How Close Are WTO Members (Really) to a Deal on Fisheries Subsidies?

World Trade Organization (WTO) members have been negotiating new rules on fisheries subsidies for 20 years since the Doha Development Agenda round was launched in 2001. Relentless drive from both the chair of the negotiations and the WTO’s director-general produced a revised negotiating text on November 8, and another draft is expected any day now. With only a few days left until the 12th Ministerial Conference, how close are members (really) to a deal?

The Back Story

The current text reveals a remarkable degree of progress toward members’ mandate (also reflected in SDG Target 14.6) to prohibit “certain forms of fisheries subsidies that contribute to overcapacity and overfishing” while ensuring “effective special and differential treatment for developing and least-developed members.” Meeting this mandate requires a deft balancing act.

For many members, key questions are whether those with large fleets and significant subsidies are doing “enough” and whether the principle of special and differential treatment has been applied appropriately to reflect developing country members’ circumstances and needs.

Part of the balance is in the relative impact of the rules among members. For many members, key questions are whether those with large fleets and significant subsidies are doing “enough” and whether the principle of special and differential treatment has been applied appropriately to reflect developing country members’ circumstances and needs. To put this in perspective, the top five marine fishing nations or groups—China, Peru, Indonesia, the European Union, and the United States—account for 42% of global marine capture production. The top five subsidizers—China, the United States, South Korea, Japan, and Russia—together provide more than 65% of the subsidies that will be captured by the agreement. At the other end of the spectrum are WTO members that individually account for less than 0.7% of global marine catch. The developing countries in this group account for around 11% of global capture and 6% of the subsidies that will fall under the agreement.

But the balancing act is also about the impact of the rules within domestic contexts. If the agreement is really going to protect fisheries’ crucial importance to the development priorities, poverty reduction, and livelihood and food security concerns the mandate also singles out, the exceptions cannot be so wide that they allow subsidies to further deplete fish stocks. The global fleet’s effective catch per unit of effort—one of the most commonly used indicators to assess the sustainability of fisheries—has already decreased dramatically since 1950, with a drop of more than 80% in most countries.

Two key policy debates are important to understand the balances struck in the text.

Two key policy debates are important to understand the balances struck in the text. The first relates to subsidies and fisheries management. The mandate asks negotiators to focus on those subsidies that contribute to overcapacity and overfishing. Work by the Organisation for Economic Co-operation and Development identifies several subsidies, including those to fuel or bait, that have a particularly strong impact on fishing effort. Most experts acknowledge that effective fisheries management, which restricts catches to an optimal level, can reduce the risk that subsidies lead to overfishing, but also that very few fisheries have management that is this effective. Completely effective management could be a safeguard for subsidy exceptions, but probably obviates the need for subsidies in the first place.

The second debate relates to subsidies and exceptions for subsidies to small- and larger-scale fishing in developing countries. The argument for such exceptions is that subsidies are needed to ensure fishing can continue to support food security and incomes, and to build fleets to increase production. The argument for some flexibility is arguably especially strong for fishing by remote communities where there are few other livelihood options (or mechanisms for policy support). But calls for flexibility for subsidies to large-scale fishing reflect a different policy priority and would have a much bigger impact than exemptions to support small-scale fishing: at a global level, just 19% of fisheries subsidies go to small-scale fishing, a share that drops to 17% in developing countries. For both large- and small-scale fleets, the impact of exceptions on the rules is unavoidable: if exceptions allow subsidies to encourage the depletion of fish stocks, the food security, income, and development prospects that flow from those resources will be undermined.

The Deals Struck So Far

This context helps explain how and why members have clinched the deals they have in the current text, and what elements of the final accord will be most important from a sustainable development perspective. The text itself contains four key rules, as well as a section on notification and transparency that matters to the overall balance of the agreement.

The text itself contains four key rules, as well as a section on notification and transparency that matters to the overall balance of the agreement.

Subsidies to IUU Fishing

The first rule (Article 3 of the draft text) prohibits subsidies to vessels and operators of vessels that are the subject of a determination of illegal, unreported, or unregulated (IUU) fishing. A subsidizing member’s obligation not to subsidize those vessels or operators applies automatically; members can’t ignore a determination. Subsidizing members can decide how long the prohibition should continue, but the text requires the prohibition to last at least as long as the original sanction or listing remains in place. This minimum limit to the length of the prohibition is a key issue still to be resolved. IUU determinations made by other actors (another member or a regional fishery management organization [RFMO]) may trigger a member’s obligation, so the other major issue is what procedural steps such determinations must follow.

The formulations on the table involve two central elements: notification of the vessel’s flag state and subsidizing member (if known) and the opportunity for the flag state and subsidizing member at least to provide information to be considered in the determination. The balances sought here are presumably to allow members to calibrate the length of prohibition based on the gravity of the offence, without giving them so much latitude that the prohibition can be circumvented, and ensuring determinations are made fairly without allowing too much intrusion or obstruction of domestic legal proceedings. Neither balance should be impossible to strike.

Overfished Stocks

The second rule (Article 4) speaks directly to the mandate’s sustainability element, because it would prohibit subsidies in fisheries where stocks are over-exploited. The question here is how broad any exceptions should be. Many members argue that an exception only for stock-rebuilding subsidies (like subsidies for more selective fishing gear) is too narrow. Others say the acknowledged state of the stock means that only these subsidies can be justified. Middle-ground compromises (perhaps requiring effective management if exceptions are widened) would seem to be possible here, too.

The last point to note here is that both Article 3 and Article 4 contain special and differential treatment for developing members in the form of “grace periods” for subsidies under these rules provided to small-scale inshore fishing.

Overcapacity and Overfishing

This set of rules (Article 5) is where the impact of the agreement is likely to be decided. The main prohibition lists subsidies that are presumed to contribute to overcapacity and overfishing. These subsidies are forbidden unless a member can “demonstrate that measures are implemented to maintain stocks in the relevant fishery at a biologically sustainable level.” Some members still object to the presumption that certain subsidies contribute to overcapacity and overfishing, while others object to the flexibility in the qualifier, which they argue does not clearly require that measures actually be effective at keeping stocks sustainable. But such a hybrid approach—i.e., the presumption that some subsidy types contribute to overfishing and overcapacity, coupled with the management qualifier —seems to be the only way to design the main prohibition in a way all members can accept.

The main prohibition is subject to special and differential treatment exceptions for developing country members. These will probably include exemptions from the main prohibition (and management qualifier) for:

• Subsidies by developing countries to fishing in their own exclusive economic zones (EEZs) and RFMO areas for a period of time; the key sticking point being the duration of the exemption. Data presented at workshops organized by IISD suggest that about 50% of global catch and 61% of global fishing effort occur in the EEZ of developing country WTO members (excluding fishing in RFMOs).
• Subsidies given by developing country members to low-income, resource-poor, and livelihood fishing (the top sticking point being geography: some members argue for a limit of 12 nautical miles from the coastal baseline, others for 200 nautical miles). If extended to 200 nautical miles, this exception could exclude around 15% of global catch, 34% to 45% of global fishing effort, and 5% of subsidies covered by the agreement.
• Subsidies provided by developing country members that individually account for less than a “de minimis” level (0.7% of global marine capture, and perhaps a level of subsidies). Based on the 0.7% threshold in the current text, this flexibility would exempt roughly 11% of global catch and 16% of global fishing effort.
• Subsidies by least-developed country members. This exemption would cover around 7% of global catch, 5% of global fishing effort, and 1.7% of the subsidies covered by the agreement.

Crucially, there is language on the table that would require members using one of these exceptions to “endeavour to ensure that … subsidies do not contribute to overcapacity or overfishing.”

The presumption that some subsidy types contribute to overfishing and overcapacity, coupled with the management qualifier, seems to be the only way to design the main prohibition in a way all members can accept.

In addition to a prohibition of certain subsidy types, there are also rules on subsidies “contingent on” fishing in areas beyond national jurisdiction, on subsidies to fishing in the unregulated high seas, and on subsidies to vessels not flagged (or perhaps not controlled) by the subsidizing member. Many members see the high seas rules as an important offensive interest because they could help reduce the highly subsidized activity of distant water fleets that now fish on the high seas just outside the border of coastal states’ EEZs, and have objected to them being subject to substantial exemptions.

The overall balance of this key article will need to be struck between the high seas rules and any exceptions to them, the main prohibition and its management qualifier, and the scale of the special and differential treatment provisions.

Transparency and Notification

The last significant element of the agreement’s balance is the set of requirements on transparency and notification. While many of the exceptions described above are potentially quite broad, the notification requirements are crafted so that the use members make of the exceptions is transparent. For example, members can only invoke exceptions for measures they have notified, including the fishing activity subsidized and the catch from the relevant fishery. They can only invoke management-related exceptions (such as the qualifier of the main prohibition) for subsidies for which they also notify both the management measures in place and the status of the stocks in question, which at least gives a very approximate indication of whether the measures are effective.

A Deal of Deals

The text takes members (with a few issues tidied up) to a point where the remaining decisions are all about the balance of rights and obligations between governments, and how these square with expectations: whether the IUU, overfished stocks, and overcapacity and overfishing prohibitions—with their attendant qualifiers and exceptions—drive enough change in subsidy patterns, and whether the special and differential treatment provisions meet the substantive (and political) demands for differential treatment, while protecting the sustainability imperative that will enable key development priorities to be achieved in the long term.

They are within striking distance of a deal.