RESTRICTEDWORLD TRADE
ORGANIZATIONWT/CTE/W/167
16 October 2000
(00-4284)
Committee on Trade and Environment
ENVIRONMENTAL BENEFITS OF REMOVING TRADE RESTRICTIONS
AND DISTORTIONS:  THE FISHERIES SECTOR
Item 6 of the work programme
Note by the Secretariat
1. In response to the request of the Committee on Trade and Environment (CTE) at its meeting
on 29 February - 1 March 2000, the Secretariat has prepared this Note to update previous papers on
the fisheries sector, in cooperation with relevant international organizations, and with attention to the
development dimension.1  This Note is intended to be used as a basis for further discussion in the
Committee's sectoral analysis of the environmental benefits of removing trade restrictions and
distortions, one part of the agenda under Item 6 of the work programme.  It summarizes different
aspects relating to the elimination of trade restrictions and distortions in light of the potential
environmental impacts on global fisheries sustainability.  The Secretariat recognizes that this is a
document which should evolve, as further empirical research becomes available, and as work onfisheries evolves in national, regional and international fora.
2. The Note is organized as follows:  Section I provides a general overview of the current status
of the world's fisheries resources.  Section II presents an economic analysis of the fisheries sector to
illustrate the unique complexities related to fish eries conservation.  Section III surveys the state of
play of international discussions and recent work on sustainable fisheries management in relevant
international fora, particularly with respect to subsidies.
2  Reference is also made in this section to the
contributions made in the CTE by Members and international organizations.  A select bibliography,including relevant submissions to the CTE, is provided at the end of the Note.
I. GENERAL OVERVIEW
3. The situation of fisheries sustainability world-wide is a source of increasing concern.
Recognition has been given to the need to analyse developments in the fisheries sector from a broad
perspective in order to take into account the comp lex issues involved in moving towards sustainable
fisheries management.  The following statistics are intended to serve as background to understanding
the status of global fisheries resources.
 3
                                                     
1 This Note updates WT/CTE/W/67 (7 November 1997), which examines the environmental effects of
removing trade restrictions and distortions in several sectors discussed under Item 6;  and WT/CTE/W/80(9 March 1998) and Add.1 (21 September 1999), which present an overview of possible subsidies relating tofisheries notified under Article 25 of the Agreement on Subsidies and Countervailing Measures.
2 The Secretariat has prepared this Note in cooperation with several international fora working on
fisheries and is grateful for comments and contri butions from APEC, FAO, OECD, UNEP, ICCAT, the
Convention on Biological Diversity, CITES and CCAMLR, as well as WWF and ICTSD.  The Secretariat takesfull responsibility for any errors in the Note and is pr epared to revise it in the light of further information.
3 The FAO Fisheries Department has contributed the data in this general overview.WT/CTE/W/167
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A. FISH PRODUCTION
4. For the two decades following 1950, world marine and inland capture fisheries production,
the traditional and largest sector, increased on average by as much as 6 per cent per year, trebling
from 18 million tonnes in 1950 to 56 million tonnes in 1969.  Subsequently during the 1970s and
1980s, the average rate of increase declined to 2 per cent per year, falling to almost zero in the 1990s.
The decrease in total catch follows the general trend of most fishing areas of the world apparentlyreaching their maximum capture fisheries production potential, with most stocks being fully
exploited.  According to FAO, it is therefore very unlikely that substantial total catch increases will be
obtained in the future.
5. In contrast, growth in aquaculture production has shown the opposite tendency.  The increase
in production of 20 million tonnes over the last decade was mainly due to aquaculture, since capture
fishery production remained relatively stable.  Starting from an insignificant level, inland and marine
aquaculture production grew by about 5 per cent per year between 1950 and 1969, by about 8 per centduring the 1970s and 1980s, and over 10 per cent since 1990.
Table 1:  World fisheries production and utilization
1994 1995 1996 1997 1998 1999*
PRODUCTION (million tonnes)
INLAND
Capture 6.7 7.2 7.4 7.5 8.0 n.a.Aquaculture 12.1 14.1 16.0 17.6 18.7 n.a.
Total inland 18.8 21.4 23.4 25.1 26.7 n.a.
MARINE
Capture 84.7 84.3 86.0 86.1 78.3 85.0
Aquaculture 8.7 10.5 10.9 11.2 12.1 n.a.
Total marine 93.4 94.8 96.9 97.3 90.4 n.a.
Total capture 91.4 91.6 93.5 93.6 86.3 90.8
Total aquaculture 20.8 24.6 26.8 28.8 30.9 32.2
Total world fisheries 112.3 116.1 120.3 122.4 117.2 123.0
UTILIZATION
Human consumption 79.8 86.5 90.7 93.9 93.3 92.6
For fishmeal and oil 32.5 29.6 29.6 28.5 23.9 30.4
Population (billion) 5.6 5.7 5.7 5.8 5.9 6.0Per capita food fish supply(kg)14.3 15.3 15.8 16.1 15.8 15.4
* preliminary estimate.
Source: FAO.
6. As set out in Table 1, reported global capture fisheries and aquaculture production fell to
117 million tonnes in 1998 from 122 million tonnes in 1997, mainly, the FAO notes, due to the effectof the climate anomaly, El Niño, on certain major marine capture fisheries.  However, production
recovered in 1999 to an estimated 123 million tonnes.  Aquaculture provided 26.1 per cent of global
fisheries production in 1999, which represents a significant increase from 18.5 per cent in 1997.  In
1998, China, Japan, the United States, the Russian Federation, Peru, Indonesia, Chile and India (in
that order) were the top-producing countries, accounting together for more than half the entire 1998WT/CTE/W/167
Page 3
capture fisheries production in terms of tonnage.  Although in decline, marine capture fisheries
continued to account for more than 90 per cent of world capture fisheries production.
7. Aquaculture production is dominated by Asian countries, particularly China which reported
increases of 0.7 million tonnes a year prior to 1992, and 2.6 million tonnes per year thereafter.  For the
rest of the world, growth in production has averaged 0.4 million tonnes a year.  Within the last
decade, low-income food deficit countries (LIFDCs), excluding China, have shown an upward trendin production.  Figure 1 illustrates world capture fisheries and aquaculture production.
Figure 1:  World capture fisheries and aquaculture production 
020406080100120140
1950 54 58 62 66 70 74 78 82 86 90 94 98Million tonnesAquaculture
Capture fisheries
Note: Aquaculture quantities prior to 1984 are estimates
Source:  FAO.
B. FISH CONSUMPTION
8. On a global basis, approximately 1 billion people rely on fish as their main source of animal
protein, with a higher dependence in coastal areas.  About 20 per cent of the world's population derive
at least 20 per cent of animal protein from fish, and some small island nations depend almostexclusively on fish.  With total food fish supply growing at a rate of 3.6 per cent per annum since
1961 - while the world's population was expanding at 1.8 per cent - the proteins derived from fish,
crustaceans and molluscs have accounted for 13.8 to 16.5 per cent of animal protein intake.  Fish
supply per capita in LIFDCs was on average one fifth that of the richest countries in the early 1960s,
but the gap has been gradually reduced;  in 1997, it was close to half the average consumption in themore affluent economies.  Figure 2 illustrates fish food supply by continent and economic group.  The
list of LIFDCs is contained in Annex I.WT/CTE/W/167
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Figure 2:  Fish food supply by continent and economic group, 1997
93.80
5.207.80
3.3063.30
13.70
0.6024.70
14.4050.2016.10
7.1016.70
10.0017.9018.5019.9027.70
14.90
13.67
0102030405060708090100
World Africa North and
Central
AmericaSouth
AmericaAsia Europe Oceania Industrialized
CountriesDeveloping
Countries
(excl.
LIFDCs)LIFDCs
051015202530
Total Food Fish Supply Per Capita Food Fish Supply
Source:  FAO.
C. TRADE
9. A large share of fish production enters international trade, with about 33 per cent exported in
1998.  LIFDCs play an active part in this trade and at present represent almost 20 per cent of exports.
Developing countries are the key exporters of fish products, representing nearly 50 per cent of total
exports in value terms.  International trade in fish, fish products and fisheries services plays a crucial
role in the development strategies of many countries, particularly developing countries, and providesan important source of income.  According to F AO, more than 90 per cent of trade in fish and
fisheries products consists of processed products in one form or another (i.e. excluding live and fresh
whole fish).  Frozen, fresh and chilled fish comprised the majority of exports.  Although live, fresh or
chilled fish represent only a small share of world fi sh trade due to perishability, trade is increasing,
reflecting improved logistics and increased demand.
10. In 1998, according to FAO estimates, total exports of fish and fish products had a value of
US$51.3 billion, a 3.8 per cent decrease compared to 1997 (a significant increase from the value of
$3 billion in the early 1970s).  In 1998, total imports of fish and fisheries products were $55 billion,
representing a slight decline compared to 1997 (a decrease of 2.8 per cent) and 1996 (a decrease of
3.9 per cent).  Figure 3 illustrates the trade flows in fish products.
11. Developed countries are the key importers of fish and fish products.  Japan was again the
biggest importer of fisheries products, accounting for some 23 per cent of total imports.  The
European Communities has increased its dependence on imports for its fish supply.  The
United States, besides being the world’s fifth major exporting country, was the second main importer.
More than 77 per cent of the value of imports is concentrated in these three countries.WT/CTE/W/167
Page 5
Europe
0102030
1976
19771978
1979
19801981198219831984198519861987
1988
198919901991
1992
199319941995
1996
19971998Oceania
00.511.52
1976
19781980198219841986
1988
1990
1992
199419961998Export value
Import ValueTrade deficit
China
01234
1976
1977
1978
19791980
1981
1982198319841985
1986
19871988
1989
19901991
1992
1993
1994
19951996
1997
1998Trade surplusAsia excluding China
0102030
1976
197719781979
1980
198119821983198419851986
1987
19881989199019911992
1993
1994
1995
199619971998 Latin America and the Caribbean
0246810
1976
1977
1978
19791980
1981
1982
1983
1984
198519861987
1988
19891990
1991
19921993
1994
19951996
1997
1998USA and Canada
04812
1976
19781980198219841986
1988
19901992
1994
19961998Africa
0123
1976
1977
1978
19791980
1981
1982
1983
19841985
1986
19871988
1989
19901991
1992
1993
1994
19951996
1997
1998Figure 3 : Import and Export value of fish products for different regions
 indicating the net deficit or surplus, 1998 ( US$ b illion)
Source:  FAO.
12. Trade in fish and fish products has been affected by the introduction of increasingly stringent
import requirements, particularly in developed countries.  These requirements generally relate to
ensuring food safety, in many cases requiring that Hazard Analysis Critical Control Point (HACCP)
procedures are applied by processors.4  HACCP has been put in place to establish standards for food
processing by tracing, for example, fish products from harvesting through their production processes.Improved post-harvest processing is also seen as  a method to develop the fishing industry without
increasing harvests;  improved processing can raise the value-added of fish products and develop uses
for otherwise discarded catches.
13. Issues of relevance in this sector include the development and use of eco-labelling; the
determination of rules of origin for fish and fish products;  and the potential impacts of these issues on
market access and sustainable fisheries management.  Eco-labelling is perceived as a way to maintain
the productivity of fisheries, while providing incentives to improve conservation and management.
                                                     
4 The investment needed to bring a fish processi ng plant up to the standards of a HACCP plan is
considered to be substantial, and many companies, es pecially in developing countries, have noted that the
implementation of new and increasingly rigid standards for fisheries products are de facto  non-tariff measures
against value-added products originating from developing countries.  See FAO (1998a).WT/CTE/W/167
Page 6
Concerns have been expressed, particularly by developing countries, with respect to the way in which
such schemes are developed and their potential costs and market access effects.5  A paper by Schmidt
(2000) provides examples of cases where "chain-of-custody" systems have been set up to monitor the
flow of fish and fish products.  This type of certification is considered to be more detailed than
systems primarily to monitor fish trade, such as the ICCAT and CCSBT Tuna Statistical Documents,
and the CCAMLR Catch Documentation Scheme.
D. STATUS OF FISHERIES RESOURCES
14. According to FAO, although the situation of some of the top-producing stocks has worsened,
the global state of exploitation of the main marine fish stocks, for which assessment information is
available, continue to follow the general trend observed in previous years.  Figure 4 reflects the status
of major marine fish stocks in 1992 and 1999.
9%
4%21% 21%46% 47%
15%18%
7%9%
3%
1%
0%5%10%15%20%25%30%35%40%45%50%
Under-exploited Moderately-exploited Fully-exploited Over-exploited Depleted RecoveringFigure 4:  Status of major marine fish stocks
1992 1999
Source:  FAO.
E. FISHERIES MANAGEMENT
15. It is widely noted that the principal cause of stock depletion is inadequate management of
fisheries resources.  According to FAO, fisheries management continues to be widely ineffective,
taking into account the state of many important fish stocks, as illustrated in Figure 4.  However,
although the rate of real change in management has been slow, FAO notes that there are signs that
improvements are taking place.  In addition to the difficulty in developing dynamic economic models,
the conditions underlying fisheries management are characterized by a significant degree of resourceand environmental uncertainty, such as inherently unpredictable environmental variations, which tend
to defy calculation by economists and biologists (Gordon and Munro, 1996;  Tietenberg and Folmer,
1998).  Determining the optimal harvesting capacity, for example, is a complex issue in fisheries
                                                     
5 See Deere (1999) for an overview of eco-labelling and sustainable fisheries.WT/CTE/W/167
Page 7
management.6  As noted in a recent Report to the US  Congress (US, 1999), the term "capacity" is
difficult to define operationally and even more difficult to measure.
16. The FAO and OECD request their Member countries to provide information on, for example,
total catches, imports, exports, employment, and the size of fishing fleets.  The FAO is improving the
monitoring of fishing fleets through its new Global Information System on Fisheries.7  Nevertheless,
the lack of data has hampered empirical research in this area.
17. As a result of the uncertainties that prevail in fisheries, a precautionary approach to
management is increasingly being followed in order that an absence of adequate scientific information
and data does not impede conservation.  The concept of precautionary action has been enshrined in
several regional and international fisheries-related agreements, such as the Regional Fisheries Bodies
(see Annex II);  the 1995 UN Conference on Stradd ling and Highly Migratory Fish Stocks,8 and the
1992 Convention on Biological Diversity.
18. According to FAO, an urgent goal in a number of  developed countries is to ensure that fishing
fleet capacity is commensurate with sustainable exploitation.  Developing countries have objectives
that tend to concentrate on fisheries development in terms of new resources and technology.  In
addition to the recognition that some stocks are over-fished and require fishing to be limited,
objectives also concentrate on enhancing and diversifying fisheries and promoting aquaculture.  This
is in part because the underlying concern for many countries is the relatively important role fisheriesand aquaculture play in employment and food security for some of their poorest people.  More
specific aims include building infrastructure, particularly for processing to reduce post-harvest losses
and increase value-added of, and market access for fisheries products.
F. D
EVELOPMENTS AT THE INTERNATIONAL LEVEL
19. One of the main multilateral developments of re levance to sustainable fisheries management is
the UN Convention on the Law of the Sea (UNCLO S), negotiated in 1982 and in force since 1994.9
UNCLOS establishes a comprehensive regime for the world's oceans and seas;  it provides a legal
framework and rules governing all ocean uses and access to their resources.  UNCLOS assigns the
exclusive right to coastal States to manage and exploit marine living and non-living resources in a
200-nautical mile Exclusive Economic Zone (EEZ) and to regulate fisheries resources through a
comprehensive management system.  Therefore, co astal states have both an exclusive right and an
obligation to ensure that marine living resources ar e exploited in a sustainable manner.  States are
obliged to conserve the living resources in their EEZs through the use of total allowable catch (TAC)
based on best available scientific evidence.  If a co astal State does not have the capacity to harvest its
TAC, UNCLOS stipulates that it shall give other St ates access to the surplus in return for fisheries-
related economic benefits.  However, as not all fish  stocks are found within EEZs, UNCLOS directs the
coastal State and other States fishing in the region to cooperate directly, or through appropriate
international organizations, to ensure conservation and promote the objective of optimum use of fish
stocks throughout the region, both within and beyond the EEZ.
                                                     
6 "Over-capacity" is defined by Stone (1997: p.513) as "a state in which the value of inputs to fishing is
greater than required for most efficiently achieving the desired level of fishing activity.  However, there is little
consensus on what would constitute the 'right' capacity, or  the 'right' level of inputs, against which excess should
be measured.  For instance, the safe catch level for any stock is always controversial and fluctuates from year toyear.  In light of the uncertainties, it is not clear what level of fishing activity will net the 'right' catch."
7 FAO's International Standard Statistical Classification of Fishery Commodities (ISSCFC) is used to
collate fisheries data.  The ISSCFC is an expansion of the UN Standard International Trade Classification
(SITC, Rev.3) and is linked with the Harmonized System (HS) nomenclature of the World Customs
Organization, which is that used in the WTO.  See FAO (2000a).
8 This Agreement states that coastal States and States fishing in the high seas shall:  "apply the
precautionary approach in accordance with Article 6."
9 See UNCLOS homepage, www.un.org/Depts/los.WT/CTE/W/167
Page 8
20. UNCLOS attributes competence to the WTO in settling disputes involving trade-related
measures, notably production subsidies and trade restrictions, and explicitly recognizes the authority
of the WTO in the applicability of trade-related measures with respect to deep seabed mining.10
21. By far the largest proportion of fisheries resources is found within national jurisdictions.  The
FAO (1999c) estimates that over 90 per cent of global fish production comes from within 200 nautical
miles of the coast, which also provides the nursery areas for fish caught on the high seas.  As a directresult, the establishment of EEZs has brought the ma jority of fish stocks within the jurisdiction of
coastal States - an important step towards limiting open access to fisheries resources.
22. UNCLOS contains provisions concerning management of fish stocks not limited to one EEZ,
including straddling stocks (migrating between EEZs and the high seas), and highly migratory stocks
(migrating over long distances, often through several EEZs).  These provisions were clarified in the
1995 Agreement Relating to the Conservation and Ma nagement of Straddling and Highly Migratory
Fish Stocks.  Also of importance in this respect is the 1993 FAO Agreement to Promote Compliancewith International Conservation and Management Measures by Fishing Vessels on the High Seas.
Both these Agreements, when they enter into force, will assist in managing shared, transboundary and
migratory fish stocks.  The UN General Assembly has adopted several resolutions on Large Scale
Pelagic Driftnet Fishing and called for a global moratorium as of 31 December 1992 on driftnet
fishing on the high seas.
23. The multilateral framework for sustainable use and conservation of living aquatic resources
has been enhanced significantly since UNCED in 1992.
11  C h a p t e r  1 7  o f  Agenda 21  addresses the
"Protection of the oceans, all kinds of seas, including enclosed and semi-enclosed seas, and coastal
areas and the protection, rational use and development of their living resources."  A focus of the
Commission for Sustainable Development (CSD) at its seventh session in 1999 was on issuesconcerning “oceans and seas”, including over-fishing, marine pollution, and destruction of coral reefs
and ecosystems.  The UN General Assembly called on governments "to consider the positive and
negative impact of subsidies on the conservation and management of fisheries through national,regional and appropriate international organizations and, based on the analyses, to consider
appropriate action" (UN, 1999).  The UN General Assembly also agreed to establish an open-ended
Informal Consultative Process on Oceans and the Law of the Sea (UNICPOLOS), which held its firstsession in June 2000 focusing on responsible fisheries and illegal, unreported and unregulated (IUU)
fishing activities.
12  Work is also being undertaken on oceans and seas in preparation for the ten-year
review of UNCED and Agenda 21  in 2002.
24. The 1992 Convention on Biological Diversity (CBD) recognizes the importance of
biodiversity, including diversity of marine and co astal biodiversity.  The FAO (2000c) estimates that
there are over 1,100 specifies of fish, molluscs, and crustaceans that contribute to production of the
major global fisheries, with additional species cont ributing to small-scale fisheries.  Over 300 species
contribute to aquaculture production.  Preservation of the biodiversity of natural populations providesthe resource base for commercial fisheries.  The second Conference of the Parties (COP) of the CBD
in 1995 agreed on the "Jakarta Mandate on Marine and Coastal Biological Diversity," which sets out
mechanisms and strategies for implementing the Convention for marine and coastal areas.  This
Mandate covers integrated area management, protected areas, sustainable use of living resources,
sustainable mariculture, and alien species, emphasizing the application of the precautionary approachto living marine resources, reliance on best available science in management, and identification of
critical ecosystem functions (CBD, 1995).
                                                     
10 See the Communication to the CTE from the UN Division for Ocean Affairs and the Law of the Sea on
UNCLOS, WT/CTE/W/62;  Section 6 on "production policy" of the Annex to the 1994 Agreement Relating tothe Implementation of Part XI of the 1982 UN Convention on the Law of the Sea.
11 For a comprehensive review see Dommen (2000).
12 See the results of these consultations, www.un.org/Depts/los/Docs/UNICPO/UNICPOpage.htm.WT/CTE/W/167
Page 9
25. Several marine species are listed under the 1973 Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES), which regulates trade in threatened species,
including sea turtles, sturgeon, whales, sea otters, all fur seals, sea lions, all cetaceans, salt water
crocodiles and corals.13  To date, there are no commercially-exploited marine species included in
CITES.  At the 1997 meeting of the Conference of the Parties to CITES, Parties rejected a proposal to
establish a working group on marine fish species, particularly large-scale commercially harvestedspecies, and to consider the possible application of Appendix II listing criteria to marine species.  The
1979 Convention on the Conservation of Migratory Species (CMS), adopted to protect the migratory
species listed in its two Appendices, includes gi ant catfish, sturgeon, Chinese swordfish and white
sharks.  At the 1999 Conference of the Parties, the CMS adopted a resolution on by-catch concerning
the protection of albatross, petrel, marine turtles and cetaceans from incidental catch during fishing.
G. R
EGIONAL FISHERIES BODIES
26. Fisheries management is also undertaken in the framework of Regional Fishery Bodies
(RFBs), which are considered to be important elements of effectively addressing fisheries
sustainability, particularly in the context of implementing UNCLOS.  Annex II contains the list of the
28 RFBs.  UNEP has a Regional Seas Programme, with a mandate to facilitate the management of
marine and coastal areas.14
27. Statistical and catch documentation programmes have been put in place in several RFBs, such
as the Commission for the Conservation of An tarctic Marine Living Resources (CCAMLR),  the
Commission for the Conservation of Southern Blue fin Tuna (CCSBT), the Inter-American Tropical
Tuna Commission (I-ATTC) and International Commission for the Conservation of Atlantic Tunas
(ICCAT).  These schemes are designed to facilitate monitoring of international trade in fish species;
identify the origins of the species imported into or  exported from the territories of contracting parties;
and determine whether the conservation measures established by RFBs have been respected.  These
schemes also facilitate the collection of data on fish stocks to ensure scientific monitoring of the
sustainability of the fishery.
28. Although ICCAT and CCAMLR, for example, contain trade-related provisions, these
agreements do not deal specifically with subsidizat ion.  Both are considered to provide examples of
appropriate and WTO-consistent (i.e. non-discriminatory) use of trade measures in multilateral
environmental agreements.  ICCAT has made several presentations in the MEA Information Sessions
of the CTE that have highlighted the strict conservation measures imposed with respect to illegal
fishing by non-contracting parties, entities and fishing entities, which are considered to be
undermining the effectiveness of its stock management programme.15
H. FISHERIES ACCESS AGREEMENTS
29. With the extension of coastal State jurisdiction in the 1980s following the UNCLOS, many
countries have negotiated fisheries access agreements.  The FAO notes that well over 300 agreements
have been signed, many of which in the 1990s.  Reference is made to "first" and "second" generation
agreements, with the former involving the paymen t of a fee for the right to fish, and the latter
developing the terms of access to include joint venture arrangements, technology and vessel transfer,
and arrangements for monitoring and surveillance.  Access agreements to a coastal fishery by distantwater fishing nations (DWFNs) are negotiated betwee n the parties based on several factors, including
the historic interest in the fishery (pursuant to UNCLOS), and the fishing capacity of the coastal State.
                                                     
13 For information on CITES see WT/CTE/W/151, W/71, W/63 and the Matrix on Trade Measures
Pursuant to Selected MEAs, WT/CTE/W/160.
14 See Regional Seas Programme,  www.unep.org/unep/program/natres/water/regseas/regsea.htm.
15 See the background papers to the MEA Information Sessions in the CTE from ICCAT
WT/CTE/W/152 and W/87 (www.iccat.es);  and from CCAMLR in WT/CTE/W/148 (www.ccamlr.org) .WT/CTE/W/167
Page 10
30. These types of agreements are interesting in so far as they can provide a source of revenue for
coastal States and increase fishing opportunities for DWFNs.  Access payments can represent an
important source of revenue for developing countries (ICTSD-IUCN, 1999).  The potential
implications of such agreements, particularly for developing countries, have been noted in the CTE.
As described by Stone (1999) and Porter (1997), so me of the main concerns are that access payments
may be relatively low compared with the value of th e catch taken;  the costs incurred by some DWFN
fleets may have been lowered as a result of subsidization;  and the coast State often devotes
insufficient funds to fisheries management and enforcement.  Other issues of relevance are the effects
of DWFN fleets on artisanal or small-scale fisheries operating in the same waters;  and the rules of
origin for fish captured pursuant to access agreements.
II. ECONOMIC ANALYSIS
A. THE NATURE OF THE ISSUES
31. As a result of five decades of expansion, the general trend according to the FAO, set out in
Section I, is that most fishing areas world-wide have reached their maximum production potential,
with many stocks fully exploited.  As illustrated in Section I, global fish production has expanded
from around 65 million tonnes in the 1970s to approximately 120 million tonnes in 1999.  The
nominal value of international fisheries trade has increased from around US$3 billion to over $51
billion in the same period.  From the extensive body of literature on developments in fisheries, it isevident that this sector has certain defining characteristics that make sustainable management all the
more difficult.  The main economic factors underlying these complexities are discussed in this
Section.
32. There are two types of classic economic problems in fisheries:  market and policy failures.
B. M
ARKET FAILURES :  THE TRAGEDY OF THE COMMONS
33. Market failures result from prices that do not reflect the full costs or the full benefits
associated with a given resource;  for example, markets often fail to internalize or reflect the actual
scarcity of fisheries resources, whence over-fishing and the depletion and collapse of some fisheries
resources.  Therefore, the market failure is the lack of incentive for individual fishers to conserve the
stocks in a system with unlimited access to the resource base;  essentially, if one fisher does not catchthe fish, the next one will.  Thus, unlimited access to a common resource base, such as a fishery, is
likely to lead to over-exploitation of that resource.
34. Marine fisheries are the classic example of a common property resource given that fish are
mobile and access is difficult to control and monitor, particularly on the high seas.  Fishing grounds
are thus referred to as "commons," in which access is, at least initially, unrestricted.  The underlyingtenet of the "tragedy of the commons," as expressed by the ecologist Garrett Hardin (1968), is that as
human populations increase, there is increasing pressure at both the local and, particularly, the global
levels to over-exploit common resources.  Such common resources are inherently difficult to manage
and are characterized by a lack of property rights.  Hardin's analogy to a tragedy is based on the fact
that although it is in the collective long-term interest of fishers to sustain the fishery, individual fishers
have an immediate incentive to over-fish stocks beyond their carrying capacity or regeneration rate;
any fish left by one fisher, will be harvested by the next.  Thus the incentive is to harvest fish stocksbefore others do, and to free ride on the restraint of others.
16  The inevitable result is over-exploitation
of fish stocks and over-investment in fishing, lead ing to "lower profits for too many fishers investing
                                                     
16 The potential for States to "free ride" on the conservation efforts of others makes international
cooperation a necessity.  This difficulty relates to the "prisoners' dilemma", whereby although it is in the mutuallong-term interest of States to reduce fishing efforts, the rational short-term behaviour of each State is tomaximize efforts;  this leads to an irrational outcome from the collective perspective.WT/CTE/W/167
Page 11
in too much capital to catch too few fish" (Anderson and Leal, 1991).  This having been said, from an
economic perspective, fisheries resources are a renewable resource that can be used in a sustainable
way;  sustainable fisheries management systems are in this regard crucial to provide appropriate
incentives to correct market failures arising from open access fisheries, or fisheries in which well-
defined or enforceable property rights are absent.
35. As described in Section I of this Note, the 1982 UN Convention on the Law of the Sea
(UNCLOS) addressed the issue of open access and extended the rights of coastal States to manage
marine resources from 12 to 200-mile Exclusive Economic Zones (EEZs).  The objective of the
establishment of EEZs was to create an incentive for States to manage their coastal living resources
sustainably.  The redistribution of the sea's w ealth pursuant to UNCLOS has led to a period of
adjustment and transition in the fisheries sector.  As noted by the FAO (1992) in its special chapter on
Marine Fisheries and the Law of the Sea , several developments were not anticipated, notably the
continued investment in long-range and large-scale fishing vessels, the significant growth in fishingeffort on the high seas beyond the 200-mile limit, increased stock depletion and ecosystem
degradation, and widespread fishing conflicts arising from the redistribution of resources.
 17  Whilst
some distant water fishing nations have significantly reduced their fleets, others are developing
capacity (Porter, 2000).
36. One difficulty in protecting common resources lies in the fact that there is often an
incongruence between the distribution of the resour ce and ownership.  Many commercially-exploited
fish stocks are shared, transboundary or migratory, which makes property rights, even those as broad
as the 200-mile EEZs, effective for only part of the year.  Ill-defined or non-existent property rights
over fisheries resources result in an incentive structure that is conducive to over-exploitation if
harvests are not controlled, and to over-capitalization of fishing fleets.  As a result, effective fisheriesmanagement is facilitated by the creation of resource property rights, such as individual transferable
quotas (ITQs) and territorial user rights.  As with any management regime, enforcement and
verification of stock levels are crucial issues to ensure that property rights are respected.  However, as
these instruments place a limit on the exploitation of a fishery and create incentives for self-
regulation, enforcement may be more effective than under regimes regulated solely by a totalallowable catch (TAC).
C. P
OLICY FAILURES :  THE CASE OF SUBSIDIES
37. Policy failures result from government interventions that distort the market.  One policy
failure is precisely inadequate fisheries management, as described above.  Instead of adequately
addressing resource problems, governments, in many cases, have actually made the situation moredifficult by introducing yet another policy failure:  subsidies that encourage entry into the fishery and
expand fishing capacity beyond what the oceans can sustain in the long run.
18  The economic theory
of common property resource use sheds light on why unlimited access fisheries tend to attract
excessive amounts of capital and labour that lead to fishing efforts beyond maximum sustainable
yields (MSY).  Iceland's submission to the CT E (WT/CTE/W/111), and a recent WTO special study
on trade and environment (Nordström and Vaughan, 1999) set out the economic theory, based on
Gordon's (1954) stylized fishery model, underlying the incentives that hamper effective fisheriesmanagement.  This analysis is summarized in Annex III.
                                                     
17 Stone (1997: p. 511) notes that "many nations with a tradition in fishing and a heavily subsidized
fishing fleet have managed to escape the dwindling stocks and toughening regulations by fishing the stocks of
less-regulated developing countries."
18 Use of the term "subsidy" in this Note is without prejudice to the definition in the SCM Agreement.
For a discussion of the coverage of the SCM Agreement see, for example, Chaytor (1998);  Downes and Van
Dyke (1998);  Deere (2000);  Porter (1998a);  Schorr (1999);  Steenblik (1999); and Stone (1997).WT/CTE/W/167
Page 12
38. The experience of several countries (e.g. Norway, Iceland and New Zealand) shows that the
adoption of more sustainable management systems is often accompanied by sharp reductions in
subsidies (Myers and Kent, 1998, p. 125;  Rory, 1996).
39. From a purely economic perspective, the question of whether particular subsidies support or
undermine efforts to manage a fishery sustainably depends on the type of management regime in
place and the interactions between policies (FAO, 1998c).   Clearly, if fishing is unrestricted, subsidies
that either boost revenues or lower costs have a stimulating effect on effort, and hence encourage
over-fishing.  As has been argued by some in the CTE, if sustainable management regimes were in
place, subsidies would in effect only amount to income  redistribution to fishers.  However, if fisheries
management is inadequate, subsidies tend to exacerbate the inherent market failure relating to the
open or common access nature of fisheries.  Moreover, this argument ignores the political economy
considerations.  If entry into the fishery is not restricted, along with the catch, subsidies will lead to
more capacity than is needed to harvest the resource efficiently.  This over-capacity will drive downincomes and lead to pressure being placed on fisheries managers to set TAC levels higher than
desirable from a sustainability perspective.
40. In principle, temporary subsidies can be used to accelerate development of a new or under-
exploited fishery without causing it great harm.
 19  However, as the experience following the extension
of coastal jurisdiction shows, when resource-rich coastal states started providing financial support totheir domestic fleets in order to take advantage of fishing opportunities vacated by foreigners, they
very often misunderstood the dynamics of the fishery and overshot the mark.  Moreover, once in
place, the subsidies used during this period often proved difficult to remove after the fisheries had
been fully developed (Steenblik, 1999).
41. Similarly, subsidies that are used to reduce fi shing capacity - such as payments to owners to
“buy-back” their vessels, gear or fishing licences - can support efforts to manage fisheries sustainably,
but only under certain conditions.  If no other subsidie s are in place, catch limits are enforced, new entry
is not allowed, and the gear or vessels are not allowed to enter another fishery, over-capacity will be
reduced - generally to the benefit of the fishery.  Th e main drawback of this type of scheme (under the
aforementioned conditions) is that if used repeatedly , or only in fisheries that have reached a critical
state, it can affect expectations and thus alter th e behaviour of fishers in ways that discourage normal
exit from fishing (Read and Buck, 1997;  OECD, 2000b, p.57).  This in turn may hinder attempts to
manage capacity and effort in other fisheries.  Other subsidies, such as undercharging for harbour berths,
may also retard exit.
42. If, on the other hand, other subsidies are also being given for the construction or purchase of
new vessels, decommissioning or buy-back schemes may accelerate the replacement of capital in the
fishery (Flaaten and Wallis, 2000).  And if the newer capital is technically more efficient at catching
fish, and only the overall tonnage of the fleet remain s unchanged, real capacity and effort is likely to
expand.  Finally, if the retired vessels or gear are allowed to be transferred to another country, the over-
capacity problem may simply be shifted elsewhere - to the high seas or the fishery of some other
country.
 20
                                                     
19 Most buy-back schemes are government financed.  However, these schemes can be industry
financed, obviating the need for large public expenditures.   Such industry-financed schemes have been used in
Iceland and have been authorized for use in the United States.  See OECD (2000b, p. 58).
20 Buy-back programmes generally seek to address resource conservation, economic efficiency, and
social equity.  These three objectives are not necessarily mutually compatible.  The policy intent of a measure is
not necessarily commensurate with its impact.  Gates, Holland and Gudmundsson (1997) look at the experiencewith, and economics behind, limited entry licensing and buy-back programmes around the world, and suggestthat alternative methods, such as individual transferable quotas (ITQs), may accomplish similar objectives andavoid some of the probable long-term consequences of buy-back programmes.WT/CTE/W/167
Page 13
43. Government programmes that facilitate adjustment  out of a fishery - such as worker retraining
and re-employment schemes - have a much greater potential to reduce capacity and contribute to
making the transition towards more sustainable fisheries.  In some cases, making that transition may
also require the use of more passive adjustment assistance, such as lump sum payments to
unemployed fishers (OECD, 2000b).  Once that st age has been reached, governments still need to
spend money on management and enforcement, and on sufficient research to understand the nature ofthe resource under their control.  These forms of government expenditure are considered to support
sustainability.
44. It must be recognised, of course, that countries provide subsidies to their fishing industries for
many reasons.  Keeping people employed in fishing communities and ensuring minimum levels of
income are two common objectives.  In general, government programmes that target particular social
concerns more directly (e.g. general income support not conditional on being a fisher), and are
delinked from fishing as an economic activity (e.g. community-based services and economicdevelopment assistance) are likely to be more effective in the long run (OECD, 2000b).  By contrast,
when subsidies are used to support employment in rural industries, such as fisheries, which require
specialised skills, the resulting low mobility of  the affected labour force can itself become an
impediment to policy change - increasing subsidy dependency, and making structural adjustment all
the more difficult when it eventually has to be addressed (Steenblik, 1999).
45. Subsidies are only one type of government policy that can impact on capacity and fishing
effort.  If, in addition to subsidizing fishing activities for the variety of reasons set out above, tariffs
are imposed at the border on fish and fish products, this acts as a further financial transfer to the
fishery to the extent that these measures raise ma rket prices.  Following the Uruguay Round, tariffs on
fish and fish products have been reduced from an average of 6.1 to 4.5 per cent, a 26 per centreduction.  The average tariff on imports from developing countries has decreased from 6.6 to
approximately 4.8 per cent, a 27 per cent reduction.  Estimates are that approximately 80 to 85 per
cent of international trade in fish and fish pr oducts are bound under most-favoured-nation (MFN)
tariffs, with the remainder included in the Generalized System of Preferences (GSP), and regional or
bilateral trade arrangements (Filhol, 1995;  GATT, 1994).
 21
46. Further work is needed to analyse the nature, extent and implications of fisheries subsidies on
trade and sustainable fisheries management.  Work in this respect in several international fora is
described in Section III.  In add ition to studies recently completed in APEC and the OECD, work
related to fisheries subsidies is ongoing.  For ex ample, the OECD Fisheries Committee will explore
the effects of changes on restrictions on investment, access to services, subsidies, as well as otherrelevant factors affecting trade in this sector.  A review of the form of fisheries subsidies and their
likely impact on trade and resource sustainabi lity will be prepared for the FAO Committee on
Fisheries.  This work is relevant to CTE discus sions and will provide an important contribution when
completed.
47. Based on the research carried out to date, however, the removal of environmentally-harmful
subsidies would represent a necessary step towards eliminating an economic obstacle hampering the
achievement of sustainable fisheries management.  Subsidy reform has a role to play incomplementing progress towards sustainable use of fisheries resources, although it will not in itself
ensure sustainable fisheries.
                                                     
21 Fish and fish products are covered under Chapter 3, 0509, 1504, 1604, 1605 and 2301 of the
Harmonized System (HS) nomenclature.WT/CTE/W/167
Page 14
III. STATE OF PLAY OF INTERNATIONAL ANALYSIS AND DISCUSSIONS
A. WORK IN INTERNATIONAL ORGANIZATIONS
48. There is an increasing concensus that the main  cause of fish stock depletion is inadequate
management of fisheries resources, including over-cap acity of fishing fleets on a global scale:  too much
fishing capacity for the available resources.  The institutional structure put in place at the domestic,
regional and international levels to respond to the growing concern over fisheries sustainability isextensive.  It is based on the principle that although  efforts are essential at the national level, without
international and regional coordination and cooperation it will be difficult to ensure sustainable
fisheries management.
49. In this context, efforts are under way to analyse the different types of government support to
the fisheries sector and to identify those fishing subsidies that are harmful to resource sustainability
and distort trade.  Estimates of the magnitude of support vary widely.  Using a variety of approaches
and with differing coverage, general estimates range from US$6.3 to $21.5 billion, approximately 15to 25 per cent of the annual revenues of commercial fishing activities.
22  Despite these studies, it
remains unclear how the line of demarcation should be drawn between potentially environmentally-
harmful and environmentally-enhancing forms of subsidization, particularly given the unintended
consequences of government transfers in the fisheries sector.  This is primarily an empirical question.
50. This Section reviews the work in APEC, FAO, OECD, UNEP and the World Bank.
Discussions in the CTE have benefited from presentations and papers on the work of several of these
organizations.
1. APEC23
51. Over the course of 2000, the Asian Pacific Ec onomic Cooperation (APEC) has undertaken a
study on the Nature and Extent of Subsidies in the Fisheries Sector of APEC Member Economies .
The background to the study is APEC’s Early Voluntary Sectoral Liberalisation proposal for fish and
fish products. The proposal required, inter alia , that Member Economies eliminate subsidies contrary
to the WTO Agreement on Subsidies and Countervailing Measures (SCM).  It was subsequently
proposed that a study be undertaken to assist Member Economies to identify such subsidies.  The
study is now in the final stages of publication (APEC, 2000).
52. There were 5 formal requirements for the study:  (i) a comprehensive inventory of generic
types of subsidisation employed globally in the fisheries sector, including multi-sectoral subsidies
applying also to fisheries;  (ii) an inventory list and categorisation of subsidies in the fisheries sector
of APEC economies;  (iii) an inventory of policy objectives underpinning subsidies;  (iv) an
assessment of subsidies in light of the SCM Agreement, which differentiates between “prohibited,”“actionable,” and “non-actionable” subsidies;  and (v) three case studies illuminating the impacts of
subsidies.
53. An inventory of subsidies and support programmes in the fisheries sector of APEC shows 162
entries across the 19 APEC economies for which in formation was obtained.  The study identified
financial transfers in six categories, or "modalities":
1. Direct Assistance to Fishers and Fisheries Workers;
2. Lending Support Programmes;
                                                     
22 By way of comparison, the OECD (2000b) estimates that government transfers to the agricultural
sector in 1997, excluding market price support, represent 22 per cent of the farm-gate (the concept of "farm-gate" is equivalent to that of landed value in fisheries).
23 The APEC Secretariat has provided this summary of its recent research.WT/CTE/W/167
Page 15
3. Tax Preferences and Insurance Support Programmes;
4. Capital and Infrastructure Support Programmes;
5. Marketing and Price Support Programmes;  and
6. Fisheries Management and Conservation Programmes.
54. The overall profile of transfers shows that the most favoured in APEC are those using
Management and Conservation , and Capital and Infrastructure  modalities, applied to capture
fisheries.  The next most favoured are the same modalities but applied to aquaculture.  There are
scarcely any subsidies in the Direct Assistance  modality, and very few for fish processing applications
regardless of modality.
55. The overall profile of subsidies in terms of concentrations in the fisheries sector within APEC
remains relatively the same, regardless of whether drawn on the basis of the number of programmes in
each category, or on the number of APEC economies represented by programmes in each category.
This suggests a considerable harmony of policies and programmes in the fisheries sector across
APEC.  There is some evidence that a major struct ural shift may be under way in terms of the “mix”
of programme modalities.  Newer programmes appear to favour Management and Conservation ,
whereas older ones appear to have been more Capital and Infrastructure  oriented.
56. The total dollar value of all APEC programmes and subsidies is estimated at approximately
US$12.9 billion.  This is in line with previous estimates of subsidies globally in the fisheries sector, if
allowance is made for inflation and the very approximate nature of the data.  However, within APEC,
the best estimate is that the total value of subsidies with a positive effect on fish stocks is US$4.2
billion, while the total with a negative effect is estimated at US$8.3 billion.  Accordingly, there is still,
on balance, a preponderance of subsidies that work against the sustainability of fishing resources.
57. Very few programmes and subsidies would seem to be incompatible with the
SCM Agreement.  Only ten out of 162 are assessed as being potentially "actionable," with a medium
or high risk of challenge.  Of the 162, 29 are viewed as probably "non-actionable".  Of the remaining
133 that might conceivably be "actionable", 123 have a very low or low risk of challenge.
Accordingly, only ten programmes are viewed as bo th conceivably "actionable" and with a medium or
high risk of challenge.  The risk of challenge is a major determining factor.  Many more subsidies and
programmes might, in principle, be "actionable", but are too small-scale, excusable as regional
development, or are some form of envi ronmental adjustment, which is exempt.
58. The estimate of dollar values in the APEC study suggests that the ten programmes identified
as least "compatible" with the SCM Agreement carry a total value of approximately US$370 million.This is a surprisingly low proportion of the total US$12.9 billion estimated for the entire APEC
inventory.
59. Case study analysis shows that the effects of subsidies on trade are not always self-evident.
This is because of the distinctive, backward-sloping supply curve in the fisheries sector beyond the
point of maximum sustainable yield (MSY) of the fish ery.  It is possible that subsidies designed to
enhance fish stocks, or for vessel buy-back programmes in order to constrain fishing efforts, to
enhance fisheries sustainability, cannot be guaranteed to have precisely the intended positive effect.
However, subsidies to expand fishing efforts may tu rn out to be compatible with sustainability,
provided the point of MSY has not been reached in a given fishery.
60. Of the ten programmes identified as appearing least compatible with the SCM Agreement, no
fewer than six fall into just two positions (out of  18) in the Modality/Applications matrix.  There are
three programmes in the category of Capital and Infrastructure  applied to capture fisheries;  and three
in the category of Marketing and Price Supports  applied to fish processing. Accordingly, these two
categories appear to be the least compatible with the SCM Agreement.WT/CTE/W/167
Page 16
61. Conversely, the modalities of Direct Assistance to Fishers  and Management and
Conservation  appear to contain no programmes within APEC (regardless of area of application) that
would appear to have poor compatibility with the SCM Agreement.  Accordingly, these two
categories are the ones assessed as most compatible with the Agreement.  This is a surprising result in
the case of Direct Support to Fishers ;  the explanation lies in the small scale of the APEC
programmes in this category, and the fact that they appear to be acting in practice as a means to adaptto new environments.
2. FAO
24
62. The FAO State of Food and Agriculture special report in 1992 on Marine Fisheries and the
Law of the Sea:  A Decade of Change , in many respects, can be credited for clearly setting out the
issues relating to the interrelationship between fish  stocks and their environment that have shaped the
discussions in the past decade.  This report was in response to the significant increase in marine
environmental degradation, mainly through exacerbated over-fishing and coastal zone pollution.  TheFAO noted that this trend was highly disturbing, give n that fish are one of the major sources of animal
protein and are of critical importance to the increasing populations in developing countries.  In this
assessment, the FAO estimated that global operating and capital costs were US$124 billion, and
revenues US$70 billion, based on data from the latter half of the 1980s.  The difference of US$54
billion was then inferred to represent the value of  fisheries subsidization.  However uncertain this
preliminary FAO estimate, it has spawned a vigorous debate on the magnitude and potential
environmental consequences of subsidization to the fisheries sector.
63. The FAO has been working on fisheries since 1965.  Recent work has led to the conclusion of
several multilateral fisheries agreements, such as the 1995 Code of Conduct for Responsible Fisheries
(WT/CTE/W/15), which sets out voluntary principles for responsible fisheries and aquaculturepractices.  Implementation of the Code of Conduct is being supported by the FAO through the
preparation and distribution of a set of technical guidelines.
25  The Code of Conduct includes the FAO
1993 Agreement to Promote Compliance with International Conservation and Management Measures
by Fishing Vessels on the High Seas.  Article 7 of the Code provides that:
"States should take measures to preven t or eliminate excess fishing capacity and
should ensure that levels of fishing capacity are commensurate with the sustainable use of
fishery resources as a means of ensuring the effectiveness of conservation and management
measures."  (Article 7.1.8)
"Such measures should provide, inter alia,  that:  excess fishing capacity is avoided
and exploitation of fish stocks remains economically viable;  the economic conditions underwhich fishing industries operate promote responsible fisheries."  (Article 7.2.2)
64. The FAO is promoting implementation of the International Plan of Action for the
Management of Fishing Capacity (IPOA), which was endorsed by the FAO Council in 1999.
26
Current FAO work in this area includes providing Members with the tools needed for the management
of fishing capacity.  Work is progressing on technical guidelines for the management of fishing
capacity to be published in 2000 and identification of factors that contribute to fisheries over-capacity
and unsustainability.
                                                     
24 The FAO provides the CTE with regular briefings on its work, see WT/CTE/W/135;  W/126;
WT/CTE/M/21: pp.15-16;  M/22: p.7;  M/23: p.9;  and M/24: p.31.
25 These FAO technical guidelines are on fishi ng operations, the precautionary approach to capture
fisheries and species introduction, integration of fisher ies into coastal area management, fisheries management,
aquaculture development, inland fisheries, responsible fish utilization, and indicators for sustainabledevelopment of marine capture fisheries.  See www.fao.org/fi/agreem/c odecond/codecon.asp#AGREEM.
26 See WT/CTE/W/126 and www.fao.org/fi/ipa/ipae.asp.WT/CTE/W/167
Page 17
65. The FAO has been called upon by its Sub-Committee on Fish Trade and by the IPOA to
compile and disseminate information on fisheries subsidies at the global level, as a basis for further
analysis aimed at understanding their role in relation to trade of fish and fish products and fisheries
resource sustainability.  The FAO will hold expert consultation on Economic Incentives and
Responsible Fisheries (Rome, 28 November - 1 D ecember 2000) to assess the state of knowledge of
fisheries subsidies and their likely impact on trade and resource sustainability.  Its findings will besubmitted to the 24
th session of the FAO Committee on Fisheries in February 2001 (FAO, 2000b).
This work is relevant to CTE discussions and will provide an important contribution when completed.
66. Illegal, unreported and unregulated (IUU) fishing is also a subject of discussion in FAO.  IUU
fishing includes unregulated and unreported fishing activities primarily by large-scale fishing vessels
on the high seas, often under "flags of convenience," which refers to the practice of using the flag of
another country.  Although information on the extent of IUU fishing is difficult to ascertain for
obvious reasons, trade in species, such as bluefin tuna in the Atlantic and Pacific, Patagonian toothfishin the Antarctic and cod in the Atlantic, tend to indicate that the practise is widespread (FAO, 2000d).
The conservation and management of many fish stocks is being undermined by increasing levels of
IUU fishing, particularly in the jurisdictions of developing coastal States.
27  The issue of IUU fishing
was addressed most recently at an FAO technical consultation on 2 to 6 October 2000.  Further
consultation will be required prior to the next Session of the Committee on Fisheries in 2001.
67. An FAO study on Eco-labelling and Sustainable Fisheries  (Deere, 1999) reviews the current
international framework and rationale for eco-labelling;  highlights the particular concerns and
opportunities that these schemes may present, particularly for developing countries;  and presents a
case for stronger engagement by all stakeholders in the development of eco-labelling, including
through the negotiation of international technical guidelines.
68. Other related work in FAO includes assessments of:  (i) CITES criteria as they may apply to
the listing of commercially-exploited aquatic species.  In June 2000, FAO convened a technical
consultation on the suitability of the CITES criteria  for listing commercially-exploited aquatic species,
the results of which will be submitted to the Committee on Fisheries in 2001 (FAO, 2000c);  and
(ii) biotechnology and biosafety issues surrounding seafood products from aquaculture, including useof drugs and other chemicals in aquaculture, quarantine and health certification of live aquatic animals
during their transboundary movements, and screening of aquatic animals and animal products for
human pathogens (i.e. genetically modified fish and fish products).
28
3. OECD29
69. The Organization for Economic Cooperation and Development (OECD) has been working on
issues related to fisheries subsidies since the early 1960s (Steenblik and Munro, 1999).  In 1965, in
response to a mandate from the OECD Council "t o examine periodically the development of the
situation as regards subsidies and other financial support to the fisheries in Member countries," the
newly formed Committee for Fisheries published its first compilation of financial support to the
fishing industry (OECD, 1965).  The report , endorsed by the OECD Council, included
recommendations to the effect that:  "Subsidies directly given to the fishers on the basis of the
quantity of fish landed, gross proceeds, or time spent at sea must be considered … less acceptable
than other types, …[and] should not be given;"  and that:  "scrapping premiums, shipbuilding and
other investment subsidies for the benefits of fisheries … are only acceptable if they are to be in force
                                                     
27 See FAO (2000d), R. Tokrisna, WTO-Consistent Trade-Related Measures to Address IUU Fishing:
Developing Country Issues,  and T. Aqorau, IUU Fishing:  Considerati ons for Developing Countries.
28 The SPS Agreement recognizes the International O ffice of Epizootics as the competent authority for
standards relating to fish and fish products.  See  FAO (1998a).
29 The OECD provides the CTE with regular briefings on its fisheries work, see WT/CTE/M/23.WT/CTE/W/167
Page 18
for a period of less than five years and/or the granted amount does not exceed 25 per cent of the
building cost of a new vessel" (OECD, 1965).
70. Thus, since its inception the OECD Fisheries Committee has been mandated "to examine
periodically the development of the situation as regards subsidies and other financial support to the
fisheries in Member countries."  Monitoring of support was continued over the next several years as
part of the 1967 and 1968 OECD Review of Fisheries , and was expanded in a second study on
financial support published in 1971.  The third and final report in the series was published in 1980.
71. In the early 1990s, the OECD Fisheries Committee decided once again to measure and
classify financial support to the fisheries sector a nd to determine how to calculate its impact on trade.
The terms of reference of the ad hoc  Expert Group, set up in 1990 specifically to examine the issue,
were "to provide conceptual clarification and to assess the possibilities of developing a methodology
and assess its usefulness for quantifying all relevant economic assistance measures in connection with
the study on economic assistance" (OECD, 1990).
72. In 1993, the Committee's Expert Group acknowledged the difficulties in quantifying some
types of assistance to the fishing industry (particularly that arising from trade restrictions).  The
Fisheries Committee accordingly decided to move on from this work and focused on deepening its
understanding of the economic aspects of the management of fisheries resources (OECD, 1993).
73. The results of a recent OECD study carried out in the Fisheries Committee, Transition to
Responsible Fisheries - Economic and Policy Implications  (OECD, 2000b), illustrate, from selected
case studies, that government financial transfers to the marine capture of fisheries sectors in OECD
Member countries represent a significant policy intervention.  The study examines in particular how
these transfers affect fishery resource sustainability.
74. This study reaches an estimate of US$6.3 billion in OECD government transfers to the fishing
industry in 1997, defining a “transfer” as the monetary value of government interventions associated
with fisheries policies, whether from central, regi onal or local governments.  While the study made
considerable progress in defining government assistance in this sector, it should be noted that the
calculations do not include market price support,30 nor many concessionary tax treatments, nor
support from regional or local authorities (OECD, 2000a).  However, market price support will be
examined in the Fisheries Committee's forthcoming study on market liberalization.  The OECD has
provided the Executive Summary of the study as an input to this Note, which is contained in
Annex IV.
75. Based on a range of case studies of experiences in OECD Members,31 the study notes that the
nature of government financial transfers has changed in OECD countries since the 1970s and 1980s,with resources having shifted from developing fisheries to reducing fishing.  The study contains the
following categories of the various types of transfers, according to how they are implemented:
• Transfers in the form of direct payments  from government budgets (i.e., financed by
taxpayers) to fishers;
• cost reducing transfers , such as those that reduce the costs of fixed capital and variable
inputs;   and
• general services.
                                                     
30 Market price support are transfers that influence both producer and consumer prices, causing the
domestic price of a product to be greater than the world price.
31 Case studies were provided by Australia, Canada, the European Community, Iceland, Japan,
New Zealand, Norway and the United States.  See the case-study summaries in OECD (2000b), pp.16-32.  Each
country determined which data to report for this study.WT/CTE/W/167
Page 19
76. Examples of these generic categories are provided in Figure 5.  In the first two of these
categories the transfers are contingent on the level of activity of an individual fisher.  The final
category, general services, involves transfers not contingent on the level of activity of a fisher, but
they reduce the costs faced by all fishers and an implicit transfer thus occurs.
Figure 5:  Examples of categories of transfers  to marine capture fisheries in OECD countries
Direct payments
Price premiums paid by governments, grants to small fisheries, direct aid to participants in
particular fisheries, grants for new vessels, grants for modernization, grants to purchase second hand
vessels, grants to set up temporary joint ventures in other countries, payments to set up permanent joint
ventures in other countries, grants for temporary withdrawal of fishing vessels, temporary grants to fishers
and vessel owners, vessel decommissioning payments, buyouts of licences and permits, buyouts of quota
and catch history, compensation for closed or reduced seasons, compensation for damage from predators on
fish stocks, disaster relief payments, income support, unemployment insurance, retirement grants for
fisheries, income guarantee compensation, vacation support payments.
Cost Reducing Transfers
Subsidized loans for vessel construction, subsidized loans for vessel modernisation, loan
guarantees, low cost loans to young fishers, low cost loans to specific fisheries, interest subsidies for the
purchase of machines and equipment for fishing vessels, interest rebates, interest subsidies for the purchase
of second-hand vessels, underwriting of insurance costs, low cost insurance, payments to reduce accounting
costs, contributions to match private sector investments, transport subsidies, fuel tax exemptions, income
tax deduction for fishers, tax exemptions for deep-sea vessels, support for crew insurance, support for
development of deep-sea fisheries, support to improv e economic efficiency, government payment of access
to other countries’ waters, reduced charges by go vernment agencies, support to build facilities for
commercial fishers at ports, provision of bait services.
General Services
Management expenditure, enforcement expenditure, research expenditure, funding of information
dissemination, funding for the promotion and development of fisheries, expenditure for information
collection and analysis, expenditure on exploratory fishing, fisheries enhancement expenditure, support for
artificial reefs, expenditure on research of deep-sea fisheries, expenditure on the protection of marine areas,
aid for restocking fish resources, payments to support community based management, payments to
producer organisations, regional development grants, support to build port facilities for commercial fishers,
grants to local authorities for retraining fishers in other activities, support to enhance the fisheries
community environment, expenditure on research and development on fishing technologies, expenditure to
promote international fisheries co-operation, support to improve the management of co-operatives, support
to improve fishing villages, market intervention.
Box Notes : Market price support not included.  The descriptions of the transfers come from a variety of sources.  They
are for illustrative purposes and the box does not contain a co mprehensive listing.  Some descriptions appear in more
than one category.  This is because, alt hough the programs have the same descriptor, the available information indicates
that they are implemented in different ways.
The box does not reflect any assessment of whether individual transfers programs have positive or negative
implications for fisheries resource sustainability.  Therefore, proper care should be applied in interpreting this summary
information to consult the country case studies provided in the Annex to the study that discusses these implications.
Source:  OECD (2000b).WT/CTE/W/167
Page 20
77. Table 2 gives the OECD (2000b) estimates of government financial transfers to marine
capture fisheries in OECD countries in 1997.
Table 2:  Estimates of Government Financial Transfers to Marine Capture Fisheries in the
OECD: 19971 (US$ million)
Direct
payments (A)Cost
Reducing
Transfers
(B)General
Services (C)Total
Transfers
(D)Total
Landed
Value (TL)(A+B)/
TLD / TL
Australia25 7 11 24 259 5% 9%
Canada 252 18 135 405 1621 17% 25%
European Union4366 358 710 1434 9324 8% 15%
Belgium - 3 2 5 99 3% 5%
Denmark 20 - 62 82 521 4% 16%
Finland 3 2 21 26 29 18% 90%
France 22 14 104 139 75645% 18%
Germany 8 3 52 63 194 5% 32%
Greece 12 - 38 50 387 3% 13%
Ireland 5 3 96 104 220 3% 47%
Italy 24 5 64 92 1,749 2% 5%
Netherlands 4 - 32 36 466 1% 8%
Portugal 32 0 34 66 319410% 21%
Spain 205 81 59 345 3,44348% 10%
Sweden 9 - 45 54 129 7% 42%
United Kingdom 23 4 101 128 1,012 3% 13%
Iceland - 18 18 36 877 2% 4%
Japan 25 22 2,899 2,946 14,117 0% 21%
Korea 30 59 253 342 4,929 2% 7%
Mexico - - 17 17 1017 -% 1%
New Zealand - - 17 17 4755-% 4%
Norway 3 62 98 163 1343 5% 12%
Poland - - 8 8 215 -% 4%
Turkey - 1 27 29 212 1% 13%
United States 21 194 662 877 3,644 6% 24%
OECD Total 702 740 4,856 6,298 38,032 4% 17%
Notes:  "-":   zero;  0:  Value less than 0.5 of the unit of measure;  1:  the table does not reflect any assessment of whether individual
transfers programs have positive or negative implications for fi sheries resource sustainability.  Therefore, proper care should  be applied in
interpreting this summary information to consult the country case studies provided in OECD (2000b);   2:  Commonwealth fisheries only;
3:  European Union values are the sum of all EU Member State values. The exception to this is cost reducing transfers, where paym ents for
access to third country waters are not allocated among each Member State. In this case, the value is added to the EU total figu re;  4:  does
not include national landings in foreign ports;  5:  1996 figure.  (figures are rounded-up).
Source:  OCED 2000b.
78. As part of its programme of work for 2000-2002, the OECD Committee for Fisheries plans to
analyse issues relating to fisheries management costs (Wallis and Flaaten, 2000);  trade and
investment liberalization in fisheries;  indicators  for monitoring sustainable fisheries development;
and the causes and consequences of changes in fishing capacity.  As part of the work on market
liberalization, the Fisheries Committee will "… explore world and regional fish trade flows, issues
and problems.  This will include an analysis of how fisheries trade and production are likely to beaffected by reductions in present tariff levels and by changes in non-tariff barriers.  In addition, the
study will explore the effects of change on restrictions on investment, access to services, subsidies in
the fisheries sector, as well as other relevant factors  (OECD, 2000a)."WT/CTE/W/167
Page 21
4. UNEP
79. UNEP co-sponsored with WWF a workshop on "The Role of Trade Policies in the Fishing
Sector" in June 1997 to discuss the relationship be tween fishing subsidies, trade distortions and the
problems of fisheries resource sustainability  (UNEP-WWF, 1997).  A study prepared for UNEP
(Porter, 1998a) contributes to the analytical framew ork for consideration of fisheries subsidies.  This
study calls for the reform of fishing subsidies and concludes that the negotiation of multilateral rulesto discipline subsidies in the fisheries sector would facilitate adjustment to sustainable management.
The options proposed are:  a fishing subsidies agreement within the WTO framework;  a protocol on
fisheries subsidies within the framework of an existing multilateral environmental agreement;  or a
stand-alone agreement on fishing subsidies or fishing over-capacity.  This initial work is being
updated in a forthcoming UNEP study (Porter, 2000).  UNEP is also undertaking integrated
assessments of trade liberalization in the fisheries sector in select countries, such as Argentina,
Senegal and Uganda.
5. World Bank
80. A World Bank paper (Milazzo, 1998) categorizes fisheries subsidies, and includes budgeted,
non-budgeted and cross-sectoral subsidies.  Based on six case studies (Japan, the EU, Norway, the
US, Russia and China), Milazzo estimates that fisheries subsidies world-wide amount to between
US$14 and 20.5 billion per year, or 17 to 25 per cent of the revenue of the industry.  This estimate isbased on budgeted subsidies of US$3.5 to $5 billion, direct subsidies of US$6 to 8 billion, indirect
shipbuilding and infrastructure subsidies of US$1.5 billion, and subsidies relating to access to the
fishery of US$3 to 7 billion.  Excluded are subsidies put in place to reduce capacity and fishing effort.
81. The World Bank and FAO are jointly developing a Forum for Sustainable Fisheries  to
provide increased direct support to developing countries for the promotion of sustainable fisheries ingeneral and for the implementation of the FAO Plan of Action (FAO, 1999c).
B. W
ORK IN NON -GOVERNMENTAL ORGANIZATIONS
82. The work of several NGOs has contributed to the analysis of fisheries subsidies.  The World
Wildlife Fund (WWF) is taking the lead in an inte rnational effort to reduce fisheries subsidies that
contribute to over-fishing, under its Endangered Seas Campaign, including initiatives to:  (i) increasetransparency in national subsidy regimes;  (ii) promote new international rules to monitor and
discipline fisheries subsidies;  and (iii) secure immediate reductions in the most harmful fisheries
subsidies, including through implementation of the FAO Plan of Action ( see WWF, 1997 and 1999;
and Schorr, 1998).
32
83. The programme of the International Centre for Trade and Sustainable Development (ICTSD)
on Fisheries, Trade and Sustainable Development addresses the intersecting issues of fisheries and
sustainable development in the context of international trade policy-making.  ICTSD focuses on
improved policy coherence to complement and support stakeholder participation in processes at the
WTO, OECD, FAO and other fora.  ICTSD has published jointly with IUCN, Fish For Thought
(ICTSD-IUCN, 1999);  and Fish Scales (Dommen, 2000).  ICTSD work in 2000-2002 will include
stakeholder policy dialogues on fisheries.
                                                     
32 WWF together with Unilever, one of the largest global fish processors, have created a Marine
Stewardship Council to promote market-based incentives for sustainable fisheries, such as eco-labelling.  See
www.msc.org.WT/CTE/W/167
Page 22
C. WORK IN GATT/WTO
1. The Uruguay Round
84. Meeting at Ministerial level in 1982, the GATT CONTRACTING PARTIES agreed to
examine problems relating to trade in three groups of products - non-ferrous metals and minerals,
forestry products, and fish and fisheries products, with a view to recommending possible solutions.
Detailed background documentation was prepared and a working party was established in March 1984to examine problems in those areas and possible solutions.  The Working Party concluded that the
elimination of obstacles would be conducive to trade liberalization; facilitate the adjustment of
production to market conditions;  favour greater stability in prices;  and help create a stronger base for
further development of industries concerned with natural resource-based products (GATT, 1985a).  It
considered that the best means of obtaining that objective was through a new round of multilateral
trade negotiations.  The 1985 Report of the Working Party (GATT, 1985b) contains a description of
measures affecting trade in fish and fish products, many of which may need further consideration.The recommendations of the Working Party led to the creation of a negotiating group on Natural
Resource Based Products (NG3) in the Uruguay Round, in which fisheries issues were discussed.
2. The Committee on Trade and Environment
85. There has been considerable discussion of the fisheries sector under Item 6 of the work
programme of the CTE, which examines the environmental effects of removing trade restrictions anddistortions.  Following the 1996 Report of the CTE to the Singapore Ministerial Conference
(WT/CTE/1), work has been undertaken to broaden and deepen the sectoral analysis under item 6 in
several sectors.
33  Discussions in the CTE have pointed to the fisheries sector as a good example of
the benefits for both trade and environment of removing trade restrictions and distortions.
86. In this context, recognition has been given to th e fact that, for the most part, it is fisheries
management, not trade, which plays the crucial role in determining sustainable resource use.
Considering that the situation of fisheries world-wide needs to be addressed through enhanced
fisheries management, the potential contribution of the WTO, which has a trade mandate, would be in
the area of addressing the major trade distortion affecting the fisheries sector, i.e. subsidies.
87. It has been noted that certain subsidies may contribute to sustainable resource management
and thus all forms of subsidies should not be condemned a priori .  Determining sustainable resource
exploitation is an issue of fisheries management first and foremost.  In this respect, it is necessary to
take a comprehensive approach to the discussion of fisheries, including the socio-economic aspects.
The EC has suggested that it would be interesting to study whether the absence of subsidies targeted
at adjustment of fishing activity could lead to undesirable over-exploitation of fisheries resources(WT/CTE/W/99).  Reference has also been made to the role, in resource conservation, of non-tariff
measures relating to transit and access to ports.
88. Contributions by New Zealand, the United States, Iceland and Australia have addressed the
potential "win-win-win" opportuniti es for trade, environment and development from eliminating
fisheries subsidies.  These submissions start from the premise that an important cause of the decline in
fish stocks is over-fishing due to over-capacity in production and fleets,34 as described in Section II of
this Note.  Contributions by Iceland (WT/CT E/W/103), New Zealand (WT/CTE/W/134) and the
                                                     
33 Under the second part of this item, Members have discussed agriculture, energy, fisheries, forestry,
non-ferrous metals, textiles and clothing, leather, and environmental goods and services.
 34 See the submissions by Australia (WT/CTE/W/36 and W/105);  Iceland (WT/CTE/W/111 and W/103);
New Zealand (WT/CTE/W/121 and W/51);  and the United States (WT/CTE/W/154 and W/52).WT/CTE/W/167
Page 23
United States35 describe the progress being made at the national level to put in place sustainable fisheries
management systems.
89. Members have raised various issues with respect to the fisheries sector in discussions in the
CTE, including the role of the fisheries sector in developing and least-developed countries, artisanal
and small-scale fisheries, access agreements, and market access for fish and fish products.
90. A recent submission by the United States (WT/CTE/W/154) distinguishes between open
access, regulated open access and rights-based fisheries;  and identifies a non-exhaustive list of
categories of fisheries subsidies that tend to promote excessive levels of fishing effort and harvesting
capacity, and to distort prices and trade.  Excluded from this list are those government programmes
for fisheries management, science, enforcement and most publicly financed port and landing facilities,
as well as programmes that facilitate the transition to sustainable fisheries.  This list is contained in
Annex V to this Note.
3. The High Level Symposium on Trade and Environment
91. At the WTO High Level Symposium on Trade and Environment in March 1999, five
Members submitted a joint statement on need to eliminate environmentally-damaging and trade-
distorting subsidies in the fisheries sector.36
4. The Seattle Ministerial Conference
92. In the preparatory process for the Seattle Ministerial Conference in December 1999, there
were several proposals with respect to fisheries subsidies.37  Views differed on the best way to
approach this issue.  Some Members put forward proposals on the need to negotiate disciplines on
environmentally-harmful and trade-distorting fisheries subsidies.38  Others felt that fisheries subsidies
should not be singled out and that sustainable fisheries management needed to be dealt with in a
comprehensive manner.  One of these Members proposed that an independent negotiating group forforestry and fisheries products be established to address a range of issues, including fisheries
subsidies.
39
D. CONCLUDING OBSERVATIONS
93. Apart from the earlier aggregate estimates by FAO and the World Bank, no detailed and
easily comparable estimates of subsidies to fisheries have yet been compiled for all major fishingnations.  Nevertheless, through the efforts of various organizations involved in examining and
measuring government financial transfers to the fisheries sector, an overall picture is starting to
emerge.  Recent work in APEC and the OECD is a st ep in this direction.  Further work to develop a
common methodology will assist efforts to monitor progress of this important element bearing on
fisheries management and trade.  This work can usefully guide discussions in the CTE on the nature,extent and implications of fisheries subsidies in the context of the transition to sustainable fisheries
management.
                                                     
35 The US (1999) made available a Congressional study on federal investments in the fisheries sector.
36 See the statement by Australia, Iceland, New Zealand, the Philippines and the United States in
Annex I of WT/CTE/W/121;  for a summary of this meeting see IISD (1999).
37 See Iceland's summary in WT/CTE/W/132.
38 See, for example,  Communication from Australia, Iceland, New Zealand, Norway, Peru, Philippines,
and the United States, WT/GC/W/303.
39 See, for example,  Communication from Japan, WT/GC/W/221.WT/CTE/W/167
Page 24
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Page 28
CTE DOCUMENTS RELATED TO THE FISHERIES SECTOR
Symbol Title of Document Date
WT/CTE/W/160 Matrix on Trade Measures Pursuant to Selected
MEAs19 September 2000
WT/CTE/W/154 Environmentally-Harmful and Trade-Distorting
Subsidies in Fisheries - Communication fromthe United States4 July 2000
WT/CTE/W/152 Conservation Measures Taken by the
International Commission for the Conservation
of Atlantic Tunas – Communication fromICCAT29 June 2000
WT/CTE/W/135 Update of FAO Activities Related to Fisheries -
Communication from the FAO25 February 2000
WT/CTE/W/134 Subsidies in the Fisheries Sector - Update on
Recent Work Conducted by New Zealand -
Communication from New Zealand24 February 2000
WT/CTE/W/132 Fisheries Subsidies and the Environment -
Communication from Iceland21 February 2000
WT/CTE/W/126 The FAO International Plan of Action for the
Management of Fishing Capacity and RelatedInitiatives for Sustainable Fisheries  -Communication from the FAO12 October 1999
WT/CTE/W/121 Benefits of Eliminating Trade Distorting and
Environmentally Damaging Subsidies in the
Fisheries Sector - Submission by New Zealand28 June 1999
WT/CTE/W/113 + Corr. The Commission for the Conservation of
Atlantic Marine Living Resources -Communication from CCAMLR20 May 2000
WT/CTE/W/80/Add. GATT/WTO Rules on Subsidies and Aids
Granted in the Fishing Industry - Note by theSecretariat21 September 1999
WT/CTE/W/111 Report by the Icelandic Ministry of Fisheries on
the Environmental Impact of Fisheries Subsidies
- Submission by Iceland11 March 1999
WT/CTE/W/105 Trade Liberalization and the Environment:
A Positive Agenda for Trade Reforms -Submission by Australia2 February 1999
WT/CTE/W/103 + Corr. The Icelandic Fisheries Management System:  A
Market-Driven Sustainable Fisheries Regime –Submission by Iceland27 January 1999
WT/CTE/W/99 Comments by the EC on the Secretariat's
document WT/CTE/W/80 on Subsidies and
Aids Granted in the Fishing Industry6 November 1998
WT/CTE/W/87 Communication from the Secretariat of the
International Commission for the Conservationof Atlantic Tunas16 July 1998
WT/CTE/W/83 Comments by the EC on the Secretariat's
document WT/CTE/W/67 (EnvironmentalBenefits of Removing Trade Distortions)10 June 1998
WT/CTE/W/80 GATT/WTO Rules on Subsidies and Aids
Granted in the Fishing Industry - Note by the
Secretariat9 March 1998WT/CTE/W/167
Page 29
Symbol Title of Document Date
WT/CTE/W/67 Environmental Benefits of Removing Trade
Restrictions and Distortions - Note by theSecretariat7 November 1997
WT/CTE/W/62 The 1994 Agreement Relating to the
Implementation of Part XI of the 1982UN Convention on the Law of the Sea -Communication from the UN Division for
Ocean Affairs and the Law of the Sea16 September 1997
WT/CTE/W/52 The Fisheries Sector - Submission by
New Zealand21 May 1997
WT/CTE/W/51 Environmental and Trade Benefits of Removing
Subsidies in the Fisheries Sector - Submissionby the United States19 May 1997
WT/CTE/1 Report (1996) of the Committee on Trade and
Environment to the Singapore Ministerial
Conference12 November 1996
WT/CTE/W/36 Trade Liberalization, the Environment and
Sustainable Development - Submission byAustralia23 July 1996
WT/CTE/W/15 + Corr Recent Developments in MEAs - Note by the
Secretariat - FAO Code of Conduct forResponsible Fisheries1 December 1995
General Council documents
WT/GC/W/348 Preparations for the 1999 Ministerial Conference
- Improved Disciplines and Remedies under theAgreement – Communication from Canada11 October 1999
WT/GC/W/303 Fisheries Subsidies Proposal Submitted by
Australia, Iceland, New Zealand, Norway, Peru,Philippines and the United States6 August 1999
WT/GC/W/292 Proposal by New Zealand on the Elimination of
Trade-Distorting and Environmentally-DamagingSubsidies in the Fisheries Sector5 August 1999
WT/GC/W/229 Preparations for the 1999 Ministerial Conference
- Fisheries Subsidies – Communication fromIceland6 July 1999
WT/GC/W/221 Preparations for the 1999 Ministerial Conference
- Negotiations on Forestry and Fishery Products -
Communication from Japan28 June 1999
WT/GC/W/185 Preparations for the 1999 Ministerial Conference
- Market Access for Industrial Goods, IncludingFish and Fish Products - Communication fromNorway19 May 1999WT/CTE/W/167
Page 30
ANNEX I
LIST OF LOW-INCOME FOOD DEFICIT COUNTRIES (LIFDCs)
Afghanistan
Albania
Angola
Armenia
Azerbaijan
BangladeshBenin
Bhutan
Bolivia
Bosnia Herzegovina
Burkina FasoBurundi
China
Cambodia
Cameroon
Cape VerdeCentral African Republic
Chad
Comoros
Congo, Dem. Rep.
Congo, Rep.Cuba
Côte d'Ivoire
Djibouti
Ecuador
EgyptEquatorial Guinea
Eritrea
Ethiopia
Ethiopia
Gambia
Georgia
GhanaGuatemala
Guinea
Guinea Bissau
Haiti
HondurasIndia
Indonesia
Kenya
KiribatiKorea D.P. Rep.
Kyrgyzstan
Laos
Lesotho
Liberia
MacedoniaMadagascar
Malawi
Maldives
Mali
MauritaniaMongolia
Morocco
Mozambique
Nepal
NicaraguaNiger
Nigeria
Pakistan
Papua New Guinea
PhilippinesRwanda
Samoa
Sao Tome Principe
Senegal
Sierra LeoneSolomon Islands
Somalia
Sri Lanka
Sudan
Swaziland
Syria
TajikistanTanzania
Togo
Turkmenistan
Tuvalu
UzbekistanVanuatu
Yemen
ZambiaWT/CTE/W/167
Page 31
ANNEX II
REGIONAL FISHERIES BODIES
These instruments set out specific duties or responsibilities on both Regional Fisheries Bodies
(RFBs) and their respective members.  They address such issues as unregulated fishing;  over
capitalization of fleets;  excessive fleet size;  insufficiently selective fishing gear;  by-catch and
discards;  data and statistics;  use of the precautionary approach;  conservation and management of
high seas fish stocks;  monitoring and compliance schemes (MCS) and enforcement by flag and port
States;  marine pollution;  ecosystem protection;  data gathering and subsequent management advice;
and assistance to developing States.
FAO Regional Fishery Bodies
• Fishery Committee for the Eastern Central Atlantic (CECAF)
• Western Central Atlantic Fishery Commission (WECAFC)
• Indian Ocean Fishery Commission (IOFC)
• Asia-Pacific Fishery Commission (APFIC)
• General Fisheries Commission for the Mediterranean (GFCM)
• Indian Ocean Tuna Commission (IOTC)
Non-FAO Regional Fishery Bodies
• Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR)
• Commission for the Conservation of Southern Bluefin Tuna (CCSBT)
• Forum Fisheries Agency (FFA)
• Inter-American Tropical Tuna Commission (I-ATTC)
• International Baltic Sea Fishery Commission (IBSFC)
• International Council for the Exploration of the Sea (ICES)
• International Commission for the Conservation of Atlantic Tunas (ICCAT)
• Northwest Atlantic Fisheries Organization (NAFO)
• Comité régional des pêches du Golfe de Guinée (COREP)
• Commission sous-régionale des pêches (CSRP)
• Joint Technical Commission for the Argentina/Uruguay Maritime Front (CTMFM)
• North Atlantic Marine Mammal Commission (NAMMCO)
• North Atlantic Salmon Conservation Organization (NASCO)
• North-East Atlantic Fisheries Commission (NEAFC)
• International Pacific Halibut Commission (IPHC)
• North Pacific Anadromous Fish Commission (NPAFC)
• North Pacific Marine Science Organization (PICES)
• Pacific Salmon Commission (PSC)
• South Pacific Permanent Commission (CPPS)
• Pacific Community (SPC)
• Latin American Organization for the Development of Fisheries (OLDEPESCA)
• International Whaling Commission (IWC)WT/CTE/W/167
Page 32
ANNEX III
MODEL OF A FISHERY:  SUBSIDIES AND OVER-FISHING
Figure 4 is a standardized model of a fishery and does not represent all fisheries, such as a
fishery in process of being developed.  In this standard model, with varying degrees of fishing effort
(number of vessels or fishers), stocks of fish will produce varying levels of sustainable yields.  It
furthermore assumes constant prices and a particular cost function for the harvesting of a fish stock.
The yield increases in response to increased fishing effort to the point of maximum sustainable yield
(MSY).  In a situation of open access, the point of economic efficiency in Figure 6  is located at point
F along the total catch curve, where the total costs equal the total revenues produced by harvesting the
fish stock.
In general, underlying economic problems are related to incentive structures in a fishery.
Policy failures relating to open access are central to over-fishing and the consequent decline of fish
stocks.  Thus, if government transfers or subsidies provide incentives to increase capital and labour
inputs beyond the level associated with MSY of the fishery, over-capitalization and over-fishingoccur.  This is represented by the shift from point F to F
1 in Figure 6.  Initially, subsidies result in
additional profits for individual fishers, which serves to attract more fishers into the sector.  Thus, if
there are no barriers to entry in the fishery, effort  will exceed the point of MSY and subsidies provide
only temporary rents to the industry.
Source:  Nordström and Vaughan (1999), p. 24.Costs with
subsidiesYield,
RevenueCosts
Y
Y1
Overfishing
F     MSY                     F1        Fishin g effortsFigure 6:  Subsidies and over-fishingWT/CTE/W/167
Page 33
ANNEX IV
OECD, TRANSITION TO RESPONSIBLE FISHERIES - ECONOMIC AND POLICY
IMPLICATIONS .  PARIS, 2000.
EXECUTIVE SUMMARY
1. Government financial transfers to the mari ne capture fishery sectors in OECD Member
countries represent a significant policy intervention.  These transfers have a variety of objectives and
employ a number of means to achieve them.  Most represent general services, of which the largest
proportion is spent on fisheries infrastructure, the remainder funding activities that are designed to
assure the sustainable use of fish stocks.  A significant amount of expenditure is also spent on
transfers that attempt to ease current transition, modernise fleets and provide access to other countries’waters.  In this study the OECD Fisheries Committee started to explore a number of transfers and
attempted to assess their impacts on fishing capacity and activity, and on fish stock sustainability.
2. It is estimated that at least US$ 4.9 billion (77 per cent of all transfers) was spent on general
services in 1997 – 13 per cent of the value of the landings.  Common examples of general services are
expenditures on fisheries research, enforcement, management, enhancement and infrastructure. Manyof these expenditures fund services that are important for ensuring the sustainable use of fish stocks
and the aquatic ecosystem, in accordance with international obligations.  For some of these services,
some OECD countries consider that fishers are th e primary beneficiaries as they own the fishing
vessels and thus are the primary users of the fishing rights.  As a consequence, these countries operate
cost recovery programmes whereby the costs asso ciated with providing these services - normally
fisheries management and research - are recovered from fishers.  Other countries take the view that
such services benefit society as a whole and should therefore be paid for from general tax revenues.
A further USD 1.4 billion was spent on support in the form of direct payments and cost reducing
transfers to the sector in 1997 – 4 per cent of the value of landings.  Common examples include
modernisation grants, decommissioning payments, tax exemptions and income support.  Transfersarising from market price support - i.e., the difference between the domestic price and the world price
of fisheries products due to a government intervention - are not included in any of these figures.
3. Many cases documented the use of direct payments and cost reducing transfers that are
targeted at reducing fishing capacity.  These policies were either intended to boost profitability of the
remaining fishers, reduce dependency on the fishery, meet international obligations or reduce pressureon stocks. In some situations, capacity reducing transfers were used in conjunction with resource
conservation measures.  The evidence presented indicates that these transfers were successful in
improving the profitability of the fishery.  Even when this was not a policy objective there appeared to
be improved performance by the remaining fishers.  Although in many countries resource
conservation policies are treated separately from transfers policies, some cases demonstrated the value
of such policies working together.  Government financial transfers have been used to effectively
lubricate the introduction of stricter management policies.  These findings underlined the value ofcoherence between resource management policies and transfers policies.
4. The presented evidence suggests that some direct payments and cost reducing transfers can
encourage a build-up of capacity and an expansion of fishing activity.  However, many of these
effects can be avoided if there are adequate management systems in place.  While some cases showed
that over-fishing had contributed to resource sustainability problems, few demonstrated the linkagebetween these problems and government financial transfers.
5. Capacity reducing transfers were observed to have other effects.  By creating opportunities
for economic rent to be generated, these policies provided the means for more efficient effort to enter
the fishery (in the absence of adequate effort controls).  Other transfers, such as those provided by
renewal and modernisation programmes, which encourage the infusion of new technology, may alsoWT/CTE/W/167
Page 34
work against the objectives of the capacity reduction programmes.  Furthermore the difference
between measured capacity (e.g., fleet tonnage and engine power) and effective capacity complicates
the design of policies that have the objective of reducing fishing effort.  Capacity reducing transfers
also have the potential to create spillover effects in other fisheries.  If these other fisheries are not
adequately managed, the net contribution to resource sustainability could be negative.  In a few cases
the costs of capacity reduction programmes were covered by funds collected from fishers.  Thepositive aspects of such an approach include its effect on the incentive structure of fishers when they
request adjustment assistance, and the reduced costs for taxpayers.
6. The evidence presented to this study suggests that a significant proportion of transfers, when
combined with sound management policies, can contribute to resource sustainability.  Some direct
payments and cost reducing transfers, however, may have a negative impact on the governance of
fisheries.  Transfers can imbed expectations about capacity and activity levels that can be expensive
and costly for governments to remove.  Excess capacity, primarily due to the lack of appropriatemanagement and transfers policies, can lead to increased pressures on fisheries management decisions
that favour short term requirements at the expense of long term sustainability.
7. Some countries consider that reform of their government financial transfers policies,
combined with other management measures, has been successful with respect to their resource
management objectives.  While the reforms reflect the unique characteristics of each situation, theycontribute to the possibility of having an economically profitable and biologically sustainable fishery
that internalises its own adjustment risks and functions without direct payments and cost reducing
transfers.
8. Capacity reducing transfers can reduce pressure on over-fished stocks.  The available
evidence suggests that improvements in resource sustainability are possible when capacity reducingtransfers are accompanied by appropriate management measures.
9. The Committee recognised the difficulties in isolating the impact on fisheries sustainability of
government financial transfers.  Nevertheless, the study advanced the understanding of the impacts of
transfers on the fisheries sector and some useful general statements and assessments can be made.
The study touched upon topics that will be part of the Committee’s next work programme. TheCommittee will be conducting further work to improve its understanding of the general services
transfers, especially those provided by fisheries research, management and enforcement expenditures.
The potential relationship between transfers and trade will also be a topic for the Committee’s future
programme of work.WT/CTE/W/167
Page 35
ANNEX V
NON-EXHAUSTIVE LIST OF ENVIRONMENTALLY-HARMFUL
AND TRADE-DISTORTING FISHERIES SUBSIDIES
Category Examples of types of measures
A.  Subsidies that reduce capital (fixed) and
operating (variable) costs
(i)  Domestic fisheries
Reduction of fixed and variable costs - Government-funded commercially applicable
research and development
Reduction of the cost of capital - Government loans and loan refinancing at below
market rates
- Government loan guarantees that facilitate below
market rate loans
- Government forgiveness of government-funded loans
Reduction of income and sales tax and increase of
profit margins- Investment tax credits
- Income tax deferrals/accelerated depreciationallowances- Exemption from national sales and fuel excise taxes(unless the tax is a user fee that funds a non-fishery
programme such as highway construction and
maintenance)
Mitigation of risks and costs - Government-supported marine insurance at below
market rates where such insurance is commercially
available
Centrally-controlled fisheries - Government ownership/management of fishing
enterprises if inconsistent with market terms
- State trading if inconsistent with market terms andcustomary business practices
Other indirect measures - Assistance to shipbuilding when the benefits accrue
specifically to fishers
(ii) International fisheries
Explicit promotion of international fisheries, such as
on the high seas and in other countries EEZs- Government-funded foreign access payments
- Government assistance to foreign fishery joint
ventures
- Government-supported fishing vessel exports
- Government-supported below market insurance for
foreign fishery investments
B.  Subsidies that support incomes and prices
Explicit price support programmes that have the
general effect of promoting operations beyond an
optimal point and sustain marginal producers- domestic price support programmes
- Government purchases for above market
remuneration
Directly trade-promoting subsidies - rebates of certain taxes on inputs if the finished
product is exported- Government-funded export subsidies
Sector-specific social assistance programmes if
implemented in way that encourage fishers to remain
active even if sufficient fishery resources are no longer
available- sector-specific income maintenance programmes
- regional economic development, if effectively
fisheries sector-specific
Source:  Communication from the United States to the CTE, WT/CTE/W/154, 4 July 2000.
__________