Fisheries Economics Lecture Notes PDF

Fisheries economics Dirk Zeller Sea Around Us – Indian Ocean  Fisheries economics Basic introduction and overview of key topics in fisheries economics, with emphasis on globally important aspects Ex-vessel prices Cost of fishi...

Fisheries economics Dirk Zeller Sea Around Us – Indian Ocean  Fisheries economics Basic introduction and overview of key topics in fisheries economics, with emphasis on globally important aspects Ex-vessel prices Cost of fishing Maximum Economic Yield Fisheries subsidies Labour issue Prof Rashid Sumaila, University of British Columbia 2/62  Ex-vessel prices I FAO: Processed and product fish prices Not ex-vessel prices, i.e., prices that fishers receive, first-point-of-sale But: Management and front-line economics, ex-vessel prices are more relevant as they motivate fishing Processed prices higher level relevance as they account for value adding through processing Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51  Ex-vessel prices I FAO: Processed and product fish prices Not ex-vessel prices, i.e., prices that fishers receive, first-point-of-sale But: Management and front-line economics, ex-vessel prices are more relevant as they motivate fishing Processed prices higher level relevance as they account for value adding through processing Various scattered, incomplete datasets existed on ex-vessel prices Combined these, including via collaborations Added rule-based decision process to derive estimates of missing prices Matched prices to Sea Around Us catch data structure Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51 4/62  Ex-vessel prices I Raw ex-vessel data >31,600 prices for 1950-2002, for 35 countries and 875 taxa Rule-based decision process 3-D matrix Taxon Year Country Each cell in matrix is price for a given taxon in a given year in a given country Used neighboring cell information and ‘logical’ averages (e.g., within countries by related taxa, and between neighboring countries with similar socio-economics status) to derive price estimates for empty cells Refined and updated regularly Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51  Ex-vessel prices I Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51 6/62 Ex-vessel prices I Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51  Ex-vessel prices I Nominal price: what you pay for something 2024: Bag of chips $4.00 2001: Bag of chips $1.50 If adjust the 2001 nominal price ($1.50) for inflation between 2001 and 2024, the adjusted price may have remained the same? Thus, real price of the bag of chips (i.e., after accounting for inflation) might have been $3.00 or $4.00 or even $5.00 in 2001 Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51 8/62  Ex-vessel prices I Landed value Combined the ex-vessel prices with the 2002 FAO landings data as spatially allocated by Sea Around Us Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51  Ex-vessel prices I Landed value Sumaila et al. (2007) Journal of Bioeconomics 9: 39-51 10/62  Ex-vessel prices II Updated to 2006 with more raw data, and improved the estimation method Swartz et al. (2013) Environmental Resource Economics 56: 467-480  Ex-vessel prices II Combined the ex-vessel prices with the 2006 FAO landings data as spatially allocated by Sea Around Us Swartz et al. (2013) Environmental Resource Economics 56: 467-480 12/62  Ex-vessel prices III Overall, Tai et al. (2017) is best source to read….. Increased raw price data to >60,000 1950-2010 Disaggregating prices for low-priced species from reduction fisheries (fish meal/fish oil) Applied to reconstructed catch data Tai et al. (2017) Frontiers in Marine Science 4: 363  Ex-vessel prices III Tai et al. (2017) Frontiers in Marine Science 4: 363 14/62 Ex-vessel prices – landed values  Cost of fishing Variable costs (operating costs): Vary with level of fishing activity Fuel Crew salaries Repair and basic maintenance of vessel and gear Mooring costs “Running costs”, such as ice or on-board processing Fixed costs: Do not vary with level of activity Capital value of vessel (amount invested in the vessel) Associated capital costs - Loan interest (opportunity cost of the capital) - Depreciation (replacement cost for normal wear and tear) - “Sunk” costs if not malleable capital Lam et al. (2011) ICES Journal of Marine Science 68(9): 1996-2004 16/62  Cost of fishing Lam et al. (2011) ICES Journal of Marine Science 68(9): 1996-2004 18/62 Cost of fishing Lam et al. (2011) ICES Journal of Marine Science 68(9): 1996-2004  Cost of fishing Australia & NZ Lam et al. (2011) ICES Journal of Marine Science 68(9): 1996-2004 20/62 Cost of fishing Dominated by small-scale Australia fishers & NZ Lam et al. (2011) ICES Journal of Marine Science 68(9): 1996-2004  Impact of cost on MSY concept What shape does cost/effort curve take (variable costs)….? Revenue ($) Effort 22/62  Impact of cost on MSY concept Cost Revenue ($) Effort 24/62  Impact of cost on MSY concept In a largely open-access, un-constrained fishery, fishing effort (and fleets) would grow and grow…. until Cost Revenue ($) Effort  Impact of cost on MSY concept … value of catch = cost of going fishing… Which is where? Cost Revenue ($) Effort 26/62  Impact of cost on MSY concept Open access or bio-economic equilibrium (zero-sum game) Cost Revenue ($) “Help !!!” Effort  Impact of cost on MSY concept Help !!!!: What is the immediate reaction from decision makers and politicians? 1. Force the fishers to reduce effort (“simply fish less”), reduce # boats? 28/62  Impact of cost on MSY concept Help !!!!: What is the immediate reaction from decision makers and politicians? 1. Force the fishers to reduce effort (“simply fish less”), reduce # boats? 2. Help the fishers stay afloat financially How?  Impact of cost on MSY concept Help !!!!: What is the immediate reaction from decision makers and politicians? 1. Force the fishers to reduce effort (“simply fish less”), reduce # boats? 2. Help the fishers stay afloat financially How? Subsidies What is a subsidy?  Impact of cost on MSY concept Help !!!!: What is the immediate reaction from decision makers and politicians? 1. Force the fishers to reduce effort (“simply fish less”), reduce # boats? 2. Help the fishers stay afloat financially How? Subsidies: Government use tax dollars directly (pay) or indirectly (not charge for something) to support an industry or an activity  Impact of cost on MSY concept Open access or bio-economic equilibrium (zero-sum game) Cost Revenue ($) Subsidies Effort 32/62  Impact of cost on MSY concept Open access or bio-economic equilibrium (zero-sum game) Cost Subsidy effect Revenue ($) Cost* Effort Increase effort  Impact of cost on MSY concept Open access or bio-economic Subsidies (most) = encourage overfishing equilibrium really, really, really bad economics, (zero-sum game) bad policy (except for politicians), bad for stock Cost Subsidy effect Revenue ($) Cost* Effort  Impact of cost on MSY concept Something good for sustainability in the fisheries economics cost story… Revenue Cost Profit Revenue ($) Cost Effort 36/62  Impact of cost on MSY concept Maximum Economic Yield MEY Total cost Profit Revenue ($) Effort  Impact of cost on MSY concept Maximum Economic Yield: maximize profit not catch Generally at around 60-70% of MSY MEY Total cost Revenue ($) Effort  Fisheries subsidies Much work done by Sumaila and colleagues on subsidies: Globalized and integrated into Sea Around Us data system Skerritt et al. (2023) Mapping the unjust global distribution of harmful fisheries subsidies. Marine Policy 152: 105611 Sumaila UR, Ebrahim N, Schuhbauer A, Skerritt D, Li Y, Kim HS, Mallory TG, Lam VWL and Pauly D (2019) Updated estimates and analysis of global fisheries subsidies. Marine Policy 109: 103695 Sumaila UR, Lam V, Le Manach F, Swartz W and Pauly D (2016) Global fisheries subsidies: An updated estimate. Marine Policy 69: 189-193 Sumaila UR, Khan A, Dyck A, Watson R, Munro R, Tyedmers P and Pauly D (2010) A bottom-up re-estimation of global fisheries subsidies. Journal of Bioeconomics 12: 201-225. Sumaila UR and Pauly D, editors (2006b) Catching more bait: A bottom-up re- estimation of global fisheries subsidies (2nd version). Fisheries Centre Research Reports 14(6) University of British Columbia Fisheries Centre, Vancouver. 115 p  Fisheries subsidies Many items/activities are subsidized by taxpayers directly or indirectly With respect to influence on sustainability, categorized into: Harmful (bad) or capacity-enhancing: Include all forms of capital inputs and infrastructure investments from public sources that reduce cost or enhance revenue, increase fishing capacity/power, or encourage overfishing. Beneficial (good): Programs that lead to investment in natural capital assets to a social optimum, i.e., by maximizing economic rent. They enhance the growth of fish stocks through conservation, and the monitoring of catch rates through control and surveillance measures to achieve a biological optimal use. Ambiguous (ugly): Programs that have the potential to lead to either investment or disinvestment in the fisheries resource. These programs can lead to positive impacts such as resource enhancement programs or to negative impacts such as resource overexploitation. 40/62  Harmful subsidies I Boat construction, renewal and modernization programs: - Include lending programs below market interest rates and geared toward fishing vessel construction, renewal and modernization such as loan guarantees, restructuring and other lending programs. This subsidy type also involves support programs to enhance fishing technology from public funds for fishing enterprises and firms. Fishery development projects and support services: - Geared towards fisheries enterprise development, such as the provision of institutional support and services, the provision of baits, and search and rescue programs. The nature and sources for such programs are diverse and includes development grants and concession credit either from national sources or through bilateral and multilateral assistance programs. Fishing port construction and renovation programs: - Include the use of public funds toward the provision of fish landing site infrastructures, port improvements for fishing fleets, harbor maintenance, jetty and landing facilities and low or free moorage for fishing fleets. Marketing support, processing and storage infrastructure programs: - Geared towards market interventions such as export promotion, value addition and price support. They also include infrastructure investment programs from public funds toward processing and storage of fishery products and fish auction facilities.  Harmful subsidies II Tax exemptions: - Subsidy programs for investment in the fisheries sector that have a direct impact on profits such as rebates and other government-funded programs including: (a) income tax deferral for fishers; (b) crew insurance; (c) duty free imports of fishing inputs; (d) vessel insurance programs, and (e) other economic incentive programs. Foreign access agreements: - Entails a combination of one of the following: (a) explicit monetary transfer; (b) the transfer of fishing technology, (c) government negotiates access, and (d) the provision of market access in another fishing country. Fuel subsidies: - Fuel tax rebates or lower fuel prices for agricultural diesel are a subsidy towards lower operating cost (fuel = 25% to 80% of operational cost). 42/62  Beneficial subsidies Fisheries management programs and services: - These are subsidy programs to ensure that publicly-owned fisheries resources are appropriately managed and that regulations are enforced. Sub-categories include: (a) monitoring, control and surveillance programs, (b) stock assessment and resource surveys, (c) fishery habitat enhancement programs, (d) implementation of MPAs, and (e) stock enhancement programs. Fishery research and development (R&D): - These are subsidy programs that are geared towards improving methods for fish catching and processing, and other strategies with minimal negative impact on the fishery resources and marine ecosystems, through scientific and technological breakthroughs. Sub-categories include: (a) fishery frame surveys, (b) oceanographic studies, (c) fishery socio-economic studies, (d) fishery planning and implementation, and (e) creating database and statistical bulletin supportive of fishery management plans. Maintenance of MPAs: - These are the cost of maintaining marine protected areas (MPAs) once they are established. These costs are calculated for each MPA in a country using an empirical non-linear equation based on Balmford et al. (PNAS, 101: 9694-9697), which estimate these cost as a function of size and the Human Development Index of the country in question. These cost are then added for the entire country and reported as a 'beneficial' subsidy to its fisheries, up to a limit of 15% of the ex-vessel value of the country's fishery catch.  Ambiguous subsidies Fisher assistance programs: - Payments to fishers to stop fishing temporarily or to ensure income during bad times. Can also be given temporarily due to a lack of alternative employment opportunities in regions where fishing is the main activity. This subsidy type could be revenue enhancing from government budgets and increase community dependence on government funds (bad); or may reduce fishing pressure through retraining programs into other economic sectors (good). They include: (a) income support programs; (b) unemployment insurance; (c) worker adjustment programs, and (d) fisher retraining. Vessel buyback programs: - These are fishing capacity reduction programs including two types: (a) permit buybacks, and (b) license retirements. These subsidies reduce fishing pressure and foster resource management goals. However, their effectiveness has been seriously questioned; Munro and Sumaila (2002, Fish & Fisheries 3: 1-18), Clark et al. (2005, Journal of Environmental Economics and Management 50: 47-58). Rural fishers’ community development programs: - Geared towards integrated rural fisher development with an overall objective of poverty alleviation and food security, and include stakeholder participation within local communities and cooperatives, often with assistance from donor agencies and NGOs for integrated livelihood objectives. However, evidence has shown that projects concentrated on enhancing productive capacity in developing countries are contributing to overcapacity, and with poor rate of management success. 44/62  Fisheries subsidies US$35 billion/year is provided as subsidies to the fishing sector via public sources HDI: Long & healthy life Knowledge & education A decent standard of living China syndrome: High HDI UN categorised as “developing” (most recently in the UN's 2022 World Economic Situation and Prospects) 7% 30% 63% Sumaila et al. (2019) Marine Policy 109: 103695  Fisheries subsidies 46/62 Sumaila et al. (2019) Marine Policy 109: 103695  Subsidies Largest challenge in fisheries around the world, and the main driver of overexploitation WTO has been trying for many years to “discipline” subsidies in fisheries (and other industries) Doha Round of Trade Negotiations (2001-2008) - Sea Around Us & FERU contributed data and expertise Just recently a partial WTO Agreement on harmful fisheries subsidies has been agreed - Eliminate harmful subsidies for IUU fishing - Sumaila et al. (2024) npj Ocean Sustainability 3(1): 6. https://doi.org/10.1038/s44183-024-00042-0 - SEE ALSO: https://www.maritime-executive.com/editorials/editorial-we-have-let- history-down-on-fisheries-subsidies 48/62 Impacts of subsidies … GFW Sea Around Us AIS data catch data FERU Nat Geo economic data Sala et al. (2018) Science Advances 4(6): eaat2504 50/62 Sala et al. (2018) Science Advances 4(6): eaat2504 Sala et al. (2018) Science Advances 4(6): eaat2504  Revenue = landed value of the catch Profits before accounting for subsidies Sala et al. (2018) Science Advances 4(6): eaat2504  Profits + subsidies = profits after accounting for subsidies Profits + subsidies + low labour cost = profits after accounting for subsidies and for exploitative, low labour costs and modern slavery Sala et al. (2018) Science Advances 4(6): eaat2504 Profits before accounting for subsidies High seas fishing at the current scale is enabled by large government subsidies and substantial labour cost cutting (incl. modern slavery), without which as much as 54% of the present high-seas fishing grounds would be unprofitable Deep water bottom trawling often produces net economic benefits only with subsidies These results support our calls for subsidy and fishery management reforms Sala et al. (2018) Science Advances 4(6): eaat2504  Aspect of “cost”: modern slavery Link global fisheries to modern slavery/labor abuses Many groups reported on specific examples Thailand Taiwan New Zealand Ireland No-one had put actual hard global data to this problem until we did… Tickler et al. (2018) Nature Communications 9: 4643  Modern slavery and the race to fish Walk Free Foundation www.globalslaveryindex.org 56/62 Tickler et al. (2018) Nature Communications 9: 4643 Modern slavery and the race to fish Tickler et al. (2018) Nature Communications 9: 4643  Modern slavery and the race to fish United States Western Europe 58/62 Tickler et al. (2018) Nature Communications 9: 4643 Tickler et al. (2018) Nature Communications 9: 4643  Summary: Fisheries economics Basic introduction and overview of key topics in fisheries economics, with emphasis on globally important aspects Ex-vessel prices (direct return to fishers) - Landed value Cost of fishing MEY Subsidies - Harmful - Beneficial - Ambiguous Labour (modern slavery) Sea Around Us – Indian Ocean