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Fishing Capacity Introduction What is Fishing Capacity? How Did U.S. Fisheries Become Overcapitalized? Why Is Excess Capacity A Problem? How Can We Realign Fishing Capacity With Resource Availability? Who Pays for Capacity Reduction? Sources and Recommended Reading Introduction The term "fishing capacity" has become increasingly familiar over the last decade as international and national laws have directed fishery management agencies to consider the widespread problem of overcapacity in fisheries, and numerous non-governmental organizations have turned their attention to the topic. Internationally, the United Nations Food and Agriculture Organization's Code of Conduct for Responsible Fisheries requires that all parties to the agreement develop implementation plans for reducing capacity in their fisheries. Nationally, the Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA), contains several provisions related to capacity reduction in U.S. fisheries. For example, the Act 1) mandates studies of the effect of government policies on capital investment and fishing capacity, and the effectiveness of buyout programs in reducing fishing capacity; 2) places a five-year moratorium on the issuance of new government loans for fishing vessel construction; 3) proposes the creation of a standardized fishing vessel registration and information management system; and 4) orders the creation of a Capacity Reduction and Financing Authority to guarantee debt obligations incurred in capacity reduction. What is Fishing Capacity? In the simplest of terms, fishing capacity is the ability of a vessel or fleet of vessels to catch fish. This ability is based on:
The term "overcapacity" indicates a level of catching power that exceeds what is needed to catch available fishery resources. The terms "capacity" and "overcapacity" are often used interchangeably with the terms "capital" and "overcapitalization"--economic measures of the total dollar value invested in the above components of a fishery over time. When a fishery is described as overcapitalized, it means that the industry has invested more in fishing capacity than what is needed to catch fish at the least cost. U.S. fishing fleets are almost universally overcapitalized, a condition described by the Federal Fisheries Investment Task Force as one of the most serious problems in U.S. fisheries management. The National Oceanic and Atmospheric Administration's Fisheries Strategic Plan contains an objective to reduce the number of federally managed fisheries with excess capacity by 15 percent before Fiscal Year 2004. How Did U.S. Fisheries Become Overcapitalized? Historically, U.S. fisheries were considered underutilized and the domestic fishing industry underdeveloped. A desire to reduce foreign fishing offshore and develop and expand the domestic fishing industry to secure fisheries as food production systems, provide employment opportunities, and further economic development led Congress to enact the MSFCMA in 1976 (then titled the Fishery Conservation and Management Act). Through the MSFCMA and other U.S. policies, the federal government provided incentives to rehabilitate, domesticate, and expand U.S. fisheries. These incentives took two major forms:
Open Access Management Participation in a fishery managed under an open access regime is restricted only by required skills and equipment. The biological productivity level of the fish stock, defined as maximum sustainable yield, is generally managed through a total allowable catch quota--a target threshold that, when reached, will force a closure of the fishery. Early entrants in an open access fishery generally reap substantial profits, which attract new participants to the fishery. This trend continues until, eventually, the fishery reaches its full capacity--a condition where no additional participation or effort is needed to capture available fishery resources. Even so, fishermen can and often do continue to invest capital in the fishery. Because no one is guaranteed a share of the Total Allowable Catch (TAC) under an open access regime, they have no assurance that fish they leave in the water today will still be available to them tomorrow. Thus, they have little incentive to restrain their catch. Instead, they engage in "capital stuffing," investing in bigger, faster boats and the best equipment and technology to help them catch available fish before their competitors catch them first. Eventually total catch exceeds the maximum biological productivity level of the stocks, a situation that requires fishermen to invest even more capital in the fishery, just to maintain the same level of catch. This cycle of increasing investments and decreasing returns eventually causes profits to decrease to the point where it becomes unprofitable to continue fishing. Historically, fishery managers attempted to control fishing capacity through regulations on inputs--such as numbers of vessels, time spent fishing, or gear restrictions--that made fishermen less efficient. More recently, they began to implement limited access programs; access to most fisheries is now limited or restricted. But because neither of these approaches effectively removes the incentive to race for fishery resources and therefore to engage in capital stuffing, neither has been an effective control on fishing capacity. Subsidies Federal government subsidies, such as the Capital Construction Fund and other tax programs and exemptions, the Fisheries Obligation Guarantee Program, and other fisheries development, marketing, and promotion programs, have also encouraged fishing capacity to exceed sustainable levels. By aiding individual investments, subsidies increase participation in the fishing industry and, by distorting the market, they make it profitable to fish far past the point where an unaffected market would have signaled an economic failure. Why Is Excess Capacity A Problem? An excessive level of fishing capacity ultimately affects:
Excess fishing capacity affects the biological health of fishery resources through the incentives it provides both fishermen and fishery managers. Fish are a renewable resource, but they have limitations. Productivity levels depend on the ability of stocks to renew themselves through reproduction and growth. Removing too many fish or changing the reproductive capacity of the population can deplete stocks below a minimum viable population. Under normal conditions, these depletion effects would provide fishermen with an incentive to maintain stocks at larger levels. But when a fishery has more capacity than it can sustain and fishermen are forced to compete for their share of the total allowable catch, fishermen have no assurance that they'll profit from taking conservation measures to keep stocks around in the long run. Competition for fishery resources often results in increased bycatch and habitat degradation, and the socioeconomic hardship associated with overcapacity pressures fishery managers to set total allowable catch at risky levels. Each of these factors ultimately leads to overfishing. Socioeconomic Status of the Fishing Industry and Fishing Communities The socioeconomic health of a fishery depends on the health of the fish it is targeting for catch. Unproductive stocks cannot sustain fishermen or fishing communities over the long term. But the socioeconomic condition of a fishery is also affected by how fish are captured. Fisheries characterized by over-investment operate at an economic loss. Although capital investment in fishing boats and equipment may increase catch in the short term, profits are eroded over the long term as fish become more difficult to find and more costly to capture. In a 1997 article, Christy estimated that each year the U.S. fishing industry loses $2.9 billion in potential revenue as a result of over-investment. These losses are passed on to the consumer in the form of higher-priced fish at the market and they also lead to social problems linked to unstable incomes and erosion of traditional culture. Overall Effectiveness of Fishery Management Excess fishing capacity also increases the costs of developing and enforcing fishery regulations and allocating scarce resources among a large and diverse number of user groups. How Can We Realign Fishing Capacity With Resource Availability? The two forms of capacity rationalization most commonly considered by fishery managers include:
Buyback programs reduce fishing capacity by purchasing existing capacity from willing participants in the form of fishing permits or vessels. Successful buyback programs achieve multiple goals. They reduce fishing capacity, they provide economic relief to those fishermen who were not very profitable and are willing to relinquish their participation in the fishery, and they increase the profitability of those fishermen who remain in the fishery. Buyback programs have been employed in several fisheries throughout the United States and are currently being considered in a number of others. They, and other capacity reduction programs, are authorized under Section 312(b) of the Magnuson-Stevens Act. Click here to read more on buyback programs. Market-Based Management Tools By redistributing the cost of resource depletion from society to the fishing industry, market-based management tools rely on the market, rather than regulatory intervention, to regulate fishing capacity. The individual fishing quota (IFQ) is the most commonly used market-based mechanism and represents a form of rights-based management. In theory, a properly designed rights-based management program will create economic incentives for vessel owners to decrease their labor and capital investments in a fishery, resulting in a reduction in fishing capacity. IFQ programs were employed in several fisheries throughout the United States before being banned by Congress through 1996 amendments to the Magnuson-Stevens Fishery Conservation and Management Act. Section 303(d) of the MSFCMA places a four-year moratorium on the development of IFQ programs. The moratorium is scheduled to sunset in October 2000, and IFQs are currently being considered as a capacity reduction tool in a number of fisheries. Click here to read more about the various forms of IFQs and other market-based management tools. Who Pays for Capacity Reduction? Capacity reduction programs are generally funded by the federal government, or jointly by government and the fishing industry. The Interjurisdictional Fisheries Act of 1986 and the MSFCMA provide for disaster relief assistance, which has been used in the past to assist fishery participants with capacity reduction initiatives. Click here to read more about federal disaster relief assistance. Sources and Recommended Reading Christy, F. 1997. Economic Waste in Fisheries: Impediments to Change and Conditions for Improvement. Pp. 28-39. In: Global Trends: Fisheries Management, E.K. Pikitch, D.D. Huppert, and M.P. Sissenwine, eds. Proceedings of the Symposium Global Trends: Fisheries Management, American Fisheries Society Symposium 20, American Fisheries Society, Bethesda, Maryland. Christy, F.T. 1996. The Death Rattle of Open Access and the Advent of Property Rights Regimes in Fisheries. Marine Resource Economics 11:287-304. Congressional Research Service. 1997. Commercial Fishing: Economic Aid and Capacity Reduction, 14 April 1997. 97-441 ENR. Food and Agriculture Organization (FAO) Marine Resources Service, Fishery Resources Division. 1997. Review of the State of World Fishery Resources: Marine Fisheries. FAO Fisheries Circular. No. 920. Rome, FAO. Food and Agriculture Organization (FAO) Technical Working Group. 1998. Report of the Technical Working Group on the Management of Fishing Capacity. Rome, FAO. Federal Fisheries Investment Task Force (FFITF). 1999. Report to Congress, July 1999. Garcia, S.M. and C. Newton. 1997. Current situation, trends and prospects in world capture fisheries." Pp. 3-27. In: Global Trends: Fisheries Management, E.K. Pikitch, D.D. Huppert, and M.P. Sissenwine, eds. Proceedings of the Symposium Global Trends: Fisheries Management, American Fisheries Society Symposium 20, American Fisheries Society, Bethesda, Maryland. Grafton, R.Q., D. Squires and J. Kirkley. 1996. Private Property Rights and Crises in World Fisheries: Turning the Tide? Contemporary Economic Policy XIV(October):90-99. Hardin, G. 1968. The Tragedy of the Commons. Science 162:1243-1248. The Heinz Center. 2000. Fishing Grounds: Defining a New Era for American Fisheries Management. Island Press, Washington, DC. Iudicello, S., M. Weber and R. Wieland. 1999. Fish, Markets and Fishermen: The Economics of Overfishing. Island Press, Washington, DC. National Marine Fisheries Service. 1999. Draft Report of the National Task Force for Defining and Measuring Fishing Capacity. Prepared by the National Excess Capacity Task Force. National Marine Fisheries Service. 1997. NOAA Fisheries Strategic Plan, May 1997. National Marine Fisheries Service. 1996. Our Living Oceans, Report on the Status of U.S. Living Marine Resources, 1995. U.S. Department of Commerce, NOAA Tech. Memo. NMFS-F/SPO-19. National Research Council. 1999. Sharing the Fish: Toward a National Policy for Individual Fishing Quotas. National Academy Press, Washington, DC. National Research Council. 1999. Sustaining Marine Fisheries. Washington, DC: National Academy Press. Organization for Economic Cooperation and Development (OECD). 1997. Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources. Pacific Fishery Management Council. 2000. Overcapitalization in the West Coast Groundfish Fishery: Background, Issues and Solutions (Draft report for review). Prepared by the Economic Subcommittee of the PFMC's Scientific and Statistical Committee, 16 March 2000. Smith, C., and S. Hanna. 1990. Measuring Fleet Capacity and Capacity Utilization. Can. J. Fish. Aquat. Sci. 47:2085-2091. |