The Global Context - How WTO can help It is difficult for any country to maintain a sustainable fisheries management regime in a world market characterized by overcapacity. Such circumstances provide for constant pressure on the domestic fisheries sector and through it on the government to increase supply, notably by allowing more fishing, to the detriment of fish stocks and marine biological diversity. Global overcapacity creates supply distortions that place downward pressures on world seafood prices. This situation reduces revenue which each fishing operation seeks to meet by increasing their individual supply by intensifying fishing with subsequent negative effects on fish stocks. Government subsidies are a major cause of this overcapacity.
Government subsidies encourage both excessive fishing effort and overinvestment in fishing capacity.
First, by reducing costs and increasing profits per unit of effort, state subsidies have attracted more entrants into the fishing industry. Second, by reducing the cost of adopting new technologies, subsidies have induced more of the industry to adopt those technologies than would have been the case in an undistorted market. And, third, subsidies have encouraged producers who would have disinvested partially or completely to remain in the industry, in spite of serious financial difficulties caused by overfishing. Subsidies to the fishing sector have prevented the market signals from influencing the fishing industry to stop investing in already overcapitalized fisheries. The single most effective way to resolve the overfishing problem would be the removal of subsidies.