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FAO Fisheries Department


Paper presented at the Workshop on the Role of Financial Institutions in Strenghtening National Fisheries Industries and Privatization of Fisheries Investments in Small island Devloping States, Port of Spain, Trinidad and Tobago, 24-28 June 1996

Erhard Ruckes
Senior Fishery Industry Officer (Marketing)
FAO, Rome, Italy


Fisheries, including aquaculture, provide a vital source of food, employment, recreation, trade and economic well-being for people throughout the world, both for present and future generations and should therefore be conducted in a responsible manner. Fisheries usually represent a particularly valuable natural resource which make the need for their conservation of it an even higher priority. The Code sets out principles and international standards of behaviour for responsible practices with a view to ensuring the effective conservation and management and development of living aquatic resources, with due respect for the ecosystem and biodiversity. It also recognizes the nutritional, economic, social, environmental and cultural importance of fisheries, as well as the interests of those concerned with the fishery sector, the resource users from fishers throughout the chain to the consumers.

Having listed all these important and comprehensive aspects, the introductory paragraph of the Code encourages States and all those involved in fisheries to apply the Code and to give effect to it.


The Code consists of five introductory articles:

  1. Nature and scope of the Code
  2. Objectives of the Code
  3. Relationship with other international instruments
  4. Implementation, monitoring and updating
  5. Special requirements of developing countries

These introductory articles are followed by an article on General Principles and the Articles 7 to 12 covering the themes of:

The FAO membership adopted the Code on 31 October 1995 and although it is voluntary, we expect its provisions to be increasingly applied to world fisheries. The formulation of the Code make extensive use of legal terminology and ways of expression. This may be difficult to understand for those who do not have experience in legal matters. Therefore, FAO has started to elaborate Technical Guidelines related to the various chapters which should help users in the appropriate application of the Code.


Article 5: Special Requirements of Developing Countries

Article 5 which deals with the requirements of developing countries contains a specific reference to small island developing countries and exhorts countries, relevant international organizations and financial institutions to fully recognize the special circumstances and requirements of developing countries which are aiming to implement of the Code of Conduct. The specific requirements mentioned are in the areas of financial and technical assistance, technology transfer, training and scientific cooperation. In order to mobilize international technical cooperation in support of developing countries, FAO has prepared and submitted to donors an Interregional Programme of Assistance to Developing Countries for the Implementation of the Code of Conduct for Responsible Fisheries. This programme covers 10 specific areas of assistance (Annexes or sub-programmes) considered to be of crucial importance to developing countries:

a. Implementation of the Compliance Agreement
b. Upgrading of capabilities for reporting on fisheries statistics
c.Upgrading capabilities in monitoring, control and surveillance
d.Promotion of responsible fishing operations
e. Upgrading marine resource survey capabilities
f. Improving the provision of scientific advice for fisheries management
g. Fisheries policy, planning and management
h. Developing and implementing fishing fleet restructuring policies
i. Implementation of responsible post-harvest practices and trade
j. Umbrella support to non-governmental organizations

The total indicative budget for all sub-programmes amounts to US$ 8.7 million; however, it is too early to speculate on the reaction of donors and the likely availability of funds for project implementation in the coming years.

It may be a bit ambiguous to attempt a ranking of the General Principles and the thematic chapters of the Code of Conduct according to their importance for the fisheries of small island developing states, because concrete fishery situations are likely to differ from country to country. The general characteristics of island states, e.g., small-scale structure of the sector, importance of tourism, use of coastal areas, often restricted marketing systems and sometimes need to import fishery products, suggest that resource management, coastal area management and post-harvest practices are probable areas of particular emphasis for island countries; although fishing operations, aquaculture and fishery research are also relevant in some cases.

Article 7: Fisheries Management

Apart from 10 general provisions, this article covers management objectives highlighting the long-term sustainable use of fishery resources as the overriding criterion of conservation and management and lists several measures as examples of appropriate management, such as avoidance of excess fishing capacity, the need to take into account the interest of fishers, including those engaged in subsistence and small-scale fisheries; conservation of aquatic habitats and ecosystems and protection of endangered species; correction of adverse environmental impacts.

The framework and procedures for effective fisheries management are addressed as is data gathering and management advice. A separate chapter is devoted to the precautionary approach which should be applied widely to conservation, management and exploitation of living aquatic resources and the Code stresses that the absence of adequate scientific information should not be used as a reason for postponing or failing to take conservation and management measures. It is essential that, on the basis of the best scientific evidence available, reference points be established indicating stock specific targets and limits. Specific management measures are the subject of another chapter as are the legal arrangements required for effective implementation of fisheries management.

In the discussions on the management article of the Code, a rather intensive exchange of views regarding the relationship between management and international trade had prevailed; however, as a consensus could not be achieved, a section proposed by the delegation of Japan on the subject was not included. Many fishery products are traded in the international market place and it can be argued that the demand pull originating from these markets affects resource exploitation and, therefore, constitutes an important variable for resource management. On the whole for fisheries, demand can be seen as influencing future supplies resulting from adjustments caused by management regimes. To a certain extent, present effective demand will determine future potential supply and to this extent cause a supply/demand gap or contribute to an equilibrium. If this line of responsibility holds, it would be justifiable to involve those responsible for the (business) administration of the demand, in the administration of the management regimes as well. Or would this be asking the goat to become the gardener?

Article 10: Integration of Fisheries into Coastal Area Management

This is a relatively short article dealing with the institutional framework, policy measures, regional cooperation and implementation of integration at national level. The latter suggests that mechanisms be established for cooperation and coordination among national authorities involved in planning, development, conservation and management of coastal areas, and stresses the need to ensure that the authorities representing fisheries in the coastal management process have the appropriate technical capacities and financial resources.

Article 11: Post-harvest Practices and Trade

Responsible fish utilization is one of the main chapters of this article, claiming the consumers' right to safe, wholesome and unadulterated fish and fishery products. It refers to the work of the FAO/WHO Codex Alimentarius Commission and calls on States to promote the implementation of quality standards agreed therein. Those involved in the processing and marketing of fish and fishery products are encouraged to reduce post-harvest losses and waste, to improve the use of by-catch to the extent that this is consistent with responsible fisheries management practices and to use resources such as water and energy, in particular wood, in an environmentally sound manner. The manufacture of value-added fishery products by developing countries is advocated and States are requested to ensure that domestic and international trade in fishery products accord with sound conservation and management practices. This latter remark points towards the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). The Convention can limit, regulate and prohibit trade in these species and products therefrom if they are listed in one of the Annexes.

The debate of the FAO membership related to the remaining two chapters of Article 11 (Responsible International Trade, and Laws and Regulations relating to Fish Trade) and was strongly influenced by the intention not to create clauses which would contrast with provisions issued under the Agreements leading to the Establishment of the World Trade Organization and to make it clear that the formulation of trade rules is the prerogative of the WTO and not of FAO. The Appendix to this paper contains a brief presentation of the WTO which will be useful in appreciating the specific functions of WTO and FAO in respect of international fish trade. The Code also states that policies and practices related to the promotion of international fish trade and export production should not result in environmental degradation or adversely impact the nutritional rights and needs of people for whom fish is critical to their health and well-being and for whom other comparable sources of food are not readily available or affordable.

According to the Code, laws, regulations and administrative procedures applicable to international fish trade should be transparent, as simple as possible, comprehensible and, when appropriate, based on scientific evidence. They should be reviewed periodically and simplified without jeopardizing their effectiveness. In cases where regulations are changed, sufficient time should be allowed for preparing the implementation of the Code and consultation with affected countries would be desirable. In this connection the Code stipulates that due consideration be given to requests from developing countries for temporary derogations from obligations.


The Code of Conduct for Responsible Fisheries has been prepared and adopted in a time frame which was remarkably short for international undertakings and the thrust provided in this context by the International Conference on Responsible Fishing in Cancún (1992) and UNCED in Rio de Janeiro in the same year were probably a very supportive factor. However, the Code is not considered a final product but will continue to evolve and be updated as the global fishery situation may demand in the future. For small island developing states it will continue to be an important instrument safeguarding their position in the international arena.


A Brief Presentation of the World Trade Organization

1. The legal and economic approaches of the WTO

Economic analysis which focuses on the gains for the country itself (what should count is country A's own interest, not the consequences on its partners of the various policies country A may follow) suggests that, under conditions which are likely to be the most frequent, a country should not hesitate to adopt unilaterally a free trade policy. By doing so, the country will improve its welfare with respect to the situation with no international trade (autarky) or less trade.

The tremendous success of WTO has been due to the fact that it has been able to combine both the legal and economic aspects in a mutually acceptable way. As underlined in the comments about section 11.2.1, the basic WTO principles do not impose any constraint on the level of protection: they do not impose a free trade view. The founding fathers of the GATT-WTO were intimately convinced about the value of free trade, but they were also politicians good enough to know the power of politics of protection at home.

Without the capacity to impose free trade to countries unwilling to follow this policy by their own will, the WTO has been able to succeed only because it has been able to improve transparency1. Countries have progressively realized the costs of their own protectionist policies for their own consumers - individual consumers or industrial users. By doing so since 1947, the WTO liberal approach has favoured a steady movement towards freer trade on a multilateral basis. Tariffs on industrial goods have been reduced from 45 to 4 percent by OECD countries which have participated to the GATT-WTO process since the start. In a nutshell, the WTO is not done for "virtuous" (or lucky) governments which can follow a freer trade policy without strong opposition from domestic vested interests. Rather, the WTO is an institution which is useful for "normal" governments struggling with strong vested lobbies on the road to freer trade and which need help from their fellow governments facing the same ordeal.

The key GATT-WTO instrument for launching and sustaining this trend of "joint liberalization" has been Rounds of trade negotiations, where each government trades concessions in its import regime for foreign concessions in the foreign import regimes. The Uruguay Round, terminated in Marrakesh in 1994, has been the 8th Round, and it is the last GATT Round. The next Round, which could be (though that seems highly unlikely) launched at the next WTO Ministerial Conference, to be held in Singapore in December 1996, will be the first WTO Round.

As it can already be seen, the WTO framework consists in three components. First, it is a set of agreements dealing with a large range of topics, from agriculture to industry and services, from intellectual property rights to trade related investment measures, as well as dealing with special fields of concerns, such as anti-dumping, subsidies or safeguards. Second, it is a series of Round negotiations, leading over time to freer trade in a wider number of activities. Lastly, the WTO is an organization, with a permanent staff of around 600-700 persons, and several bodies, such as the Appellate Body.

This brief presentation of the WTO has implications for the fish sector. The most important lesson flowing from the WTO texts has already been underlined: the focus on non-discrimination is essential for political as well as economic reasons. The second lesson comes from the Round technique: it is much easier to get compromises when there is a large choice of possible trade-offs. In other words, there is an incentive to integrate, more completely than before, fish and fishery products in the general bargain of future WTO Rounds.

2. Instruments of protection: tariffs versus other instruments

Independently from the appropriate level of protection, the WTO has precise provisions about the instruments to be used for protecting domestic markets: the WTO explicitly bans quotas and non-tariff barriers (NTBs), and it imposes a protection based on tariffs.

There are two ways to look at this WTO choice among instruments of protection. The first is to say that banned instruments are harmful for the world trade because of the lack of transparency they tend to generate. For instance, quotas are not generally available in the tariff schedule: they are published in separate publications, hard to find or available only on short notice (in newspapers). More importantly, quotas give fewer clues to foreign producers whether they could be successful exporters to the quota-imposing country than tariffs. In case of tariffs, foreign producers can roughly estimate the prices they could charge in the foreign markets (since they know their production costs and the tariffs to be applied) and they can compare these prices to the domestic prices in the importing country in order to know whether they will be successful or not. In case of quotas, other considerations have to be taken into account: what are the paper work to be done, what are the ultimate consequences of the quota system on the way to do business (are quotas non-exchangeable or not, do they impose the obligation to keep increased stocks in the importing country or not, do they require to have local correspondents or not, what happens if the demand of the import-competing country declines, etc.)? All these considerations generate costs which, by definition, are very difficult to be assessed in a predictable way by foreign firms, putting these firms under heavy stress.

The second, and indeed more useful, way to look at quotas is from the importing country perspective. By imposing a quota, the importing country imposes a protection without getting the revenue it could get if it would have used a tariff as an instrument of protection. Instead of tariff revenues, they are rents flowing from the fact that quotas create a price wedge between the lowest (world) prices and highest (domestic) prices in the country importing the goods under quantitative restrictions. Operators involved in the day-by-day quota enforcement procedures are the ones who are likely to get most of the rents generated. The existence of these rents creates endless problems. If those who get the rents are nationals of the importing country, these problems flow from the mere fact that quota permits become valuable, hence a source of collusion and/or corruption between operators and public authorities. But those who get the rents can also be foreign operators. Indeed, that is often the case when quotas take the form of NTBs called "voluntary export restraints" (VERs) which are agreed between the exporting and importing countries. In this last case, quota rents constitute a financial drain from the importing country to the exporting countries implementing VERs.

These basic points help to understand the reasons for which the GATT-WTO has banned quotas. More reasons could be mentioned. First, tariffs have the feature to keep some relations between domestic and world prices. For instance, if world prices decline, tariff will transmit this decline, allowing protected producers to realize that foreign producers are more efficient. That is not true in the case of quotas: domestic prices will stay constant, despite the increased efficiency of foreign firms - meaning that domestic firms will become less and less efficient (with respect to foreign firms). Second, declining demands - a context which may be important in the case of fish - could make quotas more harmful to domestic firms than tariffs.

Despite the GATT-WTO legal ban on quotas (and the economic good sense behind these rules), importing countries have continued to impose them under the form of VERs. As said above, VERs are fundamentally equivalent to quotas - if one leaves aside who implements the restrictions and who gets the rents. Why have importing countries shifted to VERs? Part of the answer is the WTO ban: as nobody complains against a VER (the importing country because of the protection, the exporting country because of the rents), the GATT-WTO process of dispute settlement cannot work. But, the biggest part of the answer is the fact that VERs are even less transparent than quotas (because they are created by obscure agreements, implemented in a non-transparent way). Moreover, they leave the impression that the foreign country has bowed to pressures of the importing country (indeed, rents associated to VERs can be seen as a "price" paid by the importing country to the exporting country). As said in the above notes, the Uruguay Round has launched a major effort to remove all the non-tariff barriers. As of today, it is too early to assess how successful this effort has been.

3. The 1994 SPS and TBT Agreements

The 1994 SPS (Sanitary and Phytosanitary Measures) Agreement is the first of its type. GATT Article XX mentions that trade flows could remain subject to health and safety measures the country feels necessary to take. The obvious problem is that such measures can be disguised protectionist measures which can nullify or impair concessions granted by the concerned country. A way to avoid this problem is to create international standards. Leaving aside the difficulty of such a task, it remains quite possible that a country may feel necessary to impose stricter standards than international norms (I use standards and norms as synonymous in this paragraph). The SPS agreement addresses this last case, by providing a few guidelines for health related measures, the main guideline being that stricter rules should be based on "scientifically based evidence." But, the SPS does not deal with measures based on other considerations, such as consumer interests, animal welfare or environmental issues.

The 1994 TBT (Technical Barriers to Trade) Agreement is the second of its type (a first agreement was available after the Tokyo Round). This agreement applies to all products, hence it includes fish and fishery products (but the agreement does not apply to the specific issues raised by government procurement and SPS). Technical barriers to trade can be related to mandatory technical regulations, defined as a document which lays down product characteristics or their related processes and production methods, including applicable administrative provisions, with which compliance is mandatory. They can also be related to terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method. Moreover, the TBT agreement covers non-mandatory technical regulations, i.e., standards approved by a "recognized" body. Enforcement problems are likely to be concentrated in mandatory technical regulations since they are the only ones (because of their mandatory component) to permit to exclude a foreign product from the market involved (non-compliance to non-mandatory standards may be costly, but it is not necessarily so, and/or not necessarily in a substantial way). TBT problems often rise in the implementation procedures, and particularly, in the "conformity assessment" procedures. The TBT agreement aims at solving all these issues by three types of provisions. First, it lays down detailed rules and procedures as to the adoption and application of technical regulations. When doing so, it insists on the fact that foreign goods should be granted a "treatment no less favourable" than that accorded to like products from the importing country (or from any other foreign country). Second, the TBT agreement contains detailed provisions about the "conformity assessment" conditions in order to ensure expeditious and non-discriminatory enforcement. Third, the TBT agreement contains provisions aiming at developing "mutual recognition" of conformity assessment by countries.

This last approach of "mutual recognition agreements" (MRAs) is certainly the most promising solution in the long run, as shown by the European Community experience. In the EC, full harmonization of existing rules and standards has rapidly proven to be impossible, in agriculture as well as in services (indeed, anti-European feelings have been fuelled by the fear of so-called "European" rules on cheese or other foodstuffs). By contrast, a core harmonization, limited to the most essential aspects of the concerned problem, combined with the mutual recognition of the other less crucial provisions, has proved to be the right approach. The TBT agreement has opened this way, but under a weak condition: it promotes MRAs "whenever possible." A new momentum on this aspect could be given only when a few MRAs will have been signed and implemented, showing their benefits to all signatories. It should be examined whether fish and fishery products could not be a good ground for testing the MRA approach.

Annex: The Leutwiller Report
(Executive Summary)

1. In each country, the making of trade policy should be brought into the open. The costs and benefits of trade policy actions, existing and prospective, should be analyzed through a "protection balance sheet". Private and public companies should be required to reveal in their financial statements any subsidies received. Public support for open trade policies should be fostered. (Pages 35-37)

2. Agricultural trade should be based on clearer and fairer rules, with no special treatment for particular countries or commodities. Efficient agricultural producers should be given the maximum opportunity to compete. (Page 37)

3. A timetable and procedures should be established to bring into conformity with GATT rules voluntary export restraints, orderly marketing agreements, discriminatory import restrictions, and other trade policy measures of both developed and developing countries which are inconsistent with the obligations of contracting parties under the GATT. (Page 38)

4. Trade in textiles and clothing should be fully subject to the ordinary rules of the GATT. (Page 39)

5. Rules on subsidies need to be revised, clarified and made more effective. When subsidies are permitted they should be granted only after full and detailed scrutiny. (Pages 39-40)

6. The GATT "codes" governing non-tariff distortions of trade should be improved and vigorously applied to make trade more open and fair. (Pages 40-41)

7. The rules permitting customs unions and free-trade areas have been distorted and abused. To prevent further erosion of the multilateral trading system, they need to be clarified and tightened up. (Page 41)

8. At the international level, trade policy and the functioning of the trading system should be made more open. Countries should be subject to regular oversight or surveillance of their policies and actions, about which the GATT Secretariat should collect and publish information. (Pages 41-42)

9. When emergency "safeguard" protection for particular industries is needed, it should be provided only in accordance with the rules - it should not discriminate between different suppliers, should be time-limited, should be linked to adjustment assistance, and should be subject to continuing surveillance. (Pages 42-44)

10. Developing countries receive special treatment in the GATT rules. But such special treatment is of limited value. Far greater emphasis should be placed on permitting and encouraging developing countries to take advantage of their competitive strengths, and on integrating them more fully into the trading system, with all the appropriate rights and responsibilities that this entails. (Pages 44-45)

11. Governments should be ready to examine ways and means of expanding trade in services, and to explore whether multilateral rules can appropriately be devised for this sector. (Pages 45-46)

12. In support of improved and strengthened rules, GATT's dispute settlement procedures should be reinforced by building up a permanent roster of non-governmental experts to examine disputes, and by improving the implementation of panel recommendations. Third parties should use their rights to complain when bilateral agreements break the rules. (Pages 46-47)

13. We support the launching of a new round of GATT negotiations, provided they are directed toward the primary goal of strengthening the multilateral trading system and further opening world markets. (Page 47)

14. To ensure continuous high-level attention to problems in international trade policy, and to encourage prompt negotiation of solutions to them, a permanent Ministerial-level body should be established in GATT. (Page 48)

15. The health and even the maintenance of the trading system, and the stability of the financial system, are linked to a satisfactory resolution of the world debt problem, adequate flows of development finance, better international coordination of macroeconomic policies, and greater consistency between trade and financial policies. (Pages 49-50)

1 The WTO is a more "democratic" body than the UN, in the sense that there are no "major" powers enjoying special rights in a Security Council.