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Positions
On Issues
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SPEAKING NOTES
For a presentation at the B C Seafood Alliance workshop
"Sustainability through Co-Management"
Vancouver: October 10, 2002
Introduction
Thank you for inviting me to participate in this
workshop. I know the fishing organizations represented at this meeting
are actively searching for improvements in the way their fisheries
are managed. I certainly support these efforts. I am especially
encouraged by the interest you are taking in co-management, and
the work you are doing to establish joint management agreements
with the Department of Fisheries and Oceans.
These efforts to find ways of enabling those who
fish to participate in the management of the resources are part
of a broad wave of new initiatives gathering momentum in fishing
nations around the world, most notably in advanced western countries.
The organizers of this workshop suggested to me that it would be
helpful if I took this opportunity to put the developments here,
on Canada’s west coast, into the broader context of developments
internationally. This can be helpful in at least two ways. One is
that efforts here can take strength when they are seen as advances
in fisheries management taking place in other fishing nations. The
other is that a great deal can be learned from experience elsewhere
about what works and what doesn’t, how to solve problems and
how to avoid mistakes.
At the root of the changes currently underway
in the world’s fisheries is the character of fishing rights.
I intend to direct my remarks to the rapid changes taking place
in the traditional right to fish in the oceans, and how this is
altering the incentives of those who fish to not only catch fish
as effectively as they can but also to manage them to maintain the
long term productivity of the resources. This gives me an opportunity
to share my own ideas about what governments can do to promote improvements
in fisheries management.
Fishing Rights: The Traditional Model
Fishing rights have been changing rapidly over
the last few years. To put present developments into perspective,
it is helpful to begin with a little historical perspective.
Many centuries ago it was well established that
fish in the sea belonged to no one. Roman law held that fish could
not be owned because they are not capable of being "possessed",
at least not until they are caught – a theory still deeply
entrenched in the law of western countries. A complementary rule,
more important for my discussion here, is that everyone had a right
to catch them. This common right to fish was bolstered when King
John of England signed away the Crown’s authority to grant
private fishing rights in the Magna Carta in the thirteenth century.
And four centuries later it was endorsed by Hugo Grotius in his
famous doctrine on the freedom of the seas. For centuries, the rights
of fishermen were no different from the rights of anyone else; everyone
had an equal right to fish, free from the encumbrances of property
and regulation. This remained the general rule until recently.
Writers on the economics of property say that
this open-access regime was natural and entirely appropriate as
long as the supply of fish exceeded the demands on them, which was
historically the case. There is no need to go to the trouble and
expense of organizing and allocating rights among fishermen unless
their demands exceed the supply, making it necessary to ration the
supply among them.
Over the years, as fishing industries expanded
and the technology of fishing advanced, pressures on the richest
fisheries grew. In the nineteenth century the most vulnerable stocks,
notably some of the whales and other mammals, shellfish and salmon
were overfished. By the middle of the last century it was apparent
that most of the world’s valuable stocks were fully exploited
and many were overfished. Sometimes governments intervened to protect
the stocks by restricting gear and fishing seasons. But the rights
of fishers did not change fundamentally.
About fifty years ago, economists began to elucidate
a fundamental flaw in the organization of fishing industries. As
long as access to the stocks was uncontrolled, profitable fisheries
would attract more fishers and more catching power, even if fleets
were already greater than needed to harvest the available catch,
and fleets would expand, redundantly, until all profits were dissipated
in higher costs. Thus fishing industries were condemned to a kind
of dismal Maltheusian equilibrium, evidenced around the world in
over-expanded fleets, over-exploited stocks and almost universally
low incomes among fishers.
All this was due to the unlimited access to limited
resources.
So it was explained that when demands on resources
exceed the available supply, open access gives rise to two problems.
One is the conservation problem. It was clear, after centuries of
denial, that fish stocks were exhaustible, and uncontrolled expansion
of fishing pressure leads to overfishing. The other is the economic
problem; over-expansion of labour and capital in fishing dissipates
the potential profit, or more correctly the resource rent, the stocks
are capable of producing, ensuring that even the richest fisheries
will, over time, yield low returns. These two tendencies –
overfishing and dissipation of economic returns – became worldwide
phenomena in the latter half of the twentieth century. They were
starkly evident in the fisheries here on the Pacific coast.
Governments tried to prevent overfishing by controlling
fishing effort through restrictions on fishing gear, the capacity
of vessels and fishing time, but their interventions were typically
slow, belated and faltering. They tried to alleviate the poor economic
performance through subsidies and various forms of assistance, but
in the long run this only aggravated the problem.
Recent Development of Fishing Rights
A major innovation in fishing rights took place
in the late 1960s. In Canada, over-expansion of the fishing fleet
in the Pacific salmon fishery had progressed to such an extreme
it was becoming unmanageable, and to prevent further deterioration
the government licensed all existing vessels and declared that no
more licences would be issued. This limited access policy was picked
up and spread remarkably quickly; within a few years it applied
to all the major fisheries in Canada and many of those in other
fishing nations.
In terms of the rights of those who fish, licence
limitation implied a fundamental change. Previously, all citizens
had an equal right to fish, so in a legal sense the right to fish
lacked an essential characteristic of property: the right to exclude
others. Licence limitation changed this. Fisheries remained common
property, in the sense that all those with licences shared the right
to fish, but others were now excluded. Thus governments introduced,
through the regulatory process, the first crucial characteristic
of property.
Today, limiting the number of vessels in an overcrowded
fishery seems an obvious thing to do, but at the time it met with
strong opposition. The tradition of open access was difficult to
overcome in the fishing community, and the need for this new restriction
was not widely appreciated. Many believed that the government’s
role was to conserve the stocks, and let anyone fish who wanted
to; if too many entered, some would go broke, but there was no need
to interfere. The connections between uncontrolled access, overcapacity,
overexploitation, poor earnings and the public interest were too
subtle, or insufficiently important, to justify restrictions on
the traditional free and open access to fisheries.
In any event, licence limitation was not as effective
as many had hoped. All licensed vesselowners still had strong incentives
to increase their fishing power to compete in the zero-sum game
of striving for larger individual shares of the catch. They replaced
their boats with bigger, more powerful boats, and equipped them
with more advanced equipment for finding, catching and handling
fish. In attempts to forestall this wasteful expansion of fishing
power, governments added more restrictions on vessels and gear.
But it is practically impossible to restrict all dimensions of fishing
power and fishing effort, and as a result, fishing capacity and
the cost of fishing continued to rise, but catches typically did
not. So the treadmill of overexpansion, overexploitation, poor economic
performance and regulatory intensification continued.
Then, around the late 1970s the notion of "stinting"
the fisheries was broached; that is, dividing up the total allowable
catch among the holders of fishing licenses. The idea was that if
each licence holder had the right to take a specified quantity of
fish, and the sum of these quantities was the total allowable catch,
they would no longer have to engage in a competitive race for their
shares of the catch. Moreover, if their quotas were transferable,
they could buy and sell them to adjust the scale of their operations
for maximum efficiency, thereby rationalizing the fleet. Within
a remarkably short time, quota licences – variously known
as IQs, ITQs, IVQs, enterprise allocations and catch quotas were
introduced in Canada, Iceland, New Zealand, Australia, Europe and
elsewhere.
Individual quotas were an extension of commercial
fishing licensing arrangements but they added a new dimension to
the rights of fishers by defining quantitatively their shares of
the total harvest. This allocation of the catch eliminated, for
the first time, the competitive race for fish and with it the perverse
incentives for overexpansion of fishing capacity and effort which
were at the root of both the poor economic performance of fishing
industries and the depletion of stocks.
The Experience with Individual Quotas
Over the last two decades, individual quota systems
have proliferated, and are now the basis for managing a couple of
hundred ocean fisheries around the world. Five important fishing
countries –Australia, New Zealand, the Netherlands, Greenland
and Iceland – have adopted individual quotas as the main instrument
for organizing their fisheries. A number of others, including Canada,
Norway, Denmark and Chili employ quotas in major fisheries. These
cover a wide variety of fisheries – shellfish, demersal species
and pelagic species – ranging from very small to very big
fisheries. Some have been in place for two decades.
As a result, we now have a good deal of practical
experience with this approach, and a substantial body of empirical
evidence of its advantages and disadvantages as a fisheries management
system. This documentation, in government reports, conference proceedings,
research papers and books contains valuable lessons about how the
practical problems of quota systems can be dealt with – how
to define the quotas, how to determine the initial allocations,
how to monitor catches and enforce the system, and how to embed
it in suitable law and institutions.
This documented experience is far too extensive
to attempt even a summary here, but at the risk of oversimplification,
I will venture a couple of general observations (I emphasize the
risk in generalization, because fisheries differ so widely, in so
many respects, that few conclusions apply to all).
The documented experience with individual quotas
leads convincingly to the conclusion that this method of managing
commercial fisheries has been remarkably successful in advancing
the two primary objectives noted earlier, namely to protect the
stocks from overfishing, and to improve the economic performance
of commercial fishing industries.
Improvement in economic performance has been particularly
apparent. Ragnar Arnason, of the University of Iceland, recently
calculated the productivity of labour and capital in fishing in
four fishing countries that have based their fisheries management
mainly on individual quotas for some years – Iceland, Greenland,
Holland and New Zealand. He compared this with the corresponding
productivity of labour and capital in five fishing countries that
rely, for the most part at least, on other management methods such
as fishing effort controls and licence limitation, namely the United
States, Faroe Islands, Canada, Norway and the United Kingdom. The
average catch per gross registered ton of fishing fleet in the quota
management countries was double that in the other category. The
average catch per fisherman employed was even more striking: in
the quota countries it was more than three times that in the others.
Most of the many reports on individual quota systems
introduced in particular countries and fisheries are consistent
with these findings. Notwithstanding a variety of difficulties encountered
in implementing quotas, and plenty of critics of the system, the
results are generally favourable, especially in respect to the improvements
in economic performance resulting from elimination of excess fishing
capacity, increased productivity of labour and capital and higher
value of catches. In some cases the improvements have been dramatic
in both management of the fish stocks and economic performance.
Arnason concluded that the quota system has been more successful
in achieving these policy objectives than any other fisheries management
system currently employed around the world. The continuing spread
of quota systems among fishing nations is evidence that his assessment
is widely shared.
When individual quotas were first mooted two decades
ago, much of the discussion and writing was about the potential
difficulties and obstacles to implementing the system. I refer to
the problems of initial allocations – undoubtedly the most
contentious issue among the fishers – and displacement of
employment and communities – the greatest concern among others
– as well as the practical problems of monitoring catches,
data corruption, enforcement, discarding, high-grading and concentration
of fishing rights. Undoubtedly, these problems have been experienced,
and might explain why individual quotas have not been adopted in
some cases. They should not be underestimated, but sometimes they
have been exaggerated, especially about concentration of fishing
rights, displacement of labour and enforcement.
In any event, each fishery is different, and as
governments have introduced quota management in specific fisheries,
each with its particular character and problems, these challenges
have been found to be manageable, and practical solutions found.
The system has produced some benefits that were
not anticipated. One is increased value of the catch. Until fairly
recently, the economic gain from individual quotas was expected
to arise entirely from elimination of the costs of excessive inputs
of labour and capital as fishing fleets and fishing effort were
rationalized. Experience has shown that substantial gains can be
realized also through increased value of the catch. In Canada’s
Pacific halibut fishery, under the former policy of controlling
fishing effort, the government had reduced the fishing season to
six days per year. The individual quota system allowed fishing all
year round, and as a result fishers could fish when markets were
most opportune, take time to clean and handle fish for maximum value,
and take advantage of higher prices for fresh fish, increasing the
value of the catch by more than 50 percent. Similar gains have been
experienced in Alaska’s halibut fishery and Australia’s
southern bluefin tuna fishery, among others.
Another effect that was not expected, or at least
was underestimated, results from the incentives to act collectively.
When quota holders in a fishery find themselves with new and substantial
assets in fishing rights, they look for ways to protect them from
encroachment and to enhance their value through better management
of the fish stocks, efficiencies in fishing and improvements in
the fishing rights themselves. These measures call for collective
action.
There can be no doubt that the individual quota
system of organizing fisheries is more than a passing fad. Its well-documented
success, the already deeply vested interests in the system, and
its continuing expansion suggest that it is here to stay, and may
well become the normal method of managing commercial fisheries,
in economically advanced fishing countries at least. It certainly
constitutes a major innovation in the evolution of fishing rights
and fisheries management.
Now that the initial experiments with individual
quotas are behind us, and we have the benefit of a good deal of
experience with them, we should direct our attention to the next
steps, to build on the progress we have already made.
Toward Self-Regulation
There is now plenty of evidence of the proprietary
interest fishers develop in fisheries managed under individual quotas.
Once they find themselves members of a group that collectively holds
exclusive rights to fish, and each of them has a specified share
of the harvest, the stage is set for cooperation.
Thus, we find many examples of quota-holders cooperating
in conservation measures such as larger mesh-sizes, surveillance
and enforcement, data collection and research and in contributing
to the costs of these.
Moreover, if the individual quotas are secure,
long-term and transferable they become valuable assets, and their
holders develop a keen interest in protecting them against interlopers,
poachers or governments that might in some way threaten them or
diminish their value. In New Zealand today, about three-quarters
of the assets of fishing companies is represented by their fishing
quotas. Not surprisingly, the look for ways of enhancing their assets,
by increasing the yield of the fishery or improving the security
and integrity of their fishing rights. To advance their interests
in these ways they must act collectively. These are the ingredients
of co-management.
Individual quota systems, when first introduced,
almost inevitably require a good deal of governmental management
and administration because only governments have the capabilities
needed. But experience has shown that quota-holders soon respond
to their incentives to develop collective arrangements with the
capacity to take over fisheries management responsibilities. The
benefit of this participation and cooperation is in the lower costs
and improved economic performance of the fisheries that can be expected
to follow. This is not to say that the cost of regulating the fishery
will necessarily be lower, but rather that the value generated by
the fishery, relative to all the costs of fishing, regulation and
compliance, both government and private, will be greater when those
with a direct interest in this outcome are involved in management.
Toward Co-Management
Governments can promote co-management in several
ways. Most important is to provide secure proprietary interests
in the rights to the harvest.
It’s important to recognise that the success
of individual quota systems is due to the change in fishermen’s
incentives resulting from the change in their fishing rights. Individual
quotas eliminate the incentive to wastefully expand fishing power
and effort that motivates those who fish in non-quota fisheries,
and generate, instead, incentives to minimize fishing costs, efficiently
adjust fishing capacity and the scale of operations, and maximize
the value of the catch.
The change from simply a right to catch fish to
a right to take a specific quantity of fish represents a significant
addition to the bundle of sticks in the lawyers’ metaphor
for property, and a strengthening of fishers’ property interests
in the fishery, which drives them to organize fishing more efficiently.
So to improve performance further, we should look for ways to further
strengthen fishers’ property interests.
The main characteristics of property which govern
its effectiveness in guiding economic behaviour are its exclusivity,
or the extent to which it gives the holder an exclusive right to
use an asset without interference from others, its duration, or
the period over which the rights prevail; its security against intrusions
or claims of others and its transferability or capacity to be bought
and sold, divided and leased or otherwise conveyed to others.
There is considerable scope for improvement in
these qualities of fishers’ property rights in Canadian quota
systems. In the countries with the most well developed quota systems
– New Zealand, Australia, Iceland and the Netherlands –
quotas are relatively strong rights insofar as they are long-term
or perpetual in duration, legally secure and freely transferable.
In Canada, in contrast, they are conspicuously weak in comparison,
being administrative supplements to fishing licences with tenuous
legal status. Quotas are issued with terms of only one season. Fishers
have no protection against government manipulation of their quotas
to accommodate new entrants or other political pressures, or even
against cancellation of them; they can transfer their quotas only
with governmental approval; and financial institutions won’t
accept them as collateral. All this uncertainty and insecurity undermines
confidence in the system, which weakens its power to guide economic
behaviour in constructive directions. Most individual quota systems
suffer from at least some of these deficiencies, presenting opportunities
for improving the property rights held by the fishers, and hence
also their long-term proprietary interest in the fisheries.
Of course, proposals to strengthen property rights
face resistance. In contrast to the normal resistance to introduction
of a quota system in the first place, the resistance to strengthening
the property rights embodied in individual quotas usually comes
not from the fishers but from governments. In many cases this seems
to be due simply to a lack of appreciation, within government, of
the subtle implications of security and transferability of rights
to resources for entrepreneurial incentives and investment decisions,
especially among fisheries agencies that have historically seen
their responsibility as one of constraining and restricting fishers
from pursuing their self-interests in catching fish.
More often, I believe, is the lack of clear policy
direction. The countries that have developed the most advanced forms
of individual quotas in terms of their property characteristics,
such as New Zealand, Australia and Iceland, are those in which the
government has explicitly adopted individual quotas as their preferred
approach to fisheries management, thus giving their public administrators
clear direction through policy statements, legislation and institutional
innovations. Where governments have been equivocal, such as Canada
(and the United States where the federal government has hesitated,
and for a time even invoked a congressional moratorium on individual
quotas) administrators are left with a hodge podge of conflicting
systems to administer – regulatory systems aimed at constraining
market incentives and quota systems that depend on them. Almost
inevitably the quality of the rights of quota-holders remains weak.
Clear governmental direction is obviously needed to enable development
of these policy instruments.
At the political level, the federal government
has hesitated to strengthen the property interests of fishermen
because of public anxiety about "privatizing" public resources.
This is partly a misconception, insofar as the introduction of individual
quotas does not change the ownership of fish, but only the nature
of the right to fish, as we have noted, typically from a right to
catch fish to a right to catch a specific quantity. Incidentally,
this is much more consistent with the way we issue rights to other
natural resources in Canada. But opposition to "privatization"
is often strong. In the United States and other countries legal
actions have been brought against governments for privatizing fisheries
through individual quotas. Alaska’s halibut quotas are explicitly
not private property. In Australia and elsewhere public spokespeople
have often felt it necessary to deny that they were creating property
in the form of fishing rights (public opposition to quotas is undoubtedly
aggravated by the habit among lawyers and academics of referring
to such rights as property, which they undeniably are de facto if
not de jura, but so are limited access licences and other forms
of rights).
A related public concern is about the windfall
gains or profits that may accrue to quota-holders, often considered
unfair to those excluded from the fishery. This may also involve
misunderstandings. Instead of being recognised as the emergence
of economic rent and evidence of economic improvement in a fishery,
these gains are often seen as artificial enrichment of a few at
the expense of the public owners and excluded fishers.
In short, governments can promote self-regulation
and co-management of fisheries by strengthening the rights of those
who fish. This means giving them solid legal standing, long or perpetual
terms and easy divisibility and transferability to provide their
holders with the security and incentive they need to manage both
fish stocks and their own investments for the long term.
Rights can be strengthened by reducing their political
as well as their legal vulnerability. I have already noted the importance
of a clear governmental policy commitment to support the quota system.
Half-hearted, tentative and partial measures, such as we find in
Canada, cannot be expected to generate the confidence necessary
to yield the potential results.
Another means of promoting co-management is by
adopting a policy of cost recovery for public fisheries management
and administration, as Australia and New Zealand have done. This
has the effect of internalizing both the costs and benefits of services,
closing the circle between those who pay and those who gain, and
focusing attention on the scope for improved efficiency.
The third means of facilitating the shift to co-management
is by providing an institutional framework that enables quota-holders
to manage their affairs. To be able to cooperate effectively, fishers
need a management organization on the same scale as the fish stock.
It must represent all those having rights to fish, have a clear
mandate and authority to make rules and powers to enforce them including,
most importantly, the power to exclude outsiders and free-riders.
New Zealand’s experience provides vivid
evidence of the efficacy of these policy measures in combination.
Here, where the government originally took responsibility for all
administration of the quota management system, much has now been
transferred to the fishing industry, and there has been a marked
change in the respective roles of government and industry. Quota-holders,
who initially complained about inadequate governmental services,
gradually turned their concern to bureaucratic waste and inefficiency,
and began to demand cost reductions and control over expenditures.
They have organized themselves into management companies, and in
some cases these companies finance research, enhancement and other
activities, determine allowable catches, make fishing rules and
impose sanctions. They also endeavour to strengthen their fishing
rights and expand their management role. Industry associations now
operate to government standards the quota and vessel registries,
the programs for reporting catches, and the day-to-day administration
of the quota management system. Consideration is now being given
to contracting out parts of the compliance enforcement function,
hitherto considered a core governmental responsibility.
Australia is developing a model that depends on
more governmental structures, notably a statutory authority (the
Australian Fisheries Management Authority) to manage all Commonwealth
fisheries. This authority maintains a Management Advisory Committee
for each major fishery. These committees, dominated by those who
hold fishing rights, provide a mechanism for self-regulation and
have been given increasing responsibilities.
In my view, self-regulation is the most exciting
opportunity for future development of fisheries management and fishing
rights. It has already proceeded further than anyone expected a
decade ago. In some fisheries quota holders have begun to act as
joint owners and to organize their activities as cooperatives, and
in the end they may evolve into shareholders of enterprises that
not only organize fishing but manage the fish stock and its yield
as well. Tradeable shareholdings might even provide the machinery
to manage some of the external pressures on individual fisheries,
such as the allocation of catches among competing sectors of commercial,
recreational and aboriginal fishers within a given fishery. Extending
the transferability of quotas among fishers within a sector to transferability
across sectors would shift the often intractable problem of allocating
catches among competing groups from governmental discretion to the
market, just as land is allocated among users.
Concluding Comment
By way of concluding my remarks I want to refer
again to the economic theory of property, and how property develops
in response to growing demands on resources in limited supply. Until
the twentieth century, fish in the sea were not perceived to be
scarce, and no property rights were needed to ration them. But that
century saw pressures on the world’s commercial stocks grow
to the point that most were overexploited and depressed. In response,
property rights in ocean fisheries began to emerge, and in the last
three decades they have, in historical perspective, been evolving
with astonishing speed.
Over that brief period, in the developed world
at least, the long tradition of open access to fisheries has ended.
Most fish resources have been appropriated by coastal states. Governments
of those states have reserved access to the stocks for a relatively
few, who consequently hold strongly vested interests. Increasingly,
their rights to fish are specified quantitatively. In some cases
these rights have well-developed characteristics of property, and
their holders have begun to act like cooperative owners. The trend
is clearly toward more well-defined, tangible and exclusive rights
to fish. And those who hold them have begun to take an interest
not only in catching fish but also in managing them.
Fishing rights have begun to take on the characteristics
of property common in other natural resources. The implications
for the management of ocean resources are not unlike those of the
enclosure movement for the agriculture communities of eighteenth
century Europe, and the social and economic impacts might well be
as profound.
Where is all this leading? The search for policy
direction has to take account of the urgency of improved fisheries
management which, over the last century, has been undeniably dismal.
With few exceptions, both the natural resources and the industries
that depend on them have languished, and it will take herculean
measures to restore their health, and to respond to the growing
demand for sustainable development.
In this context, the development of property rights
in fisheries over the last few years is promising, and the adoption
of individual quotas is particularly auspicious. Governments should
give high priority to what it takes to make the most of this system.
With virtually no prospect of turning back; the challenge is to
find the best way forward.
Our historical experience with agriculture, as
well as our experiments with quotas, suggest we can build on the
successes already achieved by strengthening the property rights
embodied in quotas, thus ensuring that those who fish take a long-term
interest in the health of the resources and in their efficient use.
To take full advantage of this, governments can also provide the
legal and institutional framework to enable them to manage their
fisheries. This prospect of the holders of fishing rights doing
more than simply harvesting fish, by taking responsibility for managing
and developing them as well, presents an exciting new frontier of
opportunities for ocean fisheries. |
