Healthy Fisheries, Sustainable Trade: Crafting New Rules On

HEALTHY FISHERIES, SUSTAINABLE TRADE: CRAFTING NEW RULES ON FISHING SUBSIDIES IN THE

WORLD TRADE ORGANIZATION

OUTLINE OF WWF’S PROPOSALS

JUNE 2004

When trade ministers from around the world met in November 2001 to launch the current round of WTO trade talks, they instructed WTO negotiators to “clarify and improve” WTO subsidy disciplines with regard to fishing subsidies.[1] In order to contribute to these negotiations, WWF has prepared a report, Healthy Fisheries, Sustainable Trade: Crafting New Rules on Fishing Subsidies in the World Trade Organization, to provide a detailed overview of the issues from the perspective of a nongovernmental organization dedicated to the conservation and sustainable use of the world’s living resources.

The following outline - published as a companion to WWF’s full-length report—summarizes WWF’s

specific proposals for a successful outcome to the fishing subsidies talks.2[2] This outline assumes substantial familiarity with current WTO subsidies disciplines. Background information, along with a detailed explanation of the proposals summarized below, is set forth in WWF’s full report.

Given the sensitivities surrounding the fishing subsidy negotiations, WWF offers the following caveats to the views expressed below:

• First, this outline should be understood as a well-developed but still early contribution to the fishing subsidies talks. Although it can be taken as WWF’s position as of June 2004, WWF reserves the right to develop and alter these positions as the negotiations progress.

• Second, the elements of the 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 toward a balanced solution, however, this outline also 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 lopsided outcome.

• Fourth, this outline assumes that new disciplines on fishing subsidies will be located within the current WTO Agreement on Subsidies and Countervailing Measures. WWF believes, however, that consideration should be given to locating new disciplines in a separate multilateral WTO agreement.

• Fifth, this outline does not contain certain alternative proposals included in WWF’s full report, and thus must be seen as an incomplete version of WWF’s current views.

Defining Success

As discussed in detail in WWF’s full length report, WWF believes that new WTO disciplines on fishing subsidies can only qualify as a genuine success if they

(i) achieve a true “win-win-win” for trade, environment, and development, without requiring the WTO to exceed its proper authority and competence;

(ii) are comprehensive, covering all fishing subsidy programs affecting wild-capture fisheries;

(iii) forbid harmful fishing subsidies while accommodating beneficial ones, including by

§  effectively prohibiting the most harmful types of fishing subsidies;

• allowing and protecting fishing subsidies that promote the achievement of sustainable fisheries;

• subjecting all nonprohibited fishing subsidies to effective disciplines requiring them to avoid contributing to excess fishing capacity or overfishing;

(iv) take account of the special needs of developing countries, and particularly of those with communities dependent on the fisheries sector;

(v) promote the administration of fishing subsidies programs on a fisheries-specific basis, so that proper account can be taken of the factors that most commonly distinguish harmful programs from those that are beneficial or benign;

(vi) improve transparency and accountability by subjecting all nonprohibited fishing subsidies to effective surveillance, including through proactive monitoring and substantially strengthened WTO notification requirements; and

(vii) 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, and with improved public transparency[3]

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Specific Elements

(1) Defining “fishing subsidies”

New WTO fishing subsidies disciplines must be sufficiently comprehensive to cover all significant fishing subsidy programs. This means, among other things, that

(a) the definition of “fishing subsidies” should include all subsidies that confer a commercial benefit on individuals or enterprises engaged in fishing, even if the subsidy is not granted directly to them including all governmental financial contributions to or on behalf of fishing interests, including, e.g., government-to-government payments for access to EEZ fisheries;

(b) new disciplines must avoid inappropriate distinctions or exclusions, such as more relaxed disciplines for “domestic” fisheries than for “high seas” fisheries;

(c) public “fisheries management services” should not be considered “subsidies” for the purposes of new WTO disciplines;

(d) the “fishing industry” should include all “wild capture” fisheries; and

(e) subsidies to ports, processors, transporters, marketers, or other actors should be considered “fishing subsidies” if they benefit fishing enterprises in accordance with existing SCM jurisprudence for “pass through” subsidies.

(2) A red light to prohibit the most harmful fishing subsidies

(a) Scope

Subject to certain exceptions enumerated below, and to provisions for the special and differential treatment for developing countries, the following fishing subsidies should be explicitly prohibited by new WTO “red light” provisions:

(i) Subsidies that, by nature of their design, are likely to contribute to increasing or maintaining fishing capacity or effort, such as subsidies for

• fishing vessel construction or repair

• vessel modernization or gear acquisition/improvement

• maintaining employment in the fishing sector

• transfer of capacity to foreign or high seas fisheries, including through joint ventures

• access to foreign fisheries

• research and development of fishery technology

• subsidies contingent on fishing

• fuel subsidies

• bait or ice provided in kind

• subsidies to marine insurance

• subsidies to other operating costs

• promises to reimburse vessel owners for fines or impoundments imposed by foreign authorities

(ii) Subsidies that contribute to “illegal, unreported, or unregulated” fishing, or activities that

contribute to IUU fishing[4]

(NOTE: The definition of “IUU fishing” for purposes of new WTO disciplines should be based on
¶¶ 3.1–3.4 of the FAO’s International Plan of Action on IUU fishing.)[5]

(iii) Subsidies in support of increasing or maintaining levels of domestic fish supplies, such as price supports paid to domestic fleets[6].

Note that the foregoing prohibitions could be achieved through new legal language in the body of the SCM in combination with illustrative annexes.

As with the current red box for export and domestic supply subsidies, prohibited fishing subsidies should be exempted from the specificity requirement of Article 1.2 of the SCM.[7]

(b) Exceptions to the prohibitions

Given the broad nature of the prohibitions proposed in ¶ 2(a), and in light of the legitimate role subsidies can play in promoting transitions to sustainable fisheries and economic development, the following classes of subsidies should be exempt from the foregoing red light prohibitions[8]:A N X 1

2 b

• short-term emergency relief and adjustment—i.e., temporary assistance to fishers (or their families) suffering significant loss of income as a result of reductions in fishing due to conservation measures or unforeseeable natural disasters;

• certain foreign access payments—i.e., government-to-government payments for access to EEZ fisheries, provided such fisheries are not “patently at risk” or “patently undermanaged” (see definitions under ¶ 2(c)), and further provided that access agreements are legally conditioned on compliance with prevailing national and international laws and norms; and

• certain subsidies to artisanal fishing—i.e., subsidies to small-scale artisanal fishers active exclusively in developing-country fisheries that are not “patently at risk” or “patently undermanaged.”

(c) Definitions of “patently at risk” and “patently undermanaged” fisheries

WWF has developed these two terms in order to take rudimentary consideration of the fisheries context in which subsidies are given, without asking the WTO to make environmental judgments.

(i) Definition of a “patently at risk” fishery: In the context of fishing subsidies disciplines, the general notion of an “at risk” fishery is one in which the perilous condition of fish stocks, overcapacity of fleets, or insufficiency of management renders certain classes of subsidies more likely to be harmful than they would be in a fishery that is not at risk. In order to avoid having the WTO make environmental judgments, the “patently at risk” concept is significantly underinclusive. In the context proposed here, a fishery would be considered “patently at risk” if any of the following conditions apply:

• the status of exploitation is “not known or uncertain” or is “overexploited,” “depleted,” or “recovering” according to the FAO;

• the status of the target species or stock is “data deficient,” “vulnerable,” “endangered,” or “critically endangered” on the IUCN Red List;

• the status of exploitation or of the target species is deemed equivalent to the foregoing by a competent regional or international authority having jurisdiction over the fishery; or

• total fishing capacity in the fishery has not been quantitatively assessed by a competent authority with jurisdiction over the fishery, and such assessment included in a current capacity management plan submitted in accordance with the FAO International Plan of Action for the Management of Fishing Capacity, or such a current quantitative assessment has been performed and the fishery has been found to be at or above full capacity.

(ii) Definition of a “patently undermanaged fishery”: Because of the significant underinclusiveness of the “patently at risk” concept, certain classes of subsidies should be excluded from red light exceptions if the fishery lacks any of certain

“objective indicia of minimum adequate management.”[9] Determination of whether a fishery should be considered “patently undermanaged” will require authoritysharing mechanisms to involve appropriate fisheries management and marine conservation authorities in the administration of new WTO fishing subsidy disciplines.

(d) Prerequisites and limits to red light exceptions: Subsidies qualifying for exemption from the new red light prohibitions should remain subject to continuing discipline, as follows:

• No exceptions should be allowed to the prohibition against subsidies that contribute to IUU fishing activities.

• Subsidies should qualify for exemption only if notified in advance to the WTO in accordance with special notification provisions, and if all other applicable WTO notification requirements are fully and accurately satisfied.

• Subsidies should qualify for exemption only if they are legally contingent on consistency with an existing capacity management plan as called for under the FAO’s International Plan of Action for the management of fishing capacity.[10]

• All exempted subsidies should remain subject to current Article 3 prohibitions on export and domestic supply subsidies.

• All exempted subsidies should remain actionable under the current amber light if they cause “adverse effects” within the traditional meaning of SCM Articles 5–6.

• “Emergency relief” subsidies should be automatically subject to dark amber provisions specific to fishing subsidies (see ¶ 4(c)).

• All exempted subsidies should be subject to special reporting requirements and periodic review.

(3) A green light to allow environmentally positive fishing subsidies

(a) Scope

Subject to certain conditions enumerated below, the following classes of fishing subsidies should be protected from challenge under most current or future WTO subsidy rules: • subsidies to research activities (including data collection) aimed at 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;

P P E N D I X 1

2 b – 3 a

• subsidies to the adoption of environmentally preferable fishing gear, techniques, or practices (including, for example, in conjunction with the establishment of marine protected areas or no-take zones), especially where transaction costs discourage their adoption or where such techniques are more expensive than less “clean” alternatives;

• subsidies to assist fishers in the adoption of fishing gear or techniques necessary to meet safety or sanitary standards; and

• subsidies that are designed to and in fact do lead to the reduction of fishing capacity in overcapacity fisheries (e.g., buy-back programs, license retirements, retraining programs, etc.). (Note, however, the special rules proposed for capacity-reducing subsidies in ¶ 3(c).)

(b) Prerequisites and limits to all green light subsidies

All subsidies qualifying for green light protection should be subject to the following

disciplines:

• Nothing in the green box should allow export or domestic supply subsidies otherwise

prohibited by the current red box (SCM Article 3).

• All green light subsidies should remain subject to new red light prohibitions on

subsidies to IUU fishing (see ¶ 2(a)).

• All green light subsidies should remain subject to amber light challenge if they cause “serious adverse trade effects” (i.e., a very high standard of injury). (Note, however, that this threshold might be relaxed in the case of subsidies particularly likely to have adverse effects on developing countries—see ¶ 6 of this Appendix.)

• Subsidies should qualify for green light protection only if notified in advance to the WTO, in accordance with special notification provisions.

• Subsidies should qualify for green light protection only if they are legally contingent on consistency with a current capacity management plan as called for under the FAO’s International Plan of Action for the management of fishing capacity[11].

• All green light subsidies should be required to contain explicit legal conditions requiring recipients to conduct their fishing activities in full compliance with all applicable laws, regulations, and reporting requirements, whether domestic, foreign, or international.

• All green light subsidies should be subject to special reporting requirements and periodic review.

(c) Additional disciplines on “capacity reducing” subsidies

Many capacity-reducing subsidies fail to meet the goal of lowering fishing capacity, and some even wind up contributing to the problem they are intended to resolve. For this reason, capacity-reducing subsidies qualifying for green light treatments should be:

• narrowly defined for purposes of the green light;

• subject to effective time limits and to rules preventing their repetitive application in a given fishery;

• conditioned on guarantees against export of capacity;

• conditioned on guarantees against “leakage” and “input stuffing”;

• conditioned on specific monitoring and evaluation requirements;

• subject to mandatory withdrawal upon a showing of actual increases in capacity in the relevant fleet or fishery; and

• conditioned on a capacity-management plan meeting certain formal criteria, similar to those developed for the patently undermanaged” concept.