ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT Trade & Agriculture Directorate Overfishing, undermanagement and subsidies: the economic link Anthony Cox, Fisheries Policies Division, Directorate for Trade & Agriculture 1 March 2007, Palais de Nations, Geneva

Trade & Agriculture Directorate 2 The economics of fisheries subsidies Subsidies change revenue, costs and profits Subsidies alter incentives facing fishers Subsidies result in an overall loss in economic efficiency and social welfare Subsidies stimulate rent-seeking behaviour Subsidies tend to reduce industry and community flexibility, and lock in technology and production patterns Very limited public policy rationale for subsidies Specific economic effects depend on the management context

Trade & Agriculture Directorate 3 The management context has three dimensions Status of stocksUnder-fished or over-fished? Is the TAC or effort level set at a sustainable level? Single or mixed species? Is the science underlying assessments well-understood? Highly data intensive Not amenable to “rules of thumb”

Trade & Agriculture Directorate 4 The management context has three dimensions Status of stocks Management regime Open access fisheries Regulated open access Effort controlled fisheries Rights based regimes (catch, effort rights) Robustness of regimes wrt incentives

Trade & Agriculture Directorate 5 The management context has three dimensions Status of stocks Management regime Enforcement At-sea surveillance Land-based monitoring Monitoring of fleet capacity Incentives to comply/cheat Penalty structure Probability of conviction Adequacy of governance structures

Trade & Agriculture Directorate 6 Trade effects of fisheries subsidies If supply effectively constrained subsidies will: –increase profits of exporters –have no effect on trade flows or prices (if fishers are price takers) But there will be a supply response in the case of: –Under-exploited or developing fisheries –Aquaculture –Fisheries with ineffective management –Monopoly producer –Strategic behaviour by fishers Difficult to disentangle the subsidy effects from the management effects Long-term trade gains from effective management, esp if competing countries have ineffective management

Trade & Agriculture Directorate 7 Criteria for the management context? Management context represents a complex dynamic system –Spatially, temporally specific –High data requirements –Not necessarily amenable to “rules of thumb”  Closer to certification criteria? Criteria flowing from the Code of Conduct for Responsible Fisheries? –Code is normative, voluntary, aspirational –Not an appropriate foundation for developing criteria Criteria in WTO rules? –Pushing the envelope on the WTO mandate –Risk of creating complex rules that provide plenty of shelter for continued provision of subsidies Perhaps the institutional architecture has yet to be developed?

Trade & Agriculture Directorate 8 Financial support has fluctuated around USD 6 billion a year

Trade & Agriculture Directorate 9 Management, research, enforcement Infrastructure Decommissioning Income support Other Vessel construction Access agreements Targets of support have changed

Trade & Agriculture Directorate 10 Value of support as a percentage of landed value varies considerably

Trade & Agriculture Directorate 11 Financial support has mostly declined since 1996