WORLD TRADE
ORGANIZATIONWT/CTE/W/204
19 March 2002
(02-1420)
Committee on Trade and Environment Original:  English
FISHERIES SUBSIDIES
Submission from New Zealand
on Paragraph 32(i) of the Doha Declaration
I. PURPOSE
1. This paper notes findings from a recent research paper that appear relevant to discussion in
the Committee on Trade and Environment on the issue of fisheries subsidies.
II. BACKGROUND
2. Over the past decade subsidies to the fishing industry have attracted increasing attention from
researchers and policy-makers. There has been concern about both the environmental impact (insofar
as subsidies contribute to over-fishing) and the impact of subsidies on markets and trade.
3. In the WTO context there was regular discussion of the issue in the Committee on Trade and
Environment under Item 6 of the agenda1). Ministers decided in Doha on the basis of discussion
during the preparatory process to proceed with negotiations on fisheries subsidies. Those negotiationsare to take place in the Rules Negotiating Group. It is, however, likely that there will continue to be
parallel discussion in the Committee on Trade and Environment in the context of paragraph 32(i) of
the Doha Ministerial Declaration.
4. Developing countries have a large share of global trade in fisheries products and for many of
them fisheries are an important industry and food source. These factors give the fisheries subsidies
issue an important development dimension which is recognised in the Doha mandate.
III. SIGNIFICANCE OF SUBSIDIES IN RELATION TO OVERFISHING
5. In considering the causes of damaging over-fishing one of the issues that has generated debate
in the CTE has been the relative importance of subsidies and of deficiencies in fisheries management.
Some have argued that inadequate management regimes and uncontrolled or illegal fishing activity
are the main cause of problems, and that subsidies specifically designed to reduce capacity will
actually be beneficial. Previous studies focusing on fisheries subsidies have typically assumed thatcertain categories of subsidy should be regarded as neutral or beneficial in their environmental and
possibly their trade effects.
IV. RECENT FINDINGS ON THE IMPACT OF CERTAIN TYPES OF SUBSIDY
6. A recent research paper challenges some of these earlier assumptions. Subsidies and their
potential impact on the management of th e ecosystems of the North Atlantic (Munro and Sumaila,
                                                     
1 (the effect of environmental measures on ma rket access, especially in relation to developing
countries, in particular to the least developed among them, and environmental benefits of removing trade
restrictions and distortions).WT/CTE/W/204
Page 2
University of British Columbia, 2002) provides a technical analysis of the economics of subsidies’
impact on fisheries management and sustainability. (An abstract is attached as an annex).
7. It is beyond the scope of this note to attempt any review of the economic analysis set out in
the paper. It should be noted, too, that the paper’s focus is impacts on marine ecosystems and their
management rather than on markets and trade. However in the context of long-running debate in theCTE on fisheries subsidies as an issue with trade, environmental and developmental aspects some of
the conclusions in the paper are of interest.
V. IMPACT OF SUBSIDIES UNDER DIFFERENT CONDITIONS
8. Munro and Sumaila analyse the theoretical impact of subsidies under several conditions of
access and management and for several categories of subsidy.
9. A situation of pure open access, they demonstrate, will lead to overexploitation of the
resource; and the introduction of subsidies which from the perspective of fishers increase the price ofharvested fish or reduce the cost of fishing effort or vessel capital will result in more intense
exploitation of the bio-mass and thus make a bad situation worse.
10. In a situation where there is effectively a private property rights fishery (with individual
transferable harvest quotas, for example, but in a situation where the government has essentially
relinquished resource management rights) the introduction of subsidies will again, according to theiranalysis, lead to overexploitation of the resource. It undermines what would otherwise be a socially
optimal resource management program by introducing a new set of perverse incentives.
11. The researchers finally examine the case of a fishery with regulated open access (i.e. where
the annual harvest is controlled but where that limited annual harvest becomes the “common pool”).
The key subsidy question identified in this situation is when the resource manager (government)reacts to the emergence of excess capacity by introducing a buyback or decommissioning scheme.
Such schemes have generally been characterised in previous analysis as environmentally benign. The
authors cite evidence that such schemes are not, in fact, generally effective over the long run in
reducing capacity and that they are likely to dest abilize rather than stabilize the fishery. They
conclude that in practice such schemes threaten the ability of the resource manager to control totalharvest.
VI. IMPACT OF DIFFERENT CATEGORIES OF SUBSIDY
12. Using OECD data the authors examine fisheries sector subsidies from countries in the North
Atlantic region. They characterise three major cate gories (fisheries infrastructure, investment and
modernization and tax exemption) as likely to be negative in their impact upon fisheries resources.
They further argue that, on the basis of their earlier analysis, any positive impact from
decommissioning subsidies and subsidies to gain access to other countries’ waters is likely to be onlyfleeting and that, in many cases, such subsidies will prove to be decidedly negative in their impact.
They finally include income support and unemployment insurance subsidies with those likely to be
negative in their impact. They do not include subsidies arising from price supports (the data is not
available from OECD estimates).
13. The authors set out their conclusions as follows:
“We conclude, tentatively, that just under 50 per cent of the North Atlantic fisheries subsidies
are benign, or neutral, in terms of their impact. We also conclude that just under 50 per cent
are decidedly damaging, or are to be viewed, at best, with deep suspicion. The remainder, just
over 5 per cent, we cannot classify on the basis of available information.WT/CTE/W/204
Page 3
“There is wide acceptance of the view that subsidies used in vessel decommissioning
(buyback) programs also have a positive impact upon fisheries management and
sustainability. By reducing fleet capacity such subsidies will reduce economic waste in the
fisheries and reduce pressure on the resource, or so the argument goes. We take sharp issuewith this widely held view. Such subsidies, if they come to be anticipated by industry, can and
will have a decidedly negative impact.
“Subsidies in fisheries, to the extent that their impact is negative, are seen as exacerbating the
problems arising from the “common pool” nature of many capture fisheries. We do not
question this claim. We do, however, raise the question of whether the subsidies would
continue to have a negative impact if the characteristics of the fishery were removed, i.e. bythe establishment of effective property rights. The answer is unquestionably yes.”
VII. COMMENT
14 The economic analysis in the paper is highly technical. As noted above, it is beyond the scope
of this note to review the data or the analysis used. The analysis is also selective in its scope: it islargely confined to impacts on fisheries stocks and their management; market and trade impacts are
not the focus of the paper. It considers a limited range of parameters. And the section of the paper that
looks at actual subsidies is limited to OECD data on North Atlantic fisheries. The weight to be placed
on the conclusions should be limited accordingly.
15 With those caveats, some of the paper’s findings are of interest given that they go against
prevailing assumptions about the benign or damaging nature of certain types of subsidy. To the extent
that they challenge the environmental benefits of certain categories of subsidy they potentially
reinforce the case for improving WTO disciplines over subsidies which can be demonstrated to have
negative trade impacts.WT/CTE/W/204
Page 4
ANNEX
Subsidies and their potential impact on the management of the ecosystems of the North Atlantic
Gordon R. Munro and Ussif Rashid Sumaila
Fisheries Centre
University of British Columbia
Vancouver
ABSTRACT
This paper provides both an estimate and assessment of subsidies in fisheries in the North Atlantic.
The subsidies are estimated, on the basis of data taken from an OECD study and the Sea Around Us
Project database, to be in the order of U.S.$2.0 to 2.5 billion per year. The assessment of the impact of
the subsidies upon resource management and sustainability requires an examination of the underlying
economics of subsidies in fisheries. There is general agreement, to which we subscribe, that fisheriessubsidies do great harm by exacerbating the problems arising from the “common pool” aspects of
capture fisheries. Many economists, however, believe that, if the “common pool” aspect of a fishery
could be removed by, for example, establishing a fully-fledged property rights system, the negative
impact of fisheries subsidies would prove to be trivial. This paper demonstrates that the
aforementioned comfortable belief is unfounded. Fisheries subsidies can be seriously damaging, evenif the “common pool” aspects of the fishery are removed. There is also a widely held belief, among
economists and government officials, that subsidies used for vessel decommissioning schemes, far
from being harmful, actually have a beneficial impact upon resource management and sustainability.
About twenty per cent of the fisheries subsidies in  the North Atlantic are directed towards these
purposes. In this paper we argue that these seemingly beneficial subsidies can, in fact, be highlynegative in their impact.
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