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Fisheries Problems and Reforms

Ragnar Arnason*. Fisheries Problems and Reforms. A presentation at The Fisheries Conference Talli n n, Estonia. November 27, 2013. * Professor University of Iceland. Synopsis. The fisheries problem Fisheries reforms The CFP reforms What can Estonia do?. The Fisheries Problem.

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Fisheries Problems and Reforms

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  1. Ragnar Arnason* Fisheries Problems and Reforms A presentation at The Fisheries Conference Tallinn, Estonia November 27, 2013 * Professor University of Iceland

  2. Synopsis • The fisheries problem • Fisheries reforms • The CFP reforms • What can Estonia do?

  3. The Fisheries Problem Found in ocean fisheries all around the world! Appears generally as: • Excessive fishing effort and fleets • Depressed fish stocks and falling yield • Low incomes of fishers and fishing communities • High level of biological ...and social risk

  4. The Fisheries Problem (…cont.) Often accompanied by : • High level of fish discarding • Low quality of landings • Poor access to financial capital • Distorted and often little technical progress • Economic and social stagnation Very important Fisheries management (attempts at “fisheries reforms”) frequently makes the situation worse!!

  5. This state of affairs is caused by theCommon Property Problem (CPP)! The CPP implies absence of private property rights • Markets cannot exist • No market guidance toward the common good  Overexploitation and waste !

  6. Common property • Assets, resources, property held in common by a group of people • Held in common  equal rights of use • The group can be small (2 people) or large ( nation) • Examples • Ozone layer, atmosphere, the environment, wild animals, fish stocks

  7. Aristotle (Politics, book II. ca. 350 BC) “the greater the number of owners, the less the respect for common property. People are much more careful of their personal possessions than of those owned communally; they exercise care over common property only in so far as they are personally affected.” Garret Hardin (Science 1968) “Tragedy of the Commons” Under the CP-arrangement individual users are forced to overexploit. Otherwise they get nothing!

  8. The common property arrangement is a social organization • It is a man-made institution (nothing natural about it) • Other terms for common property fisheries • Common pool fisheries • Open access fisheries • Competitive fisheries

  9. The common property problem • An error of social organization • Forces individual users to compete for available resources (wrong incentives) • The CPP does is not caused by • Lack of understanding • Lack of (biological) data Even with perfect knowledge and data the problem would persist! The common property problem is caused by lack of individual fishers’ rights in the fishery!

  10. Costs Value, $ Sustainable revenues (yield) MEY Effort MSY CSY Sustainable biomass Biomass Analysis: Common property fishery

  11. Nota Bene • It is the MEY-point (maximum economic yield ) that is socially optimal • MSY is not socially optimal • MEY • implies greater biomass than MSY • is sustainable • entails little risk of stock collapse • usually generates substantial profits (rents)

  12. Optimal The Dynamic Fishery Effort, e Competitive xmin Biomass, x

  13. The Empirical Evidence:Evolution of the global fishery • Evidence from various FAO, World Bank, OECD and academic publications • Since the end of WW-II • Fishing fleets: Huge increase • Net economic returns: Decline • Fish stocks: Drastic decline • Global ocean catches: Stagnated (even declined)

  14. Global marine catches (m.mt.) Statistically significant declining trend since 1990

  15. The Economics of Global Fishing • Not only has there been a dramatic biological mismanagement of the global fishery, the economic mismanagement is even worse • The global landed value is about USD 90 b. per year • Profits are insignificant, perhaps  USD 5 b. • Subsidies are high, perhaps USD 10 b. (EU, Japan, China)

  16. Empirical evidence: The global fishery(Sunken Billions; World Bank and FAO 2009; data 2004) Actual profits Potential profits Optimal Actual

  17. Global Fishery: Economic waste(Sunken Billions, 2009) 50 b. USD  Global Development Assistancein 2004

  18. IIFisheries Reforms

  19. Nota bene This is human management! - Get people to act in the collectively “best” manner Fishers act according to the Prevailing Fisheries Management Regime (FMR) i Fisheries reforms attempt to: • Alleviate the ravages of the CPP • Move the fishery toward the optimal point

  20. Fishers act according to the Fisheries Management Regime • The fisheries management regime (FMR): • The institutional framework under which the fishing activity operates • FMR may be set by (a) Social custom and tradition (b) The government (the fisheries authority) (c) The association of fishermen (d) Other means • It may be explicit or implicit • Fisheries reforms must alter the FMR!

  21. Fisheries management system, FMS Monitoring, control & surveillance, MCS Fisheries judicial system, FJS FMR: Main components • Links in the same chain! • If one breaks the chain is useless!

  22. Biological fisheries management Economic fisheries management Direct Indirect Taxes Property rights Fisheries Management Systems:Classification Only property rights work!

  23. Key Property Rights in Fisheries Sole ownership Territorial user rights TURFs Individual quotas IQs/ITQs Community rights Mainly sedentary species Rarely used Widely applicable; very common Fairly common Effective Effective if enforceable Mixed evidence Effective if applicable

  24. Individual Transferable Quotas: ITQs The most widely applied rights-based fisheries management system in the world Adopted as a major part of the FMS by at least 22 major fishing nations New-Zealand, Australia, Mexico, USA, Canada, Greenland, Iceland, Holland, Norway, Denmark, Sweden, Estonia, Germany, UK, Portugal, Spain, Russia, Morocco, Namibia, South Africa, Chile, Peru, Falkland Close to 25% of global catch taken under ITQs!

  25. Outcomes of ITQs- General pattern around the world - Economically very successful! • Reduction in fishing effort (immediate) • Fishing capital declines (but usually slowly) • Biomass recovers (slowly) • Unit price of landings quickly increases (often greatly) • Quotas become valuable (quickly!) • Enhanced resource stewardship by fishers • Discarding often reduced

  26. Examples of ITQ success • British Columbia trawl fishery • Great increase in profits, increased resource stewardship, stock and environmental improvements. • Icelandic demersal fisheries • Great increase in profits (30-50% of revenues), stock improvements, reduced discarding • North Atlantic pelagic fisheries • Very good profits (30%) • New Zealand fisheries • Very profitable. Stock stabilization,

  27. Social impacts of fisheries reforms • Reduces fishing effort • Alters fishing and fish processing behaviour • Leads to streamlined efficient operations • Substantial social impacts (inevitable) • Opposition • Fishing communities • Social conservationists

  28. Who gains/who loses? • Sensible reforms => net social gain (often substantial) • Possible to make everyone better off (Hicks-Kaldor improvement) • In reality not necessarily so • In the short run • Recipients of rights and retained fishers gain most • Laid-off fishers and inhabitants of declining communities may lose • Social opposition • In the long run most people gain (gdp & employment)

  29. III.CFP reforms

  30. The CFPFundamentally inappropriate !! • Common fishing grounds • Exacerbates the CPP • National enforcement • Inappropriate incentives • Built in conflict of interest • Unequal treatment of violations The EU has been trying to deal with the resulting problems ever since !

  31. Conduct of the policy has been bad Stocks: Heavily overfished Harvests: Declining Fleets: Hugely excessive Profits: Very poor Subsidies: Very high Discards: High Overall assessment EU fisheries are the worst in the western world!(Norway, Iceland, Greenland, Canada, USA and Russia are much better)

  32. The EU’s own assessment of the situation(Green paperonthereform of the CFP, 2009): The EU fisheries are characterized by: • Overfishing • Overcapacity • Heavysubsidies • Loweconomicresilience • Declinein the volume of fishcaught • Conclusion (in the Green paper) • “The CFP is not achieving its objectives”

  33. Evolution of catch volume Statistically significant declining trend: -3% per year

  34. The EU excels only in fisheries subsidies! • The highest capacity enhancing subsidies in the world ! • Major detrimental impact on fisheries efficiency • Really a negative reform • Swamps the reforms (which are considerably weaker)

  35. EU fisheries subsidies(According to a recent study for the EU parliament (IP/B/PECH/IC/2013-146)) Capacity enhancing subsidies (Billion US$ per year)

  36. Subsidies per unit volume ofcatch(US$/kg)

  37. Key initial proposals(By the commission) Advisability • Maximum Sustainable Yield (MSY) - • Multiannual quota plans -/+ • Transferable fishing concessions (ITQs) ++ • Decentralization (regionalization) + • Discard ban +/-

  38. The actual decision • Maximum Sustainable Yield (MSY) Yes • Multiannual quota plans Yes • Transferable fishing concessions (ITQs) No • Decentralization (regionalization) Yes • Discard ban Yes So the most important reform was rejected!

  39. IVImpacts on Estonia

  40. Impacts are probably not very great • Estonia already has a fairly efficient fisheries management regime (ITQs) • The reforms adopted are not radical • Potentially significant impacts: • Ban on discards (Are discards in Estonian fisheries significant?) • Stock rebuilding toward MSY (Estonia’s national quotas) • Withholding of subsidies if excessive fleets are not reduced (Does Estonia have significantly excessive fleets?) • New opportunities for structural funds (Under the social dimension of the CFP)

  41. What should Estonia do? • Do not wait for the EU • Do your own fisheries reforms • Strengthen your ITQ system • Move away from gear/effort quotas if possible • Strengthen property rights value of ITQs (duration, security) • Improve the enforcement of quotas • Support ITQ market and ITQ price listing (..if necessary) • Promote business attitude in the fisheries sector • Encourage investment in quality, processing and marketing • Avoid detrimental taxation • Allow ITQs as financial collateral

  42. Fisheries reforms (cont.) • Be careful with vessel reduction/buy-back programs • Can easily be counter productive • Use funds generated to improve the fisheries • Press for sensible Baltic stock rebuilding programme • You have shared stocks • Press for sensible Baltic marine protection policy • Stocks, ecosystem, habitat

  43. OECD report on Estonian fisheries (2009) Title page photograph Fake fish?

  44. The title page we want to see END

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