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									       XIIIth Annual Conference of the European Association of Fisheries Economists, Salerno, Italy, April 18-20 2001

     Solving the “Tragedy” of the Common Fisheries Policy: what role for economic
                                     instruments?

                                                           Gregory Valatin
                  Dipartimento di Economia Politica, Universita degli Studi di Siena, Piazza San Francesco 7, 53100 Siena, Italy


Abstract

The Common Fisheries Policy has proved tragically ineffective. After three decades, two-thirds of European Union
stocks are “over-fished” and more than a third “depleted”, with many stocks expected to collapse if current trends
continue. Potential resource rents have been dissipated in excess fishing capacity, or capitalised in fishing rights
initially granted free by governments, while fishing continues to be subsidised. After reviewing causes of failure,
potential solutions to the “Tragedy” of the CFP, including a greater role for economic instruments are examined. This
paper was largely written while based at the Ecole Nationale Supérieure Agronomique de Rennes (ENSAR) in France,
on a European Commission funded research fellowship under the Agriculture and Fisheries section of the Marie Curie
Research Training Grants Scheme.

Keywords: Fishery management, European Union Common Fisheries Policy, Economics


1. Introduction                                                               It is imperative therefore that the Community
Apart from helping prevent armed conflict, i                                  explores a new approach to economic
the European Union’s Common Fisheries                                         management of the fisheries sector.” vi
Policy (CFP) has been tragically ineffective.
After three decades of European common                                        A prerequisite in establishing fisheries
fisheries policies, ii 67% of EU stocks for                                   management on a sound economic basis is
which assessments are available are deemed                                    correctly specifying the causes of current
“over-fished” and 40% “depleted”. iii The                                     problems. According to the Commission:
European Commission’s assessment is that
improving the state of the stocks is urgent,                                  “..the over-capacity problem faced by the
with many expected to collapse if current                                     sector.. is at the root of its current
trends continue.iv                                                            difficulties.”vii

Contrary to the interests of tax-payers and                                   Despite the intuitive appeal of characterising
society as a whole, instead of providing a                                    the essential problem as one of “too many
direct contribution to public finance, potential                              boats and too few fish”, the Commission’s
resource rents in EU fisheries have been                                      emphasis on “over-capacity” is misplaced.
dissipated, or capitalised in individual fishing                              Continuation of structural policies adopted
rights initially granted free by governments.                                 under the CFP to reduce “over-capacity”
Fishing continues to be subsidised, v                                         cannot be efficient due to continuous
exacerbating over-exploitation problems and                                   technological innovation and the intangeable
the waste of scarce economic resources.                                       nature of “fishing capacity”, while failing to
                                                                              address the underlying economic incentives.
In its Green Paper, the Commission admits:                                    As fishing returns are principal determinants
                                                                              of fleet activity and investment, any
“If current policies and approaches are not                                   economics-based management policy will
changed the European fishing sector will                                      need to alter the financial attractiveness of
become less and less sustainable and                                          fishing compared to alternative activities, and
economically viable…                                                          thus tackle the “Tragedy of High Prices”.




                                                                        1
2. Causes of the “Tragedy” of EU Stock                  Guided by the Commission, in order to
Conservation                                            facilitate agreement overall limits for both
The tragic state of the stocks is partly due to         input and output quotas were initially set to
decision-makers        being      predominantly         allow fishing to continue at previous levels,
preoccupied with short-term and distributional          ignoring scientific advice of the International
impacts, rather than long-term conservation             Council for the Exploration of the Seas
issues. Adoption of less restrictive policies is        (ICES) that fishing mortality be reduced to the
largely attributable to the relatively weak role        Maximum Sustainable Yield (MSY) level
of scientific advice and constant referral to the       Fmax where yield per fish would be greatest.ix
Council of Ministers (which has frequently              Except where stocks appeared in immediate
remained in session overnight before                    danger of collapse, the Council of Ministers
decisions were reached). It also reflects the           tended subsequently to choose less restrictive
imbalance between the overwhelming                      options than recommended, increasing current
influence of producers in the decision-making           fishing opportunities. Their decisions could
process compared to consumer, environmental             then be presented to fishermen as “victories”
and other interests.                                    in the face of more restrictive Scientific
                                                        advice and proposals from the Commission,
The initial fisheries policy agreed in 1970             particularly given the widespread perception
dealt primarily with allocational issues,               in the industry that the scientific advice is
providing for equal access to all Community             often flawed. x             Subsequently, the
waters (except within existing national 6-mile          Commission was able to blame the
and 12-mile limits), while the more                     conservation failure on the Council (it does
comprehensive policy agreed in the early                essentially this in its Green Paper).xi
1980s after prolonged negotiations on the
definition and allocation of national fishing           Another reason for the ineffectiveness of the
rights, in effect established two types of quota        CFP is poor enforcement, which, with few
systems. viii Firstly, along similar lines to           exceptions, has been characterised by lack of
landings restrictions already agreed by                 resources and political commitment. By
international fora such as North Atlantic               retaining implementation as a national
Fisheries Organisation (NAFO), catch quotas             responsibility, Member States reportedly
were introduced under EU Conservation                   aimed mainly to render the policy
Policy, allocating output production rights             ineffective, xii perceiving it to be in their
specifying the maximum permissible weight               national interest initially to allow virtually
of fish that could be landed within a Total             unrestricted landings, increasing short-term
Allowable Catch (TAC) set for a specific                fishing opportunities while minimising
stock.     Secondly, despite lack of fixed              conflict with the industry, despite the resultant
relationship      with      fishing    mortality,       failure to realise the long-run benefits of
Multi-Annual         Guidance       Programmes          resource management. This represented a
(MAGPs), licensing, ‘effort’ and ‘capacity’             self-reinforcing (‘strictly dominant’) strategy,
controls introduced under EU Structural                 as lax enforcement by some Member States
Policy, allocated input exploitation rights             discouraged others from more rigorously
restricting aggregate engine power, tonnage             applying control measures on their own
and other factors influencing catches such as           fleets.xiii
time at sea, in an attempt to achieve a balance
with fishing opportunities.                             With records easy to falsify, national
                                                        administrations provided information mainly
                                                        to maintain an appearance of good practice.xiv




                                                    2
There was little possibility, for instance, of        has also failed to provide detailed reports on
those failing to prevent over-quota landings          the work of its own inspectorate.xx
being sanctioned, unless they themselves
reported the problem in the data passed to the        A further cause of fishermen’s poor
Commission.        Even when evidence was             compliance with the CFP is attributable to
found that a Member State failed to comply            dissatisfaction with allocational issues in
with its obligations, there was often a               some Member States, including the
substantial time lag in legal action being            “quota-hopping” controversy. Although no
taken, while any penalties subsequently               international quota trading between fishing
imposed can be inconsequential.            For        companies had been anticipated when the
example, in an action brought against the UK          CFP was established, vessel operators soon
in the European Court of Justice in late 1999         found ways under EU freedom of
related to infringements of the TACs during           establishment rules to purchase or re-register
1985-88 and 1990, including failure to carry          vessels, and thereby acquire fishing rights in
out inspections and to close fisheries once           other Member States. As the so-called ‘flag
catch quotas had been taken, the Commission           ships’ then became subject to the host
simply demanded that the court declare that           country’s MAGP targets and were able to
the UK had failed to abide by its obligations         participate in their fisheries on the same basis
and that it pay the court costs.xv                    as other national vessels, this created
                                                      discontent amongst fishermen in the host
The European Parliament recently reported             country, undermining confidence that the CFP
that existing mechanisms to encourage                 would protect their fishing rights and
Member States fleets to meet their MAGP               consequently, their willingness to stick to the
targets, including instituting infringement           rules. Counter to the ‘relative stability’
proceedings at the Court of Justice and               principle of allocating TAC shares to Member
withholding financial assistance for fleet            States to be fished by that country’s
renewal and modernisation are ineffective. It         fishermen,        the       phenomenon        of
called for the European Commission to                 ‘quota-hopping’, whereby companies acquire
compel Member States to meet their                    rights to fish TAC shares allocated to another
obligations, and for a review of the penalties        Member State, effectively involves unofficial
for non-compliance.xvi                                international trade in both input and output
                                                      quotas.
Member States are required to regularly notify
the Commission of the outcomes of their               Dutch and Spanish vessel operators were
monitoring and enforcement activities,                especially active in acquiring fishing rights in
including infringements detected and action           other Member States, with Spanish companies
taken, xvii but national administrations have         reportedly acquiring fishing rights for over
generally failed to fulfil their obligations in       100 UK, 28 Irish and 25 French vessels, and
this regard. There are few EU fisheries               Dutch companies acquiring rights for around
inspectors and they have no legal powers to           30 UK, 33 German, 11 Belgian, one French,
enforce legislation, their role having been           and one Danish vessel. Thus, of the 546
described as simply ‘looking over the                 Dutch operated vessels in 1998, over an
shoulder of national inspectors’. xviii               eighth were operating under other flags, xxi
Proposals to increase their powers, grant them        with a fifth of Dutch-owned vessels in the
real autonomy, and harmonise sanctions                North Sea demersal fishery (in terms of
applied, have consistently been rejected by the       number and aggregate engine power), being
Council of Ministers. xix The Commission              registered in the UK, Germany, or Belgium,




                                                  3
and fishing against these countries’ TAC               “Tragedy of High Prices” (due to landings
shares. xxii In the UK, ‘flag ships’ accounted         prices being high relative to fishing costs),
for 44% of hake, 40% of plaice and 17% of              rather than a “Tragedy of the Commons”.xxviii
sole quotas in 1996,xxiii and a quarter of the
UK’s offshore fleet tonnage at the beginning           Figure 1 below illustrates such a “Tragedy of
of 1998.xxiv                                           High Prices” in terms of the simplistic
                                                       Gordon-Schaefer model, with fleet long-run
Lax quota restrictions and enforcement,                total revenue and cost curves formulated in
together with widespread non-compliance,               terms of a single “fishing effort” variable.
made policies agreed at EU level initially of          Maximum Sustainable Yield (MSY) is shown
little relevance in practice. In effect, the CFP       together with Maximum Economic Yield
created institutional conditions conducive to          defined taking account purely of economic
development of over-fishing and a situation            rent in the catching sector (MEY0) and more
often characterised as a “Tragedy of the               broadly defined (MEY1) to take account of
Commons”.xxv                                           non-market existence and biodiversity values,
                                                       and other factors, such as consumer surplus,
3. Causes of the Economic “Tragedy”                    producer surplus of onshore sectors,
In coining the term the “Tragedy of the                regulatory and social costs. To the extent
Commons”, Hardin(1968) focused upon                    that such levels are meaningful in EU
situations which, in common with problems              fisheries (where joint production is the rule
such as the nuclear arms race and world                rather       than   the     exception     and
population growth, were argued to be                   stock-recruitment relationships weak), MEY1
insoluble    without    instituting  social            could be either above or below MEY0, with
arrangements involving mutual coercion                 its    precise    position    varying    with
mutually agreed upon. It was argued:                   environmental, biological and economic
                                                       factors. xxix Consumer surplus is highest
“Ruin is the destination toward which all men          where the quantity and quality of fish landed
rush, each pursuing his own best interest in a         is greatest (which in this simple model is
society that believes in freedom of the                represented by MSY).
Commons. Freedom in a Commons brings
ruin to all”.xxvi                                      If total fishing costs are below total revenues
                                                       at the optimal aggregate output level (e.g.
Although over-fishing can also result under            supply function S0 is below the total revenue
private ownership if harvest costs are low             curve at this level in Figure 1), the existence
relative to landings prices (or resource users         of excess profits provides an incentive for
have high implicit discount rates), xxvii              vessels to increase fishing beyond the
common property and open access regimes                optimum, to a point where costs and revenues
have often been confused in ascribing the              are equalised (in this case E0). On the
causes of resource over-exploitation, creating         contrary, if total costs would be greater than
unwarranted emphasis on solutions based                or equal to total revenue at the optimal output
upon private property rights. As in economic           level (e.g. where supply function S1 meets the
theory resource over-exploitation occurs in            total revenue curve), as the marginal cost of
the long-run under open access principally             production exceeds the landings price, no
where marginal revenue exceeds marginal                over-exploitation occurs. (Once stock age
cost of increasing resource use at the socially        class distributions are taken into account,
optimal aggregate output level, such problems          growth over-fishing occurs if fish are caught
could more accurately be characterised as a




                                                   4
before they have grown to an optimum size,xxx   causing a fall in the long-run revenue curve).
Figure 1: Gordon Schaefer Model illustrating the “Tragedy of High Prices”

   Long-run Total Revenue
   Long-run Total Costs           S1

                                           MSY                              S0
                    MEY1      MEY0




                                                                                     “ Fishing Effort ”
                         E1                                     E0


Due to technical innovation, fishing costs can         increased profitability, this tended simply to
be expected to be falling over time, lowering          create incentives for further investment,
the fleet cost schedule and providing an               resulting in shortened season length and
economic incentive for constant expansion of           increased fishing costs, dissipating the
fishing activity. By contrast, falling costs           economic rent. For example, input restrictions
could be expected to shift the economic                on vessel size characteristics in UK and Dutch
optimum exploitation level to the left, such           fisheries led to input substitution by the
that a reduction in fishing activity is optimal.       industry creating inefficiencies, including
Similarly, increasing consumer demand for              widespread modification in vessel design to
fish would also be expected to provide an              create so-called “rule-beaters”, with main
economic incentive for expansion of fishing            engines often de-rated to a fraction of their
activity by raising landings prices.                   nominal continuous ratings and auxiliary
Exogenous       cost-reducing     technological        engines installed with combined power
progress and rising consumer demand helps              exceeding that of the main engine.
explain development of overfishing.
                                                       To overcome problems such as early closures,
From an economic perspective, the primary              individual vessel fishing rights were
role of fisheries management is to counter             introduced in some EU fisheries. However,
economic incentives leading to market failure          despite official prohibitions, by accident
(overfishing), to ensure that resource rents are       rather than design, introduction of individual
not dissipated and thereby also safeguard the          fishing rights soon led to quota trading with
stocks. However, EU fisheries management               rents becoming capitalised in the market value
has focussed primarily on implementing                 of these rights. Initially granted free of
measures to safeguard stocks while neglecting          charge by governments, market values of
long-term economic effects.          Thus, as          fishing rights rose as trading developed, so
Gordon(1954) had predicted, xxxi where                 that their value in the Netherlands and the
management restrictions introduced on the              UK, for instance, now often exceeds that of
basis of biological advice temporarily                 vessels themselves, in effect creating a




                                                   5
“millionaire’s club” of existing rights holders,       and fishing pressure to obtain higher short-run
while creating insuperable barriers to entry for       profits, despite consequent further stock
prospective vessel operators.         So-called        over-exploitation.
“fire-side fishermen” living purely by renting         Economic failure of the CFP can also be
out their fishing rights instead going to sea          attributed to the lack of quantification of the
themselves, can now reportedly earn more               costs and benefits of implementing fisheries
than those who go fishing, with UK fishermen           policy alternatives (although some recent
leasing out the average level of quota “track          attempts have begun to be made in this
record” expected to earn £120,000 a year               direction in some Member States, such as the
according to the Aberdeen Fish Producers'              UK, where regulatory impact assessments
                   xxxii
Organisation.              Free       allocation       estimating compliance costs have to be
(‘grandfathering’) of quotas to firms                  published for all new regulations).xxxv Partly
effectively rewarded the largest and most              also a consequence of failure to foresee the
rapacious fishing vessel operators with the            impact of regulations, evolution of fisheries
largest (and therefore most valuable)                  regulations has tended to be fragmentary,
allocations, while appreciation in market              duplicatory and characterised by crisis
values increased subsequent management                 management, somewhat akin to attempting to
costs of vessel decommissioning schemes.               fix a leaking bath by applying a sticking
                                                       plaster each time a substantial new leak
EU and Member States schemes providing                 appears, with each subsequent measure
financial assistance for activities such as            tending to further complicate the regulatory
vessel construction and modernisation, fish            system.
advertising and withdrawals have compound
tendencies for rent dissipation, by further            Over-lapping management policies have
lower fishing costs and increasing landings            further increased economic inefficiency.
prices.      The resultant artificially high           Inconsistencies between input and output
profitability provided economic incentives             quota systems exist for instance, with the
conducive not merely to the dissipation of the         Netherlands arguing that meeting its MAGP
economic rent through a “Tragedy of High               targets would jeopardise its ability to fully
Prices”, but to further intensification of             take catch quotas, with concerns expressed
fishing pressure and development of a                  that this could undermine its group
situation which could be characterised as a            management system and enforcement of
“Disaster of Subsidies”.xxxiii                         landings. xxxvi   In the UK the National
                                                       Federation of Fishermen’s Organisations
Of an estimated US $1434 million in                    (NFFO) has characterised the industry as
government financial transfers to the fishing          “over regulated”, while the Anglo-North Irish
industry by the EU and individual member               Fishermen's Organisation has described
States in 1997, roughly a quarter (US $366             fisheries management as "an administrative
                                                                                    xxxvii
million) was spent on direct payments                  and bureaucratic nightmare".
(including those made on a sales, catch or per
vessel basis), with a similar amount (US $358          4. Solving the Tragedy of the CFP
million) spent on cost reducing transfers.             Characterising the “Tragedy” of EU stock
Representing 8% of the total value of EU               conservation as resulting from the way in
                                          xxxiv
landings of US $9324 million in 1997,                  which decisions are made, suggests that
direct payments and cost reducing transfers            solution will entail altering institutional
would have provided significant incentives for         mechanisms for fisheries management
vessel operators to increase their investments         policy-making.    This is likely to entail




                                                   6
strengthening the scientific basis of decisions        published on the DG Fisheries internet web
and the role played by consumer interests, as          site.
well as overcoming existing tendencies for
conflict between the Council of Ministers and          Greater transparency, including enactment of
the Commission.                                        Freedom of Information provisions to apply
                                                       both at EU and at Member State level, could
If durable agreement could be reached on the           also increasing political will to enforce the
method for determining overall exploitation            CFP. Currently information is often veiled
levels and subsequent allocations of fishing           by state secrecy, while publicity surrounding
rights between Member States, stock                    failure to keep agreements could provide a
conservation might be expected to improve              powerful incentive for governments to
simply by allowing the Commission to                   conform. In some Member States, such as
oversee the process, leaving the Council of            the UK, xl there are trends towards greater
Ministers to deal with more important                  openness, but considerable scope for
matters. In an era of performance-related              increasing transparency remains.
pay, consideration might also be given to
linking    fisheries    managers      pay to           Enactment of strict rules on Government
policy-related improvements in the state of            integrity at EU and Member State level, such
the stocks and other apposite indicators.              that any Minister or civil servant found to
                                                       have lied to Parliament automatically had to
To the extent that poor compliance is                  resign, could further strengthen the political
associated with industry suspicions that the           will of national administrations to keep to
scientific advice is inadequate, increased             agreements. The case of the Netherlands aptly
transparency, including greater discussion and         illustrates this, as the Dutch Minister for
debate with those responsible for providing            Agriculture,      Fisheries      and     Nature
the scientific advice could increase vessel            Conservation was forced to resign in 1990 for
operators’ perceptions of the legitimacy of            misinforming Parliament over lack of
management decisions and thus their                    enforcement of sole quotas, with a majority of
willingness to comply with regulations.                MPs judging that he had failed to restrict
Greater openness concerning errors and                 either over-quota landings or fleet size.
uncertainty in scientific estimates, and their         Providing statutory protection for officials
implications, as well as scope for                     highlighting such failures in government
improvement       (e.g.    extensions     from         could also encourage administrations abide by
single-species models to include multi-species         their obligations. (The EU Ombudsman’s
interactions and ecosystems effects), could            observation that, if understood literally,
also prove beneficial in building greater trust,       existing rules could “..oblige a witness to lie ..
while providing further impetus for improving          if instructed to do so by superiors” xli amply
existing methods, especially faced with                demonstrates that lack of transparency is not a
technical critiques. (For example, it has been         concern applying purely at Member State
claimed that existing stock assessment                 level).
methodologies generally are unable to provide
sufficiently accurate stock estimates, as              Increased use of co-management mechanisms
typical errors are sufficiently large to               and associated economic incentives could
outweigh expected economic gains of quota              facilitate compliance. This is also illustrated
management, xxxviii and that such methods              by the example of the Netherlands, with the
have a logical form analogous to “primitive            change of emphasis in the early 1990s in the
magic”). xxxix All scientific advice could be          aftermath of the resignation of the Dutch




                                                   7
Fisheries Minister leading to groups of vessel         them, using stock assessment, fleet costs and
operators being empowered to manage their              earnings, and other time-series data, the
own quotas, deciding for themselves rules to           long-run economic optimum level of resource
operate and penalties to apply, with incentives        use and the optimal time path to reach it needs
provided to encourage co-operation.           To       to be determined for each fishery, taking
benefit from additional days at sea allocations        account of transition costs, and risk and
accorded to the groups, members had to agree           uncertainty     in    accordance     with     a
to sell their fish at auction, providing the           precautionary approach.        (The     current
inspectorate with logbook and auction data.            emphasis on preventing lower limits on
The group system is widely reported to have            spawning stock biomass and upper limits on
facilitated reliable monitoring and reducing           fishing mortality established on the basis of
non-compliance, such that national catch               the precautionary approach being reached, xlv
quotas have not been exceeded since 1992.xlii          provides managers with a simple “rule of
Fisheries offences fell to a sixth of their            thumb”, but there is little reason to suppose
previous level over the period 1990-1997               that the rule is economically optimal).
(partly attributable to reduced physical               Secondly, after evaluating the costs and
inspections),xliii and although cited in the mid       benefits associated with using different policy
1980’s as the worst Member State at                    instruments, economic incentives need to be
preventing       over-quota     landings,    the       provided which balance supply and demand at
Netherlands is now generally regarded as a             the optimal level of resource use, without
model of enforcement within the EU.                    simply dissipating the economic rent due to
                                                       cost inefficiencies.
Scope also exists for a “ bottom-up ”
approach in line with the subsidiarity                 Systems of tradable fishing rights may help
principle and regionalisation initiatives              create such a balance (even if they offer no
currently under consideration to tackle                guarantee that overall exploitation levels will
non-compliance          associated        with         be efficient). However, in the process tend to
dissatisfaction regarding quota-hopping and            entail problems noted above, including
other allocational issues.           European          capitalisation of resource rents in the value of
federations of fishing organisations involving         fishing rights, their capture by an initial
most stake-holders in a given fishery might            generation of vessel operators and creation of
play a major role in proposing mutually                insuperable barriers to entry, essentially
acceptable allocation rules, including the             transforming common access by enclosure
extent to which principles of equal access and         and privatisation of the marine commons. xlvi
relative stability would apply. The example            Their introduction tends to reduce regulatory
of Ministry-backed consultations between               flexibility, as, although in theory states retain
Jersey and French fishermen which                      the power to modify or abolish quota trading
successfully resolved gear conflicts, xliv             systems, owners can be expected to resist any
illustrates the potential for greater regional         changes which could diminish their value.
co-operation.                                          For example, the House of Commons
                                                       Agriculture Select Committee has reported
Characterising principal economic failures of          that although remaining the legal owner of
the CFP as arising primarily from a “Tragedy           UK quotas:
of High Prices” and a “Disaster of Subsidies”
implies that solution will entail essentially          “it is almost inconceivable that any
two elements. Firstly, after agreeing exactly          Government could recall the title it
which factors to include and how to weight




                                                   8
theoretically retains without facing massive          fisheries management, partly due to increasing
compensation claims”.xlvii                            ethical concerns of consumers. Indeed, it has
                                                      been claimed that:
In the Netherlands, a change to measuring             “In the 21st century, consumer demand can be
engine power using a system of “maximum               the means of creating economic market
continuous rating” had to be abandoned due to         incentives that endorse and promote
successful court action by the industry, which        sustainable     fisheries   harvesting     and
claimed that the new measure to be unfair as it       management practices”.li
would have entailed significantly increasing
the registered HP of some vessels.xlviii              Figure 2 below illustrates a demand-side
                                                      solution to the “Tragedy of High Prices”,
Taxes or “access fees” which equate total             again in terms of the Gordon-Schaefer (G-S)
costs with revenues at the optimal output level       model. Total fishing costs (S0) are initially
(e.g. shifting the total cost curve in Figure 1       below total fleet revenue at the optimal
from S0 to S1) have sometimes been                    aggregate output level, providing an economic
suggested, capturing the economic rent and            incentive for “fishing effort” to increase
creating a source of public finance, without          beyond optimum levels (to E0), where total
requiring fish to be discarded unnecessarily          costs (from S0) are equated to total revenue
once quota restrictions are reached. Given            (TR0). By introducing measures that reduce
uncertainty in recruitment, fees per fish             the price paid for fish landed, without
caught are in theory more efficient than              necessarily affecting the price at which fish is
quotas, as well as more equitable, xlix but           subsequently bought (e.g. through operation
supply-side regulations have generally been           of a fixed landings price system, with fish
favoured by fisheries managers despite                subsequently auctioned), the fleet’s total
drawbacks, including the relative complexity          revenue curve is shifted downwards from R0
of quantifying fishing inputs devoted to              to R1. As total costs (from S0) are equated to
catching a particular species, l and scope for        total revenue (TR1) at the optimal aggregate
input substitution to circumvent controls.            output level (e.g. MEY1), no over-exploitation
                                                      occurs.
Interest has been growing in demand-side
measures and their potential to improve



Figure 2: G-S Model illustrating a demand-side solution to the “Tragedy of High Prices”

   Long-run Total Revenue
   Long-run Total Costs


                                          MSY                                 S0
                       MEY1
      TR0              1




                                                                               R0


      TR1                                                                R1




                                                  9
                                                                                         “ Fishing Effort ”
                           E1                                    E0
On the contrary, in practice, even where                 measures which reduce current returns cannot
stocks are over-exploited, demand-side                   be expected to be popular.            However,
measures have tended to be aimed at                      adopting     a     system    of     community
increasing demand to boost current fishing               co-management in which fishermen have a
incomes, compounding the “Tragedy of High                role in deciding how funds collected are spent
Prices” with a “Disaster of Subsidies”,                  (such uses would have to exclude influencing
whereas creating economic incentives                     fishing returns in ways that could provide
consistent with desired long-run management              further incentives for over-exploitation) could
objectives has been scarcely considered. In              increase industry support and prevent the
the UK for example, the Sea Fish Industry                existing distribution of fishing opportunities
Authority (a public sector organisation funded           being undermined.          Certainly industry
primarily by a mandatory charge on first-hand            acceptability could be expected to be a key
buyers of sea fish per tonne of fish purchased)          factor in determining whether measures are
has never attempted to use its levy to counter           adopted and subsequent success, and were
over-exploitation, instead devoting most of its          they excluded from having a say in the use of
budget to marketing initiatives to increase the          funds collected, the immediate financial
demand for fish. As shown in figure 2, even              impact would be more likely to be viewed as a
if a stock is initially exploited at the socially        “pauperisation” of the catching sector of no
optimum level, any demand-side measures                  short-term benefit.
shifting the total revenue curve upwards (e.g.
from R1 towards R0) without capturing the                Using market mechanisms for allocating EU
economic rent, could be expected in the                  fishing rights might appear simplest and most
long-run to have the perverse effect of                  efficient in enabling fisheries to be exploited
encouraging over-fishing.                                at least input cost. However, not least given
                                                         widespread support for retaining relative
There are few examples of EU countries                   stability and associated allocation keys,liii they
adopting demand-reducing measures to                     are unlikely by themselves to be broadly
regulate their fisheries, apart from the Spanish         acceptable to the sector. Indeed, where
government’s         advertising       campaign          adopted, the industry could play a useful role
(co-funded by the EU) aimed at persuading                in helping determine any distributional
consumers not to purchase the smallest fish,             nuances to be incorporated into the system,
thereby encouraging fishermen to allow the               designed to increase efficiency, promote
latter to grow and reproduce before catching             ecologically-friendly      fishing     methods,
them. Elsewhere, both Mauritania and the                 including reducing discards and increasing the
Maldives had a state agency which purchased              proportion of larger fish caught, or to avoid
fish landed at fixed prices and exported it at a         adverse socio-economic impacts.
higher price, with the former country
financing 25% of its total budget in this way,lii        Instruments such as taxes and demand-side
but the system reportedly was subsequently               measures appear appropriate in tackling the
dismantled following pressure from the World             long-run       economic        causes       of
Bank, which viewed it as an impediment to                over-exploitation, but how vessel operators
free trade.                                              respond to price changes in the short-term is
                                                         important in deciding the extent to which they
In attaining overall economic efficiency,                can be of use in attaining more immediate




                                                    10
fisheries management objectives. Economic               the detriment both of the long-term interests
incentives may exist for vessel operators to            of producers and of consumers. As the
adjust their fishing patterns to maximise               European       Commission’s        Consumer
returns in the long-run in order to remain              Committee has noted with respect to the CAP:
competitive, but short-term responses to price
changes may be inelastic, or even contrary to
management             objectives,        were          “A policy which is strongly influenced by
backward-bending supply to exist, due to                sectoral pressure groups pursuing their own
income-leisure trade-offs, liv satisficing              interest generates large costs for the rest of
behaviour, or other factors. lv Thus, despite           society.”lvi
creating the requisite economic incentives for
maintaining stock exploitation at optimal               The CFP is currently under review, but with
levels in the long-run, such measures by                no consensus either for scrapping the regime
themselves might not induce the short-run               altogether, or on what would constitute a
supply responses needed to approach desired             better alternative. While political feasibility
stock exploitation levels. Nonetheless, in              of fundamental modifications may be doubted
conjunction with other instruments altering             in view of the difficulties encountered in
the short-run opportunity costs of fishing and          negotiating the existing policy, whether or not
level of activity (e.g. diversification,                such change proves possible, it is timely to
re-training,     early       retirement,    or          consider the causes of failure and how these
decommissioning schemes) they could still               can best be addressed.
prove useful, particularly by providing a
source of funding for such other measures,              The current paper contributes to the
and projects designed to improve the health             continuing debate on the causes of failure and
and productivity of marine ecosystems.                  potential solutions.        In line with the
                                                        Commission’s desire for exploration of the
5. Conclusions                                          implications of alternative management tools
The CFP has been a resource conservation                such as Individual Transferable Quotas (ITQs)
disaster. Most stocks are over-fished and               and access fees,lvii the description provided of
many are expected to collapse if current                Dutch and UK experience clearly shows that
trends continue.                                        ITQs create large wealth inequalities and
                                                        barriers to entry, while reducing regulatory
The policy has also been an economic                    flexibility.    Access fees have not been
disaster.     From the perspective of EU                implemented, but would be expected to be
taxpayers or society as a whole, the CFP                more equitable, avoiding these negative
represents a scandalous waste of public                 distributional effects.
resources. Resource rents have been
dissipated, or capitalised in individual fishing        From an economic perspective, it is argued
rights initially granted free by governments,           that the primary role of fisheries management
and instead of making a direct contribution to          is to counter economic incentives leading to
public finance, fishing has been subsidised.            over-fishing and to ensure that resource rents
                                                        are not simply dissipated. The Commission’s
In a analogous manner to development of the             characterisation of over-capacity as the
EU Common Agricultural Policy (CAP),                    fundamental source of the sector’s difficulties,
fisheries management policies have been                 seems likely to lead to a continuation of
determined primarily on the basis of the                inefficient policies, failing to address
perceived short-term interests of producers, to         underlying economic incentives.




                                                   11
                                                        comparison to other considerations involved
Economists cannot claim the sole expertise              in practical fisheries policy-making.
necessary to assist the Commission’s search
for:
                                                        i
 “..a viable and socially acceptable                         European Commission. The Future of the
compromise       between     the     conflicting        Common Fisheries Policy, Green Paper,
                                                        COM(2001) 135 final, March 2001, 1.
maximisation objectives of economic                     ii
                                                            EEC Regulation No. 2141/70.
efficiency, ecosystem stability or productivity,        iii
                                                             European Commission. Preparation for a mid
employment and availability of other                    term review of the Multi-annual Guidance
services.”lviii                                         Programmes (MAGP). Brussels: Report from the
                                                        Commission to the Council, COM(2000) 272
However, to date little more that lip-service           final, May 2000, 4.
                                                        iv
has been paid to economics in formulating                    European Commission. n.1 above, 6,1.
                                                        v
fisheries policy at EU level, thereby                        Flaaten O, Wallis P. Government Financial
neglecting impacts on costs and allowing                Transfers to Fishing Industries in OECD
dissipation of resource rents. Although not             Countries. Xth Conference of the International
                                                        Institute of Fisheries Economics & Trade,
the only tools needed, overcoming failures of
                                                        Corvallis, July 2000.
the CFP and the “Tragedy of High Prices” and            vi
                                                             European Commission. n.1 above, 15.
“Disaster of Subsidies” will require greater            vii
                                                             European Commission. n.1 above, 32.
reliance upon economic instruments and                  viii
                                                              Valatin G. Quota Trading Systems in EU
analyses. As the Director-General of DG                 Fisheries. Review of European Community &
Fisheries has noted:                                    International Environmental Law 2000; 9(3).
                                                        ix
                                                              Holden M. The Common Fisheries Policy.
“Getting the economics of Fisheries                     Oxford: Fishing News Books, 1996.
                                                        x
Management right is one of the preconditions                  European Commission. Report from the
                                                        Commission on the Regional Meetings arranged
for achieving the objectives of the Common
                                                        by the Commission in 1998-1999 on the Common
Fisheries Policy..”lix                                  Fisheries Policy after 2002. Brussels: Report to the
                                                        Council, COM(2000) 14 final, January 2000, 9.
Strangely, the European Commission’s recent             xi
                                                             European Commission. n.1 above, 1.
Green Paper on the Future of the Common                 xii
                                                             M. Holden, n.9 above, 159.
                                                        xiii
Fisheries Policy offers no discussion of                      Flaaten O, Wallis P. Government Financial
underlying economic incentives leading to               Transfers to Fishing Industries in OECD
stock over-exploitation and the associated              Countries. Xth Conference of the International
policy-implications. It is inconceivable that,          Institute of Fisheries Economics & Trade,
half a century after Gordon’s article appeared,         Corvallis, July 2000.
                                                        xiv
                                                              Holden M. n.9 above, 161.
the Commission remains uninformed on such               xv
                                                              ECJ 30 November 1999, Case C-454/99,
issues, even if key personnel tend to be drawn          European Commission v UK, Official Journal, C
from areas of biological expertise. Thus, the           34 5.2.2000.
reason must lie elsewhere.                              xvi
                                                              European Parliament. Resolution on the annual
                                                        report to the Council and to the European
It seems most likely that, despite declarations         Parliament on the results of the Multiannual
of its generic utility, the Commission does             Guidance Programmes for the fishing fleets at the
indeed view fisheries economics as largely a            end of 1997. Brussels: COM (1999) 175 -
“useless science.” lx      The objective of             CS-0109/1999 - 1999/2112(COS).
                                                        xvii
preventing the dissipation of the economic                    EC Regulation 2847/93, Article 34(2).
                                                        xviii
                                                               Holden M, n.9 above, 163.
rent is viewed as of little relevance by




                                                   12
xix                                                       xxxi
        Reply of Commissioner-designate for                       Gordon HS. The economic theory of a
agriculture, fisheries and rural affairs Franz            common property resource: the fishery. Journal of
Fischler to questionnaire submitted by the                Political Economy, 1954;62: 124-142.
                                                          xxxii
European Parliament’s Committee on Fisheries.                     House of Commons Select Committee on
Brussels: August 1999.                                    Agriculture. Report on Sea Fishing, Eighth Report
xx
      Berg A. Implementing & enforcing fisheries          1998/99. London: HMSO, August 1999.
                                                          xxxiii
law: the implementation & the enforcement of the                  Valatin G, n.28 above.
                                                          xxxiv
Common Fisheries Policy in the Netherlands and                    Smidt S. The review of the CFP in 2002 - an
in the United Kingdom. London: Kluwer Law                 opportunity for fisheries economists. EAFE
International, 1999, 284-285.                             Conference, April 2000.
xxi                                                       xxxv
        Hoefnagel E. Legal but controversial:                     House of Commons Select Committee on
quota-hopping, the CFP & the Treaty of Rome. (in          Agriculture. Seventh Special Report. London:
Symes D. Property rights and regulatory systems in        HMSO, 1999.
                                                          xxxvi
fisheries, Oxford: Fishing News Books, 1998,                       Davidse W. The Development towards
80-91).                                                   Co-Management in the Dutch Demersal North Sea
xxii
       Davidse W. The Effects of Transferable             Fisheries. Fishrights99 Conference, Freemantle,
Property Rights on the Fleet Capacity and                 Australia, November 1999.
                                                          xxxvii
Ownership of Harvesting Rights in the Dutch                        House of Commons Select Committee on
Demersal North Sea Fisheries. Fishrights99                Agriculture. Report on Sea Fishing. London:
Conference, Freemantle, Australia, November               HMSO, Eighth Report 1998/99, August 1999.
                                                          xxxviii
1999.                                                              Walters C. Management without accurate
xxiii
       Proutiere-Maulion G, Chaumette P. Un virus         stock assessment. (Chapter 21 in Pitcher TJ, Hart
dans la Politique Commune des Peches: Le                  PJB, Pauly. Reinventing Fisheries Management.
phenomene de Quota-Hopping? Espace et                     Dordrecht: Kluwer Academic, 1998, 279-288).
                                                          xxxix
Resources Maritimes, 1997;11.                                     Corkett C. Fisheries Stock Assessment: an
xxiv
       MAFF. Departmental Report by the Ministry          Inductive Science with the logical form of
of Agriculture, Fisheries and Food and the                Primitive Magic. Xth Conference of the
Intervention Board. London: 1998.                         International Institute of Fisheries Economics &
xxv
      Valatin G. Fisheries Management Institutions        Trade, Corvallis, July 2000.
                                                          xl
& Solutions to the “ Black Fish ” Problem.                      Valatin G. The Evolution of UK Fisheries
Workshop on Management Institutions and                   Management: An Overview. IIIrd International
Systems of Fisheries Governance,             FAIR         Conference on Property Rights, Economics & the
Concerted Action on Economics & the Common                Environment, Aix-en-Provence, June 2000.
                                                          xli
Fisheries Policy, Vigo, October 1999.                           European Ombudsman. Annual Report 1998.
xxvi
       Hardin G. The Tragedy of the Commons.              Brussels: Office of the European Ombudsman,
Science 1968;162: 1244.                                   1999.
xxvii                                                     xlii
        Colin C. The economics of Exploitation.                  Valatin G. Fisheries Management in the
Science 1973;181: 630-634.                                Netherlands: An Overview. XIIth Annual
xxviii
        Valatin G. On demand-side approaches to           Conference of the European Association of
solving the “ Tragedy of High Prices ” in                 Fisheries Economists, Esbjerg, April 2000.
                                                          xliii
Fisheries. Xth Conference of the International                  Berg A, n.20 above.
                                                          xliv
Institute of Fisheries Economics & Trade,                       Valatin G, n.40 above.
                                                          xlv
Corvallis, July 2000.                                           European Commission, n.3 above.
xxix                                                      xlvi
       Rodgers P, Valatin G. The Common Fisheries                Valatin G. Development of Property Rights
Poicy after 2002: Alternative options to the TACs         based Fisheries Management in the United
and Quota system for conservation and                     Kingdom & the Netherlands: A Comparison.
management of fisheries resources. Luxembourg:            Fishrights99 Conference, Freemantle, Australia,
European Parliament Research Directorate, 1997.           November 1999.
xxx                                                       xlvii
       Anderson LG. The Economics of Fisheries                    House of Commons Select Committee on
Management. Baltimore: John Hopkins University            Agriculture, n.37 above, at 85.
Press, 1986.




                                                     13
xlviii
        LEI et. al. Licensing of Fishing Vessels in five
EU Member States. The Hague: Working
Document No.5, EU AIR                    CT94 -1489,
LEI-DLO, 1997.
xlix
        Weitzman M. Landings Fees vs. Harvest
Quotas with Uncertain Fish Stocks. Xth
Conference of the International Institute of
Fisheries Economics & Trade, Corvallis, USA,
July 2000.
l
     Valatin G. The Relationship between Fleet
Capacity and Fishing Effort. VIth Conference of
the International Institute of Fisheries Economics
& Trade, Paris, France, July 1992.
li
     Sproul, JT. Green fisheries: certification as a
management tool. (Chapter 9 in: Pitcher, T. J.,
Hart, P. J. B. & Pauly (eds). Reinventing fisheries
management. Dordrecht: Kluwer Academic,
1998,137-147).
lii
        Catanzano, J, Cunningham S. Equity,
Management units & Management Instruments in
Fisheries. IIIrd International Conference on
Property Rights, Economics & the Environment,
Aix-en-Provence, June 2000.
liii
      European Commission, n.10 above.
liv
      Gautam AB, Strand I, Kirkley J. Leisure/Labor
Tradeoffs: The Backward-Bending Labor Supply
in Fisheries. Journal of Environmental Economics
and Management, 1996; 31(3): 352-367.
lv
      Valatin G. Fishermen's objectives and the
economic determinants of fleet activity.
Edinburgh: Edinburgh University M.Phil. Thesis,
1996.
lvi
      Consumer Committee (Consultative Committee
of the European Commission). Opinion of the
Consumer Committee on the reform of the
Common Agricultural Policy, adopted 8
December, 1998.
lvii
      European Commission. n.1 above, 33.
lviii
       European Commission. n.1 above, 39.
lix
      Smidt S. The review of the CFP in 2002 - an
opportunity for fisheries economists. EAFE
Conference, April 2000.
lx
     cf: Davidse W. Fisheries Economics, a useless
science ? EAFE Conference keynote speech,
Salerno, April 2001.




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