign charter vessels. As an example, much higher price, as it is filleted and snap frozen at sea (headed and gutted compared to filleted). FCVs do not target oreo dory, In a recent trip (April 2011) of the New Zealand owned Amal- despite its lower value, as it is caught in conjunction with orange tal Explorer the vessel caught 626 M/T of Squid for an export roughy. Orange roughy is a high-value fishery targeted by domestic value of NZD ($NZ) 2.1 million. Had the vessel been flagged vessels. as a Korean FCV vessel, the landed catch value would have Figure H.8 demonstrates that after 35 years of joint ventures, increased by NZD 400,000 due to the tariff reduction. there has been little progress to a domestic industry for the lower- In addition to the duty free export premium of NZD 400,000 value species of southern blue whiting, baracouta, jack mackerel, there is also the reduced wages incurred on the Korean FCV of squid, hake, and warehou. NZD 330,000. The New Zealand vessels wage costs equated It might be argued that by keeping import restrictions and tariffs to NZD 546,000 for the Squid trip whereas the Korean wage on squid and mackerel in particular, foreign joint ventures have bill would be approximately NZD 210,000. been able to stop the development of a New Zealand domestic On this single voyage of only 40 days the New Zealand ves- industry, as it is only possible to harvest and market these species sel Amaltal Explorer incurred an effect cost surcharge of without the cost of market restrictions. NZD 730,000 compared to a similar sized Korean FCV. In a recent submission to The Ministerial Inquiry into the Operation of Foreign Charter Vessels, a New Zealand domestic Cost of Tariff on Squid NZD 400,000 company provided the following economic analysis to illustrate the Wages Differential NZD 330,000 disadvantage of a domestic operator. NZD 730,000 Emerging Perspectives on Foreign Fishing Arrangements 135 It is of little wonder that the FCV’s are catching 62.3 percent used to balance out catch plans for vessels across a company’s fleet. of our main deep water fish stocks. This gives companies greater flexibility if, for example, a domes- tic vessel requires unscheduled maintenance or the total allowable No formal studies are known to exist on the total disparities and commercial catch for a species is reduced. comparisons between domestic and charter operations. The use of FCVs by New Zealand companies can form part If the domestic chartering nation required that trade barri- of wider business relationships. These business relationships can ers by the country of vessel registration had to be lifted prior to extend to numerous points on the post-harvest supply chain from authority to fish in the NZ zone, it would create a more level play- storage, processing, and market access to marketing. ing field and lead to potential domestic development. Such an Some of the foreign companies that charter FCVs to New Zea- approach would need to be treated carefully to avoid the nation land companies have large global distribution networks. The use of the foreign vessel provider withdrawing approval for their ves- of FCVs may provide access to these networks for New Zealand sels to operate in the EEZ. companies that may be used for catch taken by domestic vessels as It is equally clear why those domestic operators of FCVs wish to well as FCVs. For example, Sealord is 50 percent owned by Māori continue to operate them with subsidized capital, preferential mar- and 50 percent owned by Nippon Suisan Kaisha Ltd (Nissui) of ket access, and lower wages; provided they can negotiate effectively Japan. Being co-owned by Nissui provides access to Nissui’s global with their foreign partner, they are likely to be more profitable than network of subsidiary companies, affiliates and partners. domestic operations. Business arrangements associated with the use of FCVs have also facilitated investment by New Zealand seafood companies in CONTRIBUTION OF FCVs TO THE offshore processing ventures in Asia. For example, Sanford Limited NEW ZEALAND ECONOMY and Dong Won Fisheries Co Ltd of Korea each own a 50-percent share in the Weihai Dong Won Food Co Ltd located in China. EEZ fishing requires significant investment because large vessels Weihai Dong Won Food Co is an added-value seafood plant that and specialized equipment are needed. New Zealand’s EEZ fishing processes fish sourced from New Zealand and other countries into industry is dominated by a small number of large companies that added-value products. These products are then exported to other can achieve economies of scale by fishing large-quota parcels with parts of Asia, the EU, America, Australia, and New Zealand. San- multiple vessels. This is in contrast with the in-shore fleet, which ford and Dong Won Fisheries Co Ltd also jointly own San Won has many small businesses catching fish on behalf of quota own- Ltd, which operates a large cold-store facility in Timaru. ers. The in-shore fleet has relatively low barriers to entry because The example above relating to Sanford Ltd is not unique. Other small vessels are relatively inexpensive and do not require specialist large New Zealand seafood companies have developed processing equipment. interests offshore, particularly in China, through subcontracting or The QMS provides flexibility for quota owners to make com- joint venture arrangements. mercial decisions on the most profitable methods of harvesting their FCVs appear to allow low-value fish to be harvested eco- rights. This means that quota owners can decide whether to catch nomically. It has not been possible to ascertain whether the the fish themselves or sell their ACE. Having access to FCVs, either less economically attractive stock would continue to be fished through a charter arrangement or by selling ACE to a New Zealand if there was a significant change in the underlying structure of company chartering an FCV , gives quota owners a range of options current FCV approvals. There is a strong counterargument that for maximizing profits from the use of their quota. It also allows com- this activity should be taking place in New Zealand. This is on panies that do not own quota to purchase ACE and fish using FCVs. the basis that if New Zealand–caught product was not discrimi- Some smaller businesses decide to use FCVs because they do nated against by tariffs, existing ventures would be able to sell not have the funds to make the capital investment needed to pur- it into Korea and Japan and operate profitably. FCV operators chase a vessel. The only options for quota holders with small quota who are exempt from the tariffs that New Zealand operators parcels are to sell their ACE or partner with larger commercial face maintain that they cannot operate profitably without cheap interests. It is worth noting that, at present, smaller businesses have Indonesian crew. chosen to operate FCVs under time charters and the option to The key financial-impact arguments that arise from the use of demise charter is not generally taken. FCVs in New Zealand’s EEZ fisheries can be grouped into the Using FCVs gives companies operational flexibility, including three categories set out below. the ability to increase or reduce catching capacity without sig- nificant capital investment or incurring the costs associated with decommissioning excess capacity. If total allowable commercial DISCREPANCY BETWEEN WAGES catches are reduced, FCVs offer companies the possibility of PAID TO CREW ON DOMESTIC restructuring without the loss of New Zealand jobs and assets. In addition, some EEZ fisheries require specialist equipment and VESSELS AND FCVs have only a relatively short season when it is profitable to catch a From the information that has been provided to the Ministerial particular species of fish. In these situations, FCVs allow companies inquiry into FCVs, it is clear that crew on domestic vessels are paid access to these fisheries without requiring them to purchase a vessel significantly more than crew on FCVs. that cannot be used for the remainder of the year or in other fisheries. However, it is an increasing global trend for service-based indus- Some of the larger fishing companies use FCVs primarily to tries to be outsourced to where the cost of labor is significantly catch high-volume, low-value species. However, they can also be cheaper. This is particularly the case for highly mobile workforces 136 Trade in Fishing Services such as fishing crews. Some see this as unfair competition; others FCVs can be retained in New Zealand by New Zealand entities see it as a legitimate use of more competitive international wage such as quota owners and the New Zealand charter parties. This rates. occurs either directly through profit sharing arrangements or from the sale of ACE. Benefits that accrue to the local economy from servicing the PRESENCE OF FCVs IN THE EEZ FCV fleet include the provision of supplies, repairs and mainte- FLEET APPEARS TO INCREASE nance, packaging, and cool-store facilities. Most of the FCVs in New Zealand have been here since the 1990s. A proportion of the THE VALUE OF ACE repairs and maintenance of these vessels is done in New Zealand Due to the reporting requirements on ACE trading, it has not been (often benefitting local economies such as Timaru, Lyttelton, and possible to quantify the impact of FCVs on the price of ACE. How- Nelson), and supplies are sourced from local businesses. These con- ever, the argument that a larger fleet provides competition in the tributions to local economies remain only to the extent that the size ACE market to the benefit of quota holders has been commented of the EEZ fleet remains constant and operates out of the same on by a number of industry players on both sides of the argument ports. These local economies would be disadvantaged if FCVs left in submissions to the Ministerial inquiry into FCVs. It seems that New Zealand’s EEZ and were not replaced by other vessels. Iwi, in particular (typically not holding a package of ACE sufficient to comprise an economic catch plan), benefit from the ability to sell their ACE holdings to third parties that utilize FCVs. Any decrease TREATY SETTLEMENT QUOTA in TACC limits may also increase competition in the ACE market ADVANTAGES as vessels compete to purchase ACE to make up an economically viable catch plan. FCVs with lower wage costs and perhaps lower As previously mentioned, the community nature of settlement maintenance and compliance costs can afford to pay more for quota shares cannot be freely sold as other quota shares can: the ACE, hence the argument that FCVs have artificially increased the Maori Fisheries Act prevents the sale of settlement quota outside value of ACE to the detriment of domestic vessels. Iwi and Te Ohu Kaimoana. On the other hand, ACE derived from settlement quota can be freely traded on the open market. In addition, Iwi have only progressively become owners of set- PRESENCE OF FCVs IS tlement quota since 2005, so there has been limited time for them to develop a long-term business model that would maximize the HAVING A MIXED IMPACT ON return on their quota asset. The individual quota shares tend to be ACCESS TO CERTAIN EXPORT relatively small, which means that in many cases, it is not economic for individual Iwi to fish their own quota. MARKETS Iwi use different models to maximize the return from their The use of FCVs by New Zealand companies can directly pro- quota asset, including vide for better access to foreign markets. Fish caught on FCVs and » Joint venture arrangements with foreign companies; exported to Korea and Japan receives tariff-free entry into their flag- » Long-term arrangements with domestic fishing companies; state markets, as it is considered to be product of Korea or Japan » Selling ACE through quota brokers or directly to fishing under flag-state principles. For example, the tariff on squid enter- operators; and ing Korea is 22 percent. A New Zealand vessel that catches 1,000 » Aggregating (or collectivizing) their ACE with other Iwi tonnes of squid with a market value of NZD 1,680,000 and exports (New Zealand Ministry of Agriculture and Forestry 2012). it to Korea would incur a tariff of NZD 369,600 that catch from a Korean-flagged vessel would avoid. The Korean-flagged vessel does not have to pay the tariff because the squid is considered a product DAMAGE TO NEW ZEALAND’S of Korea, notwithstanding that it was caught in New Zealand’s EEZ. INTERNATIONAL REPUTATION The use of FCVs is causing some market access difficulties in key markets, such as the EU, which are investigating the use of slave During 2011, there were complaints and allegations by FCV crew labor on Korean vessels. to New Zealand authorities over their physical treatment and pay- ment on FCVs operating in the New Zealand EEZ. Issues raised included vessel safety, living and working conditions, physical and HOW FCVs CONTRIBUTE sexual abuse by officers, underpayment, and manipulation of DIRECTLY TO LOCAL time sheets. The government has ongoing investigations into these claims. ECONOMIES There is no doubt that these allegations of exploitative labor FCVs are in New Zealand’s EEZ to catch fish on behalf of New practices and substandard working conditions have been dam- Zealand quota owners. This differs from arrangements in other aging to New Zealand’s reputation as a progressive and fair- countries, where foreign-flagged vessels fish under license arrange- minded nation. Reports have appeared in The New York Times, ments between the coastal state government and a foreign govern- Le Monde, China Daily, Jakarta Globe and The Guardian newspapers, ment. Depending on the commercial arrangements agreed on with publications including Bloomberg Businessweek, and a number of the FCV owner, a proportion of the profit from the fish caught by New Zealand newspapers and industry publications. A range Emerging Perspectives on Foreign Fishing Arrangements 137 of international online media agencies have also picked up the coordinated and detailed assessment of the risks of FCVs across allegations. agencies. Most of the incidents reported that are causing damage to New Risks associated with fisheries management, employment, Zealand’s reputation appear to have occurred on Korean-flagged or vessel safety will be able to be considered by the chief execu- vessels. The alleged abuse is against predominantly Indonesian tive rather than only fisheries management. This reflects that crew members. Very few complaints were made about FCVs the government is implementing an integrated risk-management flagged to other states, although some of these have been the sub- framework, so that the chief executive has a complete government- ject of complaints in the past. wide picture of risk when making decisions. From May 2016, the All five FCVs investigated by government agencies for breaches approach would apply to all vessels irrespective of ownership sta- of employment law or safety standards are flagged to Korea. The tus, ensuring an equitable, responsive, and simple approach. Ministry of Primary Industry withdrew its consent to register one The risk assessment will consider the compliance history of vessel in February 2012. Maritime New Zealand placed one vessel vessels, crew, and operators and will also inform the deployment in detention and a second vessel under an Imposition of Condi- of agency management interventions (for example, audits, inspec- tions (IOC) order. tions, observer coverage, and monitoring). There have been allegations in both the domestic and inter- In the period leading up to May 2016, the registration process national media of human trafficking on FCVs in New Zealand in the Fisheries Act will continue to distinguish between FCVs and waters. The U.S. State Department produces an annual Trafficking domestic vessels. This reflects that foreign-flagged vessels will oper- in Persons Report that assesses 184 countries, including New Zea- ate in New Zealand waters during that time. land, on measures taken to combat human trafficking. The United The bill increases the enforcement powers of the chief execu- States has identified fishing as a problem area. New Zealand’s han- tive through the introduction of new vessel suspension powers and dling of recent FCV allegations, including the Ministerial inquiry, extended cancellation powers. has been closely followed by the U.S. State Department. The U.S. The intent of the vessel registration suspension process proposed ambassador for trafficking in persons visited New Zealand for dis- in the bill is to enable the chief executive to cease operations until cussions with officials and the industry. A further Trafficking in Per- the issues are resolved and, if necessary, call the vessel back to port. sons Report is scheduled to be issued by the U.S. State Department This power provides the flexibility to mitigate the risk of illegal later this year. activity while not going as far as cancelling the vessel registration. This is a two-step process. If the matter that led to the suspension is not resolved, then the vessel registration can be cancelled. RISKS TO NEW ZEALAND’S Suspension can occur if the chief executive is satisfied on rea- SEAFOOD INDUSTRY sonable grounds that the vessel’s registration for the time being poses a risk of a breach of fisheries management, employment, or Repeated complaints about the activities of FCVs in such areas as vessel safety laws justifying that action or there has been a breach vessel safety and workplace conditions put New Zealand’s fishing of any condition of its registration. industry’s reputation and continued access to markets at risk (New The proposed amendments extend the functions of MPI Zealand Ministry of Agriculture and Forestry 2012). observers to enable them to capture information on employment Fishing companies have noted that retailers in markets such as and vessel safety matters, along with existing fisheries management the United Kingdom are paying close attention to consumer con- information. cerns about the sustainability of and ethical considerations around The purpose of these changes is to support the new coordinated the food they buy. A recent U.K. government report found that eth- risk-management approach between MPI, MBIE, and MNZ. ical standards as well as sustainability issues are now closely linked Information on employment, vessel safety, and fisheries manage- to consumers’ purchasing decisions. ment activities on board vessels will be fed back from observers to support agencies in assigning risk to individual vessel operators NEW ZEALAND GOVERNMENT and crew. The changes also empower regulations to be made and amended RESPONSE (DRAWN FROM to enable the government to recover the cost of these new observer THE PRIMARY PRODUCTION functions and empower the government to make regulations speci- fying the requirements for electronic monitoring equipment to be COMMITTEE RESPONSE TO installed and maintained on vessels. This change is necessary to FISHERIES [FOREIGN CHARTER increase the range of monitoring and surveillance options available VESSELS AND OTHER MATTERS] to the government in future. The most significant change proposed in the bill requires that AMENDMENT BILL) all FCVs be flagged as New Zealand ships (reflagging) by May 1, The government has introduced legislation to protect New Zea- 2016. land’s reputation and market access, although it had not been This change is a fundamental shift from the vessel management passed at time of this report. regime in the Fisheries Act 1996, and for this reason, the govern- The bill proposes to amend the vessel registration process ment allowed a four-year transition period to minimize the impact specified in s103 of the Fisheries Act 1996 to provide a more on fishing vessel operators. 138 Trade in Fishing Services The government made this decision because it is serious about protecting New Zealand’s international reputation as a responsible LESSONS FROM THE NEW and world-leading manager of fisheries. The intent of the change ZEALAND EXPERIENCE is to firmly and transparently place the accountability for posses- FCV operations mean that New Zealand quota and ACE hold- sion and control of FCVs with a New Zealand party. Reflagging ers do not need to raise capital for vessels and processing facilities ensures the responsibility of the New Zealand party to ongoing needed to operate in the EEZ. compliance with the respective New Zealand labor, safety, and fish- Given a free market in fisheries services, industry operators will eries rules and standards. choose those services that are the most economic, transferring pro- The government considers the reputational risks of continued cessing offshore and using the cheapest labor options for catching. use of vessels flagged to other States to be too high to use time There can be some market advantages for companies that charter or demise charters. Neither time nor demise arrangements involve themselves in FCV operations, but it does not extend to the (in absence of reflagging) would guarantee that New Zealand sector as a whole. employment laws would apply while operating in New Zealand There are advantages to community quota holders or small waters. parcel holders in being able to combine charter-catching capacity Reflagging will create a level playing field for all vessels without having to raise capital for vessels of their own, particu- operating in New Zealand waters. From May 2016, all refer- larly when their individual holdings would not support a vessel. ences to FCVs in the Fisheries Act 1996 and regulations will A bigger demand is created for ACE or leased quota to the be removed and the existing vessel registration process will be advantage of those who have small quota holdings. redundant. FCV operations do not lead automatically to development of The government wants to send a clear message domestically domestic processing and marketing arrangements. FCV operations and internationally that the bar has been raised. New Zealand is on their own do not result in technology transfer. serious about ensuring effective employment, vessel safety, and fish- It is difficult for the coastal state to exercise control over the activity eries management for all vessels fishing in our EEZ. of foreign-registered fishing vessels in their zone without sovereignty. It remains to be seen whether existing FCV arrangements Some FCV operators place profit ahead of reputation, which will convert to New Zealand registered operations, although one undermines the operations of those running legitimate operations Ukrainian venture has already done so. For operators of FCVs, it both in the FCV sector and in the domestic sector. will mean they will potentially face higher labor costs and the possi- Activities that undermine the credibility of the host nation will bility of losing preferential access to the home markets of the vessel in the end be dealt with severely. origin. While some in the industry would see this as an impediment to free trade, others both inside and outside the industry see this as ensuring New Zealand meets its international obligations and is REFERENCES not an impediment to legitimate free trade. New Zealand Ministry of Agriculture and Forestry. 2012. Report of the Min- To support the policy in the bill, the government has also isterial Inquiry into the Use and Operation of Foreign Charter Vessels. adopted the following nonlegislative measures to manage FCVs: Personal communication. 2011. Report of the Ministerial Inquiry into the use and operation of Foreign Charter Vessels Feb 2012; ISBN 978-0-478-38783-4 (Print); ISBN » Require observer coverage on all FCVs; 978-0-478-38784-1 (Online); Ministry of Agriculture and Forestry » Establishment of an interagency steering group to improve PO Box 2526, Wellington 6140, New Zealand. coordination between agencies when making decisions on FCVs; » Improved MBIE auditing of labor standards and immigra- ACRONYMS USED tion requirements through a tightened code of practice for IN THIS DOCUMENT fishing crew and immigration tests; and ACE Annual Catchment Entitlement » Stronger enforcement and auditing of vessel safety stan- DAS deepwater allocation system dards through a new Maritime Operator Safety System DoL Department of Labour (MOSS). EEZ exclusive economic zone FCV foreign charter vessel The benefit of reflagging is that it fully addresses employment, ILO International Labour Organization health and safety, and jurisdictional and market access issues asso- IMO International Maritime Organization ciated with FCVs. IOC Imposition of Conditions Domestic operators will also be held accountable for the MAF Ministry of Agriculture and Fisheries employment of foreign crew and vessel, which makes any enforce- MBIE Ministry Business Innovation and Employment ment action by government agencies more effective. New Zealand MNZ Maritime New Zealand criminal law applies in full to New Zealand–flagged vessels. Trade MPI Ministry of Primary Industries access and reputational concerns will be resolved through New NZD New Zealand Dollar Zealand’s complete control over the activities of FCVs in our EEZ, QMS Quota Management System including the ability to regulate in the areas of vessel safety, health TACC total allowable commercial catch and safety, and labor standards. UNCLOS United Nations Convention on the Law of the Sea Emerging Perspectives on Foreign Fishing Arrangements 139 APPENDIX I THE BERING SEA POLLOCK FISHERY James E. Wilen stocks in the western and eastern Bering Sea. The Soviet Union also pursued pollock as part of a national effort to increase Soviet Department of Agriculture & Resource Economics bloc per-capita consumption of fish and to obtain supplies of fish University of California, Davis meal for boosting agricultural output. The Soviet effort was mobi- Davis, CA lized by state-run bureaucracies that managed fleet construction e-mail: wilen@primal.ucdavis.edu and fishing operations with production plans and command and control directives. Pollock grow to 60 centimeters and attain individual weights of THE BERING SEA POLLOCK 1.5 kilograms. They are caught in large aggregations during spawn- ing periods using trawl gear near the bottom or in the midwater FISHERY: TRANSITION FROM column. The flesh of pollock is delicate, and the raw fish deterio- FOREIGN TO DOMESTIC rate quickly. In some places, parasites are prevalent that further degrade quality and divert catch into lower-valued uses, such as fish INTRODUCTION meal. Human-use pollock are headed and gutted by machine or The walleye pollock (Theragra chalcogramma)1 fishery is the world’s hand and then converted into fillets, whole frozen blocks, or surimi. second largest fishery in volume, behind the Peruvian anchoveta Surimi is made by deconstructing and reforming the flesh into an fishery. Walleye pollock stocks are distributed on both sides of the industrial seafood base. The base is then used to create a variety North Pacific in the eastern and western Bering Sea and Aleutian of wholesale products, including fish sausage, imitation crab, and Islands (BSAI), in the Gulf of Alaska, and off Japan and Russia in other food items. the Seas of Japan and Okhotsk (figure I.1). Pollock were historically Pollock are caught and processed with one of three kinds of harvested off the coasts of Korea and Japan in the 1930s by small industrial-scale operations: (1) motherships with catcher fleets, (2) vessels for local consumption and for processing into fish meal and integrated catcher-processor (CP) vessels, or (3) shoreside proces- oil. In the 1960s, the Japanese began to build distant-water fleets to sors served by mobile catcher fleets. Motherships are floating pro- harvest pollock in the Sea of Okhotsk and Bering Sea. During the cessors with processing lines below deck. Catcher vessels deliver same period, Soviet fleets began to expand operations into the Ber- cod ends of pollock onto the decks of motherships, ideally in a ing Sea. North Pacific pollock harvests exploded during the 1960s, coordinated operation that achieves constant throughput. Optimal from 465,000 tons in 1961 to 3.6 million tons by 1971. By 1975, processing of pollock occurs a few hours after harvest, when rigor Japan and the Soviet Republic were harvesting a combined 4.6 mil- begins to set in, a narrow timing window that further complicates lion tons of pollock with large-scale distant-water industrial-scale the operation. Integrated CP vessels have both trawl net operations fleets (table I.1). above deck and processing facilities below deck. They move to the The buildup of Soviet and Japanese harvests of pollock was an fish and also attempt to integrate both harvest and processing to important impetus for the distant-water shipbuilding boom precipi- maximize product recovery. tated by a relentless need for protein sources following World War In the early development of the BSAI fisheries, the Japanese II. New and rebuilt ships embodied innovations in navigation (such harvested with both mothership/catcher vessel fleets and with inte- as Loran radar), echo sounders, and refrigeration, all of which grated catch-processor vessels.2 During the same post–World War improved during the war effort. These new technologies allowed II rebuilding period, the Soviet Union built large and sophisticated vessels for the first time to range far from home ports, efficiently factory trawlers and mothership/catcher vessel fleets to fish in the harvest and process fish at sea, and return with holds full of frozen eastern and western Bering Seas for pollock, flatfish, and demersal products. Japan’s effort was part of its economic rebuilding strategy fish. The Soviet fleets soon became the largest harvesters of pollock that sought access to food supplies as its economy recovered from in the world (table I.1). Soviet vessels caught and processed pollock World War II. Japan has historically been a high fish-consumption into frozen blocks of fillets and headed and gutted fish destined for country, harvesting and processing many species into multiple Soviet bloc consumers. Some pollock were also processed into fish forms, including a traditional industrial fish product called surimi. meal and fish oil for the Soviet agricultural system. Soviet and Japa- Pollock was traditionally utilized as fish oil, fish meal, and fillets, nese fleets were not the only foreign fleets fishing off U.S. coastal but in 1967, Japanese technicians discovered how to process pol- lock into surimi. This fueled the development of a fleet of Japanese floating surimi processors that pursued pollock and other flatfish 2 In 1971, the Japanese fleet took 1.25 million metric tons. Seventy-one percent was taken by 206 catcher vessels (100–200 feet) that delivered to 12 motherships 1 Sometimes called Alaska pollock. of 12,000 GRT. Catcher processors took the remainder (Miller et al. 1976). Emerging Perspectives on Foreign Fishing Arrangements 141 FIGURE I.1. WALLEYE POLLOCK RANGE Source: Alaska Department of Fish and Game. TABLE I.1. WORLD WALLEYE POLLOCK CATCH BY COUNTRY (1975–84) Catch (ʼ000 tons) Country 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 U.S.S.R 1,958 2,091 1,975 2,012 2,049 2,112 2,138 2,498 2,747 3,450 Japan 2,677 2,445 1,928 1,546 1,551 1,552 1,595 1,570 1,434 1,606 United 0 0 0 2 3 1 61 130 285 455 States South 388 533 391 362 297 286 279 262 367 399 Korea Poland 0 0 1 1 40 61 93 0 0 54 Germany 0 0 0 0 0 6 10 16 24 24 Canada 0 1 1 2 3 2 1 1 1 1 TOTAL 5,024 5,070 4,296 3,925 3,944 4,021 4,177 4,478 5,047 5,986 Source: Herrfurth, 1987. Note: There are other references to “South Korea” in the text. waters in the 1960s and 1970s. According to Alverson, Soviet ships It was this rapid growth of foreign fishing fleets off U.S. waters moved into the Gulf of Alaska (GOA) in 1962 and to the Aleu- and other developed country waters that led to the United Nations tians in 1963, fishing year round for herring and bottomfish (Finlay Law of the Sea Convention III (UNCLOS III), under which coastal 2013). Then they moved southward toward Washington and Ore- nations asserted control over coastal zones to 200 miles. This enclo- gon in 1966. Polish and East Germans appeared off the West Coast sure of the commons led to a transition period and subsequent in 1973, Koreans in 1974, West Germans in 1975, and Bulgarians array of foreign fishing agreements designed to control, manage, and Taiwanese in 1976. and ultimately replace the foreign distant-water fleets. 142 Trade in Fishing Services dominated by Soviet and Japanese fleets for the prior decade. It INSTITUTIONAL IMPETUS: OPEN was anticipated, at first, that this process would be gradual because ACCESS, FOREIGN FISHING, the American fishery was not prepared to take over fishing the vast AND UNCLOS III number of fisheries in the newly formed EEZ off U.S. coastlines. The processing sector off the Pacific Coast states and in Alaska The international institutional setting that provided backdrop was underdeveloped and very labor intensive, without the ability for the development of the Bering Sea pollock fishery spanned to handle large throughputs of raw fish and with markets limited both periods of open access use and use under new international mainly to domestic consumers. Foreign fleets built by Soviet, Japa- limited-access jurisdiction. In 1956, the United Nations convened nese, Korean, and other nations over the previous decade to fish in the first of three Law of the Sea conventions, intended to refor- the Pacific were, in contrast, powerful, sophisticated, and industrial mulate outdated conventions on use rights at various distances sized, and they outclassed anything West Coast fishermen were from coastal nations’ shores. Conflicts were developing over long- operating.5 For the most part, the fish foreign fleets harvested were held historical rights of passage for shipping, safe zones to protect low valued, delivered into specialized channels in home countries, coastal nations from aggressive actions, rights to seabed miner- and unknown in the U.S. market chain. als, and rights to other marine resources, including fish in offshore The FCMA directed regional fisheries management councils zones. UNCLOS III convened in 1973 in New York, with momen- to manage fish species within the newly delineated EEZs “for the tum behind it for the creation of exclusive economic zones (EEZs) benefit of U.S. citizens.” This unequivocally established an over- that would give coastal nations rights to control use out to 200 arching goal and raison d’etre for management actions.6 Manage- miles from their coasts. ment councils promptly assigned their scientist staffs to determine sustainable total allowable catch levels for species in the new EEZs. Once TACs were determined by biologists, they were allocated in MANAGING THE NEW EEZs: U.S. FISHERY priority to their expected benefits to U.S. citizens. The rankings of CONSERVATION AND MANAGEMENT priority uses for any and all species were as follows: ACT (FCMA) 1976 First tier: fish caught and processed by U.S. firms In 1976, before UNCLOS III was ratified, the United States and Second tier: fish caught by U.S. catchers and processed by for- other nations moved multilaterally to extend jurisdiction over eign processors marine resources to 200 miles. During the same year, the United Third tier: fish caught and processed by foreign processors The States passed the Fishery Conservation and Management Act third tier priority was the all-important total allowable level of for- (FCMA), implemented in March 1977.3 The FCMA was the eign fishing (TALFF) provided for by UNCLOS III negotiations enabling legislation that gave direction to the management and use and a transition mechanism.7 Foreign fish harvest was monitored of newly claimed EEZs off the United States, including the large by a system of onboard monitors at 100 percent coverage rates and productive zones in the BSAI and Gulf of Alaska regions. after the FCMA was passed. To get buy-in from countries excluded from coastal waters in the newly formed EEZs, UNCLOS III called for a transition mecha- nism whereby countries with insufficient domestic capacity would TRANSITION TO JOINT make surplus fish within their EEZs available to foreign fleets until sufficient domestic capacity had been built.4 VENTURES The Alaska pollock fishery thus began the 1977 season with a In 1977, the United States embarked on the first steps of a path new set of institutions and a new direction that governed not only intended to eventually eliminate foreign fleets from its EEZ and the scientific determination of total allowable catches (TACs) but replace that foreign processing and catching capacity with domestic the allocation of those allowable catches to traditional users and capacity. Joint ventures became the first contractual instrument to new potential users. An important explicit aim of the FCMA was facilitate the transition from foreign-dominated fisheries to domestic to set up mechanisms, incentives, and plans to ultimately replace, with domestic fleets, the foreign fleets that had previously plied the rich waters off Alaska. From the start, the United States was 5 Lee Alverson reported attending a meeting in Hamburg in 1957 and exam- committed to a path intended to “Americanize” these previously ining Purshkin Class Soviet catcher processors. He was impressed with “the common property resources in the North Pacific that had been tremendous advancements in net designs and fabrication, diesel engines, power deck machines and navigation . . . new synthetic twines and navigational and acoustical depth- and fish-finders. . . . The Russian vessel was so big in looked 3 Also called the Magnuson Act and later the Magnuson-Stevens Act after the like a cruise boat or small whaler. I was almost embarrassed to give my talk on principal authors. small West Coast stern trawlers.” Reported in Finlay, May 4, 2012. 4 Article 62.2 states, “the coastal State shall determine its capacity to harvest 6 Note, however, that the notion of “benefits” was not specified or formalized in the living resources of the exclusive economic zone. Where the coastal State any rigorous way and was therefore left to interpretation and subsequent refine- does not have the capacity to harvest the entire allowable catch, it shall, through ment by the regional fisheries management councils. agreements or other arrangements and pursuant to the terms, conditions, laws 7 “The TALFF, if any . . . is that portion of OY . . . which cannot or will not and regulations referred to in paragraph 4, give other States access to the sur- be harvested by vessels of the United States . . . the total allowable level shall plus of the allowable catch . . .” (United Nations Convention on the Law of be zero for fisheries determined to have adequate or excess domestic harvest the Sea). capacity.” FR 32540, June 24, 1996. Emerging Perspectives on Foreign Fishing Arrangements 143 TABLE I.2. ANNUAL WHITING CATCHES (TONS) OFF WASHINGTON, OREGON, AND CALIFORNIA BY FOREIGN NATIONS, 1966–85 Bulgaria East Germany Japan Poland U.S.S.R. Total TALFF 1966 0 0 0 0 128,000 128,000 0 1967 0 0 0 0 195,092 195,092 0 1968 0 0 0 0 67,896 67,896 0 1969 0 0 98 0 109,225 109,323 0 1970 0 0 1,400 0 200,754 202,154 0 1971 0 0 799 0 146,726 147,525 0 1972 0 0 307 0 111,269 111,756 0 1973 0 0 3,782 2,200 139,060 145,042 0 1974 0 0 8,259 44,354 156,708 209,321 0 1975 0 2,000 3,214 41,542 155,405 202,161 0 1976 24,200 26,000 3,334 23,668 154,129 231,331 0 Magnuson Act Implementation 1977 0 0 0 16,805 110,208 127,013 123,200 1978 0 0 0 26,721 70,106 96,287 120,000 1979 0 0 0 18,073 96,837 114,910 161,400 1980 0 0 0 44,023 0 44,023 120,000 1981 7,023 0 0 63,342 0 70,365 95,000 1982 7,089 0 0 0 0 7,089 35,000 1983 0 0 0 0 0 0 35,500 Source: Nelson, 1985. fisheries. A joint venture (JV) is an agreement between two or more The fishery prosecuted under the newly formed MRC joint parties to combine equity and other resources to achieve some task. venture was the hake (or whiting) fishery off the lower Pacific Coast To be successful, a JV must be able to accomplish what the parties states of Oregon and Washington. Hake are a species very simi- could not accomplish independently, that is, there must be some lar to Alaskan pollock, caught during large spawning aggregations “gains from trade.” JVs are generally temporary and often face dif- with midwater trawls, with delicate flesh that is prone to disinte- ficulties determining how to organize joint resource use and share grate if not handled properly and processed quickly. The Soviets the profits. In the U.S. EEZs, joint ventures became the first con- had been fishing whiting off Oregon and Washington since 1966 tractual mechanism by which U.S. fishermen developed a toehold in (Philbin 1980), landing 128,000 tons that year (table I.2). American the industry previously dominated by foreign entities. For the most fishermen, on the other hand, avoided hake (Fisher 1991). Hake part, the JVs that emerged during this era were simple contrac- was not utilized by U.S. vessels because domestic shoreside pro- tual arrangements whereby foreign floating processors purchased cessing plant capacity was too small to handle the fish, which was roundfish from U.S. catcher vessels at some negotiated prices. difficult to process, and there were no American markets for pol- lock products.8 The Soviets, on the other hand, had a ready-made administratively generated market for protein in the Soviet bloc. MARINE RESOURCE COMPANY INTERNATIONAL AND THE HAKE FISHERY The first joint venture on the Pacific Coast was the brainchild of a 8 The flesh of hake is soft and delicate and rapidly becomes mushy soon after cold-storage owner from Seattle who recognized in the early 1970s the harvest, and hake also contain a parasite that causes the fish to deteriorate in emerging momentum building to remove foreign fleets from the coast- 5 to 15 percent of the fish. In 1976, the U.S. industry was not sophisticated. It lines of the United States. He believed that new business opportunities lacked large enough vessels with electronics, and refrigeration was just being could be developed by collaborating with Soviets over Soviet-caught experimented with. Plants also lacked chilling and holding equipment and were fish in U.S. waters. He wrote to the Soviet Minister of Fisheries in 1973 heavily labor intensive. American fishermen and processors knew that the fish proposing an arrangement. After not receiving a response for one ought to be profitable because the Soviets were taking it. There was constant and a half years, he wrote again and quickly received word from the experimentation with filleted products marketed into the California market. Ministry that the Soviets were interested. The joint venture Marine Also, Oregon State Seafood Lab at Astoria was attempting to solve the parasite Resources Corporation International (MRC) was formed in 1976. flesh breakdown problem (Fisher 1991). 144 Trade in Fishing Services ued fish in sufficient volumes to be profitable. The Soviets retained TABLE I.3. PACIFIC WHITING CATCH IN access to the fisheries that they had opened up to use, all intended THE JOINT VENTURE FISHERY to provide needed protein for the Soviet-planned food system. A OFF WASHINGTON, OREGON, side benefit was that the Soviets also needed a source of hard cur- AND CALIFORNIA, WITH U.S. rency (such as U.S. dollars) since Soviet currency was weak and inconvertible. CATCHER VESSEL AND FOREIGN The joint venture posed quirky problems as well as oppor- PROCESSOR VESSEL EFFORT tunity for American partners. The Soviet arm of MRC wanted Pacific to avoid the reach of both the Soviet Minister of Fisheries and Whiting Number Number the Bank for Foreign Trade because both bureaucracies set up Catch of U.S. Foreign roadblocks to simple transactions and demanded side payments. Year (Tons) Vessels Processors So a barter system was developed wherein American hake was traded for Soviet king crab. Later, herring roe, pink salmon, pol- 1978 856 2 2 lock, mackerel, and yellowfin sole were taken in trade for hake. 1979 8,834 7 11 Crab and salmon were marketed into the American wholesale chains, pollock was sold to the Japanese, and mackerel and sole 1980 27,537 16 11 were sent to Egypt and West African markets. The barter sys- 1981 43,557 22 20 tem was denominated in “hake units” so that each ton of hake delivered to the Soviet floating processors converted for payment 1982 67,437 21 15 into a certain number of tons of the other Soviet-caught prod- 1983 72,100 19 16 ucts delivered through MRC.9 Rates of exchange for these trades were determined administratively by the Soviets, and they were Source: Nelson 1985. quite favorable to the American partners. The imagination and entrepreneurship on the part of all participants in the joint ven- ture was an important factor that allowed the mutually agreeable In addition, the Soviets were successful in exploiting economies of arrangement to persist in the face of administrative constraints scale using catcher processors and floating mothership vessels to and other transactions costs.10 convert large volumes of raw whiting throughput into headed and gutted and fillet frozen blocks. Finally, it should be emphasized that the Soviet economy was a fully planned economy, in which opera- tions were not constrained to be efficient or profitable to persist. REALIGNMENT OF TALFFs The aim of the first JV was to have U.S. trawlers harvest pollock INTO JV OPERATIONS As the provisions of the FCMA began to be implemented on the off Washington and Oregon and offload the cod ends onto Soviet West Coast, fish previously caught exclusively by foreign fleets floating processor ships. The Soviets had a decade of experience under poorly enforced treaty agreements instead began to be both catching hake and processing hake at sea with large integrated allocated off more precisely measured and enforced biologically operations. But U.S. fishermen were inexperienced catching hake, determined TACs. The priority allocation process gave U.S. par- and the first American catcher vessel partners in 1978 encountered ticipants an advantage with any fish they had capacity to catch a number of difficulties almost at once. The first midwater trawl and process, followed by the next tranche of the surplus to joint net was installed on a West Coast vessel that was too small and ventures with U.S. catcher vessels and foreign processors, and incapable of towing the net fast enough to keep it open in the mid- lastly to foreign fleets under the TALFFs. In the early 1980s, the water column. Vessels with more power thus had to be recruited joint venture system was growing, but total allocations of pollock for midwater trawling. U.S. fishermen had to learn to offload the were still dominated by direct foreign fishing allowances to Japan cod end from their trawls to the Soviet processor vessels, no easy and the Soviet Union via TALFFs.11 In 1979, Brezhnev invaded task in rough seas. The first attempted transfer resulted in the net Afghanistan, and as political punishment, the United States full of hake sinking to the bottom. In the first abbreviated year, removed the Soviet Union from accessing any TALFF other than two American catcher vessels participated in the joint venture with through joint ventures. This was a stroke of good luck for Ameri- two floating Soviet processors. The American vessels lost money on their catch of less than 1,000 tons, but they established proof of concept. In 1979, MRC JV operations scaled up to seven catcher vessels 9 For example, a ton of king crab traded for 26.5 tons of hake. delivering to 11 floating Soviet processing ships that took close to 10 MRC soon moved toward a comprehensive joint venture model in which 9,000 tons (table I.3). In 1980, 16 vessels delivered to 11 processors ownership was evenly divided between U.S. interests and the Soviet Ministry approximately 27,000 tons. The joint venture generated benefits of Fisheries. Subsequent operations in Alaska involved leasing Soviet floating for both parties. U.S. fishermen most importantly gained access to processing capacity in order to process multiple species of groundfish products a foreign market for fish that has not been profitable to harvest and that were then marketed into U.S. and international markets. market domestically. In addition, U.S. fishermen gained knowledge 11 For example, for BSAI pollock, foreign-directed catch via TALFFs remained about how to deliver fish at sea to floating processors and Soviet close to 1 million metric tons during the 1977–84 period. During that same technical knowledge about how to handle and process the low-val- interval, joint venture pollock catches rose steadily to 237,000 tons. Emerging Perspectives on Foreign Fishing Arrangements 145 can interests in MRC because they were allowed to continue their DEVELOPMENT OF THE BSAI AND grandfathered arrangement with the Soviets via the JV. This made GOA POLLOCK JOINT VENTURES suddenly available another 400,000 tons of fish that Soviets had The BSAI pollock, flatfish, and sole fisheries at the time the FMCA been catching and that subsequently was effectively only avail- was passed were almost completely dominated by foreign fleets able though the MRC joint venture. MRC was an immediate that had the capacity to catch and process large volumes of rela- beneficiary, increasing its take to over 100,000 tons of whiting off tively low-valued fish in rough conditions. In 1976, approximately Oregon and Washington and 260,000 tons of cod and flatfish in 71 percent of the groundfish catch in the BSAI was taken by the Alaska (Fisher 1991). Japanese, with another 21 percent by the Soviets and 7 percent The early MRC joint venture experience provided an impor- by the Koreans. American fishermen and entrepreneurs (mostly tant demonstration effect quickly picked up by U.S. fishermen. from Seattle) were not involved in the large industrial-scale pollock Trawl vessels from Washington, Oregon, and California on the fishery, but they were involved in a small number of other valu- Pacific Coast began to imagine opportunities for similar joint able fisheries. The most important of these was the Alaskan king ventures in the larger and much richer Alaskan BSAI fisheries. crab fishery. After a modest start after World War II, abundance U.S. processors were wary of the risks associated with building exploded and the king crab fishery boomed in a most dramatic isolated shore-based plants in Alaska and hence did not commit fashion in the 1970s. Many of the crab fishermen were second- and to building processing capacity for the rich but comparatively low- third-generation descendants of Norwegian immigrants. These valued pollock and flatfish fisheries of the Bering Sea. As a result fishermen were mostly located in Seattle, with significant business of this vacuum in American onshore processing capacity in the interests in West Coast fishing, shipyards, outfitting companies, and BSAI area, there was a boom in new joint ventures, with domes- import and export companies. The king crab fisheries’ growth was tic catcher vessels delivering cod ends to Japanese and Korean highly lucrative for much of the 1970s. Crew made $100,000 per floating motherships and factory trawlers. This resulted in a cor- season, and vessels landed as much as 1 million pounds from 10 responding expansion of building larger trawlers that could har- days of effort. Investors lined up to purchase new and powerful vest hake off the Pacific Coast first and then head into Alaska for steel-hulled vessels designed and built in Seattle with know-how pollock in winter. transferred from Norwegian ship builders and often with funding The MRC hake joint venture fishery was an important con- from Norwegian banks.13 Fishermen paid off vessels in a single sea- duit of experience in two ways. First, the Soviet fishermen taught son of fishing, and there were anecdotes of tips of $100 left for American fishermen how to tow in the midwater for hake, offload lunches in Dutch Harbor restaurants. cod ends, time harvest so fish condition was optimal for process- Alas, the good times were too good to persist. In 1981, the Bering ing, and match harvesting throughput with processing capacity.12 Sea king crab fishery entered a precipitous and calamitous fall for The second manner in which the joint ventures were conduits of reasons that are still debated. Within a year or two, investors that had information occurred because a number of the players and com- entered late were bankrupt, the banks were out for millions of dol- panies involved in the hake fishery also fished in BSAI and GAO lars in loans, and there was a huge amount of excess fishing capital fisheries. As a result, much of the know how that was originally in the steel-hulled crabbing vessels mothballed at the docks in Seat- captured off the Pacific Coast states in the hake fishery migrated to tle.14 When the crab fishery crashed, a number of crab vessel owners the Alaskan pollock fishery, as it also became the new focus of joint began to convert their crabbers into trawlers in order to participate ventures after the Soviets’ TALFF was removed. In fact, there was via joint ventures in the Americanization of the fishery underway a network of fishermen, vessels, and fishing corporations whose reach extended from Pacific Coast fisheries to Alaska fisheries. Individuals involved had home bases in Oregon, Washington, and 13 Investors queued up to have vessels built, and during the waiting period, some Alaska, but Seattle was an important center of activities, capital, sold their “position” in line to others for $100,000. and entrepreneurship. Many of the principals in this frontier fish- 14 During 1930s, Japan and the Soviet Republic took a combined 9–14 million ery were involved not only in fishing and management but also in kilograms of crab per year from the Southeastern Bering Sea—around Bristol formulating new regulations, consulting, and lobbying on behalf of Bay. The Japanese used tangle gear. U.S. crab fishermen built first pots out opportunities opened up by the new institutions. In hindsight, the of surplus Army cots. After World War II, in 1946, U.S. fishermen began to industry played a critical role in guiding and modifying the pace of crab. By 1960s, only pots were allowed by regulations and only males retained. Americanization by lobbying for changes in the FCMA as domestic During 1970, the crab fishery was the most valuable in Alaska, with strong capacity grew. prices and profitability limited only by what could be caught. Originally, the crab fishery started out with wooden vessels—55 footers. In 1969, the first order for a steel-hulled 94-foot crabber was placed in Seattle. Seattle shipyards began building 94 to 120 footers, and fishermen were paying $100,000 for a spot in the queue to build a new boat. One Dutch Harbor plant did 1 million pounds 12 Processors of high-volume, low-value fish like hake and pollock are best oper- per day—a single vessel brought 1 million pounds in 10 days. The boom in ated continuously without production breaks due to waiting for harvest deliv- catch and profits served as impetus for steel vessel construction. The all-time eries. When fish lines are shut down, they need to be cleaned and sterilized record Bristol Bay catch of 59 million kilograms was made in 1980. Then, in before restarting. Hence, coordination between harvesting and processing units 1981, there was an abrupt collapse. Thereafter, bankrupt vessels lined wharves is important. of Ballard after meteoric rise. 146 Trade in Fishing Services under the FCMA.15 Simultaneously, an organization of crabbers and construction of U.S. catcher processors and mothership floating converted into trawlers called the Highliners’ Association organized processors. The intent of this program was to subsidize construction to lobby for modifications of the FCMA to encourage opportunities and conversion of vessels and guarantee loans that might otherwise for the newly idled capacity. Their specific aim was to lobby Con- be considered too risky by conventional lenders. In the subsequent gress to institute a number of carrot and stick policies that would buildup of the U.S. at-sea fleet, these FOG loans and others from encourage Japan and other nations using TALFFs to buy more U.S.- Norway, Japan, and Korea financed a new American-controlled caught fish via joint ventures. In 1980, an amendment to the original floating pollock-processing sector in the BSAI and GOA fisheries. FCMA was passed, the American Fisheries Promotion Act (AFPA).16 Accelerated Phase Out of TALFFs AMERICAN FISHERIES PROMOTION The AFPA of 1980 also contained another important provision ACT (AFPA) OF 1980 for speeding up the transition, with a new and explicit phase out The AFPA imposed significant changes on the original plan to pace of TALFFs. This altered the previous policy under the FCMA gradually replace foreign fleets. The AFPA was influenced by an that allowed foreign fleets access to any and all U.S. EEZ fish for industry-funded study by economists that concluded that foreign which no domestic capacity existed. The new Act called for steady fleets enjoyed a number of economic advantages over U.S. fleets reduction of TALFF using the so-called “phase out fishing level,” and that these advantages were hindering the pace of American- essentially a staged and explicit reduction in TALFFs, less rigidly ization. Among the advantages detailed in the study were high non- tied to whether there was adequate U.S. capacity. Critically, the trade barriers and tariffs on competitive products, subsidized costs Act also mandated a complete phase out of TALFFs by 1990, con- of capital, low wages, fewer regulations, and institution-mandated ditional only on the proviso that the United States had sufficient markets. The study advocated compensating and countervailing capacity to harvest 50 percent of the TALFF. This phase out was policies to benefit U.S. fishermen in order to accelerate the transi- a dramatic boost to the pace of Americanization, and it kicked off tion. A number of these carrot and stick policies were subsequently another boom in shipbuilding and expansion in the Bering Sea, embodied in the American Fisheries Promotion Act. this time with large domestic catcher processor vessels designed to operate at sea. Priority Access to TALFFs The AFPA amendment gave priority TALFF access to foreign Observer Coverage and Cost Recovery firms that helped develop U.S. fisheries. It envisioned mechanisms A final provision of the AFPA was the beefing up of the observer to assist U.S. fisheries development with joint ventures, transfer of program coupled with cost recovery mechanisms. Prior to the technology or know-how, financing catching capacity, and market AFPA, the existing observer program covered only 17 percent of access. It explicitly called for U.S. officials to consider the degree foreign fishing in the Alaska region. There was much discussion of to which foreign countries restricted access to their markets to U.S. evidence that catches of TALFF fish were being underestimated exporters in determining which countries received TALFFs and and concealed and that incidental catch of allowed and prohibited how much. The dominant foreign player by this time was Japan, bycatch species was misreported by foreign fleets. As a result, the which had a history of tariffs and nontrade barriers to imports. By AFPA required 100 percent coverage of all vessels fishing foreign tying TALFFs to foreign purchase of U.S.-caught fish, the AFPA allocations. This was funded by fees levied on the foreign fleets. In amendment created new markets for the nascent U.S. industry. In addition, foreign vessels paid a number of other fees, including a the 1982 season, Japan agreed to purchase 200,000 tons of pollock permit fee and a surcharge fee. These were nominal fees, however, from American catcher vessels, delivered to Japanese floating pro- not intended to extract rent but to avoid having U.S. citizens subsi- cessors. This was the beginning of the BSAI pollock joint ventures, dize foreign fishing. whereby American catcher vessels delivered to foreign floating pro- cessors under second-tier priority. Pollock JVs grew from a negli- gible amount in 1980 to a peak in 1987 of over 1 million metric TRANSITION OUT OF JVs: tons delivered by more than 100 catcher vessels operating within the corporate frameworks of some 28 companies (NMFS 2002). DEVELOPMENT OF DOMESTIC BERING SEA POLLOCK FISHERY Fisheries Loan Program A direct result of the intended accelerated squeeze on alloca- The AFPA also authorized the Fisheries Obligation Guarantee pro- tions to foreign fleets was the creation of opportunities for U.S. gram (FOG), which guaranteed low-interest loans for the purchase fishermen and investors to step into the vacuum about to be left as a result of the exit of foreign floating processors. In 1984, an American partner in the original MRC and a Korean counterpart 15 The most foresighted vessel owners had built their crab vessels with ramps invested in the first domestic catcher-processor designed to fit the and space to install trawl drums and bigger shafts to upgrade engine size. When first-tier preference for U.S. EEZ-caught and -processed pollock. they fished crab, they simply paneled over the ramp; when the crab fishery The Arctic Storm was financed by a Norwegian Bank, the Chris- crashed, it was easy to convert to stern trawlers. tiana Bank, and designed by Norwegian shipyards. The ship was 16 Also called the “fish and chips” amendment, in which fish would be allocated retrofitted in Seattle at a cost of $25 million and started fishing in to foreigners for chips or special considerations such as market access. the 1986 season. Emerging Perspectives on Foreign Fishing Arrangements 147 TABLE I.4. FOREIGN CATCH OF WALLEYE POLLOCK WITHIN 200-MILE EXCLUSIVE ECONOMIC ZONE OF UNITED STATES, BY COUNTRY AND QUANTITIES, 1980–85 Catch (1,000 tons) Country 1980 1981 1982 1983 1984 1985 Japan 870.9 855.2 835.4 732.1 723.5 635.5 Korea 141.0 154.6 196.2 217/1 218.4 174.7 Poland 59.2 93.9 0 0 55.0 32.0 Germany 6.0 10.3 16.1 23.6 24.4 0 U.S.S.R. 39.2 0 0 0 11.8 1.5 Taiwan, 5.0 3.4 4.2 0 0 0 China TOTAL 1,119.1 1,117.3 1,051.9 972.8 1,033.2 843.7 Source: NMFS. Fisheries Statistics of United States. The AFPA’s accelerated phase out of TALFFs for pollock over in the ownership, construction, and operation of vessels in the U.S. the 1980s (table I.4) basically forced foreign-owned and -operated EEZ (Walsh and Weinstein 1988). This Act restricted fishery partic- fleets to reconfigure their operations and businesses under short- ipation to U.S.-flagged vessels that had fishing “endorsements” or horizon joint ventures with U.S. partners. permission to fish in U.S. waters. The Act expanded the definition Simultaneously, in anticipation of the elimination of TALFFs of “participation” to include floating processors, eliminating the in 1990, significant new domestic floating processing capacity eligibility of foreign-flagged motherships and catcher-processors was built, much of it financed by foreign interests in Norway and that had been allowed prior to the Act. The Act also tightened Japan.17 The reports of the observer program show that in 1989, requirements for fishing endorsements by requiring that they could the last year of the joint venture program, there were a significant only be attached to vessels for which U.S. ownership was at least 50 number of joint ventures pursuing not only pollock but also flatfish percent. Because of the ongoing and explosive growth of the fleet in the BSAI region. For example, there were surimi joint ventures under the joint venture program, Congress allowed some exemp- with Japan (13 floating processors), Poland (7), and Korea (4) con- tions and loopholes for vessels under construction, thus grandfa- verting pollock into surimi and another 7 vessels from Japan and thering in a number of vessels.18 Korea processing yellowfin sole and flatfish into surimi. In addition, other vessels were catching yellowfin sole and other flatfish and pro- cessing them into head and gut and fillet frozen blocks. These flat- fish fisheries involved a large number of JVs with several countries, MATURATION OF THE including Japan (37 vessels), Poland (15), Korea (49), China (8), and AMERICANIZED BSAI the Soviet Republic (45). This second group of vessels was in the process of opening up what would become the BSAI “head and POLLOCK FISHERY gut” fleet of groundfish trawlers. As the 1980s came to an end, an offshore sector ostensibly of U.S. vessel registry rules at that time allowed foreigners to own Americanized vessels had completely replaced the foreign fleets U.S.-built vessels or to reflag foreign-built and -owned vessels if fishing TALFFs, as provided for by the AFPA (figure I.2). This subsidiaries were formed with U.S. CEOs and boards of director- transition was aided by the use of joint ventures, which com- ships. Processing vessels were not considered “fishing” vessels and bined new U.S. catcher vessel capacity with old foreign-owned hence did not have to be U.S. flagged to operate. But the explo- floating processing capacity. The joint venture period was shorter sive expansion of the at-sea pollock and groundfish fleets in foreign than originally planned because of new provisions embodied in shipyards by foreign investors led many to question whether the the AFPA in 1980. Most importantly, the accelerated removal of industry was actually being Americanized as intended by Congress. TALFFs resulted in a boom of construction of domestic floating In 1987, the Commercial Fishing Vessel Anti-reflagging Act was passed to restrict the manner in which noncitizens could participate 18 Noncitizens could hold nonvoting shares up to 100 percent. In addition, they could also secure interest in a vessel via loans and preferred mortgage instru- 17 A principal at the time noted that an investor “could get into a factory trawler ments. A preferred ship mortgage is guaranteed by the vessel; hence holders of with nothing down”—indicating that the capital was freely available for invest- mortgages in Norway and Japan were able to exercise considerable control over ments that were understood to be potentially very lucrative. highly mortgaged vessels. 148 Trade in Fishing Services FIGURE I.2. POLLOCK CATCH DISTRIBUTION: Bering Sea TAC of 65 percent to the offshore sector and 35 percent to the inshore sector, after reserving 7.5 percent for native Alaska DOMESTIC, JOINT VENTURE, communities.19 The Alaska-oriented Council was interested in shift- AND TALFF ing TAC onshore, in the belief that those fish benefited Alaskans 2.0 Domestic Joint venture Foreign more than fish harvested and processed at sea. Legally, however, Bering Sea fish were not Alaska residents’ fish but rather EEZ fish 1.5 belonging to U.S. citizens at large. Hence, a rather intense and pro- Catches 106 t tracted battle over allocation unfolded repeatedly over the decade of the 1990s. This pitted the at-sea sector, composed mainly of an 1.0 American-controlled fleet, against the shoreside sector, composed predominately of Japanese surimi producers. 0.5 In 1995, the TAC split came up for consideration for the sec- ond time (called Inshore/Offshore II) and the Council retained 0.0 the prior split to an approximation. There followed in 1998 the 1964 1974 1984 1994 2004 most contentious dispute in what has been called Inshore/Offshore Source: Criddle, 2012. III. At the same time the Council was debating Inshore/Offshore III, Congress was debating increasing the stringency of the Anti- reflagging Act. Specifically, there was pressure from Alaska’s sena- processor and catcher-processor capacity, financed and owned in tor to strip the fishing endorsements of numerous factory trawlers complicated interlocking financial arrangements with Norwegian, that had been built or refitted in foreign shipyards and further limit Japanese, and Korean firms. In 1990, the last year of the TALFF foreign ownership from 49 to 25 percent. The convergence of two allocations, there were 50 factory trawlers operating in the BSAI issues, the original dispute over allocation of the TAC and the drive pollock fishery (NMFS 2002). to limit foreign ownership, resulted in the American Fisheries Act (AFA), passed at the end of 1998. INSHORE/OFFSHORE DISPUTES Simultaneously with the Seattle-based and foreign-funded offshore THE AMERICAN FISHERIES ACT OF 1998 sector buildup, the onshore sector, led by Japanese surimi interests The AFA brought to an end a decade of bitter battles between that were being excluded from TALFF access, was also developing representatives of the two sectors that had been built up to and expanding. In 1985, the Japanese began building two shoreside replace foreign presences in the BSAI. Ironically, neither sec- processing plants in Dutch Harbor, Alaska. These began produc- tor was fully Americanized as the TALFF era came to a close in tion at scale a few years later and by the early 1990s became the 1990. The inshore sector had been built in response to the special nexus of Alaska’s shoreside processing industry that, along with the considerations given to nations willing to trade technical know offshore industry, processed pollock formerly caught and processed how and access to markets to retain access to the rich Bering Sea by floating plants in the BSAI. By the early 1990s, Japanese firms waters. The inshore sector was mostly owned by large Japanese owned and controlled 85 percent of the onshore pollock-processing conglomerates, except for a smaller American-owned company. sector. These plants took delivery of fish caught by a fleet of more Their willingness to reveal surimi processing technology and than 100 U.S. catcher vessels that steamed for 24 to 36 hours to techniques, coupled with their purchase of the surimi, satisfied deliver fish shoreside. Onshore plants converted pollock exclusively the terms of the AFPA. The Japanese inshore sector (which also into surimi for the markets served by the Japanese conglomerate included floating motherships) conformed to the AFPA owner- owners. In contrast, catcher processors at sea processed pollock ship requirements by setting up holding companies, subsidiaries, into a number of products, including surimi, fillets, and frozen and nonvoting share control (Criddle 2012). The offshore sector roundfish in the tradition of the early Soviet joint ventures. included motherships controlled by Japanese interests and served In hindsight, it is easy to see that the massive, purposeful, and by catcher vessels owned by American citizens, as well as domesti- relatively unfettered race to build the domestic pollock fishery cally owned catcher processors, many built in Norwegian ship- resulted in overcapacity. In 1989, for example, the offshore fleet yards at the peak of the boom period and grandfathered in under alone harvested most of the GAO allocation of pollock, forcing original rules. an early season closure and leaving the newly built nearshore sec- The AFA was a complex piece of legislation designed to tor without fish to process. This led to the first of a number of achieve multiple goals, including completing the Americaniza- years of conflict between the two sectors—the floating offshore tion of the pollock fishery, reducing incentives to race for fish, sector (operated mainly by Seattle residents in complex interlock- reducing excess capacity in the offshore sector that threatened the ing corporations with Japanese, Korean, and Norwegian interests) inshore sector, and resolving the high-stakes allocation dispute. and the onshore sector (dominated by two Japanese plants and one It settled permanently the inshore/offshore allocation dispute, American- and Norwegian-owned plant). In 1992, after much contentious debate and disagreement among the stakeholders and between the North Pacific Council 19 The portion allocated to native communities was the so-called Community and the National Marine Fisheries Service, the so-called Inshore/ Development Quota, designed to both transfer income to disadvantage native Offshore I amendment was approved that established a split of the communities and provide fishing-based employment. Emerging Perspectives on Foreign Fishing Arrangements 149 reducing the share to the offshore sector. In exchange for the limited the amounts allowed taken by foreign entities. Third, a reduction in share, the offshore sector was granted security of prioritization of the TAC was made among prospective claimants access by being given a sector-level allocation, with further per- that gave incentives to foreign and domestic participants to build mission to establish a harvester cooperative.20 Offshore catcher domestic capacity. This prioritization gave rise to joint ventures, processor representatives argued that they could not absorb the under which domestic catcher vessels replaced the foreign catcher share reduction without being able to manage their internal race vessel fleets that had formerly been part of the Japanese- and to fish incentives. The AFA also funded a $90 million loan to pur- Soviet-integrated operations in the 1960s. Joint venture forma- chase 9 of the 29 factory trawlers that were mostly Norwegian- tion and operation was left to the market and to individual entre- owned reflagged vessels built in foreign shipyards and to further preneurship. In the pollock fishery, joint ventures gave American force the Norwegian company American Seafoods to divest its trawler owners (many idled by the crab fishery collapse) a market operations to U.S interests. Their catch histories were transferred for fish. They gave foreign floating processors access to fish they to the inshore sector and paid back with a landings tax on inshore had formerly caught themselves and a transition period that eased pollock landed. the exit forced by the extension of jurisdiction. The evolution of the FCMA was influenced heavily from the bottom up by entrepreneurial and self-interested American fish- POST-AFA BSAI ermen who lobbied for provisions that would aid the building of POLLOCK FISHERY domestic capacity. Two important amendments strengthened the The arc of the transformation of the Bering Sea pollock fishery original Act during the transition period, the American Fisheries from virtually completely foreign exploited to one that is now Promotion Act and the Anti-reflagging Act. The former amend- mostly domestically owned and controlled is a lesson in how insti- ment accelerated the transition out of TALFF-based foreign fishing tutions matter to economic outcomes. Prior to the 1970s, the rich quotas, thereby giving rise to the need to replace foreign floating waters of the Bering Sea were mostly open access, inaccessible, and processing capacity with domestic capacity. The latter amendment underutilized until Japan and the Soviet Republic began to build accelerated the assumption of ownership by domestic entities by distant water fleets to exploit global fish stocks. And Japan and restricting foreign financial and corporate control over vessel and the Soviet Republic’s move to exploit distant waters was itself the processing ownership. result of cataclysmic internal institutional changes brought about The most recent and most important phase of the pollock by World War II: Japan by the post-war rebuilding plan directed by fishery transformation has been the phase following passage of the Supreme Command of Allied Powers and the Soviet Repub- the American Fisheries Act in 1998. As the JV period came to lic by the Soviet revolution that installed a planned economy with an end in 1989, foreign entities were finally fully excluded from top-down direction by bureaucracies. Both institutions committed the operational aspects of the harvesting sector and processing at to using the ocean’s wealth to feed growing populations, and both sea. But within the fishery, domestic capacity has exploded, and built fleets with an impetus that embodied centralized investment there was substantial overcapacity. As a result, while control had and top-down government directive. shifted to domestic interests, rents were low because of race to fish The impetus behind the Americanization of the BSAI pollock incentives and there was considerable wasted capital in both the fishery was the extension of jurisdiction in 1976. The extension offshore and inshore sectors. The AFA changed incentives dra- of jurisdiction was of enormous importance to all fishing and matically by, first, fixing the shares allocated to each sector for fish-consuming nations. Within a short period, historical arrange- a reasonable period and, second, allowing both sectors to form ments were thrown into disarray, and countries that had domi- harvester cooperatives.21 nated global harvests suddenly saw their access begin to shrink. The results of the AFA period have been dramatic. Overcapac- The responses by coastal nation states, with laws and new leg- ity was almost immediately reduced, seasons were lengthened, fish- islation, changed institutions again, and with these changes, the ing was slowed, bycatch was reduced, utilization was increased, and economic incentives faced by individual fishermen. In the United new products were developed to take advantage of the elimination States, the important FCMA laid the groundwork for the mosaic of the race to fish (Wilen and Richardson 2008).22 This period has of regulations that would guide use of newly captured resources within its EEZs. 21 Each of the offshore and inshore sectors is allocated an undifferentiated share The FCMA was founded on three major pillars. First, it man- of the biologically determined TAC. The harvester cooperatives then deter- dated that U.S. fisheries within the newly claimed EEZs would be mine how the aggregate allocations will be operationally utilized and how they managed for the benefit of U.S. citizens. Second, TACs were set will be split among members of each cooperative. The cooperatives manage that not only adhered to scientific understanding but that explicitly internal affairs by delegating various decisions to managers or boards of mem- bers, backed up legally with civil contracts among members. These contracts specify internally agreed-upon allocation rules and sanctions for deviating from 20 To bring the story full circle, the harvester coop developed in the Bering Sea group-determined norms, including quota holdings for both target and bycatch pollock fishery included a number of companies that were involved in the off- species. In essence, the harvester cooperatives implement self-organized inter- shore hake fishery in the lower states off Oregon and Washington, a fishery that nal IQ systems in each sector via legally binding civil contracts. established its own harvester cooperative a few years before the AFA. Recall that 22 In the offshore sector, substantial savings were achieved as a first step by the first joint ventures were developed in that fishery, with the knowledge trans- retiring the least-efficient vessels and reallocating their historical shares among ferred subsequently to joint venture development in the BSAI pollock fishery. remaining active vessels. The coop currently utilizes 14 vessels out of the 20 that 150 Trade in Fishing Services been enormously profitable, generating new wealth for participants entrepreneurship among a number of “first-movers” in the indus- on the order of several billion dollars. Coupled with the new incen- try. West Coast vessels were comparatively small and underpow- tives that have impacted profitability of both sectors has been the ered to profitably fish low-valued but high-volume species like gradual increase in allocation to the so-called Community Devel- hake, compared with industrial scale foreign fleets that fished far opment Quota (CDQ) program. The CDQ program currently from home. As foreign allocations began (by legislative design) takes 10 percent of the pollock TAC and allocates it to consortia of to be reduced, American entrepreneurs and Soviet counterparts native Alaska communities along the western slope.23 These com- found mutually beneficial arrangements in joint ventures as tran- munities are poor, isolated, and underdeveloped; the CDQ pro- sitional institutional mechanisms. The MRC venture was quickly gram gives them a formal financial and legal stake in the Bering successful in transferring Soviet knowledge of midwater trawling, Sea pollock fisheries as well as other designated CDQ fisheries. As cod-end transfer, and onboard processing to Americans as well wealth has emerged with the end of overcapacity and race to fish as providing a ready market for American-caught fish. Joint ven- conditions, a significant portion of that has been captured by the ture partners exhibited a willingness to adapt in order to facilitate part of the quota dedicated to addressing social and economic con- contractual arrangements that were hemmed in by idiosyncratic ditions of native Alaskans.24 restrictions and constraints. A second factor that enhanced the transition was the intercon- TRANSITION IN THE nectedness and geographic mobility of the West Coast domestic fleet. Fishermen with home bases in Seattle steamed southward to BSAI POLLOCK FISHERY: fish hake off the coasts of California and Oregon for Soviet floating ASSESSMENTS AND LESSONS processors and then northward to fish pollock off Alaskan coasts for Japanese and Korean surimi processors. They brought knowledge The BSAI pollock fishery is today an exceptional example of a gained in the hake fishery about joint venture operations, mother- well-managed and profitable fishery. It maintains sustainable yields ship-catcher vessel coordination, onboard processing, new product of over 1 million metric tons, and it generates hundreds of mil- developments, and Soviet bloc fish markets. This knowledge was lions of dollars in profits annually. Much, although not all, of the instrumental in transferring the first experiences in hake on the wealth and economic returns now accrue to U.S. citizens, includ- West Coast into the development of the BSAI pollock fishery in ing important shares to native Alaskans. The current fishery is in Alaska, given the similarities in species, catching and processing the later stages of a long transition from open access and foreign- technology, and markets. dominated to U.S.-managed and domestically controlled. The Third, there was a significant amount of domestic harvesting transition period utilized a number of mechanisms to facilitate and capacity suitable to begin replacing the flotillas of distant-water accelerate the transition, implemented with new national legisla- integrated catcher and processing operations that had emerged tion and aimed to change economic incentives and provide car- under open access. In particular, and fortuitously, the collapse of rots and sticks to various players. Individual entrepreneurs played the king crab fishery left many catcher vessels mothballed, bank- dual roles of not only forming the evolving national legislation but rupt, and otherwise idle. There was thus a ready-made fleet of new also responding to changed incentives by investing, taking risks, and American-owned Bering Sea–worthy catcher vessels, ready to find exploiting new opportunities. opportunity in the newly developing domestic offshore pollock fish- What general lessons can be drawn from the pollock case? It ery. The conversion of the pollock fishery to a domestic fishery is appropriate to acknowledge from the outset that there were made use of the redundant crabbers with minimal outfitting. But important supporting factors that aided the rapid and orderly the use of this redundant capital to replace foreign capacity did not transition from foreign to domestic domination within a fairly happen spontaneously and without nudging; instead, industry rep- short time. First, there was an eagerness for opportunity and resentatives made the case to Congress to alter existing legislation to provide opportunities to put the idle capacity back to work. This were originally granted membership rights. The rents generated by the remain- materialized in the American Fisheries Promotion Act that was so ing operational fleet have been derived from multiple margins but largely by important in accelerating the transition. increasing yield (from 19 percent to over 33 percent of raw weight), shifting to Fourth, there was a huge amount of new investment capital higher-valued products (for example, deep skin fillets instead of surimi), slowing available to entrepreneurs willing to invest in newly developing and catch rates to smooth and optimize throughput, and more efficient production transforming fisheries. This money was available in part through of byproducts (roe, fish meal, and fish oil). the Fisheries Obligation Loan Guarantee that was part of the 23 There are six CDQ entities representing 65 separate communities. AFPA. But the capital was also available because of long-standing 24 CDQ communities have adopted a number of financial arrangements to best connections between Norwegians in Seattle and Norwegians in utilize their shares of the CDQ allocations. Some have simply leased their quota Norway. One of the largest lenders was Norway’s Christiana Bank, to the firm offering the highest bid, whereas others have leased quota to firms which had a reported portfolio of $435 million wrapped up in new willing to provide various side benefits. These include employment opportunities factory trawlers and catcher vessels readying themselves for the for unemployed community members, scholarships for schooling and training, turnover to U.S. fishermen in the late 1980s. A principal remarked and investments in community infrastructure. A number of CDQ communities with amazement that one could invest in a ($30-million) catcher- have also bought into the offshore sector so that they are co-owners of original processor to harvest pollock with nothing down. But similar invest- coop companies. The flow of revenues generated from CDQ allocations and ment funding was also available because of the reliable institutions arrangements is currently over $200 million annually. in the United States, institutions that enabled, with low transactions Emerging Perspectives on Foreign Fishing Arrangements 151 costs, credit to be obtained, collateral to be pledged, and enforce- If there is an overarching lesson for developing countries, it is ment of contractual arrangements under default. that domestication is neither necessary nor sufficient to guarantee A final important set of supports was provided by the ena- that fisheries resources can return significant rents to coastal nation bling legislation that paved the way for an orderly replacement stakeholders. In the pollock fishery, domestication occurred rea- of foreign vessels. The FCMA initially laid the foundation by sonably quickly. But profitability did not occur until much later in committing the use of BSAI fisheries within the EEZ expressly the process, after the incentive problems associated with insecure for the benefit of U.S. citizens and communities. This established access rights and the race to fish were eliminated. the principle that would guide further amendments that enacted those precepts. The Act next required scientific determination of TACs, a management mechanism to allocate those, and observer REFERENCES and enforcement resources to back up regulations. But the FCMA Alverson, Dayton Lee. 2008. Race to the Sea: Autobiography of a Marine Biologist. was also readily and quickly modified as the need arose, mostly by Seattle: University of Washington Press. the AFPA, which made room for mothballed crabbers and later Bailey, K. M. 2011. Billion Dollar Fish: The Untold Story of Alaskan Pollock. for new catcher processors and motherships in the pollock transi- Chicago: University of Chicago Press. tion. The enabling legislation was thus flexible, responsive, and Bakkala, R., W. Hirschberger, and K. King. 1979. “The Groundfish creative in turning events into opportunities for domestication at Resources of the Eastern Bering Sea and Aleutian Islands Regions.” more rapid rates. Marine Fisheries Review 41 (11): 1–24. Berger, J., J. Smoker, and K. King. 1986. Foreign and Joint Venture Catches and Lastly, the very nature of the harvesting and processing opera- Allocations in the Pacific Northwest and Alaska Fishing Area under the Magnu- tion that evolved in the open access period for pollock is some- son Fishery Conservation and Management Act, 1977–84. Seattle: National what unique, with floating processors and fleets of catcher vessels Oceanic and Atmospheric Association and Northwest Fishery Sci- delivering to floating motherships. The at-sea processing nature ence Center. of the fishery’s operations made possible splitting the functions of Berger, J., and H. Weikhart. 1989. Summary of Observer Sampling of Foreign and harvesting and processing between foreign and domestic interests. Joint Venture Fisheries in the Northeast Pacific Ocean and Eastern Bering Sea, This allowed a simple and easy transition, whereby foreign-owned 1988. Seattle: National Oceanic and Atmospheric Association and integrated operations were split into separate processing and har- Northwest Fishery Science Center. vesting operations, joined by joint venture agreements, which were Criddle, K. R. 2012. “Adaption and Maladaption: Factors that Influence simply new individual arms-length ex-vessel markets. Resilience in Four Alaskan Fisheries Governed by Durable Entitle- In reviewing the entire history of the Bering Sea pollock fishery, ments.” ICES J. Marine Science 69 (7): 1168–79. Criddle, K., and S. Macinko. 2000. “A Requiem for the IFQ in U.S. Fisher- perhaps the most important lesson is that sustained profitability has ies?” Marine Policy 24: 461–69. only emerged recently, after the passage of the all-important Amer- Finlay, Carmen. http://carmelfinley.wordpress.com. ican Fisheries Act in 1998. Before 1998, the provisions of the Fish- Barry Fisher. 1992. “Oregon’s Whiting Fishery: A Case Study in Coopera- ery Conservation and Management Act of 1976, supplemented by tive Development” in Pacific Whiting: Harvesting, Processing, Marketing, and the American Fisheries Promotion Act and Anti-Reflagging Act Quality Assurance, edited by Gilbert Sylvia and Michael T. Morrissey. of 1987, achieved an orderly and reasonably rapid domestication Corvallis, Oregon: Oregon Sea Grant. of both harvesting and processing functions. But, especially after Guttormsen, M., R. Narita, and J. Berger. 1990. “Summary of U.S. Americanization, the fishery was locked in a high-stakes race to fish Observer Sampling of Foreign and Joint Venture Fisheries in the among remaining American interests because open-access incen- Northeast Pacific Ocean and Eastern Bering Sea.” 1989. NOAA tives were still in operation. This manifested itself in short seasons, Technical Memorandum NMFS FI/NWC-189. allocation disputes, habitat destruction, bycatch, low-valued final Herrick S. F., I. Strand, D. Squires, M. Miller, D. Lipton, J. Walden, and S. Freese. 1994. “Application of Benefit-Cost Analysis to Fisheries Allo- products, incomplete utilization, and geographically concentrated cation Decisions: The Case of Alaska Walleye Pollock and Pacific fishing. The AFA radically changed the playing field, resolving the Cod.” North American Journal of Fisheries Management 14: 726–41. conflict between inshore and offshore sectors by guaranteeing each Herrfurth, G. 1987. Walleye Pollock and Its Utilization and Trade. Marine sector a fixed share of the allocation. This meant that although Fisheries Review 49 (1): 61–68. individual members of each sector still had insecure access to their Kaczynski, V. 2012. Alaskan Pollock: Case Study Report. Integration of the Distant sector shares, they were at least protected from share erosion at the Water Interests with the Coastal State’s Economy: The Case of the Alaska Pollock sector level. Fishery in U.S. Waters. MRAG draft report. More importantly, as part of the AFA, legislation encouraged Miller, M., L. Nelson, R. French, and S. Hoag. 1976. “U.S. Observers each sector to manage its share cooperatively. Funds and mech- Board Japanese Trawl Vessels in the Bering Sea.” Marine Fisheries anisms were provided to buy out excess capacity, and legislation Review 38 (4): 1–10. was provided to facilitate the formation of sector-level cooperative Murai, S., H. Gangmark, and R. French. 1981. “All-Nation Removals of Groundfish, Herring and Shrimp from the Eastern Bering Sea and decentralized management. It is these last steps that have been the Northeast Pacific Ocean, 1964–80.” NOAA Technical Memoran- impetus for wealth generation that has emerged over the past 15 dum NMFS F/NWC-14. years in the pollock fishery. The race to fish has mostly ended, har- North Pacific Management Council. 1991. “Fishery Management Plan for vesting is coordinated over time and space to maximize value of the Bering Sea/Aleutian Island Groundfish.” National Oceanic and output, and the security of access has given stakeholders the incen- Atmospheric Association, Anchorage, Alaska. tives to pursue value, cost reduction, operational efficiencies, and National Marine Fisheries Service. 2002. Final Environmental Impact Statement new markets. for the American Fisheries Act. 152 Trade in Fishing Services Nelson, R. E. 1985. “Historical Review of the Coastal Pacific Whiting, United Nations. 1982. Text of the Convention on the Law of the Sea. Merluccius productus, Fishery.” Marine Fisheries Review 47 (2): 39–41. Vaisman, A. 2001. Trawling in the Mist: Industrial Fisheries in the Russian Part of Philbin, Calvin. 1980. Three Different Delivery Modes for Fresh-Caught the Bering Sea. Cambridge: TRAFFIC Europe. Pacific Whiting. Marine Fisheries Review 30–36. Walsh, J. P., and J. Weinstein. 1988. “Foreign Investment in the U.S. Fish- Stanley, S. 1982. “Mare Clausum: The American Fisheries Promotion ery Industry after the Anti-reflagging Act of 1987.” The International Act of 1980.” Syracuse Journal of International Law and Commerce 9 (2): Lawyer 22 (4): 1207–15. 222–26. Wilen J. E., and E. J. Richardson. 2008. “Rent Generation in the Alaskan Pol- Sylvia, G., Mann H. Munro, and C. Pugmire. 2008. “Achievements of the lock Conservation cooperative.” In Case Studies in Fisheries Self-Governance: Pacific Whiting Conservation Cooperative: Rational Collaboration FAO Fisheries Technical Paper 504, edited by R. Townsend, R. Shotton, in a Sea of Irrational Competition.” In Case Studies in Fisheries Self- and H. Uchida, 361–369. Rome: Food and Agriculture Organization. Governance: FAO Fisheries Technical Paper 504, edited by R. Townsend, Zimmerman, M., C. B. Dew, and B. Malley. “History of the Alaska Red R. Shotton, and H. Uchida, 425–40. Rome: Food and Agriculture King Crab Paralithodes camtschaticus: Bottom Trawl Surveys, 1940–61.” Organization. Marine Fisheries Review 71 (1): 1–22. Emerging Perspectives on Foreign Fishing Arrangements 153 E N V I RO N M E N T A N D N AT U R A L R E S O U RC E S G LO B A L P R AC T I C E D I S C U S S I O N PA P E R # 0 1 W O R L D B A N K G R O U P R E P O R T N U M B E R 92662-GLB 1818 H Street, NW Washington, D.C. 20433 USA Telephone: 202-473-1000 Internet: www.worldbank.org/environment