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Although management of fisheries resources by limiting catches through the imposition of catch quotas has a long history (and is often incorporated into traditional fishing practices), the theoretical basis for such quota management as an integrated management system has, surprisingly, not received much attention. In fisheries where quota management is the policy tool of choice, the basis for such quota management has usually been approached in a piecemeal fashion with traditional stock assessment techniques being used to assess the status of the stocks and to advise on ‘appropriate’ quotas or Total Allowable Catches (TACs). The determination of what is an ‘appropriate’ TAC is usually underpinned by a desire to ensure long-term sustainability of the particular fish resource but, beyond that, there has usually been no explicit consideration (apart from socio-political objectives) as to the impacts of various TAC levels (or the way in which the TAC is allocated) on overall economic performance of the industry, financial impacts on individual operators, etc. In some instances, although such occasions are still the exception rather than common practice, economic and financial information is assessed in determining TACs but the integration of these data and the biological processes which determines the productivity of an exploited fish stock is usually not considered.

Catch quota, or TAC, management where the catch quota is not individually assigned to operators in the fisheries has not had an impressive track record in either resource conservation or in economic optimization of fisheries. Of the 22 fisheries managed by catch quotas and monitored by the Organization for Economic Cooperation and Development (OECD), only 6 fisheries were maintained at steady catch levels, while 16 experienced declines or collapses at some point while under TAC management (OECD 1996) (Management by TACs has also had a poor record schemes in the countries of the European Union (Corten, 1996). TACs used alone were not able to prevent the collapses of herring stocks in British Columbia, Iceland or Europe.

Even when TAC management is supplemented with other regulations, including limited entry, the record in stock conservation or economic optimisation is not good. Of the OECD group of 22 fisheries managed by TACs, 11 were also subject to limited entry restrictions as well as additional restrictions on inputs in some of them. Three of the six fisheries which were maintained at steady levels were managed by combinations of TACs and limited entry while eight of the 16 fisheries which experienced declines were also managed by such combinations. The reason for this poor performance may be found in the prime characteristic of global TAC managed fisheries that such a management system provides strong incentives for increased competition between participants - the fishermen. This heightened competition is manifested in the development of a ‘race-to-fish’ approach where each individual operator seeks to maximize his efficiency to take as much of the available TAC as possible. In all of the quota managed fisheries monitored by OECD (OECD 1996) there was also strong evidence for this expected ‘race-to-fish’ as TAC management heightened the competition between individual operators. This resulted, in all fisheries, in increasing often already excess capacity and shortened fishing seasons. The race-to-fish also resulted in reduced profitability, increased costs and capital stuffing1 in all the monitored fisheries.

1 Capital stuffing is a term often used for situations of over-capitalization where fishermen have increased the fishing power of their vessels by investing in larger engines and other enhancing changes.
Management by catch quotas where these catch quotas are not assigned to individual operators (i.e. are not ‘individual’ quotas) therefore suffer significantly from inherent incentives which produce excess capacity, poor stock conservation and reduced profitability. These disadvantages have been well documented both from a theoretical point of view and from practical experience in a number of countries (OECD 1996; Corten 1996) with the result that simple quota management of fisheries by ‘global’ TACs is no longer a favoured approach to fisheries management.

However, more recent developments in quota management of fisheries, such as the introduction in countries such as New Zealand, Australia, Canada, the Netherlands and the United States of America of Individual Transferable Quotas (ITQs) have focused increasing and renewed attention on quota management and the way in which catch quotas may be determined, allocated and traded. In the short time that they have been implemented, individual quotas have generally been highly successful in reducing capacity, generating economic rent, improving quality and achieving increased profitability. Of the fisheries managed by individual quotas in the OECD countries (OECD 1996) and for which data were available, 22 fisheries provide evidence of economic rents being generated through positive quota values and none indicated the contrary. In addition, 23 of 24 fisheries managed under transferable quotas experienced increased profitability and reduced fleet capacity, while quality improvements were documented in all 13 fisheries for which data was available. The limited negative experiences with individual quota management related mainly to the initial allocation of quota.

This paper is the first in a series which will examine in detail the theoretical bases of individual quota management in fisheries as an integrated management system in which the relationships between biological, economic, financial and operational processes are explicitly considered. This involves a consideration of not only the broader implications of setting TAC but also, inter alia, the methodology and implications (biological, economic, operational and financial) by which the TAC is initially allocated to participants in a fishery, the mechanisms for ensuring continuing economic efficiency in the quota transfer process, quota administration, data requirements for individual quota management, compliance and monitoring issues including cost minimization, by-catch reduction mechanisms, etc. By approaching individual quota management in this integrated way, the series will provide direction for management of fisheries by individual quotas which address the entire management process (not just the biological processes) and will also be able to shed light on the causes of failure, in some areas, of past quota management schemes.

This paper addresses the important aspects of determining and initially allocating individual catch quotas (IQs) which are the essential precursors of any ITQ management arrangement. Details of the mechanisms for optimizing transferability and quota trading, reducing transaction costs, and compliance, monitoring and administrative issues, etc., will be the subject of subsequent papers.

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