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Fishing cooperatives. TURFS and marine tenure. Individual fishing quotas. Community quotas. In situ rights to fish and shellfish. Short-term leases. Fishing rights ...
Reviews in Fish Biology and Fisheries (2005) 15:201–215 DOI 10.1007/s11160-005-4869-9

Ó Springer 2006

An overview of fishing rights Daniel D. Huppert School of Marine Affairs, University of Washington, Seattle, WA 98195-6715, USA (Phone: +1-206-543-0111; E-mail: [email protected]) Accepted 13 October 2005

Contents Abstract Introduction Defining and explaining the economic problem Fishing rights The many versions of enhanced fishing rights Limited access Fishing cooperatives TURFS and marine tenure Individual fishing quotas Community quotas In situ rights to fish and shellfish Short-term leases Fishing rights controversies Fairness of the initial distribution Community or social effects Public versus private economic benefits Conclusion: Putting the ‘‘fishing rights’’ controversy into perspective References

page 201 202 202 205 206

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Key words: conservation, economics, fishing rights, incentives, individual quotas, license limitation Abstract Coastal state management of marine harvests within 200-mile Exclusive Economic Zones was a new and innovative process during the period from the late 1970s through the 1980s. The spread of conservation-focused harvest management was a key step in the evolution of fishing rights, followed in some nations by a second step of creating more exclusive, individual or group fishing rights. The three main forms of more exclusive fishing rights – limited entry permits, individual fishing quotas (IFQs), and local community-based or co-operative harvesting – vary widely in content and detail. But, when successful, they all increase the economic efficiency of fisheries, and they reshape the economic and political landscape of fisheries. All three types, but particularly IFQs, may initiate radical changes in the economic organization of the fishery, ultimately changing who fishes, where and when they fish, the products sold, the balance of power among industry sectors, incentives to support conservation, the size of incomes from fishing, and the location of shore-side economic activity. Changes of this sort are bound to provoke controversy. The controversies over fishing rights take three forms: disagreements over the meaning and intent of fishing rights, disputes over the distribution of rights and associated economic gain, and concern for disruptions imposed on people who are dependent on the ‘‘old order’’. This paper provides a short review of the underlying concepts, rights systems, and current controversies concerning fishing rights.

202 Introduction As economic growth and modern technologies expanded the scope of world fisheries during the period of 1950–1980, free and unregulated fisheries often depleted valuable ocean fish stocks and frittered away potential economic returns. Reversal of this trend required collective action to limit harvests to levels that are biologically sustainable. Within their 200-mile exclusive economic zones, coastal nations responded by developing a variety of institutional regimes to conserve fish stocks and to pursue other socio-economic objectives. In industrialized nations, the management problem is often viewed as a need to regulate use of a public resource, and the natural response is a set of regulations to reduce the levels of harvest. These include the ‘‘traditional’’ gear restrictions, such as fish size limits, time and area closures, and annual harvest limits (or total allowable catch – TAC). Where these regulations are successful, the fisheries sustain higher levels of harvest and healthier fish stocks. But, economists have long noted that competition among fishing enterprises continues unabated in management systems consisting solely of these traditional regulations (Crutchfield, 1979). Section I of this paper briefly reviews the standard explanation of this economic problem. Attempts to improve economic returns from fishing, mainly through more exclusive individual or community fishing rights, have triggered huge changes in the operation and management of some ocean fisheries during the past three decades. The new fishing rights replace the tradition of free and open access to marine fish stocks by assigning fishing rights to identified people, firms, or communities. The importance of this change is reflected in the recent outpouring of scholarly works, legislation, conferences, and expert studies (e.g. Shotton, 2000; and Shotton, 2001). New Zealand, Australia, Iceland and Canada have been enthusiastic and thorough in adopting the new regime of fishing rights, while the United States, Chile, Norway and other have been somewhat less resolute. The intense discussion of fishing rights led to the re-discovery, or at least enhanced recognition, of earlier versions of community-based exclusive fishing rights, called traditional marine tenure or territorial use rights in fisheries (Christy, 1982; Ruddle and Akimichi, 1984; Ruddle, 1989; Aswani, 2005; and Defeo

and Castilla, 2005. All of these forms of limited fishing rights provide more secure and predictable access by fishermen to marine fish stocks in coastal waters. The second section below reviews the wide variety of harvest rights that have evolved traditionally or have been designed by governments. In theory and in practice the creation of enhanced individual fishing rights opens significant opportunities for fishing firms to reduce fishing costs and/or to increase the quality and market value of their catches (Wilen and Homans, 1997). Greater profits (or resource rents) also raise numerous questions concerning fair division of the fishing rights and associated wealth. How should economic rewards be divided among past and current fishing firms, among size classes of vessels, between vessel owners and crew, and among fishing operations versus on-shore support and fish processing firms? Also, should the fishing industry pay special fees to cover the costs of fishery management or to direct some of the fishery profits to the public treasury? None of these questions have obvious and broadly supported answers. Further, some fear that economic incentives under IFQs may cause fishers to increase discards of less valuable fish and may increase the difficulty of monitoring fish landings (Copes, 1986). Because the extent and texture of these potential problems and policy questions vary with circumstances, successful administration of a fishing rights system requires a repertoire of measures to deal with the perceived injustices, regulatory failures, and other effects of the program. The third section below reviews some of these controversies and technical problems and describes some ameliorative measures that have been used with license limitation and individual fishing quotas systems.

Defining and explaining the economic problem The economic problem of open access fishing was first explained by H. Scott Gordon (1954), who developed a simple economic model of fishing. He postulated that increasing fishing effort applied to fish stock results in declining average catch per unit of effort due to stock depletion. Assuming that the market price of fish remains constant, the average revenue (or revenue per unit effort)

203 declines steadily with increasing effort, as illustrated in Figure 1, ultimately reaching zero as the fish stock is driven to extinction. Gordon further assumes that the cost of fishing is proportional to the amount of effort. So, as fishing effort grows, the average cost per effort remains constant (corresponding to the horizontal line in Figure 1) while the market value of fish caught per unit of effort declines. If the fishery is a competitive industry with free access, fishing firms will be drawn into the business so long as profits are positive (average revenue exceeds cost). This increases the level of effort until the average revenue drops to the level of cost per effort, depicted as effort level E2 in Figure 1. This is a standard, competitive market equilibrium which occurs when fishing firms are earning just enough to pay for all the capital, labor and other inputs (e.g. fuel) used in fishing. Because the declining average revenue implies declining fish abundance and catch rate, the equilibrium is both an economic and a biological equilibrium, or ‘‘bioeconomic equilibrium’’. As the biological and economic systems are interacting, the state of the fish stock becomes a function of fishing technology, the price of fish, and costs of fishing. Biological overexploitation (depressing fish stocks

$

Ave. Revenue

A

Cost per Effort

C

E1

Fishing Effort

E2

Marginal Revenue

Figure 1. The simple H.Scott Gordon model of fishery bioeconomic equilibrium.

to below the level supporting MSY, for example) will not necessarily occur in the open access fishery if the price is low relative to the cost of fishing. On the other hand, this model leads one to expect the problem of overfishing to be most notable in fisheries with high fish price and low fishing costs, such as a Pacific salmon or herring roe fishery. The fish stock could be conserved at a target level (e.g. associated with maximum sustainable yield – MSY) by various regulatory measures, often called ‘‘traditional regulations’’, such as seasonal closures of the fishery, area closures to protect small fish or spawning populations, annual harvest limits (or total allowable catch or TAC), fish size limits, limitations on amount and type of fishing gear used, and limitations on size of vessels. All of these regulatory measures are quite common in commercial and recreational fisheries regulations to this day. And, applied appropriately with adequate enforcement, the traditional regulations can prevent the excessive harvests and depletion of fish stocks. In the bioeconomic model of the open access fishery, traditional regulations to a fishery will, at first, reduce the level of fishing effort applied by the regulated fleet. As the fish stock recovers, the average revenue increases, profits emerge, and additional firms enter the fishery. In response, regulations are tightened, which again reduces the effort applied by the fleet but increases the cost per unit effort as the fixed cost of fleet construction and maintenance are spread over smaller quantities of effort. The regulatory ‘‘tightening’’ could be experienced as shorter fishing seasons, restrictions on catch per trip, or restrictions on size or use of gear. So long as profits remain positive, the fleet expands, the regulations become more restrictive, and the cost per effort rises. The new ‘‘regulatory equilibrium’’ occurs when fishing cost is pushed up enough to create zero profits at the target stock size. Finally, an economic criterion for fishery performance concerns the efficient use of inputs consumed in the process of fishing. Assuming that the cost paid for those inputs is a fair measure of their value relative to the value of fish produced, an efficient level of fishing effort would be found where the marginal revenue (i.e. the increment to total revenue caused by an additional unit of effort or rate of increase in total revenue) equals the constant cost of effort. At any lower effort level,

204 an additional unit of effort would add more to value of fish harvested than to cost of harvesting. At any higher level of effort, an additional unit of effort adds more to cost of harvesting than to the market value of the harvest. This economically efficient level of fishing effort corresponds to level E1 in Figure 1. At the efficient level of effort, the fishery would generate a level of net revenue, which may be called the resource rent attributable to the fishery, equal to the difference between average revenue and cost times the level of effort, which is depicted as the area of the rectangle in Figure with height (A – C) and width E1. A good example of this process played out over the period from 1977 to 1994 in the U.S. north Pacific halibut fishery. The International North Pacific Halibut Commission establishes annual harvest quotas by sub-areas, restricts commercial gear to longlines, monitors halibut populations, and coordinates landings records with Canada and the United States. The two nations regulate the fishing, mainly through season closures to achieve the agreed TAC. During the period from 1977 to 1992 the annual harvest quota for one major fishing area in the Gulf of Alaska (Area 3A) expanded from 11.1 to 26.8 million pounds (Hoag et al., 1993). The fleet grew even faster in response to rising prices, and the open access, regulated fishing seasons were reduced from 47 to 4 days. Donald Bevan once called this ‘‘fishery management by crowd control’’. And the consequence is not just excessive fishing cost, but also includes reduced market value, lost gear and ‘‘ghost fishing’’, gear conflicts, higher discard rates for nontarget species, and increased hazards in fishing (National Research Council, 1999b; pp. 298–308). This illustrates how a high value fishery, with intense regulations to achieve fish stock conservation, is bound up in stringent fishing regulations and forced into economic inefficiency. Anthony Scott (1955) noted that a sole owner of a fish stock would have direct economic incentives to maintain the stock at an economically optimal level and to keep fishing costs to a minimum. The sole owner of a fishery could be relied upon, at least so far as the fish stock dynamics were understood, to manage the fish like any other valuable economic resource to maximize profits (or rents) to the enterprise. While no one seriously proposed that ocean fish stocks be

assigned to private owners, this proposal provided an extreme endpoint to the range of possible property rights regimes – from ‘‘no property’’ competition among unlimited numbers of firms under open access to ‘‘private property’’ and sole ownership. Many researchers and managers have explored the economics of regulatory regimes in the middle ground of regulated open access and limited access. Crutchfield (1979) reviewed the range of regulations and noted that only those which limit the number of firms or assign individual quotas would create incentives among competitive fisherman which bring the costs down to a reasonable level. Wilen (1985) carried the logic further in developing a theory that clearly details the role of fishing regulations in modifying economic incentives and the behavior of competitive fishing firms. The major insight of the economic analysis is that parallel economic and biological problems coexist – a potential source of economic benefit to the economy is squandered in excessive costs under open access fishing, even if harvest regulations successfully conserve the fish stocks. A fish stock, like a plot of productive land or a mineral deposit, is capable of sustaining production that is worth more than the economic costs of extraction or harvesting, generating what economists call ‘‘resource rent’’. The resource rent from a fishery is a signal of the value that the natural resource contributes to the economy. Gordon (1954) showed why open access fisheries tend to perform poorly in economic terms, and how fishing pressure is related to fish price and fishing cost. He attributed this to the ‘‘common property’’ character of fish stocks, but today we do not consider the open access fishery a ‘‘commons’’. In a true commons, a known set of owners-incommon have authority and incentives to conserve. Whereas individual firms have no firm claim on any portion of the fish stock or the annual sustainable yield of the stock in traditional open access fishing. They race each other to catch the fish. Rather than blaming the overuse of fish resources on a flaw of human nature; e.g., claiming that people are ‘‘inexorably driven’’ to destroy common resources (Hardin, 1968); this theory explains that the undesirable outcome stems largely from flaws in the institutional framework

205 which shapes economic incentives and behavior. Overfishing and inability to generate significant economic rent is a consequence of economic competition by firms with no control over the resources, individually or collectively. Further, when conservation is pursued by governments regulating the details of fishing operations – where and when to fish, limitations on gear, fish size limits, etc. – the fishery still finds an economic equilibrium where costs equal sales revenue. If the fishery is potentially very profitable, the operational constraints for fish stock conservation must be very draconian. Gordon’s simple fishery model clearly illustrates a cause of low economic returns from open access fishing. But the simple assumptions (fixed cost per effort and fixed price, single species, for example) obscure other important aspects of fishing economics. Open access, ‘‘derby style’’ fisheries tend to exhibit a number of other undesirable traits (e.g. Wilen and Homans, 1997). When fishing seasons are short and furious, poor product quality and bad market timing tend to depress the ex-vessel prices. In some cases, short seasons for single species tend to encourage discards of non-target species. Some fisheries seem to experience more at-sea risks and casualties under traditional regulations. All of these problems can be reduced when the source of excessive competition in the fishery is removed.

Fishing rights Much of the discussion (especially among economists) concerning alternative institutions for fisheries management concerns the structure of fishing rights (Neher et al., 1989; Leal, 2002; Hannesson, 2004). The detailed content of fishing rights molds individual incentives, leading to behaviors that are consequential for conservation and economic performance of the fishery. However, to some minds the term ‘‘rights’’ evokes strong feeling of possession, of exclusion, and raises questions of justice. Some people react negatively to the prospect of creating private rights to ‘‘public resources’’, and this heightens the opposition to creating stronger and more flexible fishing rights. (See Bromley, this issue) Others don’t view the marine fish populations as being anyone’s ‘‘property’’. If we would

simply avoid the term ‘‘property rights’’ in discussions of fishery limited access systems – speaking instead of various forms of rules, privileges, duties, individual quotas and permits – we might avoid some of the controversy and misunderstanding surrounding the term rights-based fishing. The recent report by the U.S. Commission on Ocean Policy coined the term ‘‘designated access privileges’’ to replace fishing rights. Another approach would be to emphasize that these are use rights, not ownership of the ocean or the marine fish stocks. But the rights discourse became a standard part of the discussion for perfectly good reasons. Economists exploring institutional options for fish conservation recognized that a suite of characteristics describe the duties and privileges that individuals generally exercise during fishing. For example, Scott (1989) and Grafton et al. (2000) adopt the legal profession’s notion of property rights as bundles of sticks, where the sticks are characteristics like duration, exclusivity, transferability, divisibility, flexibility and quality of title. Arnason (this issue) uses Scott’s conceptual approach in describing Iceland’s individual fishing quota system. Further, even in an open access fishery, the fishermen do have fishing rights. They have a right to access the fishery in common with others, under conditions stipulated by fishery management authorities. And, of course, they obtain a property right to the fish that are caught. If someone tries unfairly to prevent a fisherman from accessing the fishery, the fisherman can appeal to the State, using the police power or judiciary to remedy the insult. So an open access regime implies a fishing right; it’s just that the right is non-exclusive, non-transferable, not divisible, etc. And open access fishing rights tend to be worth little for the reasons explained by Gordon (1954). On the other hand, a fully exclusive right to a fish stock, e.g. Scott’s (1955) ‘‘sole owner’’, would place the fisherman, like a wheat farmer, in full control of harvest rates and most ancillary conditions, giving him/her something equivalent to a fee-simple property right to land. Under these circumstances over-fishing, crowding, and wasted inputs would presumably not be a problem. For practical and legal reasons, we don’t expect ever to establish fishing rights approaching this extreme

206 (except perhaps in fish ponds on private land). The practical reason is that most marine stocks range widely, with unclear or overlapping boundaries, and they are also linked to prey species and predators, some of which are also sought as food or are protected as ‘‘special’’ species, like marine mammals in the U.S. Given the multiple jurisdictions and complex ecological and economic interactions triggered by fishing, it would be difficult, if not impossible, to fully define rights to fish stocks – with a set of boundaries, permissible harvest operations, and duties towards related species and habitats – that would adequately deal with the whole range of effects of fishing. Further, the UN Law of the Sea Treaty and most national laws assign authority to manage marine fish stocks to coastal states and international organizations formed by fishing nations. Coastal states have the legal authority and duty to assure that marine fish stocks are adequately conserved. This arrangement seems fairly permanent and ocean fish stocks are not likely to be transformed into a private property. With the intellectual battles still being fought over property rights in fisheries (Bromley, this issue; Bromley, 2002; Macinko and Hennessey, 2002; Cole and Grossman, 2002), policy makers are well advised to focus on the structure of fishing rights as something distinct from ‘‘ownership’’ of the marine fisheries resources. Rather, the enhanced individual fishing rights being devised in modern fisheries are more akin to fishing permits, often revocable, with associated quantitative catch levels and ancillary conditions and rules. In framing these rights a wide range of options must be considered in light of the history of the fishery, the technology being employed in fishing, and standards for fairness in dividing up the potential wealth in marine fisheries. Alternative rights structures alter fishing behavior with consequences for both fish stocks and economic outcomes. Where poor conservation or economic waste is likely to result, either additional regulations or adjustment of the content of fishing rights is called for. And this is a major point. Restructuring fishing rights is a complement to other forms of fishing regulations; one which can be an extremely useful device for furthering the goals of resource management. At the same time, fishing rights are not easily and quickly adjusted to changing conditions, because they normally rep-

resent the results of long negotiations and solid commitments. Fishing rights are not just another tool for annual harvest management, because to work properly they must influence long-term investments by the fishing and fish processing industries. Hence, significant changes to the structure of fishing rights should be infrequent and, where necessary, developed in consultation with the fishing industry and other stakeholders.

The many versions of enhanced fishing rights Eight types of more exclusive fishing rights, in three major categories, are identified in Table 1. Limited access Limiting access to fisheries, especially by allocating a limited number of licenses or permits, follows the simple logic that, if the problem is excessive cost and ‘‘too many fishermen chase too few fish’’, then an obvious solution is to limit the number of fisherman. License limitation is one of the more common measures used to control commercial fishing in Canada, the United States, Europe, and Australia. By its very nature the limit on numbers of operators or firms eliminates the form of competition that was most obvious in the open access fisheries, the proliferation of fishing vessels. But this does not eliminate the individual incentive to compete among licensees by increasing fishing power. Often called ‘‘capital stuffing’’, the extent to which this form of competition will extinguish fishing profits depends upon the specific technical and operational features of the fisheries. For example, in a terminal salmon gillnet fishery, a limit on net length and vessel size may eliminate most, if not all, avenues for overcapitalizing the fishing operation. Where such limited licenses are tradable, the rents generated by lower costs of fishing (or increased volume or price of fish) would be reflected in purchase prices (Huppert et al., 1996). And the license prices will track the economic fortunes of the fishery. Fishing cooperatives Once a group of fishing vessel owners is identified by licenses, they may agree among themselves to

207 Table 1. Many versions of more exclusive fishing rights systems Type of rights

Variations

Description

Examples (year implemented)

Access rights

(1) Limited entry permits Holders of individual entry permits are allowed to compete for harvests from a common pool. Can be restrictions on gear and seasons. (2) Fishing cooperatives Limited entry permit holders agree on a harvest sharing system, usually by written contract. (3) Territorial Use Rights Access to fishing areas limited by custom or force to members of a village, tribe or other group.

Harvest share rights

(4) Individual quota shares or IFQs

Individuals have permanent or temporary rights to harvest shares of a TAC. Could be transferred by gift or sale. (5) Collective quotas or Groups hold rights to harvest territorial rights specific shares of the annual total quota. (6) Short-term leases Groups or firms pay to harvest a species on a specific tract. In situ rights to (7) Rearing and harvest Individual exclusive rights to fish and shellfish rights on public raise and or private lands harvest within defined areas for species with limited mobility. (8) Rearing in private Individuals enjoy exclusive harvest facilities in public waters rights for aquatic animals within artificial enclosures in public waters.

Salmon fishing licenses (Alaska 1974, British Columbia 1968); Western Australia rock lobster (1963) Pacific Whiting Conservation Cooperative (1998); Bering Sea Pollock Co-ops (1999) Community-based territorial rights in Oceania and Japan (see Ruddle, 1989 and Aswani, this issue). New Zealand fisheries (1983–1986); Alaska halibut and sablefish fisheries (1995);

Western Alaska Community Development Quotas (1994), Washington State geoduck track auctions (197?) Oyster rearing on public and privately held tidelands.

Raft culture of mussels in Penn Cove, Washington (1975). Salmon net-pen culture in Norway, Canada, Chile, and elsewhere.

Source: This is modified from Table 2 in Huppert and Knapp (2001).

measures which reduce fishing costs and improve market value of their harvests. The conditions under which such cooperation is likely to succeed have been investigated by Crutchfield (1955), McCay (1980) Johnson and Libecap (1982), Ostrom (1990), and Scott (1993). Cooperative action is most likely to succeed when the membership to the group is well-defined, the members share common interests in improved resource use, and they have trustworthy monitoring systems and means of conflict resolution. An early example of the fishing cooperative was provided by Austin Laing, Director-General of the British Trawler’s Federation Limited in a letter included as an appendix to Christy (1973). Laing explained that the deep sea trawlers implemented a form of company quotas, similar to Christy’s individual quota, for the UK’s share of quotas under

International Commission for North Atlantic Fisheries. Other informal fishing cooperatives are identified in Kitts and Edwards (2003). Recently, formal fishing cooperatives have proliferated in the U.S. The first such was formed in the Pacific whiting fishery on the west coast in 1997. The catcher-processor fishing fleet (also know as factory trawlers) was under license limitation system with an annual TAC, when the Pacific Fishery Management Council allocated the TAC among the shore-side fishing fleet and offshore fleet. After obtaining a supportive opinion from the US Department of Justice concerning anti-trust law (Sullivan, 2002), the four companies operating factory trawlers quickly established the Pacific Whiting Conservation Cooperative (PWCC) and agreed among themselves to share the whiting quota. PWCC developed rules and

208 associated bylaws among themselves, including means to transfer quota shares and requirements to have a federal observer on board each vessel during fishing operations. They also report catches and by-catches to a private monitoring service and agreed to collect a tonnage fee which members pay into a fund for research. The PWCC members reduced the fleet from ten to 4 vessels, and have increased the average product yield from whiting while reducing the bycatch rates (Higgins, 1999; Leal, 2002). Other cooperatives following this example include Bering Sea pollock co-operatives and, surprisingly, a salmon fishing cooperative in Chignik, Alaska (Kitts and Edwards, 2003). Generally, fishing cooperatives accomplish through contract what the individual fishing quotas do by government regulation. The cooperatives, in effect, create private company shares of the TAC through written agreement. Criddle and Macinko (2000) go so far as to suggest that cooperatives will supplant the individual quota option in fisheries management. TURFS and marine tenure A quite different approach to limiting access rights is territorial use rights in fisheries (TURFs) or traditional marine tenure as described by Christy (1982) and Ruddle (1989) and Aswani (this issue). These are often found in small close-knit communities of inshore fishermen. For example, Japanese fishing villages have substantial authority over who may fish and how much within well-defined regions. Fishing villages in tropical Oceania exercise marine tenure systems in which rights to harvest are closely tied to local social organization and power structure. Both of these systems can potentially encourage conservation of resources for the benefit of local people. Whether community-based fishing rights systems are successful at conserving fish stocks and generating economic returns depends upon the whole range of conditions that impinge upon cooperative management: (a) whether the local knowledge base is adequate to manage the resources and develop local economies, (b) whether the politics of local resource access supports restrictive fishing practices that can conserve the fish stocks, and (c) whether local authorities or traditions create incentives for economic efficiency and resource rent creation. Also, the allocation of fishing rights by custom

tends to be rather undemocratic, often related to ethnicity, inheritance, family connections, or station in the local society (Hannesson, 2004). Individual fishing quotas Francis Christy (1973) first suggested that the traditional regulatory straightjacket could be alleviated by allocating the annual allowable catch among licensed fishermen. The individual quotas (IQs) allow fishermen the flexibility to test various patterns of harvesting and marketing fish, rather than encumbering them with short seasons and a plethora of ancillary regulations designed to limit harvests. This works, of course, only in those fisheries for which an annual harvest quotas are established as a means of conservation, which leaves out most salmon fisheries, where spawning escapement rather than TACs are used to control fishing, and many crab fisheries that are regulated by size limits. Moloney and Pearse (1979) made a strong case for dividing annual harvest quotas into shares among permit holders in limited entry fisheries, thus using a step-wise process of limiting numbers of permits before sharing the harvests. New Zealand was one of the earliest and most enthusiastic adopters of this approach, establishing individual transferable quotas (ITQs) for its major deep-water fisheries in 1983 and for many inshore fisheries in 1986. By 1997, there were 30 species or species groups managed under ITQs in New Zealand (NRC, 1999b, p. 347). For each quota management unit, the annual TAC is established by the Minister of Fisheries. Early in the program, the New Zealand government sold extra quota to the industry (particularly for hoke, a whiting-like species), and officially sought to collect resource rentals. After dealing with some overfishing problems with orange roughy, the government and industry agreed to shift from individual quotas to quota shares and to aim for cost recovery rather than resource rent collection. Four examples can illustrate the effectiveness of IFQs in creating a more economically productive fishery. Exel and Kaufmann (1997) describe the southern Australian bluefin tuna IFQs, introduced in 1984. The previous fishery had been largely a purse fishery operating from the Adelaide area which caught small, schooling bluefin tuna for a local cannery. Once ITQs were introduced, a huge

209 shift occurred in fleet and processing structure. Nearly all the bluefin ITQs were sold by purse seine vessel owners to longline and handline vessels who fish for the Japanese sashimi market. The price for the large, hook-and-line caught fish far exceeds those of the small fish caught for the cannery. In 1994 the quota lease price was about $4000/mt (Exel and Kaufman, 1997; p. 251). This illustrates the huge potential for increasing value of product under an IFQ system. The halibut and sablefish IFQs systems in British Columbia and Alaska illustrate the power of IFQs systems to both facilitate reductions in fleet size and increase the market value of the fish caught. Casey et al. (1995) explain that the British Columbia IVQ system was adopted on a trial basis for 1991 and 1992, with transferability of quota shares beginning in 1993. The most notable effects through 1993 were changes in landings patterns and ex-vessel prices. Instead of being concentrated during two short openings in April and September, landings were spread out over eights months from March through October. The price differential between B.C. halibut and U.S. average jumped from US$ 0.22 in the 1988–1990 period to US$ 0.77 in 1991–1993 due to the IVQ program. Essentially all of the halibut are now sold as fresh, rather than frozen, thus increasing the market price and reducing the costs associated with freezing and holding halibut in frozen storage for extended periods of time. The industry pays for the costs of running the IVQ system. Third, Dupont and Grafton (2000) describe ITQs introduced to inshore mobile gear fleet in Nova Scotia in 1991. Initially there were 455 license holders. During 1991 – 98 the number of active ITQ vessels fell to half from 268 to 137 (p. 216). In 1994, a majority of the fishers elected to make the quotas permanent and to endorse permanent transfers of quota. Fishers pay for cost of dockside monitoring and at-sea observers required by DFO. There is weak evidence in this fishery that ITQs changed incentives and enabled fishers to land a higher-quality and higher-priced product. Haddock prices obtained by the mobile gear fleet increased relative to the fixed gear fleet (which persistently has experienced higher ex-vessel prices). The difference for 1991–1995 over 1981– 1990 was statistically significant for haddock. The relative price increased for cod and pollock as well,

but not statistically significant difference. The huge reduction in active fleet, and maintenance costs associated with that undoubtedly improved the economic performance of the fishery. Fourth, IFQs in the Icelandic pelagic and demersal fisheries (Arnason, this issue) apparently triggered the full range of economic improvements that proponents claim. The fleet sizes were reduced, fleet productivity increased, profitability increased, and the increased rental value of the fishery was reflected in the annual lease-value of the ITQs which reached roughly US$ 400 million by the late 1990s. Community quotas Another option is to allocate fishing rights to communities or classes of people instead of to individuals and companies. This type of use right can be expressed as a share of a fishing quota or as a right to exploit a specific resource or territory. For example, ten percent of several groundfish stocks in the Bering Sea have been allocated to native villages. The villages have formed into development corporations which allocate or lease these harvest rights and invest the proceeds into local fishery development projects (NRC, 1999a). Short-term leases Generally, all the forms of exclusive fishing rights described so far assume a relatively long-lived or permanent conferral of rights on a private individual, firm, or community. Another option is for the Nation or State to lease short-term rights to harvest specified species in specified areas. For example, Washington State holds periodic auctions of harvest rights for geoducks, a large clam taken by divers. Patterned after auctions for public forest tracts, the geoduck auctions specify the geographic tract within which the harvest occurs, the quantity that may be taken, the methods and timing of harvest, and the requirements for reporting and monitoring of harvests. Because the auctions are competitive among clam harvesters, the State is able to collect significant amount of economic rent – over $60 million during the past 10 years (Huppert, 2004). Combined revenues from leases on aquatic lands in Washington State exceeded $17 million in 2003 (Washington Department of Natural Resources, 2004). Under Chile’s 1991 Fisheries Law, annual ITQs for two relatively

210 small fisheries (red shrimp and cod) were auctioned by competitive bid (Pen˜a-Torres, 1997). Few nations have engaged in short-term leases for fisheries, with or without rent collection through auctions.

public consideration and possible regulation. (Waknitz et al., 2002).

In situ rights to fish and shellfish

As noted earlier, controversies frequently arise during the establishment of fishing rights systems, most of which concern the effect of the new system on existing stakeholders. Broadly, we review three areas of critical concern: (1) the distribution of rights among fishers; (2) effects of a new fishing rights regime on established communities and onshore facilities; and (3) distribution of costs and economic returns from ocean fishery resources between the private sector and the public treasury.

For completeness, I include leases or direct private ownership of tidelands or ocean areas for fish or shellfish culture. For example, tidelands are leased to private oyster growers in Washington State. Because the leases continue over long periods, the oyster growers logically invest in all the long-lived assets needed for successful shellfish culture. But the land itself remains in the hands of the State, and, depending upon how the State sets the lease terms; annual lease payments may capture a share of the economic rent from those lands for the public treasury. Leasing and ownership of tideland for private shellfish culture is widespread in Europe and North America. While this raises issues of public access to the shore and side effects on other valuable inter-tidal organisms (e.g. juvenile crabs), the private culture operators have reasonably well-structured and adequate incentives to maintain the habitats for commercial shellfish. There is no great concern that private oyster growers will exploit their stocks in a destructive manner. So, this system works much like the ownership of farm land in framing economic incentives. Private aquaculture facilities in public waters are also becoming a major industry, especially as the practice of salmon net-pen culture has spread from Norway to Iceland, Scotland, Nova Scotia, British Columbia, Chile and elsewhere (Anderson, 1997). The conditions under which these facilities are licensed or permitted undoubtedly vary widely among the host nations. Generally, rational economic decision-making is a hallmark of the salmon farming industry. Side-effects which may call for public regulation include effects of escaping fish on local wild fish stocks, spread of disease to wild fish, and local water pollution and degraded benthic habitats beneath the net-pens. These issues are analogous to the ‘‘externalities’’ associated with agricultural and animal feeding operations on land. And this serves as a reminder that use of nearly all property rights, whether fully privatized or not, have side effects on others which call for

Fishing rights controversies

Fairness of the initial distribution Most observers agree the initial distribution of fishing rights must be done in a way that is seen broadly as fair, especially among existing stakeholders in the fishery. This ideal is difficult to achieve in practice. Even the common practice of allocating rights based upon historic fishing participation can leave some feeling ill served. In distributing salmon licenses in Alaska in 1973, for example, the State used a rating system which assigned points to individuals based upon history of fishing and dependence on fishing (roughly, the proportion of past income obtained from salmon fishing). Some active salmon fishermen received no permit, because they were not dependent enough on salmon; they fished herring, halibut and other species as well. From personal observation, some of these fishermen were still angry about this 15 years later. Similarly, most IFQ systems begin by giving quota shares to past participants, especially holders of limited permits where they exist. So, for example, the Alaska sablefish and halibut IFQs were distributed based upon shares of landings during a qualifying period of 1984–1990. In British Columbia, the shares were allocated to vessel owners based a formula assigning 70% weight to harvests during 1986–1989 and 30% to vessel length. Under either the Alaska or British Columbia allocation rules, some vessel owners could still complain that their records are imperfectly represented in the official paperwork or that they

211 are being unfairly penalized for having fished less than usual during an arbitrarily selected qualification period. In Iceland quotas were allocated freely in various ways, including dividing the TAC equally among licensed herring vessels and allocating demersal quotas to vessels based upon average share of the harvest during a 3-year period (Runolfsson and Arnason, 2001). In a related criticism, some find ‘‘rights based fishing’’ unjust simply because it confers all fishing profits on those receiving fishing rights to the exclusion of everyone else. Once a system of tradable IFQs is established, for example, the market value of the IFQs becomes a burden for any new firm attempting to enter the fishery. Copes (1986) first raised this concern and called it a ‘‘transitional gains trap’’ – suggesting that only the first recipients of the IFQs would receive economic benefits from the new rights regime. The IFQ system could be modified in a number of ways to ameliorate these effects. For example, the IFQs could be of limited duration (5-year rights) or the value of IFQs could be taxed as property or annual fees could be collected and used to create a loan fund for new entrants to the fishery. Community or social effects The location and structure of fishing communities, especially those arrayed over wide stretches of remote coast (such as in the Gulf of Alaska, northern Norway, Atlantic Canada, western Australia, or New Zealand’s south island), are heavily influenced by fishing regulations. In the early history of the Alaska halibut fishery, for example, a large fraction of the fish were taken by halibut schooners out of Seattle, and a large portion of the annual harvest was brought back to Seattle for sale (Crutchfield and Zellner, 1962). As the halibut price increased and the fleet grew in response, the Pacific Halibut Commission steadily shortened fishing seasons. One effect of this was that the fleet began operating from and delivering fish in smaller communities closer to the fishing grounds. Also, the short seasons dictated that almost all of the fish be frozen and then distributed from frozen storage over many months. Hence, the geographic distribution of fishing ports and onshore frozen storage facilities is largely determined by the method of fishery regulation. With IFQs, the

fishing fleet very quickly shifted to long seasons, delivering directly to fresh fish processors and brokers (Casey et al., 1995). In the Australian bluefin tuna fishery, the shift from purse seines to hook-and-line fishing created distributional and adjustment issues. But the canners shifted to skipjack tuna, and cage culture of bluefin created additional jobs which helped to offset local concerns about the economic shifts. In Alaska, the re-organization of the industry following IFQ introduction could reasonably be viewed as disadvantageous to the communities, and fish freezing plants that thrived under the open access regime. Matulich et al. (1996), for example, claim to show that allocation of IFQs to the fishing sector can cause significant loss of economic wealth from the processing sector. So, from one perspective the fishing fleet’s response to IFQs was an impressive example of business acumen and economic rationality. From another perspective, the IFQ system was a disaster that left some onshore plants with costly but useless capacity and some communities with suddenly diminished employment and income opportunities. Another fear was that tradable IFQs would be bought up and consolidated in the hands of fewer, larger fishing enterprises which would abandon the smaller communities and swiftly change the character of the fishing fleet. Sudden changes in economic fortunes of this sort are obviously painful to those on the losing end. Hence, an array of ameliorative measures can be incorporated in the fishing rights regime. Some measures included in the Alaska halibut program – limits on ownership to 1/2% of the quota in any of the halibut subareas, allocation to specific vessel length categories, and a requirement that the IFQ owner be on board the vessel landing the fish – were designed to reduce the degree to which the fishing fleet and the industry structure could rapidly shift from its historical pattern. The politics of quota allocation are sufficiently inventive to develop many additional ways to address the competing views on fairness in allocating fishing rights. Public versus private economic benefits Another broad critique concerns the division of economic benefits and costs between the private fishing interests and the public at large. In its

212 review of fishing rights, the National Research Council (1999b) recommended that IFQs be ‘‘accompanied by the assignment of obligations and responsibilities’’ to IFQ holders and that Congress should authorize collection of fees to cover attributable costs of the program (p. 214). They further examined means to extract some or all of the economic rent. Other critical reviews claim that free allocation of IFQs to commercial fishing firms create a ‘‘windfall for initial recipients’’, are a ‘‘giveaway of public resources’’, and constituted an ‘‘inequitable disposition of benefits from a public resource’’ (The Marine Fish Conservation Network, 2004; p. 5). Because the rights-based approach to fisheries facilitates the generation of resource rents, why should public agencies with authority over fishery management continue to use public funds to support fishery scientific research, regulatory enforcement efforts, and decision making processes? The public funds could be supplanted by landings taxes or annual fees paid by the fishing rights holders and which could be placed in a revolving fund to support the management system. The funds collected could cover monitoring and verifying fish landings, enforcing any relevant gear or area restrictions, fish stock assessment for setting periodic total allowable catches, and any additional research necessary for understanding the social or ecological impacts of the fishery. As noted above, many existing IFQ systems (New Zealand’s and Australia’s programs, for example) include landings fees and/or annual license fees for cost recovery. In the United States the 1996 amendment to the Magnuson Fishery Conservation Management Act (MFCMA) requires that the Secretary of Commerce ‘‘collect a fee to recover the actual costs directly related to the management and enforcement of any ... individual fishing quota program’’ (Section 304(d)(2)(A)), but the fees authorized are limited to no more than 3% of the landed value of the harvest. In accordance with this amendment, for example, a landing fee of 2% of ex-vessel value was established for halibut/sablefish IFQ holders in Alaska to cover estimated costs of $3,430,357 in 2001 (National Marine Fisheries Service, 2002). The Canadian IVQ program for the British Columbia halibut and sablefish fishery is not similarly guided by national legislation, but the

program was approved and implemented with an agreement that the fishery would pay fees adequate to cover any additional costs of monitoring and enforcement associated with individual quotas. Further, the Australian Fishery Management Authority (AFMA) collects payments from industry to cover 100% of fishery management costs. Recoverable costs include: running costs of Marine Advisory Councils, licensing, day-to-day management activity, ongoing costs of maintaining management plans, logbooks, surveillance and deterrence of illegal foreign fishing activity in the Australia Fishing Zone, and participation of AFMA in international forums. Because marine fish stocks belong to coastal states, the management system could go beyond program cost recovery to include collection of economic rents from the resource users. The rationale would be that the resource owners – the public – should receive the rewards for good public stewardship. Fishery rent collection could resemble the approach used by the US Minerals Management Service in selling exploration and development rights to offshore minerals on the US continental shelf, the US Forest Service in auctioning rights to harvest timber on federal land, and the Washington State geoduck auction system described earlier. All of these involve auctions in which potential resource users compete for access or specific harvest opportunities. However, the commercial fisheries have a long history of low profits, government assistance and subsidy, making the agency culture inexperienced in selling resource rights. Also, because new innovations in fisheries management often requires collaboration with, and approval of existing stakeholders in the fishery, it is unlikely that a system of full rent recovery could be developed through existing political systems. New Zealand’s quota management system, for example, began with the goal of collecting rents, but later settled on simply recovering costs. Anferova et al. (2004) and Vetemaa et al. (2002) report on two failed attempts to extract a portion of the rents from the fisheries through IQ auctions in Russia and Estonia. But there are options for going part way towards rent recovery. Auctions of some portion of the fishing rights, or taxes and fees structured to vary with profits or market prices, can be fashioned to capture an agreed portion of the resource rent.

213 Conclusion: Putting the ‘‘fishing rights’’ controversy into perspective Fishing rights are an important aspect of the institutions within which fisheries operate. All fishery management regimes involve setting rules which alter rights, duties, incentives, expectations, and behavior of fishermen. Fishery managers are necessarily engaged in communicating, enforcing and altering fishing rights. In some cases the ‘‘rights’’ terminology is avoided, as the rules are best described as access privileges or quantitative use permits. In other cases the rights are meant to be permanent, compensable, and tradable (a clear form of property right), not temporary, revocable privileges. Regardless of terminology, we are concerns with the conditions, restrictions, and obligations that are imposed on those using publicly managed marine fish resources. Second, fierce debates over the nature and extent of fishing rights are a natural outcome of the fact that each new wrinkle in the structure of rights favors some interests over others. There is no general and adequate rule for ameliorating those conflicts. Local, collaborative systems of management may de-fang the battles over fishing rights allocation in some circumstances. In other cases, a top-down government edict may work. Third, limited access rights and quantitative harvest rights are but one dimension of fishery management. Successful management is contingent on a reasonably accurate assessment of sustainable yields from the affected fish stocks or ecosystems. It also requires tools to deal with (a) physical conflicts between groups using different types of gear, (2) effects of fishing on non-target organisms and habitats, and (3) non-harvest objectives, like high biodiversity and avoidance of protected species. Fourth, the physical, technical, economic, social and biological character of fisheries vary widely – from small subsistence fishermen using twenty-foot, open boats and hand lines in remote tropical lagoons to fleets of 250-foot factory trawlers operating in stormy, northern seas. Management of such widely differing fisheries requires a wide range of approaches. The various forms of exclusive fishing rights (limited licenses, IFQs, leases and auctions, territorial marine tenure systems) clearly need to be fashioned to address specific needs and conditions.

Fifth, the institutional regimes surrounding fishing rules and rights range from village-based customary sea tenure in Pacific Islands to multilayered decision processes under national and local legislation and involving regional councils, and judicial review in the United States. Fishing rights systems are as variable and adaptable as the regimes within which fisheries operate. These observations and principles should help to place the broad agreements and deep disagreements concerning fishing rights into a constructive framework for further consideration.

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