As the only organization that can draft global agreements to curb harmful subsidies, the World Trade Organization WTO has the power to regulate fisheries subsidies. Negotiations on this are now at a crucial stage.
Governments have subsidized their fleets for centuries for a variety of reasons: food security, pressure from industry lobbies, or simply national pride. Global catches at sea continued to grow after World War II, peaking at 86 million tons in 1996. They have remained around that level ever since, despite ships becoming more efficient at fishing.
Subsidy on fuel
Without government help, some fishermen would go bankrupt. But with subsidies that lower their operating costs, they can continue. In the European Union, for example, fishermen, like farmers, do not have to pay tax for their diesel. For many fishing vessels, fuel is by far the largest cost item. With a cutter of 2000 hp that ticks nicely.
In theory, the environment itself should keep fishing in check: low fish stocks mean that fishing costs more time and therefore more money. In practice, therefore, public funding often keeps unprofitable fishing fleets at sea. The IN THAT estimates global fishing subsidies to be between $14 billion to $54 billion a year. These subsidies are partly harmful (capacity-increasing), partly neutral, and partly good, for example buying ships and fishing licenses.
Fishery biologist Daniel Pauly of the University of British Columbia, describes this dynamic as a “race to the bottom”, where countries that have depleted their stocks in their own waters go elsewhere to fish the remaining stocks1.
Who are the biggest losers?
Developing countries such as Senegal are among the biggest losers from current subsidies. There, the economy is very dependent on fishing, but the country does not have the resources to develop large industrial fleets to compete with countries such as China that come to fish in their waters. This deprives the local population of both livelihood and an essential source of protein. A decline in stocks of predatory fish, including snappers, forced Senegalese fishing boats to switch to smaller sardinella.
The environmental impact of subsidies is also felt on the high seas, outside the territorial waters of countries. The Indian Ocean is an important example of this: 94% of yellowfin tuna stocks are overfished.
The main subsidisers
A 2019 study, published in Marine Policy, estimated global subsidies at $35.4 billion, of which $22.2 billion is “harmful” capacity-enhancing subsidies. The top five grant providers (China, European Union, US, Republic of Korea and Japan) contribute 58% (20.5 billion) of the total estimated grant. Asia, including China, is by far the largest subsidizing region (55% of the total), followed by Europe (18% of the total) and North America (13% of the total). The Asian subsidies are for the most part capacity enhancing.
With the UN Sustainable Development Goal 14.6 the World Trade Organization negotiators IN THAT the task of tackling fisheries subsidies that contribute to overcapacity and overfishing. In addition, they must abolish subsidies that contribute to illegal, unreported and unregulated (IUU) fishing.
The WTO negotiators have been sitting around the table for 20 years, and had a United Nations deadline in December 2020. In March 2020, preparations for a consolidated draft text were in full swing, but meetings were canceled due to COVID-19. They missed the December 2020 deadline to close a deal set by the United Nations, though they finally agreed on the definition of “fish” last year. The WTO is now also able to meet online and a draft agreement was ready for the 12th Ministerial Conference to be held in Geneva from November 30 to December 3, 2021. Unfortunately, the Omikron variant of the COVID virus finally threw a spanner in the works and the meeting was canceled again. Negotiators hope to reach an agreement soon. And that is not easy. Not all subsidies are considered ‘harmful’ and some are not covered by a WTO agreement. In addition, Beijing opposes attempts to limit subsidies for high-seas fishing. Some delegates see proposals to tackle the use of forced labor – a hidden subsidy – as futile, as it is unlikely that all 164 members will agree.
The Chinese Fleet
After depleting much of its fish stocks in inland waters, the Chinese fleet is now fishing elsewhere. China’s Distant Water Fishing (DWF) fleet had nearly 17,000 ships in 2020, five to eight times more than previously documented, according to the Overseas Development Institute (ODI), an independent global think tank. While other countries are also responsible for overfishing, China is the main player in the global fishing crisis due to the sheer size and global presence of its fishing activities. In comparison, the European Union’s DWF fleet had 289 ships in 2014 and the United States had 225 large DWF ships in 2015.
Nearly 1,000 Chinese DWF ships fly the flags of other countries, most of which – 518 in total – are registered in African countries. In Ghana, for example, up to 93 percent of trawlers are owned by the Chinese. By operating under the Ghanaian flag, the Chinese companies hide behind locally established entities, pay very low licensing fees and fines are much lower. They also receive subsidies from China. Ghana now loses between €12.1 million and €20 million annually in fishing licenses and fines from trawlers. In addition, Ghana’s monitoring and control capacity is very limited.
More than 58% of the vessels involved (believed or confirmed) in IUU fishing worldwide are Chinese, the Overseas Development Institute revealed in its study. The violators include vessels owned by China’s largest state-owned far-water fisheries companies. China’s involvement in IUU activities may be even more extensive, the report said.
Another research, based on satellite images, found more than 900 vessels of Chinese origin in 2017 and more than 700 vessels of Chinese origin illegally fishing in North Korean waters. They caught an amount of Japanese flying squid that approaches the combined catch of Japan and South Korea (more than 164,000 tons worth more than US$440 million), according to Science Advances magazine. The researchers also found 3,000 small-scale North Korean vessels fishing, mostly illegally, in Russian waters.
A third incident is the recent discovery of a large concentration of Chinese fishing vessels off Ecuador’s Galapagos Islands. At its peak in 2020, more than 350 vessels were fishing simultaneously.
Until recently, where ships are in the open sea and what they do was difficult to control. By combining satellite images via Global Fishing Watch and information from public tracking devices, ships can now always be found, even if they turn off their public tracking devices.
The Chinese government’s 13th Five-Year Plan for 2016-2020 recognized the need to reduce the impact of fishing. A new analysis of Chinese fisheries subsidies indeed saw a decrease in domestic subsidy expenditure. But the analysis also showed that there is opaque reporting and persistently high subsidies for the far-water fleet. The study, commissioned by campaign group Oceana, suggests that 85 percent of China’s fleet subsidies are harmful to the sustainability of fish stocks.
Vessels fishing outside Chinese waters receive disproportionate subsidies
The financing structure and reporting of Chinese grants has changed significantly in recent years. China published an annual detailed report of its programs and amounts for fisheries subsidies in the China Fisheries Yearbook. This may concern fuel subsidies, but also new construction or the dismantling of ships. Since 2016, most subsidy programs go through the provinces, which are not obliged to report the distribution of their subsidy expenditure to the central level.
Vessels fishing outside China’s waters receive a disproportionate subsidy (42%) despite the fact that they account for only 22% of China’s catch. This is proof that subsidies support an unprofitable fleet, according to the Oceana report.
DWF fuel subsidies have declined, but subsidies for the construction of DWF bases (ports, processing and storage facilities) that started in 2016 now make up 57% of direct subsidies to support the DWF industry. Under the auspices of the Belt and Road Initiative mainly Chinese fishing bases have been built in various West African countries.
In addition, the DWF industry receives many indirect subsidies in the form of tax breaks and preferential loans.
China’s growing opacity comes just as World Trade Organization negotiators must agree to end harmful fisheries subsidies. So far, Chinese negotiators have been hesitant about the terms under which they would agree to a WTO deal, especially if it includes provisions on data reporting.
The key points for the WTO negotiators to decide:
- Banning fisheries subsidies that cause harm, such as subsidies that reduce the cost of fuel and ship building and subsidies that provide price support to keep market prices artificially high.
- The abolition of subsidies to fishing fleets on large waters. Such subsidies threaten low-income countries that depend on fish.
- Eliminating subsidies for illegal/unregulated vessels.
- Exceptions to the rules – so-called ‘special and differential treatment’ – should be considered for small-scale fishermen using low-impact fishing gear or fishing to earn a living.
- Finally, the agreement should require transparent data documentation and enforcement measures.
Given the recent history of the Chinese fleet, all this will not be easy.
1. According to the latest data from the Food and Agriculture Organization of the UN, fish stocks in many parts of the world are at risk of collapse due to overfishing. It is estimated that 34% of the world’s stocks are overfished, compared to 10% in 1990. Some regions, such as the Mediterranean, are even more severely affected. That is at a rate where the fish population cannot replenish itself. Declining fish stocks exacerbate poverty. About 39 million people depend on fishing for their livelihood. Healthy seas are also important for food security: fish provide on average 20% of the animal protein needs of 3.3 billion people.
This article by Christien Absil is the second in a triptych about IUU, illegal, unreported, unregulated fishing. The first part, The Persistent Problem of Illegal Fishing, was published on January 21st.
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Harmful fishing subsidies – ‘Government funding often keeps unprofitable fishing fleets at sea’ – Foodlog