WTO Doha Round Negotiation and Sustainability on Fisheries Resources

Living marine resources in the Doha round of WTO trade talks

In the Doha round of trade talks at the World Trade Organization (WTO), issues related to fishery resources are being discussed on two fronts, namely, in the Rules negotiations and as part of the Non-Agricultural Market Access (NAMA) negotiations. Apart from the Doha Round talks, a series of judicial decisions have been made by WTO dispute settlement panels on import bans for the purpose of protecting living marine resources and trade in fishery products.

In the NAMA negotiations, which primarily concern tariff reductions, the need to provide special and differentiated treatment (S&DT) to developing countries is taken into account but no specific consideration is given to environmental conservation. On the other hand, the Rules negotiations, which cover among others WTO disciplines on fisheries subsidies, give consideration to both the environment and developing countries. Meanwhile, on the judicial front, an importing country's unilateral prohibition on certain shrimp and shrimp products for the purpose of protecting sea turtles had become a major issue with a series of exporting developing countries filing complaints with the WTO Dispute Settlement Body. The ruling by the WTO's dispute settlement panel on the case shows consideration to the environment but little to developing countries.

Fish and fishery products are discussed as part of the NAMA negotiations that cover all non-agricultural products. In the NAMA negotiations, Japan, South Korea, and Chinese Taipei are calling for balancing the two goals of liberalizing trade and protecting natural resources, whereas fish and fish product exporters, namely, New Zealand, Iceland, and Thailand, insist that tariffs on all fish and fishery products should be brought down to zero. At the moment, the negotiations are moving in the direction of treating fish and fishery products as subject to tariff-cutting without exception, no different from industrial products.

Overview of fish and fish product trade and tariffs thereon

Japan's tariff rates for fish and fishery products are relatively low among the member countries of the Organization for Economic Cooperation and Development (OECD) with the trade volume weighted average rate of 4.0%. Mexico and South Korea have the average tariff rates of 11.2% and 12.7% respectively, which are relatively lower than the average tariff rates on agricultural products. One reason behind Japan's low tariff rates on fish and fishery products lies in the fact that the country was a net exporter of fish and fishery products when it joined the General Agreement on Tariffs and Trade (GATT) in 1955. Japan's tariffs on fish and fishery products, which were set at the uniform rate of 10% at that time, were lowered to 5% or 3% on certain items through the Kennedy and Tokyo Rounds of trade liberalization talks. Then, in the Uruguay Round, tariff rates were further reduced to 3.5% for items that had been subject to 5% tariffs (such as tuna and salmon) and to 1% for those that had been subject to 3% tariffs (such as shrimp).

About 37% of the fish landed around the world is traded in the international market, according to the Food and Agricultural Organization of the United Nations (FAO). The percentage is extremely high compared to 11.2% for cereals or 9.2% for fruits. Meanwhile, exports from developing countries account for about 60% of the world's fish trade. Indeed, for developing countries, fish and fishery products are a very important trade item with the value of net exports of fish and fishery products far exceeding that of agricultural products such as coffee, rubber, cocoa, bananas, and sugar. The European Union, Japan, and the United States are major consumption markets for fish and fishery products. In particular, Japan, whose per capita consumption of fish and seafood is one of the largest among the developed countries, is the world's biggest importer of fish and fishery products.

The past few decades witnessed a sharp rise in the volume of Japan's fish and fish product imports. Although Japan's fish and fish product exports have been slightly increasing in the most recent years, it is overwhelmed by the strong imports. The nation's self-sufficiency rate in fish and fishery products was 62% in fiscal 2007 (April 2007 - March 2008), relatively high compared to that in agricultural products. However, in terms of value, imports exceed domestic production.

State of fishery resources in the world

When we look at trends on a global scale, fishery production has been on a gradual rise since the 1970s. However, this is mostly accounted for by an increase in aquaculture production, particularly in China, whereas capture production has been little changed since the 1980s. As to the trends of the world's fishery resources, the proportion of overexploited (i.e. overfished) stocks increased from around 10% in the 1970s to about 30% in recent years, whereas the proportion of underexploited or moderately exploited stocks declined from about 40% to 20%, according to the FAO.

Various regulatory measures have been implemented to prevent overexploitation. These include fishery management provisions in bilateral fishery treaties and domestic laws in addition to the United Nations Convention on the Law of the Sea (UNCLOS), initiatives under the framework of the FAO, and regulations implemented by regional fishery organizations. Though not specifically targeted at fishery activities, other related regulations include those under international treaties for wildlife protection, such as the Convention on Biological Diversity (CBD) and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (Washington Convention). The deterioration of fishery resources has been occurring despite the various regulations. Such is the reality we have today.

Indeed, the introduction of new regulations in developed countries tends to induce greater exploitation of resources in less-regulated developing countries. For instance, the overfishing of sea cucumbers in the Galapagos Islands has become a serious problem, while the illegal, unreported and unregulated (IUU) fishing of catch such as a tuna and Patagonian toothfish, which fetch a high price, is occurring in the high sea areas in clear violation of international rules. For instance, about 20% of tuna landed around the world in the late 1990s, when such illegal activities were at their peak, is estimated to have been from IUU fishing according to a case study published by the OECD.

Trade problems with fish and fishery products

Finding the right balance between the trade of marine products and the need for natural resource management is important. However, one problem with natural resource management is that it is often costly. The total cost of fisheries management for OECD countries amounts to 2.5 billion dollars (about 250 billion yen). This figure only includes costs borne by the governments; however, the costs incurred by the private sector, including lost fishing opportunities resulting from compliance with various rules, are believed to be significant. Thus, it is feared that free competition could result in a situation where unmanaged and unregulated competitively priced fish and fishery products may drive out those products that are properly regulated and managed. In order to rectify or prevent this situation, it is necessary to implement a mechanism transferring and/or recovering the costs of resource management, for instance, by charging certain premiums above market prices. In relation to this, it is also necessary to provide consumers with accurate information by such means as eco-labeling so that they are able to make informed decisions about the products they are purchasing.

Based on these observations, I believe that the WTO NAMA negotiations on fish and fishery products should be concerned more about the risk of resource depletion than about tariff reductions. But not many WTO member economies share this view. For instance, when Japan raised the concern that the elimination of tariffs could accelerate further depletion of fishery resources, six years ago, there was little support from other WTO members, except for South Korea and Chinese Taipei, which submitted similar views. Typical counterarguments made by other WTO members include: 1) import tariffs are not supposed to be a tool for fishery resource management, and 2) an ideal approach is to ensure the proper management of fishery resources by each exporting member and move on to the liberalization of tariffs. Also, because of the nature of the NAMA negotiations, in which tariffs on all non-agricultural items are treated systematically and without exception, there exists an atmosphere that makes it difficult to discuss circumstances of specific trade items from the open floor of the negotiation.

Unilateral measures by importing members

Such is the state of Doha Round negotiations. However, there was a case of a WTO panel ruling that found an import prohibition for the purpose of protecting living marine resources to be WTO consistent. In 1996, the United States imposed a ban on the importation of shrimp harvested in a manner posing a threat of the incidental capture of endangered sea turtles, and this prompted four exporting countries - India, Malaysia, Pakistan, and Thailand - to file complaints with the WTO (Shrimp-Turtle Case) in 1997. Ultimately, the WTO Appellate Body ruled in November 2001 that the U.S. import prohibition is consistent with the relevant rules of the WTO.

The United States in 2007 enacted the Magnuson-Stevens Fishery Conservation and Management Reauthorization Act to prohibit the importation of fish and fishery products from a country whose vessels have been proven by the U.S. government to be engaged in IUU fishing activities. In January 2009, the U.S. government identified France, Italy, Libya, Panama, China, and Tunisia as such countries. If bilateral consultations with each of those countries fail to produce a mutually agreed solution, the United States may prohibit imports of certain fish products from such countries.

Meanwhile, the European Community (EC) will enforce regulations requiring that fish and fishery products imported into EU countries be accompanied by a catch certificate which specifies information such as the area(s) and date(s) of catch, and the name of the fishing vessel, effective from 2010. The importation of fish and fishery products without such certification will be prohibited.

Rules negotiations (fisheries subsidies)

The rules concerning subsidies were originally set out under the GATT regime in 1948; however, these were joined by the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the Agreement on Agriculture in 1995 with the inauguration of the WTO. With respect to disciplines on fisheries subsidies, negotiations are currently underway on additional provisions, which would be introduced as an annex to the SCM Agreement. In the Doha Round negotiations, the ministerial declaration adopted in 2001 explicitly calls for "taking into account the needs of developing and least-developed participants" in negotiating rules on subsidies, whereas the 2005 ministerial conference in Hong Kong reached broad agreement to pursue, as a general direction, the strengthening of subsidies disciplines. What is noteworthy about the Hong Kong ministerial declaration is its explicit reference to the "prohibition of certain forms of fisheries subsidies that contribute to overcapacity and over-fishing."

According to OECD data, Japan is the largest provider of fisheries subsidies in terms of the disbursement amount of registered types of government financial transfers (GFTs). However, in terms of the ratio of subsidies to the landed value of fish, Canada is the largest at 32.7%, while Japan's ratio is relatively low at 16.8%. In addition, most of Japan's GFTs fall under the type of "general services" (i.e. monitoring and controlling of fisheries, surveys and research, and construction of public ports in fishing villages), with a significant portion accounted for by public port constructions. They may not fit into the criteria of “fisheries subsidies,” but this point is still unclear because there is no definition of “fisheries subsidies” at the WTO or any other international bodies. Furthermore, despite being the largest subsidy provider in terms of the disbursement amount, Japan has seen a decrease in the fishing capacity (total gross tonnage and the number of fishing vessels) and fishing production for the most recent two decades. This indicates that Japan's fisheries subsidies have not contributed much to overcapacity and overharvest. In contrast, GFTs are low both in Norway and New Zealand where the total gross tonnage of vessels has been increasing.

In the WTO fisheries subsidies negotiations, the prevailing view at the moment is that shipbuilding subsidies should be almost entirely prohibited, while an increasing number of members are taking a position to allow for subsidies for the purposes of fisheries monitoring, post-disaster reconstruction, and research and development. WTO members have so far agreed to prohibit subsidies that contribute to overcapacity and over-fishing. However, no consensus has been made on the specific definition of overcapacity and over-fishing nor have they agreed on S&DT to developing countries.

It has been pointed out that disciplines on fisheries subsidies face two peculiar problems. One is that, unlike in the industrial sector, the provision of subsidies in the fishing sector does not automatically lead to over-fishing if catch limits exist. The other is the question of what to do with S&DT to developing countries. Developing countries have an overwhelming presence in the production of fish and fishery products. Japan and the United States are the only developed WTO members listed among the top 10 countries in fishery production. Thus, allowing developing countries to provide fisheries subsidies under the name of S&DT could turn what is intended to be disciplinary rules into a mere formality. In other words, the success or failure of the fisheries subsidies negotiations in terms of the effect on overcapacity and over-fishing hinges on the treatment of developing countries which produce more fish than developed countries.

To sum up, my topic today was to introduce the current situation of the WTO and the conservation of living marine resources. I talked about the NAMA negotiations, the Rules negotiations, and past WTO rulings on unilateral trade measures by importing countries. Unilateral trade measures are problematic in that there is a tendency for importing countries to impose restrictions beyond the existing standard of the regulations agreed at international fishery treaties. In this regard, I find it problematic that the WTO is also seeking pro-environment provisions that are more aggressive than the existing standards of relevant international conventions and treaties relating to the conservation of fishery resources. In negotiating new rules on fisheries subsidies, greater attention should be paid to the possible impact the outcome of such negotiations could have on the nature of the WTO in the future.

Q: Subsidies negotiations are a very interesting area of WTO negotiations in terms of their historical background. Traditionally, the WTO has been taking a rather passive approach to the environment, seeking to ensure consistency with the existing relevant rules and conventions. The subsidies rules currently under negotiation, if formally adopted, would mark the WTO's first attempt to proactively induce pro-environment policies on its members. However, can the WTO set viable rules governing non-economic issues such as the preservation of the environment and natural resources? There have been calls for trade rules designed to prevent global warming. Do you think there is a possibility that the rules on fisheries subsidies may pave the way for a broader set of environmental rules under the framework of the WTO?

YAGI Nobuyuki
Assuming there are two areas of value, the environment conservation and trade liberalization, the WTO has traditionally tended to prioritize the latter value over the former. However, the ongoing negotiations on fisheries subsidies seem to be giving greater consideration to resource preservation. One of the problems on this move is that the WTO is stepping into an area where its professional expertise hardly exists. In reality, if a dispute over such non-traditional issues occurred, a WTO panel would seek the advice from relevant specialized organizations such as the FAO, however, I wonder if it would be advisable for the WTO to strengthen its discipline while relying on outside expertise. As you clearly pointed out, the ongoing move may have a spillover effect on other areas such as global warming. For instance, trade measures against fish and fishery products originating from IUU fishing are targeted at the way in which products have been produced, rather than products themselves. Developing this idea further could lead us to prohibiting the importation of industrial products manufactured in factories emitting large quantities of greenhouse gases (GHGs). Also, the absence of a preamble to the Agreement on Subsidies and Countervailing Measures leaves the door open for calls to prohibit subsidies to factories emitting massive GHGs under the framework of this agreement or any other future bans of subsidies to achieve new environmental goals set by the WTO without taking into account the discussions of other international bodies relevant to that specific issue.

Q: Japan's proposal of subsidies exempt from prohibition seem to substantially differ from those listed as general exceptions in the 2007 draft text proposed by the chairperson of the Negotiating Group on Rules. Meanwhile, various policies advocated by the Democratic Party of Japan (DPJ) would bring changes to the nation's domestic policies toward the fishing industry. What impact do you expect the currently under negotiation WTO subsidies rules to have on Japan's fisheries production system including the number of fishing vessels?

YAGI Nobuyuki
In Japan, the number of fishing vessels has been decreasing dramatically for more than 20 years. Currently, the issues causing concern are what to do with the depopulated coastal communities and how to deal with the aging and declining workforces in the fishery industry. What is imperative for Japan is to take drastic measures to solve its problems before that, and this is far from a policy to create over-fishing and overcapacity.

Q: China's fish production has been increasing. Is this attributable to fishing operations by state-run enterprises? In introducing rules on subsidies, wouldn't it be necessary to make sure that those state-run enterprises would not be exempt from the rules? Regarding over-fishing, I believe that new rules should be created outside the framework of the WTO because this is essentially an issue of fishery resource management.

YAGI Nobuyuki
I do not have detailed data as to whether China's fishing operations are carried out by state-run enterprises or private-sector enterprises. I believe that the treatment of state-run enterprises will become an important issue in future discussions on subsidies. As you pointed out, over-fishing is not a WTO issue but rather one of resource management. I agree with you that this issue should be addressed by the FAO or regional fisheries organizations. However, the problem here is that many participants of the negotiation do not share this view. Some non-government organizations (NGOs) want the WTO to address this issue and approached many WTO delegates to convey their messages. The FAO and other regional fishery management bodies have some shortcomings such as slow speed of decision making (often three to five years) and insufficient enforcement power. In this regard, the WTO has strength in that its judicial branch, i.e., the Dispute Settlement Body, has more established mechanisms to ensure the implementation of its decisions. If the WTO decides to establish a new environmental rule to accommodate the request of the NGOs, many environmental disputes will be brought to the WTO panel which does not necessarily have specific expertise on the technical aspects of the dispute.