WORLD TRADE  
ORGANIZATION  TN/RL/W/201 
6 March 2006 
 (06-0961) 
Negotiating Group on Rules Original:   English 
  
 
FISHERIES SUBSIDIES 
SUBSIDIES FOR VESSEL CONSTRUCTION AND MODIFICATION 
 
Paper from Japan
 
 
 
  The following communication, dated 2 March 2006,  is being circulated at the request of the 
Delegation of Japan.  
_______________ 
 
Introduction 
 
1. The discussion of the disciplines on fisheri es subsidies at the WTO Rules Negotiating Group 
has made significant progress since its beginning.  Ja pan is confident that it has made a substantial 
contribution to the discussion, particularly thro ugh its proposals in June and September 2004 as well 
as the joint proposal co-sponsored by Korea and the Separate Customs Territo ry of  Taiwan, Penghu, 
Kinmen and Matsu in February 2005 (TN/RL/W/159, 164 and 172 respectively).   2. The progress of the fisheries subsidies ne gotiation is duly recognized in the Hong Kong 
Ministerial Declaration.  In paragraph 9 of Annex D, Ministers “ note that there is broad agreement 
that the Group should strengthen disciplines on subsidi es in the fisheries sector, including through the 
prohibition  of certain forms of fisheries subsidies that contribute to overcapacity and over-fishing, and 
call on Participants promptly to undertake further detailed work to, inter alia , establish the nature and 
extent of those disciplines, includi ng transparency and enforceability”.  
 3. The bottom-up approach supported by Japan, Korea, the Separate Customs Territory of 
Taiwan, Penghu, Kinmen and Matsu and the European Community as well as some developing 
countries, which intends to prohibit fisheries subsidi es that are deemed to directly cause serious harm 
to the fisheries resources, is clearly in line with th e Ministerial Declaration.  In the joint proposal, 
Japan, Korea and the Separate Customs Territory of  Taiwan, Penghu, Kinmen and Matsu specified the 
5 types of fisheries subsidies which could cause ser ious harm to the fisheries resources and proposed 
to prohibit them.  Further discussion was made on the details of the 2 types of subsidies out of the 5 
candidates to be prohibited, namely “subsidies fo r overseas transfers of fishing vessels to non-CPCs 
(contracting parties, cooperati ng non-contracting parties, entities or fishing entities) of RFMOs 
(regional fisheries management orga nizations)” and “subsidies relati ng to IUU (illegal, unregulated 
and unreported) fishing” in Japan’s cont ribution in June 2005 (TN/RL/GEN/47).   
 
4. In this document, Japan further examines th e 2 other types of proposed prohibited subsidies 
from the joint proposal, i.e. subsidies for the “cons truction of new fishing vessels resulting in capacity 
enhancement” and for the “fishing vessel modificati on for capacity enhancement”.  It should be noted 
that this is not Japan’s final position and it reserves its right to make further proposals in the course of 
the discussion. 
 
 TN/RL/W/201 
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  Background 
 
5. Most of the marine fisheries production is made within the EEZs (Exclusive Economic Zone) 
of each country and the UN Law of the Sea Convent ion, which came into force in 1994, recognizes 
the sovereign rights of coastal countries on the fisher ies resources in their E EZs.  Therefore, it is 
Japan’s basic understanding that the responsibility of the fisheries resources management within their 
EEZs, including whether they provide fisheries subsidies or not, lies with the coastal country. Therefore, Japan made a proposal in Septembe r 2004 which suggests permitting vessel construction 
subsidies if the resources are properly managed.  With regard to this pr oposal, many constructive 
comments were made by various Members such as “the threshold or the standard of proper 
management is unclear”, or “it is  inappropriate for coastal countries to determine whether their own 
fisheries management is proper or not”.  6. Japan strongly supports the prohibition of fi sheries subsidies which have negative effects on 
the fisheries resources.  Therefore, Japan took in to account comments made by various Members after 
the September 2004 meeting, held bilateral and plurilateral meetings with other Members and 
proposed, in its joint proposal with Korea and th e Separate Customs Terr itory of Taiwan, Penghu, 
Kinmen and Matsu, to prohibit subsidies for th e “construction of new fishing vessels resulting in 
capacity enhancement” and for “fishing vessel modification for capacity enhancement”, aiming at providing more amenable disciplines for a WTO framework.  In this document, we are trying to transfer those concepts into a more concrete rule  which can be easily transformed into a legal text. 
While doing so, it is indispensable to construct a cl ear, workable and enforceable rule in order to 
prevent the enhancement of the fishing capacity wh ile maintaining the right to provide subsidies 
which do not result in capacity enhancement.   
How to manage fishing capacity 
 7. Let us look at the examples of the fishi ng capacity management measures implemented by 
RFMOs as well as Japan as a reference for our discussion.    (i) Measures taken by RFMOs;   
(a) In 1999, ICCAT
1 introduced a measure to limit the number of vessels belonging to each 
Member that are over 24m and that target bigeye tunas. The upper limit is the average 
number of those vessels belonging to each Member in 1991 and 1992. 
 
(b) IOTC2 restricts the increase of either the numbe r or the sum of the gross tonnage of the 
vessels of each Member who holds more than 50 vessels over 24m.  Those Members who hold less than 50 vessels and intend to increase their number must notify their plan to the Commission.
 
 
(ii) Measures taken by Japan; 
 
(a) All vessels which are intended to be used for commercial fishing must be registered to the 
fishing vessel registration system.  Registration is possible only when the owner of the vessel possesses a valid fishing license or it is confirmed that the owner will obtain a license. 
 
 
(b) An authorization in advance is necessary for vessel construction.  In order to obtain an 
authorization, information such as whether the future owner possesses a valid fishing licence and detailed specifications of the planned vessel will be required.
 
                                                      
1 International Convention for the Conservation of Atlantic Tunas  
2 Indian Ocean Tuna Commission   TN/RL/W/201 
 Page 3 
 
 
   
(c) A fishing licence is periodically renewed.  Inappropriate licence holders (e.g. those who 
violate regulations, who do not actually operate,  etc.) cannot renew their fishing licences.   
 
(d) A limited entry system is adopted, i.e. the number of licences to be issued for each vessel size 
class is determined based on the stock assessment.  A new licence is issued only when there is a withdrawal of an existing licence.
 
 
(e) Due to the measures above, the number of fishing vessels as well as the sum of their 
gross tonnage in Japan has been declining stead ily in the long run.  In addition, the total 
fisheries production has also been decreasing due  to other management measures such as 
the limitation of operating days and TACs. (below) 
 
 Figure:  Transition of Japan’s marine capt ure production, number of vessels and sum of 
    gross  tonnage of fishing vessels  
 
8. Japan implements many layers of fisheries management, as mentioned above, and ensures to 
avoid any negative affects on the global fisheries resources. Implementing those strict management measures as a prerequisite condition, the Japanese government provides a minimum amount of vessel 
construction subsidies (subsidy to the interest of the loan provided for fishermen) to vessel 
construction for small-medium business owners engaging in the risky business called fisheries.  It is obvious from the above information that those subsid ies do not result in the enhancement of fishing 
capacity.  
 
How to define “capacity enhancement” at WTO 
 
9. In order to transfer the concept in our joint proposal to prohibit subsidies for “construction of 
new fishing vessels resulting in capacity enhancem ent” and for “fishing vessel modification for 01,0002,0003,000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Yearsum of gross tonnage
 (thousand tons)
0100,000200,000300,000400,000500,000
number of vesselssum of gross tonnage
number of vessels3,0004,0005,0006,0007,0008,0009,00010,00011,00012,000marine capture production 
(thousand tons)marine capture productionTN/RL/W/201 
Page 4  
 
  capacity enhancement” into a WTO suitable wordi ng, a clear definition or common understanding of 
“capacity enhancement” at the WTO is indispensable.  If we are to use fisheries production, which is 
an output of the industry, as an indicator of the level of activities, such issues as the relationship between the fisheries management and the WTO and the fluctuation of production caused by non-human factors cannot be avoided.  Therefore, we be lieve that it is more suitable for the WTO to 
establish disciplines on fisheries subsidies which are based on the inputs such as fishing capacity 
rather than outputs such as production.   10. Based on the discussion above, Japan suggests the transfer of the prohibition of subsidies for 
“construction of new fishing vessels resulting in capacity enhancement” and for “fishing vessel 
modification for capacity enhancement” in the jo int proposal, into a more specific proposal as 
follows.  Please note that these are to be applied only to marine capture fisheries since Japan believes 
that the new discipline should be applicable only to  subsidies which are provided directly to those 
who engage in marine capture fisheries activities.    
(i) If any of the following conditions is not me t, the likelihood of capacity enhancement is 
deemed to exist and those fisheries subsidies for vessel construction or modification will be 
prohibited.  
   
(a) A limited entry system is in place where: 
  -  each vessel obtains a licence from the flag country, and 
  - the vessel to be constructed or modified possesses a valid fishing licence or is 
confirmed to obtain a licence after the construction or modification.  
  
(b) In case of new vessel construction, the vessel(s ) are withdrawn in exchange for the new 
vessel to be constructed.  In addition, neither  (i) gross tonnage, (ii) volume of fish hold, 
nor (iii) engine power of the new vessel in creases compared with the sum of the criteria 
of the vessels to be withdrawn.  Furthermor e, in case there are mu ltiple vessels to be 
withdrawn, the gross tonnage of the newly c onstructed vessel  is reduced by more than 
20% of the sum of the gross tonnage of the vessels to be withdrawn (e.g. when 2 vessels, 100GT respectively, are withdrawn, the new vessel is less than 160GT.). 
 
(c) In case of modification, neither (i) gross tonnage, (ii) volume of fish hold, nor (iii) engine 
power increases.  
 (ii)  As an exception to the prohibition of paragraph 10(i), fisheries subsidies for vessel 
construction or modification can be provided in case the gross tonnage of a vessel to be 
constructed or modified increases for the improvement of safety or the working conditions of 
the crew
3, provided that neither the volume of fish  hold nor the engine power increase.  
Members must ensure that those subsidi es do not undermine the conservation and 
management measures taken by RFMOs.  
 
11. As recognized by the Members, there are many different ways to manage fisheries in the 
world.  However, the information on the criteria suggested above; number of vessels, individual gross 
tonnage, volume of fish hold, and engine power, is relatively easy to obtain and to evaluate 
objectively, and we believe that they are being used  in many countries as criteria for the management 
                                                      
3 The improvement of safety and working conditions of crew on fishing vessels includes the expansion of the 
living area per crew or the heightening of the accommodation. This is an important issue for fishing crew so the ILO 
Convention concerning Accommodation on Board Fishing Vessels  also addresses this issue.  The construction or 
modification of fishing vessels are made  often not with the purpose of increas ing the production, but as a response to 
external requirements such as the ILO convention.  Theref ore, it is unnecessary and unreasonable to prohibit all vessel 
construction and modification subsidies as l ong as there is an effective rule to prevent them from resulting in overcapacity or  
overfishing.  TN/RL/W/201 
 Page 5 
 
 
  of fishing capacity.  The larger the volume of fish  hold is, the longer the vessels can stay in fishing 
grounds.  Engine power subs tantially affects the scale of gear to be used, the ability to tow the net and 
the time to reach fishing grounds.  If this proposal  is supported by the Members, Japan would also 
need to implement additional monitoring on volume of fish hold and engine power since they are 
generally not controlled in the Japanese fisheries management system.  However, we believe this 
could be done quite effectively by requiring this information from applicants upon the application of 
subsidies.  Of course, there can be other crite ria and we welcome the contribution from other 
Members.  Japan believes, however, that the combination of these four criteria (i.e. number,  gross tonnage, volume of fish hold and engine power of v essels) would be efficient and appropriate in order 
to make the new discipline applicable to all types of fisheries and effectively preventing the expansion 
of fishing capacity while allowing necessary flexibility for policy makers.  
 12. In order to give Members sufficient time to  adapt the domestic legal framework to the new 
discipline, a 5-year transitiona l period would be recognized.  
 
13. The treatment of subsidies to small-scale fish eries as well as artisanal fisheries needs to be 
discussed and determined separately.   
Special and differential (S&D) treatment fo r developing and least-developed countries 
 
14. As reaffirmed in the Hong Kong Ministerial Decl aration, the fisheries industry is an important 
sector especially for developing and least-develope d countries and this must be taken well into 
account when we develop a new discipline on fisheri es subsidies.  At the sa me time, we must be 
aware that the fisheries industry has a special and unique character given the following aspects.  The 
first one is that the fisheries resources are limited and are a common property of the world.  The second one is that some of the current main player s in the world fisheries production are developing 
countries. 
 15. Therefore, the primal recipients of the S&D treatment should be those developing Members 
who have only a small fisheries industry and whose impact on the global fisheries resources is very 
small or negligible.  One possible framework of the S&D in terms of the vess el construction subsidies 
would be to exempt Members from the application of  the prohibition referred to in paragraph 10 until 
such time when the level of their fisheries producti on reaches a certain level.  (Further discussions 
would be required on the appropria te level of the threshold and how to determine whether the 
threshold is reached.)  Giving priority to the S& D for developing Members with a small fisheries 
industry is in line with the fundamental purpose of  fisheries subsidies negotiations, which is to 
contribute to the sustainable utilization of fisheries resources, and is worth our serious consideration.  
 
16.  Furthermore, taking into account the importa nce of this sector to all developing Members, 
additional S&D treatments applicable for all developing Members should be recognized.  One 
example would be that a longer transitional peri od should be provided for developing Members and a 
further longer transitional period s hould be provided for least-devel oped Members than described in 
paragraph 12.  This is for the consideration of the Members and Japan is very flexible on this issue.  
We welcome suggestions by Members. 
 
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