Gordon R. Munro
Department of Economics
University of British Columbia
This paper, in keeping with the author's instructions, attempts to describe and to assess the various techniques that coastal States may employ in deriving direct benefits from distant water nations. The task of assessing the techniques appears at first glance to be simple enough, but the apparent simplicity of the task vanishes when it is realized that the choice of technique cannot properly be divorced from the overall problem of management of living resources within the coastal States' EEZs.
Thus, before examining the individual techniques in detail, it is desirable to consider, in general terms at least, the link between resource management and coastal State extraction of benefits from distant water nations.
2. SOME GENERAL OBSERVATIONS
Under Articles 56 and 62 of the Law of the Sea Convention, the coastal States are given virtual property or ownership rights to the living resources within their EEZs. It is true, of course, that Article 62 contains the so-called "Surplus Principle" under which coastal States are to give distant water nations access to surplus portions of the TACs. However, given the breadth of terms and conditions the coastal State may impose upon those countries seeking access to the surpluses, it is difficult to escape the conclusion that the surplus principle does little to undermine the coastal State's aforementioned ownership rights.
If the fishery resources within a given EEZ constitute coastal State property, then one can in the first instance think of the object of resource management as being the maximization of coastal State net benefits from the resources. As a convenience, or short hand, it is common to refer to these net benefits as "resource rents".
The resource rents can be viewed as the difference between the gross revenues derived from the fishery minus all harvesting, processing and resource management costs. It should be noted in passing that, if desired, one can broaden the definition of resource rents to include non-monetary benefits (and costs).
Fisheries constitute renewable resources and hence can be harvested on a sustained yield basis. This implies, in turn, that the resource rents from the fisheries are also sustainable. Hence the object of fisheries management must be more carefully stated as the maximization of resource rents over time. If the object is to maximize resource rents over time, then it becomes obvious that any management measure or policy must be judged in terms of its short and long run effects. A particular measure may enhance rents from the fishery in the short run, but only at the cost of undermining future prospects for obtaining resource rents.
Now consider the role of distant water nations in the coastal State zone. If distant water nations are permitted to share in the exploitation of coastal State fisheries, then it must be expected that they will also share in the resource rents associated with those fisheries. The size of the distant water nations' share of the resource rents will presumably depend upon their bargaining power vis à vis the coastal State.
It must thus appear that granting distant water nations access to coastal State EEZs runs directly counter to the goal of maximizing coastal State rents from the relevant fisheries. Indeed one might be tempted to refer to the rents accruing to distant water nations as a consequence of being granted access to the EEZs as a "Surplus Principle" or Article 62 tax imposed upon the coastal States.
If the appearances were correct, then the purpose of various techniques to extract direct benefits from distant water nations would be straightforward. It would be to mitigate, if not reduce to zero, the effects of the aforementioned tax. The various techniques could then be assessed on this basis.
It is certainly true that many coastal States, at the commencement of E.E.J. at least, acted as if acceding to the "Surplus Principle" meant submitting to a tax. Nonetheless, it can be argued that there is no necessary reason why granting distant water nations access to a given EEZ must run counter to the goal of maximizing coastal State rents from fisheries within the EEZ. On the contrary, it is quite possible that coastal State rents from the relevant fisheries will be enhanced by accepting distant water nation participation.
The argument runs as follows. If a coastal State invites or willingly permits a distant water nation fleet to harvest a fishery resource within coastal fishery zone and/or process the catch, then one should think of the coastal State engaging in an international trade exercise in that it is importing harvesting and/or processing services from the distant water nation. Under any one of several circumstances it could prove to be less costly to the coastal State to employ the harvesting and/or processing services of distant water fleets than trying to supply them domestically. Hence by inviting or permitting the participation of distant water fleets in some aspects of some of its fisheries, the coastal State may actually increase the flow of rent over time it enjoys from the fishery resources. Moreover, this may be true even though the distant water nation enjoys a significant share of the global rent from the fisheries.
The apparent paradox is resolved when one recognizes that, by acquiring the lower cost services of the distant water fleet(s), the coastal State is increasing the total or global rent from the fisheries. This makes it possible for the coastal State to enjoy a larger rent from the fisheries than would otherwise be the case, even though the distant water partners enjoy a significant share of the rent.
Consider by way of illustration a joint venture arrangement in which a distant water fleet harvests a coastal State fishery resource and delivers the catch to onshore plants at an ex-vessel price of US$ 0.50 per kilo. Let it be supposed that, if the resource were to be harvested by coastal State fleets, the unit harvesting costs would be not less than US$ 0.80 per kilo. Thus by importing the harvesting services of the distant water fleet, the coastal State's rent from the fishery will be enhanced, even though the price of US$ 0.50 a kilo may allow the distant water fleet owners to enjoy substantial profits.
Our example was of a specific form of joint venture. The principles set forth, however, apply with equal force to all other forms of joint ventures and to arrangements in which distant water fleets both harvest the resource and process the catch and compensate the coastal State through direct payments in cash or kind.
If it is conceded that distant water participation in a coastal State's EEZ may enhance, rather than diminish, the coastal State's rent from the relevant fisheries, then two general conclusions follow with respect to the techniques to be used by the coastal State in extracting benefits from the distant water participants. First the appropriate form of distant water nation participation is presumably that which will maximize the coastal State's rent from the fishery over time. The appropriate form of distant water participation will in turn dictate the class of techniques that should be used. If, for example, it is in the best interests of the coastal State to have distant water nation participation take the form exclusively of joint ventures, formal or informal, then the benefits the coastal State obtains from the distant water participation will be entirely indirect. The various techniques for obtaining direct benefits from distant water nation partners will as a class, be irrelevant and assessment of individual techniques will be pointless.
The second conclusion is that where techniques for obtaining direct benefits from distant water nations are deemed to be appropriate, they must be judged in terms of their long run as well as their short run effects. This is in keeping with the point made earlier that, since rents from the fishery are sustainable, all management policies must be assessed in terms of their long run implications.
It is common to judge the aforementioned techniques in terms of their impact upon the current willingness of distant water nations to pay. They should also be judged in terms of their impact upon the long term willingness of distant water countries to participate in coastal State fisheries. Techniques that may appear to be successful in the short term, but which serve to undermine the arrangements with distant water nations over the long run, will result in the returns or rent from the fisheries enjoyed by the coastal State being less than the maximum over time.
The question of the short term and long term effects of the aforementioned techniques is given particular importance by the future investment problem to be faced by distant water nations as a group. It is generally recognized that most distant water nations are currently in a transition phase. At the commencement of E.F.J. they had large fleets in place for which there were few alternative uses. Thus they were and are presumably prepared to enter into arrangements with coastal States so long as they could/can expect to do somewhat better than cover their operating costs on a year-by-year basis.
Eventually, however, the vessels comprising the current distant water fleets will reach the end of their economic lives and will have to be scrapped. If the distant water nations are to undertake the heavy investment required to replace all, or even part of, the fleets, they must expect to receive returns over the lifetime of the capital embodied in the fleets that are sufficiently high to justify that investment.
It is virtually certain that what the distant water nation investors deem to be a minimum expected return on the fleet investment will be governed by the degree of risk associated with the investment. The degree of risk will, of course, be affected powerfully by the terms and conditions under which these fleet owners operate in EEZs. Thus, if coastal States use techniques for extracting benefits that serve to enhance the degree of uncertainty to which their distant water partners are subject, then this must act to reduce the willingness of the distant water partners to engage in fleet replacement over the long run.
One should observe in passing that the aforementioned uncertainty under which distant water countries operate is also affected by the other terms and conditions negotiated with the coastal States such as the length of term of the arrangements, e.g., whether a particular arrangement is to be in force for say three years as opposed to one year. It is questionable, therefore, whether the techniques for extracting benefits from distant water nations can be properly separated from these other terms and conditions.
In conclusion, techniques for extracting direct benefits from distant water nations should be seen as only one class of techniques for extracting benefits. There is no prior assurance that as a class these techniques will be appropriate. To the extent that they are appropriate, they must be assessed in terms of their long run, as well as their short run, impact.
We turn now and consider the techniques individually.
2. SPECIFIC TECHNIQUES FOR EXTRACTING DIRECT BENEFITS FROM DISTANT WATER NATIONS
My instructions call upon me to examine the following specific techniques:
i) Taxes on profits
ii) Taxes on catch and gross revenues
iii) Fees or taxes on vessels, vessel tonnage and gear
iv) Lump sum taxes or fees
In passing, my instructions also require me to consider a particular method of obtaining indirect benefits, namely through access to markets. This will be dealt with at a later point in the paper.
We shall attempt to assess the techniques in terms of four broad, and widely applicable, criteria. The criteria are:
(a) Level of administrative and enforcement costs required for effective implementation
(b) Tendency to distort fishing/processing operations of distant water partners
(c) Degree of seasonal or yearly risk imposed upon distant water partners
(d) Sensitivity to long term shifts in economic and biological parameters
Criterion (a) is concerned with all of the costs of regulating the activities of distant water fleets and vessels while in the coastal State's EEZ. Included are all costs of issuing licences, imposing and collecting fees and taxes. Of particular importance are the costs implementing surveillance procedures and the costs enforcing the terms of the arrangements.
In our earlier comments on net return or rent from the fishery, we emphasized harvesting and processing costs. Administration and enforcement costs cannot be neglected, however, and indeed may be of great importance. High administration/enforcement costs can easily result in the true rent from the fishery proving to be negative.
Surveillance and enforcement costs cannot be evaded without serious long run consequences. If inadequate enforcement procedures are implemented, the suspicion is bound to arise among coastal State managers that the terms of the arrangements are being circumvented. Indeed, if the enforcement is weak, the temptation on the part of distant water participants to engage in evasion may be irresistible. Thus relations between the partners are certain to deteriorate over time. Even if there is no formal rupture in relations, one can argue that the cloud of uncertainty created by the deteriorating relations will undermine the distant water partner's willingness to participate over the long run.
The difficulty and coastlines of enforcement will, of course, be dependent upon the amount of information on the distant water partner's activities required by the coastal State for effective enforcement. Thus one can argue that, as a general rule, where coastal State enforcement capabilities are limited, coastal State-distant water nation arrangements placing heavy information demand on the coastal State are certain to be unstable over the long run.
Criterion (b) refers to the incentive the tax, fee or payment system employed gives to distant water fleet owners to implement relatively inefficient harvesting and/or processing methods. Thus suppose that in a particular fishery the least cost method of exploiting a resource was to use many relatively small vessels. The coastal State now imposes a heavy tax per ton per fishing day. Over time this induces the distant water partners to employ a few relatively large vessels, with each vessel having more catching power per ton than the smaller vessels. While harvesting costs are now greater, the distant water partners see themselves as benefiting because they are interested, not in harvesting costs alone, but in harvesting costs plus taxes. The sum of harvesting costs plus taxes will be lower than before.
The problem of induced inefficiency might appear to be a matter of concern only to distant water nations. This view is incorrect, however. The rent that the coastal State enjoys from the fishery over time must depend upon the magnitude of the global rent from the fishery. This will be true regardless of the degree of bargaining power possessed by the coastal State. Thus if the global rent is reduced because of the adoption of inefficient methods by distant water fleets, the coastal State must expect to suffer.
Criterion (c) refers, not to long run risks that are created by coastal State policies, and which are thus avoidable, but rather to intra-seasonal uncertainties associated with price and input cost fluctuations and with resource fluctuations due to environmental factors. As a consequence of these fluctuations, the returns from the fishery may be either unexpectedly low or high during a given season or year.
In any event, this form of risk is inescapable and must be borne by the coastal State, by the distant water partner(s) or shared by the two sets of partners. From the point of the coastal State, it may or may not make a difference whether the distant water nation partner(s) bear the risk in all or in part. The deciding factor will be whether the distant water fleet owners are risk averse, i.e., react negatively towards risk bearing. If the distant water fleet owners are risk averse, then they will require an extra return, or what be termed risk premium, in order to participate in the fishery. It will thus appear to the coastal State that the willingness to pay off the distant water fleet owners is reduced thereby. Consequently, where distant water fleet owners are risk averse, the benefits extracted from them by the coastal State will, other things being equal, be greater per period of time the smaller is the distant water fleets partner(s) share of the risk. It follows as well, of course, that the smaller the aforementioned owner's share of the risk the greater will be their willingness to participate in the relevant fisheries over the long run. Criterion (b) is linked to the previous criterion, as it is concerned to some degree at least with questions of risk. It is, however, primarily concerned with longer term changes, as opposed to seasonal fluctuations. Consider the following example. In many fisheries the costs of harvesting, and hence the flow of rent from the fishery, are affected by the density of the stock. Thus, if the stock is rebuilt as a consequence of management measures implemented by the coastal State, the global rent from the fishery will increase over time. If the techniques used by the coastal State are such that they are insensitive to the effects of the stock rebuilding programme, then all of the benefits from the programme may flow to the distant water nation partners. The consequence will be, either that the coastal State's interest in resource management will diminish sharply, or that the terms of the arrangement between coastal State and distant water partners will have to be subject to continual renegotiations. Either outcome will do nothing for the long term stability of the arrangement. For the sake of stability, one would want techniques that automatically maintained the rental shares of the coastal State and its distant water partner(s).
Now let us commence our survey of the individual techniques by considering taxes on profits, i.e., profit sharing. Since the object presumably of a coastal State-distant water nation cooperative fisheries arrangement is that of maximizing the flow of rent from the fishery over time and of sharing the rent in what is deemed by both sides to be an equitable manner, the profit sharing technique would seem to be an obvious one to adopt.
Indeed the technique appears to do well in terms of criteria (b), (c) and (d). The technique should prove to be neutral with respect to various methods of fishing and offshore processing. There is no obvious reason why the distant water partners should use other than the most efficient techniques of harvesting and processing. Secondly, the season by season risk should be shared equitably between coastal State and distant water partners. In a sense it would perform the same sort of risk allocating function that the share system does on individual vessels. Finally, the technique is sensitive to long term shifts in underlying biological and economic parameters. Thus, if the resource stock is built up or depleted, both partners will share automatically in the harvesting cost benefits, be these benefits positive or negative.
While the technique does well in terms of criteria (b), (c) and (d), it does badly in terms of criterion (a), the level of costs required for effective implementation. The costs of enforcement are immense simply because information requirements imposed upon the coastal State are immense. The coastal State must be able to assess accurately all aspects of the revenues enjoyed by the distant water vessels and all aspects of the vessel costs. Indeed even a full and accurate assessment of vessel revenues and costs may not be sufficient. If the vessels are delivering to home based plants, then there is an obvious opportunity for evasion through setting the ex-vessel prices at artificially low levels. If the plants are owned by the same companies that own the vessels, then the ex-vessel price will be a mere transfer price and thus readily subject to manipulation. If the plants and vessels are independent of one another, then evasion is only somewhat more difficult. It could be carried out fairly easily through under-invoicing. Thus the information required may well extend to the onshore processing sector.
So great are the information demands, so irresistibly easy is it for the distant water partners to engage in evasion, that arrangements resting upon profits' taxes must be viewed as inherently instable.
The alternative techniques on our list can all be viewed as means for taxing indirectly the profits earned by the distant water fleets. The indirect approaches have the advantage of being less demanding in terms of information and hence are more likely to be viable.
The first of these alternatives consists of taxes on catches. A tax on catch can be viewed as a type of royalty, a device which is used widely by governments in obtaining revenue from natural resource-based industries.
With respect to criterion (a), the costs of administration and enforcement, taxes on catch perform better than do profit taxes, simply because the information requirements are lower. Nonetheless, they are high. If the taxes are broken down finely among species and reflect the relative values of the species, then obviously close monitoring of the individual vessels will be required, almost certainly to the extent of placing observers on board individual vessels.
The coastal State may insist that the distant water vessel owners pay for the cost of the observers and believe that it has thereby escaped the cost burden. This is a delusion, however. The costs exist and will serve to reduce the global rent from the fishery. Thus they will affect the coastal State through an apparent reduced willingness to pay on the part of the distant water nation(s).
If the coastal State attempts to avoid information costs by applying the taxes to broad as opposed to narrow, categories of species, then another problem or cost will arise. Distant water vessels may have an incentive to discard low valued species within each broad species category. This will entail, not only loss of revenue for the coastal State, but management difficulties as well. The resource managers' estimates of the fishing mortality of the aforementioned low valued species will be faulty.
With respect to criterion (b), there are no reasons, that are obvious to the author at least, why taxes on catch should produce serious distortions of fishing or processing operations.
Next with respect to criterion (c), the imposition of seasonal risk upon distant water partners, taxes on catches must be given a mixed rating. Risks arising from seasonal fluctuations in resource availability will clearly be shared by both distant water nation and coastal State partners. Risks arising from short term fluctuations in prices of fish or fish products and of costs of inputs will, however, be borne entirely by the distant water nation partners.
The burden of risk imposed upon distant water nations arising from fluctuating prices can be reduced by establishing the taxes on a sliding scale, i.e., sliding up or down according to price movements. As such they would become taxes more on gross revenues from harvesting as opposed to catches per se.
Taxes on catch, or variants such as taxes on gross revenues, provide a good example of the types of difficulties implied by criterion (d). Suppose, by way of example, that in a particular fishery, the coastal partner as resource manager undertook to build up the relevant biomass over time. Suppose further that the increased biomass density resulted in a gradual decline in harvesting costs. Unless the tax on catch could be geared to increase steadily with the growth in biomass density, the benefits would flow directly to the distant water partner. Conversely, of course, if the coastal State authorities were to permit substantial depletion of the resource the burden would be borne largely by the distant water nation.
One possible, and indeed likely, outcome of this state of affairs is that coastal State's interest in effective management of the resource would wane. The coastal State would neither benefit directly in the short run from good management nor suffer directly from poor management. Over the longer term, however, the coastal State would suffer. The coastal State's waning interest in effective management must increase the uncertainties faced by distant water fleet owners and thus undermine their willingness to participate in the relevant fisheries over the long run.
The third technique on our list consists of taxes or fees, e.g., licence fees, on vessels and/or gear. It is necessary first to make a distinction between those taxes or fees that are essentially seasonal lump sum taxes and those that are taxes on fishing effort. Thus a licence fee per vessel or per ton (or what amounts to the same thing as a tax per vessel or per ton) that is paid each year at the beginning of the fishing season is, in effect, a lump sum fee or tax, as opposed to a tax/fee on vessels or tons per fishing day (week, etc.). At this point we shall focus on effort taxes and shall return at a later point to various forms of lump sum taxes.
If it is possible to think of taxes on catches as being indirect taxes on profits, it is equally possible to view taxes (fees) on effort as indirect taxes on catch. If the tax on effort, e.g., per Gross Registered Ton (GRT) per fishing day, is accompanied by an effort allocation on a per country of per fleet basis (as seems inevitable), then the tax will in fact be an indirect tax on catch. The effort allocations will almost certainly be based upon the coastal State's estimate of the amount of effort, e.g., fishing days required to take the catch deemed appropriate for the distant water partner.
Since effort taxes are one further step removed from profit taxes, they are less costly to implement than taxes on catch. It is easier to monitor the number of days a vessel is operating in the coastal State's zone than it is to monitor the vessel's catch. There is, of course, an offsetting cost in terms of effective management in that the coastal State authorities obtain only an indirect measure of catch.
Controls on fishing effort, be they quantitative or monetary, are notorious for producing distortions in fishing operations. Fishing effort has so many facets that it is impossible to tax or control them all. Vessel owners, fleet owners, are thus given an obvious incentive to avoid the taxes or controls by emphasizing the untaxed or uncontrolled aspects of fishing effort. Thus a tax on effort in the form of a tax per GRT per fishing days does not allow for the fact that harvesting power per ton will vary among vessels. Consequently, one can expect that the taxed fleets will be biased towards larger vessels with more harvesting power per ton. Clearly, then, effort taxes fare less well in terms of criterion (b) than the other techniques considered so far.
Effort taxes also fare less well in terms of criterion (c). In addition to the risks associated with taxes on catches, distant water partners will be subject to risks arising from the fact that catches per unit of effort will fluctuate. The fluctuations may arise because of variable stock abundance or because of variations in the "catchability" of the gear.
Finally, with respect to the last criterion, sensitivity to long term biological and economic shifts, it is certain that effort taxes will fare no better than taxes on catch. Whether they will fare worse is not at all clear.
The last technique on the list consists of lump sum payments or taxes in which the distant water partner pays a fixed amount at the beginning of each year or fishing season. The fee or tax may be established on a fleet, vessel, or ton basis, or some other basis entirely.
If a tax on effort can be seen as an indirect tax on catch, then lump sum taxes or access fees can be seen as an indirect tax on effort. Presumably in giving foreign vessels access rights for a limited period of time, the coastal State authorities will make a rough estimate of the average number of fishing days per vessel implied by these rights for each type and class of vessel.
As the technique is the furthest removed from the profits' tax, the technique has the great advantage of low administrative costs and more importantly low enforcement costs. The coastal State authorities have only to be assured that a given distant water nation vessel is duly licensed and that it has not exceeded its time allowance within the EEZ. The low enforcement costs should help to promote long term stability of the cooperative agreements or arrangements. There is, of course, an offsetting cost in terms of management effectiveness.
With respect to criterion (b), distortion of fishing operations, lump sum taxes tend to bring about distortions in fishing/harvesting operations the more narrowly defined they are. Thus suppose, for example, that the tax was so narrowly defined as to be applied to specific items of gear. The distant water vessel owners would then have an obvious incentive to modify their gear or obtain substitutes in order to reduce the impact of the tax.
Perhaps the most negative aspect of the lump sum tax is that virtually the entire seasonal risk is imposed upon the distant water nation partner(s). Effort taxes were seen to impose a greater share of the risk burden upon the distant water nation partner than taxes on catch because they did not allow for variations in catch per fishing day. Lump sum taxes or fees go one step further and make no allowances for variations in days fished per vessel per season.
Finally, with respect to the last criterion, lump sum taxes display no sensitivity whatsoever to long term shifts in biological and economic conditions. This is so virtually by definition.
In reviewing the techniques for extracting direct benefits from distant water countries, one can discern a distinct and simple pattern of tradeoffs. The technique of taxes on profits constitutes the most demanding of the techniques in terms of information required by the coastal State for effective implementation, with all that that implies for long run stability of coastal State-distant water nation relations. On the other hand, it is also the technique which shares most evenly seasonal risk between distant water nation and coastal State partners. Furthermore, it is sensitive to long term shifts of economic and biological conditions. Finally, it probably acts to distort fishing operations less than any of the other techniques.
At the other end of the spectrum stand lump sum taxes or payments. They are the least demanding in terms of information required of the coastal State. At the same time, however, they impose a maximum share of the seasonal risk burden upon the distant water nation partner, are insensitive to long term shifts in biological and economic conditions and can easily lead to distortion of distant water nation fishing operations. Thus one can make the following generalization. The more demanding a technique is in terms of information required for effective implementation, the better it will perform in terms of risk sharing and in terms of not inducing inefficiencies in distant water fishing/processing operations. Moreover, the more sensitive it will be to long term shift in biological and economic parameters.
This suggests the following. One can expect that coastal States will opt for a mix of techniques, rather than for one particular set. One should expect further that the balance of the mix will reflect the coastal State's ability to mount effective surveillance and enforcement procedures. Thus it would make little sense for a coastal State with very limited enforcement capability to rely upon taxes on catch, let alone taxes on profits. The benefits in terms of risk sharing and neutrality with respect to harvesting/processing operations would be overwhelmed by the fact that the coastal State's arrangements with its distant water partners would be made inherently unstable by the use of the technique.
Finally, in response to the last of my instructions, I offer a few comments on the reliance of coastal States upon access to markets as a means of obtaining benefits from distant water partners. I view access to markets, not as a technique unto itself, but rather as an equivalent of a lump sum tax in which the payment is indirect, rather than direct.
There is a case to be made for using access to markets as a means of payment. Distant water nations like other countries, do protect domestic markets. Thus, their domestic prices for some fish and/or fish products may be significantly higher than world prices. Consequently, if the coastal State is able to surmount the trade barriers of its distant water nation partner(s), it can hope to gain additional revenues on the sale of its fish products. Having said this, however, one must also emphasize that the granting of improved access to markets is only but one means by which a distant water nation may compensate a coastal State. Moreover, the benefits provided are uncertain. The uncertainty arises because it is often unclear what the coastal State would have earned on the sale of its fish products without the trade concessions. Consequently, it is very difficult to argue that there is any justification for coastal States relying primarily upon trade concessions as a means of compensation.
Writing from a North American perspective, this author can only observe that many coastal States, e.g., Canada and the United States, do place heavy reliance upon access to markets as a means of compensation. Taxes, fees, etc. tend to be relegated to the role of obtaining partial recovery of the costs of administering the EEZ. The consequence is that such coastal States in fact severely restrict themselves in terms of the benefits they can obtain from distant water nation activity in their zones.
While this self-imposed constraint on the part of a given coastal State may appear to confer important benefits upon distant water nations, the benefits are short term at best. It is inevitable that it will become widely recognized within the coastal State that the benefits to be enjoyed from cooperative arrangements with distant water nations are meagre. Indeed it may be suspected that the benefits are negative. As an equally inevitable consequence, groups within the coastal State will press for increased restrictions on distant water fleets with a view towards the ultimate exclusion of the fleets from the coastal State's EEZ. Thus over the long run the cost to distant water nations arising from a coastal State's refusal to make full use of taxes and fees could be just as great as the cost to the coastal States themselves.
In this paper we have attempted to examine and assess several of the techniques coastal States may employ to extract direct benefits from distant water countries operating in their EEZs.
After considering the techniques as a group in relation to the overall problem of coastal State resource management, it was argued that, before assessing individual techniques, one has to ask whether the techniques as a group are in fact appropriate. It is possible that the returns resource rents that the coastal State realizes from its fisheries may be greatest if it obtains benefits from distant water nations largely through indirect means. Secondly it was pointed out that, to the extent that the aforementioned techniques are appropriate, it is of great importance that they be judged in terms of their long run as well as short run consequences.
With respect to the individual techniques, it is clear that there exists a clear tradeoff between factors that are likely to reduce the distant water partners' willingness to pay such as risk and distortion of fishing/processing operations and the difficulty of effective implementation. We noted that difficulties of implementation held implications, not only for administrative costs but also for the long term stability of the coastal State-distant water nation fisheries arrangement.
In light of these tradeoffs, it seems reasonable to suppose that most coastal States will opt for a mix of techniques. The appropriate weighting of the mix should reflect the coastal State's enforcement capabilities.