by
Fernand J. Doucet
Toledo
Ontario, Canada
1. INTRODUCTION
Recognition of the common property nature of fish resources is probably as old as the history of fishing itself, although the elaboration of the common-property resource concept and its built-in shelf destructive elements is more recent. Similarly, allocating access to a piece of common property to an individual or a community was an accepted practice many centuries ago with respect to common land. It is at least one hundred years old with respect to certain fishing rights. One reads about fishermen on the east coast of Canada being given rights to certain “berths” for setting sardine weirs and on the coast of newfoundland for cod traps. Although there were no legislative limits to the number of such “berths”, there were natural limits and, while some such rights were for one season and allocated by lottery, many were in perpetuity and deeded from father to son.
What distinguishes the more recent discussions of the common-property nature of fishery resources from earlier concerns is the conclusion that open access to such resources leads to excessive investment, reducing average returns, and to the depletion, if not the eventual destruction, of the resource. Some fishery managers on Canada's Pacific Coast recommended the granting of quasi-proprietary rights over certain salmon berths early in this century. It was not until the second part of the century, however, that the destructive nature of open access to a common-property resource was formalized in the economic literature.
Most fishing countries accept the need for restricting access and do so by requiring all participants to obtain licences. Although many fisheries are open to all who wish to pay the (generally modest) licence fees, limited entry is becoming more and more common every year. Restricting the number of licences is reasonably effective in small-boat artisanal-type fisheries, where all units are standard and participants are not able to replace their fishing boats with larger and more powerful vessels. In most fisheries, however, limiting the number of licences does not necessarily control the amount of the resource that the licensed participants are able to harvest.
As one participant tries to increase his share by investing in more powerful catching gear, others follow with predictable results. To deal with this problem, fisheries management authorities have placed restrictions on the amount and type of gear, the size and fishing power of the vessels, on mesh sizes, on seasons, on annual quotas by species and fishing zones, on the volume of the catch by vessel trip, by week and by month. More recently, fisheries authorities have allocated an amount of fish to a fishing enterprise in the form of a quota which the enterprise can fish as if it had title to it.
The purpose of this paper is to discuss the concept and practice of controlling fishing effort by creating quasi-proprietary rights for fishing enterprises in the form of individual catch quotas. For purposes of this paper, a “fisherman” is a fishing enterprise. The owner of the enterprise may be an individual fisherman who owns his fishing vessel, a person who owns a vessel but does not fish, or a corporate entity which might be a public or private company or a cooperative that owns one or more vessels. The enterprise could, of course, also be owned by a partnership or a consortium.
2. CONTROLLING FISHING EFFORT
The principal reason for controlling fishing effort on any fish stock is to control the catch per unit effort which in large measure determines the returns the fishing vessel can obtain from exploiting the stock. There are different methods of controlling fishing effort which can be divided into two categories: those that control inputs and those that control the output. The first category would include at least the following: restrictions on the size and power of the vessel; the amount and type of fishing gear; the kind of technology to be used; and the number of days a vessel is permitted to fish. The second category would include the following: an allocation of fish to each enterprise in the form of an annual quota; a limit of so much fish per fishing trip or per week or per month; and a limit on the number of trips per selected time periods. Both categories place limits on the number of units licensed to participate in the fishery.
2.1 Controlling inputs
Until now the methods of controlling fishing effort have been from the first category. For those fisheries where bottom or pelagic trawls are used, the emphasis has been on restricting the number of fishing vessels, their size and/or fishing power. For some fisheries this works well enough, provided that the authorized harvesting levels or total allowable catches (TACs) are set at a conservative level. This method of controlling fishing effort is considered by many to be the easiest to implement and to police. In practice, however, there are difficulties.
The estimated increase in catching capacity resulting from technological improvements alone has been estimated at about 10 percent per year for the Canadian wet-fish (ice trawler) trawler fleet. Replacement vessels, even with the same horse power and of the same dimensions, can catch at least 50 percent more fish than the replaced vessels.
In Canada, where only the length of the vessel was limited, new vessels can catch more than twice the amount of fish that the retired vessels of the same size could catch.
The most serious drawback in controlling fishing effort by restricting vessel fishing power is that it does not reduce the incentive to over-invest but rather the opposite. There are few species or stocks that do not have seasonal fluctuations in their abundance and this leads to fiercely competitive effort by each fleet to obtain its share in the shortest possible time. In theory, this would appear to be the sensible thing to do: fish when catches are rates are at their highest. In practice, however, the results may be less satisfactory. Very high catch rates make it difficult for the crew to handle the fish properly so that generally poorer quality fish is landed. In Canada, where the trawler fleet is owned by the processing companies, larger volumes and poorer quality create inventory financing problems because of the inability of the market to absorb the product quickly enough. Poorer quality and high inventory costs thus tend to offset the gains from the higher catch rates. The Canadian experience with large trawlers in the northern cod fishery in 1980 and 1981 is a perfect example of the results of this type of competitive fishing.
Another disadvantage of controlling fishing effort by controlling fishing power is that it tends to encourage fixation on quantity, to the detriment of fish quality. Although the problem is less serious for freezer than for wet-fish trawlers, the tendency is there just the same. This tendency, in Canada at least, is strengthened by crew-share arrangements where the share is calculated in part on the basis of price per pound of fish landed.
Another serious disadvantage of controlling fishing effort by limiting fishing power is the restriction that competitive fishing places on the investment and operational decisions of the vessel owner. He cannot purchase the most efficient vessel but rather the vessel that will get him the largest share. Nor can he decide when to fish a particular stock because if he does not fish when the others are fishing he will not get his share.
In some fisheries, such as those for herring or mackerel, where seining is used, it is the size of the seine and the carrying capacity of the vessels that determine the fishing power of the enterprise. Similarly, in lobster and crab fishing, it is the number of traps that is the important factor.
Controlling fishing inputs to control fishing effort has been the principal method used in most fisheries in the majority of fishing countries. Generally speaking, the method has been successful in preventing the depletion of fish stocks, when used in conjunction with annual TACs. It has failed to reduce the incentive to over-invest and it has tended to increase the competitive race to harvest the available resource.
2.2 Controlling the output
In spite of the obvious failure of the attempts to control fishing effort by restricting inputs, fishermen are generally reluctant to consider restricting their output as an alternative. In part this is because of the competitive nature of the hunt for wild fish stocks where each hunter considers himself either smarter or luckier (or both) than his competitor. Furthermore, as the volume of his catch is more visible than its value, the more fish he lands the more successful he is considered to be by his peers. Hence, placing an upper limit on his catch in the form of a “quota” is not psychologically very attractive to him unless he happens to be at the lower end of the volume scale.
Attempting to control fishing effort by restricting the output of each fishing enterprise is of much more recent origin as a tool of fisheries management. Although the principle of enterprise quotas is well understood by most people associated with the fishing industry, its practice is much less so. This is not surprising, as few people have had direct experience in its application. Moreover, the few fisheries where individual enterprise quotas have been established have not involved large numbers of enterprises. They have generally been established, as a result of some crisis or other, under difficult time and resource constraints. In many cases, the fishery concerned was not the only or indeed the principal fishery of the enterprise. Where it was the principal fishery, the fleet was generally much in excess of the capacity required to harvest the resource, and the resource itself inadequate to provide for viable operations. It is difficult, if not impossible, under such circumstances to ensure that the enterprise quotas are established in a way that will ensure their success.
The advantages of enterprise quotas as a mechanism for controlling fishing effort are that: (a) they remove or greatly reduce the incentive to over-invest; (b) they eliminate the need to compete for a larlger share of the resource; (c) they help to avoid gluts by making it easier for fishermen to fish to market requirements; and (d) by de-emphasizing volume, help to remove some obstacles to landing better quality fish.
There are, however, certain disadvantages: cheating on volume landed is easier and more attractive; policing is more difficult; the system is not practical for small-boat fisheries where the number is very large; the catch is landed at many ports and the vessels fish several species in the course of one season; and finally it can only be implemented successfully with the acceptance and full cooperation of the fishermen involved. The latter stipulation makes it particularly difficult to apply in areas where the fishermen are not organized in some formal association, union or cooperative.
3. THE IMPERATIVES OF ENTERPRISE QUOTAS
Enterprise quotas, like any other management tool, must be considered within the context of the whole structure of the industry and the fishery management system. Some of the imperatives of enterprise quotas are the same as for any other mechanism for controlling fishing effort; others are specific to the enterprise quota system. Among the more important imperatives for controlling fishing effort under any system are the following:
A knowledge of the resource sufficient to permit the establishment of an annual TAC at a biologically safe level
Sufficient knowledge to establish an economic harvesting level
A control and surveillance capability sufficient to ensure that whatever harvesting level is authorized will be respected
Adequate research and administrative resources to ensure continuing of required knowledge
A competent and timely data base for all these purposes
In addition to the above, there are other imperatives that are specific to an individual enterprise quota system. Among the more important such imperatives are:
Good historical data on the catch and on the costs and earnings of the existing fishing vessels, including their replacement costs
A system for the establishment of the size of the individual quotas that is seen to be fair
A long-term commitment to the system by the management authority, to provide some sense of permanency for enterprise owners so that they may make realistic investment decisions
A practical method for trading quotas or parts of quotas, sufficiently well enunciated so that the participants understand its application and operation
Acceptance of the system by the owners of the enterprise after proper consultations
Formal group organization of the enterprises involved if these numbers are more than a dozen
A set of guidelines that will protect the interest of the founder group and specify clearly the conditions for admitting new entrants
Some central form of catch-marketing: either by an auction, a cooperative or a State-controlled marketing agency; and, last but not least
A better than average local fisheries manager who is committed to making the system work and enjoys the confidence of the fishermen and the support of senior management
I think it will be obvious from the above list of imperatives - and likely I have missed some - why individual enterprise quotas have not been more popular, given the benefits that a properly constructed system could yield not only to the enterprise owners but to the State as well.
4. THE CANADIAN EXPERIENCE
Enterprise quotas as a tool of fisheries management have been in existence in Canada for more than a decade. Lake Winnipeg fishermen have had quotas for the main species fished since 1972 and the vessels participating in the seal hunt off Newfoundland were also placed on quotas about the same time. There are at least nine fisheries now operating under an individual enterprise - quota system on both coasts and at least one large lake.
The most recent enterprise-quota system was established in the largest Canadian offshore fishery: the Atlantic wet-fish trawler fishery for groundfish. The fleet comprises nearly 150 vessels, 100 ft in length (LOA), catching over 400,000 tons of fish in 1981 and employing over 2,500 fishermen. About 80 percent of the vessels are owned by four vertically integrated fish-processing companies; the remaining vessels are owned by smaller processing companies and individuals.
The enterprise-quota system for that fleet was developed in 1981 and established on a trial basis in 1982. The experiment is being extended into 1983 at the request of the participants. Consultations with the principal fleet owners began in January and did not conclude until the end of December when all participants had agreed to try enterprise quotas on an experimental basis for one year. During 1981, several studies were undertaken by the Government and the fishing companies. The studies included the construction of a simulated computer model of the fleet. This was required to demonstrate more accurately than was done before that the current fleet had considerable excess capacity, given the resources that the government was prepared to allocate to this fleet. During the consultations with fleet owners, it was agreed that the quota system, if established, would include a provision for trading quantities of fish within the quotas.
This was the first time in Canada that nearly all the imperatives listed in Section 3 above were fulfilled. It could be argued that the first imperative, which demands a long-term commitment, was hot honoured. This, however, was at the request of the participants; the government was prepared to make the long-term commitment. It is also true that there is no central marketing, because the fleet is so largely owned by vertically integrated companies. Normally this would increase the amount of cheating and make policing very difficult. In the case of the larger trawler fleet, this is less serious because the vessels land their catch at major processing plants where fisheries inspectors are located, making the policing of the quotas much easier.
As to its success, it is too early to judge. It is interesting to note that, for the first time, the fleet owners chose not to catch the entire northern cod quota during the winter but to retain a portion which was fished in the following November and December because it made more economic sense to do so. The fleet caught more fish than in the previous year even though some vessels were tied up. It will obviously take several years to establish the success or failure of the system, although some observers are ready to write it off because it did not yield all the anticipated long-term benefits in the first year!
In spite of the fact that none of the other individual enterprise-quota schemes met all or most of the imperatives, they all represent an improvement over previous management systems and none has been abandoned. None of the quota arrangements contained provisions for trading quotas: an element which is central to the long-term success of the system. Only two included central marketing and one of these only for four years. The cheating problem in the latter case began when central marketing crumbled. Nevertheless, this particular scheme, which involved the Bay of Fundy purse-seining herring fishery, is still functioning. In a recent conversation by the author with a senior captain of that fleet, it became obvious that, with some encouragement from the management authority, central marketing could be restored and quota trading introduced into the management system. In a separate paper, prepared in 1981, I have described the Bay of Fundy quota system and how it operated from 1976 to 1980.
5. CONCLUSIONS
The individual enterprise-quota system is better understood in theory than in practice. As one fisherman on the Pacific Coast put it: “It is better for economists than for the fishermen”. For some fisheries he is correct, while for others he is wrong. In some respects it appears complex, difficult to establish and even more difficult to police. Yet, if properly constructed, accepted by the fishermen and adequately supported by the management authority, it can be an ideal system requiring the minimum of regulations and being self-policing. To achieve this, however, the imperatives listed in Section 3 above must be fulfilled.
Individual enterprise quotas represent one approach to the control of fishing effort and the removal of the incentive to over-invest. It is not the only one and not necessarily the best one for all fisheries. It requires a very sophisticated fishery-management establishment and well organized, intelligent and well educated fishermen if it is to succeed. As the system has been in operation on such a limited basis and for such a short time, there is much to be learned before it will be as widely accepted as some other systems. It is only then that we can begin to judge its merits.
