Redistributed as a Service of the National Library for the Environment*
Andrew G. Read
April 14, 1997
The Magnuson-Stevens Fishery Conservation and Management Act of 1976 had as one of its original aims expanding the U.S. commercial fishing fleet and displacing other nations that were fishing within 200 miles of the U.S. coast. By 1993, U.S. landings had risen by 50%, and employment on U.S. fishing vessels by 60%. This expansion was aided by rising prices and demand for fish products, government encouragement, and open access to most fisheries.1
Both experience and economic models show that, in the absence of enforceable access or catch restrictions, competition among commercial fishermen results in an expansion of fishing capacity,2 and resultant fishing effort, beyond the sustainable limits of the fish population being pursued. This unsustainable harvesting causes catch rates to fall, inducing investments in more effective equipment to maintain short-term profits, regardless of the consequences for the fish stocks. The absence of individual property rights to the fishery resource effectively deters individual fishermen from taking action based on a long-term view of fish stocks, because individual decreases in short-term landings from the fishery are likely to be taken by current competitors or new entrants. Attempts to regulate the total amount of fish captured (e.g., through total allowable catch [TAC] restrictions) may induce further investment, as the fastest vessels with the best equipment will probably fare best in the "race for fish" that usually results from closed seasons or overall harvest quotas.
Overcapitalization 3 -- investments in fishing capacity that are currently or are likely to become idle for significant periods -- within the world's fishing industries has been well documented, and is a phenomenon seen within most U.S. fisheries. The legacy of this overcapitalization is now becoming apparent: by 1995, 56 of the 201 U.S. fish stocks (28%), were classified as "overutilized," including almost all of the higher-valued species.4 In several areas, aid has been provided to mitigate local economic distress following fishery collapses and/or complete bans or major harvest reductions to stave off commercial extinction of fish stocks. The spiral of increasing effort and diminishing returns (i.e., rent dissipation) has helped to fuel increases in fish prices that reduce benefits to consumers and processors; has shifted many fish populations toward smaller, younger fish that typically command lower prices; and in many cases has reduced yields far below achievable levels.
Congress has considered several approaches to address concerns about overcapitalization and excess capacity in the fishing industry. The economic aid and capacity reduction programs discussed in this document are some possible approaches to reducing overcapitalization and overfishing. Alternative approaches, such as community development quotas and individual transferable quotas, seek to meet some of the same objectives, but are not discussed in this report.5 Some of these alternatives may be government programs, akin to capacity reduction programs, but others attempt to use market forces to address these concerns.
Economic aid is usually a short-term measure, designed to alleviate individual and community losses resulting from a natural disaster (such as a hurricane) as well as longer-developing fish stock collapses, often resulting from a combination of human action and environmental factors. Financing normally comes from government funds, as grants or low-interest loans, and may be designed to help owners and/or crew of affected vessels. Cash compensation for uninsured losses within the fishery as well as other measures, such as extended eligibility for unemployment benefits or help in procuring low-interest loans from state or other agencies, may be included.
In the United States, economic aid for the commercial fishing industry has been provided under the authority of the Interjurisdictional Fisheries Act of 1986 (16 USC 4101 et seq.) which established a formula-based financial assistance program. Under this Act, the Secretary of Commerce is authorized to declare a fishery disaster following a commercial fishing failure, but only after it has been determined that adequate conservation and management measures are in place in the fishery.
Some have criticized economic aid programs for fisheries as blaming climatic and/or environmental conditions for circumstances caused by overfishing. These critics fault fishermen, fishery managers, and politicians for using economic aid as a means of forestalling, and possibly exacerbating, the inevitable distress that will likely come when overfishing and stock recovery must eventually be addressed.
Although some U.S. fisheries remain open to new entrants, access to many fisheries is limited or restricted.6 If new entry to a fishery is permitted, capacity removed could be replaced or increased, negating the effects of any capacity reduction scheme. Even in many U.S. fisheries where access has been limited, either the number of participants had already expanded well beyond what the fishery could sustain or qualification requirements for limited access eligibility were extremely liberal. Thus, although new entrants may be limited in many U.S. fisheries, managers must cope with so much excess capacity that these fisheries may be virtually indistinguishable from open access fisheries. Capacity reduction in a limited access fishery may be feasible if vessels or licenses that are removed cannot be replaced. However, without measures to prevent upgrading (i.e., "capital stuffing",) -- increasing the size or fishing power (i.e., efficiency or effectiveness) -- of remaining vessels, the benefits of capacity removal could again be negated.
Bodies governing limited access fisheries at local, state, national, and international levels have initiated various buyback or retirement schemes 7 to reduce overcapacity and the consequent overfishing. The nature and scope of these programs have been as varied as the fisheries they have covered. In some fisheries, buybacks have been attempted to prevent the collapse of seriously depleted stocks, or after a stock collapse serious enough to have caused the closure of a fishery. In others, the aim has been to increase profitability for vessels remaining in the fishery. The common objective of vessel buybacks or license retirement is the permanent withdrawal of effort (i.e., fishermen and their vessels) from a particular fishery. In most cases, however, the reduction in the number of vessels or licenses has had a relatively modest effect on fleet capacity, since the first to accept buybacks are usually the oldest and least efficient units.
Although sometimes conceived as a means for easing financial hardship caused by reduced landings of fish, capacity reduction is more often viewed as a measure to realign effort and eventually increase sustainable catch levels. Unlike economic aid, however, capacity reduction aims to provide long-term benefits to those choosing, or able, to remain within the industry and may thus indirectly confer benefits to some of the communities that the fishery supports. In some cases, the demand for vessels created by a buyback scheme has caused vessel prices to rise. This may allow some vessel owners to receive more compensation for the capital they have invested, and also may help prevent entry into other marginal fisheries that is only profitable when vessel prices are very low, but it also raises the cost of the retirement program.
The ultimate aim of most capacity reduction schemes is to improve the economics of the fishery for those fishermen choosing (and able) to remain as well as to provide some economic aid for those exiting the fishery. Methods of effort limitation other than capacity reduction are possible, and many have been tried in conjunction with capacity reduction measures. Quotas, closed areas, and closed seasons have all been tried, with varying degrees of success. These same alternatives, however, often have provided the very incentives that encourage further capital stuffing -- the frantic derby fishing that often occurs in open access fisheries managed by TAC quotas.
In fisheries where effort is controlled by individual quota shares (either transferable or not), buyback of quota shares is an option. Although this does not reduce capacity in itself, economic forces after a quota share buyback can lead to rationalization (i.e., realigning effort and sustainable catch levels) of the fleet concerned and a subsequent reduction of the capacity within it, until there is a better balance between capacity and sustainable yield.8
Vessel buyback schemes generally rely on a "reverse bid" approach --fishermen offer bids for government purchase of their vessels, which are accepted if they are lower than other bids tendered. Methods of deciding the lowest price for very different types or sizes of vessel may depend on the vessels' landings (track) record, length, tonnage, engine size, or a combination of these and other factors. In a few cases, vessels were purchased on a first-come/first-served basis, with compensation based on appraised vessel value.
Vessels purchased may be disposed of in various ways. Some schemes have involved the resale of vessels into any fishery other than the one from which it was purchased. Other schemes have allowed the vessels to be sold to fisheries outside the affected area or country. Elsewhere, buyback has involved either the mandatory destruction of the vessel or permanent withdrawal of its ability to join any commercial fishing register. These latter two options alleviate the problem of exporting overcapacity to other fisheries, which may, in turn, suffer the same problems as those in the original fishery.
In many cases, license retirement involves tendering processes similar to those described for vessels. However, in other cases across-the-board payments for individual licenses have been made, with no regard to the history or potential effort of each licensee. Prices may be set at the market rate (although expectation of increased revenues after capacity reduction may cause license prices to rise sharply) or at the value required to encourage the chosen proportion of fishermen to surrender their licenses.
In some cases, compulsory purchase has been used. Where licenses are measured in capacity or effort units of some sort (i.e., fractional licensing), a percentage of each vessel's units must be sold back to the management authority. Every vessel wishing to remain in the fishery must then purchase additional units from vessels choosing to retire to regain the required number of units. An alternative approach is where the management authority announces that, at some future date, an increased number of units will be required for continued participation in the fishery. After this announcement, fishery participants must purchase additional units from within the fishery, and the ensuing capacity reduction is industry- rather than government-financed.
In addition to reducing overall effort, as in vessel buybacks and license retirement, gear retirement can be used to reduce specific types of effort, or to change overall effort patterns. Gear retirement can be used, for example, to reduce discards, bycatches, or environmental damage; to reduce the take of a certain species within a mixed (multispecies) fishery; or to enhance the profitability of certain sectors within a fleet. A gear retirement program may involve destruction of the gear, or storage and subsequent sale to another fishery, but all will subsequently prohibit or restrict use of that type of gear in the fishery from which it was purchased. Alternatively, compensation may be paid after use of a gear type has been prohibited or, in the case of fixed gear (such as traps or pots), after reductions in the amount of gear allowed per vessel have been introduced.
An alternative approach is through gear limitation or restriction. This may, for example, limit the number of traps a vessel may set, or the size of a trawl net. Other technical measures, such as increasing mesh size (which increases the average size at first capture of a species) may allow more individuals within a stock to spawn as well as increase the economic yield per unit of fishing effort invested by allowing fish to reach more marketable size.9 Although catch may be reduced, this approach tends to increase individual effort
Financing for buyback and retirement schemes has come from a number of sources:
Government funding has to date proved to be the greatest source of funds, although in many cases industry levies and increased tax revenues have repaid this initial capital expenditure. In some cases (e.g., Australian northern prawn and barramundi fisheries), the federal government has provided guarantees, while the fishing industry has paid for most of the buyback. With the exception of Australia and a few salmonid fisheries, the latter two sources have primarily been used to provide supplementary funding rather than as the main source of financing.
Economic aid programs providing disaster assistance and capacity reduction are presented chronologically within each category below. Most recent U.S. programs are described, along with a selection of Canadian and other foreign programs for comparison. Although Japanese, Danish, and Dutch buyout and capacity reduction programs are believed to have been successful, information could not readily be obtained to summarize them in this report.
Massive algal blooms (so called "red-tides") led to the closure of shellfish fisheries off the coast of North Carolina on November 2, 1987. Unlike the other instances of economic aid described below, this disaster was initially declared by Congress in Title V of P.L. 100-220. Aid was made possible following the declaration of a disaster by the Small Business Administration on December 29, 1987, allowing access by affected fishermen and processors to low-interest loans. 10
In 1990 and 1991, Canadians fishing for cod in the northern Gulf of St. Lawrence and northeastern Newfoundland were given disaster aid because of severe ice conditions that prevented them from fishing.
A fishery disaster was declared by the Secretary of Commerce for the West Coast salmon fisheries on May 26, 1994,11 following closure of many fisheries and large declines in catches of those that remained open. Initial aid of $15.7 million was made available, with an additional $13 million being provided after the disaster was extended on August 2,1995.12 The disaster was declared due to a collapse in the salmon stocks, thought to be caused by a combination of an "El Nino" event, which brought warmer water northward along the coast, and of very irregular rainfall patterns. 13
Economic aid has been split among habitat restoration, data collection, and vessel license retirement. Details of the vessel license retirement program are discussed later in this report. Additional aid of as much as $14 million, in the form of unemployment assistance for affected fishermen, has been made available by the U.S. Department of Labor, and the Small Business Administration has made low-interest loans and debt-restructuring programs available to vessel owners.
Approximately 8,000 salmon fishermen were affected by the disaster, many of them in areas where the only other major employment was in logging, which has also declined substantially in the past decade. Some fishermen were able to move to other fisheries; the habitat restoration and data collection programs aimed to provide employment for some of those unable to move. It is hoped that these programs will enhance the fishery in the long term, enabling salmon populations and catches to recover and increasing understanding of many aspects of salmon population biology.
Phase I of the program created jobs lasting between 5 weeks and 2 months for 477 fishermen. Most of the disaster relief money appears to have helped those who want to continue fishing commercially. However, those who needed the most help -- part-time trollers, retired persons, and those who shift between commercial fishing and recreational angling -- apparently received very little. Programs designed to provide new employment opportunities yielded very few jobs. 14 Phase II runs until January 1998; to date, 140 jobs have been created in data collection. Further employment in both data collection and habitat restoration are anticipated as the program progresses.15
1 Open access to fisheries becomes more common as central governments assume fishery management responsibilities. In the absence of central government management, access to fishing and landing sites may be rigorously controlled by private vested interests.
2 Fishing capacity is an expression of the combination of all physical means that affect one's ability to harvest fish, such as hold capacity, engine size, electronic equipment, and other factors.
3 In a purely static sense, overcapitalization refers to the existence of more capital applied in an industry than is necessary for the most efficient operation. However, the fishing industry is not static, and the optimum fleet size to harvest a fishery resource may necessitate certain "inefficiencies." See CRS Report 95-296 ENR, Overcapitalization in the U.S. Commercial fishing Industry.
4 U.S. Dept. of Commerce, National Marine Fisheries Service. Our Living Oceans: Report on the Status of U.S. Living Marine Resources, 1995. NOAA Tech. Memo.NMFS-F/SPO-19. Washington, DC: February 1996. p.10.
5 See CRS Report 95-849 ENR, Individual Transferable Quotas in Fishery Management; and CRS Report No.95-553 ENR, Social Aspects of Federal Fishery Management.
6 See the appendix for a list of U.S. fisheries with restricted access.
7 Although "buyback" is more commonly used, "retirement" might more precisely indicate that commercial fishing is usually a privilege rather than a right, especially when dealing with licenses or quotas.
8 Although theoretically any level of capacity could yield a sustainable fishery as long as quotas were strictly enforced, such a program would become increasingly difficult to enforce effectively at extreme capacities due to the ability of such a fleet to harvest large amounts of the resource in a short time.
9 This approach is more effective for some types of nets than for others. It is fairly ineffective for trawls because once the cod-end mesh is filled, fish of all sizes are caught. However, minimum mesh size requirements can be quite effective in making gillnets more selective.
10 53 Federal Register No.9 (Jan.14, 1988): 982.
11 59 Federal Register No.106 (June 3, 1994): 28838.
12 61 Federal Register No.79 (Apr.23, 1996): 17879-17881.
13 For an example of how an El Nino event might affect fish stocks, See "Climate Change and It's Effects on Salmon in the Pacific Ocean" on the World Wide Web at: http://www.gladstone.uoregon.edu/jooleel/
14 Gilden, Jennifer, and Courtland Smith. Survey of Gillnetters in Oregon and Washington: Summary of Results. Adapting to Change: Fishing Families, Businesses, Communities and Regions. Oregon Sea Grant ORESU-T-96-001, 1996, 12p.; Gilden, Jennifer, and Courtland Smith. Survey of Oregon Troll Permit Owners: Summary of Results. Adapting to Change: Fishing Families, Businesses, Communities and Regions. Oregon Sea Grant ORESU-T-96-002, 1996, 15p.
15 Personal communication, Stephen Freese, National Marine Fisheries Service, Seattle, WA, October 1996.
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