Leah Worrall (Senior Research Officer, ODI)
22 December 2017
There was optimism at the start of the World Trade Organization’s (WTO’s) 11th Ministerial Conference (MC 11) that an agreement on fisheries subsidies would be reached. In the aftermath, Member States’ failure to conclude such an agreement represents a heavy burden, as this was once described as the ‘low hanging fruit’ for the negotiations.
Under the Sustainable Development Goals (SDGs), countries agreed to the elimination by 2020 of fisheries subsidies contributing to overfishing, overcapacity and illegal, unreported and unregulated (IUU) fishing (SDG 14.6). In order to allow countries sufficient time to implement this, the need to reach agreement during MC 11 – or by 2018 at the latest – was acknowledged. The Buenos Aires Ministerial Decision instead notes the need to adopt a fisheries agreement by the time of the Ministerial Conference in 2019.
Subsidies are harmful, from an economic transformation perspective. Capacity-enhancing subsidies reduce global fishing efficiency, with inefficient fishers replacing efficient ones, whilst also enabling fishery production that would otherwise not be economically viable. The global increased production is particularly negative for countries that rely on fisheries for livelihoods, trade and value addition.
In a recent paper, we argue for the disciplining of fisheries subsidies as a first step in protecting the global commons of fisheries and reducing trade distortions. Developing countries capture more fish than developed nations (52 million tonnes compared with 25 million tonnes in 2015), but developed countries add more value (commodity exports reached $68.9 billion in developing countries and $70.2 billion in developed countries in 2013). Developing countries provide more fisheries subsidies in absolute terms, but only just (2003 data). Publicly available global data on fisheries subsidies are severely out of date, however.
Reduced fishing capacity – as a result of the elimination of capacity-enhancing fisheries subsidies – could be somewhat compensated for by restructuring – which can be described as shifting fishing capacity from inefficient firms (dependent on subsidies) to efficient firms (less dependent on subsidies).
Action in the following two areas could have a disproportionately positive impact in reducing global fisheries capture:
- Eliminating subsidies to IUU fishing. The benefit here would arise largely from the enforcement mechanism required to implement such disciplines, and could eliminate up to a quarter of global catches (according to UN Food and Agricultural Organization estimates).
- Eliminating fuel subsidies. Fuel subsidies support the rise of distant water fleets, in turn leading to overcapacity. Their elimination would have a strong capacity-reducing effect in fuel subsidy-dependent fishing fleets, as a function of the distant travelled by vessels.
Special and differentiated treatment
Countries are asking for special and differentiated treatment (SDT) provisions in a fisheries subsidies agreement at the WTO – for least developed countries (LDCs) or developing countries, more generally. These include Indonesia, Europe, the ACP Group, the Latin American bloc, the New Zealand, Iceland and Pakistan bloc, and China. The SDT provisions in Member State proposals range from exemptions to technical support and extended implementation timelines.
As developing countries may be responsible for a significant proportion of fisheries subsidies, there is a need to focus any SDT provisions on LDCs and other small and vulnerable states. As we note in our recent paper, such subsidies in LDCs may not be efficient and encourage the development of inefficient firms.
Other carve-outs for developing countries may also be warranted. For example, the small-scale fishing sector currently receives only 10% of capacity-enhancing subsidies globally.
If agreement cannot be reached at the WTO – or outside – there remains little hope of meeting the SDG 14.6 target. The WTO and its Member States have rallied to achieve multilateral agreement in the face of increasing doubts before; the 2015 Nairobi Package is one example.
Opportunities remain to pursue fisheries subsidies at the WTO and include the following:
- The Ministerial Decision on fisheries subsidies aims to reach an agreement by 2019, leaving two years to agree the text. Member States should seek a broad-ranging agreement prohibiting subsidies to IUU fishing, overcapacity and overfishing. Multiple avenues remain, including modelling the text on the Agriculture Agreement (and its green, amber and red boxes). Strong SDT flexibilities may be necessary for buy-in. Some broad flexibilities could be awarded to developing countries on implementation timelines, given the short timescales available. Stronger SDT provisions could be introduced for LDCs, such as in the form of technical and financial capacity support, or exemptions where necessary. This approach could follow that of the Trade Facilitation Agreement, for example.
- WTO plurilateral negotiations on fisheries subsidies could be launched, drawing on lessons learnt through the Environmental Goods Agreement negotiations (with agreement yet to be reached). This would be a forum for the major players, including major opponents of fisheries subsidy disciplines, to reach consensus. The plurilateral group could include Europe, emerging and developed Asian economies (e.g. China, South Korea, Japan and others) and the US, among others. The aim would be for other WTO Member States to join the plurilateral agreement over time.
- The Agreement on Subsidies and Countervailing Measures (SCM) could be used to discipline fisheries subsidies through disputes. The US proposal on fishery subsidies recommends improvements in notifications of fisheries subsidies to the WTO under SCM Article 25.3. Fisheries-related cases brought to the WTO’s Appellate Body before include the US-Shrimp and Dolphin-Tuna But challenges remain in adopting this approach. The willingness of Member States to bring cases on fisheries subsidies may be low. The WTO’s Appellate Body has a poor track record of ruling in favour of environmental concerns. The SCM itself does not have the environmental exemption present in other agreements, such as that included in the General Agreement on Tariffs and Trade (GATT) Article XX. The US is meanwhile blocking the appointment (or re-appointment) of judges to the Appellate Body, with negative implications for the long-term functioning of the WTO’s dispute settlement mechanism.
Regardless, Member States should continue to pursue all these avenues to discipline fisheries subsidies. This is pertinent not only to reviving trust in the WTO but also to achieving the SDGs. The WTO’s Negotiating Group on Rules (NGR) should endeavour to reach consensus on fisheries subsidy disciplines. These negotiations will likely touch upon political sticking points. For example, whereas Europe seeks to exclude fuel subsidies from the agreement, the US seeks to include these. This will require consensus-building by the NGR and compromise by Member States.
In the meantime, countries should pursue unilateral action in disciplining fisheries subsidies – and eliminating subsidies to IUU fishing could be an important first step.
 Argentina, Colombia, Costa Rica, Panama, Peru and Uruguay.
 These contested restrictions on fishing methods for shrimp and tuna species, using the General Agreement on Tariffs and Trade (GATT) and Technical Barriers on Trade agreements.
 This owes in particular to the difficulty in proving environmental measures do not constitute ‘arbitrary or unjustifiable discrimination between countries’ (GATT Article XX). The few successful cases on environmental/health grounds include France–Canada asbestos, Brazil re-treaded tyres and the Canada renewable energy case.
Photo credit: Fisheries by Giulian Frisoni via Flickr