Xiiith Annual Conference of the European Association of Fisheries Economists, Salerno, Italy, April 18-20 2001



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XIIIth Annual Conference of the European Association of Fisheries Economists, Salerno, Italy, April 18-20 2001

Solving the “Tragedy” of the Common Fisheries Policy: what role for economic instruments?


Gregory Valatin

Dipartimento di Economia Politica, Universita degli Studi di Siena, Piazza San Francesco 7, 53100 Siena, Italy


Abstract
The Common Fisheries Policy has proved tragically ineffective. After three decades, two-thirds of European Union stocks are “over-fished” and more than a third “depleted”, with many stocks expected to collapse if current trends continue. Potential resource rents have been dissipated in excess fishing capacity, or capitalised in fishing rights initially granted free by governments, while fishing continues to be subsidised. After reviewing causes of failure, potential solutions to the “Tragedy” of the CFP, including a greater role for economic instruments are examined. This paper was largely written while based at the Ecole Nationale Supérieure Agronomique de Rennes (ENSAR) in France, on a European Commission funded research fellowship under the Agriculture and Fisheries section of the Marie Curie Research Training Grants Scheme.
Keywords: Fishery management, European Union Common Fisheries Policy, Economics


1. Introduction

Apart from helping prevent armed conflict,1 the European Union’s Common Fisheries Policy (CFP) has been tragically ineffective. After three decades of European common fisheries policies,2 67% of EU stocks for which assessments are available are deemed “over-fished”and 40% “depleted”. The European Commission’s assessment is that improving the state of the stocks is urgent, with many expected to collapse if current trends continue.3


Contrary to the interests of tax-payers and society as a whole, instead of providing a direct contribution to public finance, potential resource rents in EU fisheries have been dissipated, or capitalised in individual fishing rights initially granted free by governments. Fishing continues to be subsidised,4 exacerbating over-exploitation problems and the waste of scarce economic resources.
In its Green Paper, the Commission admits:
“If current policies and approaches are not changed the European fishing sector will become less and less sustainable and economically viable…

It is imperative therefore that the Community explores a new approach to economic management of the fisheries sector.”


A prerequisite in establishing fisheries management on a sound economic basis is correctly specifying the causes of current problems. According to the Commission:
“..the over-capacity problem faced by the sector.. is at the root of its current difficulties.”5
Despite the intuitive appeal of characterising the essential problem as one of “too many boats and too few fish”, the Commission’s emphasis on “over-capacity” is misplaced. Continuation of structural policies adopted under the CFP to reduce “over-capacity” cannot be efficient due to continuous technological innovation and the intangeable nature of “fishing capacity”, while failing to address the underlying economic incentives. As fishing returns are principal determinants of fleet activity and investment, any economics-based management policy will need to alter the financial attractiveness of fishing compared to alternative activities, and thus tackle the “Tragedy of High Prices”.

2. Causes of the “Tragedy” of EU Stock Conservation

The tragic state of the stocks is partly due to decision-makers being predominantly preoccupied with short-term and distributional impacts, rather than long-term conservation issues. Adoption of less restrictive policies is largely attributable to the relatively weak role of scientific advice and constant referral to the Council of Ministers (which has frequently remained in session overnight before decisions were reached). It also reflects the imbalance between the overwhelming influence of producers in the decision-making process compared to consumer, environmental and other interests.


The initial fisheries policy agreed in 1970 dealt primarily with allocational issues, providing for equal access to all Community waters (except within existing national 6-mile and 12-mile limits), while the more comprehensive policy agreed in the early 1980s after prolonged negotiations on the definition and allocation of national fishing rights, in effect established two types of quota systems.6 Firstly, along similar lines to landings restrictions already agreed by international fora such as North Atlantic Fisheries Organisation (NAFO), catch quotas were introduced under EU Conservation Policy, allocating output production rights specifying the maximum permissible weight of fish that could be landed within a Total Allowable Catch (TAC) set for a specific stock. Secondly, despite lack of fixed relationship with fishing mortality, Multi-Annual Guidance Programmes (MAGPs), licensing, ‘effort’ and ‘capacity’ controls introduced under EU Structural Policy, allocated input exploitation rights restricting aggregate engine power, tonnage and other factors influencing catches such as time at sea,in an attempt to achieve a balance with fishing opportunities.
Guided by the Commission, in order to facilitate agreement overall limits for both input and output quotas were initially set to allow fishing to continue at previous levels, ignoring scientific advice of the International Council for the Exploration of the Seas (ICES) that fishing mortality be reduced to the Maximum Sustainable Yield (MSY) level Fmax where yield per fish would be greatest. Except where stocks appeared in immediate danger of collapse, the Council of Ministers tended subsequently to choose less restrictive options than recommended, increasing current fishing opportunities. Their decisions could then be presented to fishermen as “victories” in the face of more restrictive Scientific advice and proposals from the Commission, particularly given the widespread perception in the industry that the scientific advice is often flawed.7 Subsequently, the Commission was able to blame the conservation failure on the Council (it does essentially this in its Green Paper).8
Another reason for the ineffectiveness of the CFP is poor enforcement, which, with few exceptions, has been characterised by lack of resources and political commitment.  By retaining implementation as a national responsibility, Member States reportedly aimed mainly to render the policy ineffective,9 perceiving it to be in their national interest initially to allow virtually unrestricted landings, increasing short-term fishing opportunities while minimising conflict with the industry, despite the resultant failure to realise the long-run benefits of resource management. This represented a self-reinforcing (‘strictly dominant’) strategy, as lax enforcement by some Member States discouraged others from more rigorously applying control measures on their own fleets.10
With records easy to falsify, national administrations provided information mainly to maintain an appearance of good practice.11 There was little possibility, for instance, of those failing to prevent over-quota landings being sanctioned, unless they themselves reported the problem in the data passed to the Commission. Even when evidence was found that a Member State failed to comply with its obligations, there was often a substantial time lag in legal action being taken, while any penalties subsequently imposed can be inconsequential. For example, in an action brought against the UK in the European Court of Justice in late 1999 related to infringements of the TACs during 1985-88 and 1990, including failure to carry out inspections and to close fisheries once catch quotas had been taken, the Commission simply demanded that the court declare that the UK had failed to abide by its obligations and that it pay the court costs.12
The European Parliament recently reported that existing mechanisms to encourage Member States fleets to meet their MAGP targets, including instituting infringement proceedings at the Court of Justice and withholding financial assistance for fleet renewal and modernisation are ineffective. It called for the European Commission to compel Member States to meet their obligations, and for a review of the penalties for non-compliance.13
Member States are required to regularly notify the Commission of the outcomes of their monitoring and enforcement activities, including infringements detected and action taken,14 but national administrations have generally failed to fulfil their obligations in this regard. There are few EU fisheries inspectors and they have no legal powers to enforce legislation, their role having been described as simply ‘looking over the shoulder of national inspectors’.15 Proposals to increase their powers, grant them real autonomy, and harmonise sanctions applied, have consistently been rejected by the Council of Ministers.16 The Commission has also failed to provide detailed reports on the work of its own inspectorate.17
A further cause of fishermen’s poor compliance with the CFP is attributable to dissatisfaction with allocational issues in some Member States, including the “quota-hopping” controversy. Although no international quota trading between fishing companies had been anticipated when the CFP was established, vessel operators soon found ways under EU freedom of establishment rules to purchase or re-register vessels, and thereby acquire fishing rights in other Member States. As the so-called ‘flag ships’ then became subject to the host country’s MAGP targets and were able to participate in their fisheries on the same basis as other national vessels, this created discontent amongst fishermen in the host country, undermining confidence that the CFP would protect their fishing rights and consequently, their willingness to stick to the rules. Counter to the ‘relative stability’ principle of allocating TAC shares to Member States to be fished by that country’s fishermen, the phenomenon of ‘quota-hopping’, whereby companies acquire rights to fish TAC shares allocated to another Member State, effectively involves unofficial international trade in both input and output quotas.
Dutch and Spanish vessel operators were especially active in acquiring fishing rights in other Member States, with Spanish companies reportedly acquiring fishing rights for over 100 UK, 28 Irish and 25 French vessels, and Dutch companies acquiring rights for around 30 UK, 33 German, 11 Belgian, one French, and one Danish vessel. Thus, of the 546 Dutch operated vessels in 1998, over an eighth were operating under other flags,18 with a fifth of Dutch-owned vessels in the North Sea demersal fishery (in terms of number and aggregate engine power), being registered in the UK, Germany, or Belgium, and fishing against these countries’ TAC shares.19 In the UK, ‘flag ships’ accounted for 44% of hake, 40% of plaice and 17% of sole quotas in 1996,20 and a quarter of the UK’s offshore fleet tonnage at the beginning of 1998.21
Lax quota restrictions and enforcement, together with widespread non-compliance, made policies agreed at EU level initially of little relevance in practice. In effect, the CFP created institutional conditions conducive to development of over-fishing and a situation often characterised as a “Tragedy of the Commons”.22
3. Causes of the Economic “Tragedy”

In coining the term the “Tragedy of the Commons”, Hardin(1968) focused upon situations which, in common with problems such as the nuclear arms race and world population growth, were argued to be insoluble without instituting social arrangements involving mutual coercion mutually agreed upon. It was argued:


“Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in freedom of the Commons. Freedom in a Commons brings ruin to all”.23

Although over-fishing can also result under private ownership if harvest costs are low relative to landings prices (or resource users have high implicit discount rates),24 common property and open access regimes have often been confused in ascribing the causes of resource over-exploitation, creating unwarranted emphasis on solutions based upon private property rights. As in economic theory resource over-exploitation occurs in the long-run under open access principally where marginal revenue exceeds marginal cost of increasing resource use at the socially optimal aggregate output level, such problems could more accurately be characterised as a “Tragedy of High Prices” (due to landings prices being high relative to fishing costs), rather than a “Tragedy of the Commons”.25


Figure 1 below illustrates such a “Tragedy of High Prices” in terms of the simplistic Gordon-Schaefer model, with fleet long-run total revenue and cost curves formulated in terms of a single “fishing effort” variable. Maximum Sustainable Yield (MSY) is shown together with Maximum Economic Yield defined taking account purely of economic rent in the catching sector (MEY0) and more broadly defined (MEY1) to take account of non-market existence and biodiversity values, and other factors, such as consumer surplus, producer surplus of onshore sectors, regulatory and social costs. To the extent that such levels are meaningful in EU fisheries (where joint production is the rule rather than the exception and stock-recruitment relationships weak), MEY1 could be either above or below MEY0, with its precise position varying with environmental, biological and economic factors.26 Consumer surplus is highest where the quantity and quality of fish landed is greatest (which in this simple model is represented by MSY).
If total fishing costs are below total revenues at the optimal aggregate output level (e.g. supply function S0 is below the total revenue curve at this level in Figure 1), the existence of excess profits provides an incentive for vessels to increase fishing beyond the optimum, to a point where costs and revenues are equalised (in this case E0). On the contrary, if total costs would be greater than or equal to total revenue at the optimal output level (e.g. where supply function S1 meets the total revenue curve), as the marginal cost of production exceeds the landings price, no over-exploitation occurs. (Once stock age class distributions are taken into account, growth over-fishing occurs if fish are caught before they have grown to an optimum size,27 causing a fall in the long-run revenue curve).

Figure 1: Gordon Schaefer Model illustrating the “Tragedy of High Prices”



Long-run Total Revenue Long-run Total Costs
S1

MSY

S0
MEY0

MEY1

E1

E0

“ Fishing Effort ”



Due to technical innovation, fishing costs can be expected to be falling over time, lowering the fleet cost schedule and providing an economic incentive for constant expansion of fishing activity. By contrast, falling costs could be expected to shift the economic optimum exploitation level to the left, such that a reduction in fishing activity is optimal. Similarly, increasing consumer demand for fish would also be expected to provide an economic incentive for expansion of fishing activity by raising landings prices. Exogenous cost-reducing technological progress and rising consumer demand helps explain development of overfishing.
From an economic perspective, the primary role of fisheries management is to counter economic incentives leading to market failure (overfishing), to ensure that resource rents are not dissipated and thereby also safeguard the stocks. However, EU fisheries management has focussed primarily on implementing measures to safeguard stocks while neglecting long-term economic effects. Thus, as Gordon(1954) had predicted,28 where management restrictions introduced on the basis of biological advice temporarily increased profitability, this tended simply to create incentives for further investment, resulting in shortened season length and increased fishing costs, dissipating the economic rent. For example, input restrictions on vessel size characteristics in UK and Dutch fisheries led to input substitution by the industry creating inefficiencies, including widespread modification in vessel design to create so-called “rule-beaters”, with main engines often de-rated to a fraction of their nominal continuous ratings and auxiliary engines installed with combined power exceeding that of the main engine.
To overcome problems such as early closures, individual vessel fishing rights were introduced in some EU fisheries. However, despite official prohibitions, by accident rather than design, introduction of individual fishing rights soon led to quota trading with rents becoming capitalised in the market value of these rights. Initially granted free of charge by governments, market values of fishing rights rose as trading developed, so that their value in the Netherlands and the UK, for instance, now often exceeds that of vessels themselves, in effect creating a “millionaire’s club” of existing rights holders, while creating insuperable barriers to entry for prospective vessel operators. So-called “fire-side fishermen” living purely by renting out their fishing rights instead going to sea themselves, can now reportedly earn more than those who go fishing, with UK fishermen leasing out the average level of quota “track record” expected to earn £120,000 a year according to the Aberdeen Fish Producers' Organisation.29 Free allocation (‘grandfathering’) of quotas to firms effectively rewarded the largest and most rapacious fishing vessel operators with the largest (and therefore most valuable) allocations, while appreciation in market values increased subsequent management costs of vessel decommissioning schemes.
EU and Member States schemes providing financial assistance for activities such as vessel construction and modernisation, fish advertising and withdrawals have compound tendencies for rent dissipation, by further lower fishing costs and increasing landings prices. The resultant artificially high profitability provided economic incentives conducive not merely to the dissipation of the economic rent through a “Tragedy of High Prices”, but to further intensification of fishing pressure and development of a situation which could be characterised as a “Disaster of Subsidies”.30
Of an estimated US $1434 million in government financial transfers to the fishing industry by the EU and individual member States in 1997, roughly a quarter (US $366 million) was spent on direct payments (including those made on a sales, catch or per vessel basis), with a similar amount (US $358 million) spent on cost reducing transfers. Representing 8% of the total value of EU landings of US $9324 million in 1997,31 direct payments and cost reducing transfers would have provided significant incentives for vessel operators to increase their investments and fishing pressure to obtain higher short-run profits, despite consequent further stock over-exploitation.

Economic failure of the CFP can also be attributed to the lack of quantification of the costs and benefits of implementing fisheries policy alternatives (although some recent attempts have begun to be made in this direction in some Member States, such as the UK, where regulatory impact assessments estimating compliance costs have to be published for all new regulations).32 Partly also a consequence of failure to foresee the impact of regulations, evolution of fisheries regulations has tended to be fragmentary, duplicatory and characterised by crisis management, somewhat akin to attempting to fix a leaking bath by applying a sticking plaster each time a substantial new leak appears, with each subsequent measure tending to further complicate the regulatory system.


Over-lapping management policies have further increased economic inefficiency. Inconsistencies between input and output quota systems exist for instance, with the Netherlands arguing that meeting its MAGP targets would jeopardise its ability to fully take catch quotas, with concerns expressed that this could undermine its group management system and enforcement of landings.33 In the UK the National Federation of Fishermen’s Organisations (NFFO) has characterised the industry as “over regulated”, while the Anglo-North Irish Fishermen's Organisation has described fisheries management as "an administrative and bureaucratic nightmare".34
4. Solving the Tragedy of the CFP

Characterising the “Tragedy” of EU stock conservation as resulting from the way in which decisions are made, suggests that solution will entail altering institutional mechanisms for fisheries management policy-making. This is likely to entail strengthening the scientific basis of decisions and the role played by consumer interests, as well as overcoming existing tendencies for conflict between the Council of Ministers and the Commission.


If durable agreement could be reached on the method for determining overall exploitation levels and subsequent allocations of fishing rights between Member States, stock conservation might be expected to improve simply by allowing the Commission to oversee the process, leaving the Council of Ministers to deal with more important matters. In an era of performance-related pay, consideration might also be given to linking fisheries managers pay to policy-related improvements in the state of the stocks and other apposite indicators.
To the extent that poor compliance is associated with industry suspicions that the scientific advice is inadequate, increased transparency, including greater discussion and debate with those responsible for providing the scientific advice could increase vessel operators’ perceptions of the legitimacy of management decisions and thus their willingness to comply with regulations. Greater openness concerning errors and uncertainty in scientific estimates, and their implications, as well as scope for improvement (e.g. extensions from single-species models to include multi-species interactions and ecosystems effects), could also prove beneficial in building greater trust, while providing further impetus for improving existing methods, especially faced with technical critiques. (For example, it has been claimed that existing stock assessment methodologies generally are unable to provide sufficiently accurate stock estimates, as typical errors are sufficiently large to outweigh expected economic gains of quota management,35 and that such methods have a logical form analogous to “primitive magic”).36 All scientific advice could be published on the DG Fisheries internet web site.
Greater transparency, including enactment of Freedom of Information provisions to apply both at EU and at Member State level, could also increasing political will to enforce the CFP. Currently information is often veiled by state secrecy, while publicity surrounding failure to keep agreements could provide a powerful incentive for governments to conform. In some Member States, such as the UK,37 there are trends towards greater openness, but considerable scope for increasing transparency remains.
Enactment of strict rules on Government integrity at EU and Member State level, such that any Minister or civil servant found to have lied to Parliament automatically had to resign, could further strengthen the political will of national administrations to keep to agreements. The case of the Netherlands aptly illustrates this, as the Dutch Minister for Agriculture, Fisheries and Nature Conservation was forced to resign in 1990 for misinforming Parliament over lack of enforcement of sole quotas, with a majority of MPs judging that he had failed to restrict either over-quota landings or fleet size. Providing statutory protection for officials highlighting such failures in government could also encourage administrations abide by their obligations. (The EU Ombudsman’s observation that, if understood literally, existing rules could “..oblige a witness to lie .. if instructed to do so by superiors”38 amply demonstrates that lack of transparency is not a concern applying purely at Member State level).
Increased use of co-management mechanisms and associated economic incentives could facilitate compliance. This is also illustrated by the example of the Netherlands, with the change of emphasis in the early 1990s in the aftermath of the resignation of the Dutch Fisheries Minister leading to groups of vessel operators being empowered to manage their own quotas, deciding for themselves rules to operate and penalties to apply, with incentives provided to encourage co-operation. To benefit from additional days at sea allocations accorded to the groups, members had to agree to sell their fish at auction, providing the inspectorate with logbook and auction data. The group system is widely reported to have facilitated reliable monitoring and reducing non-compliance, such that national catch quotas have not been exceeded since 1992.39 Fisheries offences fell to a sixth of their previous level over the period 1990-1997 (partly attributable to reduced physical inspections),40 and although cited in the mid 1980’s as the worst Member State at preventing over-quota landings, the Netherlands is now generally regarded as a model of enforcement within the EU.
Scope also exists for a “ bottom-up ” approach in line with the subsidiarity principle and regionalisation initiatives currently under consideration to tackle non-compliance associated with dissatisfaction regarding quota-hopping and other allocational issues. European federations of fishing organisations involving most stake-holders in a given fishery might play a major role in proposing mutually acceptable allocation rules, including the extent to which principles of equal access and relative stability would apply. The example of Ministry-backed consultations between Jersey and French fishermen which successfully resolved gear conflicts,41 illustrates the potential for greater regional co-operation.
Characterising principal economic failures of the CFP as arising primarily from a “Tragedy of High Prices” and a “Disaster of Subsidies” implies that solution will entail essentially two elements. Firstly, after agreeing exactly which factors to include and how to weight them, using stock assessment, fleet costs and earnings, and other time-series data, the long-run economic optimum level of resource use and the optimal time path to reach it needs to be determined for each fishery, taking account of transition costs, and risk and uncertainty in accordance with a precautionary approach. (The current emphasis on preventing lower limits on spawning stock biomass and upper limits on fishing mortality established on the basis of the precautionary approach being reached,42 provides managers with a simple “rule of thumb”, but there is little reason to suppose that the rule is economically optimal). Secondly, after evaluating the costs and benefits associated with using different policy instruments, economic incentives need to be provided which balance supply and demand at the optimal level of resource use, without simply dissipating the economic rent due to cost inefficiencies.
Systems of tradable fishing rights may help create such a balance (even if they offer no guarantee that overall exploitation levels will be efficient). However, in the process tend to entail problems noted above, including capitalisation of resource rents in the value of fishing rights, their capture by an initial generation of vessel operators and creation of insuperable barriers to entry, essentially transforming common access by enclosure and privatisation of the marine commons.43 Their introduction tends to reduce regulatory flexibility, as, although in theory states retain the power to modify or abolish quota trading systems, owners can be expected to resist any changes which could diminish their value. For example, the House of Commons Agriculture Select Committee has reported that although remaining the legal owner of UK quotas:
“it is almost inconceivable that any Government could recall the title it theoretically retains without facing massive compensation claims”.44
In the Netherlands, a change to measuring engine power using a system of “maximum continuous rating” had to be abandoned due to successful court action by the industry, which claimed that the new measure to be unfair as it would have entailed significantly increasing the registered HP of some vessels.45
Taxes or “access fees” which equate total costs with revenues at the optimal output level (e.g. shifting the total cost curve in Figure 1 from S0 to S1) have sometimes been suggested, capturing the economic rent and creating a source of public finance, without requiring fish to be discarded unnecessarily once quota restrictions are reached. Given uncertainty in recruitment, fees per fish caught are in theory more efficient than quotas, as well as more equitable,46 but supply-side regulations have generally been favoured by fisheries managers despite drawbacks, including the relative complexity of quantifying fishing inputs devoted to catching a particular species,47 and scope for input substitution to circumvent controls.
Interest has been growing in demand-side measures and their potential to improve fisheries management, partly due to increasing ethical concerns of consumers. Indeed, it has been claimed that:

“In the 21 century, consumer demand can be the means of creating economic market incentives that endorse and promote sustainable fisheries harvesting and management practices”.st


Figure 2 below illustrates a demand-side solution to the “Tragedy of High Prices”, again in terms of the Gordon-Schaefer (G-S) model. Total fishing costs (S0) are initially below total fleet revenue at the optimal aggregate output level, providing an economic incentive for “fishing effort” to increase beyond optimum levels (to E0), where total costs (from S0) are equated to total revenue (TR0). By introducing measures that reduce the price paid for fish landed, without necessarily affecting the price at which fish is subsequently bought (e.g. through operation of a fixed landings price system, with fish subsequently auctioned), the fleet’s total revenue curve is shifted downwards from R0 to R1. As total costs (from S0) are equated to total revenue (TR1) at the optimal aggregate output level (e.g. MEY1), no over-exploitation occurs.


Figure 2: G-S Model illustrating a demand-side solution to the “Tragedy of High Prices”
Long-run Total Revenue Long-run Total Costs


MSY

S0
MEY1

1

TR0

R0

TR1

R1


E1

E0

“ Fishing Effort ”





On the contrary, in practice, even where stocks are over-exploited, demand-side measures have tended to be aimed at increasing demand to boost current fishing incomes, compounding the “Tragedy of High Prices” with a “Disaster of Subsidies”, whereas creating economic incentives consistent with desired long-run management objectives has been scarcely considered. In the UK for example, the Sea Fish Industry Authority (a public sector organisation funded primarily by a mandatory charge on first-hand buyers of sea fish per tonne of fish purchased) has never attempted to use its levy to counter over-exploitation, instead devoting most of its budget to marketing initiatives to increase the demand for fish. As shown in figure 2, even if a stock is initially exploited at the socially optimum level, any demand-side measures shifting the total revenue curve upwards (e.g. from R1 towards R0) without capturing the economic rent, could be expected in the long-run to have the perverse effect of encouraging over-fishing.
There are few examples of EU countries adopting demand-reducing measures to regulate their fisheries, apart from the Spanish government’s advertising campaign (co-funded by the EU) aimed at persuading consumers not to purchase the smallest fish, thereby encouraging fishermen to allow the latter to grow and reproduce before catching them. Elsewhere, both Mauritania and the Maldives had a state agency which purchased fish landed at fixed prices and exported it at a higher price, with the former country financing 25% of its total budget in this way,48 but the system reportedly was subsequently dismantled following pressure from the World Bank, which viewed it as an impediment to free trade.

In attaining overall economic efficiency, measures which reduce current returns cannot be expected to be popular. However, adopting a system of community co-management in which fishermen have a role in deciding how funds collected are spent (such uses would have to exclude influencing fishing returns in ways that could provide further incentives for over-exploitation) could increase industry support and prevent the existing distribution of fishing opportunities being undermined. Certainly industry acceptability could be expected to be a key factor in determining whether measures are adopted and subsequent success, and were they excluded from having a say in the use of funds collected, the immediate financial impact would be more likely to be viewed as a “pauperisation” of the catching sector of no short-term benefit.


Using market mechanisms for allocating EU fishing rights might appear simplest and most efficient in enabling fisheries to be exploited at least input cost. However, not least given widespread support for retaining relative stability and associated allocation keys,49 they are unlikely by themselves to be broadly acceptable to the sector. Indeed, where adopted, the industry could play a useful role in helping determine any distributional nuances to be incorporated into the system, designed to increase efficiency, promote ecologically-friendly fishing methods, including reducing discards and increasing the proportion of larger fish caught, or to avoid adverse socio-economic impacts.
Instruments such as taxes and demand-side measures appear appropriate in tackling the long-run economic causes of over-exploitation, but how vessel operators respond to price changes in the short-term is important in deciding the extent to which they can be of use in attaining more immediate fisheries management objectives. Economic incentives may exist for vessel operators to adjust their fishing patterns to maximise returns in the long-run in order to remain competitive, but short-term responses to price changes may be inelastic, or even contrary to management objectives, were backward-bending supply to exist, due to income-leisure trade-offs,50 satisficing behaviour, or other factors.51 Thus, despite creating the requisite economic incentives for maintaining stock exploitation at optimal levels in the long-run, such measures by themselves might not induce the short-run supply responses needed to approach desired stock exploitation levels. Nonetheless, in conjunction with other instruments altering the short-run opportunity costs of fishing and level of activity (e.g. diversification, re-training, early retirement, or decommissioning schemes) they could still prove useful, particularly by providing a source of funding for such other measures, and projects designed to improve the health and productivity of marine ecosystems.
5. Conclusions

The CFP has been a resource conservation disaster. Most stocks are over-fished and many are expected to collapse if current trends continue.


The policy has also been an economic disaster. From the perspective of EU taxpayers or society as a whole, the CFP represents a scandalous waste of public resources. Resource rents have been dissipated, or capitalised in individual fishing rights initially granted free by governments, and instead of making a direct contribution to public finance, fishing has been subsidised.
In a analogous manner to development of the EU Common Agricultural Policy (CAP), fisheries management policies have been determined primarily on the basis of the perceived short-term interests of producers, to the detriment both of the long-term interests of producers and of consumers. As the European Commission’s Consumer Committee has noted with respect to the CAP:

“A policy which is strongly influenced by sectoral pressure groups pursuing their own interest generates large costs for the rest of society.”52


The CFP is currently under review, but with no consensus either for scrapping the regime altogether, or on what would constitute a better alternative. While political feasibility of fundamental modifications may be doubted in view of the difficulties encountered in negotiating the existing policy, whether or not such change proves possible, it is timely to consider the causes of failure and how these can best be addressed.
The current paper contributes to the continuing debate on the causes of failure and potential solutions. In line with the Commission’s desire for exploration of the implications of alternative management tools such as Individual Transferable Quotas (ITQs) and access fees,53 the description provided of Dutch and UK experience clearly shows that ITQs create large wealth inequalities and barriers to entry, while reducing regulatory flexibility. Access fees have not been implemented, but would be expected to be more equitable, avoiding these negative distributional effects.

From an economic perspective, it is argued that the primary role of fisheries management is to counter economic incentives leading to over-fishing and to ensure that resource rents are not simply dissipated. The Commission’s characterisation of over-capacity as the fundamental source of the sector’s difficulties, seems likely to lead to a continuation of inefficient policies, failing to address underlying economic incentives.


Economists cannot claim the sole expertise necessary to assist the Commission’s search for:
“..a viable and socially acceptable compromise between the conflicting maximisation objectives of economic efficiency, ecosystem stability or productivity, employment and availability of other services.”54
However, to date little more that lip-service has been paid to economics in formulating fisheries policy at EU level, thereby neglecting impacts on costs and allowing dissipation of resource rents. Although not the only tools needed, overcoming failures of the CFP and the “Tragedy of High Prices” and “Disaster of Subsidies” will require greater reliance upon economic instruments and analyses. As the Director-General of DG Fisheries has noted:
“Getting the economics of Fisheries Management right is one of the preconditions for achieving the objectives of the Common Fisheries Policy..”55
Strangely, the European Commission’s recent Green Paper on the Future of the Common Fisheries Policy offers no discussion of underlying economic incentives leading to stock over-exploitation and the associated policy-implications. It is inconceivable that, half a century after Gordon’s article appeared, the Commission remains uninformed on such issues, even if key personnel tend to be drawn from areas of biological expertise. Thus, the reason must lie elsewhere.
It seems most likely that, despite declarations of its generic utility, the Commission does indeed view fisheries economics as largely a “useless science.”56 The objective of preventing the dissipation of the economic rent is viewed as of little relevance by comparison to other considerations involved in practical fisheries policy-making.



1 European Commission. The Future of the Common Fisheries Policy, Green Paper, COM(2001) 135 final, March 2001, 1.

2 EEC Regulation No. 2141/70.

European Commission. Preparation for a mid term review of the Multi-annual Guidance Programmes (MAGP). Brussels: Report from the Commission to the Council, COM(2000) 272 final, May 2000, 4.

3 European Commission. n.1 above, 6,1.

4 Flaaten O, Wallis P. Government Financial Transfers to Fishing Industries in OECD Countries. Xth Conference of the International Institute of Fisheries Economics & Trade, Corvallis, July 2000.

European Commission. n.1 above, 15.

5 European Commission. n.1 above, 32.

6 Valatin G. Quota Trading Systems in EU Fisheries. Review of European Community & International Environmental Law 2000; 9(3).

Holden M. The Common Fisheries Policy. Oxford: Fishing News Books, 1996.

7 European Commission. Report from the Commission on the Regional Meetings arranged by the Commission in 1998-1999 on the Common Fisheries Policy after 2002. Brussels: Report to the Council, COM(2000) 14 final, January 2000, 9.

8 European Commission. n.1 above, 1.

9 M. Holden, n.9 above, 159.

10 Flaaten O, Wallis P. Government Financial Transfers to Fishing Industries in OECD Countries. Xth Conference of the International Institute of Fisheries Economics & Trade, Corvallis, July 2000.

11 Holden M. n.9 above, 161.

12 ECJ 30 November 1999, Case C-454/99, European Commission v UK, Official Journal, C 34 5.2.2000.

13 European Parliament. Resolution on the annual report to the Council and to the European Parliament on the results of the Multiannual Guidance Programmes for the fishing fleets at the end of 1997. Brussels: COM (1999) 175 - CS-0109/1999 - 1999/2112(COS).

14 EC Regulation 2847/93, Article 34(2).

15 Holden M, n.9 above, 163.

16 Reply of Commissioner-designate for agriculture, fisheries and rural affairs Franz Fischler to questionnaire submitted by the European Parliament’s Committee on Fisheries. Brussels: August 1999.

17 Berg A. Implementing & enforcing fisheries law: the implementation & the enforcement of the Common Fisheries Policy in the Netherlands and in the United Kingdom. London: Kluwer Law International, 1999, 284-285.

18 Hoefnagel E. Legal but controversial: quota-hopping, the CFP & the Treaty of Rome. (in Symes D. Property rights and regulatory systems in fisheries, Oxford: Fishing News Books, 1998, 80-91).

19 Davidse W. The Effects of Transferable Property Rights on the Fleet Capacity and Ownership of Harvesting Rights in the Dutch Demersal North Sea Fisheries. Fishrights99 Conference, Freemantle, Australia, November 1999.

20 Proutiere-Maulion G, Chaumette P. Un virus dans la Politique Commune des Peches: Le phenomene de Quota-Hopping? Espace et Resources Maritimes, 1997;11.

21 MAFF. Departmental Report by the Ministry of Agriculture, Fisheries and Food and the Intervention Board. London: 1998.

22 Valatin G. Fisheries Management Institutions & Solutions to the “ Black Fish ” Problem. Workshop on Management Institutions and Systems of Fisheries Governance,  FAIR Concerted Action on Economics & the Common Fisheries Policy, Vigo, October 1999.

23 Hardin G. The Tragedy of the Commons. Science 1968;162: 1244.

24 Colin C. The economics of Exploitation. Science 1973;181: 630-634.

25 Valatin G. On demand-side approaches to solving the “ Tragedy of High Prices ” in Fisheries. Xth Conference of the International Institute of Fisheries Economics & Trade, Corvallis, July 2000.

26 Rodgers P, Valatin G. The Common Fisheries Poicy after 2002: Alternative options to the TACs and Quota system for conservation and management of fisheries resources. Luxembourg: European Parliament Research Directorate, 1997.

27 Anderson LG. The Economics of Fisheries Management. Baltimore: John Hopkins University Press, 1986.

28 Gordon HS. The economic theory of a common property resource: the fishery. Journal of Political Economy, 1954;62: 124 142.

29 House of Commons Select Committee on Agriculture. Report on Sea Fishing, Eighth Report 1998/99. London: HMSO, August 1999.

30 Valatin G, n.28 above.

31 Smidt S. The review of the CFP in 2002 - an opportunity for fisheries economists. EAFE Conference, April 2000.

32 House of Commons Select Committee on Agriculture. Seventh Special Report. London: HMSO, 1999.

33 Davidse W. The Development towards Co-Management in the Dutch Demersal North Sea Fisheries. Fishrights99 Conference, Freemantle, Australia, November 1999.

34 House of Commons Select Committee on Agriculture. Report on Sea Fishing. London: HMSO, Eighth Report 1998/99, August 1999.

35 Walters C. Management without accurate stock assessment. (Chapter 21 in Pitcher TJ, Hart PJB, Pauly. Reinventing Fisheries Management. Dordrecht: Kluwer Academic, 1998, 279-288).

36 Corkett C. Fisheries Stock Assessment: an Inductive Science with the logical form of Primitive Magic. Xth Conference of the International Institute of Fisheries Economics & Trade, Corvallis, July 2000.

37 Valatin G. The Evolution of UK Fisheries Management: An Overview. IIIrd International Conference on Property Rights, Economics & the Environment, Aix-en-Provence, June 2000.

38 European Ombudsman. Annual Report 1998. Brussels: Office of the European Ombudsman, 1999.

39 Valatin G. Fisheries Management in the Netherlands: An Overview. XIIth Annual Conference of the European Association of Fisheries Economists, Esbjerg, April 2000.

40 Berg A, n.20 above.

41 Valatin G, n.40 above.

42 European Commission, n.3 above.

43 Valatin G. Development of Property Rights based Fisheries Management in the United Kingdom & the Netherlands: A Comparison. Fishrights99 Conference, Freemantle, Australia, November 1999.

44 House of Commons Select Committee on Agriculture, n.37 above, at 85.

45 LEI et. al. Licensing of Fishing Vessels in five EU Member States. The Hague: Working Document No.5, EU AIR CT94 -1489, LEI-DLO, 1997.

46 Weitzman M. Landings Fees vs. Harvest Quotas with Uncertain Fish Stocks. Xth Conference of the International Institute of Fisheries Economics & Trade, Corvallis, USA, July 2000.

47 Valatin G. The Relationship between Fleet Capacity and Fishing Effort. VIth Conference of the International Institute of Fisheries Economics & Trade, Paris, France, July 1992.

st Sproul, JT. Green fisheries: certification as a management tool. (Chapter 9 in: Pitcher, T. J., Hart, P. J. B. & Pauly (eds). Reinventing fisheries management. Dordrecht: Kluwer Academic, 1998,137-147).

48 Catanzano, J, Cunningham S. Equity, Management units & Management Instruments in Fisheries. IIIrd International Conference on Property Rights, Economics & the Environment, Aix-en-Provence, June 2000.

49 European Commission, n.10 above.

50 Gautam AB, Strand I, Kirkley J. Leisure/Labor Tradeoffs: The Backward-Bending Labor Supply in Fisheries. Journal of Environmental Economics and Management, 1996; 31(3): 352-367.

51 Valatin G. Fishermen's objectives and the economic determinants of fleet activity. Edinburgh: Edinburgh University M.Phil. Thesis, 1996.

52 Consumer Committee (Consultative Committee of the European Commission). Opinion of the Consumer Committee on the reform of the Common Agricultural Policy, adopted 8 December, 1998.

53 European Commission. n.1 above, 33.

54 European Commission. n.1 above, 39.

55 Smidt S. The review of the CFP in 2002 - an opportunity for fisheries economists. EAFE Conference, April 2000.

56 cf: Davidse W. Fisheries Economics, a useless science ? EAFE Conference keynote speech, Salerno, April 2001.





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