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5.1. Four categories of fisheries subsidies

When working on identifying subsidies, we will realize that there are many different types of fisheries subsidies. Some situations and measures can quite indisputably be identified as subsidies, e.g. grants and other direct financial transfers from the government to the private fishing industry, while we may have more doubts with regard to a situation of, for example, apparent lack of pollution control. Moreover, depending on the objective of our study, we may have decided that we only want to look at the most direct subsidies and that we do not have any interest or time for carrying out the often quite comprehensive and time-consuming analyses related to more indirect or non-intervention subsidies (see also chapter 3).

Consequently, to facilitate the organization and analysis of our subsidies information, the Guide suggests that we classify fisheries subsidies into four main categories, i.e.:

1. Direct financial transfers
2. Services and indirect financial transfers
3. Interventions with different short and long-term effects
4. Lack of intervention

5.2. Category 1: Direct financial transfers

The first category includes all direct payments by the government to the fisheries industry. These subsidies have a direct short-term effect on the profitability of the industry and can also be negative. Their cost (revenue) to the government can usually be found in the public budget and its direct value to the industry will appear directly in the cash flow of the recipient industry. Subsidies belonging to this category are easy to identify and it would generally not be difficult to find consensus when defining these subsidies.

Examples of Category 1 subsidies include:

Investment grants (e.g. to purchase vessels or for modernization), grants for safety equipment, vessel decommissioning programmes, equity infusions, income guarantee schemes, disaster relief payments, price support, direct export incentives, etc.

Negative subsidies in this category would include, for example, various taxes and fees, and import/export duties.

5.3. Category 2: Services and indirect financial transfers

The second category covers any other active and explicit government intervention but which does not involve a direct financial transfer as specified under Category 1. Category 2 subsidies also have a direct short-term effect on profitability but are rarely negative. Their cost may or may not be specified in the public budget and the value to the industry does usually not appear explicitly in the accounting of the recipient industry. Many of the subsidies in this category are services of some kind provided by the public sector or indirect financial transfers.

There are four sub-groups in this category which are listed below together with examples from each group:

5.4. Category 3: Interventions with different short and long-term effects

Our third category of fisheries subsidies allows us to consider a longer time perspective and includes government interventions that have a negative economic impact on the industry in the short-term but ultimately result in long-term benefits (with regard to, for example, the resource base) and/or more general benefits to society as a whole (with regard to, for example, the environment). The cost of Category 3 subsidies - usually an administrative cost - may be accounted for among other public expenditures for management and regulations and difficult to identify. The short-term value to the industry would commonly appear as an expenditure in the accounting of the industry while the positive long-term effects are implicit.

Some examples of Category 3 subsidies are:

Environmental protection programmes, gear regulations (e.g. Turtle Excluder Devices), chemicals and drugs regulations, etc.

5.5. Category 4: Lack of intervention

The last and fourth category covers the area of lack of government intervention and may be the most difficult one to deal with. Category 4 comprises inaction on behalf of the government that allows producers to impose - in the short or long-term - certain costs of production on others, including on the environment and natural resources, and that has short-term positive effects on the industry’s revenues and/or costs. These subsidies are usually positive in the short-term but negative in the long-term. By definition, they do not imply a cost to the government and their value to the industry is implicit.

Examples of this type of subsidies include:

Free access to fishing grounds, lack of pollution control, lack of management measures, non implementation of existing regulations, etc.

Box 3: What to do when there is more than one suitable subsidy category?

Some subsidies may fall into several different categories at the same time. Duty on imports of fish and fishery products, for example, may protect local producers and would hence be a positive Category 2 subsidy for the processing industry. At the same time, it may be a negative Category 1 subsidy for fish importers and retailers who are paying the import duties. Likewise, most subsidies are impacting not only on the direct recipient of the subsidy but will be “carried along” in the downstream production and distribution chain and it could at times be difficult to determine which stage in the chain should be considered the true direct beneficiary. Market facilities at a landing site, for example, benefit both the fishers - the sellers - and the traders and processors - the buyers. When studying subsidies, each measure and support program has to be analysed individually and should be classified according to its particular characteristics. Naturally, there are subsidies that are difficult to put in one “box”. The criteria for classification should be the most direct and main impact on revenues or costs. There are often second-stage and indirect consequences as well as side effects but, even though their importance is recognized, these should not be the main concern for the classification. The general rule should be to only classify subsidies in one category but there may of course be occasions when this is not feasible or unpractical. It has to be recognized, though, that sometimes we have to make assumptions and simplify our analysis for practical reasons.

It should also be remembered that the examples of subsidies and of how to classify them in this Guide are only there for guidance. We may find in our particular fisheries subsidies study that we want to classify certain measures or situations in a different way and we will most probably find subsidies that are not specifically mentioned in the Guide.

Figure 7: The Guide’s four subsidy categories

As can be seen, this classification in categories builds on the modality of the subsidy, i.e. whether it is based on a direct financial transfer or not (Categories 1 and 2), how the subsidy modifies industry profits in the short- or medium/long-term (Category 3) and whether it involves an action on behalf of the government or not (Category 4). Categories 1 and 2 - with the exception of some of the government specific services such as fisheries management - correspond quite closely to other definitions used in practice by, for example, WTO, while Categories 3 and 4 include more implicit benefits (or detriments) to the industry.

There are of course many ways of classifying subsidies and also many possible subcategories available. Some of the main aspects found in the literature according to which subsidies can be classified are reviewed in Appendix II. A list containing more examples of subsidies from the different categories presented here is found in Appendix III.

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