Present knowledge of the nature and magnitude of the impact of subsidies on resources
41. A review of the literature reveals several attempts to categorise the wide diversity of subsidies currently in existence. Amongst these, the OECD[8] study of government financial transfers lists numerous subsidies by country and the expenditure involved. Similarly, Price Waterhouse Coopers performed a subsidy study for APEC[9] which also listed subsidies by country together with expenditures. However, few studies have attempted to link the value of subsidies quantitatively to the effect on fish stocks. This shortcoming remains a matter of concern that would need to be addressed in future research.
42. In its deliberations, the experts agreed that subsidies do not inevitably contribute to resource depletion. Neither are they inherently good or bad. The effects of subsidies on the sustainability of resources are created by induced changes in costs or revenues. Costs may include the costs of variable inputs, the costs of investment in new technology or in additional productive capacity.
43. The effects of subsidies will depend on the extent to which fishing effort is controlled. One would expect no increase in effort and therefore in catch in the case of a fishery managed in such a way that effort or output is perfectly constrained. In the case of output constraint, for example, there will be implications for the economics of the fishery, but not, by definition, for the resource. If there were perfect control of effort, then the effect of a subsidy on sustainability through increases in capital and labour or efficiency would be matched by a compensatory reduction in effort.
44. Various categories of subsidies were analysed. Each subsidy category was considered only for situations of fully developed or overexploited fisheries under imperfect controls of effort and not for underutilized fish stocks or for cases where effort is perfectly constrained.
45. There was a consensus that under many, if not most, real-world fishery management regimes, fishery subsidies tend to lead to increased fishing effort. Although economic theory, and modelling studies, predict this quite firmly, direct empirical evidence is hard to find. While we can therefore anticipate the direction of any impact can be anticipated with some confidence, one cannot, with the existing state of knowledge, estimate the relative magnitude of the effects in any given situation.
46. Nevertheless, the direction of impact of some subsidies on sustainability is impossible, in the abstract, to determine. As an example, vessel decommissioning programs will generally have a positive effect on sustainability. However, if the buy back program has no restrictions on the use to which the buy backs funds can be put, then the money may be reinvested in the fishery. Fishing capacity may therefore be increased and the purpose of the decommissioning exercise defeated. Without detailed description of such programs, the direction of impact is impossible to determine.
47. The experts suggest that, subject to available data, there are three approaches for estimating the impact of a subsidy on the sustainability of a fish stock.
48. The first two approaches have similar data requirements. Estimating corresponding parameters and functional relationships requires extensive time series, cross section or pooled data. The third approach aiming at providing basic guidance and preliminary qualitative assessments of subsidy impacts, in turn, require only information for understanding the functioning and structure of the determining variables.
49. In terms of required resources for the approaches/methods referred above, they vary according to both the specific needs and practical use of the resulting analysis. The first two categories provide quantitative results and more information than qualitative models which could be focused on simple but fundamental categories explaining global trends and cause-effect relationships of subsidies on sustainability.
50. In addition, although three different economic approaches to the measurement and estimation of impacts were discussed, the experts felt that further study would be necessary to more closely reflect real world situations. In particular, this would entail comparison of the differential impacts obtained with the dynamic bioeconomic models, (1) under a combination of different fisheries management measures, (input, output, and technical measures), and (2) under different institutional management regimes (at local, national and international levels).
51. The modelling and analysis of subsidy impacts on resources should, of course, incorporate the uncertainties inherent in the study of marine fisheries.
52. Crucial to the analysis of subsidies is the ability to trace their effects first, to changes in costs and revenues and therefore in profits. Second, to trace the effects of changes in profits to changes in effort, and third, to trace the effects of changes in effort on the state of the stock, as measured by changes in biomass.
53. Methods for measuring the impact of subsidies on sustainability may differ among regions or types of fisheries (e.g. artisanal, inshore and offshore fisheries) and may depend on the fisheries context and the availability of data.
54. To derive a suitable measure or set of measures with which to assess the value of various subsidies would require some further research. The experts nevertheless considered that a feasible method might involve estimating the effective percentage reduction in investment or input costs or the effective increase in output prices that the subsidy achieved. In some cases such a measure might be relatively easy to estimate, for example in the case of capital grants, while in other cases it might be more difficult, in the case of government R&D programmes for example. Such a relative measure would facilitate the comparison of different subsidies and of subsidies in different fisheries and countries.
55. The experts compiled a list of subsidies with dual categories. The major breakdowns relate to the effects of the subsidies on costs and revenues. These classifications show whether the subsidy is cost reducing, cost increasing, revenue enhancing or has an undetermined effect. Within these classifications are functional sub-categories organised according to the logical role played by the subsidy in the fisheries economy. These sub-classifications are generally homogeneous, in that the specific subsidies in a subclass usually have similar economic effects, including their effects on fish populations.
56. Those subsidies which are expected to have a negative effect on fish stock sustainability were ranked according to their anticipated potential negative effect. Priority 1 indicates that the group believes that these subsidies have the greatest negative effect on sustainability and should be subject to further analysis and consideration by decision-makers (see Table 2).
57. Each of the subsidy classifications assigned priority 1 are included in Set 2 subsidies.
58. Future studies should also explore the potential effect of subsidies on:
59. Such studies should, where possible, compare differential impacts obtained with dynamic bioeconomic models under combinations of different fisheries management measures and under different institutional management regimes.
Table 2. Subsidies and their effect on sustainability of fishery resources
| Classification of Subsidies |
Category of Subsidy |
Effect on Sustainability |
Priority for Analysis |
| COST REDUCTION |
| |
|
| Capital
Expansion | Grants to purchase
new or old vessels, or to modernise vessels. Grants to establish international
joint ventures. Matching contributions for private sector investment. Non-fishing
specific infrastructure programmes |
Negative | 1 |
| Labour Cost Reduction |
Income support, unemployment insurance and income guarantee payments. Government
funded health programmes specific to fisheries. Disaster relief payments to fishermen.
Grants to small fisheries and direct aid to participants in specific fisheries.
Vacation support programmes | Negative |
2 |
|
Miscellaneous Cost Reductions |
Payments to foreign governments to secure access to fishing grounds. Fishing-specific
infrastructure. Payment to reduce accounting costs. Transport subsidies. Provision
of bait services. Grants for safety equipment. Gear development. |
Negative | 2 |
| Tax Waivers and Deferrals |
Fuel tax exemptions for vessel fuel. Sales tax exemptions. Special income tax
deductions for fishermen. Tax exemptions for deep-sea fisheries. Deferred tax
programmes. Investment tax credits |
Negative | 1 |
| Loans and Insurance |
Loans made on favourable terms (interest rate and amortisation periods. Government
guarantees of bank loans. Fishermen's insurance programmes or subsidised insurance.
Small business loans. | Negative |
2 |
|
Market Interventions | Reduced
charges by government agencies. Sales of commodities to fishermen at less than
market price | Negative |
2 |
|
Science and Fisheries Management |
Hatchery and fish habitat programmes. Free or below market price resource access.
Unrecovered costs of fisheries management. Technology transfer. Government funded
research and development. Information collection, analysis and dissemination.
Exploratory fishing and gear development. Fisheries enhancement including support
for artificial reefs. Research on deep-sea fisheries. Enhancement of the fisheries
community environment | Positive |
|
| REVENUE
ENHANCEMENT | |
| |
| Price Support |
Price support payments to fishermen |
Negative | 1 |
| Compensation Programmes |
Compensation for closed or reduced season. Compensation for damage to fish
stocks. Gear conflict compensation programmes. General disaster and relief |
Negative | 2 |
| Equity Infusions by
Governments | |
Negative | 2 |
| Sales Promotion |
Market promotion programmes. Promotion and development of fisheries |
Negative | 3 |
| Foreign Affairs |
Tariff and tariff quotas. Import quotas. Landing bans. Prohibitions on foreign
direct investment | Negative |
3 |
|
COST INCREASING | |
Positive | |
| Regulations |
Input and output regulations. Gear, technology and vessel limitations. Environmental
regulations. Protection of marine areas. Labour legislation |
| |
| UNSPECIFIED |
| |
|
| Factor
Reductions | Vessel decommissioning
payments. License, permit and quota buy-outs and retirement grants. Grants for
temporarily withdrawing fishing vessels |
Positive | |
| Science and Fisheries Management |
Support for community-based management. Support for regional development bodies.
Support for producers organisations |
| |
| International Fisheries Cooperation |
| |
|
| Adjustment
Programmes | Retraining fishermen
for other industries. Regional development programmes |
Positive | |
| General Programmes that affect fisheries |
Subsidy programmes for other industries which affect fisheries. Social programmes
(national health systems, public education) |
| |
| Market Intervention |
Exchange rate regimes | |
|
