RFMOs and the New Member Problem: From Theory to Policy

1. RFMOs and the New Member Problem: From Theory to Policy Gordon Munro University of British Columbia, Vancouver; University of Portsmouth, UK GTP 8, Riverside, CA July, 2011

2. Introduction • This paper is about Practice, not about new developments in Theory • marked shortage of equations • Designed to answer the 2008 question of Albiac, Sánchez-Soriano and Dinar: • “--- has game theory developed sufficiently to assist in evaluating policies in improving management of shared natural resources and amenities?” • Quick answer – • YES ! - • at least in fisheries

3. Changing Opinions • At GTP 6 and GTP 7, I argued that game theory has great relevance to the management of internationally shared fisheries, but also argued that game theory (GT) concepts poorly understood by policy makers. • little influence on policy -much work to be done • Now seeing clear signs that GT concepts are, in fact, having an influence on policy makers in this area; that our work is beginning to pay off. • the long lag between advances in GT and impact on policy

4. RFMOs Reviewed • Previous paper in this session has shown that Regional Fisheries Management Organizations (RFMOs) designed to manage fishery resources to be found both in EEZs and adjacent high seas • explicitly include coastal states and so called distant water states (DWFSs) - e.g. Japan, Spain • Key international treaty law – 1982 UN Convention on Law of the Sea; 1995 UN Fish Stocks Agreement (1995 UNFSA) • particularly the latter

5. Unregulated Fishing and Free Riding • Under 1995 UNFSA, a RFMO open to all states with “real” interest in relevant fishery(ies). • No state to fish in high seas under RFMO jurisdiction, unless it abides by RFMO management plans • but ambiguity of international treaty law, has led to unregulated fishing in RFMO high seas areas • free riding, pure and simple • the GT message about consequences of rampant unregulated fishing has got through to policy makers – vigorous measures now being taken to curb such fishing • move to customary international law

6. The New Member Problem • Left with New Member problem – under 1995 UNFSA, “charter” members of a RFMO have to be prepared to welcome prospective new members, who agree to abide by RFMO management regime. • Legal experts in the 1990s maintained that new members must be given “just and reasonable” share of the economic returns from the RFMO fisheries • an example – a tuna RFMO – Western and Central Pacific Fisheries Convention (WCPFC)

8. WCPFC • WCPFC covers the largest concentration of tropical tuna stocks in the world – extensive DWFS activity – traditional DWFSs – USA, Japan, China, Taiwan, ROK • After Convention negotiated, prospective “new members” appeared from the other side of the Pacific expressing a “real” interest in the resources- Mexico, Panama, Ecuador • how to explain emergence of new members: Answer- shifting comparative advantage • issue not yet resolved

9. The New Member Problem Analyzed • Kaitala and Munro were the first to analyze the New Member Problem in1997 – a simple model • 2 member RFMO, coastal state, C, and DWFS, D1,, rebuilding a fishery resource - target biomass reached at t = TR >0. No harvesting until t = TR Then faced with flood of new members. Pure symmetry; Nash egalitarian rule for sharing global payoff. Denote “just and reasonable” equal share as ω – PV of economic returns from fishery discounted back to TR.. • can find a number of new members such that: • where LHS denotes Threat Point payoffs of “charter” members, i=C, D1, x denotes biomass level, N denotes non-cooperation, and δ the common discount rate.

10. The K - M Inequality • The K-M inequality implies that influx of new members could completely undermine the RFMO cooperative game. • implicit free riding ,or what we might now call the public good problem • Li (1998) countered with Fair Sharing rule. • drop symmetry assumption and Nash egalitarian rule and take a c-game approach. K- M inequality would not hold – new members granted allocations based on their contributions to the “economic pie” • Li rule does not work with large numbers, which is typical of RFMOs – “ in the end full utilization of the stock might have to be declared” (Li, 1998) – contrary to the spirit of the 1995 UNFSA

11. The Waiting Period Solution • Let new members into the “club”, but inform them that will have to go through a waiting period, before receiving any payoff. • in practice, RFMOs do have cooperating non-members – 2nd class citizenship – transition • Analytically issue unresolved. Pintassilgo and Costa-Duarte (2000) argue that the waiting period can work; K&M have counter example, in which the waiting period solves nothing. • if P & C-D are right, then have to say that a solution that works only from time to time will not do

12. Transferable Membership Solution • What this solution really comes down to is having the “charter” members being allocated national harvest quotas, which they can sell/lease, in all or part, to new members • New members would then effectively have to “buy” their way in. The K-M inequality would then not hold – “charter” members have de facto collective property rights to resource(s) • the approach is fully compatible with international law • Pintassilgo and Costa-Duarte (2000) assess the three solutions that we have discussed and declare the Transferable Membership to be the most efficient.

13. What Has Been Done Up to This Time? • The two most common solutions to the new member problem: • 1.declare resources to be fully utilized – “slam the door” on new members (recall Li’s Fair Allocation rule) • guaranteed to intensify unregulated fishing problem • 2. grant new members harvest allocations ,which are then added on to existing TAC(s) • excellent chance of intensifying resource overexploitation

14. Independent Panel on RFMO Governance • London based 2006/2007Independent Panel (IP) established due to recommendation of OECD High Seas Task Force • IP’s report (Chatham House Report) now used extensively by OECD • IP report, inter alia, recommends that: • “in each RFMO, members should seek means of accommodating new members that will not undermine --- the RFMO, such as allowing new members to purchase or lease fishing opportunities from existing RFMO members” • how was this recommendation arrived at?

15. Commission for the Conservation of Southern Bluefin Tuna (CCSBT) • One RFMO, in which the Transferable Membership solution is being seriously discussed, is the CCSBT –centered on Australia and NZ • resource in need of extensive rebuilding • RFMO plagued with new members – previously granted allocations added on to TAC –expected results • From recent OECD case study on the CCSBT: “---quota trading may occur in the not too distant future.---it makes sense where the stock is being rebuilt and there is no scope to increase global TAC for states wishing to enter the fishery ---- “ • Once one RFMO adopts the solution, others certain to follow.

16. http://www.fao.org/fishery/rfb/ccsbt/en#Org-GeoCoverage

17. Some Conclusions • GT does have very useful insights into the management of internationally shared fishery resources • Eventually, these insights make their way into policy circles – but be prepared for long lags. K & M, for example, first wrote about the new member problem in 1993! • There remain some unresolved GT new member problems – go back to K&M, 1997.

18. Payoff D1, D2 A2 A1 TP2 Pareto Frontier TP1 0 Payoff C TP1 – Threat point payoff – C and D1 TP2 – Threat point payoff – C and D2 A1, A2 – cooperative solution payoffs Effect of New Member, D2, Buying Out D1