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The WTO must act to reduce harmful fisheries subsidies

Summary:
At a time when overfishing is increasingly depleting the world's oceans, the World Trade Organization (WTO) may be closing in on a deal to address harmful fisheries subsidies that contribute mightily to the problem. The most recent draft language of an accord being negotiated under WTO auspices would ban subsidies in specific regulated fishing areas along with other types of bans on subsidies for developed countries. Poorer countries would be granted exemptions or a phase-in period. Negotiators are working hard to break a 20-year deadlock over the issue. Even if the ultimate deal establishes some significant carve-outs for some developing countries, it is a deal worth making. Progress toward breaking the deadlock could come at a forthcoming WTO ministerial meeting, originally scheduled for

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At a time when overfishing is increasingly depleting the world's oceans, the World Trade Organization (WTO) may be closing in on a deal to address harmful fisheries subsidies that contribute mightily to the problem. The most recent draft language of an accord being negotiated under WTO auspices would ban subsidies in specific regulated fishing areas along with other types of bans on subsidies for developed countries. Poorer countries would be granted exemptions or a phase-in period. Negotiators are working hard to break a 20-year deadlock over the issue. Even if the ultimate deal establishes some significant carve-outs for some developing countries, it is a deal worth making.

Progress toward breaking the deadlock could come at a forthcoming WTO ministerial meeting, originally scheduled for November 30 to December 3 but postponed because of the latest COVID-19 variant.

Confronting the problems of overfishing as well as illegal, unreported, and unregulated fishing would contribute not only to more sustainable oceans—an agreement would also promote fisheries development in lower-income countries, help address climate change, and attenuate a source of potential international conflict.

According to the Food and Agriculture Organization, a third of the world's assessed fisheries are being pushed beyond their biological limits. For example, the Atlantic cod fishery off the shores of Newfoundland—once one of the most productive and economically valuable in the North Atlantic Ocean (figure 1)—had gone from supporting small-scale local fishers and migratory fleets for centuries to being overfished by larger industrial vessels armed with sonar and navigation systems beginning in the 1970s, undermining the ability of the cod to reproduce. The cod population collapsed in the early 1990s and has never rebounded despite moratoria on fishing.

The WTO must act to reduce harmful fisheries subsidies

Harmful subsidies are a key contributor to overfishing. As outlined in a recent letter published in Science, harmful subsidies include those that lower the cost of fuel and vessel construction and those that provide producer price supports that artificially inflate the value of catches. A 2019 estimate put the total volume of these subsidies at $22.2 billion, or 14 percent of the total value of marine catches in 2018, the date for which most recent estimates are available.

The most recent draft language pending at the WTO would ban subsidies for deep-sea and distant water fishing that occurs in exclusive economic zones (EEZs)—200 kilometer zones beyond a country's coast in which they have exclusive economic rights (though these rights can be licensed to foreign fishers)—and the management areas of regional fisheries management organizations. These organizations collaboratively govern and monitor fishing in the open ocean beyond the EEZs of adjacent countries, as well as most other types of subsidies for developed countries. The current draft also includes language exempting poorer countries with small shares of global marine catch (0.7 percent to 2.0 percent, depending on the draft, but pending negotiation) and a phase-in period for developing countries, like India, whose catch shares exceed that limit.

Though progress has been made, it is far from a done deal. There are a variety of potentially divisive issues, ranging from the extent of special and differential treatment for developing countries to the types of subsidies covered. The current draft agreement has provisional language on non-specific fuel subsidies, or those not specifically related to marine wild capture fishing, that may wind up being excluded from the final deal. These include general fuel tax exemptions for fisheries. Another divisive issue relates to the treatment of fishing in areas subject to contested territorial claims, such as those in the South China Sea between China and Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam. Negotiations around these issues are ongoing.

Like the carbon emissions that drive climate change, ocean overfishing is a commons problem where a relatively small number of countries are responsible for the majority of fishing. Twenty countries have accounted for 74 percent of global ocean fish catches by tonnage since 1950. Five of those account for 39 percent: the USSR/Russia (9.6 percent), Japan (8.3 percent), China (7.7 percent), Peru (7.5 percent), and the United States (6.1 percent). Since 2000, the top five countries' share has also been 39 percent, though China's share has nearly doubled (14.4 percent). Many of these countries are among the top harmful subsidizers. The countries of Northeast Asia account for 51 percent of the global total subsidies. As figure 2 shows, China alone provides over a quarter (27 percent), followed by Japan (10 percent), South Korea (7 percent), Russia (5 percent) and Taiwan (3 percent). The adjacent Seas of Okhotsk, Japan, and East and South China are some of the world's most heavily fished waters.

The WTO must act to reduce harmful fisheries subsidies

While subsidies lower the price of vessel construction and fuel, they promote overcapacity in the respective countries' fishing sectors and fishing oceans away from the vessels' home ports. Much of this fishing is done near or even in other countries' EEZs, such as when a large flotilla of Chinese vessels fished near Ecuador's Galapagos Islands and in Chilean waters in December 2020. As recently as 2014, foreign vessels caught twice as many fish in Somalia's EEZ as did the Somali domestic fleet.

Eliminating or reducing harmful fisheries subsidies would also help promote fishing industry development in poor- and middle-income countries, which have trouble keeping up with subsidized fishing by rich countries. Bangladesh, India, Indonesia, and the Philippines—which have a combined population of nearly two billion people—account for just 4 percent of these subsidies. Large global subsides naturally deter them from making capital investments to meet their own needs.

Curbing subsidies would also help mitigate climate change. Fossil fuel subsidies, including fuel-specific tax exemptions, account for 22 percent of all harmful subsidies. As recent estimates put the median fossil fuel footprint of ocean fishing activities at nearly 700 liters per landed metric ton, reducing subsidies would, on margin, reduce fishing pressure and incentivize more efficient fishing techniques.

An accord might also ease geopolitical tensions. Competition over ocean fisheries resources is a surprisingly common source of militarized conflict between countries. The East and South China Seas—where subsidies are high and fishing pressure is intense—are particular flash points. Encroachment by foreign vessels on other country's EEZ is one of the main sources of these conflicts.

The global oceans and the fisheries they sustain face a variety of threats related to climate change, geopolitical competition, and rising demand for fish; the nature of many ocean fisheries make tragedy of the common dynamics all too typical. In addition to being anti-competitive, harmful fisheries subsidies contribute to all three. While not a panacea for addressing challenges facing the global oceans, the WTO has a chance to either eliminate or radically reduce these subsides, albeit with some carveouts for developing countries and certain types of fishing activities. Even with those exceptions, it's a deal well worth making.

Political Economy, Food Security, Climate Change, and Political Violence. Assoc Prof josefkorbel & Nonres Senior Fellow PIIE, @kcollege & UCSanDiego alum.

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