New Zealand leads push to remove global fishing subsidies

By Nikki Mandow

New Zealand's fishing industry has taken the lead in an international push to remove fishing industry subsidies worldwide - subsidies worth between $US14 billion and $US20 billion a year, according to experts.

Other countries' subsidies cost New Zealand's $NZ1.2 billion seafood export industry in excess of $NZ100 million a year, according to Craig Ellison, Commissioner of the Treaty of Waitangi Fisheries Commission and co-convenor of the Pacific Economic Cooperation Council (PECC)'s Fisheries Development and Cooperation Taskforce.

Subsidies are also the major cause of over-fishing and bad fisheries management worldwide.

All New Zealand fishing industry subsidies were removed between 1986 and 1994.

Ellison recently returned from the Philippines capital Manila, where he chaired a three-day PECC workshop on the impact of subsidies on fisheries resource management and international trade.

One of the main outcomes of the meeting was a decision PECC will coordinate a $US140,000 research study, funded by the organisation of Asia Pacific Economic Cooperation (APEC), into the effects of existing trade distortions on the fishing industry, and what the ramifications would be of removing them.

While many countries are understandably nervous that the removal of subsidies would seriously damage their fishing industries, Ellison believes the ramifications of not doing so are greater.

He points to a recent countervailing duty case brought by the US against the Chilean salmon industry in the World Trade Organisation. The US was asking for 45% tariffs, but when the US Department of Commerce examined the case by investigating 10 producers, it found these producers had only minimum subsidies - some had none at all. However, in the end it imposed a 4.5% blanket tariff on the rest of the Chilean industry, despite the fact that some of these players may not have been enjoying any subsidies.

"The Chilean case is chilling in that even though its industry enjoys virtually no subsidies, to prove its innocence cost $9 million and the institution of tariff barriers. One can only speculate on the damage to Chile's salmon industry if it had been guilty.

"From a New Zealand perspective, the Chilean salmon industry turnover - approximately $US600 million - is about the same size as the entire New Zealand industry.
Imagine the impact on the New Zealand industry of similar action if we hadn't removed subsidies."

Final decisions should be made by the end of the month on which academics will conduct the APEC research, and the study should be complete by mid-1999. While the researchers may well come from outside New Zealand, the research project will be managed by New Zealand Seafood Industry Council general manager Alastair Macfarlane.

Ellison says New Zealand has been key in spearheading the fishing industry moves. The latest workshop had its genesis in an NZPECC symposium in Wellington in November 1996 when the first steps were taken to establish a link between fisheries management practices and trade and to get approval for research to be carried out on these linkages.

Ellison says New Zealand's industry stands to benefit substantially from any worldwide fishing industry liberalisation not only because our industry is one of the most liberalised in the world, but also because of its position leading the charge in terms of getting the subsidies removed.

"I'd like to think New Zealand's involvement pushing in PECC led to it being studied with more alacrity. It would have happened, but it might have taken 10 years.
And if you are talking about $NZ100 million a year for the New Zealand fishing industry, that's $1 billion [if the process is delayed 10 years]."

Ellison believes 2003 is a practical target for seeing fishing industry subsidies removed.

"The biggest sticking block is probably the melt-down in Asia. When you have a problem like the crisis, governments should be saying 'our structures are bad, our management is bad, let's make radical changes.' But in reality, there is the threat of retrenchment back to the halcyon days of protection. Because that's human nature.

"Protectionism doesn't work and there are too many examples to disagree with that, but the transition can be painful… New Zealand's shift to quota as property rights is an example of that… And it's very hard to put efficient economic structures in place for free and fair trade against the backdrop of countries going bankrupt."

Without the removal of subsidies, however, there is little chance of introducing long-term, sustainable fishing management regimes worldwide, he says.

"It's obvious - removal of subsidies reduces the fleet capacity and so reduces the harvesting capacity and promotes the protection of stocks."

The sort of restrictions put on many fishing companies at present - limiting vessel size, allowing entry into specific fisheries only, or imposing seasonal controls - are only partially successful and can be very inefficient.

"You many be catching only five fish with a 40-metre trawler, but if you get subsidised loans, or subsidised wages, or other incentives, that may well work for you."

Ellison also sees PECC's involvement as crucial, especially now it is working very closely with APEC.
"Subsidy" has tended to be seen as a dirty word among many APEC economy policy makers, particularly in Japan, meaning the issues were largely put on the back-burner for political reasons.

But PECC as an independent body has been able to come up with research which makes it hard for APEC economies to ignore the problem any longer, Ellison says.

"PECC can do the sensitive work because people there aren't constrained by the need to observe Government policy. That's a real impediment to the APEC process."

One important part of PECC's research for APEC research will be examining a proposal from some developing nations that there is a value in a limited period of subsidies for nascent industries to develop infrastructure - a kind of "catch-up" phase.

These countries argue that fishing industries in European and other countries have already benefited from a period of subsidies and that it is unfair to expect developing countries to compete without having had the benefit of their own subsidy regime.

But Ellison argues subsidies may help an individual industry for a time, but aren't good for the sector in the long term, and certainly aren't the best use of government resources.

"We would say that such subsidies are in the long run simply a transfer of wealth from the public purse to the private wallet. I believe you can demonstrate there is greater public benefit if you use the money for something else."

* This article was prepared by Nikki Mandow for the New Zealand Committee of the Pacific Economic Cooperation Council (NZPECC) as one of an occasional series on developments in the Asia-Pacific region.