APPLYING RIGHTS-BASED MANAGEMENT - Chairman: Ross Shotton, Food and Agriculture Organization, Rome

Determining the Impacts of Adopting Property Rights as a Fishery Management Tool in Regulated Open Access Fisheries - J.M. Ward and W. Keithly
The Commercial Geoduck (Panopea abrupta) Fishery in British Columbia, Canada - An Operational Perspective of a Limited Entry Fishery with Individual Quotas - S. Heizer
Abalone and the Implementation of a Share-based Property Right in New South Wales, Australia - D. Watkins
Canadian Scallop Fishery Management: A Case History and Comparison of Property Rights vs. Competitive Approaches - F. G. Peacock, J. Nelson, E. Kenchington and G. Stevens
The Orange Roughy Management Company Limited - A Positive Example of Fish Rights in Action - G. Clement
The Effects of Transferable Property Rights on the Fleet Capacity and Ownership of Harvesting Rights in the Dutch Demersal North Sea Fisheries - W. P. Davidse
Trends in Fishing Capacity and Aggregation of Fishing Rights in New Zealand under Individual Transferable Quota - R. Connor
Measurement of Concentration in Canada’s Scotia-Fundy Inshore Groundfish Fishery - D.S.K. Liew
Indicators of the Effectiveness of Quota Markets: the South East Trawl Fishery of Australia - R. Connor and D. Alden

Determining the Impacts of Adopting Property Rights as a Fishery Management Tool in Regulated Open Access Fisheries - J.M. Ward and W. Keithly

J.M. Ward
U.S. Department of Commerce
National Oceanic and Atmospheric Administration
National Marine Fisheries Service, F/ST1, 1315 East-West Highway
Silver Spring, Maryland, USA 20910
<[email protected]>
and
W. Keithly
Coastal Fisheries Institute, Center for Wetland Resources
Louisiana State University, Baton Rouge, Louisiana
<[email protected]>

1. INTRODUCTION

The “problem of the commons” plagues marine fisheries managers since no-one conserves a resource that belongs to everyone. Management programmes designed to control inputs in the harvesting process have generally been unsuccessful if property rights for the in situ resource do not exist. In recent years, rights-based management measures have been developed to give fishermen partial property rights or access rights to fish-in-the-sea as an alternative approach to achieving fisheries rationalization. However, this alternative approach has also been criticized for its shortcomings. Copes (1986) presents many sound arguments against the use of individual transferable quotas (ITQs) as a fishery management instrument citing the results of actual applications. These include quota-busting, data-fouling, residual catch management, unstable stocks, short lived species, flash fisheries, real-time management, high-grading, multi-species fisheries, seasonal variations, spatial distribution of effort, TAC-setting, transitional gains trap, and lack of industry acceptance. In addition, impacts of transferability of individual quotas on allocation of income and equity have been identified. Finally, the question of whether ITQs are preferable to the common property or open access fishery scenario remains unanswered.

While many of these concerns have been addressed in the economics literature, some have not; including unstable stocks and short-lived species. For example, Anderson (1993), Arnason (1994), Townsend (1995), and Turner (1996) have addressed high grading and bycatch in ITQ fisheries. The incentives to bust quota were addressed by Sutinen (1987) and Muse (1991). Unstable fish stocks prevent fishery managers from setting total catch limits (TCLs) for their firm at the beginning of the season. The resulting fear of a TCL re-adjustment reduces the fishers’ confidence since they may not have the entire season to harvest their quota share without causing them to lose a portion of their quota. This uncertainty causes a race-for-fish at the beginning of the season. In some short-lived species, no discernable relationship exists between the size of the catch and the subsequent recruitment. As in the Gulf of Mexico shrimp fishery, the high fecundity of even a small number of spawners given favorable environmental conditions is sufficient to fully restock the fishery in each season. The rationale for not implementing a rights-based management programme is that fish left unharvested are wasted. However, the cost of harvesting the last fish is also a concern, as are the benefits, since the distribution of fish among size classes could have an effect on ex-vessel prices. Last, excessive capacity levels needed to harvest the last fish could have negative impacts on other fish stocks and fishing operations as a result of the discarding of incidentally caught fish; i.e. bycatch.

An empirical model of the Gulf of Mexico shrimp fishery is used to investigate the possible effects of introducing a rights-based fishery management instrument into a fishery characterized by both a short-lived species and highly variable recruitment. The approach is to integrate empirical analyses of fleet dynamics, vessel operating costs, and market demand for shrimp in a dynamic optimization model of the Gulf of Mexico shrimp fishery. Random recruitment into the fishery is based on a random number generator with the same mean and variance as a fishery-independent survey of brown shrimp abundance conducted by the Galveston Laboratory, National Marine Fisheries Service (NMFS)¹. Shadow prices that approximate the shrimp resource-rent are used to determine an annual lease value. This model can be used to compare and contrast deterministic recruitment with variable recruitment under different TCLs that accurately predict landings-levels versus those that are fixed over time at higher or lower than optimal levels. Although a simulation, the advantages of this approach are that the actual behaviour of a group of individual fishermen is the basis for the model assuming that the model is correctly specified. Various scenarios can be compared based on the same set of initial assumptions. Transition paths can be compared to long-run equilibrium conditions. Finally, an index based on the present value of net benefits can be generated for open-access, common-property, and rights-based fishery resource management.

¹ Brown shrimp represents about 60% of total shrimp landings in the Gulf of Mexico.

² Multiple variables are allowed to adjust to their equilibrium values in these quasi-phase diagrams instead of the two variables represented on the axis. As a result, transition paths between long-run equilibrium points can intersect. This is especially true in the diagrams where abundance randomly shocks the system of equations that determine the transition path to the long-run equilibrium.

2.1 Model structure

A simplified flow-chart of the empirical model for the Gulf of Mexico Shrimp Fishery is presented in Figure 1 (Keithly, Roberts and Ward 1993, Ward and Sutinen 1994, and War, Ozuna and Griffin 1995). The model is based on a multinomial logit model that predicts the probability that an individual fishing firm will enter or exit the fishing fleet (Ward and Sutinen 1994). Based on this probability of entry and exit and a known universe of firms in the fishing fleet, a new fleet size can be calculated for each time period. This new fleet size can be used to determine a change in fleet production levels that result in a new ex-vessel price for shrimp. This ex-vessel shrimp price is then used to calculate a new operating cost for an individual vessel that results in a change in its production level. This change in production level, fleet size, and ex-vessel price then affects the probability of entry and exit into the fishing fleet through a set of feed back loops in the programme.

Figure 1: Flow-chart of computer simulation model for the Gulf of Mexico Shrimp Fishery

The simulation model goes through a series of iterations until an equilibrium fleet size is found for the existing biological and market conditions initially set to describe the fishery at a point in time. Once an initial equilibrium point is found, the initial values are modified to reflect a change due to a management regulation. Then, the model allows firms to enter or exit the shrimp fishery until a new equilibrium fleet size is found. The present value of net benefits are calculated for the initial equilibrium point and compared to the present value of net benefits generated along the transition path to the new equilibrium point plus those generated at the new equilibrium point.

2.2 Shadow price³

³ Personal communication, Jon Sutinen, Dept. of Natural Resource Economics, University of Rhode Island, Kingston, RI.

	= N [Ph - Ch]	(1)
such that	Nh < TAC

where

N is the number of firms in the fishing fleet;
P is the ex-vessel price for shrimp harvested;
h is the level of shrimp harvested;
C is the unit cost of harvesting shrimp; and
TAC is the total allowable catch level.

L = N[Ph - Ch] + [TAC - Nh]

(2)

and first order conditions can be taken from which l can be solved. The value of l represents the change in profits that would occur with a one-unit relaxation of the constraint; i.e. the resource shadow price. Equation (3) calculates the value of the shadow price based on the analyses underlying the computer simulation model. Equation (3) varies endogenously with changes in fleet size (N), TAC, and crew share. TAC can be set as a fixed constant or allowed to vary depending upon the level of abundance in the fishery.

= -0.0186(TAC) - 7.659(TAC/Fleet Size) × 1.07(length)0.6 × (fuel price)0.04 × (vessel age)-0.22 × (abundance)-0.08 × (crew share)0.52

(3)

2.3 Random recruitment

Abundance can be either an exogenous constant or can be allowed to vary randomly reflecting annual recruitment in the shrimp fishery. Random abundance levels are generated using a random number generator with a mean of 53.3 and a variance of 50 to generate the range of values found in the brown shrimp abundance index maintained by the NMFS’s Galveston Laboratory.

3. RESULTS

Figures 2 through 9 demonstrate graphically the results from running the simulation model over time. These results are based on the assumption that the TAC can be set accurately, based on the fishery independent survey conducted by the NMFS Galveston Laboratory⁴. Figures 2 and 3 indicate the effect random abundance can have on the equilibrium fleet size over time. In Figure 2, the model approaches a stable equilibrium fleet size of approximately 3030 vessels with constant abundance by the seventy-fifth year. At this point in time, the harvest rights instrument is implemented in the fishery and the fleet size declines asymptotically to about 2884 vessels by year 100; a reduction of 5%. With the introduction of random abundance in Figure 3, a similar pattern with more variation in fleet size results. Fleet size initially reaches an equilibrium size of 3082 and then declines to approximately 2900 vessels; a reduction of 6%. However, the exogenous shocks caused by the random fluctuations in abundance do not allow the fishery to maintain a stable, long-run equilibrium.

⁴ Results from simulations run with TACs fixed over time will be briefly discussed in Section 4.

Figure 3: Projected Impact of Access Rights On Fleet Size in the Gulf of Mexico Shrimp Fishery With Random Abundance

Figures 4 and 5 compare the effect of constant and random abundance on the shadow price for the shrimp resource stock. The positive value of the shadow price after the imposition of the access-right management regulation in the 75^th year varies by less than 1 cent/lb under constant abundance in Figure 4. The shadow price also appears to approach an equilibrium value of 25.5 cents/lb as the fleet approaches its new equilibrium level. Under variable abundance, the shadow price varies by slightly more (almost 2 cents/lb) and fluctuates around its mean value.

Figure 4: Projected Impact of Access Rights On Fleet Size in the Gulf of Mexico Shrimp Fishery With Constant Abundance

Figure 5: Projected Impact of Access Rights On Fleet Size in the Gulf of Mexico Shrimp Fishery With Random Abundance

Figures 6 and 7 compare the effect of price changes on fleet size under constant and random recruitment. In Figure 6, the fleet oscillates toward an equilibrium fleet size of 3030 vessels with a price of $1.64 ranging from $1.59 to $1.68/lb. After the imposition of the access-right management instrument, fleet size declines toward 2880 vessels and price rises to $1.69 within a range of $1.68 to $1.70/lb. This pattern, of a price increase, a decline in its variance and a fleet size decrease, is less clear in Figure 7 because abundance is random, but is similar in direction and magnitude. Price rises from about $1.60 with a fleet size of between 3000 and 3100 vessels to a price of $1.76 with a fleet size of about 2800 vessels. The output from the simulation model indicates that prices rise because total landings fell as a result of the decline in fleet size even though landings per vessel have increased.

Figure 6: Projected Impact of Access Rights On Fleet Size in the Gulf of Mexico Shrimp Fishery With Constant Abundance

Figure 7: Projected Impact of Access Rights On Fleet Size in the Gulf of Mexico Shrimp Fishery With Random Abundance

The increase in landings per vessel as price increases can be seen in Figures 8 and 9. With constant abundance (Figure 8), production for the individual vessel in the fishery spirals toward an equilibrium of approximately 67 000lb of shrimp landed per year at a price of a $1.63/lb. With the adoption of the access rights, management instrument, the individual vessel spirals toward a new equilibrium of 68 000lb with a price of $1.70/lb. With random abundance, the pattern is not as clear, but a close inspection indicates that a similar pattern in terms of direction and magnitude of change exists in Figure 9.

4. SUMMARY

The ability to accurately predict a TAC level based on fishery-independent surveys of abundance in this particular model of the Gulf of Mexico shrimp fishery suggests that random recruitment does not significantly affect the direction or magnitude of change induced by the access-rights instrument. Fewer firms each harvest more shrimp at a higher price, suggesting that net benefits to the nation will increase under a management programme of rationalization for this fishery. In fact, the computer simulation model results suggest that the benefits-to-costs ratio of adopting an access-rights management programme would be 1.99 with constant abundance and 2.03 with random abundance (the change in producer and consumer surplus relative to the status quo fishery scenario); probably not a significant difference.

The computer simulation model was also run using a constant TAC set at the highest and the lowest reported landings level to determine if model results would change substantially. With a low, constraining TAC, the shadow price for the shrimp resource was generally higher than under a high, less constraining, TAC and under a variable TAC set each year based on abundance. This resulted in a lower equilibrium size fleet, higher prices and higher landings for individual vessels in the fishery. The opposite result was true for a high constant TAC. Fewer vessels exited the fishery, prices did not rise as much and landings per vessel while higher relative to the status quo fishery, did not increase as much as under the constraining or variable TAC scenarios.

In the political reality that is fisheries management, all access rights management programmes need to be evaluated in terms of the individual fisheries for which they are being designed to ensure they meet all management programme goals and objectives; not just economic efficiency criteria. The concern that stocks characterized by random recruitment and short lived species may not be suitable for these management programmes does not seem to be a problem in this particular fishery. In addition, the costs of harvesting the last shrimp do seem to outweigh the benefits. The costs to society associated with the reduction in shrimp harvest are more than out weighted by the benefits derived from reductions in harvesting costs. However, this result may not generalize to other fisheries characterized by short lived species and random recruitment. In addition, the Gulf of Mexico shrimp fishery is extremely complex and this computer simulation model while empirically based on actual fishers behaviour is by necessity a simplification of the real world and may not accurately predict change.

5. LITERATURE CITED

Anderson, L.G. 1993. Some Preliminary Thoughts on Discards, By-Catch, and Highgrading. Presented at the International Conference on Fisheries Economics, Os, Norway, May 26-28.

Arnason, R. 1994. On Catch Discarding in Fisheries. Marine Resource Economics, 9(3):189-207.

Copes, P. 1986. A Critical Review of the Individual Quota as a Device in Fisheries Management. Land Economics, 62(3), pp. 278-291.

Keithly, W.R., K.J. Roberts and J.M. Ward 1993. Effects of Shrimp Aquaculture on the U.S. Market: An Econometric Analysis. Chapter 8 in Upton Hatch and Henry Kinnucan (eds.). Aquaculture, Models and Economics. Westview Press, Boulder, Colorado.

Muse, B. 1991. Survey of Individual Quota Programs. Draft report, Alaska Commercial Fisheries Entry Commission, June. 32pp.

Sutinen, J.G. 1987. Enforcement of the MFCMA: An Economist’s Perspective. Mar. Fish. 49(3):36-43.

Townsend, R.E. 1995. Transferable Dynamic Stock Rights. Marine Policy, 19(2)153-158.

Turner, M.A. 1996. Value-based ITQs. Marine Resource Economics, 11(2):59-69.

Ward, J.M. and J.G. Sutinen 1994. Vessel Entry-Exit Behavior in the Gulf of Mexico Shrimp Fishery. American Journal of Agricultural Economics, 76(4):916-923.

Ward, J.M., T. Ozuna and W.L. Griffin 1995. Cost and Revenues in the Gulf of Mexico Shrimp Fishery. NOAA Technical Memorandum NMFS-SEFSC-371, National Marine Fisheries Service, Southeast Regional Office, Economics and Trade Analysis Division, 9721 Executive Center Drive, North, St. Petersburg, FL, May, 76 pp.

The Commercial Geoduck (Panopea abrupta) Fishery in British Columbia, Canada - An Operational Perspective of a Limited Entry Fishery with Individual Quotas - S. Heizer

S. Heizer
Operations Branch, Fisheries and Oceans Canada, Coastal British Columbia South
3225 Stephenson Point Road, Nanaimo, British Columbia, Canada V9T 1K3
<[email protected]>

1. INTRODUCTION

The fishery for geoduck clams, Panopea abrupta (Conrad 1849), in British Columbia (BC) is one of several Canadian fisheries managed by limited entry and individual vessel quotas (IVQs). By Canadian standards, individual vessel quotas provide a ‘right’ of access to the harvest of these valuable clams. This opportunity is constrained by the fact that the Minister of Fisheries retains the absolute right to allocate licences and could take away a fisher’s access to the fishery at his discretion (Canada, Fisheries Act Sec. 7). In 11 years of this programme, this has never happened and the IVQ programme has helped to render this fishery one of the most valuable in Canada.

Figure 1: Geoduck clam, Panopea abrupta

The great value of this fishery has allowed the fishers to not only pay for the incremental costs of the IVQ programme, such as monitoring, but also to contribute to a large share of the cost of managing the fishery. Fishers provide support for data collection and analysis, for scientific and other research as well as for personnel for programme operations.

This paper details, from an operational point of view, the benefits and costs of managing the BC geoduck fishery after Fisheries and Oceans Canada (the Department) provided licence holders certain ‘rights of access’. The benefits have been in cost-recovery, advances in knowledge, manageability and control of the fishery and public health and safety. The costs have been increases in poaching and high-grading due to the high value of the product, a reduction in employment in the fishery and the high cost of entry into the fishery.

2. DESCRIPTION OF THE FISHERY

The geoduck is a large hiatellid clam which occurs from Alaska to Baja California. The name ‘geoduck’ comes from a Nisqually (native American) word for ‘dig deep’ (Quayle 1978). The clam lives buried up to 1m deep in sand and mud substrates (Goodwin and Pease 1989) from the lower intertidal zone to depths of at least 110m (Jamison et al. 1984). Once dug in, geoducks remain in the same spot for the duration of their lifespan, sometimes well in excess of 100 years (Goodwin and Pease 1989). If removed, they are unable to rebury themselves and quickly perish. The oldest clam on record was an estimated 146 years old (Harbo et al. 1983). Clams reach sizes of 4.5kg, but generally average about 1kg (Cox and Charman 1980).

Divers use surface-supplied air (‘hookah’ systems) and harvest geoducks from the substrate using water under pressure, delivered through a hose and nozzle system or ‘stinger’. The diver grabs the clam by the siphon as he inserts the stinger, which delivers a stream of high-pressure water into the ground near the clam. As the ground liquefies, the diver is able to remove the clam alive. He then places each clam in a bag attached to his waist. At intervals, the diver returns to a line reaching to the bottom below the vessel and the dive-tender hoists the full bag to the deck. The crew places animals in containers and keeps them alive, moist and covered. The vessel usually delivers the clams on the day of harvest.

In the early period of the fishery, markets were for processed siphons in Japan and to a lesser extent to the United States (US) and Hong Kong. The body meat was marketed at a low value domestically and in the US. Lesser amounts of live product went to the US and Hong Kong. In the late 1980s, live geoducks became the primary product, and markets shifted from Japan to the People’s Republic of China. The market in China required a year-round supply of clams. This enhanced the value of geoducks and resulted in the industry funding a pilot IVQ programme.

3. HISTORY OF THE FISHERY

3.1 The unlimited fishery

Geoducks have been harvested in British Columbia since 1976, when fishers seeing the success of fishers in neighbouring Washington State, began harvesting these clams in the southern regions of the province (Cox 1979). Prior to the commercial fishery, recreational and aboriginal fishers may have had some limited intertidal harvest. In 1976 and in early 1977 the Department issued seven special permits giving each permit-holder an opportunity to harvest geoducks from specific assigned areas in the Strait of Georgia. There was no harvest limit, but regulations required fishers to fish below a certain depth (3m below chart datum) and limited the ‘stinger’ design. In 1976, the seven permit holders using five vessels, harvested about 44 000kg of geoducks (Harbo et al. 1992). Figure 2 shows catches from 1976 through 1998.

Figure 2: BC geoduck catches from 1976 through 1998

In July of 1977 the Department instituted a licensing system. For extensive discussions of the licensing and entry limitation in this fishery, see Muse (1998). The Department did not limit the number of licences issued and eliminated the exclusive harvesting rights which had accompanied the special permits. The holder of the licence, who could be a person or incorporated company, need not be present at the fishing operation. As well, the Department did not require that the licence be fished in order to guarantee continued entitlement. Licence-holders were required to submit sales slips, and to return harvest logs and charts of harvest locations. There was no total allowable catch (TAC) limiting harvest.

The number of active vessels and harvest levels rose dramatically during the early period between 1976 and 1979. For extensive discussion of the catch and effort in this fishery, see Campbell et al. (1998). In 1977 the Department issued thirty licences and 14 vessels landed about 245 400kg of geoducks. In 1978, 54 licences were issued, and 14 vessels landed about 1.0 million kg. In 1979 101 licences were issued, and 72 vessels landed 2.5 million kg. During the same period, the mean ex-vessel price also rose from $Can0.37/kg in 1977 to $Can0.68/kg in 1979.

3.2 The limited entry fishery

In mid-1979, due to concerns about the increasing effort and harvest levels, the Department imposed a moratorium on the issuance on new licences. In 1980 the Department issued 95 licences, and 63 vessels landed 2.8 million kg of geoducks. In the next two years, a legal framework and selection criteria were developed for limiting entry to the fishery. In 1981 and 1982, licences were issued to persons who landed more than 13 600kg of geoducks in either 1978 or 1979. The effect of this was to limit licences to 52 in both 1981 and 1982. In 1981, 49 vessels landed about 2.7 million kg, and in 1982, 53 vessels (one licence was fished on two vessels) landed 3.1 million kg.

In 1983, the current licence limitation programme came into force. A new vessel licence (called a ‘G’ licence) was issued to persons who met the landing criteria. The licences were vessel-based licences and carried limitations in transferability between vessels. Fifty-four licences were issued in 1983 and 1984 and increased to the current 55 in 1985 after a successful appeal.

3.3 Establishment of Total Allowable Catches

Managers instituted Total Allowable Catches (TACs) in 1979, one for the North Coast (1.59 million kg) and one for the South Coast (2.04 million kg) (Harbo et al. 1992). These initial TACs were arbitrary since available information on stock sizes was limited. Over the next 10 years, TACs fluctuated between 2.8 and 4.2 million kg, and reflected the Department’s assessment of the ability of stocks to absorb heavy harvests.

The TACs were exceeded in 1979 1982 and 1984 to 1988, and in the period 1984 to 1988, the TACs were exceeded by an average of 34%! Catches peaked in 1987 with 7.5 million kg landed, exceeding the TAC by 1.5 million kg. There are several reasons why TACs were exceeded. The primary reason was that catch information did not come in quickly enough for managers to close the fishery in time. As well, effort was increasing because of the rising value of the fishery. Between 1979 and 1987, ex-vessel prices fluctuated between $Can68/kg and $Can88/kg then jumped to $Can08/kg, in 1987and reached $Can2.14/kg in 1989.

The TAC is currently set at 1% of the estimated virgin biomass. The biomass is calculated by applying the estimated virgin densities (in kg/m²) times the estimated bed area (Hand et al. 1998a 1998b). The Department calculates the TAC annually to adjust for advances in understanding of bed size and geoduck densities.

3.4 The individual vessel quota fishery

3.4.1 IVQs

By 1988 it was obvious that limited entry was not able to control effort or harvest levels. Fishers referred to the fishery as a ‘shotgun’ fishery where high effort was expended as areas opened. In 1988, the fisher’s association (the Underwater Harvesters Association or UHA) requested that an individual quota system be set up. They pointed to a number of problems including loss of profitability due to erratic product supply, difficulties in product handling and transport caused by periodic gluts which followed openings, TAC overruns, safety concerns created by the race-to-fish and economic losses possible from missing a ‘shotgun’ opening. Under the shotgun-style fishery, fishers could not properly service the profitable live market, opening in China, that demanded a year-round supply.

Estimates of incremental programme costs for an IVQ fishery were high, primarily for catch monitoring and the Department was not prepared to commit this expense. Fishers proposed to fund the necessary programmes, and a two-year pilot programme was started in 1989. This programme, with minor changes, has continued until today. The essential elements are described below.

3.4.2 Initial allocation

Often, the biggest problem in the development of an IVQ programme is the initial allocation of quotas. The determination of who is to get what portion of the TAC can be contentious. In the case of the geoduck IVQs, this was not a problem. Fishers approached the Department with the proposal that initial IVQs be equal. In this programme, the 55 licence holders each have access to 1/55 of the TAC. In the first year of the programme, several licence holders refused to join the UHA and pay the catch monitoring fee. But, in the second year of the programme, these fishers apparently realized the benefits and there was full participation.

3.4.3 Transferability

Although licences can be transferred, the quota may not be split and sold or traded. However, up to three licences can be fished from a single vessel. Unharvested quotas may not be carried over into the next fishing year. Small quota overages (less than 91kg) may be transferred to another vessel which has not harvested its whole quota. Larger quota overages are sold and the proceeds relinquished to the Crown.

3.4.4 Area licensing

Area licensing was instituted at the same time as IVQs. The coast was divided into three areas (a) the north coast, (b) the west coast of Vancouver Island and (c), the waters between Vancouver Island and mainland BC (See Figure 3). Licences are distributed to the three areas so that the TAC from each area can be taken exactly by the licences present. The number of licences assigned to the north has increased over time, as TACs increased. The UHA assigns specific vessels to areas through an internal process.

Figure 3: Map of coastal BC

3.4.5 Rotational fishing

Each licence area is further subdivided into management areas, each with an assigned quota. One-third of the management areas are fished each year, at three times the annual 1% harvest rate. Thus each management area is unfished for two years and fished for one year. The benefits of this rotational fishery are the reduction of monitoring and operating costs as only one-third of the coast is fished each year.

3.4.6 Fishery monitoring

The Department and the UHA have currently developed a 5-year collaborative agreement that details the programme requirements and standards. Licence conditions also define many of the requirements. The Department requires licence holders to validate their catch when landed. The UHA hires a private firm to undertake this activity at a cost (in 1999) of $Can525 000. Fishers must notify the validation company when they move into or out of an area. They must also provide the company with the time and place of every landing and the method of transport to and from the landing port. The validation company weighs every load of geoducks as landed. The harvest-logs, first required under the limited entry fishery and also required under the IVQ fishery, have recently been incorporated into the validation form. The Department requires that information for each dive be recorded on this form, including time, place and duration of dive, name of diver and amount of product harvested. Precise data such as these allow for a much more refined understanding of the effects of harvest on a bed, with improvements in stock assessment activities and micro-management.

On the remote north coast, the UHA hires an on-grounds observer and charters a vessel that moves with the fleet and is present for every day of every opening. Besides monitoring all movements and landings, the observer gathers a great deal of site-specific catch and effort information and provides unique observations possible only from an observer who is not also concentrating on the job of harvesting. The cost of this patrolman is around $Can140 000, which is included in the costs of the validation programme.

4. EFFECTS OF THE LIMITED ENTRY/IVQ PROGRAMME

4.1 The value of the fishery

Since the institution of IVQs and the associated area licensing and rotational fisheries, the ex-vessel value of the fishery has ranged from $Can9.6 million, in 1991, to a maximum of $Can43.3 million in 1995, and had a value of $Can30 million in 1998. The wholesale value is twice these values. The drop in ex-vessel value, between 1996 and 1998, is attributed to the recent decline in prices for most fish and shellfish exported to Asia and to the continuing market presence of large quantities of product from Washington State. At the same time, quotas dropped from 3.63 million kg to 1.80 million kg due stock assessments and a precautionary TAC-setting approach.

As Figure 4 shows the obvious result of the programme is a profitable fishery where IVQs have resulted in a high value based on quality and flexibility in supply to compensate for the significant decreases in quotas (Figure 4).

Figure 4: Trends in value and quota size for the BC geoduck fishery

4.2 On management of the fishery

4.2.1 Cost recovery

The profitability of this fishery is tracked by a concomitant mechanism for cost recovery for the Department. Fishers currently pay $Can1.16 million (not including licence fees), which covers a significant proportion of costs incurred in the prosecution and management of the fishery. These payments can be divided into two types: (a) those required for the IVQ programme (catch validation, patrolman, water quality and biotoxin monitoring), and (b), those which fund other activities such as stock assessment and management costs for the programme.

Licence fees (currently known as ‘access fees’) have risen, as well, from $Can10 between 1985 and 1995, to $Can3615 in 1996, to $Can3520.80 in 1997 and 1998, to $Can7215.20 in 1999. Benefits go beyond the recovery of programme costs from fishers. Managers enjoy a rare ability to have improved fishery data collection and management, more operational flexibility to deal with real-time biological, enforcement and logistical issues, greater confidence in essential control functions such as fishery monitoring, enforcement, and biotoxin and contamination monitoring.

4.2.2 Catch validation

Perhaps the greatest benefit for the Department from the IVQ fishery is the industry-funded catch validation programme. Data obtained by this programme allow the Department to closely control the fishery, to be flexible in adjusting times and areas of openings and to have improved data for stock assessment purposes. Fiscal restraints on the Department would never otherwise allow the collection of such precise and timely data.

Improved fishery information collection and management has reduced over-harvesting. Prior to the IVQ programme, coastwide quotas were often exceeded by as much as 81%. In 1998, the quota overage was 342kg, or slightly less than 0.02%. This improved information is gradually leading towards bed-by-bed management as well. With bed-by-bed management, effort can be precisely targeted on specific areas, thus reducing over-harvesting on particularly productive areas while avoiding less desirable areas. Local over-harvesting can be masked when larger areas, including several beds, are open.

4.2.3 Public health and safety

The UHA has contributed to the costs of an extensive biotoxin monitoring programme ($Can187 000 in 1999), and for a growing water-testing programme ($Can100 000 in 1999). These programmes are essential to a molluscan fishery which exports the vast majority of its product live. These programmes allow the Department to confidently open remote, or problematical, areas while still complying with various international agreements regarding product safety. Again, fiscal restraints would not allow the Department to provide this level of service, and without industry support, a considerable fishable area would not be approved for harvesting.

4.2.4 Enforcement

Catch validation has introduced control structures which have made illegal activities (poaching, harvesting without a licence) more difficult. All shipments of geoducks are validated and labelled. This product tracking has reduced the necessity of routine enforcement. The UHA has also made financial and in-kind contributions towards enforcement activities.

The Department views the validation programme as providing effective enforcement controls. The Conservation and Protection Division (C&P) of the Department confirms this by maintaining, in the draft 2000 Integrated Fishery Management Plan for Geoducks¹, that the geoduck fishery is a ‘...low (enforcement) priority except where human health and safety issues are identified.’ and that C&P will ‘...pursue opportunities to monitor and enforce issues and problems related to these fisheries in conjunction with the monitoring and enforcement activities dedicated to....identified priority fisheries....’.

¹ Pacific Region Integrated Fisheries Management Plan - Geoduck & Horse Clam 2000. Available from the Communications Branch, Fisheries and Oceans Canada, Pacific Region, Vancouver, BC, Canada.

Licence holders have supported stock assessment activities in response to reductions in quotas. The UHA spends approximately $Can150 000 annually on survey activities related to better understand the biology of geoducks. Surveys provide information needed for estimates of biomass (bed sizes, densities, and sizes of clams), for studies of recruitment and for population age-structure. Interestingly, data from these studies have been partially responsible for the drop in quotas, but the UHA continues to fund these studies. The UHA has also provided funds for analytical and reporting activities that have allowed the science sector to do stock assessment and research in support of the fishery that would otherwise be impossible.

4.2.6 Management support

The UHA provides the Department with the funding for a management biologist. The biologist (the author) works for the Department, but, in return for the funding, is assigned full time to the management of the geoduck fishery. The Department can now service the commercial fishery better with a dedicated biologist, which was impossible in the past as management biologists oversaw several fisheries concurrently and often had other priorities at critical times.

4.2.7 Geoduck enhancement

The UHA has embarked on an enhancement programme. A biologist in the direct employ of the UHA is working with a local hatchery to spawn and rear geoducks and to plant juveniles in the wild. The UHA claims no proprietary or ownership rights to the planted seed and both the Department and the UHA currently consider them part of the common property resource.

Their studies provide stock assessment information as they help address how planting density and size affects survival, whether these planted animals will survive to make a significant impact on stock size and whether they might increase the local spawning stock and affect recruitment.

4.2.8 Consultation and co-management

Another major benefit of the IVQ programme is improved consultation with the industry. Commercial fishers and the Department have an ongoing formal and informal dialogue regarding the prosecution of the fishery. This has led to vast improvements in the relationship between the Department and fishers. There are still differences in philosophy and opinion, but there is greater trust and less confrontation. It is an excellent example of government/industry co-management.

Two agreements govern the co-management, one covering the provision of the dockside monitoring programme, the other covering the funding for the fishery manager. The current term of these contracts is five years. A number of projects are not covered by specific agreements (i.e. enforcement contributions, science and research commitments, geoduck enhancement). Instead, fishers and DFO prioritize these UHA funded initiatives through the consultation process.

4.3 On the industry

4.3.1 Financial benefits

Fishers enjoy a higher and more reliable income stream for several reasons. First, the ability to fish as the market requires has removed the periodic market gluts and has allowed fishers to develop and supply lucrative markets. Second, the higher-quality product being landed, a result of improved harvesting techniques and product handling, has increased the value of the product. Third, savings in vessel operating-costs have also had a marked effect on profitability.

Fishers have a greater stake in the industry, created in part, by increased profitability and the enhanced access to the fishery created by the limited entry and IVQ programme. Consequently, fishers have become more interested in the sustainablity of the fishery and less in developing strategies to better their individual competitive position. This has led to fishers requesting unchanging quotas to avoid both high and low fluctuations that often accompany fixed harvest rates. These fluctuations are often viewed by the market as a sign of instability in the fishery. Fishers were willing to take slightly less product each year in return for the stabilized quotas.

4.3.2 Health and safety

The industry believes in general that the number of incidents with vessels (sinkings, breakdowns, etc.) has decreased since the rush to fish has ended and vessels are better equipped and maintained. There is little data on this subject and the data that exist are incomplete as fishers do not necessarily report such incidents. Still, the industry is firmly convinced that it is a much safer fishery (J. Austin², pers. comm. 1999).

² President British Columbia Underwater Harvesters Association. Qualicum Beach, British Columbia, Canada.

³ Associate Clinical Professor, Faculty of Medicine, University of British Columbia and Medical Director, Hyperbaric Medicine, Vancouver General Hospital, Vancouver, British Columbia.

Although crew sizes and numbers of divers participating were initially reduced with the institution of IVQs, job security and safety conditions for those remaining in the industry has improved greatly. The crew on a geoduck harvesting vessel usually consists of a vessel master, a tender, who looks after the diver in the water, and two divers. In 1997, there were 86 divers fishing off 42 vessels. This is a significant change from the record number of divers fishing in 1988, the year just prior to IVQ implementation. In that year, 233 divers fished from 56 vessels for an average of just over four divers per vessel (Muse 1998). The decline in crew size is a consequence of efficiencies introduced through the IVQ programme and the declines in quotas. Nonetheless, crews are smaller and there is little turnover. Crew earnings have increased along with the increased value of the product (J. Austin², pers. comm.), employment is more secure and the industry is safer.

5. OTHER ISSUES

5.1 Aquaculture

A private aquaculture firm is spawning geoducks and rearing the seed in tenured tracts in the Strait of Georgia. This firm and the UHA are working co-operatively and jointly fund some disease studies. Managers hope that geoducks harvested off these tenures will have marking protocols similar to those in the commercial fishery. In this way tracking in the wild fishery validation programme would not be compromised by quantities of unmarked cultured product in the marketplace.

5.2 First Nations

There is currently no involvement of First Nations in the geoduck fishery except for opportunities to harvest for food, social or ceremonial purposes. No harvest is reported. Treaty negotiations are now underway with First Nations and will certainly affect all fisheries. If First Nations obtain access to geoducks, managers hope that the control structures similar to those in place in the current commercial fishery would be implemented. Similarly, managers hope First Nations’ involvement in aquaculture will also have appropriate control structures in place.

6. THE FUTURE

Although there are several uncertainties for the geoduck fishery, such as the ultimate effect of First Nation treaty negotiations, aquaculture development and Asian seafood markets, the future of the commercial fishery appears fairly robust. The understanding of the resource has improved substantially over the last ten years and allows a degree of comfort about both the sustainability of the fishery and co-operation between managers and the commercial industry

For the future, both industry and government desire a more formal co-management agreement. The UHA would like more secure, longer term access to the resource while, from a managers perspective, the Department would like a longer term agreement on the roles in the fishery, in particular, to secure programme funding. The will and positions of the respective stakeholders appear suitable for negotiating a successful co-management agreement.

7. CONCLUSIONS

The geoduck fishery is an example of a co-management success story. The fishery is very profitable. The fishers, because of the high value, are capable of making considerable investments in the future of the fishery by making significant contributions towards the cost of managing the fishery through fees and voluntary contributions.

Operational personnel involved in the fishery enjoy having enhanced tools and information at hand such as willing survey teams and timely catch and effort information. Consultation is largely lacking the strife found in many other fisheries. Fishers enjoy a greater responsibility and say in the fishery. And, there are advances in understanding of geoduck biology allowing a more scientific approach to the management of the fishery. And longer-term studies are in place due to commitments of funding from the fishers.

Control of the fishery is highly efficient due to the dock-side validation programme. Catch and effort information is timely enough to allow managers greater flexibility in making in-season course corrections. And the Department has more eyes and ears out on the grounds.

There has been some displacement of workers from the fishery due to efficiencies possible through the IVQ programme. As in other such fisheries, high-grading has become a problem of some magnitude. Because the fishery is not causing conservation concerns, there is little routine enforcement and poaching and other infractions have received little attention.

The Government of Canada may, at some time, be required to buy licences for First Nations in settlements of treaty negotiations. But, the high value of geoduck licences will be a big problem for this process. Government, the public and stakeholders can learn from the successes of the fishery and modify and apply them to new and existing fisheries.

8. LITERATURE CITED

Campbell, A., R.M. Harbo and C.M. Hand 1998. Harvesting and distribution of Pacific geoduck clams, Panopea abrupta, in British Columbia. In Proceedings of the North Pacific Symposium on Invertebrate Stock Assessment and Management. Edited by G.S. Jamieson and A. Campbell. Spec. Publ. Fish. Aquat. Sci. 125. pp 349-358.

Canada 1985. Fisheries Act. R.S.C. 1985, c. F-14. Government of Canada, Ottawa, Canada.

Cox, R. 1979. The geoduck, Panope generosa: some general information on distribution, life history, harvesting, marketing and management in British Columbia. Fisheries Development Report No. 15. B.C. Mar. Res. Br., Ministry of Environment, Province of British Columbia. 25 pp.

Cox, R. K. and E.M. Charman 1980. A survey of abundance and distribution (1977) of the geoduck clam ‘Panope generosa’ in Queen Charlotte, Johnstone and Georgia Straits, British Columbia. Fisheries Development Report No. 16. B.C. Mar. Res. Br., Ministry of Environment, Province of British Columbia. 122 pp.

Goodwin, C.L. and B.C. Pease. 1989. Species profiles, life histories and environmental requirements of coastal fish and invertebrates (Pacific Northwest) - Pacific geoduck clam. U.S. Wildl. Serv. Biol. Rep. 82(11.120). U.S. Army Corps of Engineers, TR EL-82-4. 15 pp.

Hand, C.M., B.G. Vaughn and S. Heizer 1998a. Quota options and recommendations for the 1999 and 2000 geoduck clam fisheries. Canadian Stock Assessment Secretariat Research Document 98/146. 52 pp.

Hand, C.M., K. Marcus, S. Heizer and R. Harbo 1998b. Quota options and recommendations for the 1997 and 1998 geoduck clam fisheries. Can. Tech. Rpt. Fish. Aq. Sci. 2221. pp 71-159.

Harbo, R.M., B.G. Adkins, P.A. Breen and K.L. Hobbs 1983. Age and size in market samples of geoduck clams (Panope generosa). Can Ms Rep. Fish. Aqaut. Sci. No. 1714. 77 pp.

Harbo, R., S. Farlinger, K. Hobbs and G. Thomas 1992. A review of quota management in the geoduck clam fishery in British Columbia, 1976 to 1990, and quota options for the 1991 fishery. Can. MS. Rep. Fish. Aq. Sci. 2178. 135 pp.

Jamison, D., R. Heggen, and J. Lukes 1984. Underwater video in a regional benthos survey. Proc. Pac. Cong. on Mar. Tech., Mar. Tech. Soc., Honolulu, Hawaii.

Muse, B. 1998. Management of the British Columbia Geoduck Fishery. Alaska Commercial Fisheries Entry Commission. CFEC 98-3N. 23 pp.

Quayle, F.B. 1978. The intertidal bivalves of British Columbia. Handbook No. 17. B.C. Prov. Mus., Victoria, B.C. 104 pp.

Abalone and the Implementation of a Share-based Property Right in New South Wales, Australia - D. Watkins

D. Watkins
NSW Fisheries
P.O. Box 21, Cronulla, NSW 2230 Australia
<[email protected]>

1. BACKGROUND

The commercial fishery for abalone commenced in the 1960s with access to the fishery by way of a commercial fishers licence only. Most abalone were dried or salted and sold on the local market. A market collapse in 1976 led to the establishment of a Parliamentary Select Committee of Inquiry in 1978. Result of this inquiry was the subsequent introduction of a restricted access regime for the abalone and the closely associated sea urchin fishery. The fishery was called the Abalone Restricted Fishery. Access to the fishery was limited to those with a demonstrated catch history of abalone or sea urchin, or to a class of individual who was an aborigine within the meaning of the Aborigines Act 1969. Turban shell was added to the definition of the restricted fishery in 1981.

Prior to the introduction of this management regime, an economic study was conducted to determine what a reasonable income would be for an abalone diver to receive if restricted access was introduced. The study concluded that about $A26 000 was a reasonable return at that time.

The results of the restriction process were that from over 100 applicants, 59 divers were granted access to the fishery. These divers were issued with an annually-renewable, non-transferable permit to operate in the abalone restricted fishery. It is worthwhile noting that 2 permits were issued to indigenous applicants at this time. In addition, 2 permits were surrendered during the first few years of restricted access.

Even though diver numbers had been restricted, developing markets and increasing returns resulted in greater pressure on the abalone resource and an industry initiative to reduce diver number was adopted in 1985. Under this initiative, which became commonly known as the “2 for 1”, a new entrant could enter the fishery provided they secured the surrender of 2 of the permits that had originally been issued. A new permit that became known as consolidated permit could then be transferred on a one for one basis. The 2 permits that had been issued to indigenous fishers were surrendered under the “2 for 1” scheme.

By 1989 fourteen permits had been removed from the fishery under the “2 for 1” scheme. However, new entrants paid considerable sums of money to enter the fishery and, in most instances applied greater pressure to the resource than those they had replaced, in an attempt to service the substantive loans taken out to enter the fishery.

In a further attempt to reduce effort, a quota was introduced in 1989 and total output was capped. The decision was made, with majority industry support, to allocate equal quota to all permit holders. This decision was taken so that new entrants who had in most instances bought permits with relatively low catch history were not disadvantaged and had the ability to meet their financial commitments. Quota, of 10t per annum was initially allocated but reduced to 9t in 1992. The “2 for 1” and the quota scheme continued to operate until the declaration of the commencement of the share management fishery in 1996.

2. THE SHARE MANAGEMENT SCHEME

Abalone licences became “transferable” in 1985 under the “ 2 for 1” scheme. Prices achieved for these licences rose steadily and increased from $A120 000 to $A850 000 by 1992. Industry and lending institutions were concerned with the lack of security and statutory right, i.e. licences were still a personal commodity and still annually renewable with quota allocated as a condition of the fishing licence. In addition to the perceived lack of security, partnerships or company ownership were not recognised and operators who wished to employ another person to fish on their behalf had to do so outside existing fisheries legislation through complex legal agreements.

In June 1993, the Minister at the time, recognising that the fisheries resources needed protection and that fishers needed increased security, established a Property Rights Working Group to investigate the feasibility of a management regime based on a transferable fishing right. This Group recommended a system whereby statutory transferable shares, similar to a Torrens¹ title, were issued to fishers based on past entitlements or catch history. This scheme has formed the basis for the Fisheries Management Act 1994. Share management was included in this Act following extensive research and consultation with industry.

¹ Introduced in South Australia in 1858: a system whereby title to land is evidenced by one document issued by a Government department

A change in Government in March 1995 resulted in a review into the implementation of the share management regime. The terms of reference of this review were:

“To review the implementation of share management fisheries to ensure that the concept is effectively applied as part of an integrated approach to fisheries management in NSW”.

3. LEGISLATION

The implementation of share management is a 4-stage process:

i. Stage 1 (Consultation) - where the Minister consults relevant industry bodies about which fisheries should become share management fisheries.

ii. Stage 2 (Identification of fishery and shareholders) - when a fishery is identified as a share management fishery by the inclusion of a description of the fishery in Schedule 1. During this second stage, an interim Management Advisory Committee for the fishery is established, the criteria for the allocation of shares in the fishery are determined, eligible persons are invited to apply for shares and shares are issued provisionally.

iii. Stage 3 (Access to the fishery limited to shareholders) - when access to the fishery is limited to provisional shareholders (and also to any person claiming to be eligible to receive shares). During this stage, appeals against the provisional issue of shares are determined and a draft management plan for the fishery is prepared.

iv. Stage 4 (Full implementation) - when the management plan for the fishery commences and the fishing, share transfer and other rights of shareholders are fully identified and exercisable and subject to review.

The share management regime provides fishers with the security of a transferable statutory property right that is initially allocated for a 10-year period, but is automatically renewed if the management plan for the fishery is amended. The shares are also automatically renewed at the end of the 10-year period. It provides fishers with a long-term access right on which business decisions can be based and it provides flexibility within the fishing business itself, i.e. the ability to nominate another person to fish on one’s behalf and the ability to adjust the size of their operation to best suit one’s needs. The size of a business can be adjusted on a permanent basis through share-trading or an annual basis through quota-trading if provided for in the management plan. Part of the rationale of this system is that by providing fishers with a greater property right, they will demonstrate greater husbandry of the resource.

5. WHAT DOES IT COST?

It is NSW Government policy that the costs to the Government for managing the fishery are fully recoverable. In addition, the legislation requires that shareholders make a periodic payment to the community for their privilege of right of access to the resource. Matters relating to this payment must have the Treasurer’s concurrence.

6. CALCULATION OF MANAGEMENT CHARGES

The costs of managing the NSW abalone fishery are calculated based on the resources required to deliver an acceptable level of service to industry. Industry has chosen over the years to dedicate funds towards specific research and compliance. In 1997 the Independent Pricing and Regulatory Tribunal (IPART) examined the cost to NSW Fisheries of managing the State’s commercial fisheries and whether there were other beneficiaries of that management. IPART recommended that fishers should only pay the efficient costs of management and that a discount on management costs should be provided to commercial fishers for other beneficiaries of that management, such as recreational fishers.

Salaries and operating costs are calculated based on identified resource requirements and then savings based on efficiency and other beneficiaries are subtracted from the total amount. This new total is then divided by the number of shares in the fishery to provide a per share cost. This fee is then payable by shareholders in quarterly installments. In 1999/2000 abalone shareholders paid a management fee of $A242 per share.

7. DETERMINING THE COMMUNITY CONTRIBUTION

A community contribution is payable by shareholders in a share management fishery for their privileged access to what is ostensibly a community-owned resource. The Treasurer’s concurrence is required on the level of this charge and any other matters relating to the charge.

To assess the amount of economic rent available in the abalone fishery and to determine an appropriate pricing mechanism for this charge, an expression of interest was sought from an independent consultant. This independent economic assessment recommended a community contribution based on 10% of the gross value of the catch at an average beach price of $A33/kg. It further recommended that the rate of community contribution should be on a sliding scale to take into account significant rises and falls in beach price. Industry was provided with the opportunity to make submissions on this report and an amount of 6% of the gross value of the catch phased in over a three year period was agreed by the Minister and Treasurer to be specified in the draft management plan.

Share management provides fishers with the opportunity for compensation, based on the market of those shares should the fishery definition be removed from Schedule 1. In reality however, this is unlikely to occur for a fishery such as abalone as structural adjustment has already occurred. Compensation is not payable if the total allowable catch is determined to be zero.

8. TRANSFER OF SHARES DURING STAGE 3

Transfer of shares during the limited-access stage of share management is controlled by general regulatory provisions that require a fisher’s whole fishing business to transfer. This regulation was implemented to prevent speculation prior to a statutory management plan being made. Once full shares have been issued, transfer will be subject to the management plan and will provide greater flexibility.

9. ABALONE FISHERY IMPLEMENTATION OF SHARE MANAGEMENT

As noted above the implementation of share management is a four-stage process, requiring extensive and exhaustive consultation with stakeholders. Section 50(1) of the Act states that:

“If a restricted fishery becomes a share management fishery, the persons entitled to shares in the fishery are the persons who, immediately before it became a share management fishery, were entitled to take fish for sale in the restricted fishery. The allocation of shares to any such persons may be made having regard to existing entitlements in the restricted fishery.”

“An allocation (of quota) among shareholders in a particular fishery is to be made in proportion to the shareholdings of the persons concerned.”

The Department consulted extensively with industry with regard to the allocation of shares. All divers were personally interviewed to seek their views. They were provided with a questionnaire about how the share management system, particularly the allocation of shares, could be implemented and were requested to provide copies of any documentation that may have indicated that the “2 for 1” system would continue until all licences had been consolidated or, that they had a greater right of access to the fishery. In addition, the Department sought detailed legal advice on what constituted an entitlement in the abalone restricted fishery.

Based on the facts that: (a) no written assurance had ever been given to new entrants that the “2 for 1” would continue, or that they would receive a greater right of access to the fishery; (b) quota had always been allocated equally to all divers; (c) all divers had contributed equally to management charges and to a buy-back fund, on legal advice, the Minister decided to allocate 100 equal shares to the 37 participants in the abalone restricted fishery. Applicants were notified of this decision and the appeal process that was available to them. The third stage of share management commenced on 9 February 1996.

10. REGULATORY REQUIREMENTS FOR THE ABALONE SHARE MANAGEMENT FISHERY

The abalone restricted fishery had specific regulations that provided for new entrants (“2 for 1”), transfer of quota, collection of management fees and other administrative requirements. When it commenced as a share management fishery, the restricted fishery regulations ceased to have effect for the abalone share management fishery. They did however, still have effect for the sea urchin and turban shell (SUTS) fishery that had remained as a restricted fishery. To ensure that there was a statutory base for administering the fisheries and that fishing business transfer regulations were consistent, a regulatory amendment was made that took effect on 9 February 1996.

As sea urchin and turban shell were included in the definition of “abalone” for the restricted fishery, all restricted fishery regulations also applied to these species, including the transfer of permits and endorsements. When the abalone fishery progressed to share management, sea urchin and turban shell were still bound by the “2 for 1” entry criteria, even though this scheme was implemented to reduce abalone diver numbers.

The Fisheries Management (General) Regulation 1995, and not the amended abalone share management regulation, provides for transfer of shares while the fishery is in the limited access stage of share management. This regulation requires a shareholder to transfer the whole of their fishing business. As shares were allocated to those who had operated in the restricted fishery, a fishing business now comprised abalone shares and an endorsement to take sea urchin and turban shell. The “2 for 1” entry criteria for the SUTS fishery was now inconsistent with the regulations that had been made specifically for those fisheries and thus the businesses that proceeded to share management.

11. JUDICIAL AND POLITICAL CHALLENGES

11.1 Implementation of the system

The implementation of share management for the abalone fishery was challenged at both the judicial and political level. The underlying reason for the challenges being the demise of the “2 for 1” entry scheme as a result of the decision to allocate equal shares and not by a mechanism that reflected the “2 for 1”. The amended Regulation was disallowed by the Upper House of NSW Parliament on 30 April 1996. Their intent was that the fishery would revert to a restricted fishery and that the “2 for 1” would become effective for abalone once again. The disallowance did not result in the reversion of the fishery, but merely resulted in a fishery that had to be managed by policy and regulation rather than on a legislative basis.

A challenge was mounted in the Supreme Court of NSW by those divers (Consolidated Divers Group) who had entered the fishery under the “2 for 1” scheme with the initial summons being served on 14 March 1996. As the disallowance did not have the desired effect of restoring the restricted fishery, the summons was amended in July 1996.

Following the 3-month statutory period required before a disallowed regulation can be resubmitted, and on the basis that the disallowance did not resurrect the “2 for 1”, another regulatory amendment was made in December 1996 that was ostensibly the same as the previous amendment. This Regulation was disallowed in March 1997, this time on the basis that if it were not disallowed the Supreme Court process would be compromised. In addition, it was believed if the amendment was not disallowed, the ‘2 for 1’ could not be implemented again. In December 1997, the Supreme Court ruled that there had been no invalidity or error of law in the process (of implementation of share management for the abalone fishery) so far.

A regulation amendment was again made in March 1999 to provide a statutory basis for the management of the abalone share management fishery and the associated sea urchin and turban shell restricted fishery. A further challenge to this regulation was withdrawn in September 1999.

The decision of the Supreme Court was challenged in the Court of Appeal and in December 1998 this Court comprehensively dismissed the Appeal. An application for special leave to appeal to the High Court was made following this decision, but withdrawn in July 1999, one week before it was due to be heard.

11.2 Share appeals

Any applicant for shares in a share management fishery may appeal against the allocation decision, regardless of whether they were actually issued shares. Seven appeals were lodged with the Panel in relation to the issue of shares and all were based on the decision to allocate equal shares. Some claimed that they should have been allocated twice the number of shares as “original” divers while others believed different classes of shares should have been allocated. It was not within the power of the Panel to allocate different classes of shares, and no additional shares could be allocated. Any additional allocations to a shareholder will result in a redistribution of shares within the fishery.

The Panel upheld the decision of the Minister and the Department in the allocation of provisional shares. They ruled that no evidence was supplied by the appellants that supported their claim that NSW Fisheries did not at all times comply with the directions of the Minister.

11.3 Importance of process

The process, particularly the administrative procedures proved to be critical in ensuring the successful implementation of share management for the abalone fishery. The process required the collection of the appropriate data, i.e. survey information of industry, legal advice and analysis of previous decisions to ensure that when the decision on the allocation of shares was eventually made, the data were accurate and there was evidence that all concerned had been consulted.

The process included exhaustive consultation, documentation of meetings, approval (i.e. sign-off of decisions, filing of relevant material and record keeping, appropriate wording of documents, timely gazettal of orders and proclamations and distribution through the relevant channels. The steps, tasks and interactions during the implementation of share management for the abalone fishery withstood the judicial and political challenge reinforcing the views that the Department was committed providing to quality customer service.

11.4 Allocation of the statutory property right

Fishers are keen to see the implementation of a management plan and the allocation of shares that have a statutory basis. They believe this will provide them with greater security and stability and that financial institutions will be more willing to lend on a property right that goes into perpetuity rather than an annually renewable licence.

The system will provide shareholders with a 10-year statutory property right that is automatically renewed after this period. This access right is separate to the fishing right. It will provide shareholders with a statutory management plan that contains objectives, performance indicators and trigger points, and thus a sustainable resource and economically viable businesses into the future.

12. FUTURE OF THE COMMERCIAL ABALONE FISHERY IN NSW

The management plan will provide the basis for future management of the commercial fishery. Resources will be channelled into those areas of most need and as the management advisory committee becomes increasingly more mature, a devolution of the management of the commercial fishery to a management committee should occur. The Government’s role as custodian of the resource will however not diminish and there will still be a requirement for the Government to be involved in the monitoring, compliance and management of the fishery.

Canadian Scallop Fishery Management: A Case History and Comparison of Property Rights vs. Competitive Approaches - F. G. Peacock, J. Nelson, E. Kenchington and G. Stevens

F. G. Peacock¹, J. Nelson², E. Kenchington³ and G. Stevens^1
1 Resource Management Branch
² Policy and Economics Branch
³ Science Branch
Department of Fisheries and Oceans
Dartmouth, Nova Scotia, Canada
<[email protected]>

1. INTRODUCTION

Modern fishery management in Canada began in the late 1960s with the introduction of limited entry licensing in inshore lobster fisheries and it relatively quickly developed into a complex of licence, catch and effort controls covering most fisheries. These were extensively used to manage the industry after 1977 when extended jurisdiction by Canada to 200 miles promised prosperity to many fleets (Parsons 1993). Today, each fishery operates under an annually-developed conservation-oriented harvest plan established to control the composition of the catch and the amount of fishing. Catch composition is controlled by mesh-size regulations, minimum size limits, closed areas and closed seasons. Catch quotas and effort controls control the amount of fishing. The elements of the plans vary from fishery to fishery in response to the individual circumstances of the resource and the industry.

The Canadian sea scallop (Placopecten magellanicus) fisheries offer the opportunity to evaluate the effectiveness of some of these management practices as two contrasting management approaches were in place for a decade; one being applied to offshore resources, the other to those inshore and in particular, in the Bay of Fundy (Figure 1). Until 1986, the management of both inshore and offshore scallop fisheries was largely identical with both operating under competitive formats, although largely in different locations with only a small amount of overlap. In 1986, an agreement was reached between the two fleets and accepted by the Government of Canada, which altered the management and operations of these two fisheries. This agreement, which withstood a legal challenge by inshore participants in 1996, separated the fleets’ operating areas, confining the inshore fleet to waters north of latitude 43°40’N in the Bay of Fundy and the offshore fleet to waters 12 miles from shore to the south. This agreement provided a basis for a divergence in management approaches following its introduction, i.e. a rights-based management plan in the offshore and a competitive fishery in the inshore.

The management system within the offshore fishery has been largely unchanged from 1986 through to the present. However, the competitive format pursued by the inshore fishery was indirectly affected by management decisions in the groundfish fishery, in particular by the introduction of ITQs to the groundfish fleet in 1991 as many fishermen were dual licence holders. The inshore scallop management plan was changed to an area management and ITQ system in 1997 (Kenchington et al. 1997).

This analysis reviews the period 1986 to 1996 in order to assess the effects of the inshore and offshore management approaches on the performances and profitability of the fleets, the fishermen and associated fishing communities and the resources being harvested. It extends an earlier review (Brander and Burke 1995) of the impacts of rights-based versus competitive fishing of Canadian sea scallops.

2. RESOURCE BIOLOGY

The biology of the resource is well understood and the pertinent aspects to fisheries management have been conveyed to both industry and management to assist with the development of harvesting plans. The sea scallop is found only in the northwest Atlantic Ocean from Virginia to Labrador. Within this range, scallops are concentrated in persistent areas or “beds”, many of which support valuable commercial fisheries. In the Canadian region, there are major concentrations on Georges Bank, Scotian Shelf (Middle Grounds, Sable Island Bank, Western Bank, Browns Bank and German Bank), in the Bay of Fundy and on St. Pierre Bank (Figure 1). Different beds, and areas within beds, have different growth and yield characteristics dependent on temperature and food availability. Studies on movement show that although the scallop is a capable swimmer, and there is individual movement within a bed, the beds themselves do not shift markedly.

Figure 1: Location of major scallop fishing grounds in Atlantic Canada NAFO areas, the International Court of Justice line and place names referred to in the text are indicated.

This species is a broadcast spawner (fertilization takes place in the sea) with separate sexes. To ensure successful spawning, adult scallops must live in close proximity to one another with both males and females in the population. The formation of dense beds is therefore critical to spawning success. Overfishing of beds has caused stock collapse in many parts of the world (Kenchington and Lundy 1996). These collapses may be due to destruction of the bed formation as well as reduction of broodstock abundance (Kenchington and Lundy 1996). Spawning occurs from August to September and the larvae are planktonic for five to six weeks before settling in October. With so many uncertainties it is not surprising to find that recruitment is highly variable and unpredictable. No stock/recruitment relationship has been clearly demonstrated.

The quality and weight of the scallop meat (adductor muscle) is directly influenced by this reproductive cycle. After spawning there is a 30-40% increase in adductor muscle wet-weight in the Bay of Fundy (Kenchington et al. 1994) and at least a 15-20% increase on Georges Bank (Serchuk 1983). Scallops can live to at least 20 years old, and animals up to 17 years old are found at low densities throughout the Bay of Fundy. The gear generally captures them first at age three or four. This lifespan offers the potential to manage year - classes so that catches can be stabilized through periods of poor recruitment.

3. THE FISHERY

3.1 Fleets and vessels: history and current status

Many diverse fleets fish scallops in Atlantic Canadian waters. Most are small, exploit only local, near-shore beds and involve fishermen, boats and communities for which scallops are strictly a seasonally exploited resource. In some cases local lobster boats are fitted with light scallop gear at the appropriate time of year. Elsewhere, slightly larger groundfish boats are used. There are such fisheries in the Gulf of St. Lawrence and at various points along the Atlantic coast. Within the Bay of Fundy, similar fisheries operate along the western (New Brunswick) shore and in the upper parts of the Bay.

Two more substantial fleets, primarily based in the Province of Nova Scotia, harvest scallops on a nearly year-round basis as their primary resource. One fleet fishes offshore and is owned by a small number of relatively large companies, some of which are traded publicly. These vessels are based along the south shore of Nova Scotia, primarily in Lunenburg, but also in Riverport, Liverpool and Yarmouth. The other fleet is based in the Bay of Fundy; many of its boats operate out of Digby, Nova Scotia. It is referred to as the “Full-Bay” fleet because the boats are licensed to fish scallops throughout the Bay of Fundy, including the traditionally-lucrative beds off Digby to which this fleet enjoys exclusive access. Elsewhere in the Bay, it shares the beds with other, local fleets of smaller boats. This Full-Bay fleet is owned by a mixture of small companies, some with a single boat and some with multi-boat fleets, with individual owners, some of whom are active captains.

In 1987 the licensing system recognized three distinct scallop fleets in the Bay of Fundy: The Full-Bay fleet, an “Upper-Bay” fleet that was confined to the upper reaches of the Bay, and a “Mid-Bay” fleet that was licensed to fish from the New Brunswick shore out to a “mid-bay” line. There were 99 licensed boats in the Full-Bay fleet, 16 in the Upper-Bay and 210 in the Mid-Bay, though not all of these boats are active in the scallop fisheries every year. The Full-Bay fleet regularly harvests over 80% of the total Bay of Fundy catch.

The inshore scallop fisheries are the oldest, having begun by the late nineteenth century in various parts of the Bay and on the south coast of Nova Scotia. The commercial dragger fishery in the Bay of Fundy began in 1920 in Digby. Scallops were fished from a 12m sloop, 4.6m in the beam with 11 horsepower and equipped with one drum and a head for hauling a single drag and hoisting it on deck. The drag allowed for the exploitation of scallops from greater depths than could be taken with tongs. The adoption of powered draggers and improved gear design allowed an expansion in the 1940s. Thereafter the Full-Bay fleet worked particularly the beds off Digby, and elsewhere in the Bay. This fleet also fished on the offshore banks, when the nearshore and Bay of Fundy beds were depleted and when particularly plentiful populations of scallops were present on the banks. Today, Full-Bay vessels are 15 to 19.8m in length.

The Canadian offshore scallop fishery developed after 1945 in response to an increased market demand for scallops. Canadian boats then competed with American ones on the outer banks from Newfoundland waters south to Virginia and fished on a continuous basis regardless of the status of the inshore stocks. This development brought with it the need for larger (27 to 45.7m overall length), all-weather vessels capable of harvesting scallops in the severe conditions of the winter months in the northwest Atlantic. The typical Canadian offshore scallop dragger came to be a wooden boat of about 30m in length and, in shape much like a North Sea side-trawler. They were fitted to tow two rakes simultaneously, one from either bow. Wooden boats were gradually replaced with steel boats through the 1970s. This offshore fleet dominated scalloping on the outer banks after 1950 and became the sole scallop fleet operating there after 1988.

Fishing methods have changed relatively little since dragging replaced tonging. The offshore fleet uses large steel rakes of the “New Bedford” type 4 to 4.9m in width, while the inshore boats use “Digby drags” - up to nine individual “buckets” (chain bags attached to steel frames) flexibly linked to a rigid bar. This arrangement is thought to be more efficient on the irregular bottom of the Bay of Fundy.

The offshore boats typically make trips of up to 12 days duration, working round the clock when on the scallop beds. The inshore fleets formerly went to sea for only one day at a time but they have come to undertake three- or four-day trips, sometimes with sufficient crew for 24-hour operations. Both the offshore and the Full-Bay fleets take scallops throughout the year.

3.2 Products and processing

Almost the only product of these fisheries is the adductor muscles, or “meats”, of the scallops, which are separated from the rest of the animals (“shucked”) at sea. Small scallops are sorted from the catch and returned to the sea alive and other processing is largely limited to washing and packing for market, which takes place at plants on shore. There has been a small “roe-on” fishery, using boats of the offshore fleet, in the spring of recent years. They produce whole scallops for markets requiring that product. However, Canadian scallops can accumulate dangerous quantities of Paralytic Shellfish Poisoning (PSP) toxins in most of their tissues other than the adductor muscle. Thus, the roe-on product must be carefully inspected and this specialist fishery is susceptible to closure due to unacceptable levels of toxins.

3.3 Markets

Apart from the small market in Europe for scallops with roe, scallops are sold as either fresh or frozen scallop meats in Canada and the United States. Normally, the price received for scallops at the wholesale level depends on supply and demand conditions in the US, the major market. Resource conditions on major fishing banks such as Georges Bank influence supply and demand is based on general economic factors, which are fairly stable. Prices for scallops have been extremely high for the last two or three years because of a shortage of scallops in the markets in relation to demand. The size of scallops also influences price - larger sizes get a higher price.

4. FLEET SEPARATION

4.1 The 1986 Agreement

Although the 1984 International Court of Justice (ICJ) decision delimited Canada’s jurisdiction over the various scallop beds in the Northwest Atlantic, it left the different Canadian fleets sharing access to the national resource. That access was partitioned between the fleets in 1986, through an agreement between the various parties concerned, both government and industry. This “1986 Agreement” allowed different management regimes to develop in the Bay of Fundy and on the offshore banks, while it also influenced the different developments in the two areas.

4.2 Process and history leading up to the agreement

The first scallop management plans appeared in the early 1970s and as with other fisheries the development and operation of the offshore and inshore scallop fleets was done with few rules or regulations in place. Most accounts suggest that the two fleets operated harmoniously with only a small overlap of fishing areas even though there were no spatial restrictions on either fleet. By 1978 this had changed as declining resources and catches in the inshore created increased fishing activity on the outer banks. The implementation in this year of the “2.9% rule” whereby 2.9% of the previous year’s catches on Georges Bank were allocated to the inshore fleet, paralleled a decline in catches of Bay of Fundy scallops necessitating greater dependence by some on the Georges Bank harvest.

By 1984 Canadian scallop landings from Georges Bank had declined to less than 2000t of meats. Both fleets fished to the same meat-count (maximum number of scallops per 500g sample) on Georges, but in other areas, only the offshore fleet was bound by strict meat-count regulations. The offshore fleet was not permitted in the Bay of Fundy or within the territorial sea (to 12 nautical miles). Prior to 1986 the Bay of Fundy was defined as a line from Digby Neck, N.S. to Grand Manan, N.B. Other issues, such as “shellstocking” (holding whole animals on board), conducted by the inshore fleet during peak years, were additional irritants. The two fleet sectors had divergent points of view to settle before economic stability could be restored and the fleets rationalized.

In 1986, the entire 2.9% inshore share was already taken by July and the inshore fleet became aggressively interested in increasing their share on Georges Bank. The added problem of non-complementary regulations for the two fleets harvesting Georges further convinced the offshore fleet of the necessity to change management course and to separate the fleets. Interest in an Enterprise Allocation (EA), (company quota) property-right plan grew following their introduction into the groundfish industry and logical extension to offshore scallops, which involved many of the same players (enterprises). Despite numerous discussions and a series of industry - government seminars in 1985-86, mutual agreement on a common management strategy for all scallop fleets could not be reached. However, agreement was reached between the inshore and offshore groups on the concept of exclusive zones for each fleet.

4.3 Terms of the Agreement

The 1986 Agreement dealt with a number of issues, including, among others:

i. Separation of the grounds open to the offshore and inshore fleets at the 43°40’ N parallel of Latitude

ii. Phasing-out the Bay of Fundy fleet from Georges Bank (with 8% of the TAC in 1987, 4% in 1988 and none thereafter)

iii. Extension of the zone open to the New Brunswick “seven-mile” licences out to a new “Mid-Bay” line

iv. Cancellation of never-used licences

v. A voluntary licence-reduction programme

vi. Establishment of new closed areas

vii. Introduction of a meat-count limit in the Bay of Fundy and

viii. Stricter penalties for violators.

Following this agreement, which was accepted by the Minister of Fisheries, a permanent separation of the two fleets at the 43°40’N line was announced in October 1986. The offshore sector moved to a trial EA programme in June 1986 with nine corporations holding allocations. In 1986 a TAC on Georges Bank was established before the offshore companies completed sharing arrangements. This resulted in 50% of the TAC being harvested in a six-week period. The fishery was closed while companies determined shares then resumed under an EA programme and the race for the resource was over. The programme was made permanent in 1989. The 1986 Agreement is considered to be a milestone decision for the management of commercial scallop fishing off Nova Scotia.

5. EFFECT OF THE GROUNDFISH FISHERY AND ITQ SYSTEM ON THE INSHORE SCALLOP FISHERY

From 1981 to 1985, 50 to 60% of the dual (groundfish and scallop) licence holders among the Full-Bay scallop licence holders (Table 1) fished scallops exclusively (Figure 2) with no prominent monthly trend in activity (Kenchington et al. 1995). Mixed fishing within a year (Figure 2) was practiced by 15 to 25% of dual licence holders. During this period the groundfish TACs were high, although the catches of both cod (Campana and Hamel 1992) and haddock (Hurley et al. 1992) were declining.

Table 1

Number of Full-Bay of Fundy scallop licences and additional groundfish licences carried from 1981-95 Prior to 1986 the number of licences included transfers during the year and reflect the number of licences used during that year and not the absolute number of licences

Year	No. scallop licences	No. groundfish licences
1981	99	81
1982	107	86
1983	115	91
1984	106	79
1985	96	73
1986	96	74
1987	95	73
1988	98	68
1989	98	61
1990	99	61
1991	99	64
1992	99	61
1993	99	59
1994	99	58
1995	99	54

In 1986 this pattern changed (Figure 2) due to a number of factors. The 1986 separation agreement confined the inshore fleet to the Bay of Fundy at a time when scallop landings were at a low level. Government surveys that year detected the presence of a large number of scallop pre-recruits. As a result, an area off Digby, Nova Scotia referred to as the Inside Zone was extended to 8 miles from shore and closed to protect the incoming year-classes causing further spatial restriction. For the only period in this time (Figure 2) exclusive groundfish fishing was more common than exclusive scallop fishing among dual licence holders on a monthly (Jan. 1986 to June 1987, excluding May 1986) and yearly basis (Kenchington et al. 1995). Coincident with the decline in the scallop fishery, the groundfish fishery was at a peak in 1986 (Digou 1994), further increasing the incentive for dual licence holders to spend more time in that fishery (Figure 2). In 1986, and continuing through to 1994, a strong mixed fishery appeared with vessels spending a part of each year fishing both scallop and groundfish. The number of dual licence holders declined from 74 in 1986 to 54 in 1995 (Table 1).

Figure 2: Annual trends in active licences amongst the dual (groundfish-GF, scallop-SC) licence holders in the inshore Full-Bay fleet

Exploitation of the large scallop year-classes off Digby began with the opening of the seasonally restricted “Inside Zone” off Digby, Nova Scotia in October 1987, resulting in an increase in directed scallop fishing. In both 1987 and 1988 increased directed scallop activity was associated with the opening of the Inside Zone each year. In 1988 and 1989 all dual scallop licence holders fished from October to December (Kenchington et al. 1995). Exclusive demersal fishing activity fell dramatically from August of 1988 through to the summer of 1990 and total landings by this gear sector show a decline from 1986 to 1990 (Digou 1994). In 1987 and 1988 the groundfish fishery was closed or restricted several times during the year.

From 1989 to 1994 exclusive scallop fishing was high all year (generally over 60%; Figures 2, 3) because in 1989 the groundfish stocks had largely disappeared and the mobile gear sector (under 19.8m in length) exceeded their cod/haddock/pollock (CHP) quotas (introduced in 1989 - c.f. Hurley et al. 1991) and were tied up in June. By the second half of 1990 exclusive demersal fishing picked up and was regulated by CHP trip limit (Hurley et al. 1991). ITQs were introduced to that fleet in 1991 (Apostle et al. 1997). The decline in groundfish activity associated with the ITQ cuts of September 1993 can readily be seen in Figure 2. Groundfish fishing ceased for the next three months and has not returned to any significant degree due to low quotas. In 1994 there was more scallop-only fishing than in any previous year with over 90% of the dual licence holders targeting scallops (Figure 3). Thus, the consequence of small groundfish quotas has been a movement of the fleet into directed scallop fishing. Multiple groundfish quotas have been transferred to a single boat allowing that boat to fish the quota economically, while the original owners of the quota free their boats up to fish scallop exclusively.

Figure 3: Relationship between the % of vessels fishing scallop-only and those fishing groundfish and scallop by year

In conclusion, the imbalance between the scallop resource and capacity was further exacerbated by the introduction of groundfish quotas. However, the activation of the latent capacity in the fleet was also driven by the increased scallop abundance in the Bay. With a high price for scallops, unprecedented high landings and no meaningful effort controls, the increase in capacity would likely have arisen regardless of the groundfish ITQ plan. For a short while, and for the first time, the resource was greater than the available fleet capacity. Ultimately, the introduction of groundfish ITQs may only have facilitated an inevitable process.

6. FISHERY MANAGEMENT APPROACHES

6.1 Inshore fishery management

During most of the period under review (1986-1995) Bay of Fundy management plans were not conservation-oriented, reflecting the wish of the fishing and processing sector within the Inshore Scallop Advisory Committee (ISAC) for an uncontrolled harvest (i.e. no Total Allowable Catch or TAC). Minimum shell sizes were set too small (76mm) and meat counts too high (72 and 55 meats/500g) to be effective at controlling the composition of the catch to biologically-based target sizes. Closed areas, the only other tool addressing conservation, were partly effective. Other measures included limited-entry of vessels to the fishery, gear-restrictions, vessel-replacement rules and banning the splitting of scallop licences from groundfish licences. Throughout this period there was a major imbalance between resource and fleet capacity.

Significant progress was made in the 1995 and 1996 harvest plans. These had several initiatives that seriously addressed biological/conservation concerns, including lowering meat counts substantially to 45 meats/500g over large areas and maintaining area-closures put in place to protect broodstock. Distribution/effort controls which focused on issues such as crew size and weekday fishing¹ (introduced at industry’s request) appear to have had little impact on the stocks. There was no limitation on overall harvest levels and no harvest targets were put in place.

¹ This term refers to fishing only during daylight hours, specifically 05.00 - 20.00.

6.2 Offshore fishery management

The offshore fishery is managed through the Offshore Scallop Advisory Committee (OSAC), which is composed of the seven enterprises as well as federal and provincial representatives and a representative of the crew unions. Management methods include a Total Allowable Catch (TAC) to control harvest levels. Industry is provided with biologically-based TACs for different levels of exploitation and the final TAC is set through government/industry agreement.

To provide the needed stability for investment decisions on vessels, as well as the cost-savings from a rationalized fleet, the offshore corporations decided on an Enterprise Allocation (EA) option where the TAC is divided into quotas. An EA is a fixed percentage of the fleet quota that is allocated to an enterprise or company that holds licences for the fishery. This system provides the enterprise with a mechanism for assigning a vessel or vessels to catch the enterprise quota as required. EAs are not intended to convey ownership of the resource to enterprises in the industry. Rather, the enterprises hold valid licences to harvest, within the fishery, a specified quantity, in an organized and deliberate fashion without interference by the performance of others within the fleet. Under the competitive scenario, the majority of owners felt that the process of replacing the aging fleet would be disorderly and costly compared to the more orderly and stable environment under the EA programme. Scallop EAs were based on each firm’s dependence on the fishery determined by the numbers of licences held (50%) and historical catch (50%).

No one enterprise may hold more than 50% of any specific scallop stock. The EA allocations are not permanently transferable although temporary transfers are permitted. Except under exceptional circumstances an enterprise cannot transfer in excess of 25% of its EA for more than 2 consecutive years. Temporary transfers of quota are permitted within the year. Permanent transfers of quota can only be made if a Canadian purchases the entire company. All or part of any allocation that cannot be harvested must be offered to the remaining active enterprises. The EA plan includes provision for allocating licence and quota in the event of the collapse of the programme or of the bankruptcy of one of the enterprise holding licences.

With an EA process in place, enterprises could focus on maximizing efficiency by assigning appropriate vessels in appropriate circumstances and integrating firm’s operations from sea to market. Previously, the lack of individual-catch controls led to costly competitive races for scallops and an unstable environment for planning business investments and operations. In addition to the TAC, there are minimum size provisions and complete hail and landing industry monitoring applications in place (Appendix 1). The meat counts are set at biologically-based levels and are different for different stocks. Industry also assists in stock surveys. Fleet capacity is voluntarily adjusted by enterprises as necessary and ongoing reviews of catches and catch rates allow for in-season adjustments.

7. IMPACTS OF THE 1986 AGREEMENT ON THE INSHORE FISHERY

7.1 Resource conservation

The scallop fishery in the Bay of Fundy continues to be strongly driven by the variability in recruitment as a consequence of the high levels of fishing mortality (Kenchington et al. 1997). During the past decade three exceptional year-classes have settled in the Bay, two in the Digby area and one on the beds in the lower Bay of Fundy. None of these year-classes were effectively managed. In the case of the Digby scallops a mass mortality event coincided with the annual closure of the beds such that the extent of the losses were not realized until it was too late. Coupled with extremely high fishing mortality (F>1.0) the resource was devastated to the point where densities were so low that large areas were closed to prevent further fishing of the broodstock in 1995. This event created two mindsets that have been detrimental to the development of conservation schemes. One is that there is no link between stock abundance and recruitment, since the 1984 and 1985 boom year-classes came from the lowest stock-abundance on record to that date. Secondly, that if scallops are too plentiful they will die and so they must be thinned out when they are small. These views are widely held by the majority of ISAC members, including the non-fishing representatives. Thus when the strong 1990 year-class recruited to the fishery in the lower Bay of Fundy it was heavily fished, resulting in low yields and there was no interest in trying to extend the life of the cohort.

As the scallop beds returned to more average densities the fishing effort remained high, bolstered by good prices and a fully dependent active fleet, resulting in the depletion of most inshore scallop beds and widespread recruitment failure on the traditional beds off Digby. Landings have been reduced dramatically, and coupled with the new more restrictive management measures, operational and economic difficulties existed. Seasonal closures for large parts of the year (fishing restricted to 1 to 3 months) were effective in maintaining the Grand Manan and Annapolis Basin stocks. Both of those areas show regular recruitment with a range of ages in the populations. The seasonal closure of a portion of the beds off Digby did not benefit recruitment, although the timing of the closure maximizes yield. The fishing season was prolonged in that area (October to May) and occurred during the settling period of the larvae. The season-length did not generally restrict the catch as in the other areas. Meat count regulations were not effective in protecting broodstock or strong year-classes. Changes to the meat counts toward biological-based recommendations have been too recent to see an effect on the resource.

7.2 Fishing capacity

Inshore scallop licence holders may have less incentive to over-invest in the fishery than others in the inshore groundfish dragger fleet where technical innovation provides a competitive advantage. In the scallop fleet, all vessels use the same gear and electronic equipment and since horsepower is not as much of an issue as in other fisheries this suggests that equipment-upgrading is not a major concern. Similarly, vessel-size is not an issue. Most fishermen use a vessel 16-17m in length and while replacement rules allow for increases, none occur, which suggests an ideal design exists for current conditions. However, during the late 1980s a major boat-building campaign resulted in many new vessels, adding a considerable debt burden to individuals within the fleet.

While capacity growth in this fleet did not come from investing in the “new-bigger” phenomenon so common in competitive fisheries, more than half the 99 scallop licence holders also had licences for groundfish otter trawling (Table 1). Consequently their vessels were larger and more powerful than those of the single (scallop) licence holders. Throughout most of the 1980s this represented latent scallop capacity with most dual licence holders targetting in groundfish for at least 50% of the fishing year.

7.3 Fishing effort

With the introduction of ITQs into the inshore groundfish dragger fleet in 1991, the ability of groundfish draggers to harvest individual quotas quickly and under an individual schedule, or to sell off the quota, freed up latent capacity to participate in the scallop fishery. This opportunity increased the number of full-time scallop operators and, while this number has fluctuated in recent years, the corresponding decrease in groundfish quotas has resulted in a major increase in committed scallop-effort in the 1990s (Kenchington et al. 1995). The number of vessels specializing in scallops, (landing more than 80% of their gross revenue from scallops) increased from 68 in 1991 to 90 by 1995. This was largely attributed to differences in management and allocation of resource procedures, nonetheless a major effort increase did occur in scallop fishing. The major downswing in the scallop resource (Figure 4), the impending tight controls of the Individual Transferable Quota on catch and effort on the scallop fleet for 1997, suggested that the dedicated scallop fleet would again decline and a reduction in the number of vessels active in the fishery did occur, and at present (1999) only 52 vessels are active.

Catch per unit effort (kg/hr) is at low levels on both the Digby and Brier Island/Lurcher Shoal beds and has been declining in recent years. The input-based competitive fishery for Bay of Fundy scallops had no mechanism to rationalize fleet capacity, other than limited entry, in the face of dwindling scallop resources. Costs of fishing increased and incomes of captains, crews and returns on vessel operations fell as vessel owners struggled to make ends meet.

7.4 Vessel earnings

By 1996 the scallop catch by the Bay of Fundy fleet had fallen to around 700t of meats for the first time since 1986 (Figure 4). Many inshore scallop vessels were suffering losses due to a scarcity of scallops and higher harvesting costs (Figure 5). Average gross revenue per vessel of scallop specialists (those who earned greater than 80% of their fishing income from scallops) based on a sample survey was $C187 000, slightly higher than the $C176 000 grossed in 1986, but only half the $C381 000 attained in 1989. There was a net average loss of $C4400 per vessel in 1996 after all expenses including labour and depreciation are considered. Average net vessel earnings were $C21 562 in 1986 and $C74 319 in 1989. This amounted to a 10.6% return on a vessel investment of $C202 708 in 1986 and 29.9% of $C248 336 in 1989 compared to a negative return in 1996.

Figure 4: Inshore Full-Bay Scallop fleet landings and number of vessels active (1983-1998)

Figure 5: Inshore Full-Bay Scallop fleet revenue per vessel and number of vessels active (1983-1998)

Despite near record ex-vessel prices of $C8-$C9/lb in 1996, lower catches kept revenues down. Harvesting costs were higher in 1996 compared to 1986 due mainly to the fuel and fixed costs per vessel almost doubling. Increased fees for book-keeping, legal fees, etc. along with new fees for a Dockside Monitoring Programme and a $C6500 licence fee were responsible for the fixed cost increase in 1996. Operating, maintenance and repair costs were about $C20 000 per vessel higher in 1996 than in 1986 partly due to more days fishing and partly because of price increases in supplies and other inputs.

7.5 Crew shares

Labour costs for captain and crew, based on a share system, were down from $C76 000 in 1986 to $C66 000 for 1996. In 1989, the average labour bill was $C162 000 with the captain’s share $C45,000 and each crew-member earning $C28 000. By 1996, the average crew-member’s earnings had fallen to $C15 300 with the captain earning $C24 800. Labour cost as a percentage of gross revenue has fallen from 43% in 1986 and 42% in 1989 to 35% in 1996.

There has been an increase in the variety of crew-sharing throughout the fishery since 1986. Some of the vessels have hired captains while others are owner-operators. Some crews take a larger percentage than others for boat share and on some boats, crews share different operating expenses than others. Lay arrangements are not publicly announced, but among fleet members this information is known. The standard crew sharing arrangement is for a set percentage of the gross stock to be deducted for the boat, the crew pays certain operating costs (e.g. for food) and the remainder is split equally among the crew.

7.6 Employment

Employment in this fleet has not changed significantly since 1986, although it has declined from 1989/1990 when landings of scallops were at their highest. Employment has closely tracked the cycle of the scallop resource, increasing in good times and decreasing when scallops were scarce. The average vessel crew size in 1986 was 2.2 men, excluding the captain, which is similar to 1996 as most vessels carried a crew of two to three. During the peak year of 1989, the average crew size was 4.2 and numerous shuckers were hired to deal with scallops that had to be shucked at the wharf. Therefore, the downturn from 1989 to 1996 created a reduction in crew employment of approximately 200 people, and a further 300 part-time shuckers. Most of these workers have been absorbed into other industries but further reductions, necessitated by resource depletion, will not be so easily dealt with. The current ITQ programme implemented in the inshore fishery is expected to reduce fleet capacity by up to 50%. This will result in a decrease of 200 persons employed (4 crew including captain x 50 vessels) over the time it takes the fleet to rationalize.

The downturn in the inshore fishery has also affected the employment in the fishery, resulting in protests to acquire new fishing areas. Also, illegal fishing has occurred: in 1996, 11 incidents of illegal fishing were documented (fishing in more lucrative offshore zones).

7.7 Local employment effects

Most inshore vessels land in the Southwest Nova Scotia area with the largest landings occurring in Digby, followed by Yarmouth and Meteghan. Recent protests (1996) led by crews of Full-Bay vessels created a major write-in campaign to government including letters from local businesses hit hard by this inshore downturn. Inshore fishers, both crews and captains/owners, tend to spend money locally. A 50% reduction in revenue over the last three years has had a major negative impact on local businesses, towns and suppliers and ancillary industries supporting the fishery. The Full-Bay fishery is the largest employer in the Digby area today and its ill-health is affecting local centres significantly (F. MacIntosh, pers. comm., Mayor of Digby, Nova Scotia). Concurrent declines in the groundfish fishery have further exacerbated the situation. In April 1997, a number of scallop fishermen occupied Federal Government offices in Digby and Yarmouth as a protest to draw attention to their inability to make a living in the Bay of Fundy scallop fishery.

8. IMPACTS OF THE 1986 AGREEMENT ON THE OFFSHORE FISHERY

8.1 Resource conservation

During the 1980s the offshore fishery on Georges Bank was highly competitive and fishing mortality was high; consequently, the scallop stock biomass was reduced to low levels. After 1986, three strong year-classes (1986, 1988 and 1989) caused the stock to increase to peak levels in 1993. However, both the 1990 and 1991 year-classes were poor and the stock biomass dropped sharply to levels experienced during the 1980s (Robert and Butler 1995a). The 1992 year-class strength was close to the long-term average and was responsible for the increase in biomass available to the 1996 fishery. The TACs for Georges Bank have ranged from 2000t to 6850t since 1986 and was set at 3000t in 1996. This range is considerably smaller than that recorded from the landings during the period from 1957 to 1986 (732 to 11 126t). Low meat counts (e.g. 33/500g on Georges Bank) which have been in place for several years have not been completely effective in preventing the harvesting of small scallops. Industry has put in place a self-monitoring programme based on minimum meat sizes in the catch to try to resolve this problem.

The scallop fishery on Browns Bank was largely restricted to the southern part and along the edge of the Bank, at depths over 100m, during the years of the competitive fishery. The northern part of Browns Bank is now also exploited, with landings first seen in 1988 (Robert and Butler 1995b). The TAC has ranged from 220t in 1990 to 2000t in 1995. The recent good catches (post 1993) are largely due to the exploitation of new fishing areas further to the east than previously fished. The area fished continued to expand through 1996 but the opportunities for further expansion are now small.

The scallop stocks on the eastern Scotian Shelf (Banquereau Bank, Middle Grounds, Western and Sable Island Banks) historically have been a relatively minor component of the offshore catch and are currently at very low levels. Prior to 1995 these beds were fished competitively; since then they have been grouped under one allocation management plan with a quota and meat count restrictions.

Thus, the scallop fishery on the offshore banks continues to be strongly driven by the variability in recruitment (Figure 6). High fishing mortality has created a fishery largely dependent on two age groups (4 and 5 year olds) on the major beds on Georges Bank which furthers the dependence on good recruitment. However, reduction in fishing effort and capacity has had a positive influence on landing variability as the range of variability has been reduced considerably.

Figure 6: Offshore scallop fleet landings and number of vessels active (1983-1998)

8.2 Fishing capacity

Fishing capacity has been reduced under the EA programme (Figure 6). In 1986, there were nine companies with 76 licences operating 69 vessels. Forty-six of these were older wooden vessels of 28-30 m average length and the remainder were made of steel. Rules respecting numbers of participants, vessel replacement, and concentration were defined and approved within the management plan structure, and today there are seven companies operating 26 vessels of 25 to 45m length in operation. Most of these are older steel vessels, increased fishing capacity per vessel to some extent, however the reduction in the fleet more than compensates for the increased vessel capacity (Brander and Burke 1995). Some of these vessels will need to be replaced soon, as their average age is around 25 years.

8.3 Fishing effort

Fishing effort on Georges Bank initially increased from 1986 to 1988 but has declined steadily from 1989 to the present. Fishing effort on Browns Bank increased sharply in 1995 but returned to more average levels in 1996. Catch per unit effort (CPUE) tracked effort-levels in these cases except for 1996 when CPUE was high relative to effort on Georges Bank. This evidence supports the arguments which favoured the introduction of EAs, i.e. firms with individual quota allocations would deploy just enough fishing capacity to efficiently harvest their allocations (Anderson 1986) in a time pattern dictated by catch rates, prices, markets etc.

8.4 Vessel earnings

Revenues of the offshore scallop fleet have ranged between $C50 to $C80 million annually from 1986 to 1995. Revenue rose steadily from 1988 to 1994 reaching $C77 million before falling to $C50 million in 1995. Over this period, fishing effort in terms of both vessels and days at sea fell steadily, which resulted in an increase in revenue per vessel from $C800 000 in 1986 to almost $C2 million in 1994. The earnings level per vessel fell in 1995 to below $C1.5 million and was just below $C1.4 million in 1996 (Figure 7). From 1986 to the present, the number of vessels active in the offshore scallop fishery was reduced by half, i.e. from 69 in 1986 to 32 in 1996. The access fees are paid based upon the allocations to the company and in 1996 totaled approximately $C2.5 million. The formula for determining access fees is $C547.50/t of quota meat. These fees go directly to the Receiver General for Canada.

Figure 7: Offshore scallop fleet revenue per vessel and number of vessels active (1983-1998)

8.5 Crew shares

Lay arrangements are established by collective agreements for unionized offshore scallop crew-members and are similar for the non-unionized vessels. Crew shares have remained the same proportions of gross vessel revenues less operating expenses from 1986 to 1996 - crews share 60% and vessels take 40%.

8.6 Employment

There has been a negative impact on employment through the vessels removed from the offshore fishery. However, for the remaining crews opportunities for work have improved. The offshore reduction in vessels, initially targeted at 50%, has been surpassed. The reduction was gradual with the largest portion occurring between the years 1987 and 1992. Even today, the fleet size continues to adjust to current economic conditions. In several cases, down-sizing paralleled vessel replacement, but in some companies, a more direct aggressive approach was adopted.

The total number of crew affected over the 10-year period approximates 700 through eliminating 42 vessels since 1986 with an average crew size of 17. Seniority dictates employment in the offshore fishery that has unionized crews. Job-sharing is not a feature except in one company. Anecdotal evidence suggests that during the 1987-1992 period, approximately 300 crew members moved from the offshore to the inshore scallop fishery, which at the time was lucrative. It is estimated that 20% of inshore captains came from offshore operations and that as many as 200 crew from the offshore displacement remain in the inshore fishery. Discussions with employment centres suggest that most displaced crew-members have continued their attachment to the fishery; others have found work in construction and forestry. Some have left to work in the United States and other parts of Canada. It is understandable that the inshore fishery became an employment opportunity for offshore individuals with specific fishery skills. The slow and steady vessel removal in the offshore fishery, coupled with the ability of the local labour market at the time to absorb these workers, suggests a net benefit to the economy.

The earnings of captains and crew has improved since 1986, partialy due to improved fishing conditions, i.e. available quotas as well as an overall reduction in crew size. The increased wealth is shared among fewer crew as enterprises attempt to maximize profits. Thus, the ability of enterprises within this fishery to ensure a more stable harvest environment has improved productivity, not only at the corporate level, but also from the individual’s perspective.

8.7 Local employment effects

Community-impacts appear to be minimal as the offshore fleet has traditionally landed in only five or six ports. In Yarmouth, N.S. the transfer of one complete offshore company to Lunenburg reduced the overall landings but, given the major port activities in the fishery in inshore scallops, groundfish, herring and lobster, the effect of this closure was not considered to be major. As well, the new activity in Lunenburg was as an employment offset. The total number of vessel landings is down to less than 500 from approximately 800 in the early 1990s. Offshore revenues are distributed locally, but crews tend to be more varied in residence creating a less concentrated impact.

9. CONCLUSIONS

The primary conclusion from this comparison of the two management approaches is that a property-rights regime is superior to a competitive-fishery approach. Under an EA programme the offshore fleet was successful at matching capacity to the resource. Because fleet-reduction occurred gradually, the impacts on employees and associated communities were reduced. However, this reduction took place at a time when displaced workers could be absorbed into the inshore scallop, lobster and groundfish fisheries, which were then in a growth phase. With this balancing influence it is difficult to say what the impact would have been if reduction had taken place during a downturn in other fisheries and in the economy in general. Nevertheless, the EA programme has been highly successful at reducing fishing capacity in an orderly and efficient manner (as predicted by theory: e.g. Arnason 1996, Townsend 1998). From an economic viewpoint, the expected benefits of the EA programme have generally been realized. Firms with their own allocations are motivated to harvest their catch as efficiently as possible because they reap the financial gains of doing so. Since 1986 offshore scallop firms have adjusted their fleets to deploy just enough fishing capacity and fishing effort to efficiently harvest their allocations. Not only has the available scallop resource been harvested with less than half the number of vessels and crew that were engaged prior to the implementation of the EA programme, the amount of effort in terms of sea-days used to harvest it has been significantly reduced as well. This has resulted in increased economic returns per vessel as the fleet has been rationalized (Figure 7) and since the available catch can be harvested with less effort and cost, savings are generated by the fleet as a whole. This contrasts with quota-fisheries without individual shares, or competitive-fisheries where the race for available resource causes inefficiencies and waste in the production of effort. In the case of the inshore scallop fleet this has resulted in higher harvesting costs and subsequent lower vessel earnings (Figure 5).

The uncontrolled competitive inshore fishery failed to rationalize capacity, resulting in growth and recruitment over-fishing of all the major stocks (again, as predicted by theory: e.g. Arnason 1996). Confining a large dedicated fishing fleet to a restricted fishing area (as determined in the 1986 agreement between fleets), during a period of high and increasing effort, has proven to be detrimental to this resource. The need for a “fallow” time for heavily-fished scallop beds to recover is extremely difficult to maintain in situations where the financial and social demands of a competitive fishing dominate industry activities. The use of closed areas and time-periods have proven insufficient to stem over-fishing of scallop beds and indicates the need for far more extensive and restrictive controls.

The regulatory framework supporting the competitive fishery was insufficient to match fleet over-capacity and excess fishing effort on the resource. Further, there was a failure of the fleet to self-regulate and implement the voluntary licence reduction programme agreed to in 1986. Over-capacity was further exacerbated by fleet adjustments in 1991 with the creation of groundfish ITQs. Had recruitment remained moderately high and had the groundfish fishery flourished through this period, it is unlikely that scallop stock collapse would have occurred, even with the relatively high fishing on the beds. Thus, the failure of the inshore scallop competitive fishery is specifically a failure to adjust fishing effort to the optimal catch and size composition of the available resource. The resulting impact on workers and their communities has been great, and economic conditions are such that opportunities for employment in other sectors are almost non-existent.

The result of the long-term over-fishing and the associated decline in fleet viability in the inshore fishery has been an increase in demand for government programmes and services during the transition period; this has not been necessary within the offshore scenario. In the offshore fishery, dispute resolution was internalized, minimizing the need for government intervention.

And last, neither management approach has removed the dependence of these fisheries on scallop year-class strength. In a relatively long-lived species such as the sea scallop, which sees several good recruitment events within the lifetime of a cohort, has relatively low natural mortality in the recruited year-classes, and increases meat and gonad-yield occur throughout its lifetime, it should be possible to further stabilize landings. This will be one of the challenges of the next decade.

10. ACKNOWLEDGEMENTS

We thank Dr. T.J. Kenchington (Gadus Associates, Musquodoboit Hbr., N.S.) for his valuable comments and discussion, Dr. G. Robert, Mr. M. Lundy (Science Branch, Dept. Fisheries and Oceans, Dartmouth, N.S.) and two anonymous reviewers for providing comments on this paper.

11. LITERATURE CITED

Anderson, L.G. 1986. The Economics of Fisheries Management, The Johns Hopkins University Press, Baltimore and London, 296pp.

Apostle, R., B. McCay and K.H. Mikalsen 1997. The political construction of an IQ management system: The mobile gear ITQ experiment in the Scotia Fundy region of Canada, Social Implications of Quota Systems in Fisheries, G. Palsson and G. Petursdottir, Copenhagen, Nordic Council of Ministers, 27-49.

Arnason, R. 1996. Property rights as an organizational framework in fisheries: The cases of six fishing nations, Taking ownership: Property rights and fishery management on the Atlantic coast, B.L. Crowley, Halifax Nova Scotia, Atlantic Institute for Market Studies, 99-144.

Brander, L. and D.L. Burke 1995. Rights-based vs. competitive fishing of sea scallops Placopecten magellanicus in Nova Scotia, Aquatic Living Resources, 8, 279-288.

Campana, S, and J. Hamel 1992. Status of the 1991 4X cod fishery, Canadian Atlantic Scientific Advisory Committee Research Document, 92/46, 42pp.

Digou, D. 1994. Scotia-Fundy region harvesting sector overview. 1986-1993, Economics Comm. Ann. Rep., 144, 39pp.

Hurley, P.C.F, J. Simon and K.T. 1992. Frank, Assessment of 4X haddock in 1991, Canadian Atlantic Scientific Advisory Committee Research Document 92/63, 40pp.

Kenchington, E. and M.J. Lundy 1996. An assessment of areas for scallop broodstock protection in the approaches to the Bay of Fundy, DFO Atlantic Fisheries Research Document, 96/13, 21 pp.

Kenchington, E., M.J. Lundy and V. Hazelton 1994. Seasonal changes in somatic and reproductive tissue weights in wild populations of Placopecten magellanicus from the Bay of Fundy, Canada, In: Bourne, N.F., Bunting, B.L. and Townsend, L.D., eds, Proceedings of the 9th International Pectinid Workshop, Nanaimo, B.C., Canada, April 22-27. 1993, Volume 2, Canadian Technical Report of Fisheries and Aquatic Science, 154-162.

Kenchington, E., M.J. Lundy and D.L. Roddick 1995. An overview of the scallop fishery in the Bay of Fundy 1986 to 1994 with a report on fishing activity trends amongst the dual licence holders in the Full-Bay fleet, DFO Atlantic Fisheries Research Document, 95/126, 40pp.

Kenchington, E., M.J. Lundy and S.J. Smith 1997. Bay of Fundy Scallop Stock Assessment: Areas 2, 3, 4, 5, 7, Canadian Stock Assessment Secretariat Research Document, 97/63, 98pp.

Parsons L.S. 1993. Management of marine fisheries in Canada, Canadian Bulletin of Fisheries and Aquatic Science, 225.

Robert, G. and M.A.E. Butler 1995a. Georges Bank scallop stock assessment-1994, DFO Atlantic Fisheries Research Document, 95/140, 37pp.

Robert, G. and M.A.E. Butler 1995b. Activity report for 1994-Scotian Shelf scallop fishing grounds, DFO Atlantic Fisheries Research Document, 95/141, 28 pp.

Serchuk, F.M. 1983. Seasonality in sea scallop shell height-meat weight relationships: review and analysis of temporal and spatial variability and implications for management measures based on meat count, Woods Hole Laboratory Research Document, 83-35, 30pp.

Townsend, R.E. 1998. Beyond ITQs: property rights as a management tool, Fisheries Research, 37, 203-210.

Appendix 1
Regulations

The following paraphrases and summarizes the regulations applicable to the inshore and offshore scallop fleets from 1986 to 1996. Shaded areas indicate regulations applicable to both fleet sectors. This summary does not consider variation orders issued annually to adjust seasons and meat counts, or to establish specific closures for conservation reasons. On 8 January 1986, the Atlantic Fishery Regulations, 1985 came into effect. These regulations were the result of a consolidation of the Atlantic Coast Marine Plant Regulations, the Atlantic Crab Fishery Regulations, the Atlantic Fishery Regulations, the Atlantic Fishing Registration and Licensing Regulations, the Atlantic Herring Fishery Regulations, the Fishing Gear Marking Regulations, and the Lobster Fishery Regulations.

1986

Regulations applicable to the offshore scallop fleet

1. Scallop Fishing Areas (SFAs) 1 to 28 were created and closed times established.

2. Offshore scallop vessels (>65’) were prohibited from fishing in SFA 28 (Bay of Fundy) and from the Territorial Sea in SFAs 25 and 26 (4VWX).

3. A 33 per 500g average meat count was in effect for all SFAs except 21, 22 and 24 (Gulf of St. Lawrence). (Variation orders were used annually to adjust this count in certain SFAs.)

4. The average count was to be determined on the basis of eight or more samples of meats, each sample weighing 500 grams or more.

5. Offshore vessels were restricted

- to trip limits of 13,700 kg (30,000 lb.), and
- quarterly limits not to exceed 82,200 kg (181,000 lb.)

6. Offshore vessels could not fish for more than 12 consecutive 24 hour periods.

7. It was prohibited in any SFA to have scallop drags onboard a vessel unless that vessel was authorized to fish for scallops in that area at that time, or the scallop drags had to be unshackled and stowed.

1. Scallop Fishing Areas (SFAs) 1 to 28 were created and closed times established.

2. That portion of SFA 28 from Parkers Cove to Sandy Cove within 6 nautical miles from shore was closed from May 1 to September 30 (Inside Fishing Zone).

3. The waters of Digby Gut and Annapolis Basin were closed from May 1 to November 30.

4. Inshore vessels (<65’) were exempted from meat count regulations except in the SFAs 21, 22, 24 and 27 (Gulf of St. Lawrence and Georges Bank).

5. Inshore vessels only permitted to fish in SFA 27 (Georges Bank) under a written authorization issued by a fishery officer.

6. Written authorizations were valid only for the period specified therein.

7. Scallops caught and retained by holders of a written authorization were deemed to have been caught in SFA 27 (Georges Bank).

8. It was prohibited in any SFA to have scallop drags onboard a vessel unless that vessel was authorized to fish for scallops in that area at that time, or the scallop drags had to be unshackled and stowed.

9. Scallop Fishing in SFA 28 (Bay of Fundy) was prohibited using a drag with rings less than 82 mm inside diameter.

Amendments to Regulations applicable to the offshore scallop fleet

1. Vessel classes for the nine offshore scallop license holders were introduced and closed times established for each vessel class in each of the SFAs.

2. The regulation which prohibited offshore scallop vessels (>65’) from fishing in SFA 28 (Bay of Fundy) and from the Territorial Sea in SFAs 25 and 26 (4VWX) was revoked but the same rules were implemented as a condition of the offshore scallop fishing licenses.

3. License fees were increased (essentially doubled).

4. A definition for “shell height” was introduced.

5. A 45 per 500 gram average meat count was specifically implemented for SFA 25 (Eastern Scotian Shelf).

6. Any scallops caught and retained or found on board a vessel were deemed to have been caught in the SFA area in which the vessel was authorized to fish.

7. It was prohibited to have on board a vessel any scallops caught in SFA 27 (Georges Bank) unless the shell height was 105 mm or greater.

8. Offshore scallop vessels were required to hail to a fishery officer 12 hours before a vessel arrived at port

- the port where the scallops would be landed, and
- the time when scallops would be landed.

9. Created an offense to land at a port or time different than that hails unless by permission of a fishery officer.

10. A fishery officer could direct that scallops not be landed until they were first inspected and made it an offense not to comply with the fishery officer’s direction.

11. Trans-shipping of scallops to another vessel was prohibited.

12. Offshore scallop license holders were required to weigh all scallops caught in SFAs 26 and 27 (Browns/German banks and Georges Bank) at the time of landing.

1. Vessel classes were introduced and closed times established for in each of the SFAs.

2. A definition for “shell height” was introduced.

3. That portion of SFA 28 from Parkers Cove to Sandy Cove within 8 nautical miles from shore was closed from May 1 to September 30.

4. A 72 per 500 gram average meat count was specifically implemented for SFA 28 (Bay of Fundy) from May 1 to September 30 and 55 per 500 gram average meat count from October 1 to April 30.

5. Any scallops caught and retained or found on board a vessel were deemed to have been caught in the SFA area in which the vessel was authorized to fish (also applied to inshore vessels fishing Georges Bank under written authorizations).

6. It was prohibited to catch and retain or have on board a vessel in SFA 28 (Bay of Fundy) any scallops unless the shell height was 76 mm or greater.

7. Inshore scallop vessels fishing in SFA 27 (Georges Bank) under a written authorization were required to hail to a fishery officer 12 hours before a vessel arrived at port

- the port where the scallops would be landed, and
- the time when scallops would be landed.

8. Created an offense for inshore vessels operating under a written authorization to land at a port or time different than that hails unless by permission of a fishery officer.

9. A fishery officer could direct that scallops not be landed from inshore vessels operating under a written authorization until they were first inspected and made it an offense not to comply with the fishery officer’s direction.

10. Trans-shipping of scallops from inshore vessels, operating under a written authorization, to another vessel was prohibited.

11. Inshore scallop license holders were required to weigh all scallops caught in SFA 27 (Georges Bank) at the time of landing.

12. It was prohibited for inshore vessels in SFA 28 (Bay of Fundy) to fish with

- an offshore scallop drag;
- a Green sweep scallop drag;
- a scallop drag or drags greater than 5.5 m in total length;
- a scallop drag with a bag that has rings of less than 82 mm inside diameter.

Amendments to Regulations applicable to the offshore scallop fleet

1. Offshore vessel classes were revoked from the regulations but implemented as a condition of the fishing license.

Amendments to Regulations applicable to the offshore scallop fleet

1. It was prohibited in any SFA, other than SFA 26 and 27 (Browns and German banks and Georges Bank), to have scallop drags onboard a vessel unless that vessel was authorized to fish for scallops in that area at that time, or, the scallop drags had to be unshackled and stowed.

2. In SFA 27 (Georges Bank) it was prohibited to have scallop drags on board a vessel unless the vessel was authorized to fish for scallops in that area at that time even if the drags were unshackled and stowed.

1. SFA 28 (Bay of Fundy) was subdivided into four SFAs (28A, 28B. 28C, and 28D.

2. The seasonal scallop fishing closure around Grand Manan Island in SFA 28B (from April 1 to 08:00 on the second Tuesday in January next following), previously implemented as a license condition, was formally implemented as a regulation.

3. The scallop fishing closure for waters within approximately 2 miles of the shore from the Canada/US boundary to Joes Point in SFA 28B, previously implemented as a license condition, was formally implemented as a regulation.

4. It was prohibited in any SFA, other than SFA 26 and 27 (Browns and German banks and Georges Bank), to have scallop drags onboard a vessel unless that vessel was authorized to fish for scallops in that area at that time, or, the scallop drags had to be unshackled and stowed.

5. In SFA 27 (Georges Bank) it was prohibited to have scallop drags on board a vessel unless the vessel was authorized to fish for scallops in that area at that time even if the drags were unshackled and stowed.

6. In SFA 26 (Browns and German banks) it was prohibited to have scallop drags on board a vessel unless the vessel was authorized to fish for scallops in that area at that time, or, the vessel was transiting SFA 26 under a written authorization from fishery officer, and, the scallop drags were unshackled and stowed.

7. Written authorizations for vessels transiting SFA 26 (Browns and German banks) were to be issued at the request of the master of the vessel if the home port was in SFA 29 (Territorial Sea) and that vessel was authorized to fish in SFA 28A, 28B, 28C or 28D, at that time.

8. Written authorizations must state the period for which the authorization is valid.

Amendments to Regulations applicable to the offshore scallop fleet

1. License fees were amended and the new fee based on $547.50 per tonne of scallop meat allocated (previous fees were based on the number of vessels eligible to be licensed by each company).

1. License fees were amended and the new flat rate of $6,500 applied (previous fee was $200).

The Orange Roughy Management Company Limited - A Positive Example of Fish Rights in Action - G. Clement

G. Clement
Clement and Associates Ltd
PO Box 2145, Tauranga, New Zealand
<[email protected]>

1. INTRODUCTION

New Zealand’s deepwater fisheries for orange roughy and oreos earn $US67 million annually. Within New Zealand’s 200 mile Exclusive Economic Zone (EEZ), these fisheries are predominantly found in depths between 800 and 1200 metres. New Zealand first developed these fisheries in the late 1970s, principally through joint venture arrangements with trawler operators from other countries. Since the late 1980s, almost all the catches have been taken by New Zealand domestic vessels.

In 1983, a quota system was introduced in the deepwater fisheries for orange roughy, squid, oreos, silver warehou, hake, ling and hoki. Initial allocations of quota were based on an assessment of catch history, investment in vessels and commitment to processing. These deepwater quotas were initially non-transferable and were converted into Individual Transferable Quotas (ITQs) in 1986 when the comprehensive Quota Management System (QMS) was introduced, principally to conserve and restructure inshore fisheries.

The objective of the QMS is sustainable fisheries management by maintaining fishstocks at or above the size that will produce the maximum sustainable yield (MSY). The setting and enforcement of conservative total allowable commercial catch (TACC) levels ensure resource conservation. A comprehensive scientific stock assessment programme underpins determination of the appropriate TACC levels. Each TACC is allocated as ITQs, which grant the right to catch a specified proportion of the TACC in perpetuity. Thus the property right, by ITQ, is a permanent harvest access right to a prescribed fishery for an annually determined tonnage of catch.

Quota-owners pay for the full costs of management and enforcement of their fisheries. It is therefore in their interests to act co-operatively, both to ensure that the appropriate information and management decisions are made and that value is obtained from their investment in the research and management costs of these fisheries. Their objective is the same as the Government’s - sustainable fisheries.

2. THE ORANGE ROUGHY MANAGEMENT COMPANY LIMITED

In 1991, a consortium of orange roughy and oreo dory quota-owners united to form The Orange Roughy Management Company Limited (ORMC). Their objective was to maximise the value of the deepwater fisheries through sustainable management.

All fisheries are market driven - without markets there is no basis for fishermen and seafood companies to risk the substantial investments required to develop and to maintain fisheries. The Orange Roughy Management Company’s vision is to maximise the long-term value of orange roughy and oreo fisheries in the world’s best markets. This value can only be maximised by ensuring continuity of supply of consistent, high-quality products to niche markets that demand them. Long-term consistency of supply only results from sustainably managed fisheries.

Fish rights, through ITQs, provide the incentives for individual seafood companies, who would be competing for resources in an open access fishery, to work together allowing co-operation to replace competition. Co-operation can best happen through a quota-owners’ company, such as ORMC, which provides a vehicle for the combination of their independent expertise and resources to the common purpose of improving the sustainable management and utilisation of their fisheries. ORMC, represents 99% of orange roughy and oreo quota-owners, and acts on their behalf to:

i. add value to shareholders’ businesses through a direct involvement in improved management of these fisheries

ii. provide a united and credible voice on all matters concerning the sustainable management and utilisation of New Zealand’s deepwater fisheries

iii. provide professional capability to undertake a range of projects to improve the management of these resources including fisheries research, strategic and fisheries planning, dispute resolution and relations with other stakeholders who have an interest in these fisheries and

iv. provide and maintain a direct dialogue with the Government and, in particular, the Minister of Fisheries, who has a statutory role as the fisheries manager within the New Zealand legislature, and his officials within the Ministry of Fisheries.

3. BENEFITS ACHIEVED THROUGH ITQs

3.1 Range of benefits

The achievements of deepwater quota-owners through The Orange Roughy Management Company cover a broad range of activities highlighted below:

i. Management benefits
ii. Economic benefits
iii. Research benefits and
iv. Development benefits

Within the New Zealand deepwater fisheries, cooperative action by quota-owners has enhanced sustainable management measures - Fish rights secure sustainability.

Agreements, through civil contracts between ORMC, quota-owners and the Government, have implemented self-regulatory management controls that include:

i. closing areas to fishing

ii. establishing and maintaining catch limits for separate sub-areas within the TACC set for the large quota management

iii. areas voluntarily reducing catches through the setting aside of quota and supporting TACC reductions and

iv. spreading catches amongst discrete geographic locations, such as seamounts, to provide a spread of fishing effort.

There are eight QMAs for orange roughy within the quota management system. The main fishing grounds are distributed around the New Zealand EEZ, along the 1000 metre contour and on topographical features such as ridges, seamounts and canyons. Experience has demonstrated that fisheries in relatively localised areas appear to behave independently and fishing pressure can act to reduce population sizes. For orange roughy, the biomass which will support the MSY is estimated to be 30% of the size of the unfished biomass. On this basis the management strategy is to: fish the population size down by 70%, set a sustainable catch level and monitor the ongoing management.

Through the ORMC, industry has identified separate fisheries within a number of these large quota management areas and has reached agreement with the Minister of Fisheries to manage these fisheries separately, within the Quota Management System - effectively setting up paddocks, or delimited management areas, within each QMA. These measures allow for moderation of fishing pressure on a localised fishery basis.

Quota-owners cooperate to ensure that catches are within agreed limits on separate fisheries within the main QMAs. For example, the large ORH3B fishery has separate catch limits set in five areas, determined after assessment of the information that is available and in consultation with the Minister and then set in place through civil contract among the quota-owners. Within this process, where necessary, catch limits have been set at zero to provide for increased rates of recovery where the populations of localised fisheries have been assessed to be below the level that will produce the MSY. The Sub-Antarctic area, the southern portion of New Zealand’s 200 mile zone, remains substantially unexplored. These unsheltered waters are exposed to the roaring forties and are notorious for their storms and high sea-states. Exploration of deepwater fisheries is expensive, difficult and dangerous. Quota-owners are progressively and cooperatively exploring these areas. An agreement with the Minister of Fisheries provides that quota-owners will voluntarily limit catches to 500 tonnes within a 12 nautical mile radius of any geographic feature. This is to both ensure spreading of the catch, to explore as much area as possible and to reduce the fishing impact on any new resource before its long term productive capacity can be assessed.

Quota-based management systems are information-intensive. The management target, to maintain the stock at or above the biomass level that will produce the MSY, requires detailed knowledge on a fishery-specific basis of a range of life-history parameters, including age, growth, stock boundaries, stock sizes and available yields. Collection of a range of biological data from the fishing fleet will increasingly become an important component in the assessment and management of these fisheries. Within the deepwater fisheries, ORMC has successfully established a scheme to collect a range of biological information on the new and developing fisheries using a mix of independent expertise, trained industry personnel and quality assured processes to assist with the management of these fisheries.

The oreo fishery currently comprises three species: smooth, black and spiky oreo, which are managed under a single TACC in each of four Quota Management Areas. There is agreement to manage fisheries for the main two species (smooth and black oreo) as separate species but the legislative and administrative changes required cannot be completed until 2001. In the meantime, ORMC has taken the initiative to develop a comprehensive fisheries plan for the management of oreo and set in place measures to separately manage smooth and black oreo in the main fishery on the Western Chatham Rise.

3.3 Economic benefits - Rights create rent

Fish rights also provide economic benefits. Open access fisheries not only result in poor resource conservation, but they also result in dissipation of resource rents. Fish rights create rents. ITQs have provided the incentives for the more efficient operators to invest in additional quota, new vessels, improved harvesting and processing capabilities and market development. Cooperation in management has improved dialogue between quota-owners and resulted in a broad range of initiatives that have increased cooperation in harvesting. For example, as management has become increasingly more complex with smaller areas and lower catch limits, the larger quota-owners have undertaken to lease, or to catch quota that is owned by smaller operators on their behalf. In these cases the contracting harvester may only charge for his additional direct marginal costs. This results in improved utilisation of existing investments in vessels, rationalisation of the fleet and processing capabilities and substantially less fishing pressure on the grounds. ITQs enable the rationalisation and reduction of harvesting costs.

ITQs also enable higher market returns. Security of resource-access allows quota-owners to focus on market needs. This has resulted in substantial increases in fish quality and a move away from bulk fishing during spawning seasons to fishing for small catches on a year-round basis to optimise fish quality and to ensure year round market supply. For example, during the late 1980s over 90% of the orange roughy catch from the Chatham Rise was taken during the spawning season, where 20 or more large trawlers operated in a very small area. Catch utilisation was sub-optimal with fish and product quality loss resulting from burst cod-end bags, crushing of the catch, spoilage and the need to reprocess on shore.

Today less than 10% of the Chatham Rise catch is taken during the spawning season. The majority is taken throughout the year by a fleet of less than 10 vessels, with fish quality being optimised through small catches, targeting of non-spawning fish and, in many cases, processing onboard to frozen-at-sea consumer-ready products. As a result, New Zealand companies have been able to obtain price premiums over competitors, not only because of quality and consistency of supply, but also in recognition of access to ongoing supplies into the future.

The security of resource-access provided by fishing rights within New Zealand has resulted in the most modern and efficient fishing fleet in the world. ITQs enable quota-owners to make both long-term investment decisions and to optimise the use of technology and capital on a year-by-year basis. There are now 15 modern factory trawlers in the New Zealand fleet each of which annually spend in the order of 320 days at sea. This is a direct result of a successful rights-based fishery providing secure ongoing access to resources and the environment for the optimum investment and use of technology and the creation of real economic rents.

3.4 Improved research - Rights require responsibility

Quota-owners, more than any other stakeholder in the fishery, have a need to know the productive limits of the fishery. It is in their interests to ensure sustainable management more than any other stakeholder. Their whole investment is underpinned by resource-access and by sustainable management. Management by ITQ requires significant levels of information. It is the responsibility of quota-owners to ensure this information, through fishery research, is available. A successful Fish rights regime requires that this responsibility be met.

In New Zealand quota-owners pay all the costs of fisheries management, research and enforcement. Thus the need to know the productive limits is coupled with the need to ensure that the substantial investments made in scientific are value-driven and can directly assist in the management and conservation of these resources.

Quota-owners have not only insisted on quality research but also understand that this work needs to be undertaken by independent organisations with international expertise and standing. ORMC shareholders have invested an estimated $NZ30 million in research over the past 10 years both through direct purchase and through government levies.

The ORMC has recognized that improved research is required over a wide range of issues and ORMC has directly contracted research in the following areas:

Stock discrimination

Current techniques in genetics have a relatively low power to determine stock differences and industry has funded research into the development and assessment of new techniques. ORMC negotiates and manages this research on behalf of quota-owners.

Age and growth

There remains uncertainty about the age, growth and recruitment parameters in deepwater fisheries. For management purposes it is critically important to have good estimates of these parameters to assess the productivity, and hence annual sustainable yields from these resources. Assessment of New Zealand’s deepwater fisheries are based on the conservative assumption that orange roughy and oreo are slow-growing and long-lived fish. These assumptions are based on the interpretations of rings and otoliths as annual marks. However the periodicity of deposition of these rings remains unvalidated and thus unknown.

Orange roughy quota-owners, through ORMC, have funded studies to investigate alternative techniques and to validate existing techniques, including studies using radioactive isotopes, C₁₄, and endolymph chemistry. This has proven a difficult field to make positive progress but work is ongoing

Biological sampling

A range of biological parameters is routinely measured from commercial catches in exploratory areas. Funding and coordination of this project is managed through ORMC.

Environmental studies

Increasing awareness on the need to consider the possible impacts of fishing activities on the marine environment require quota-owners to take a broader view of the relevant factors in developing fisheries plans. Throughout the first 15 years of the Quota Management System the focus has been on determining and setting sustainable catch limits for target species. Quota-owners now accept the need for a broader focus and are working with Ministry of Fisheries officials and other stakeholders to develop a strategy for the management of non-target benthic fauna in areas such as deep-water seamounts.

Biomass surveys

A challenge has been to count orange roughy at depths of 1000 metres or more, in dense aggregations often close to the bottom and over sloping ground. Earlier techniques such as research trawl-surveys, egg-surveys and CPUE indices have proven useful during the fishing-down phase, where the management objectives have been to harvest the population size to the B_MSY level. These techniques provide relative indices of biomass and are useful to track changes in the resource side. Once “fishing down” to the B_MSY level is completed the sizes of stocks managed at B_MSY are not expected to change significantly. This leads to the need for precise estimates of biomass and preferably estimates of absolute biomass rather than relative indices. This is a challenge that scientists have yet to meet. To date ORMC has invested in excess of $NZ14 million in the development of acoustic technology for the biomass-assessment of deepwater stocks, and research and development are ongoing.

Stock assessment

Assessment of deepwater stocks through modeling techniques is at an advanced stage within New Zealand and ORMC has commissioned the University of Washington to develop Bayesian models applicable to these fisheries.

Risk analyses

Unfortunately the nature of fisheries science and stock assessment, particularly in these deepwater species, is such that the results are often imprecise. ORMC has promoted the use of a range of risk analyses to assist managers to make informed decisions.

The transition from research purchased by Government to research purchased by industry is an inevitable and desirable outcome of Fish rights. The responsibilities of the quota-owners require them to be informed about the state of their fisheries and to use this information to improve management.

As New Zealand moves towards the quota-owners directly purchasing their required research, the focus will continue to be on the quality of research and not just the quantity. The results must also be relevant to the application of fisheries management and not driven by the service providers’ interests or capabilities.

In the direct purchase of research information, quota-owners also need to ensure that they can satisfy the concerns of outside commentators and stakeholders at large. Thus research must be of the highest quality and of internationally accepted standards and independent from the purchaser. The costs need to be relevant to the size of the fishery, research outcomes need to be relevant to the management of the fishery and provide value for the investment.

The commercial fleet operates in fisheries on a year-round basis and provides the optimum basis for data-gathering supplemented by the judicious application of fishery independent research. Quota-owners have the unique incentive to ensure that the research is both relevant and provides value.

3.5 Development benefits - Cooperation replaces competition

The development of improved fisheries management processes is another positive outcome of Fish rights. In New Zealand, management focus is shifting to the development of comprehensive fisheries plans, led by quota-owners. These plans will encapsulate the vision, strategies and processes for the ongoing management and development of each fishery, including important issues that need to be addressed, the information requirements and the management responses at pre-agreed trigger points or in response to other outcomes. Co-operation among quota-owners and between them and with the government has increased.

Deepwater quota-owners have supported all recent TACC changes, which have been based on scientifically-obtained information. In several fisheries, including Chatham Rise, Puysegur and ORH7A, quota-owners have set in place catch-limits below those recommended by scientists in order to increase the rate of rebuilding of these fisheries.

Fisheries do not exist in themselves - they must first be discovered and developed commercially to determine both their commercial and resource viability. The development of deepwater fisheries has proven risky and costly. These fisheries have all too often been found in remote, localized and inhospitable areas and require specialist expertise and technology to develop. Development of deepwater fisheries is not too dissimilar to looking for a needle in a haystack but at considerably greater commercial expense.

Security of access through quota has enabled the investment in leading-edge technologies such as swath-mapping which acoustically maps the ocean floor in swaths or strips up to 12 kilometres wide at orange roughy depths. The data can be digitally-enhanced to produce a range of products including acoustic images of the seafloor, the underwater equivalent of aerial photographs.

Swath-mapping also enables a much clearer understanding of these deepwater habitats and their nature through refined bathymetric outputs. This information will be critical in further improving the management of these fisheries, particular when we look for the assessment and management of possible environmental issues.

New Zealand leads the world in this field for deepwater fisheries and through the ORMC, has now mapped more of New Zealand’s EEZ than any other group.

4. FISH RIGHTS IN ACTION

In summary, Fish rights have proven invaluable in the conservation and sustainable economic exploitation of resources within the New Zealand Quota Management System. The ORMC experience is that:

i. Fish rights secure sustainability
ii. Fish rights create rent
iii. Fish rights require responsibility and
iv. Under fish rights, co-operation replaces competition.

The Effects of Transferable Property Rights on the Fleet Capacity and Ownership of Harvesting Rights in the Dutch Demersal North Sea Fisheries - W. P. Davidse

W. P. Davidse
Agricultural Economics Research Institute, LEI - Burgemeester Patijnlaan 19
2502 LS The Hague, Netherlands
<[email protected]>

1. INTRODUCTION

This case study considers the development of fleet capacity and harvesting rights in the Dutch demersal North Sea fishery¹ since 1983. The Common Fisheries Policy (CFP) of the European Union was implemented in that year, which meant for this fishery a growing importance of harvesting rights. Individual vessel quota IQ for sole and plaice had already been introduced in 1976 within the framework of the North East Atlantic Fishery Convention (NEAFC)².

¹ In the Netherlands known as ‘Cutter fishery’.

² The case study of W. Smit, “Dutch Demersal North Sea Fisheries, Initial Allocation of Flatfish ITQs” describes the initial allocation of these individual vessel quota (FAO press).

The CFP of the European Union (EU) requires setting annual Total Allowable Catches (TACs) for almost all commercial species landed by vessels of the member states. The Council of Ministers of the EU decides annually on these TACs, which are proposed by the European Commission. Each country has its own management system to fullfil the TAC obligations. The Dutch fishing sector is so far the only one within the EU that operates under an individual transferable quota (ITQ) system.

The Dutch demersal North Sea fishery consisted by the end of 1983 of 595 vessels, owned by some 500 firms. The fishery is composed by four main segments:

i. Beam trawlers, targetting sole and plaice, they are by far the most important segment. Most of these vessels are equipped with an engine whose power exceeds 800kW

ii. Roundfish trawlers, concentrated in the 225-810kW engine-power range

iii. Vessels with a 221kW engine, mostly operating in different fisheries (beam trawling for flatfish, demersal trawl for cod and whiting and shrimp fishing) and

iv. Vessels under 221kW, generally specialised shrimp trawlers. A part of these vessels operate in the Wadden Sea, in the north of the Netherlands.

Table 1 shows some major characteristics of the demersal North Sea fishery. Recent figures have been added to demonstrate the important changes. The following sections of this paper explain how transferable property rights have influenced the changes in fleet-capacity and ownership of rights.

Table 1
Characteristics of the Dutch demersal North Sea Fishery in 1983 and 1998

Annual quota (tonnes)	1983	1998
Sole	15 400	14 600
Plaice	53700	35 300
Cod	22 900	14900
Financial results
Proceeds (mln NLG, deflated)1	840	607
Net profit (mln NLG, deflated)2	-44	39
Number of vessels	595	407
Value of harvesting rights per vessel (on average, NLG)1 2	150 000	5 000 000

¹ Deflated for 1983 on the basis of the NLG purchase power in 1998.
1 NLG= 0.45 EURO or 0.49 US$.

² Estimated on the basis of market prices.

Source: Ministry of Agriculture, Nature management and Fisheries; Shipping Inspection; Dutch Agricultural Economics Research Institute, LEI.

Transferability of the IQs for sole and plaice was officially allowed in 1985 by the Ministry of Agriculture and Fisheries since informal trade of these documents had occurred more frequently and more in the early 1980s. An extension of rights-based fishing came in 1994 when ITQs for cod were introduced and then in 1996 with the implementation of herring and mackerel rights. As a result, all quota species have been brought under an ITQ regime nowadays.

Co-management groups have pooled the ITQs of their members since 1993. This results in a group-quota for eight different management groups whereby the board of each group is responsible for compliance with this group-quota. The ownership of the rights remains with the individual holders. The groups facilitate trade, hiring and renting of the ITQs between their members, which makes the system far more flexible. The rights can be used as a collateral for a loan; in fact, the ITQs always serve as a security for the bank when a loan is acquired, for example to finance a new vessel.

Investments in ITQs used to be encouraged by a fiscal allowance for depreciation. This included a 12.5% annual depreciation from the purchase price of the right. Trade in the 1990s has led to high prices for the ITQs. In fact they have become an important production factor for the firms (as the high value of the harvesting rights in Table 1 indicates). The sole and plaice ITQs are responsible for the major part of this value.

Apart from the ITQs the Dutch rights-based fisheries management nowadays consists of a number of other individual rights:

i. Licences, expressed in quantities of horsepower-per-vessel, introduced in 1984. These transferable rights aim to limit the total engine power of the sea-going fleet and give an entitlement to fish on quota species. This licence scheme resulted from the first Multi-annual Guidance Programme (MAGP l), implemented in 1985 within the framework of the CFP. The target of the subsequent MAGPs has been the limitation of the capacity of fishing fleets in European Union (EU) waters.

ii. Transferable entitlements for shrimp fishing in the North Sea and in the Wadden Sea area.

iii. Entitlements to fish in the coastal zone, the so-called List l and ll documents, which may also be transferred.

iv. Limitation of gross tonnage (GT) per vessel, implemented in 1998, which has led to rising values for transferable GTs. This measure results from the Dutch obligations in MAGP lV, running from 1997-2001.

3.1 Characterizing fleet capacity

As stated in Section 1, the development of the fleet capacity will only be considered here for the period 1983-1998 since EU’s Common Fisheries Policy started in 1983. Individual quota changed gradually from limitations, towards valuable property-rights in the early 1980s and the transferability of these rights, officially allowed in 1985.

Specialised beam-trawlers, equipped with an engine exceeding 810kW (1100 horsepower) took the most important part (65%) of the total fleet capacity in terms of engine-power in 1983. These vessels target sole and plaice, taking turbot, cod and whiting as bycatch species. Their crew varies from 6-8 people.

The medium-size trawlers, with engine-powers ranging from 222-810kW operate in different fisheries such as otter-trawling and pair-trawling on cod and whiting, herring pair-trawling and also beam-trawling. This segment consisted of 173 vessels in 1983 counting for 24% of the total engine-power of the fleet. The 221kW vessels mostly operate in the beam-trawl and shrimp fishery, whereas most of the smallest vessels are specialised shrimp vessels. Engine-power is mostly used to express the capacity of the Dutch demersal fleet since this parameter is likely to have the main influence on the catches of the vessels. In particular for the beam-trawlers this relationship is rather clear. Table 2 gives an overview of the fleet capacity and its development.

Table 2
Dutch demersal North Sea fleet, number of vessels and total engine-power

	1983	1998
Total number of vessels	595	407
Number of vessels as to engine-power
0 - 190kW	141	82
191 - 221 kW	78	142
222 - 1104kW	295	32
>1104 kW	81	151
Total engine-power (kW)	367 000	319 000

Source: Ministry of Agriculture, Nature management and Fisheries; Shipping Inspection; LEI.

Table 3
Fishing effort of the Dutch demersal North Sea fleet
(*100 000 horse-power-days)

Fishing method	1983	1998
Beam trawl	656	703
Otter trawl and pair trawl, roundfish	126	32
Pair trawl, herring	35	6
Shrimp trawl	33	38
Other	5	12
Total	855	791

Source: LEI.

3.2 Changes in fleet capacity over the period 1983-1998

The number of vessels has decreased significantly in this fifteen year period and the fleet composition changed dramatically (Tables 2 and 5). The mid-size vessels (222-1104 kW) almost disappeared and two other classes became far more important in 1998. These two segments, the ‘Euro-cutters’ (191-221 kW) and the bigger beamers (more than 1104kW) nowadays count for about 90% of the engine-power of the fleet. In terms of engine-power the capacity of the fleet diminished by 13%, whereas the fishing effort was at a 7% lower level in 1998. Thus, the average number of days-at-sea per vessel increased since 1983.

Table 4
Dutch demersal North Sea fleet, age profile of the vessels

Age	1983	1998
0-10 years	231	94
11-20 years	170	148
> 20 years	194	165
Total number of vessels	595	407

Source: Ministry of Agriculture, Nature management and Fisheries; Shipping Inspection; LEI.

Table 5
Dutch demersal North Sea fishery, changes in fleet capacity
1983-1998 (1983=100)

	Index 1998
Total number of vessels	68
Number of smallest vessels (0-90kW)	58
Number of ‘Euro-cutters’ (191-221kW)	182
Number of mid-size vessels (222-1104kW)	11
Number of bigger vessels (>1104kW)	186
Total engine-power (kW)	87
Total engine-power (standard kWs)1	77
Fishing effort (in horse power/days):
Beam trawl	107
Otter/pair trawl	25
Shrimp trawl	115
Total fishing effort	93

¹ Explanation see Section 3.2.

Source: Ministry of Agriculture, Nature management and Fisheries; Shipping Inspection; LEI.

The change in vessel numbers has been analyzed further in Table 6. It appears that different subsequent decommissioning schemes³ have had an important impact on the fleet capacity. The decommissioned vessels had to be scrapped or sold to third countries, i.e. countries outside the EU.

³ The first decommissiong scheme started in 1988.

Table 6
Dutch demersal North Sea fishery, additions to and withdrawals from the fleet in the period 1988-1998

	Number of vessels
Fleet at 31 December 1987	611
Period 1988-1998:
Newbuildings	+ 111
Second-hand, bought abroad	+ 22
Decommissioned	- 161
Other withdrawals1	- 176
Fleet at 31 December 1998	407

¹ Sold to other countries, re-flagged, changed to other activities, scrapped etc.

Source: Fisheries Directorate; Shipping Inspection; LEI.

3.3 Common fisheries policy

The establishment of the CFP in 1983 was the first and main influencing factor through the implementation of TACs in the framework of the conservation policy and the introduction of MAGPs resulting from EU structural policy. The CFP has led to several national measures which have caused major changes in the structure and scope of the Dutch demersal North Sea fleet.

The national quota levels in the 1980s for sole, plaice, cod and whiting caused a big imbalance between the capacity of many cutters and their fishing rights. A study by LEI in 1988 (Pavel 1988)⁴ pointed out that 70 000 - 100 000 horsepower-units of the operating fleet would face liquidity problems in the next 2-4 years, due to this disproportion. To comply with the EU TACs allocated to the Netherlands a number of measures have been implemented, such as distribution of the national quota through ITQs, days-at-sea regulations, decommissioning and heavy enforcement of the quota.

⁴ Pavel, S. et al. “Vooruitzichten voor de Nederlandse platen rondvissector op korte en middellange termijn”, LEI-DLO report nr 5.79, August 1988.

3.4 Decommissioning schemes

The first scheme started in 1988 and this was followed by subsequent programmes so that decommissioning grants could be obtained nearly throughout the whole period 1988-1998. Quota limitations for cod and whiting have forced most of the owners of otter- and pair trawlers to apply for decommissioning. This has been the main cause of the decline of the cutter fleet after 1988, in particular the dramatic decrease of the number of mid-size vessels. A total of 183 000 horsepower (135 000kW) from 161 vessels was withdrawn from the fleet in the period 1988-1998. The majority of these decommissioned vessels (120) belonged to the medium size group (222-1104kW).

A major intensification of enforcement of ITQs through monitoring of landings in 1988, which meant systematic control of landings carried out by some 100 inspectors, made the overcapacity of the fleet visible. This has contributed significantly to the effectiveness of the decommissioning schemes.

A maximum limit on the number of vessels entitled to fish within the 12-mile limit exists. This is a EU measure (Regulation nr. 55/87) whereby the concerned vessels are registered in two separate files. The power of the coastal vessels was permitted up to 300 HP (221kW). These entitlements have been the main cause of the increase of vessel power up to the 300 HP limit.

3.5 Economic performance and prices of fishing rights

The heavy enforcement, mentioned earlier, led to a sharp rise of prices for flat fish ITQs in 1988. The good profitability of the cutters in 1991 and 1992 kept these prices at a high level and even resulted in further price increases. The decommissioning process contributed importantly to the trade in ITQs in the period 1988-1998. This enabled those who remained in the industry to adjust their fishing rights to the available capacity of the vessel, by buying additional ITQs. The high Dutch prices for rights have stimulated purchases of different types of rights in other countries in the early 1990s, which led to re-flagging of vessels.

A special law for investment promotion (for all industries) was introduced in 1978. This allowed a deduction of a certain percentage (12% at a minimum) of the amount invested from the taxable income. In fact, it meant a diminishing amount of the income-tax, or corporate-tax and this stimulated new construction of fishing vessels in the period 1979-1988. This contributed to an increase of total fleet horsepower up to 1988. The investment allowance was abolished in 1988.

A good level of profitability in the years 1985-1987 and 1991-1992 stimulated the construction of new vessels, in combination (in the first period) with the investment allowances mentioned before. The existence of a second-hand market for vessels abroad enabled the investors in new vessels to sell their ‘old’ one at a rather high price and to transfer the horsepower licence from the vessel sold to the new one. In cases of expansion additional horsepower could be bought from those who withdrew their vessel from the Dutch fleet, apart from through the decommissioning scheme. However, this mechanism stopped nearly completely in the early 1990s, mainly due to the tightening of the licence schemes in the UK. This has caused a major fall in the demand for second hand vessels.

3.6 The role of transferable property-rights in changes to fleet capacity

As noted in Section 3.3, there has been a complex variety of causes for the changes in the capacity of the Dutch demersal North Sea fleet and it is difficult to assess separately the impact of transferability of rights separately. But it can be stated that the advent of input and output rights have contributed to many factors:

i. Withdrawals from the fleet, apart from decommissioning, to realise high earnings from selling of the ITQs.

ii. Decommissioning of vessels. Vessel owners who have left the fishery had to hand in their horsepower licence but they could keep their ITQ. The high earnings from these rights have stimulated decisions to decommission in a number of cases.

iii. Concentration of rights amongst the owners of the bigger beam trawlers, which has led to their dominating part of the fleet by these vessels in terms of total horsepower.

iv. The absence of a high level of new constructions in the 1990s after profitable years. The effective horse power ‘ceiling’ has prevented further fleet expansion. This constraint led to a shift in investments from vessels towards ITQs in the early 1990s. These investments in ITQs absorbed more or less the depreciation funds of the firms so that future new vessel-constructions will also be at a lower level than in the 1980s.

v. Re-flagging of vessels. The Dutch vessel owners have acquired much experience in the market for harvesting-rights. High prices for ITQs in the early 1990s prompted them to look at the situation abroad. Low prices for such rights in the UK and other countries have prompted operations to buy rights abroad by purchasing foreign firms. A number of Dutch cutters has been re-flagged to these foreign subsidary firms since they could not operate profitably at that time.

vi. In particular the possibility for hiring and renting of ITQs has contributed to a better adaptation of rules to business practices and enabled a better utilisation of the vessels and a more efficient uptake of quota. The co-management sytem, established in 1993, has created an important condition for this improved efficiency.

⁵ One of the co-management groups expelled three members in October 1999 and held under arrest one vessel because of ITQ over-fishing, Visserijnieuws 29 October 1999.

⁶ This advantage of co-management in an ITQ fishery has been emphasized by Dick Langstraat, Chairman of the Dutch Fish Board. Transfer of some competence from the individual right holder to the collective of the management group is necessary in that case (pers. comm.).

The lower capacity of the demersal North Sea fleet, shown in Table 5, has had several consequences:

i. Improvement of the profitability level of the cutters. The sector has been profitable or at break-even level since 1991. This is a rather long period of good economic results in view of developments in the 1970s and the 1980s. Profitable years were followed by years with adverse results in that period. Fleet expansion through investments in new cutters after good years used to dissipate potential profitability. This is impossible now because of the effective engine-power licence scheme.

ii. Decrease in the level of employment from 2750 crew members in 1983 to 1920 by the end of 1997. Generally, those who have left the fishery could find a job ashore, in particular in the past few years. It is now even difficult to find enough capable crew-members for the cutters, due to sometimes good economic development in the Netherlands and ageing of the labour force.

iii. Decline of fishing communities. The industry fears that the ‘critical mass’ of some communities may be too small for sustainability in the longer run.

iv. A much larger proportion of the bigger beam trawlers in the fleet which has had consequences for the productivity of the sector. Such vessels show a decreasing yield per kW/day (Smit 1998: 47-53) so that the capacity has in fact diminished more than the ‘nominal’ figure for engine-power indicates. Therefore Table 5 also shows the capacity expressed in standard kWs. This measure corrects for lower yields per kW/day for the bigger beamers so that a better estimate for the real capacity is obtained. In the same way, real fishing effort is in fact lower than the index shows in Table 5. Taking into account this lower productivity among the bigger vessels the real fishing-effort decreased by some 20% in the period 1983-1998, instead of the ‘nominal’ 7%.

v. Difficulties to fully take the quota. The cutters are also limited by days-at-sea, apart from the engine-power limitation. The current MAGP intends further reduction of days-at-sea per vessel which may make it impossible for the fleet to land all the quota⁷.

⁷ Conclusion in “ Ondernemend vissen”, p. 54.

4.1 Status prior to the programme

The demersal North Sea fleet consisted of 530 enterprises in 1985, the year when transferability of flatfish IQs was allowed officially by the Fisheries Directorate. These firms are family enterprises, employing a majority of family members in many cases. Ownership may rest with the father alone or together with several sons or brothers. In particular the situation of these being many sons of the same owner has led to expansion of the enterprise, when the objective was that each son would become skipper on a vessel. This kind of expansion was possible before rights-based fishing became effective, in the second half of the 1980s. It has resulted in a number of bigger firms owning more than one vessel. In fact, a concentration process was going on already before 1985, leading to more engine-power being exploited by fewer enterprises. About half of the total engine-power was concentrated in 1987 in these ‘multi-vessel’ companies, whereas their number counted for only 13% of the total number of firms⁸.

⁸ “Visserij in Cijfers 1987”, p. 22, LEI 1988.

4.2 Restrictions for transfer of ownership

A number of more detailed quota regulations were in force in 1998:

i. A continuous individual quota regulation, whereby annual changes in the Dutch part of the EU TACs and resulting changes in ITQs were included as an appendix of the regulation. This continuity of rights replaced the annual allocation process in 1997.

ii. Related species are associated, which mean that there should always be an ITQ for sole and plaice, just as for cod and whiting.

iii. Transfers of the ITQs have to be registered by the Fisheries Directorate of the Ministry of Agriculture, Nature management and Fisheries.

iv. The ITQs should be attached to a principal vessel, with the exemption that the rights may be reserved separately for a five year maximum (from 1 January 1998). This only applies for ITQs that have been included in a total quota of the group. This reservation-term enables right holders, which have e.g. sold their vessel, to hire out their ITQ temporarily while a new vessel is being built.

i. Selling of a part of the quantity sole or plaice to vessels not having such ITQs is not allowed.

ii. A quantity of both sole and plaice should remain after such a sale; the same applies for cod and whiting ITQs.

iii. ITQ holders are not free to withdraw their ITQ from the group quota in the course of the year unless the group board agrees and 90% of the group quota has not been taken. Sale of the vessel and bankruptcy are two other cases in which the ITQ may be separated from the group quota.

i. Formation of group-quota for the main species before 1February

ii. Requests for transfer of a sole quota into a plaice quota, or vice versa, before 1 March and

iii. Requests for lease or rental transactions of ITQs between groups before 1 December. For fishermen who are non-group members this date is 1 March.

The prices of ITQs are not publicly recorded but the co-management groups have a good overview of these prices through their involvement in the trade of rights. Table 7 contains price indications for flat-fish rights (Davidse et al. 1997: 105). These prices were obtained by the LEI cost-and-earnings panel and from interviews with representatives of co-management groups.

Rather high prices have also been paid for other entitlements, e.g. cod/whiting NLG 14-17/kg since 1998 and some NLG 300 000 for shrimp permits for the Wadden Sea. Further, horsepower-licences were priced at NLG 800-1500 in 1998 and 1999.

Prices of flat-fish ITQs increased sharply in 1987/1988 as Table 7 shows. This reflects the fact that control measures became very stringent in 1988. In that year systematic control of landings was implemented, carried out by about 100 inspectors. In 1993/1994 prices of sole and plaice quotas dropped, due to the high level of the national sole quota and diminished catches of plaice. The catches were low in many cases compared with the available plaice quota so that there was no need, in general, to buy plaice quota.

Table 7
Price indications of flat-fish ITQs

Year	Flat fish ITQ
	Sole/plaice (NLG/kg)1	Sole only (NLG/kg)
1986	10-15	10-15
1987	70-85	.
1988	100-120	70-80
1989	100-120	70-80
1990	100-120	70-80
1991	130-150	90-95
1992	130-150	90-95
1993	70-95	55-75
1994	65-90	50-70
1995	.a)	60-80
1996	.a)	75-85
1997	.a)	70-90

¹1 NLG=0.45EURO or 0.49US$.

a) Plaice has been traded more and more separately, at higher prices: NLG 9-13 in 1996 and NLG 10-18 in 1997.

Source: LEI; Co-management groups.

i. Enforcement of quotas: A major improvement of enforcement in 1988 caused a sharp price increase.

ii. Profitability of the fishery: Better profitability in 1991 also caused higher quota prices. Formerly, investments in fishing vessels used to increase sharply in such situations but in 1991 investments in vessels were to a major extent diverted to investments in flat-fish ITQs.

iii. Potential harvest of the fish relative to the quota level: In 1993/1994 the national plaice quota was rather high in view of the catch potential for this species. This contributed to a downward price trend for plaice quotas.

ITQs should be attached to a vessel as they are owned by the owners of that vessel. A dis-association from the cutter-vessel is allowed for up to five years because of new constructions, or other reasons, if the vessel is included in a group quota. Loopholes have been the attachments to small boats to the extent that there is a disconnection from a real commercial vessel. Conditions for linkage with working vessels have been strenghthened by requirements for commercial exploitation. But the phenomenon of fishermen ashore who try to make a living from hiring out ITQs still exists and this a matter of concern, though not a major one for the industry. The possession of valuable rights has gradually resulted in rather complicated financial arrangements to facilitate, for example, succession of ownership to the son(s) of the right-holder. Nowadays the ITQs have the same fiscal status as agricultural-rights such as milk-quotas.

4.5 Affects of the programme

The major intensification of enforcement in 1988, accompanied by vessel decommissioning, prompted more and more transfers of rights. Vessel owners who had to adjust their flat-fish rights to the capacity of their vessel were prepared to pay high prices for sole and plaice ITQs. The extra proceeds from the additional quota held had only to cover the marginal cost for catching and landing the extra fish. Moreover, the possibility to avoid heavy fines was an important condition for this willingness to pay high prices.

Table 8 shows that the owners of the bigger cutters (over 1104kW) possessed 86% of the sole rights, whereas six months, in mid 1988, this percentage was 56%⁹ (Salz 1996). The change in the rights situation followed the trend towards bigger beamers in the fleet. But the share of this segment in the total of flatfish rights has increased somewhat more than its contribution in the total fleet engine-power (an increase of 54% against 49% since 1988).

⁹ The concentration level has been measured in sole rights and the same conclusions can be drawn for the ITQs for plaice and cod.

Table 8
Concentration of fishing rights according to engine-power

Fleet Segment (kW-group)	Mid 1988			January 1998
	Number of vessels	Total power 1000kW	% sole quota	Number of vessels	Total power 1000kW	% sole quota
0-190	141	19	1.0	87	12	0.3
191-221	125	27	4.7	143	32	9.6
222-1104	201	151	38.5	30	18	4.1
>1104	139	236	55.8	156	264	86.0
Total	606	433	100	416	326	100

Source: Ministry of Agriculture, Nature management and Fisheries; Shipping Inspection; LEI.

¹⁰ In the first years after the introduction of horsepower licences a quantity of ‘floating’ licences existed because of extra orders for new constructions just before this licence scheme was put in place in 1985. Therefore, trade of these rights mainly began some five years after the introduction.

Table 9 shows that some concentration of sole ITQs occurred in the period 1988-1994. Holders of bigger sole ITQs, owning 1% or more of the national sole-quota, had a higher share in the total ITQ in 1994 (8%) compared with 1988 (4.7%). On the other hand, the percentage of holders owning smaller ITQs (up to 0.5%) has decreased since 1988. The distribution of ownership with respect to the plaice ITQs (not shown in the table) followed the same development, though holders of the biggest plaice ITQs (1.5-2.5%) were somewhat less in number compared with the sole ITQs.

Table 9 also shows the ITQ distribution according to size of holding for the 1997 allocations. This shows that the trend in concentration did not continue clearly in the period 1994-1997. The number of holders of the smallest ITQs decreased on the one hand, but also the number of bigger ITQ holders (category >1%) decreased somewhat. The underlying factor seems to be less trade in ITQs, since the number of holders remained rather constant between 1994 and 1997.

Table 9

Distribution of ITQ holders according to size of the ITQ, expressed as percentage share in total allocated Dutch sole-quotas in 1988, 1994 and 1997

Percentage share of ITQ in total sole quota	Percentage of ITQ holders
	1988 (n=387)	1994 (n=289)	1997 (n=276)
0.005 (mini ITQ)	20.2	17.3	14.9
0.005-0.5	65.3	57.7	59.7
0.5-1.0	9.8	17.0	17.8
1.0-1.5	3.9	4.5	3.6
1.5-2.5	0.8	3.5	3.6
>2.5	0.0	0.0	0.4
Total	100.0	100.0	100.0

A significant decrease in the total number of ITQ holders (by 25%) in the period 1988-1994 was caused by selling of sole/plaice ITQs in combination with decommissioning, closing of enterprises for other reasons, or only stopping fishing with beam trawls. The share in the total Dutch sole/plaice-quotas of the holders of the 20% biggest ITQs is another measure of the level of concentration. In 1994 this group owned almost 60% of total Dutch sole quota and 56% of the plaice-quota. By 1997 it was 58% and 56% respectively. Nearly all of these ITQ holders are companies owning more than one vessel.

The regional concentration of flat-fish rights was also been considered in the property-rights study mentioned before. The conclusion from the 1997 situation was that the share of the national quota in Urk, the main Dutch fishing port, had decreased somewhat, whereas the Den Helder/Texel region had expanded their share. However, there was no major concentration of flat-fish ITQs in a limited number of regions in the period 1988-1997.

5. DISCUSSION

5.1 Reduction in fleet capacity

The Common Fisheries Policy (CFP) of the European Union (EU) has two main goals: limiting the catches by fixing annual TACs, and reduction of the fishing capacity by implementing multi-annual guidance programmes (MAGPs). The MAGP objectives for the Dutch demersal North Sea fishery have not been met so far, although an engine power licence scheme has been in place since 1985 and subsequent decommissioning schemes have been implemented. The owners of the cutters cannot be forced to leave the fishery so that the actual fleet reduction depends on the profitability of the fishery and also on the ownership situation, i.e. the presence of a successor for the current vessel’s owner. In the past eight years most of the cutters have operated on, or above, break-even in relation to their costs, so that many skipper owners have not had an urgent reason to stop fishing.

The Dutch Ministry of Agriculture, Nature Management and Fisheries has been indeed successful in preventing expansion of the capacity after profitable fishing years. This kind of expansion occurred regularly before the licence scheme became effective in the early 1990s.

Looking at the developments of the past fifteen years two kinds of reactions by vessel owners were contrary to the expectations of policy-makers:

i. Extra orders for new constructions, just before the engine-power licence scheme was put into place in 1985. In response the Ministry has limited the validity of the ‘floating’ licences and has strengthened the condition for attachment to a vessel.

ii. Re-flagging of cutters to other countries, to get more harvesting rights for the remaining ones in the Dutch fishery. In fact this has not been a problem for the Dutch fisheries management since it contributed to compliance with the Dutch TAC and MAGP obligations.

¹¹ Visserijnieuws 21 May 1999.

5.2 Concentration of ownership

ITQs for all quota species have now become an important production factor for fishing enterprises. It is a major intangible asset on the balance sheet of many firms. The rights can be ‘banked’ and fiscal allowances for depreciation are in force, as for other assets. The co-management system facilitates transfers and hiring of rights via the group boards. This combined management of ITQs has brought advantages in the past five years in the form of price increases for plaice in particular, through compliance with much the lower quota.

Transferability has led to a continuing concentration of rights since the mid 1980s, although this did not result in a few companies owning a major part of the rights so far. It is reasonable to assume that this process will continue in future. Newcomers cannot enter the fishery since prices of rights are too high to permit a new firm to be profitable (Davidse et al. 1997:201). Hence the number of enterprises will diminish.

It is necessary to understand the nature of quota trade to explore future developments. ITQs have mainly been purchased by vessel owners who had already vessels with harvesting rights. Thus high prices could be paid since marginal revenues had only to cover the marginal costs. These high price levels will hamper concentration of rights because of finance limitations. Nowadays the economic depreciation of vessels has been absorbed more or less by quota investments so that vessel replacements may be difficult in a number of cases. However, the quota market determines the future price of rights. In this respect the concentration process has not been hampered, apart from some restrictions described in Section 4.2 above.

An important aspect of this issue concerning the concentration of rights is the review of the CFP due in 2001. Quota-hopping by Dutch enterprises in the past has made clear that concentration of rights has gone further than the national situation alone reveals. A question is whether new possibilities will arise to acquire harvesting rights in other countries from 2001 onwards. If so, the concentration of rights may accelerate in a more open, international market. That would bring the fishing sector more in line with other branches of the economy in the common EU market.

6. LITERATURE CITED

Davidse, W.P. et al. 1997. Property rights in fishing, LEI-DLO report 159. 328pp.

FAO (in press). Case studies on the allocation of Transferable Quota Rights in Fisheries. Fish.Tech.Paper, FAO, Rome

Salz, P. 1996. ITQs in the Netherlands: twenty years of experience, ICES paper. 17pp.

Salz, P. et al. 1988. Vooruitzichten voor de Nederlandse plat- en rondvissector op korte en middellange termijn, LEI-DLO report nr 5.79. 64pp.

Smit, W. et al. 1998. Ondernemend vissen, Toekomstperspektief van de kottervisserij. Report 1.98.001. LEI. 100pp.

Smit W. et al. 1998. Visserij in cijfers, annual edition, LEI.

Trends in Fishing Capacity and Aggregation of Fishing Rights in New Zealand under Individual Transferable Quota - R. Connor

R. Connor
Centre for Resource and Environmental Studies,
The Australian National University, Canberra, ACT 0200, Australia.
<[email protected]>

1. INTRODUCTION

The introduction of individual transferable quota (ITQ) could be expected to result in reduced ratios of fleet fishing capacity proxies to catch, due to increases in technical efficiency and greater utilisation of existing capacity with the exit of some vessels from the fleet. A concomitant expectation of the process of effort and capacity rationalisation is increased concentration of quota ownership. This paper is a progress report on an FAO-supported study (FAO in press) of quota concentration and fleet change under the New Zealand quota management system (QMS). Vessel capacity is assessed through the indicator of gross registered tonnage (GRT). Quota ownership, end of year holdings and catches are assessed through the use of a range of indices of market concentration and the Gini Index. A preliminary interpretation of the results is made here.

2. THE NEW ZEALAND QMS

New Zealand’s quota management system (QMS), based on strongly-defined individual transferable quota (ITQ), was introduced in October 1986 for all of the significant fin-fish species. This followed four years of enterprise allocations (EA), with very limited transferability, applied to the deepwater species. The fishing of the large deepwater resource was being taken over by the New Zealand domestic industry following the declaration of the EEZ in 1978. These stocks had been discovered and fished by several foreign fleets, particularly those of the USSR, Japan and the Republic of Korea ("South Korea"). The EA scheme was used as a means of allocating the resources among the domestic companies investing in fishing and processing deepwater species. The NZ inshore fisheries were in decline in the early 1980s after 15 years of unrestricted fishing and government-supported development of capacity (Clark and Duncan 1986). A full moratorium on fishing permits was effected from 1980, part-time fishers were excluded in 1983, and after grand-fathering quota to remaining fishers at average levels of their catch history for the best two out of three years, a quota buyback was undertaken for many inshore species for which TAC reductions were required (ibid.).

New Zealand fisheries may be divided into several sectors. The inshore fin-fisheries, of which 17 species or species groups were introduced to the QMS in 1986, produced a total catch of 34 000t (QMS species only) in the first year of quota management. A range of catching methods is used, including trawling, bottom long-line and set-netting. The most significant species by value is snapper, which is mainly exported to Japan. The deepwater trawl fisheries for orange roughy and oreo species operate in depths to 1500m, and in 1986-7 produced some 66 000t of catch. The further seven mid-depth species comprise the largest proportion of the total catch. In 1986-87 catch of these species was around 308 000t. Some 98 000t of this total was from squid and jack mackerel, which were brought into the quota system in its second year. In this study, these are excluded from the mid-water figures. This sector is dominated by hoki, which has a (currently fully caught) TACC of 250 000t. In 1987 the hoki catch reported within the quota system was 158 000t. Although the vast bulk of this fish is caught by large off-shore trawlers, the species is found in most fished demersal habitats, making hoki a by-catch species for many fishers. The QMS shellfish were all introduced in later years (paua/abalone 1987; rock lobster 1989; scallops 1993; oysters 1998). Rock lobster is included in this report, but problems with paua data are yet to be resolved. Scallops and oysters are not considered.

3. QUOTA CONCENTRATION

3.1 Background to the debate

A concern in the debate over ITQs is the concentration in ownership of quota shares. From an economic point of view there are two reasons for monitoring concentration. The first is that in fisheries where production is inefficient due to over-capitalisation, likely accompanied by stock-depletion and higher than necessary variable catching costs, the introduction of quota management often has as the explicit objective of reducing the number of vessels in the fishery. Assuming grand-fathering is used in allocation, if rationalisation of the fleet is to occur, then some degree of quota concentration is to be expected as a result. On the other hand, there are limits beyond which concentration can be negative. Should a small number of owners control the large majority of quota, monopoly-type market-power effects may occur. These can include the manipulation of prices for both fish and quota to capture rents and to facilitate further accumulation of quota, and undue dominance in the labour market affecting wages and conditions of fishers (National Research Council 1999). The development of such monopoly-power may be avoided by specifying aggregation limits for quota. In practice such limits have been set at levels ranging from 0.5% to 35% of a fish stock. Otherwise, antitrust-type legislation may be relied upon to protect against monopoly power developing, without having to specify and arbitrary limit on individual holdings. However, some means to estimate concentration is required. There has been few published studies to date estimating quota concentration in fisheries (for examples see Gauvin, Ward and Burgess 1994; Hogan, Thorpe and Timcke 1999).

3.2 Methods and data

Standard measurements of concentration of such factors as market-share, assets, physical output, or employment among competing industrial companies are considered by Scherer (1973). Should data on marginal costs of production be available, which is usually not the case, a direct comparison with price can estimate the degree of monopoly-power present in a market. The most straightforward index for commonly available data is the Concentration Ratio (CR), which is the proportion of the factor chosen represented by a selected number of the largest firms. The top four firms are commonly used (CR4), and often a table is presented with a range of values (e.g. CR4, 8, 20 and 50).

An extension of this comparison is to use percentiles, or to construct a Lorenz curve, which is a plot of the cumulative total proportion of the factor represented against the proportion of the firms represented, sorted in rank order for the factor. For example, if fish quota owning firms are ordered by amount of quota held, the proportion of the total held by all up to each firm is plotted. In the case that all participants hold the same amount (for instance 100 firms with 1 per cent of the quota each) a 45 degree straight line is the result. Where there are differences in holdings a curve will sag below the 45 degree line but start and finish at the same points (0 and 100% of quota owned by 0 and 100% of owners). The Lorenz curve can be converted to a single number, the Gini Index (GI), by comparing the area between the 45 degree line and the curve with the total area under the 45 degree line. For any number of firms all with identical shares, the curve will be the line, and the GI is zero. As the distribution of shares becomes less equal, the index approaches unity. The GI is a measure of inequality in shares that does not take into account the number of participants. It is therefore not ideal for measuring competitiveness where firms are likely to have similar sized shares, as it will give the same answer for 2 firms with 50% of quota each and for 100 firms with 1% each. However, it may be useful in indicating inequality when used with other indices.

The Gini Index (GI) has a range from zero to one and is calculated as follows:

where	q = quota or catch amount
	Q = total of all quotas or catches
	N = number of quota holdings or catches and
	all q are ordered, 1 to N from smallest to largest.

An index more useful for estimating potential market power, the Herfindahl-Hirschman Index (HHI), sums the squared proportionate shares of all firms. This takes account of both the number of firms and inequality in quota shares, weighting the larger firms quadratically. The HHI is calculated as follows:

where	q = quota or catch amount
	Q = total of all quotas or catches
	N = number of quota holdings or catches.

The index as calculated has a range of zero to one. In this study, both the GI and the HHI are expressed as percentages. Hence a calculated index of 0.75 is written as 75%.

With the New Zealand quota and catch data, the GI tends to be quite high for all stocks, in the 75% to 97% range. However, for the same GI, the HHI can range widely. For example:

IS1988	GI = 82.9%,	HHI = 1.6%
DW1995	GI = 82.7%,	HHI = 14.8%

In many years there were large numbers of small-quota holdings that were less than the minimum for a fishing permit to be issued. If these are eliminated from the index calculations, the GI decreases slightly as the degree of inequality has decreased, but the HHI increases as the number of firms has decreased and thereby the concentration of ownership has increased. This illustrates the utility of the two indexes. In fact, neither is sensitive to large numbers of small holdings being eliminated. On the other hand, all the indices are sensitive to the presence of single large owners at the top of the scale. In New Zealand, Te Ohu Kai Moana (TOKM) [the Treaty of Waitangi Fisheries Commission] holds approximately 10% of all quota species, and this makes them significantly larger owners than any other in fisheries such as paua (abalone) and rock lobster. This distorts some of the figures as this quota is essentially being held in trust and will (eventually) be distributed in small holdings to the 78 tribal groups (Maori iwi) recognised by TOKM.

Other data-issues that may affect results at this early stage in the study are government ownership of large holdings for some deepwater species in the first years of the quota system, and multiple quota accounts being maintained by fishing companies. Cross ownership by larger interests in the industry also effectively concentrates control over quota, but this is even more difficult to take into account.

3.3 Results of concentration analysis

The New Zealand data for quota ownership, holdings at the end of the season, and catch were processed separately to generate a range of indices:

i. HHI
ii. GI
iii. CR1, CR3, CR4, CR10
iv. Number and percentage of owners with 95% share
v. Percentage share controlled by top 5% of owners and
vi. Number with less than minimum holdings for the class.

4. INSHORE SPECIES

The seventeen inshore finfish species (or species groups) are blue cod, blue nose, alfonsino, elephant fish, flatfish (group of 8 species), grey mullet, red gurnard, hapuka/bass, john dory, blue moki, red cod, school shark, snapper, rig, stargazer, tarakihi and trevally.

While total allowable commercial catches (TACCs) and therefore quota owned for these species increased by 15% between 1987 and 1998, the number of quota owners decreased by 26% from 1309 to 963 (Table 1). The HHI has increased marginally, which would be predicted by falling numbers of owners, but there is more going on here. While the top ten owners have steadily increased their share of the quota from 43% to just under 50%, some jockeying has been going on among the top three or four owners, with TOKM building its holdings to take the number one position with just under 10%. Given that there are almost one thousand owners (1998) having 50% owned by 10 interests (1% of owners) might seem concentrated, but it represents a low concentration relative to other sectors. The top 5% of owners has 75% of the inshore, up a little from 69%, and the proportion of all owners holding 95% of all quota has dropped from 43 to 33%. The HHI is low at around 3.3%, the GI has moved from 84% to 88%, indicating a moderately high degree of inequality in holding sizes, and the number with less than minimum holdings has dropped by a third.

Table 1
Quota owned - by sector

Fishery	Year	Total quota owned (t)	No. owning quota	HHI	CR1	CR3	CR4	CR10	No. owning 95%	% owning 95%	% owned by top 5%	No. owning < 5t	Gini index
Inshore	1987	59 015	1309	3.1%	12%	26%	30%	44%	563	43%	69%	454	84.1%
	1988	61 198	1289	3.2%	12%	25%	29%	45%	533	41%	71%	445	84.8%
	1989	64 715	1312	3.5%	12%	28%	32%	46%	525	40%	72%	452	85.3%
	1990	67 026	1320	3.4%	13%	27%	30%	44%	512	39%	71%	459	85.6%
	1991	66 666	1291	2.9%	10%	23%	28%	44%	491	38%	73%	439	86.1%
	1992	68 391	1244	2.8%	7%	21%	27%	46%	457	37%	74%	411	86.7%
	1993	67 694	1187	2.8%	9%	23%	28%	44%	426	36%	74%	398	86.9%
	1994	67 858	1161	2.8%	10%	23%	28%	44%	411	35%	74%	386	86.9%
	1995	68 057	1110	3.3%	11%	27%	31%	45%	391	35%	74%	364	86.9%
	1996	68 444	1077	3.0%	10%	24%	29%	46%	366	34%	75%	350	87.3%
	1997	69 071	1023	3.2%	10%	24%	29%	49%	343	34%	75%	323	87.5%
	1998	67 958	963	3.3%	10%	24%	30%	49%	322	33%	76%	292	87.6%
Mid-depth	1987	325 175	493	30.2%	53%	72%	76%	91%	15	3%	98%	327	98.2%
	1988	326 081	478	29.9%	52%	72%	77%	90%	17	4%	98%	317	98.1%
	1989	329 119	475	28.9%	51%	71%	78%	91%	16	3%	97%	312	98.1%
	1990	333 569	466	26.6%	49%	68%	74%	89%	18	4%	97%	291	97.9%
	1991	308 161	457	19.0%	40%	59%	66%	84%	23	5%	95%	290	97.3%
	1992	290 266	449	14.8%	31%	58%	65%	86%	20	4%	96%	278	97.3%
	1993	290 694	424	14.1%	31%	55%	62%	85%	22	5%	95%	259	97.0%
	1994	290 770	417	14.6%	31%	55%	65%	87%	22	5%	95%	247	97.0%
	1995	311 864	409	11.4%	21%	50%	60%	88%	21	5%	95%	236	96.9%
	1996	331 514	396	13.6%	29%	53%	63%	89%	18	5%	96%	224	97.0%
	1997	340 668	378	13.5%	28%	53%	63%	90%	17	4%	96%	217	97.0%
	1998	338 242	360	13.6%	28%	53%	63%	90%	17	5%	96%	210	96.9%
Deep-water	1987	83 010	44	12.4%	22%	55%	64%	88%	19	43%	40%	1	76.3%
	1988	85 216	38	13.8%	23%	56%	70%	90%	16	42%	41%	1	76.0%
	1989	86 623	43	13.6%	23%	56%	70%	90%	16	37%	41%	3	78.2%
	1990	70 353	42	10.9%	20%	50%	61%	85%	20	48%	36%	2	72.7%
	1991	64 110	41	15.8%	28%	64%	72%	87%	18	44%	50%	4	76.9%
	1992	63 076	49	15.5%	29%	60%	66%	84%	19	39%	52%	2	78.3%
	1993	61 700	47	15.9%	30%	61%	68%	84%	18	38%	52%	4	78.1%
	1994	61 534	49	16.1%	30%	62%	70%	85%	18	37%	52%	6	79.8%
	1995	56 233	47	15.6%	27%	61%	69%	86%	18	38%	52%	5	79.1%
	1996	50 050	41	16.5%	29%	62%	71%	89%	14	34%	53%	6	79.3%
	1997	50 474	39	16.2%	28%	62%	71%	92%	13	33%	50%	7	79.9%
	1998	50 474	40	16.1%	28%	62%	72%	92%	13	33%	50%	8	80.2%
Rock lobster	1987
	1988
	1989
	1990	3 726	686	0.6%	6%	8%	9%	13%	503	73%	23%	411	48.7%
	1991	3 597	656	0.6%	4%	9%	10%	16%	479	73%	27%	418	51.2%
	1992	3 286	598	0.7%	6%	9%	11%	18%	438	73%	29%	382	52.6%
	1993	2 936	554	1.1%	8%	12%	14%	21%	404	73%	32%	379	54.5%
	1994	2 932	525	1.1%	8%	13%	15%	21%	383	73%	32%	350	55.0%
	1995	2 915	517	1.2%	8%	14%	15%	22%	372	72%	33%	342	55.5%
	1996	2 968	512	1.2%	8%	14%	16%	23%	358	70%	35%	336	57.5%
	1997	2 894	490	1.3%	8%	15%	17%	24%	344	70%	34%	315	57.1%
	1998	2 954	470	1.4%	8%	15%	17%	26%	329	70%	37%	293	58.1%

The figures for end of year (EOY) holdings (Table 2), which take into account effective redistribution of access through leasing, show a decrease in concentration with respect to the ownership figures, systematically expressed in all indicators. Numbers of holders are about 10% up on numbers of owners, HHI is down slightly, all CRs are down and so on. The numbers with less than the minimum holdings are up slightly, presumably because some have leased almost all their quota.

For catch, the HHI and GI indicators are lower again than for holding and ownership. The CR1 and CR3 are the same as holdings, indicating the top owners are getting all their fish, but CR4 and CR10 drop off the pace slightly. The proportion caught by the top 5% in 1998 was two thirds the total catch, whereas the top 5% of owners owned three quarters of all quota. This indicates a small shift in effective share down the line to smaller operators.

Table 2
Quota owned - All stocks combines

Fishery	Year	Total quota owned (t)	No. Owning Quota	HHI	CR1	CR3	CR4	CR10	No. owning 95%	% owning 95%	% owned by top 5%	No. owning < 5t	Gini index
All data	1987	467 201	1357	20.7%	42%	63%	68%	83%	62	5%	95%	457	97.2%
	1988	594 734	1459	17.4%	37%	58%	66%	83%	45	3%	96%	497	97.6%
	1989	671 927	1495	12.8%	29%	50%	59%	82%	45	3%	96%	520	97.6%
	1990	673 180	1899	11.3%	27%	48%	56%	78%	67	4%	96%	682	97.5%
	1991	568 021	1873	10.5%	24%	49%	56%	74%	82	4%	95%	694	97.2%
	1992	577 180	1809	9.5%	24%	43%	52%	76%	69	4%	96%	660	97.3%
	1993	581 436	1769	9.9%	26%	44%	51%	74%	79	4%	95%	641	97.2%
	1994	581 838	1764	10.3%	25%	45%	54%	76%	75	4%	96%	622	97.2%
	1995	595 312	1738	9.6%	20%	45%	55%	78%	72	4%	96%	616	97.3%
	1996	609 352	1718	10.6%	25%	45%	55%	80%	64	4%	96%	615	97.5%
	1997	646 610	1755	10.2%	23%	44%	55%	81%	57	3%	96%	650	97.6%
	1998	661 395	1673	9.8%	22%	43%	54%	79%	66	4%	96%	599	97.5%

Fishery	Year	Total quota held (t)	No. holding quota	HHI	CR1	CR3	CR4	CR10	No. holding 95%	% holding 95%	% held by top 5%	No. holding < 5t	Gini Index
All data	1987	473 657	1461	8.5%	21%	43%	49%	74%	97	7%	94%	450	96.5%
	1988	618 676	1650	6.9%	15%	37%	47%	70%	74	4%	95%	487	97.0%
	1989	702 421	1695	6.2%	17%	35%	41%	63%	75	4%	96%	497	97.0%
	1990	683 091	2100	5.3%	15%	33%	39%	58%	97	5%	95%	658	96.9%
	1991	573 075	2233	4.5%	9%	26%	33%	59%	135	6%	94%	656	96.4%
	1992	582 929	2243	6.3%	17%	35%	43%	66%	113	5%	95%	668	96.7%
	1993	581 765	2151	5.5%	13%	32%	40%	64%	127	6%	94%	639	96.4%
	1994	581 879	2132	6.7%	17%	36%	44%	67%	132	6%	94%	587	96.4%
	1995	595 320	2052	10.6%	22%	51%	56%	70%	111	5%	95%	595	96.8%
	1996	609 353	1940	8.3%	18%	39%	49%	79%	71	4%	96%	639	97.4%
	1997	646 610	1947	7.9%	19%	40%	50%	73%	89	5%	95%	634	97.1%
	1998	661 395	1889	7.4%	17%	39%	48%	71%	91	5%	95%	578	97.0%

Figure 1: Percentage of total inshore finfish quota owned by top 1, 3, 4 and 10 owners and by top 5% of owners

Figure 2: Percentage of total mid-depth finfish quota owned by top 1, 3, 4 and 10 owners and by top 5% of owners

Figure 3: Percentage of total deep-water finfish quota owned by top 1, 3, 4 and 10 owners and by top 5% of owners

Figure 4: Percentage of total rock lobster quota owned by top 1, 3, 4 and 10 owners and by top 5% of owners

5. MID-DEPTH SPECIES

This group of species includes: barracouta, hake, hoki, ling, gemfish, silver warehou, and blue warehou.

The ownership of quota in this group is highly concentrated in comparison with the inshore species, reflecting the small number of companies with sufficient capital to participate in the bulk hoki fishery. The figures for the first four years of the quota system are confounded by the fact that the Crown (New Zealand Government) owned large amounts of quota that was leased out. Hence in this early period the CR1 is 53% which would have been illegal for any owner other than the Crown under the prevailing aggregation limits of 20% for inshore fin-fish and 35% for deepwater and mid-depth species. In 1992, the CR1 reached 31%, as the government got out of quota ownership with the move to proportional quota, and has stayed about there since. The number of quota owners has dropped by 25% over the period and those with less than minimum holdings (5t) have dropped by a third, accounting for most of the overall reduction. The HHI is about 14% and the GI is 97%, both remained stable since the exit of the Crown from ownership. The CRs are all high with 17 of 360 quota owners having 95% of the quota in 1998.

The relativity of end-of-year holdings to owned quota is similar to that of the inshore. Numbers of holders are about 10% up on numbers of owners, and all the indicators show that the quota is spread around a little more, with CR10 dropping from 90 to 82% indicating about 30 000t of quota is been leased out from this group of owners. The HHI drops from 14% for owned to 10% for "held". The effect of Crown ownership on the indices can be seen in the contrast between owned and "held" figures for the early years. The HHI for "held" in 1987 was only 11%, almost the same as in 1998, as are all the concentration ratios.

The catch indices show a further dilution of concentration with respect to holdings and ownership, with the biggest holders taking the losses. However, the top 5% of those reporting catch controlled 90% of the catch.

6. DEEPWATER SPECIES

This group comprises orange roughy and the oreo species.

A similar small number of companies controls 95% of these fisheries as is the case in the mid-depth stocks. The nature of the fishing limits the participation to large vessels and there are a total of around 40 owners, a number that has remained relatively static over the period. However, ownership has become more concentrated among the top four, with CR4 moving from 64 to 72% while CR10 has increased less than 4 percentage points. Of deepwater quota 95% is held in 13 accounts. The HHI has increased from 12.5 to 16% over the period. Despite this high and increasing concentration, the deepwater quota is more evenly spread among the owners than the other categories according to the GI, due to the limited scope for small players. The top 5% of owners (2) had 50% of the quota in 1998 with a GI ranging 72 to 80% over the period.

Holdings show somewhat different patterns to the other groups relative to owned quota. Numbers of participants are 25-30% higher, but the HHI barely moves, and the CRs are all about the same as for ownership. This pattern is likely to reflect the leasing of small amounts of quota to cover incidental catches in mid-depth fisheries, rather than any attempt by non-owners to target these species. Both catches and TACCs have fallen by about 40% over the period. Thirteen accounts reported 95% of the catch in 1998, and the other indicators are almost identical to ownership.

7. ROCK LOBSTER

This fishery has a relatively large number of participants with small tonnage holdings as it is a high-value, small-boat, near-shore fishery. Rock lobster was introduced into the QMS in 1989-90, and TACCs had fallen 20% in total by 1998. Total participants fell by a third from 686 to 470 over the 9-year period. This has doubled the HHI, but it is still very low at 1.4%. TOKM is the biggest owner, but the CR10 was only 26% in 1998. However, this has also doubled since 1989-90. The proportion of all quota owned by the top 5% has increased from 23 to 37% and the GI has ranged from 49% in 1990 to 58% in 1998, indicating a relatively low, but increasing, inequality in parcel sizes among quota owners. The average holding for rock lobster is around 6t.

The number of participants holding quota at the end of year is almost identical to ownership, but indices of holdings show large amounts of leasing by the big owners. This reflects both the fact that TOKM is the top owner and the nature of the fishery; it would be a busy lobsterman that brought in 250t in a season. The holding concentration ratios are all about half the ownership values and have remained stable over the period. A full 78% of holders are included in the group with 95% of the quota at year’s end.

8. SUMMARY OF QUOTA CONCENTRATION

Most sectors assessed showed increasing concentration in quota ownership, but large shifts in distribution were not noted. All three fin-fish sectors began with large proportions held by the top few owners, which did not change. The highest concentration of quota ownership at the start of the system was in the mid-water species-group where the large hoki fishery dominates. The concentration indices for this sector decreased with time due to the exit of the government from quota ownership, but figures of EOY holdings were static over the period, as were ownership indices after 1992. The lowest concentration found was in the rock lobster fishery, where small parcels of quota are comparatively evenly distributed, reflecting the practicalities of the fishery. A couple of large holders, including TOKM which holds quota in trust for Mâori, distort the indices somewhat. The deepwater quota is held by a small number of large interests, and this is reflected in the high HHI and a GI which is relatively low compared to that for the mid-depth species. The deep-water species had the highest HHI in 1998.

Consistently, EOY holdings and catch were less concentrated than ownership, with the exception of deep-water species. The major holders in the inshore and mid-depth sectors are leasing out about 10% of their quota to others and where there are shortfalls in catch these tend to be borne by the larger holders. In rock lobster half the quota of the top ten owners is leased out of the group.

9. FLEET CAPACITY

9.1 Methods and data

New Zealand fleet data for the period from the implementation of the quota management system (QMS) has been examined for indications of trends in capacity.

From data supplied by the Ministry of Fisheries, vessels are categorised as domestic, chartered, or foreign. Vessel dimensions include gross registered tonnage (GRT), which is used here as a proxy for fishing capacity¹. GRT by length-class is summarised for domestic vessels from 1987 to 1998, and GRT by flag-state for charters (foreign vessel data are not yet assessed). The data are somewhat error-ridden with some significant gaps, although this improved in later years. For vessels with no recorded GRT, the averages of recorded GRT for the relevant length-class from the same year were used as estimates. After tracking many gross entry errors (most in the under-10m classes where they are more obvious), these averages are remarkably consistent, with any changes being smooth trends. Pre-QMS data is still under assessment and present more problems. Changes are likely in the fleet capacity across the boundary where the QMS was introduced, particularly for the inshore where total allowable catches were reduced considerably through a quota buy-back scheme.

¹ Discussion of methods for capacity estimation and the suitability of GRT as a proxy is not undertaken here due to time constraints and the preliminary nature of this report

Preliminary results are presented in Figures 5 and 6 for capacity, and in Figures 7 and 8 for catch. Total GRT in the domestic fleet in 1998 was up 43% on 1987. The big increases are in the larger classes, and these are described below.

Numbers of vessels less-than-10m LOA dropped substantially from 1850 in 1987 to 1050 in 1998, some 43%. This shed 2200 from 4000t for these classes, with most coming from the largest (8.5-10m) vessels. These 800 exiting vessels (under-10m) account for virtually all (93%) of the net exits from the fleet and represent nearly 30% of total number of vessels in the domestic fleet in 1987. However, the tonnage lost in these classes amounts to only 4% of 1987 totals. The number of vessels (10-15m) has been fairly static for the first 8 years and lost about 20% of their tonnage since 1994, another 4% of the total. Numbers and total tonnage of vessels in the 15 to 25m range have changed little. Vessels between 25 and 40m LOA have increased over 70% in tonnage and 62% in number. In the 30-35m class the average vessel tonnage has increased markedly.

The vessel classes with the greatest growth for the period were the 40-45m and 60-70m. In the 40-4m class, there were 4 vessels in 1987 and 18 in 1998. Average tonnage of these vessels has also increased by 50%, so total GRT has increased from 1600 to over 11 000. This distortion in the fleet is caused by a licensing rule that excludes vessels over 43m in length from many inshore areas. Vessels in the 60-70m class are now the largest vessels in the domestic fleet: there was 1 vessel in 1987 and 12 in 1998. Again, average tonnage has increased by 50% and total GRT has increased from about 1400 to 23 000. The data recorded up to ten vessels in length classes greater than 70m in the years since the implementation of the QMS, but all have now gone. Assuming these were part of the domestic fleet and are not entry errors, this capacity has been more than accounted for by the expansion in the two classes described.

The charter fleet is still important to the New Zealand fishing industry, with 125 000GRT active during 1998. This compares with less than 80 000GRT for the total domestic fleet, but charter vessels would not generally spend all year fishing in New Zealand waters. The 1998 charter tonnage is within 4% of the total in 1987, with 1997 being the lowest total since the start of the QMS. In the interim, a huge peak of 288 000GRT was registered in 1990. The majority of this (176 000GRT) was Russian (possibly reflecting chaos in the administration of the fleet following the collapse of the Soviet Union). The Japanese charter fleet was already declining off its peak by the previous year. From a traditional base in the Russian, Korean, and Japanese distant water fleets that have fished New Zealand waters since the 1950s and 1960s, the flag status of the charter capacity has diversified substantially since 1992, with some 20 nations now represented. Russian and Ukrainian flagged vessels still provide some 45% of charter tonnage.

9.3 Catch

Catch figures for the period have been reviewed to give some perspective on fleet changes. Total catches of quota species have increased over the period by some 30%. Inshore catches have increased by 60%, about 21 000t, while catches of mid-depth and deep-water species have risen 27%, or just over 100 000t. Of the inshore increase, a 43% is accounted for by one species, red cod, for which the catch has increased two and a half times over 1987. This species is subject to large variation in recruitment, which accounts for much of this seemingly dramatic increase. However, catches of all inshore quota species have increased over the period, many by substantial proportions.

In deeper waters, the net change is more than accounted for by the 100 000t increase in the hoki catch. The jack mackerel and ling fisheries have developed strongly, with new long-liners in the ling fishery accounting for some of the expansion in capacity. Big declines have been posted for gemfish, especially in the South Island where the catch has dropped from over 5000t in the early eighties to the point where there is no longer a target fishery. Orange roughy catches have also declined steadily, despite the serial discovery of new grounds. Catches of roughy in 1998 were 39% of 1987 totals, at just over 20 000t. The other main variable in the total catch over the period has been squid, which is subject to high annual variability in abundance.

Figure 5: New Zealand domestic fleet: gross registered tonnes by size class (m)

Figure 6: New Zeland foreign charter fleet: gross registered tonnes by flag state

Figure 7: New Zealand ITQ Fisheries: Allowable and Actual Catch (t)

Figure 8: New Zealand inshore ITQ fisheries: allowable and actual catch (t)

9.4 Summary of fleet-capacity trends

Overall, the data indicates steady patterns of growth in both catches and in capacity of particular length classes in the fleet. The decline of the boats under 10m, and big increases in the 43m and 65m classes are the most conspicuous changes in fleet structure, with vessel tonnage in the 25 to 40m range growing more moderately over the period. A few companies are responsible for the increase in numbers of larger vessels. The 43m boats work in the Cook Strait and Hokitika Canyon hoki fisheries and other inshore areas, with some of these, and the larger entrants, replacing charter capacity. Some very large vessels, probably leased on an annual basis, were counted in the domestic fleet in the early years of the quota system, but now the 60-70m boats are the largest in the fleet.

Insufficient data are available at this stage to accurately separate the impact of charter capacity. Charter vessels are not in New Zealand waters all year round and a fuller assessment of the relationships and trends in capacity and catch will require data on how long the vessels are in-country. The expansion of the domestic fleet in the larger length classes indicates that some charter capacity is being domesticated on an ongoing basis. It has also proved difficult so far to obtain data for foreign licensed fishing, on either catch or vessel dimensions. Numbers of foreign vessels visiting New Zealand waters have declined steeply, and it is known from published catch data for important species that foreign catching has dwindled to insignificant levels in most fisheries (Annala and Sullivan 1997).

In the inshore fisheries where charter vessels do not operate, catches have been steadily expanding. While the under-15m fleet has contracted, the 25-45m fleet has experienced a 66% increase in numbers (27 vessels), and a 274% increase in GRT (14 300GRT), ably demonstrating the perverse effect that regulations such as length limits can have on investment and shipbuilding practice. This increase represents 27% of the total fleet tonnage in 1987, 19% of the 1998 total, and 62% of the net increase in tonnage over the period. As many of these vessels will be fishing hoki and other non-inshore species such as ling, it is impossible to get a true picture of inshore trends from the current data. However, while total domestic tonnage under 45m length is up 27%, the inshore catch (which does not include hoki) is up by 60%. In general this indicates, by the proxy of GRT, that capacity is not expanding as fast as catch, and it is likely that significant operational efficiencies have been achieved under quota management.

From preliminary analysis of available data from before the QMS, there seems to have been a major jump in vessel capacity with the introduction of the system, despite the buyback scheme and reduction of TACs. The under 40m fleet GRT figures increase by a third between 1984 and 1987 data. There are some problems with data between the two systems of recording that were in place at the time of the change. However, it seems likely that there was some rush to get (back) into fishing with the introduction of the new management arrangements. Since then total numbers participating have been steadily dropping again. This issue of the impact of the buyback on participation warrants further investigation.

10. CONCLUSIONS

The study, at this preliminary stage, is proving interesting from several points of view. The assessment of concentration of quota shows slow but steady reduction in the numbers of quota-holders in each sector except the deep-water. The HHI and GI indices are useful but more experience with these is needed through comparison across fisheries to get a better feel for what they really mean. This would be assisted by the adoption of standard indices across studies. The concentration ratios are easy to generate and understand and are the most useful for indicating the basic situation, especially where experience with the other idices is lacking.

Although the changes in concentration are not particularly alarming, the effect on individuals of exit from fishing can be profound. It is not possible in this type of assessment to understand what is happening at the local level. Even disaggregation of the data to the stock level may give a better indication of potential for adverse effects. Assessment of the impacts of concentration in particular fisheries will require more intensive techniques including economic modeling using price and cost data, inclusion of corporate structures and cross-ownership in the analysis, surveys of stakeholders and application of other social science methods.

Rationalisation of effort in the New Zealand fleet has been occurring, if slowly, over the period of operation of the quota system. Smaller boats, particularly in the 10m class have been disappearing, while capacity of the fleet vessels between 10 and 25m has remained static. At the same time the inshore catch has increased steadily, indicating better utilisation of existing assets. Vessels in the 25-43m range have increased markedly and the bottleneck created by the 43m rule prohibiting large boats from inshore and other key areas has distorted vessel design. At the top end, a few large vessels have moved out of the domestic fleet and capacity has expanded greatly in the 60-70m class. Chartering is still important to total effort and diversification in flag states of charter vessels indicates increasing competitiveness in the supply of capacity.

Overall from this assessment, the QMS appears to be living up to the promise of rationalisation, albeit at a somewhat more sedate pace in aggregate than some might have imagined in their enthusiasm for the concept. It is likely that in reality events have been more dynamic in particular areas than is indicated here. Much more detailed work should be done in estimating change and the effects of concentration of quota, but diminishing returns are likely to set in fairly quickly given the data available. A much richer understanding of the whole process of industry restructuring and change in the New Zealand fishing industry as a result of the quota system would be available through the involvement of industry in the research process, and could fill a substantial volume with useful and interesting lessons for managers and industry worldwide. In the interim, this study will attempt to address the gaps in the preliminary assessment of quota concentration and fleet change reported here.

11. LITERATURE CITED

Annala, J.H. and K.J. Sullivan 1997. Report from the Fishery Assessment Plenary, May 1997: stock assessments and yield estimates. Wellington, Ministry of Fisheries.

Clark, I.N. and A.J. Duncan 1986. New Zealand's Fisheries Management Policies - Past, Present and Future: The Implementation of an ITQ - Based Management System. Fisheries Access Control Programs Worldwide: Proceedings of the Workshop on Management Options for the North Pacific Longline Fisheries, Orcas Island, Washington, April 21-25, 1986, Alaska Sea Grant College Program, University of Alaska.

FAO in press. Case studies on the effect of Transferable Quota Rights on fishing fleet capacity and concentration of catch-quota ownership. Fisheries Technical Paper. FAO Rome.

Gauvin, J.R., J.M. Ward and E.E. Burgess 1994. “Description and evaluation of the Wreckfish (Polyprion americanus) fishery under Individual Transferable Quotas.” Marine Resource Economics 9: 99-118.

Hogan, L., S. Thorpe and D. Timcke 1999. Tradable quotas in fisheries management: implications for Australia's south east fishery. Canberra, ABARE.

National Research Council 1999. Sharing the fish: toward a national policy on individual fishing quotas, National Academy Press.

Scherer, F.M. 1973. Industrial Market Structure and Economic Performance. Chicago, Rand McNally and Co.

Measurement of Concentration in Canada’s Scotia-Fundy Inshore Groundfish Fishery - D.S.K. Liew

D.S.K. Liew
Policy and Economics, Department of Fisheries and Oceans Maritimes Region
P.O.Box 1035 - Dartmouth, Nova Scotia, Canada B2Y 4T3.
<[email protected]>

1. INTRODUCTION

With the increasing use of individual transferable quotas (ITQs) worldwide as a management regime in recent years, there has been increasing interest in the level of concentration of quota ownershipin these fisheries. This paper looks at the concentration of ownership of two Scotia Fundy Inshore Groundfish fleets operating under different management regimes, the Mobile Gear fleet¹, vessels under 65 ft in length, that has used ITQs since 1991, and the Fixed Gear fleet of vessels under 65 ft that has used competitive quotas for most of this period. This report summarises the work in progress on what has happened eight years after the implementation of ITQs.

¹ The majority of the Mobile Gear fleet employed otter trawl gear, but a few vessels also fished with midwater trawls, danish and scottish seines. But, in Canada, the term "mobile gear" usually refers to demersal trawls.

The Scotia-Fundy Inshore Groundfish fishery consists of approximately 3200 licenced vessels of which 438 are for mobile gear. As explained in Section 2.1 below, some mobile gear licences also have fixed gear designations and are currently fishing in the Fixed Gear² fishery. The Mobile Gear fleet has largely been managed by ITQs since 1991, with the initial allocation based on six stocks and six more added over the years since then. The Fixed Gear fleet was managed using competitive quotas until 1997 when the majority of the fleet (vessels under 45 ft in length) switched to community quotas and a small portion of the fleet (vessels 45-64 ft in length) changed to ITQs. These two fleets fished a number of common groundfish species and stocks.

² The Fixed Gear fleet fished using longline, gillnet, handline and automatic jigger gears.

2. QUOTA HOLDINGS BY LICENCE AND LANDINGS BY VESSEL

2.1 Mobile gear fishery

ITQs were initially allocated to 455 groundfish-mobile-gear-licences for six groundfish stocks. In brief, licence holders were given three choices: (a) to fish the IQs as allocated to them, (b) to fish from a competitive generalist pool made up of the sum of the IQs of pool members with the option to go back to the ITQ programme at a later date, or (c) to give up their IQs and fish in the competitive Fixed Gear fishery. All licence holders retained their mobile gear licences regardless of the choice they made and can come back to the ITQ programme at any time by purchasing quota. Between 1991 and 1998, 17 licences were cancelled for various reasons and as a result, 438 valid mobile gear licences remained in 1998. Of these, 329 licence holders had chosen to fish in the ITQ programme. The remaining 109 consisted of those who had chosen the Fixed Gear or Generalist option and are eligible to enter into the ITQ programme anytime by purchasing quota.

Table 1 shows the distribution of the 1998 quota-holdings of the 329 ITQ licences; of these, 74 had no permanent quota by 1998. Another 16 licences had permanent quota of less than one tonne, bringing the total number of licences with less than one tonne of permanent quota to 90, or 27%. After temporary quota transfers were included, the number of licences with less than one tonne of quota almost doubled by 53% to 175. As some of the small quota-holdings may be due to rounding when quotas were transferred, inactivity here is defined as quota-holdings of less than one tonne of groundfish.

The data showed that temporary quota-accumulation is an important factor in concentration. About 27% of licence holders have made “permanent exits” and another 26% have exited only temporarily, suggesting that the latter group may find it uneconomical to fish at low quota-levels but could potentially re-enter the fishery when the resource improves.

Figure 1 shows the cumulative distribution of quota holdings when quotas are ranked from the highest to the lowest. There are three curves; the curve on the far right shows the initial 1991 distribution, the middle curve depicts the 1998 permanent quota distribution and the curve on the left depicts the 1998 permanent plus temporary quota distribution. Note the shift from the 1998(P) curve to the 1998(P+T) curve after temporary quotas were included. At the start of the ITQ programme in 1991, 162 licencees held 80% of the quota. By 1998, the same percentage was held permanently by 109 licencees and when temporary quotas were added, the number of licences was further reduced to 63.

Table 1
Distribution of 1998 quota holdings, groundfish ITQ fleet

Quota holdings (tonnes)	Permanent			Permanent and temporary
	No. of licences	Group quota	% of total quota	No. of licences	Group quota	% of total quota
Chose ITQ
0	74	0	0	126	0	0
< 1	16	6	0.0	49	13	0.1
1 - 10	31	129	0.6	26	100	0.5
10 - 30	54	1 102	5.1	15	308	1.4
30 - 50	30	1 200	5.6	16	614	2.8
50 - 100	44	3 189	14.7	20	1 538	7.0
100 - 200	54	7 715	35.5	26	3 780	17.2
200 - 300	18	4 579	21.1	22	5 476	24.9
> 300	8	3 797	17.5	29	10 160	46.2
Sub-total	329	21 7181	100.0	329	21 9891	100.0
Remaining	109			109
TOTAL	438			438

¹ The total quotas in these two columns are not equal due to inter-fleet transfers.

Quotas are attached to the licence in the ITQ fishery, but multiple licences can be fished by a single vessel throughout the year by transferring the new licence with quota to the vessel after the quota on the previous licence has been caught. Besides quota transfers from licence to licence, stacking of multiple licences on to a vessel can result in fewer active vessels than licences with quota. Thus an important perspective is catch by vessel, instead of quota holdings by licence. Figure 2 shows the cumulative catch of the mobile gear vessels in 1998 compared to 1990. As the licence holders who opted to fish in the Generalist Pool or Fixed Gear sector can come back to the ITQ programme at any time, they have been included in the total licensed population. The Generalist licences fished using mobile gear, so their catches were included in both 1990 and 1998. Vessels that fished in the Fixed Gear Programme would not have any mobile gear activities in 1998 but would have recorded mobile gear landings in 1990, the year before the ITQ programme. These catches were included in the 1990 catch data and as a result, some of the observed increase in concentration was also caused by the choice made by these licence holders to go to the Fixed Gear category.

As expected, the figure shows that concentration of catches from fewer vessels occurred between 1990 and 1998. The number of active vessels (i.e. groundfish landings over 1t) declined from 343 to 146, a decline of 57%, and the number of vessels that accounted for 80% of the fish caught by mobile gear decreased from 166 to 61, a reduction of 63%.

Figure 2: Cumulative catch of groundfish mobile gear vessels under 65 ft, 1990 and 1998

2.2 Fixed gear fishery

Figure 3 shows the cumulative catch graph for the Fixed Gear fleet. It is evident that there had also been an increase in concentration in the Fixed Gear fishery between 1990 and 1998. The number of active Fixed Gear vessels decreased from 1660 in 1990 to 795 in 1998, a decline of 52%, and the number of vessels that accounted for 80% of the fish decreased from 445 in 1990 to 253 in 1998, a decrease of 43%.

Figure 3: Cumulative catch of groundfish fixed gear vessels under 65 ft, 1990 and 1998

3. METHODOLOGY TO MEASURE CONCENTRATION

3.1 The Gini Index of Concentration

The Gini concentration index is a measure widely used in the measurement of income inequalities. According to Needleman (1978), the most-frequently used summary measure of the degree of inequality of income distributions is the Gini coefficient of concentration. Examples of the applications of this index have included the measurement of income distributions in Canada (Needleman 1979), in Barbados (Holder and Prescod 1989) and in a 12-country study (Berrebi et al. 1987). The literature on the Gini index has included studies on the characteristics, variations and different methods of computation of the index.

Before defining what the Gini index is it is useful to first consider the Lorenz curve. The Lorenz curve shows the proportion of total income received by a given (bottom) proportion of the population, i.e. it is the cumulative-income curve when incomes are ranked from lowest to highest. When incomes are equally distributed, the Lorenz curve will be a straight line across the diagonal. The further away the Lorenz curve is from the diagonal, the more inequality there is in the income distribution. The Gini coefficient (or index when multiplying by 100) is graphically represented by the area bounded by the Lorenz curve and the equal share line, divided by the total area below the equal share line.

In this application, I have inverted the Lorenz curve when the cumulative catch curves in Figures 1 to 3 plotted with catches ranked from highest to lowest, instead of from lowest to highest. The Gini index in this application is equivalent to the Area X divided by the total area of the upper triangle in Figure 4. This index has a scale of zero to 100; zero indicates no concentration and 100 indicates maximum concentration. When all vessels have equal catch, the cumulative catch curve is depicted by the diagonal line labeled A in Figure 4. As the level of concentration increases, the curve shifts from the right to the left. Curve C is more concentrated than B or A. In the limiting case when all the fish are caught by one vessel, the cumulative catch curve would be represented by the straight lines on the left and top side of the rectangle. The index in this case would be 100.

In practice, it may be impossible for one vessel to catch all the quota and the true maximum scenario would be the straight line (line D in Figure) defined by the minimum number of vessels required to harvest all the catch. The area bounded between this line and the equal-catch line would then be the true maximum. In this paper, no attempt is made to estimate the minimum number of vessels, and the one-vessel case is used as the maximum possible.

Note that this index only tracks concentration within the fleet, i.e. how vessels within the fleet stack up against each other. It does not take into account differences in the absolute level of catches by vessels across different fleet sectors.

3.2 Concentration indices of mobile gear and fixed gear fleets at the vessel level

The concentration indices for the Mobile and Fixed Gear fisheries were calculated using the above methodology and are shown in parenthesis in Table 2. Based on these indices, the Fixed Gear fishery is relatively more concentrated than the Mobile Gear fishery - the 1998 Fixed Gear index was 89.8 compared to 83.1 for the Mobile Gear. The concentration indices were much higher in the Fixed Gear fishery due to the higher percentages of in-active licences and also the more uneven distribution of catches among the active vessels. For example, in 1990, the top 10% of active vessels in Fixed Gear caught 53% of the fish while the top 10% in Mobile Gear only caught 29%. As noted in the previous section, the higher concentration index in the Fixed Gear fleet does not imply that the same number of Fixed Gear vessels caught more fish than Mobile Gear in absolute terms. It only means that the same percentage of the Fixed Gear vessels caught a higher percentage of the catch compared to Mobile Gear.

Figure 4: Cumulative catch at various concentration levels

3.3 Methodology to measure the change in concentration

The Mobile Gear index increased from 56.9 points in 1990 to 83.1 points in 1998, an increase of 26.2 points. Using conventional arithmetics, one could calculate the percentage change as an increase of 46%, which is the 26.2-point increase divided by the 1990-index of 56.9 points. Similarly, the increase in Fixed Gear would have been 10%, which is the difference between the 1998-index of 89.8 points and the 1990-index of 81.5 points, divided by the 1990-index of 81.5 points. But examination of the detailed data gives a different picture. The numbers in Table 2 help put this into perspective. The number of active vessels in the Mobile Gear fishery between 1990 and 1998 decreased by 57% - this compares to the 52% decrease for Fixed Gear. At the 50% cumulative catch level, the decrease for Mobile Gear was 60% compared to Fixed Gear’s 44% and at the 80% level, the decline in Mobile Gear was 63% compared to 43% in Fixed Gear.

Table 2
Comparison of catch concentration indicators for groundfish mobile and fixed gear vessels under 65 ft

Cumulative catch	Mobile gear			Fixed gear
%	No. vessels		%	No. vessels		%
	1990	1998		1990	1998
50%	78	31	(60%)	148	83	(44%)
80%	166	61	(63%)	445	253	(43%)
100%1	343	146	(57%)	1660	795	(52%)

¹ Includes only vessels that caught over 1 tonne of groundfish.

As noted, the relative change between two points in time depends on the index at the starting-point. Higher starting-point indices do not have much “room” to increase in absolute terms. For example in the Mobile Gear sector, the 1990 vessel concentration index was 56.9 and the index has to increase by 43.1 points to get to 100. By comparison, the Fixed Gear index of 81.5 only had to increase by 18.5 points to get to 100. If the starting-point index was used as the base, then the Mobile Gear index would have to increase by 76% (43.1/56.9) but Fixed Gear only has to increase by 23% (18.5/81.5) to get to maximum concentration of 100 points. This is not very meaningful for comparative purposes. A Concentration-Change-Measurement index could be based on a maximum increase of 100% regardless of the starting-index level. It would measure the actual increase against the “room” left to increase. For example, in the case of the Mobile Gear sector, the maximum “room” was 43.1 points and the increase between 1990 and 1998 was 26.2 points. Out of a maximum of 43.1 points, the 26.2-point increase represents 61%.

Table 3
Percentage of groundfish landings (mobile gear, vessels under 65 ft) purchased by buyer, 1990 and 1998

1990		1998
Company	% of mobile gear landings	Company	% of mobile gear landings
A	7.0	1	8.9
1	5.0	2	7.8
5	4.4	3	6.8
6	3.5	4	6.6
B	3.1	5	6.4
7	2.8	6	6.2
2	2.8	7	6.1
C	2.8	8	6.0
D	2.6	9	4.9
E	2.5	10	4.3
Subtotal	36.5	Subtotal	64.5
Others (144 buyers)	63.5	Others (67 buyers)	36.0
Total (154 buyers)	100.0	Total (77 buyers)	100.0

Note that this change-index tracks approximately the relative changes in the percentage decline in the number of vessels at various levels of cumulative catch. In the Mobile Gear sector example, declines at the 50%, 80% and 100% cumulative catch levels ranged from 57-63% and the Concentration-Change-Measurement index calculated for Mobile Gear of 61% lies within the range. Similarly, the declines at the 50%, 80% and 100% cumulative catch levels ranged from 43-52% in Fixed Gear sector and the Concentration-Change-Measurement index calculated for this fleet was 45%.

4. PURCHASES BY BUYERS

4.1 Mobile gear fishery

In 1990 there were 154 buyers for the fish caught by mobile gear and by 1998, there were only 77, a decline of 50%. At the 80% cumulative level, the decline was even higher - 47 buyers bought 80% of the fish in 1990 compared to 18 in 1998 or a decline of 62%. Applying the concentration methodology to buyers, the buyer concentration index was estimated to increase from 66.3 to 86.9 over this period and the change-index was estimated to be 61%.

The distribution of groundfish purchases mobile gear by the top-10 buyers in 1990 and 1998 are shown in Table 3. To protect the confidentiality of the buyers, the actual names of the buyers are not shown, instead, a coding system based on the 1998 Top-10 ranking was used. Rankings higher than 10 were not done. For example, Company 1 was the buyer that purchased the most fish caught by mobile gear in 1998 and Company 10 ranks number 10 in 1998. The 1990 list indicates the company's 1998 ranking numerically, but companies not in the 1998 Top-10 list were simply listed alphabetically in ascending order.

In 1990, the top-10 buyers purchased 36.5% of the mobile gear landings and by 1998 this percentage had increased to 64%. The largest buyer purchased about 9% of the total mobile gear landings in 1998, and seven out of the ten buyers were in the 6-8% range.

4.2 Fixed gear fishery

The number of buyers of fish caught by Fixed Gear decreased from 156 in 1990 to 119 in 1998, or a decrease of 24%. The buyer concentration index increased from 63.6 to 70.4 and the change-index was estimated to be 19%. Table 4 shows the distribution of fixed gear groundfish purchases by the top 10 buyers in 1990 and 1998. The top-10 companies purchased 36.4% of the fixed gear fish in 1998, up from 28.3% in 1990.

Table 4
Percentage of groundfish length landings (fixed gear, vessels under 65 ft) purchased by buyer, 1990 and 1998

1990		1998
Company	% of fixed gear landings	Company	% of fixed gear landings
A	4.2	1	4.5
B	4.0	2	4.4
6	2.7	3	4.1
C	2.7	4	4.1
D	2.7	5	3.9
E	2.6	6	3.7
F	2.4	7	3.4
G	2.4	8	3.1
9	2.2	9	2.7
4	2.2	10	2.5
Subtotal	28.3	Subtotal	36.4
Others (146 buyers)	71.7	Others (109 buyers)	63.6
Total (156 buyers)	100.0	Total (119 buyers)	100.0

5. LANDINGS BY PORT

5.1 Mobile gear fishery

In 1990, 101 ports recorded landings from mobile gear and by 1998 this number had dropped to 53, a decline of 48%. Eighty percent of the landings from mobile gear were made in the top-23 ports in 1990 and by 1998, that same percentage was landed in the top-9 ports. The geographical concentration index for Mobile Gear increased from 74.1 in 1990 to 91.0 in 1998. Based on the proposed change-index methodology, this was an increase of 65%.

The top-10 ports ranked by landing quantities in 1990 and 1998 are shown in Table 5. As it is possible that some of the ports may have only few buyers or vessels, actual names of the ports are not shown to protect the confidentiality of the players. Instead, a coding system similar to that used for buyers is used.

Table 5
Percentage of groundfish landings (mobile gear, vessels under 65 ft) by port, 1990 and 1998

1990		1998
Port	% of mobile gear landings	Port	% of mobile gear landings
1	13.8	1	31.7
5	7.4	2	12.4
3	6.3	3	6.9
A	6.3	4	6.6
2	5.7	5	6.5
6	5.0	6	5.4
B	5.0	7	5.0
C	3.0	8	4.2
D	3.0	9	3.8
E	3.0	10	3.6
Subtotal	58.5	Subtotal	86.1
Others (91 buyers)	41.5	Others (43 buyers)	13.9
Total (101 buyers)	100.0	Total (53 buyers)	100.0

The top-port in 1998 accounted for 31.7% of all mobile gear landings. This port was also the top-port in 1990, but it accounted for only 13.8% of the landings then. Besides increased concentration among fewer ports, there had also been some shifts in the landings by port as some ports gain in importance while others lose out. Only 5 of the top-10 ports in 1990 made the top-10 list in 1998.

5.2 Fixed gear fishery

The number of ports with fixed gear landings decreased from 188 in 1990 to 151 in 1998, a decline of 20%. Eighty percent of fixed gear landings were accounted by the top-30 ports in 1998 compared to 39 in 1990. The Fixed Gear geographical concentration index increased from 75.4 to 80.7 and concentration was estimated to increase by 22%.

The top-10 ports accounted for 50.1% of all fixed gear landings in 1998. This was up marginally from 38.6% in 1990. The relative importance of the ports appear to be more stable between 1990 and 1998, 8 of the top-10 ports in 1990 were still in the top-10 ports in 1998.

6. SUMMARY AND CONCLUSIONS

Concentration indices based on the Gini concentration index were calculated for two Scotia Fundy Inshore Groundfish fleets, the Mobile Gear and the Fixed Gear. A methodology to measure the relative change in the concentration levels between two time periods was proposed and applied to these fisheries. This index, called the Concentration-Change-Measurement index was based on the increase in the Gini index as a percentage of how much "room" there is left to increase. These indices were applied to vessels, buyers and ports for the years 1990 and 1998. The proposed methodology for measuring changes in concentration over time appears to provide a reasonable measure of the relative changes in the number of participants for the two fisheries studied.

The concentration indices based on Gini and the Concentration-Change-Measurement methodology are summarized in Table 7. The number of vessels, buyers and ports at the 50%, 80% and 100% cumulative landings levels in 1990 and 1998 along with the relative changes between these two years are also shown.

At the vessel level, the number of active Mobile Gear vessels declined from 343 in 1990 to 146 in 1998, a reduction of 57%. Fixed Gear vessels also recorded a significant decline, from 1660 to 795, or a reduction of 52%. The concentration index increased from 56.9 in 1990 to 83.1 in 1998 in the Mobile Gear sector while in the Fixed Gear sector it increased from 81.5 to 89.8. Based on the Concentration-Change-Measurement methodology proposed, it is estimated that the relative increase in concentration between 1990 and 1998 was 61% for Mobile Gear and 45% for Fixed Gear.

The number of active buyers in the Mobile Gear fishery declined by half over the 1990 to 1998 period, from 154 to 77. By comparison, the number of buyers from Fixed Gear vessels declined by only 24%, from 156 to 119. A greater difference was noted in the changes in the buyer concentration indices between 1990 and 1998, with Mobile Gear at 61% compared to Fixed Gear’s 19%.

Table 6
Percentage of groundfish fixed gear < 65' landings by port, 1990 and 1998

1990		1998
Port	% of fixed gear landings	Port	% of fixed gear landings
5	6.3	1	6.7
1	5.0	2	6.6
3	4.3	3	6.1
4	3.7	4	5.4
6	3.7	5	4.9
9	3.5	6	4.6
8	3.3	7	4.2
A	3.3	8	4.2
B	3.0	9	4.1
10	2.5	10	3.3
Subtotal	38.6	Subtotal	50.1
Others (91 buyers)	61.4	Others (43 buyers)	49.9
Total (101 buyers)	100.0	Total (53 buyers)	100.0

Indicator	Mobile gear			Fixed gear
	1990	1998	Relative change (%)	1990	1998	Relative change (%)
Vessel
No. of active vessels	343	146	(57%)	1660	795	(52%)
No. of vessels that caught 50%	78	31	(60%)	148	83	(44%)
No. of vessels that caught 80%	166	61	(63%)	445	253	(43%)
Vessel concentration index	56.9	83.1	61%	81.5	89.8	45%
Buyer
No. of active buyers	154	77	(50%)	156	119	(24%)
No. of buyers that bought 50%	17	8	(53%)	22	17	(23%)
No. of buyers that bought 80%	47	18	(62%)	47	41	(13%)
Buyer concentration index	66.3	86.9	61%	63.6	70.4	19%
Port
No. of active ports	101	53	(48%)	188	151	(20%)
No. of ports that land 50%	8	3	(63%)	16	10	(37%)
No. of ports that land 80%	23	9	(61%)	39	30	(23%)
Port concentration index	74.1	91.0	65%	75.4	80.7	22%

The number of ports receiving mobile gear landings declined from 101 in 1990 to 53 in 1998, or 48%. The decline for Fixed Gear landing sites was lower at 20%, from 188 to 151. The difference in the concentration indices in these two fisheries was even higher, with Mobile Gear at 65% and Fixed Gear at 22%.

For the Mobile Gear fleet, a significant amount of the quota accumulation was in the form of temporary quota-holdings. This could indicate that some of the vessels might have exited only temporarily and could conceivably return to the fishery when the resource conditions improve.

Finally, it should be noted that the study covers a period when there had been major resource-declines and the complete closure of fisheries for most eastern Scotian Shelf stocks. Part of the increased concentration would be due to the changes in the resource conditions. Some of the increased concentration in Mobile Gear was also due to the reduction in vessels as a result of licence holders opting for the Fixed Gear fishery. The analysis in this report basically compared the concentration levels in 1990 and 1998; the effects due to the resource decline or reduction in vessels that went to fish in the Fixed Gear fishery were not separated out. In the Mobile Gear fishery, a significant portion of the quota was accumulated on a temporary basis. It remains to be seen whether these concentration levels would prevail when the resource improves.

7. LITERATURE CITED

Atkinson, A.D. 1970. On the measurement of inequality, Journal of Economic Theory, 2, 244-263.

Berrebi, Z.M. and J. Silber 1987a. Interquantile differences, income inequality measurement and the Gini concentration index, Mathematical Social Sciences, 13, 67-72.

Berrebi, Z.M. and J. Silber 1987b. Dispersion, asymmetry and the Gini index of inequality, International Economic Review, 28(2), 331-338.

Brown, J.A.C. and G. Mazzarino 1987b. Drawing the Lorenz curve and calculating the Gini concentration index from grouped data by computer, Oxford Bulletin of Economics and Statistics, 46(3), 273-278, 1984.

Fisheries and Oceans Canada 1990. Atlantic Groundfish Management Plan.

Fisheries and Oceans Canada 1998. Integrated Fisheries Management Plan Atlantic Groundfish.

Holder, C. and R. Prescod 1989. The distribution of personal income in Barbados, Social and Economic Studies, 38(1), 87-114.

Kondor, Y. 1975. The Gini coefficient of concentration and the Kuznets measure of inequality: A note, Review of Income and Wealth, 21(3), 345.

Needleman, L. 1978. On the approximation of the Gini coefficient of concentration, The Manchester School of Economic and Social Studies, 46(2), 105-122,

Needleman, L. 1979. Income distribution in Canada and the disaggregation of the Gini coefficient of concentration, Canadian Public Policy, 4, 497-505.

Indicators of the Effectiveness of Quota Markets: the South East Trawl Fishery of Australia - R. Connor and D. Alden

R. Connor
Centre for Resource and Environmental Studies,
The Australian National University, Canberra, ACT 0200, Australia.
<[email protected]>
and
D. Alden
Australian Fisheries Management Authority
PO Box 7051, Canberra Mail Centre, CANBERRA, ACT 2610, Australia
<[email protected]>

This paper¹ presents some results of an investigation into potential indicators for the assessment of markets for individual transferable fishing quota where price data does not exist. The economic logic for implementing such markets and how they are expected to work is used as a basis for asking questions about how well they are performing, and what might comprise evidence of problems. Given data on quota ownership, transfer and leasing, and associated catches, but no quota price data, indicators are suggested for monitoring and analysing market activity and are applied to data from the Australian South East Trawl Fishery (SETF). The focus is on aspects of the data that might speak to the issues of information asymmetry and transaction costs in particular, and briefly at the issue of the competitiveness. First we look at aspects of market participation as evidence that quota owners have sufficient information and knowledge to utilise trade when it is in their interests to do so. We also look for evidence here for the effect of transaction costs on participation. The issues of quota “landlording” and quota concentration are examined for scale that might lead to the development of market power. We then present an original analysis that looks at the match of catch against quota holdings, and how this changes over time, again looking for evidence of possible asymmetries in transaction costs and information. The descriptive statistics and indicators show that the SETF quota market has contributed flexibility to the system. They show the market has assisted stakeholders to maximise their interests, given the constraints imposed by the annual total allowable catches, the allocations of quota species mix, and vicissitudes of the environment and the price of fish. The study provides an optimistic view of the health of the SETF quota market, and our hope is that it can help separate the question of whether the market mechanism is working, from the other issues of concern in the management of the fishery.

¹ This paper is to be published in Marine and Freshwater Research, 2001 Vol. 53.