Fisheries sector plays an important role in food supply. Apart from that, it is also a source of livelihood for many people, especially those in developing countries. Therefore, many countries subsidize their fishing industries to protect their food supply. In the world, the annual subsidies are $10 to $15 billion - possibly more than 25 percent of the annual $56 billion trade in fish. Hence, we can realize how prevalent subsidizing fishing industry is in the world.
There are many forms of subsidies:
Direct government payments to the industry
- a diverse range of subsidies as grants made for the purchase of new fishing vessels, vessel decommissioning payments (buybacks), fishermen's unemployment insurance, compensation for closed seasons, equity infusions, and price support programmes (Schrank, 2003)
- "Grants for the purchase of new fishing vessels might be introduced to aid in the development of an indigenous fishing industry. Vessel decommissioning payments may be introduced to stimulate a process of reducing excess capacity. Fishermen's unemployment insurance may be introduced to stimulate fishermen to enter or remain in the industry. Compensation for closed seasons may be introduced to permit fishermen to remain in the industry when their incomes are unexpectedly cut because of measures introduced by governments to protect declining fish stocks. Equity infusions may be made to avoid the bankruptcy of fishing firms when the bankruptcy would have catastrophic effects on the employment of a region, particularly when the bankruptcy is caused by a temporary economic occurrence such as the decline of markets during a severe business recession. Price support programmes, whereby government pays producers the difference between market price and an administratively set target price, may be introduced to support fishermen's incomes." (Schrank, 2003)
- Tax waivers and deferrals
- Government loans and loan guarantees, and insurance
- Implicit payments to, or charge against the industry
- General programs that affect fisheries
Case Study:
United States of America's and Canada's fisheries are highly subsidized for many years. Most of the subsidies are generated by the government and monopoly. The main aim of their subsidies is to develop their domestic fisheries. Apart from that, they have also used approximately US$3,000,000,000 on income maintenance for unemployed fishermen and fish plant workers and improving fisheries science. In 1990s, when people start to realize the problem of overfishing, both countries started to subsidize to develop technologies to reduce capacity. (Schrank, 2003)
Norway, one of the largest cod-catching countries, grants loans to their fishing industries to support the export of their fishing market. They also grant loans to vessel arrangements, price support, insurance subsidies, operating subsidies, minimum income guarantees, vacation support and unemployment insurance, bait subsidies, gear subisidies and damage compensation) (Schrank, 2003)
Some are harmful; some may help to solve the problem of overfishing. In view of this, WTO agreed on restricting subsidies designed to promote export and establish controls over other form of subsidies. However, Canada,Japan, and other countries with large fishery industry, endorses the "no-need approach" in which no restriction of subsidies should be imposed as they dispute the casual link between subsidies and overexploitation of fish resources. They propose fisheries management regimes deal with catch controls (quotas), effort controls (restrictions on boat size, engine power and days at sea, etc.) and right-based structures (permits, individual transferable quotas, etc.). Therefore, in Japan's view, it would be unfair if these varying situations are ignored and certain fisheries subsidies automatically prohibited. (Benitah, 2004)
Other countries propose the Traffic Light approach: red (forbidden subsidies), green (permitted subsidies), amber (slow down, which means that subsidies may be subjected to a complaint on the basis of their adverse trade effects). By this approach, desirable subsidies will be maintained while direct payment to promote export would be banned or discouraged.
This measure has been supported by countries like Norway. (Benitah, 2004)
However, difficulties exist in the elimination of subsidies. As subsidies are regarded as one of the invisible protectionist measures, it is almost impossible to measure the amount of subsidies that a country provides to is fishing industry.
Sources used in my research:
- Milazzo, M. (2000). The World Bank: Subsidies in World Fisheries: A Re-examination. Technical Paper, No. 406, 4-6.
- Benitah, M. (June 2004). Ongoing WTO Negotiations on Fisheries SUbsidies. ASIL Insights, 1-3.
- Schrank, W. (2003). Introducing Fisheries Subsidies. FAO Fisheries Technical Paper, 437, 1-5.