World Trade Organisation bans harmful fisheries subsidies

by Thomas Jensen

WTO members commit to more sustainability

This article was featured in Eurofish Magazine 5/2022

After over 20 years of effort, the 164 WTO member states have come to an agreement on fisheries subsidies. By signing the agreement, the states commit themselves to prosecuting illegal fishing and removing subsidies for fleets if the fish stocks they exploit are endangered. This means that, for the first time, doing business at the expense of nature will be directly treated as price dumping that can be prosecuted by the WTO courts of arbitration.

The oceans accommodate 80 percent of biodiversity and feed billions of people. But around 34 percent of global fish stocks are overfished according to the FAO. The distribution of this valuable marine protein is already the subject of dispute. This makes the work of people who live off fishing more difficult and puts the food security of entire nations at risk. Worldwide, around 39 million people earn their living from catching fish, and fish accounts for nearly 20% of the animal protein needs of 3.3 billion people. Because oceans will continue to play an indispensable role in supplying food in the future, we have a responsibility to preserve these resources for future generations. However, this is difficult if basic market mechanisms are undermined by fisheries subsidies. According to the law of supply and demand, decreasing fish stocks should mean that the price of fish rises and demand reduces, making fishing unprofitable and preserving fish stocks. However, state subsidies ensure that fishing is assiduously continued contrary to all economic logic even if it is not profitable.

Fisheries subsidies globally are estimated at 14 to 54 billion US dollars per year. According to a Canadian study from the year 2019, governments spend around 35 billion US dollars on fisheries subsidies annually, of which 22 billion dollars has “harmful effects”. If these figures are accurate, taxpayers are subsidising more than one third of global fisheries costs. Some 36 percent of subsidies for fisheries come from China and the EU, followed by Japan, South Korea, Thailand and the USA. Fuel subsidies are the main way fishing is subsidised. Some of the subsidies go towards diesel discounts for vessels and some for giving fishers fuel tax or VAT exemptions. This enables them to continue to head out to sea and to fish outside of their national waters. Financial aid for building new fishing ­vessels and associated fishing technology is also common practice in many countries.

Subsidies cover up negative economic developments

According to cautious estimates, since the start of the ­millennium at least 400 billion USD has been spent on harmful subsidies, with 60% of this sum accounted for by prosperous countries. But even here there are serious inequalities, since an estimated 81% of the money goes to large industrial fishing vessels. Environmental groups estimate that subsidies in some countries could account for half of the income of large industrial vessels. Without this financial aid, deep-sea fishing would probably often in fact be unprofitable. Compared to the amount of harmful subsidies, the proportion of financial aid that has a positive effect is relatively small. It goes to, for example, the acquisition of more selective, sustainable fishing gear.

Fisheries subsidies are also quite standard in the EU. The small organisation Our Fish claimed in a 2018 study (“Climate Impacts & Fishing Industry profits from EU Fuel Tax Subsidies”) that EU fishers consume around 2.3 billion litres of marine diesel each year and generate almost 7.3 million tonnes of CO2. Despite these effects on the climate, the EU subsidises fisheries with up to 1.5 billion euro, mainly through tax exemptions. As part of the EU Commission’s Green Deal, the Energy Tax Directive is now to be reviewed and adjusted in line with energy and climate policy. Environmental groups, however, are criticising the fact that the EU Commission still approved generous financial aid in September 2018 for the purchase of new fishing trawlers in its outermost regions. These include, among others, Guadeloupe, French ­Guiana, La Réunion, Mayotte, Martinique and
St. Martin, as well as Madeira and the Azores.

Although only a few profit from harmful fisheries subsidies, we all pay the price for the ­overfishing of the seas. In 2017, the World Bank estimated that, if it was really sustainably operated, the fishing industry could bring in around 83 billion US dollars more per year. Removing harmful fisheries subsidies would lead to an increase in global fish biomass, by 2050 catch quantities could increase by 12.5%.

The harmfulness of many subsidies is due to multiple effects. Above all, the promotion of overcapacities in the fishing industry, which are imbalanced compared to fish stocks in the world’s seas, has a negative effect. This can be seen in particular in unsustainable catch quantities, which often exceed the quantities recommended by scientists. The increase in vessel capacity as a result of subsidies also has a negative effect on the climate, since CO2 emissions also increase with the duration and length of fishing trips. Subsidies can even destroy livelihoods, as small-time fishers find it particularly difficult to compete with the subsidised fisheries fleets.

The UN sustainability goals are a commitment

This information is generally not new, since the harmfulness of some subsidies has been known for decades. The pressure to finally do something about this has since increased further, influenced by current developments. Global warming, which is driving some boreal fish stocks towards the poles, is the most important. Small coastal fishers in poorer countries, for whom fishing is often indispensable, are the ones who suffer most due to these changes. Fishing industry methods have also changed. Today they are largely dominated by highly technologised commercial fleets that operate thousands of kilometres from their native coasts. The deep-sea fleets of the EU countries comprise around 250 vessels, and those of the US around 300. This sounds like a lot, but is actually very few compared to the figures for China. Allegedly, only 2,700 vessels that fished far from the coast were officially registered in China in 2019. These figures are however doubted by the London Overseas Development Institute, whose experts estimated China’s distant-water fishing fleet at 17,000 fishing vessels in 2020.

The Sustainable Development Goals (SDG) of the United Nations are also increasing the pressure to act to solve these problems. In SDG 14.6, it is explicitly stated that all forms of fisheries subsidies that contribute to overfishing, IUU fishing and fishing fleet overcapacities should be banned by 2020. This is intended to take reasonable account of the interests of developing and less developed countries. The negotiations on fisheries subsidies fall into the area of responsibility of the World Trade Organisation (WTO), which was founded in 1995 as the successor organisation to the GATT, with an expanded remit. A mammoth task, since the trust of many states in neoliberally oriented market mechanisms, which are a core philosophy of the WTO, has been shattered since the financial crisis of 2008. The WTO’s work is also made harder by the consensus principle for resolutions, according to which the voice of each country holds the same weight, whether it is a small island state or the powerful USA. Because this entails endless discussions with little decisiveness, very many WTO members – including the EU – avoid it by coming to bilateral agreements with other states. The risk would therefore be great that the negotiations on fisheries subsidies would also lead to endless palaver without any tangible successes.


Two decades of tough negotiations

It really was a long and difficult road to reach an agreement. It took more than 20 years until the responsible ministers from all 164 WTO member countries could sign the agreement on this matter on 17 June 2022. The WTO negotiations on fisheries subsidies began in 2001 at the Minister’s Conference in Doha with the declared goal of securing the health of the oceans, fair global trade and food security and greater equity when it comes to the common good of fish. According to the United Nations, by 2020 the WTO was to reach an agreement that, among other matters, uniformly regulated the problem of fisheries subsidies. This schedule ultimately could not be complied with. One reason for this was that the political wrangling over small details took years. Another was that the coronavirus pandemic caused the 12th Ministerial Conference to be postponed. However, there was movement in the tough negotiations in mid-June 2022. In a marathon session that ended in the early hours of 17 June approaching 5:00 AM, the ministers in Geneva finally acceded to an agreement on limiting harmful fisheries subsidies.

Not all of them, however. Some subsidy areas still had to be left out in order for all 164 WTO members to reach a tolerable compromise. Nevertheless, the consensus does represent progress. States that allow or even promote IUU fishing can now be prosecuted before WTO courts of arbitration. Governments will also be required to report their fisheries subsidies to the WTO in future. Compliance with the agreements – with the option to strengthen them – is to be reviewed every 5 years. All WTO states are requested to negotiate further on the missing details in the agreement and to close the loopholes. Ngozi Okonjo-Iweala, the Director-General of the WTO, even effusively described the agreement negotiated as “the greatest advance of all time”. The WTO has shown that it can react to the challenges of the times. The specifications apply exclusively to fishing at sea and not to aquaculture and inland fisheries.

Regular reports on the state of fish stocks

Originally the agreement aimed to eliminate overcapacities in ­fishing fleets and to stop overfishing. However, these areas were largely removed from the draft agreement in order to reach as wide a consensus as possible among the WTO states. The final version bans harmful subsidies that support IUU fishing as well as the exploitation of overfished fish stocks (regular reports must be submitted on the state of stocks exploited by fishing). Subsidies for fisheries in marine areas that are not managed by regional fisheries management organisations were also banned. All WTO states are obliged to conscientiously and promptly implement the framework set out and to continue to negotiate the details that are still outstanding. Further recommendations for a more comprehensive agreement are to be introduced as soon as the next ministerial conference. The members have been given a deadline of four years after the agreement enters into force to agree on corresponding regulations. Developing countries are to be supported in converting their fisheries according to the specifications of the agreement negotiated. This primarily means more generous deadlines for implementation and more flexibility in financing.

Although the agreement still contains numerous open questions and does not solve all problems with regard to fisheries, it represents a decisive step in the direction of greater sustainability. This advance does merit the adjective “historic”, since it is the first agreement between WTO members with ecological sustainability rather than economic interests at its heart. The fisheries agreement represents an important step in the direction of sustainable exploitation of marine resources, healthier oceans and preserving biodiversity for people and nature. Also, profiting at the expense of nature can now for the first time be treated as price dumping and prosecuted by WTO courts of arbitration.
Developing countries demand longer
transition periods

Despite these successes, there has of course been criticism of the agreement. It concerns in particular the exemption regulations, as the WTO negotiators had to slim down the draft text where appropriate because otherwise the negotiations threatened to break down. The main deletions were with regard to the subsidies for marine diesel and the VAT exemptions that are standard in many industrialised countries. The passages regarding this are not found in the final version of the agreement because the more prosperous countries pushed their interests and obtained exemptions to their advantage. Several developing countries are therefore accusing them of disadvantaging small fisheries in the Global South. India above all insisted to the WTO that the industrialised countries stop their fisheries subsidies and stop fishing the oceans empty in freely accessible zones. It claims that the WTO agreement is imbalanced, because it makes it more difficult for poorer coastal inhabitants to officially register as fishers and to invest in sustainable catch methods. The approval procedures for fisheries as well as the reporting obligation regarding the state of fish stocks are claimed to require a “crazy amount of effort” and to be much too complicated for developing countries. The required monitoring of fish stocks is said to represent an almost ­insurmountable task for island states such as Mauritius, whose coastal waters are larger than those of Germany and France combined. This is why, according to critics, significantly longer transition periods are necessary, so that administration and fisheries management can be equipped accordingly and the extended requirements can thus actually be implemented.

Some developing countries are also annoyed that the fuel vouchers given by them to small-scale fishers are classified as a “specific subsidy” and are therefore not allowed according to the agreement. They want their fishers to be able to fish further out to sea with their subsidised fuel and not only directly by the coast. According to the regulations of the agreement, this must now be registered at the WTO and there is significant doubt that it will be approved. In contrast, the VAT exemption for marine diesel practised in the USA or the EU is permitted as a “non-specific subsidy”. It is therefore no surprise that this practice is viewed as unfair by many developing countries.

National egos hinder rapid progress

On the other hand, some industrialised states accuse other countries of unjustifiably claiming the status of a developing country because of the associated benefits, less stringent requirements and exceptions. While the World Bank has unambiguous criteria for developing and industrialised countries, in the WTO each country can decide for itself what group it belongs to. This strange regulation best explains why the economically strong China, with its enormous deep-sea fleet and the most fisheries subsidies ­globally still claims the status of a developing country for itself. This is particularly strongly criticised by the USA, and the EU is also demanding that China voluntarily waives any preferential treatment. To change this situation, however, a reform of the practice of assignment would be required. The USA has already suggested a catalogue of binding criteria for the status of a developing country. However, it has little prospect of success, because it would mean that not only China, but also some other countries would lose their status and the associated advantages.

Great celebrations over the agreement negotiated would in fact be premature, because the real work has only just begun with its signing. While the rapid implementation of the agreements is publicly required and there is a push to eradicate the remaining weak points, almost all of the parties are secretly continuing to pursue their own agendas. For example, Piyush Goyal, India’s Minister of Commerce and Industry, is demanding that the rights of Indian fishers “must not be restricted in any way”. According to him, it is primarily the industrialised countries that should come to a deal, because they bear the main responsibility for the decimation of fish stocks in the oceans. The EU is also claiming exemptions for itself. It would like to support fishers who contribute to the stabilisation of fish stocks with subsidies, regardless of whether the measures are shown to actually have an effect in the end. The problems with fisheries subsidies therefore appear to remain unsolved by the WTO agreement.

Manfred Klinkhardt

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