Fisheries subsidies negotiations at the WTO: Developing countries at risk; here’s why

Published: November 28, 2016 6:16:16 AM

While no country can support illegal, unregulated and unreported fishing, developing countries are at risk of agreeing to obligations they might find onerous

While no country can support IUU fishing or subsidising overfished stocks, the developing countries are at a risk of agreeing to obligations that they might find extremely onerous to comply with. (Reuters)While no country can support IUU fishing or subsidising overfished stocks, the developing countries are at a risk of agreeing to obligations that they might find extremely onerous to comply with. (Reuters)

The recent developments at the World Trade Organisation (WTO) on negotiations on fisheries subsidies have put India and many other developing countries in a spot. A concerted effort is being made by the developed nations and some developing countries to prohibit subsidies granted for illegal, unregulated and unreported (IUU) fishing, or subsidies granted to overfished stocks.

While no country can support IUU fishing or subsidising overfished stocks, the developing countries are at a risk of agreeing to obligations that they might find extremely onerous to comply with. Consequently, even subsidies granted for non-IUU fishing may get prohibited, thereby threatening the livelihoods of millions of fishermen and fish workers in developing countries.

Negotiations on fisheries subsidies are an integral part of the Doha Round of trade negotiations at the WTO. While most of the Doha Round issues are languishing, there appears to be a renewed vigour among some countries to prohibit fisheries subsidies. This stems from the narrative that subsidies have contributed to overexploitation of fish stocks, resulting in unsustainable fishing.

According to the Food and Agriculture Organisation (FAO), the total production of capture and aquaculture fisheries has increased from 145.9 million tonnes in 2009 to 167.2 million tonnes in 2014. World trade in fish and fisheries products has grown significantly, with exports rising from $8 billion in 1976 to $148 billion in 2014. China is the largest fish producer and exporter in the world, with exports of $20.98 billion in 2014. India’s exports were $5.6 billion in 2014.

The high demand for fish has led to an acute pressure on the existing global fish stock, resulting in a situation of overexploitation. The FAO has estimated that 31.4% of world’s marine fish stocks were overfished at unsustainable levels in 2013.

The progress in fisheries subsidies negotiations at the WTO has been rather chequered. A group of countries comprising the US, Australia, New Zealand, Norway, Chile, Colombia, Peru and Iceland, and referred to as Friends of Fish, have been at the forefront in demanding strong rules against granting subsidies to this sector. The main target of Friends of Fish was to prohibit two categories of subsidies. One, subsidies granted for fishing vessels construction and fleet modernisation, both of which enhance the capacity to fish; and two, subsidies that reduce operating costs, such as fuel subsidy.

While Japan, Korea and Chinese Taipei, the traditional big subsidisers, would have been adversely affected by the prohibition on subsidies granted for capacity enhancement, the livelihood of tens of millions of fishermen in developing countries including India, Indonesia and Malaysia would have been severely disrupted from prohibition on fuel subsidies. On the other hand, generic subsidies granted by the US, which benefit its fisheries sector, would have escaped the prohibition. Given this fault-line, it is not surprising that even after one decade of discussions, the negotiations made little headway. However, during 2015, two developments have changed the negotiating landscape in fisheries subsidies.

First, in September 2015, under the UN Sustainable Development Goals (SDG), countries have committed to prohibit by 2020 subsidies that contribute to overcapacity and overfishing and eliminate subsidies that contribute IUU fishing. In tandem, it was recognised that appropriate and effective special and differential treatment for developing countries should be an integral part of the fisheries subsidies negotiations.

Second, the Trans-Pacific Partnership (TPP) Agreement, which was concluded in October 2015, includes rules to prohibit subsidies that contribute to overcapacity and overfishing or where these support IUU fishing.

With the US and Japan, which were on opposite sides of the divide in WTO negotiations on fisheries subsidies, having achieved common ground on this issue at the TPP; and given the commitment of the global community to prohibit some forms of fisheries subsidies, it was to be expected that this issue would gather significant traction at the WTO in 2016. And this is what has happened.

On the face of it, prohibiting subsidies for IUU fishing, or subsidies granted to overfished stocks, appears laudable. However, if we dive deep into the complexities involved in this issue, it would be clear that for three reasons countries such as India should be worried at this development.

One, at the WTO, there is no consensus on the definition of IUU fishing. However, the TPP has defined IUU fishing to have the same meaning as that contained in 2001 IUU Fishing Plan of Action of the FAO. If this definition of IUU fishing is adopted in the WTO negotiations as well, then it would mandate WTO members to adhere to commitments contained in this document of the FAO.

While the commitments at the FAO are on a voluntary basis, transplanting them at the WTO would make them mandatory. In particular, WTO members would be required to undertake comprehensive and effective monitoring, control and surveillance of fishing from its commencement, through the point of landing to final destination. It is extremely unlikely that India and most other developing countries would be able to meet this onerous requirement. Failure to comply with this requirement has the risk of any fishing activity being treated as IUU fishing. Consequently, any subsidy given for fishing that may not be IUU fishing in reality may also be prohibited.

Two, implementing prohibition of subsidies where fish stocks are in an overfished condition would require national authorities to undertake detailed and scientific stock assessment. The catch data in India is perhaps not detailed enough for stock assessment. Hence, it may be extremely onerous for India to establish that the subsidies that are provided for fishing were not in respect of overfished stock.

Three, while the commitment under the SDG for fisheries subsidies is accompanied with the flexibility of a carve-out for developing countries, the WTO discussions appear to be veering towards a blanket prohibition for all countries without any exceptions. As India would have difficulty in complying with requirements relating to IUU fishing and scientific stock assessment, the only window available to India for providing support to its poor fisher-folks is a carve-out from the general prohibition. However, in the absence of a carve-out, the livelihood of almost 14 million fish workers could be at peril.

In conclusion, at a superficial level, supporting a prohibition on subsidies for IUU fishing may appear appealing. However, the fine print of the negotiating text on fisheries subsidies at the WTO could prevent the central government and state governments from continuing to provide subsidies to fishermen, which are mainly exemption of sales tax/VAT on high-speed diesel oil used by fishing boats. India should seek to build coalitions with other developing countries with similar interests by explaining the implications of the fine-print and seek a balanced negotiating outcome.

Mukesh Bhatnagar

The author is professor, Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi.

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