SUSTAINABLE FISHING
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A deep dive into the world of government subsidies in the fisheries sector and ways in which decisive political action could change the industry.
This document is Tom Zamzow’s master thesis paper entitled ‘Subversive Subsidies’, drafted in February of 2021. Tom decided to publish it (July 2021) ahead of a milestone moment for the World Trade Organisation to change the nature of government subsidies for a more sustainable future.
EXECUTIVE SUMMARY
This policy paper explores possible amendments to the European Common Fisheries Policy (CFP), in particular to tackle negative socio-economic and environmental impacts of current government subsidies to fleet operators. Guiding this research is the following lead question: "How could a legally binding amendment to the CFP on governmental subsidies to fishing fleets safeguard diverse, ecologically and economically viable fish stocks in European waters for future generations?".
The Nature of Current Governmental Subsidies
The current nature, level and direction of government subsidies to European fishing fleets has in the past, and will in the future under the currently debated European Maritime, Fisheries and Aquaculture Fund (EMFAF), promoted dangerous levels of fleet-overcapacity. Fleet-overcapacity in turn risks the fishing of stocks beyond their Maximum Sustainable Yield (MSY) levels, and thins out profits for individual operators thus perpetuating the need for further subsidies to ensure economically viable operations and integrity of coastal community revenue streams. Furthermore, the current distribution of subsidies disadvantage smaller and often more sustainable fishing operations while promoting the operation of large commercial conglomerates. The CFP aims to ensure that fishing and aquaculture are environmentally, economically and socially sustainable and that they provide a source of healthy food for EU citizens. Its goal is to foster a dynamic fishing industry and ensure a fair standard of living for fishing communities. A repurposing of the allotted subsidies, by CFP decree, towards smaller operations, upgrades to more sustainable and species-specific gear, as well as innovation in the supply chain to combat produce loss from sea to plate could help realize the CFP's stated goal. Current subsidies subvert this goal.
The State of European Fisheries and Effectiveness of Current Subsidies
According to recent data from the Scientific, Technical and Economic Committee For Fisheries, 30 out of the 70 commercially fished stocks in European waters are overfished. 54% of fisheries operations globally would not be economically viable without governmental subsidies. This pushes fishing operations into a vicious cycle: they need to increase fishing effort and pressure on stocks, enabled by fishing quotas approved by Brussels that are above scientific consensus, to make ends meet. With higher pressure comes greater risk to stock health, and so the industry is forced to gradually erode its own future. Subsidies are necessary. The trick is to repurpose them to foster a sustainable operation that safeguards people, planet and profit for generations to come. Currently, subsidies are largely funnelled into fleet expansion, modernization of vessels to enable longer stays at sea with further reach into the Exclusive Economic Zones (EEZ) and fuel economy.
Redirecting Subsidies to Safeguard People, Planet and Profit
This paper proposes to redirect subsidies towards human capital, particularly into the following 2 areas with the goal to decrease fleet-overcapacity and alleviate pressure on stocks that won't be economically viable in the long-run:
Investment in more selective and less harmful fishing gear and incentive schemes to operators to equip with it. Technology has made great strides to allow for more targeted fishing effort, reduce unwanted by-catch and foster a healthy marine biome that commercial stocks rely on to remain productive and replenish effectively.
Paths to alternative livelihoods are to be forged, funded and promoted for those seeking to either leave the sector or those otherwise not seeing an alternative career path for themselves. The scientific community relies on real-time data from experienced seafarers to inform scientific assessment and quota setting. The same holds true researches from various academic institutions that seek new pathways to extract value from fisheries while minimizing its impact on the natural environment. This provides an under-exploited job market for current and future fishing communities.
The Road Ahead
With an informal deal (negotiated between the Council of Europe 'Fisheries/Aquaculture' and the European Parliament) having been agreed on December 4th, the window of opportunity is closing. The deal has received wide-spread criticism from watchdogs such as the WWF and Seas At Risk for the sustained use of subsidies for fleet modernization and promoting overcapacity, and stands in contrast to targets pursued by the WTO globally. A policy intervention shall be delivered to the Council's Committee of Permanent Representatives (COREPER), which will be the next entity required to endorse the text, following legal and technical scrutiny, prior to it being ratified by the Council and European Parliament.
Why We must Act Now
Before looking to make recommendations on policy amendments, it is crucial to inspect those areas of the socio-economic fabric of fisheries for which the current state of government subsidies creates cascading problems. Firstly looking at the stated aims of the CFP and the wider context of commitments it operates in at the United Nations Sustainable Development Goal level. As will become evident, we are not quite where we need to be, despite moderate upward trends in fish stock health. Secondly looking into the socio-economic and environmental consequences of subsidy-driven fleet-overcapacity and consequent fishing activities beyond MSY. Lastly, the current nature and levels of government subsidies, and the policy cycle we find ourselves in, will guide this research and argument as to why this is the moment to act with targeted policy amendments.
WHAT THE CFP PROMISES
Stated Goals of the CFP-- In a Q&A published by the European Commission (EC) June 2019 entitled "Questions & Answers about the state of play on implementation of the Common Fisheries Policy (CFP) and the Fishing Opportunities in the EU for 2020", the EC makes clear their perspective on the original and future-looking goals of the CFP. The CFP aims to ensure that "the exploitation of living marine biological resources restores and maintains populations of harvested species above levels that can produce the maximum sustainable yield – which also contributes to achieving good environmental status in European seas by 2020 [...]". This statement introduces not only the mechanism of MSYs, but furthermore declares an ambitious goal: that European fisheries be managed in a way that maintains fish populations above MSY levels. Before looking into how well the CFP has advanced European fisheries towards this goal, let's look at the wider picture in which the discussion is taking place.
Sustainable Development Goals-- The European Union and Regional Fisheries Management Organization's (RFMOs) contracting parties have committed to deliver against the UN 2030 Agenda and more specifically Sustainable Development Goal (SDG) 14, Target 6, which states: "By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the World Trade Organization fisheries subsidies negotiation." Let's summarize: the ambition is to have a fisheries operation that manages populations above maximum sustainable yield and prohibits subsidies that harm both fish stocks and those that depend on them.
The Current State of Stocks-- In a March 2020, the European Commission took stock (pun intended) of how well the CFP has delivered against its aims so far. This against the backdrop of the European Union agreeing that all fish stocks should be fished at MSY levels (actual aim is populations above MSY) by 2020 in the North-East Atlantic, which is comprised of North Sea, English Channel, Baltic Sea, Skagerrak, Kattegat, west of Scotland, west of Ireland, Irish Sea, Celtic Sea, Bay of Biscay and Iberian Atlantic waters. As is evidenced, European fisheries are on the right path, but are falling short on their promise by about 42% with 30 of the 70 fisheries operating above MSY. The question is, how can this be?
Quotas Are Assessed But Ignored. Who's To Blame?-- Fishing quotas for European waters are set based on a mix of fleet landings reports and scientific assessment. Scientists sample various sites at various times throughout the year, and cross-match their findings with data from fishing activity, including by-catch, to produce quota recommendations for the following year to remain in line with the MSY target. This work is coordinated by the International Council for the Exploration of the Sea (ICES), which then provides the European Commission with independent advice . With this holistic and evidence-based system in place, how is it possible that the European Commission can record an under-achievement against their 2020 target? The reasons might vary widely, but are chiefly found in the decision making protocol used to legally decide on quotas: The Council of the European Union "Agriculture/Fisheries" has the final say (more on that later in this paper when we look at implementation options), and systematically ratifies quotas exceeding catch-limits suggested by advisory bodies aiming to establish MSY fisheries . The question is why. Why does the Council act as it does? This research found the root-cause in government subsidies, and invites you to look into their nature, levels, reason to be and socio-economic and environmental consequences on the following pages.
THE NATURE OF GOVERNMENTAL SUBSIDIES IN THE EUROPEAN FISHING INDUSTRY
What They Are-- Governmental subsidies for the fishing sector are neither new nor uncommon. A 2019 report from the Organization for Economic Co-Operation and Development (OECD) estimates that globally, governments subsidize their fisheries sectors with around USD 35 billion annually . The EU is no exception to this rule, with a 2011 WWF report estimating annual subsidies amounting to EUR 3.4 billion, EUR 1 billion of which having come directly out of the EU budget . The figures are hardly surprising, given that near 54% of global high-seas fisheries would not be cash-positive without them . These funding mechanisms have been around for a long time, and though recent CFP reform measures have indicated that the European Union might finally acknowledge its responsibility to achieve the targets it has committed to under SDG 14 Target 6, a potential set-back lurks around the corner.
The EU has recognized the potentially devastating nature of these subsidies as early as 2002, when a reform to the CFP was introduced to phase out public aid to renew fishing vessels. Since then, the EU has widely advocated for measures to protect both the maritime environment and those that depend on its sustained economic power from misuse of governmental subsidies. Notably during negotiations with the WTO with respects to the aforementioned SDG 14 Target 6 in 2015. The EU appeared to have parted ways with this form of economic corruption for good. And yet, the reintroduction of governmental subsidies is on the horizon. The European Parliament in February of 2019, has voted to reintroduce subsidies for fleet renewal and modernization under the EMFAF to the height of EUR 6 billion annually between 2021 and 2027 . The result: sustained contribution to fleet-overcapacity. This word has already been used on multiple occasions throughout this paper, but what does it actually mean? And why is it a bad thing that needs to be addressed through policy amendment?
Fleet-Overcapacity As A Vicious Cycle-- The current nature of governmental subsidies promote fleet-overcapacity to the point at which it stimulates fishing beyond MSY levels in a variety of ways. For one, the subsidies incentivise the construction of new vessels, hence allowing ever more vessels to enter the competition for the same amount of stocks available. Another example is the refurbishment of older vessels that would otherwise be retired, possibly together with their crew. In short this means that fewer people diversify income options and a heavy reliance (and thus pressure) on marine resources is artificially maintained. These subsidies can also be targeted directly at reducing fuel costs for operations, which in combination with modernized vessels allows fleets to remain at sea for longer without impact on their balance sheets . This mechanic tilts the conventional supply and demand cycles on its head, and promotes aggressive fisheries pressure over other alternatives (see chapter on policy amendments) that could benefit both fishermen and stocks in the long run. Without subsidies directly being funnelled into the operations of current fishing efforts, the natural trade-off of cost of operation vs profit would create an automatic equilibrium. Thus enabling fishing effort only to the extend that is economically viable, and would increase kg prices in sales besides. On a personal note, not only would this benefit stocks, it would also increase resilience of coastal communities through less time spent at sea, more community building opportunities and cultural cohesion. Not to mention the sustainability of the concept of fisheries, for which naturally healthy stock levels are required.