NEW WTO DISCIPLINES ON FISHING SUBSIDIES: OUTLINE OF A ROBUST SOLUTION (WWF DISCUSSION PAPER 29 APRIL 2003)

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1 NEW WTO DISCIPLINES ON FISHING SUBSIDIES: OUTLINE OF A ROBUST SOLUTION (WWF DISCUSSION PAPER 29 APRIL 2003) The WTO negotiations on fishing subsidies have entered a critical period during which the parameters of possible outcomes will begin to take shape. It is vitally important now for parties to the negotiations to bring forward substantive proposals for achieving bona fide win-win-win results. The following outline was prepared by WWF as a contribution to thinking about how new and robust fishing subsidy disciplines might be crafted. Given the sensitivities surrounding this issue, several prefatory caveats are in order: First, this outline should be understood as a preliminary thought-piece. It does not represent a fixed position taken by WWF in the debate, and should not be cited as such. Second, the elements of a possible solution suggested here should be read together as parts of an integrated whole. Third, this outline is presented from an environmentalist perspective. As a step towards a balanced solution, this outline includes some attention to development issues. Any insufficiencies in WWF s approach should be regarded as an invitation to dialogue rather than as an effort to promote a lop-sided outcome. Fourth, this outline focuses on the policy content of potential new rules; it is not an analysis of the legal and institutional mechanisms by which such norms might be made operational. WWF believes such mechanisms can be crafted, and intends to offer more technical analyses in the future. At the outset, this outline sets out the basic goals of a proposed outcome in some detail. Defining Success To qualify as a genuine success, new WTO disciplines on fishing subsidies must: Effectively prohibit the most harmful types of fishing subsidies; (ii) Allow and protect environmentally positive fishing subsidies as well as environmentally benign subsidies that foster economic and social development in developing countries; (iii) Subject all non-prohibited fishing subsidies to disciplines effectively requiring them to avoid contributing to excess fishing capacity, overfishing, or destructive fishing practices; (iv) Subject all non-prohibited fishing subsidies to effective surveillance, including through proactive monitoring and substantially improved WTO notification requirements; and (v) Provide mechanisms to guarantee that WTO fishing subsidies disciplines are administered with the appropriate participation of intergovernmental bodies and experts competent in fisheries management and protection of the marine environment WWF outline on WTO rules on fishing subsidies

2 In addition, new WTO fishing subsidies disciplines must be sufficiently comprehensive to cover all significant fishing subsidy programs. This means, among other things, that: The definition of fishing subsidies must include all governmental financial contributions to or on behalf of fishing interests, including, e.g., government-to-government payments for access to EEZ fisheries; 1 and New disciplines must avoid inappropriate distinctions or exclusions, such as more relaxed disciplines for domestic fisheries than for high seas fisheries. Specific Elements (1) A Red Box for Fishing Subsidies: (2) Subsidies that should be explicitly prohibited include: Subsidies which directly or indirectly support the operation of vessels fishing contrary to international, national, or sub-national laws, or in any fishery not subject to national or international management (including all IUU fishing); Subsidies to fishing in fisheries (or pertaining to fleets) not subject to a current capacity management plan developed, made public, and kept updated under the FAO International Plan of Action for the Management of Fishing Capacity; Subsidies designed in law or in fact to promote or allow adoption of fishing techniques that are contrary to prevailing laws or norms; Subsidies designed in law or in fact to increase capacity in a fishery (whether domestic, foreign, or international) that has previously been found to be overcapacity by a competent national or international authority, or which is determined to be fully exploited, overexploited, depleted, or recovering by the U.N. FAO, or which involves a stock determined to be critically endangered, endangered, or vulnerable by the IUCN Red List, or which has been determined by any other competent authority to be in a condition substantially equivalent to any of the foregoing; Subsidies which directly or indirectly support the operation of vessels not registered with any vessel registry (whether voluntary or mandatory) covering the fisheries or fleets within which the vessels operate, including any registry established by or pursuant to the U.N. FAO; 1 The definition of fishing subsidy should not, however, include management services or other traditionally public functions, such as regulatory enforcement. Nor should fishing subsidies be construed to include aquaculture or other forms of marine resource use beyond wild capture fishing. WWF outline on WTO rules on fishing subsidies 2

3 (2) A Green Box for Positive Fishing Subsidies: (a) Subsidies that should be protected from WTO challenge include: Subsidies to research activities (including data collection) aimed at facilitating or improving the management of fishery and other marine resources or at the development of fishing gear or techniques to protect and preserve marine resources and ecosystems or other aspects of the environment; Subsidies that are designed to and in fact do lead to the reduction of fishing capacity in over-capacity fisheries (e.g., retraining programs); Subsidies to the adoption of environmentally preferable fishing techniques, especially where transaction costs discourage their adoption or where such techniques are more expensive than less clean alternatives; Subsidies to fishers to assist in the adoption of technology or practices associated with new management regimes; Subsidies to stock assessments or other research activity in support of improving fisheries or ecosystem management; and (b) Additional provisions for developing countries should allow subsidies to the development of underdeveloped regions or fishing sectors, if applied in the context of effective fisheries management and in accordance with a current capacity management plan developed and made public under the FAO International Plan of Action for the Management of Fishing Subsidies. (c) Limits and disciplines: Nothing in the green box should allow subsidies otherwise prohibited by the red box. (ii) Members seeking the protection of the green box should be required to notify all qualifying programs in advance; protection should extend only to programs so notified and for which all other mandatory notifications are fully and accurately maintained. (iii) Periodic reviews of the operation of the green box should be mandatory, and should include participation by relevant intergovernmental bodies and expert individuals. (3) An Amber Box for Actionable Fishing Subsidies: (a) For all actionable fishing subsidies, current amber box definitions of adverse effects should be expanded to include increases in fishing capacity levels and changes in relative catch shares. 2 Recognition of these production-related impacts is critical to the effectiveness of any amber box disciplines for fishing subsidies. The tendency of the current amber box to address only export market distortions (and not market distortions felt at the level of production itself) is one of the essential shortcomings of the status quo. (b) Dark Amber Provisions: 2 A change in relative catch shares could be either an increase in the relative catch of the subsidized vessels or a decrease in the relative catch of vessels fishing in the same fishery or for like or competitive products. The focus on relative catch shares is meant to avoid debate over causal factors that might be associated with changes in absolute catch levels. With regard to the form of this proposed rule, assuming it is located within the body of the current SCM, the best means for broadening the concept of adverse effects would likely be through an expansion of the term serious prejudice as set forth in SCM Art Causality should be demonstrable by showing a temporal correlation between subsidies and changes in catch share (cf. SCM Art. 6.3(d)). WWF outline on WTO rules on fishing subsidies 3

4 Renewal and refinement of the now-lapsed SCM Art. 6.1 provisions for raising a presumption of serious prejudice would be of some benefit in the effort to discipline fishing subsidies. For example, it would be useful to clarify that the five percent test of Art. 6.1 to cover more effectively price supports that impact on fishing effort. (ii) More pressing, however, is the need for new dark amber provisions specific to fishing subsidies. Unless an enumerated exception applies (see below), a presumption of serious prejudice should be raised with regard to any subsidy of a kind that tends to increase or maintain the fishing capacity or level of fishing effort of a vessel or fishing fleet. While this concept should be left open-ended, it should be supplemented by an illustrative list which should include, inter alia : Subsidies to vessel construction, repair, or modernization; Subsidies to the acquisition, repair, or modernization of fishing gear; Subsidies to offset operating costs of fishing, including, e.g., fuel subsidies; Subsidies to maintain or increase fishing labor supply; and Subsidies in the form of government-to-government payments for access to EEZ fishing grounds. The presumption of serious prejudice would be rebuttable through an affirmative showing that a subsidy did not lead to an increase in fishing capacity and did not lead to an adverse change in the relative shares of fish catches within the relevant fisheries. (iii) Exceptions: In addition to protections afforded by the green box, but without reducing the applicability of red box prohibitions, serious prejudice should not be presumed where: Subsidies are applied in the context of a fishery that is considered underexploited by the U.N. FAO; Subsidies are specific to small-scale or artisanal fishers, and are consistent with a current capacity management plan developed and made public under the FAO International Plan of Action for the Management of Fishing Subsidies; All subsidies to a given fleet or vessels in a given fishery total less than 5% of the landed value (at first point of sale) of fish caught by the subsidized vessels in a given year; In the case of foreign access payments, payments are contingent upon enforceable measures to ensure that any transfer of capacity is consistent with a current capacity management plan for the host fishery, developed and made public under the FAO International Plan of Action for the Management of Fishing Subsidies. Subsidies are adjustment assistance awarded to fishermen suffering from contractions in allowable fishing due to conservation measures or natural disasters, so long as such assistance is temporary, is contingent on avoiding increases in fishing capacity or effort in the effected fishery, and is consistent with a current capacity management plan developed and made public under the FAO International Plan of Action for the Management of Fishing Subsidies. WWF outline on WTO rules on fishing subsidies 4

5 (4) Surveillance and Notification (a) Improved notification requirements: Notification requirements applicable to fishing subsidies including both green box notifications (see above) and any notifications required under SCM Art. 25 or analogous language should require detailed reporting about the actual uses of the subsidies, including identification of specific enterprises receiving subsidies, identification of how subsidies are applied, identification of fisheries in which subsidized fishing takes place under a given subsidy program, and subsidy amounts on a per vessel, per fleet, and per fishery basis. (ii) Notification requirements should be made enforceable. Failure to notify a subsidy should have consequences, such as: Liability for monetary fines; Application of a presumption of serious prejudice and raising of the evidentiary bar for proving the absence of adverse effects; Automatic application, where adverse effects are found, of a recommendation to remove a previously unnotified subsidy (rather than mere removal of adverse effects); and/or Where a failure to notify is not remedied, liability to countervailing measures without a required showing of adverse effects. (b) Other monitoring and reporting: In addition to periodic reviews of the operation of the green box (see above), periodic reviews of WTO fishing subsidy disciplines generally should be required. Specific goals of such reviews should include amending or refining the illustrative lists associated with new disciplines. (ii) All reviews relating to fishing subsidies should be carried out with the participation of appropriate experts and intergovernmental organizations with competence in fisheries management and marine conservation. (5) Institutional Mechanisms New WTO disciplines for fishing subsidies should include explicit provision for the participation of external intergovernmental organizations and individual experts with competence in fisheries management and marine conservation in disputes and WTO reviews involving fishing subsidies. WWF outline on WTO rules on fishing subsidies 5