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Table of contents

In late , the negotiation group on fisheries subsidies was revitalized with the goal of achieving binding outcomes to be adopted at the WTO Ministerial Conference in This Ministerial Conference, however, did not achieve substantive outcomes. A possible link between subsidies and overfishing was discussed during these negotiations. Participants engaged in the WTO negotiations had to tackle the problem of a lack of a common viewpoint on the effects of subsidies.

Academic studies on fisheries subsidies can play a key role in these negotiations by providing more accurate information on the link between subsidies and overfishing. This paper aims to review the existing academic literature and discuss the role of academic studies in policy-making processes during the negotiation of fisheries subsidies. Descriptive studies determine the definition of subsidies, describe the social and political contexts under which these subsidies are funded, and estimate subsidies at local and global levels. These studies offer the foundation for subsequent theoretical and empirical analyses.

Theoretical studies of subsidies started with static open access fishery models, but more recent studies include rational expectation, political economy, shared fish stocks, and international trade. They provide a number of predictions, but the general conclusion seems to be that the impact of subsidies should depend on the type of subsidies, biological characteristics of the fishery concerned, as well as the management and political systems in place.

Empirical studies aim to provide systematic evidence on how subsidies affect fishery outcomes in the real world. As the data on fishery subsidies are limited, empirical studies are still scarce; however, solid advances have been made during the last decade. This large estimated subsidy, together with the declining fishery resources worldwide at that time, spurred a large volume of subsequent research on the topic.


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Porter makes an important contribution to this debate by highlighting that the impact of subsidies on resource stocks depends on the combination of management and biological conditions of the fishery concerned. At the same time, a number of studies have provided estimates of fishery subsidies. The latest estimates for the global fishery subsidies are provided by Sumaila and Pauly , Sumaila et al. Previously, Milazzo assumed the amount of subsidies to be zero when information about the amount of a subsidy was not available.

In the three studies of Sumaila and his colleagues [Sumaila and Pauly ; Sumaila et al. Estimates at more national and local levels have also been carried out. Sharp and Sumaila provide detailed estimates of the amount of fisheries subsidies provided by the US government to the US fishing industry, i.

Mallory reports that, in , the Chinese central government spent RMB Sumaila et al. Schuhbauer et al. Schuhbauer and Sumaila argue that this unequal provision of subsidies undermines the economic viability of SSF. Another set of studies provides detailed accounts of the social and political contexts under which fishery subsidies are funded, and the consequences of these subsidies.

However, Lindebo finds limited supporting evidence that catch opportunities improved for the vessels during this period. Abdallah and Sumaila describe the history of Brazilian public policy on fisheries subsidies, and discuss how fiscal incentives and rural credit policies have driven the development of fisheries as well as overfishing in recent years.

Mesnil examines the consequence of government aid provided in response to three historical crises of French fisheries, and argues that the subsidies did nothing to cure the root causes of these crises. Additionally, two studies are worth mentioning, as they shed light on new aspects of fishery subsidies. First, Cullis-Suzuki and Pauly argue that marine protected areas MPAs , which are increasingly popular instruments for marine resource conservation, can be seen as a form of subsidy for fisheries. As MPAs can potentially benefit fishers in the long run, they are regarded as beneficial subsidies.

Using data provided by Balmford et al. Second, Squires et al. Knowing about how to avoid bycatch is likely to be a public good among fishers, which means it is undersupplied by the market. Thus, subsidies that encourage fishery production e. Another concern of Squires et al. Although these side payments appear to be subsidies in themselves, they are a part of an agreement that can benefit all the parties involved in the agreement.

If this is true, such side payments are beneficial. Effect of cost-reducing subsidies left panel and price-support subsidies right panel in an open-access fishery. Left panel Total cost curve rotates clockwise when cost-reducing subsidies are provided. Right panel Total revenue curve shifts upward when price-support subsidies are provided. Alternatively, to examine the impact of price-support subsidies, we can adjust the price parameter in the model, as depicted in Fig. As the price of fish increases due to price-support subsidies, the total revenue curve shifts upward to TR 2 , which results in an artificially inflated fishing effort, leading to lower harvests, and lower resource stocks with time.

While Fig. Thus, one may argue that well-managed fisheries can avoid the negative impacts of the subsidies discussed above. Munro and Sumaila , among others, counterargue this by building a dynamic fishery model with vessel non-malleability Ainsworth and Sumaila ; Clark ; Martell et al. Using this model, Munro and Sumaila show that there will be the same negative impact of subsidies even when a fishery has a sole owner or a resource manager who exercises full property rights over the resource.

The reasoning for this is simple: a sole owner of the fishery whose objective is to maximize the net present value of the fishery will exploit more resources when the cost of fishing is lower or the price of fish is higher due to subsidies. In fact, it is a theoretical possibility that a sole owner would choose to exhaust the fishery resource and invest the money in other sectors, if the cost of fishing became sufficiently low.

In their model, Munro and Sumaila assume that the sole owner or the resource manager would seek to maximize the net present value of the fishery, which is the standard assumption in fisheries economics e. While this setting is a useful benchmark, modern real-world resource managers do not set out to only maximize the net present value of a fishery but also consider resource conservation as one of the key objectives of fisheries management.

For example, Homans and Wilen provide a model of regulated open access fishery where the resource manager sets the total harvest quota to ensure stock safety rather than to maximize the value of the fishery. When the manager sets the total harvest quota independent of fishery subsidies, cost-reducing and price-support subsidies do not, in theory, affect harvests or resources; their only impact is predicted to be on fishing effort. In practice, however, an increase of fishing effort is likely to result in the weakening of quota management systems through political process. Poole examines such a possibility by extending the Homans and Wilen model.

Poole shows that when there is an unemployment insurance UI scheme which is a type of income support that requires a certain amount of time at sea for fishers to qualify, these fishers have a strong incentive to lobby to lengthen the fishing season. This will in turn increase the total harvest and potentially reduce the resource stock. Hence, a general note of caution is appropriate here.

Even if fishery managers intend to set total quotas based on the resource conservation principle, it is difficult to keep an iron-clad quota management system when there is, among other things, political pressure from powerful and influential groups in society. It is therefore still prudent to eliminate harmful subsidies even under quota management systems. We have so far limited our discussion to cost-reducing and price-support subsidies, but there are numerous other types of subsidies.

Vessel buyback programs are intended to reduce the overcapacity of fleets, which should be beneficial for the profitability of fishery and resource conservation purposes, at least at first glance. The literature shows that this premise may not necessarily be true, however. One such argument is that vessels lost from a fishery due to vessel buyback programs are likely to be the least efficient ones in the fishery.


As a result, the actual fishing capacity does not decrease as much as these programs are designed to achieve. An even stronger economic argument is provided by Clark et al. That is, if a future vessel buyback program is anticipated, it will be seen as a subsidy for investment by fishers. Thus, the impact of these programs depends on how much they are anticipated by fishers, and it seems reasonable to expect that the frequent implementation of vessel buyback programs around the world will induce existing fishers to expect similar programs in the future. Jinji provides a two-sector general equilibrium model of a small open economy where fishers allocate their time to labor and leisure.

Jinji shows that, under certain conditions, reductions in income support or price-support subsidies induce fishers to spend more time on fishing, which results in a decrease in resource stocks because fishers may choose to work more to offset the reduction in income. Jinji then extends the model to analyze trading equilibrium between two countries, and shows that the global subsidy reductions do not necessarily lead to resource recovery.

Some other papers focus on the interaction between countries in an attempt to explain why certain countries provide or do not reduce fishery subsidies. Ruseski builds a two-country model where there is a shared fish stock.

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In this model, each country has an incentive to provide effort subsidies for strategic rent-shifting purposes. Quinn and Ruseski use a similar model to show that a country with cost advantages may provide effort subsidies to domestic fleets so that it is not profitable for foreign fleets to enter the fishery.

These two studies provide potential explanations for the existence of subsidies for shared fish stocks, but not for domestic stocks. In contrast to Ruseski , Bayramoglu et al. They provide three explanations for this. First, providing fishery subsidies raises the price of fish as the stock depletes, which benefits other exporting countries. Second, as the production of fishery products is bound by ecological constraints, providing subsidies does not increase harvests above certain levels, which then limits the decrease in fish prices.

Third, governments can reduce subsidies while compensating for such a policy by weakening fishery regulations at the same time. These three factors may make it difficult for countries to reach an agreement to reduce domestic fishery subsidies. Another reason why fisheries targeting shared stocks are likely to receive more subsidies stems from the classic non-cooperative, tragedy of the commons problem Munro ; Sumaila and Pauly , which led Sumaila to suggest that two approaches to disciplining subsidies be pursued, one for stocks that are shared and another for those that are not because the incentives faced by countries for the two types of stocks are different.

Overall, the theoretical works discussed above clarify the conditions under which different types of subsidies may have harmful effects on resource stocks. In particular, partial equilibrium models of open access fisheries indicate unambiguous negative consequences of cost-reducing or price-support subsidies. A consideration of the labor-leisure choice of fisher, however, highlights a theoretical possibility that removing such subsidies could reduce both harvests and resource stocks.

Vessel buyback programs are beneficial in reducing excess capacity, but they may encourage over-investment if anticipated by fishers.

In addition, the potential impact of buyback subsidies can be either positive or negative depending on the fishery management measures in place. Three early studies focus on the impact of a specific type of subsidy, UI, on fishery outcomes in Canada. Then, using time series data for the period from to , they find weak evidence that the extension of seasonal UI in increased the number of fishers in the inshore fishery in Newfoundland.

Alternatively, Roy et al. They find that, on average, UI decreases the length of the fishing season in Newfoundland. They point out, however, that there may be some fishers who increase the time that they spend fishing to enable them to qualify for the insurance. The first two studies that shed light on the impact of broader fishery subsidies are those of Yagi et al.

Yagi et al. When examining the impact of subsidies at the country level, it is important to consider cultural and institutional differences across countries. For example, if some countries are more tolerant to providing subsidies and also exhibit higher demand for fishery products, we may observe a spurious positive relationship between subsidies and fishery production.

To consider such possibilities, Yagi et al. Overall, Yagi et al. These results are similar to those of Sumaila et al. Similarly, Yagi et al. Based on 24 univariate error correction models, they find that only other general services and the value per fisher have a statistically significant positive relationship. Since other general services include costs of fishery management, scientific research, and other administrative activities, they argue that fishery management activities may be the driver of this positive relationship.

Moreover, they argue that the result of a lack of a relationship between most subsidies and fishery outcome variables is likely due to regulatory measures in Japan that limit the impact of subsidies. Another study, conducted in Chile by Mondaca-Schachermayer et al. By looking at 32 fishing villages over the period —, they find that the changes in landings and income are not related to the annual average funding each village received. Rather, they are related to the ecological and productive characteristics of the villages. They argue that the funding did not have any impact on fishery outcomes because most of these subsidies were aimed at improving working conditions for fishers, such as building better ports, better piers, and better storage capacity.

While these types of subsidies still have the potential to lead to overfishing by reducing the cost of fishing operations , their study sheds light on the important point that the effect of subsidies depends on what and how subsidies are spent. Similar insight is provided by Sumaila et al. They first use the historical catch data to estimate the maximum sustainable yield MSY for each fish stock, and then calculate the potential catch loss as the difference between the current catch and the MSY. They find that bad subsidies are significantly associated with the amount of potential catch loss, while good subsidies do not have a statistically significant relationship with the potential catch loss.

This result confirms what is accepted in the literature that the effect of a fishery subsidy depends on its type Milazzo ; Sumaila and Pauly Sakai provides the most recent empirical evidence for this line of research. He uses data for a panel of 23 OECD countries from — to examine the impact of three types of subsidies on resource stocks. Building on the theoretical predictions and empirical findings in the literature, he allows the estimated impact of subsidies to depend both on the type of subsidy and the type of fishery management.

This is the first empirical study to examine the impact of subsidies on fish stocks, rather than input or output variables of a fishery. This resource index is created from catch data, which poses some challenges in interpreting its changes. For example, if subsidies increase fishing effort and consequently the catch, this resource index will increase in the short run.

However, in the long run, the resource index will decrease as a result of resource degradation. Therefore, it is crucial to distinguish between the effects of subsidies in the short and long run when using this resource index.

Sakai applies fixed effect models with various lag structures, and finds that the impact of subsidies on resource stocks indeed depends on the type of subsidy and management. In particular, he finds that both direct payments and cost-reducing transfers are harmful for resource stocks, while general services are beneficial.

Overall, these findings are consistent with the predictions of simple partial equilibrium models. While the studies cited above look at the impact of subsidies at macro levels, two studies examine the effect of fishery subsidies at the individual vessel level. Their data are unique in the sense that they had access to information on whether a given vessel received aid for exiting the fishery. They find that while aid i.

Thus, Duy and Flaaten provide a potential mechanism that explains the general theoretical assertion e. Yet another strand of research calibrates general equilibrium models to assess the feedback effects of fishery subsidies in the entire economy. Since this type of study directly includes subsidies for the profit function of vessels, the direct impact of removing these subsidies on the vessels is negative by construction. The focus of these studies is to quantify the indirect effects of such a policy. For example, Carvalho et al.

Using a dynamic computable general equilibrium model, they show that reducing fishery subsidies has negative impacts on fishing sectors, while it has positive impacts on the economy as a whole, except for exports and employment. They argue that the reduction in fishery subsidies increases the disposable income for households through tax cuts as the government keeps the budget balance , which then allows households to increase their consumption. Hardliners who supported this initially believed that the date for these elections would be far enough in the future that they could control the process.

Instead, Gorbachev announced that they would be held just months later. While some Communist Party members reserved many of the seats for themselves, other hardliners went down to defeat at the ballot box to liberal reformers. Former dissidents and prisoners, including Nobel laureate physicist and activist Andrei Sakharov, were elected, as candidates waged Western-style campaigns. When the new Congress met for its first session in May , newspapers, television and radio stations — newly empowered by the lifting of press restrictions under glasnost — devoted hours of time to the meetings, which featured open conflict between conservatives and liberals.

But as with economic reforms, many of these newly-elected reformers used their platforms to criticize what they still considered limited change. And the pushback by hardliners was just as fierce. In March , the largest newspaper in the Soviet Union published a full-throttled attack on Gorbachev by chemist and social critic Nina Andreyeva. Gorbachev held firm on a promise to end Soviet involvement in a war in Afghanistan, which the U.

After 10 controversial years and nearly 15, Soviet deaths, troops fully withdrew in It was with the staunchly anti-Communist Reagan that Gorbachev, a new kind of Communist leader, achieved a series of landmark agreements, including the INF Treaty that eliminated all intermediate range nuclear weapons in Europe.

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After decades of heavy-handed control over Eastern Bloc nations, the Soviet Union under Gorbachev eased their grip. In , he announced to the United Nations that Soviet troop levels would be reduced, and later said that the U.

Fishery subsidies: the interaction between science and policy

The remarkable speed of the collapse of these satellite countries was stunning: By the end of the Berlin Wall came down and Germany was on the path to reunification, and relatively peaceful revolutions had brought democracy to countries like Poland, Bulgaria, Czechoslovakia and Romania. Inspired by reforms with the Soviet Union under both perestroika and glasnost, as well as the collapse of Communism in Eastern Europe, nationalist independence movements began to swell within the U. As the difficulties of half a decade of reform rattled the stability of Communist Party, Gorbachev attempted to right the ship, shifting his positions to appease both hardliners and liberals.

His increasing appeals for Western support and assistance, particularly to President George H. Bush , went unheeded. In August , a coup by hardliners aligned with some members of the KGB attempted to remove Gorbachev, but he maintained in control, albeit temporarily. Gorbachev resigned on December 25, The Cold War was over. Milestones of Perestroika: Spiegel Online.

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The New York Times , November 9, Perestroika, Library of Economics and Liberty. The New York Times , June 4, Perestroika: Reform that changed the world. BBC News , March 10 Glasnost: RT Media. But if you see something that doesn't look right, click here to contact us! Subscribe for fascinating stories connecting the past to the present. However, the relationship between the two nations was a tense one. Nikita Khrushchev led the Soviet Union during the height of the Cold War, serving as premier from to Though he largely pursued a policy of peaceful coexistence with the West, the Cuban Missile Crisis began after he positioned nuclear weapons 90 miles from Nixon visited the secretary-general of the House of Representatives, investigated allegations of communist activity in the U.

Established in , the committee wielded its subpoena power as a During the Cuban Missile Crisis, leaders of the U.