WORLD TRADE
ORGANIZATIONTN/RL/W/115
10 June 2003
(03-3006)
Negotiating Group on Rules Original:  Spanish
POSSIBLE APPROACHES TO IMPROVED DISCIPLINES
ON FISHERIES SUBSIDIES
Communication from Chile
General background
1. Considerable progress has been made in the last two meetings with submissions in addition to
those already received from the group of countries known as "Friends of Fish" (TN/RL/W/58 and
TN/RL/W/3) and the papers from the United States (TN/RL/W77) and the European Communities
(TN/RL/W/82).  Chile wishes to add the following contribution.
2. In line with the above documents, Chile considers that the existing disciplines of the
Agreement on Subsidies and Countervailing Measures (SCM Agreement) do not adequately regulate
fisheries subsidies, primarily because fisheries resources are a classic example of the "tragedy of the
commons".  Indeed, while it is in the global intere st to conserve fish stocks, the immediate incentive
for owners of fishing vessels is to catch as much fish as possible, the incentive becoming even greaterwhen fishing is subsidized.
3. The traditional solution to the "tragedy of the commons" is to establish property rights, so as
to provide a direct incentive for conservation.  However, not all oceans – and certainly not the high
seas – are subject to property rights, and the dynami cs and migratory nature of fish populations make
it impossible to assign such rights.  Because of the specific nature of the fisheries sector, therefore, the
effect of the subsidies enjoyed by some countries' high-sea fleets is to limit access to commonfisheries resources (fish) for non-subsidizing fleets and countries and to resources under national
jurisdiction, which are the property of coastal States (migratory species).  Limited access
unquestionably constitutes a barrier to trade for all non-subsidizing countries and diminishes their
opportunities to participate on equal terms.
4. The provisions of the SCM Agreement were designed to address market distortions and
harmful trade effects caused by subsidies, which translate directly into lower relative prices for
subsidized products and hence stand in the way of equitable market access.  However, it is extremely
difficult to demonstrate the damaging trade effects of fisheries subsidies, which are to make
competition in operations involving shared resources unviable for non-subsidized fleets, in the contextof the existing provisions of the SCM Agreement.
5. This distinctive feature of fisheries subsidies, which limit access to shared resources and in
certain cases even to one's own resources, is sufficient reason to make such subsidies subject to
special treatment under the SCM Agreement.  In other words, the Agreement's existing disciplinesneed to be improved.  As indicated in document TN/RL/W/3, the fisheries sector is governed by
dynamics that are different from those of other business sectors.
6. Chile has been seeking to achieve sustainable management of its fisheries.  Periods of closure
and maximum quotas for capture have been established in order to conserve resources, which is notalways an easy or popular task.  Since fish stocks  are not subject to property rights – a feature unique
to the fisheries sector – and the fish is caught by fleets which in all likelihood would be unable toTN/RL/W/115
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engage in distant-water operations without various types of subsidy, this conservation measure,
designed to guarantee the sustainable development of fisheries resources, loses much of its impact.
This evidently raises economic problems and unquestionably involves a trade aspect.
7. Another factor to be considered is that lack of access is not the only trade distortion caused by
fisheries subsidies.  It is also necessary to take into account inter alia  the loss of share in the markets
of subsidizing countries.  Chile is unable to export its fisheries products – or exports less than it could
– to markets that are self-sufficient thanks to the harvests made by their subsidized fleets.  The
difficulty of applying the existing disciplines of the SCM Agreement in order to resolve the problem
has already been mentioned in this Negotiating Group.
8. In view of the above, Chile proposes that several provisions relating to fisheries subsidies be
included in the SCM Agreement.  The proposal provides for an express ban on fisheries subsidies of a
commercial nature that promote aspects such as overcapacity and overfishing.  It also makes provision
for an amber box for all remaining subsidies, which will not be subject to such a ban to the extent that
notification requirements are satisfied.  Such requirements should be addressed in the relevant
discussions of the Negotiating Group on Rules.
Provisions to be added to the SCM Agreement
(i) Red light :
1.3 All fisheries subsidies of a commercial nature, directly geared towards lowering costs,
increasing revenues, raising production (by enhancing capacity), or directly
promoting overcapacity and overfishing, shall be expressly prohibited.  The
following, inter alia , are prohibited subsidies:
1. Subsidies designed to transfer a country's ships for operation on the high seas
or in the local waters of a third country.
2. Subsidies that contribute to the purchase of ships, whether new or used.3. Subsidies to help modernize an existing fleet.
4. Subsidies that contribute to reducing the costs of production factors.
5. Subsidies that generate positive discrimination in the tax treatment of the
economic activity of operators involved in the capture, processing and/or
marketing of fisheries resources.
6. Subsidies that result in positive discrimination in access to credit.
(ii) Amber category :
1.4 The remaining subsidies, which have not been incorporated into the red light box
shall not be prohibited, to the extent that they are sufficiently accredited and notified
in the WTO.  Since subsidies always affect trade, however, no Member shall cause,
through use of these subsidies, the trade interests of other Members to be adversely
affected.  Hence, any Member affected by such a subsidy shall present arguments insupport of its claim only and strictly where the subsidizing Member has fully
complied with the notification procedures established for the purpose in the context of
the SCM Agreement.  Where the subsidizing Member has not fully met its
notification obligations or has failed to notify the programme, it shall be determinedTN/RL/W/115
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that that Member has the responsibility of demonstrating that the subsidy at issue does
not cause trade injury to the complaining Member.
1.5. Considering that the following subsidies may not affect third countries, and may even
be necessary to preserve the resources and/or social development of communities, where aMember considers its trade to be adversely affe cted by such subsidies, it shall be for the
complaining Member to provide evidence of the injury.
1. Subsidies of a social nature, the final purpose of which is to resolve problems
affecting small-scale fisheries, for the benefit of coastal communities and with
a view to improving quality of life;
2. Subsidies relating to fisheries management, including research and
administrative and other measures, the sole purpose of which is to ensure the
sustainability of hydro-biological resources and their environment.
Improvements in the quality of notifications (transparency)
The amber box proposal requires a proper system for the notification of fisheries subsidies,
which should be discussed in the Negotiating Group on Rules.  The following are some of the
questions to bear in mind in the discussions:
(i) Notifications of fisheries subsidies should be complementary to the existing
notifications in other forums, in particular the FAO.
(ii) Notifications relating to fisheries subsid ies should be mandatory, in particular for
subsidies in the amber category.
(iii) Chile endorses the idea put forward by the EC that the WTO Secretariat should keep a
"scoreboard" of notifications received per Member and per type of subsidy, which
would be made available publicly.
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