8. The Consultation decided to conduct the discussion according to the suggestions provided in document: “Guide for discussing of the draft Guide for identifying, assessing and reporting on subsidies in the fisheries sector” (FI:ECFS/2002/3). The Guide is reproduced in Appendix E.
9. Ms Lena Westlund, principal author of the Guide, at the invitation of the Chair, made a presentation of issues that emerged in the course of developing the Guide. This was followed by a general discussion of the context and purpose of the Guide. The following paragraphs summarize the observations made and conclusions reached in the course of these discussions.
10. Subsidies are not studied in a vacuum. It is important that the data and information that is collected about subsidies be selected so that it becomes useful not only for fulfilling the analysis specified in the guide but also so that it is amenable for use in studies aiming to assess and evaluate the impact of subsidies on sustainability, economic development and trade. This has implications also for the way information is presented
11. However, at the same time the Consultation recognized the fact that the Guide is not normative in respect of subsidies. While it provides guidance for assessing the costs to the provider and the benefits to the receiver, it provides no methodologies for evaluating whether subsidies have impacts on social, economic, environmental, trade or other characteristics of the economies in which they are used. Information generated by using the Guide would need to be further evaluated - and complemented by other types of information - before judgements about impact can be made.
12. The Guide provides a framework for how to define subsidies but leaves the user free to select which government policies to consider as subsidies and which not to consider as subsidies. There was a wide consensus amongst the experts that this is not a constructive approach. Two remedies were suggested. First, it was suggested that the Guide should also make clear to its users what, from the point of view of economic theory, could or ought to be considered as a subsidy and to facilitate international comparisons. Second, the Guide should also provide information as to what should be considered as a subsidy to the fisheries sector, given international practice. It was recognized that international practice is influenced by institutional arrangements as well as by public sector resource availability and that any international comparisons must recognize such differences.
13. The Consultation also considered the question of international comparisons of the magnitude of subsidies and their assessment. It recognized that both in respect of criteria for identifying subsidies, as well as for benchmarks, to assess their values, more work needs to be done. Possibly the task will be easier in respect of agreeing to criteria for identifying subsidies than to agree on benchmarks for their assessments.
14. The Consultation reviewed the concepts of ‘positive versus negative’ and ‘good versus bad’ subsidies. It noted that amongst economists there is a shared understanding of the connotation of these terms. But, as that is not the case for those who deal with this issue and are not of the economic profession, it was agreed to try to avoid using these terms and, where useful, replace the “positive versus negative” terminology with ‘revenue enhancing/decreasing and ‘cost enhancing/decreasing’.
15. The Consultation also noted that it may not be sufficient to note the effect on the recipient only. In order to get a grasp of the total outcomes of a policy it is necessary to look also at the economic effects on the industry and on society as a whole.
16. In discussing Chapter 4 of the Guide (What is a fisheries subsidy?) the Consultation noted that the very wide set of public policies considered, meant that the de facto definition of subsidies was much wider in scope than that applied in the WTO Agreement on Subsidies and Countervailing Measures. This was noted with approval as the Consultation held the view that this wider definition is useful for subsequent evaluation of impacts on the environment.
17. In Chapter 4, the Guide makes use of the concept of “specificity” in identifying if a policy measure is a subsidy or not. The Guide designates a policy measure as ‘specific” if it is not “normal”. Some experts felt that common sense, economic theory and analysis show that some policy measures - although applicable to a whole economy - in fact have impacts on recipients that eventually lead to effects that are undesirable. Therefore such policy measures, although normal in the economy concerned, could be considered as subsidies.
18. It was pointed out, and acknowledged by the Consultation, that in many ways developing countries represent a special situation and that this must be considered when evaluating the impacts of subsidies.
19. Furthermore the Consultation agreed that support to the fishery sector funded through foreign aid should be considered as subsidy.
20. The Consultation had an extensive discussion of the Guide’s four categories of subsidies (Chapter 5): (1) direct financial transfers; (2) services and indirect financial transfers; (3) interventions with different short and long-term effects; and, (4) lack of intervention. While it was recognized that the first two categories are easier to work with, it was agreed as important to keep the four categories in the Guide. Furthermore it was concluded that:
subsidies included in categories 1 and 2 also can have long-term effects
subsidies in categories 1 and 2 generally can be measured in monetary terms.
21. There was also general agreement that the Guide should not be rigid in the attempt to classify subsidies into different categories. The categories are meant to be helpful to those using the Guide. Therefore the purpose of the categories should be presented clearly in the Guide.
22. It was agreed that it is useful to split category 2 into sub-categories of which there should be at least two; direct transfers and services (including, inter alia, costs of fishery management). On the other hand, no definite advice could be given about the maximum duration of the concept “short-term”. It was felt more appropriate to let the circumstances decide this limit. The Consultation could not identify a general rule for separating direct effects from second-stage effects and indirect consequences.
23. The Consultation agreed that impact on the economic results of up-stream or down-stream activities - should not be considered by the Guide. The indirect consequences - in the shape of externalities - should be identified but not assessed or quantified through the Guide. This should be addressed in the follow-up work attempting to assess the impacts of subsidies on environment, development and trade.
24. In the course of the discussion of Chapter 6 (Assessing subsidies) it became clear that with respect of the period covered in the identification of subsidies most of the experts in the Consultation favoured the approach taken in the Guide, that is to calculate the yearly volume, or value, of subsidies. In addition, the long-term effects must be addressed to the degree this is possible.
25. The Consultation also noted that in respect of infrastructure (in particular harbours and similar large fixed assets) and other services, the procedure for estimating the value to the user, recipient must be very carefully done. This means, inter alia, that it is not the intended purpose of a facility that is important - it is its actual use. For example a harbour built for fishing vessels - that turns out to be used exclusively by pleasure craft - will not have had any effects on the fishing industry and should therefore not be considered as a subsidy.
26. In respect of infrastructure, it was agreed that in the Guide it would be useful to reserve the term “infrastructure” for physical infrastructure only and should not be used to describe institutions and government services.
27. With respect to opportunity costs of the government resources used, it was agreed that in respect of major government supplied infrastructure (harbours) and services (loans) the opportunity cost of capital should preferably be calculated.
28. Free or below market price access to fishing grounds was discussed extensively. The issue is complicated by: (i) the distinction between cost-recovery of fishery management costs and a payment for the access to the resource, and by (ii) the issue of what is a normal access fee.
29. The Consultation agreed that the starting point for the discussion is that the “normal” case is that management costs and research and development costs should be recovered and, if they are not, then this amounts to a subsidy provided to the sector. In this context, however, the Consultation noted that when the value of this subsidy to the industry is assessed care should be taken.
30. The Consultation then discussed what could be a norm for estimating what can be expected to be a reasonable “pure” fee for the access, which is a fee that does not include payment for management services. It noted that such a fee will be a portion of the resource rent. However, for practical reasons the Consultation quantified the access fee as a percentage of the landed value of catch, not as a percentage of the resource rent. The Consultation therefore suggested that the Guide should:
where possible investigate each fishery to see what resource rents are generated;
where no information could be obtained, a range of 3-5 % of the landed value could be used in the first instance as an indicator of the appropriate use fee and of the value of the subsidy provided if not collected
finally, the Guide should acknowledge that for some fisheries a zero access fee would be appropriate, and therefore no resource rent subsidy is involved.
31. The Guide gives some examples of the difficulties encountered when government facilities or services are used also by other firms than those in the fishery sector. In the Guide, allocation keys are the ratios used to divide the costs to the producer - and the benefits to the recipients - between the fisheries sector and the rest of the economy. Allocation keys were discussed. The Consultation recognized that the users of the Guide would have to be pragmatic in respect of defining allocation keys.
32. The Consultation, after some discussion concluded that it is reasonable to value access to resources in foreign countries differently from access to resources in national waters.
33. The Consultation recognized that assessing category 3 and category 4 subsidies is a difficult task. It may be particularly complicated in fisheries exploited by more than one country and in those subject to international fisheries agreements. The advice provided in the Guide in respect of these categories of subsidies should be strengthened. It would be useful to undertake analytical work aiming to clarify how subsidies in categories 3 and 4 impact on recipients.
34. The Consultation reviewed Chapter 7 of the Guide; “costs and earnings analysis - the impact of industry profits”. It found that costs and earnings information concerning subsidy recipients is needed. Normally such information will be presented on an industry basis. It may be useful to consider how the annual information developed through the use of the Guide, can be placed into the context of a longer period.
35. In reviewing Chapter 8 of the Guide - comparative analysis - the Consultation noted that the ratios proposed in the Guide would have a national and an international use. The ratios provided by the guide are intended for use in a national context. It was agreed that further work would be needed before these rations could be used in international comparisons.
36. Before the Consultation concluded its discussion of the Guide, Ms Sita Kuruvilla described how an earlier version of the Guide had been used by the Government of Trinidad and Tobago to identify, assess and report on subsidies. The Consultation noted the substantial amount of work done and the comprehensive information produced and commended the government for the effort.
37. In concluding its review of the draft “Guide for identifying, assessing and reporting on subsidies in the fisheries sector”, the Consultation expressed satisfaction at the excellent work done in developing the Guide. It noted that it will be useful for the various Intergovernmental Organizations that do work in this area to agree on a common method and reporting format. It was further recognized that the Guide is limited in scope as it does not permit the user to assess the degree to which subsidies reach the objectives established by governments, as those objectives go beyond effects on the economic results of recipient enterprises.
