Fishery subsidies: the interaction between science and policy / by Francisco Blaha

Been writing about the impact of subsidies for a while now. In fact I said many times that in my simple and humble opinion y we could tackle subsidies and increase transparency open licences negotiations, CDS, etc) the challenges around fisheries work will be much more manageable.

spreading the subsidies around, like live bait in a P&L just to generate some action…

spreading the subsidies around, like live bait in a P&L just to generate some action…

I always had the idea a well managed fishery the fisheries is la table with 3 legs science, policy (including law) and MCS, they retro-feed each other, and if one fails the table collapses, hence based on my interest on subsidies I’m always keen to read the work of Dr Rashid Sumaila and his collaborators.

This latest paper, does the usual good job and digs deep on the 3 different academic branches used to analyse subsidies: descriptive, theoretical, and empirical.

Descriptive studies determine the definition of subsidies, describe the social and political contexts under which these subsidies are funded, and estimate subsidies at local and global levels. These studies offer the foundation for subsequent theoretical and empirical analyses.

Theoretical studies of subsidies started with static open access fishery models, but more recent studies include rational expectation, political economy, shared fish stocks, and international trade. They provide a number of predictions, but the general conclusion seems to be that the impact of subsidies should depend on the type of subsidies, biological characteristics of the fishery concerned, as well as the management and political systems in place.

Empirical studies aim to provide systematic evidence on how subsidies affect fishery outcomes in the real world. As the data on fishery subsidies are limited, empirical studies are still scarce; however, solid advances have been made during the last decade.

They then relate their analysis to the two over-aching topics in fisheries Science and Policy, which makes it a very good read. So, as usual I quote parts of it, but always read the original.

Fisheries subsidies have attracted considerable attention worldwide since the 1990s. The World Trade Organization (WTO), among others, started to strengthen its disciplines in fisheries subsidies in 2001. The academic study of fisheries subsidies can play a key role in contributing to policy-making processes such as WTO negotiations by providing more accurate information on the link between subsidies and overfishing. This paper aims to review the existing academic literature and discuss the role of academic studies in the process of designing and implementing policies on fisheries subsidies. Academic studies on fishery subsides can be divided into three branches: descriptive, theoretical, and empirical. Overall, there has been significant progress in empirical studies on fishery subsidies during the last decade. While the number of studies is still limited, they generate insights that are consistent with theoretical predictions. As for potential contributions of academic studies to actual policies and sustainable management, more interaction between academic experts and policy makers is desirable.

Policy background on fisheries subsidies
The issue of how to control the negative impacts of fisheries subsidies has attracted considerable attention since the 1990s among scientists, policy makers and managers worldwide. In 1992, the Food and Agriculture Organization (FAO) pointed out that providing subsidies to the fishing sector could lead to the depletion of fish stocks (FAO 1992). The World Summit on Sustainable Development in 2002 identified fisheries subsidies as an important issue in relation to sustainable fisheries. The United Nations Environment Program also hosted meetings and workshops on fisheries subsidies during this period (von Moltke 2012). In addition, the World Trade Organization (WTO) started work to strengthen its disciplines on fisheries subsidies in 2001. Before that, one of the main legal instruments at the disposal of the WTO was the General Agreement on Tariffs and Trade (GATT) agreed in 1947 (GATT 1947). GATT 1947 has its own disciplines focused on subsidies in general. Its article XVI provides rules on export subsidies and other forms of subsidies that could cause trade distortion. These rules were further improved during the GATT Uruguay Round of Multilateral Trade Negotiations from 1986 to 1994, and a new legal instrument, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), was signed in 1994. This agreement establishes three categories of subsidies: prohibited, actionable, and non-actionable. These categories are determined based upon the trade-distortion effect of the subsidies. Potential effects of subsidies on fishery resources fall outside of the scope of the SCM Agreement.

In 2001, new negotiations of the WTO started. One of the main objectives of the negotiations was to clarify and improve WTO disciplines focused on fisheries subsidies. Members of the WTO intensively negotiated this subject and, in 2005, the WTO Hong Kong Ministerial Declaration noted that there was “broad agreement that the (Negotiation) Group should strengthen disciplines on subsidies in the fisheries sector, including through the prohibition of certain forms of fisheries subsidies that contribute to overcapacity and overfishing”. There were active negotiations on fisheries subsidies for several years around 2005. However, the WTO Doha round negotiation as a whole came to an impasse in 2007, and the negotiation on fisheries subsidies also stopped. In late 2016, the negotiation group on fisheries subsidies was revitalized with the goal of achieving binding outcomes to be adopted at the WTO Ministerial Conference in 2017. This Ministerial Conference, however, did not achieve substantive outcomes.

A possible link between subsidies and overfishing was discussed during these negotiations. Participants engaged in the WTO negotiations had to tackle the problem of a lack of a common viewpoint on the effects of subsidies. Academic studies on fisheries subsidies can play a key role in these negotiations by providing more accurate information on the link between subsidies and overfishing. This paper aims to review the existing academic literature and discuss the role of academic studies in policy-making processes during the negotiation of fisheries subsidies.

Future challenges
Overall, the literature on fishery subsidies shows that significant progress has been made in the last three decades. Descriptive and theoretical studies clarify under what conditions various subsidies are beneficial or harmful. While the number of empirical studies is still limited, they generate insights that are consistent with theoretical predictions by simple partial equilibrium models. Given that an increasing amount of data on fishery subsidies is becoming available, there is scope for more studies.

In particular, the fisheries support estimate (FSE) database recently developed by the OECD seems to provide a potential avenue for future research (OECD 2017). The FSE database replaces the government financial transfer (GFT) database, and it provides more detailed subsidy data for OECD countries. For example, the FSE database includes an independent category for the provision of infrastructure, the effect of which is controversial as previous studies could not examine its impact due to data limitation. Another strength of the FSE database is that the People’s Republic of China—the country with the largest total amount of fishery subsidies—is included. As such, the scope of the database has increased, even though it still does not include data for many of the world’s coastal countries.

One drawback, however, of the FSE database is that it only goes back to 2009. Researchers may be able to manually append the FSE and GFT (which started in 1996) databases, but they must make sure that the data series are consistent across databases. In addition, quality is always of concern for both GFT and FSE data, as they are self-reported. As such, it is important for empirical researchers to use other sources of data (e.g., academic databases) and various techniques to mitigate the shortcomings of the FSE database. For example, country fixed effect estimation may mitigate the concern that some countries systematically under-report their subsidies. Alternatively, SEs that allow heteroscedasticity may be useful if some countries report their subsidies data with high variances. Researchers should also conduct estimations using various subsamples of countries to ensure that the main result is not affected by a group of countries with low quality data.

Another potential direction for empirical studies is to analyze the impact of subsidies at the fishery level. Existing studies are conducted at the regional level or at the vessel level due to data limitation. However, from a policy perspective, it is more useful to examine which subsidies are effective/ineffective in which fisheries, as the relevant management unit is a fishery. Thus, a fishery-level analysis will yield more useful insights for fishery management. It is also desirable that future empirical studies employ careful identification strategies, as in Duy and Flaaten (2016) and Sakai (2017). To evaluate the impact of subsidies, we need to know counterfactual outcomes, e.g., what would have happened without the subsidies? As fishery subsidies are not distributed randomly to fishers, it is challenging to construct a control group of fishers that can be used to assess a counter-factual outcome. In this regard, both fixed effect models and propensity score matching methods are useful, if not perfect, tools to provide us with such control groups.

As for possible contributions of academic studies to society, more interactions between academic experts (such as economists and scientists) and policy makers (such as diplomats and politicians) are desirable. Under the current situation, the participation of economists and other experts on fishery science is limited to a handful of large delegations like those of the European Union, Japan, Norway, and USA. Most members of groups negotiating fisheries subsidies at the WTO are diplomats and they are usually not aware of the progress that has been made in studies in this field. More outreach toward delegation members from developing countries needs to be considered to strengthen the bond between science and the implications of fisheries subsidies worldwide.