 |
 |
 |
 |
 |
 |
 |
 |
|
 |
 |
|
 |
|
 |
|
Market-Based Management Tools Introduction Taxes Rights-Based Management Programs Where Are Individual Fishing Quota Programs in Place? Advantages and Disadvantages of Individual Quota Programs Conclusion Sources and Recommended Reading Introduction The use of market-based tools such as quota shares or cooperatives to manage fishing capacity has received increased attention over the last decade as our recognition of the ineffectiveness of traditional fishery management tools and our appreciation of the importance of economics in fisheries has increased. Conventional management approaches like gear restrictions or seasonal limitations don't motivate fishermen to keep fishing capacity in line with resource availability because they fail to make fishermen pay the long-term costs of depleting fishery resources. Restricting fishing time or catch provides fishermen with no right to the resource and no assurance that they will benefit from actions that conserve fish stocks. Instead, these conventional tools encourage fishermen to pull fish out of the water while they can and invest their money elsewhere with more security. This leaves the costs of depleting fishery resources to be borne by society at large. Market-based management tools work to redistribute the costs of resource depletion and the benefits of conservation from society more directly to the fishing industry. The two forms of market-based management tools most commonly considered in fisheries are:
Taxes, if properly set, increase the cost of fishing to better represent actual costs--those associated with fishing plus those incurred by society as a result of resource depletion. In addition to redistributing the costs of depletion, taxes provide revenues that could be used to expand funding for fishery management, and they encourage fishermen to be technologically innovative to reduce costs and maximize profits. But properly setting a tax is not an easy task--it's an iterative process and one that does not necessarily lend itself to achieving a pre-determined productivity goal, such as maximum sustainable yield. Taxes also create distortions in the market by setting false prices, and they can be politically difficult to implement, particularly in fisheries where catch has traditionally been "free." Rights-Based Management Programs Rights-based management programs offer a different kind of market-based management. They are based on the assumption that providing fishermen exclusive, transferable, and enforceable rights to fishery resources will give them a long-term interest in the health of those resources and, thus, incentives to capture them efficiently and conserve them for the future. Property rights eliminate the incentive to over-invest in the fishery by eliminating the incentive to race for fish. With guaranteed rights to fishery resources, fishing inefficiently represents a personal loss. In addition, because property rights represent an investment, they are believed to help fishermen to see more clearly the benefits of managing for the long-term health and productivity of fishery resources. The most commonly employed rights-based management program in U.S. fisheries is the individual fishing quota (IFQ). What Is An Individual Fishing Quota? The Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA) defines an IFQ as "a Federal permit under a limited access system to harvest a quantity of fish, expressed by a unit or units representing a percentage of the total allowable catch of a fishery that may be received or held for exclusive use by a person" (MSFCMA, Sec. 3(21)). How Do Individual Fishing Quota Programs Work? Under an IFQ program, fishermen are allocated percentages of a total allowable catch, which is set by fishery managers based on an estimated sustainable catch level. Quota holders possess some of the privileges of property rights, but not others. For example, they can decide when and how to take their share of the quota, but they cannot control the amount of quota allocated. There are different methods of allocating quota shares. Auctions are one alternative and have two benefits. First, they allow quota to be distributed to those fishermen who place the highest value on them and, second, they provide revenue that can be used to offset negative distributional effects of the allocation. But auctioning quota is prohibited under the MSFCMA. Even if it were not, public support for charging for something that has generally been free in the past would be about as scarce as that for taxes. Allocations based on some sort of criteria, such as past history, although often complex and contentious, are more politically feasible and more commonly used in practice. Most IFQ systems allocate quota to individuals, but some programs have been established in which quota is allocated to communities in the form of Community Development Quotas (CDQs) or to an identified group of industry members in the form of cooperatives. Once allocated, quota is valued for the right it provides to catch fish. IFQ programs that permit transferability (commonly referred to as Individual Transferable Quota (ITQ) programs) allow the market to reduce fishing capacity, as quota can be consolidated among fewer vessels, which then have an incentive to fish efficiently to maximize their profits. ITQ programs allow fishermen who desire more quota than they received through initial allocations to purchase additional shares. Conversely, those fishermen who have been allocated too little quota to make fishing worthwhile, and have no money to purchase additional shares, can sell their quota and invest their money elsewhere. In this way, a market develops where quota is bought and sold. This system allows quota shares to move to the most efficient fishermen because they value them most highly and are willing to pay the highest price for them. It provides fishermen the opportunity to sell out and leave the fishery when productivity is low--a major change from the present system, which encourages fishermen to stay in the business even when profits are very low because they have no other options. Some government programs have been designed to offer relief to fishermen in this predicament. (Click here to read about buyback programs designed to purchase excess fishing capacity). (Click here to read about federal disaster relief assistance programs). Some IFQ programs prohibit quota from being transferred once allocated. These programs prevent consolidation of quota beyond that which occurs through initial allocations and, consequently, are less effective as capacity reduction tools. Where Are Individual Fishing Quota Programs in Place? Four U.S. fisheries are managed under IFQ programs, including Alaskan halibut, Alaskan sablefish, surf clams and ocean quahogs, and wreckfish. A CDQ program is in effect in Alaska, and cooperatives have been established in both the Pacific whiting and the Alaskan pollock fisheries. Great controversy surrounding proclaimed advantages and disadvantages of IFQ programs led Congress to mandate a four-year moratorium on the development of such programs through 1996 amendments to the MSFCMA. The amendments also directed the National Research Council to develop comprehensive reports on the social, economic, and biological effects of IFQs and provide recommendations for existing and future programs. With the exception of the Alaskan pollock cooperative (authorized by the American Fisheries Act of 1998), all IFQ programs currently in place were implemented prior to the congressionally-imposed moratorium. Advantages and Disadvantages of Individual Quota Programs In addition to reducing fishing capacity, experience has shown IFQ programs to be generally effective in controlling exploitation, generating profits, reducing the incentive to fish during unsafe conditions, and extending the availability of fresh fish products to consumers. In some cases, these programs have also been shown to improve product quality by improving fishing and handling methods, and to reduce bycatch by giving fishermen greater flexibility to decide where and when to fish. But by reducing fishing capacity, IFQ programs result in direct negative consequences for some. Allocating rights to fish creates winners and losers. Many people are concerned about the fairness of initial allocations that result in windfall profits to a select few, the reduction of employment opportunities for vessel crew, the effects of IFQs on processors, the costs that new fishermen will have to pay to gain entry, and the potential for quota to be consolidated in the hands of a select few. The surf clam/ocean quahog ITQ program, the first in the United States, provides a good example of the potential of ITQ programs for consolidation. It was designed with few restraints on ownership, transfer, or consolidation of quota shares and, consequently, was extremely effective in reducing fishing capacity. In addition to eliminating many jobs, the program decreased opportunities for both young people and hired captains to become vessel owners and for independent fishermen to find markets for their clams. Most concerns related to consolidation of quota can be addressed through individual program design. The Alaskan halibut IFQ program, for example, was effectively designed to keep rights to the fishery well distributed. But many people have voiced additional concerns that have proved more difficult to alleviate. These relate to the quasi-privatization of a public trust resource and uncertainty about the conservation benefits of IFQs. Conclusion After providing a comprehensive assessment of the potential advantages and disadvantages of IFQ programs, the National Research Council report solicited by Congress concludes: "IFQs can be used to address a number of social, economic, and biological issues in fisheries management. Alternative management approaches can achieve some, but not all, of the objectives that can be achieved with IFQs. There are no general threshold criteria for deciding when IFQs are appropriate; the use of IFQs should be considered on a fishery-by-fishery basis. IFQs can be used to remedy the effects of overcapitalization and overfishing or to prevent the development of these negative effects." The Committee to Review Individual Fishing Quotas recommended that the moratorium on IFQ programs be rescinded, and that decisions regarding the use of IFQ programs or alternative methods of capacity reduction be left to the regional fishery management councils. The regional councils have also joined together in support of their option to develop and implement IFQ programs in their fisheries. The congressional moratorium on IFQs is scheduled to sunset in October 2000. Sources and Recommended Reading Berkes, F. 1994. Property Rights and Coastal Fisheries. Pp. 51-62. In: Community Management and Common Property of Coastal Fisheries in Asia and the Pacific: Concepts, Methods and Experiences, R.S. Pomeroy, ed. ICLARM Conf. Proc. 45. Copes, P. 1986. A Critical Review of the Individual Quota as a Device in Fisheries Management. Land Economics 62(3):278-291. Fujita, R.M., D.D. Hopkins and W.R.Z. Willey. 1996. Creating Incentives to Curb Overfishing. Forum for Applied Research and Public Policy (Summer):29-34. General Accounting Office. 2000. Fishery Management: American Fisheries Act Produces Benefits. RCED-00-176, June 29. 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 The Heinz Center. 2000. Fishing Grounds: Defining a New Era for American Fisheries Management. Island Press, Washington, DC. International Council for the Exploration of the Sea (ICES). 1997. Report of the ICES Study Group on the Management Performance of Individual Transferable Quota (ITQ) Systems. ICES C.M. 1997/H:2. Iudicello, S., M. Weber and R. Wieland. 1999. Fish, Markets and Fishermen: The Economics of Overfishing. Island Press, Washington, DC. Loy, W. 2000. Co-ops: Ending the Race for Fish. National Fisherman (June):30-33. National Research Council. 1999. Sharing the Fish: Toward a National Policy for Individual Fishing Quotas. National Academy Press, Washington, DC. National Research Council. 1999. The Community Development Quota Program in Alaska. National Academy Press, Washington, DC. Organisation for Economic Cooperation and Development. 1998. Individual Transferable Quotas as an Incentive Measure for the Conservation and the Sustainable Use of Marine Biodiversity. ENV/EPOC/GEEI/BIO(97)14/FINAL. Paris, France. Organisation for Economic Cooperation and Development. 1997. Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources. Paris, France. 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 Scientific and Statistical Committee, March 16. |