Impact of a simultaneous reduction in fishing subsidies and introduction of efficient management of rents: the case of the Northwest Spanish fleet

Abstract

Subsidies to the fishing sector have long been criticized for fueling over-fishing, and a reduction in subsidies is currently on the agenda in the negotiations within the World Trade Organization (WTO). This article analyzes the role of subsidies and other management measures for Spain, one of the largest fishing nations within the EU. A static bio-economic model is used to analyze the effect of simultaneous elimination of subsidies and introduction of an economically efficient management system for the Northwest Spanish fleet. It is concluded that improvements in management would bring substantial rents to the industry, up to €164 million, irrespective of subsidy level, but also a reduction in fishing effort of almost 60%. Under a management scheme that maximizes economic rents, elimination of subsidies in the fishery would increase social welfare, induced by a decrease in the equilibrium fishing effort level. However, the impact of subsidies under this scheme is limited.

International effects of fisheries support policies

“…In North and South America, support based on fisher's income is the largest share, while in Europe fuel tax concessions (FTCs) are the largest support category. Prior research on the effects of support on fishing was reviewed in OECD (2017 [4]) and in Martini and Innes (2018 [2]). In summary, large global studies contain some conclusions regarding the impact of different types of subsidies, but are based largely on a first-principles analysis (APEC, 2000 [5]; Milazzo, 1998[6]; Sumaila et al, 2016 [7]).…”

“…South America has the most unbalanced trade, with exports exceeding imports by volume by a wide margin. The version of the model used in Martini and Innes (2018 [2]) was developed to reflect the global fishery and was based on the global bioeconomic model used in World Bank (2017[17]), modified with additional features found in the model developed for OECD (2005 [18]). The lack of a regional view of fisheries polices prevented that analysis from investigating one of the elements of fisheries support of interest to policy makers: the spillover effects of policies in one region on fishing opportunities and activity in other areas.…”

“…A first analysis of the relative impacts of different FSE support categories was made using the Fisheries Policy Evaluation Model (FishPEM) (Martini and Innes, 2018 [2]). The original FishPEM represented a single global fishery and was designed to investigate the impact of fisheries support on overfishing, overcapacity and IUU fishing.…”

Relative Effects of Fisheries Support Policies

“…Payments based on vessels, output, or fishers' income increase the importance of the capital stock of vessel in the production mix of fishing operation, while other forms of support reduce it. 16 The large segment increases fleet capacity more than does the small segment in response to increased support to fishing vessels ( The large change in their effort caused by this type of support is enough to overcome the compositional effect from relative input prices, which acts in the opposite direction. Otherwise the effects are similar; small changes resulting from all policies except for vessel-related support.…”

“…Otherwise the effects are similar; small changes resulting from all policies except for vessel-related support. 16 Scrapping or decommissioning schemes will add a constraint on use of vessels, effectively mandating reduced investment. This effect is not accounted for in the model so the results for such policies as a separate category of support may be different.…”