THE EQUITY PRINCIPLE AND TRADEABLE FISHING QUOTAS

Allocation

The allocation of fishing quotas is usually made on the basis of the past catch history of fishing vessels and awarded to the owners of those vessels. The aim of doing it this way is to 'preserve the status quo of a fishery and to gain the support of the industry' (Bess 2005: 340).

Grandfathering is a great source of inequity, because quotas are usually given free and quickly become very valuable, so that those who are granted quotas get a windfall benefit.

Currently, there are no standards on how allocations might be done fairly and equitably. For example, regardless of one's record in the Alaska halibut and sablefish fishery, vessel owners who did not fish between 1988 and 1990 were ineligible to receive initial IFQ [indi­vidual fishing quota] shares. Conversely, someone who last fished in or retired after 1988 would have received (or their estate would have received) quota shares, while someone who entered the fishery in 1991 would receive none. (Buck 1995)

The US group Taxpayers for Common Sense (TCS 2002a) claims that: Once handed out, the quotas amount to a winning lotto ticket that can be sold to the highest bidder... In the Alaska Halibut program, for instance, many fishermen became instant millionaires when they sold their quota shares to other, less fortunate fishermen who had not received quotas.

In the meantime, others involved in the fishing industry suffer, including the fishers who don't own a share of a fishing vessel: crew, onshore fishing industry workers, and the community that supports the industry.

Groups like TCS (2002b) argue that since fisheries are a public resource, it is taxpayers who should benefit from the resource, not private individuals and companies: 'In some cases, the IFQ recipients don't even fish.

Similarly, in Iceland, where quota owners are renting their quotas to those who want to fish, many fishers are effectively paying taxes to quota owners rather than the government. These quota owners are referred to as 'Lords-of-the-Sea' (Hannibalsson 1995).

Access

Traditionally, fishing has been an industry of small-scale operators. This description of the US fishing industry in the 1970s is typical: 'The fishing industry is highly fragmented. Fishermen consist, for the most part, of small independent fishing vessel operators, more than 90% of which employ less than five people' (Macinko amp; Bromley 2002: 26). Under indi­vidual transferable quota (ITQ) systems, all that has changed.

In New Zealand, more than 2000 part-time fishers, including many Maori fishers living in rural areas and seasonal workers who fished to supplement their meagre incomes, were not given quotas because they were not defined as commercial fishers and thus were excluded from fishing. This violated the Treaty of Waitangi - an agreement between the government and the Maori people on which the nation was founded - that gave the Maori people rights to fisheries resources. In 1992 Maori fishers were allocated 10 per cent of the ITQ for species already in the system and 20 per cent of the ITQ for species brought into the system after that date (Bess 2005: 341; Duncan 1995: 102-3).

Small 'commercial' fishers in New Zealand received quotas that were too small to be commercially viable. The price of quotas quickly rose, 'with just a few tonnes worth many thousands of dollars'. It meant that small fishers either had to buy expensive quotas in the hope that their catch would earn enough profit to pay back the investment - a risky proposition - or sell their quotas and leave the business.

The 1980s management procedure was, firstly, to commodify access to the fish species most under threat, in the form of catch 'quota'; and then to award these rights to the major commercial operators as a free gift, pro rata according to their documented histories. The small­scale and 'informal' operators, and the local people who thought they enjoyed an environmental domain as a collective heritage and source of sustenance, were told that they do not 'own' it at all. Effectively, ownership (all commercial catch rights) were awarded to the large commercial operators. (Duncan 1995: 102)

Concentration

Grandfathering also makes it more difficult for new fishers to come into a fishery because they have the extra cost of buying quotas. Those with best access to low-interest capital are able to buy up quotas: 'Thus, cor­porate investors, rather than more efficient fishermen, are likely to pur­chase available ITQ shares'. Fish processors or wholesalers who buy up quotas are able to 'exert substantial control over the industry'. For example, by 1995 the largest holders of quahog and surf clam quotas in the USAwere the National Westminster Bank of Jersey and transnational accounting firm KPMG (Buck 1995). According to Taxpayers for Common Sense: 'More than $80 million worth of fish were given away to 180 individuals and companies, now 51% of the quotas are owned by just 5 companies' (TCS 2002b).

Although some countries restrict the amount of the total allowable catch of a species that individuals or companies can own in a particular area, concentration of ownership still occurs. It is easy enough 'to create ad hoc subsidiaries for quota-holding purposes' (Greer 1995: 100). In New Zealand, for example, 'quotas have rapidly transferred into the hands of fewer and fewer companies and individuals and the process is still ongoing', despite legal limits to the extent of ownership of quotas (SFN 2003; Walker 2005).

Many companies also put themselves in the favourable (and illegal) position of controlling even more quota in each area than the QMS [quota management system] rules allowed. Some conspired and made secret deals with each other, while others bought up extra quota through the use of subsidiary companies. (SFN 2003) As a result 'shore based fishing companies control almost the entire New Zealand fish catching sector' (SFN 2003). By 1995 three companies owned more than 60 per cent of the quota. In Australia, quotas in the southern bluefin tuna fishery were concentrated in the hands of South Australian corporations (Duncan 1995: 102-3).

Small inshore fishing boats decreased in numbers in Iceland as else­where, while there was a growth in large trawlers with processing facil­ities on board: 'There has been a substantial concentration of quota shares within the larger, vertically integrated companies since the intro­duction of ITQs', so that by 1999 the five largest quota owners controlled 25 per cent of the total allowable catch and more than half the TAC was owned by the 20 largest companies (Eythorsson 2000: 487-8).

Along with a general liberalisation of the economic policy in Iceland, there is a trend towards an ideological shift within the industry, leaving behind the idea that fisheries and fish processing should be locally embedded in fisheries communities. Many fisheries compa­nies have joined the Icelandic stock-market, and ownership is in many cases not linked to any particular community. Investors without fisheries background are now well represented among the owners of quota holding companies. (Eythorsson 2000: 488)

Employment

A reduction in vessel numbers and employment has been observed in many fisheries around the world which have been subjected to tradeable quota systems, including the southern bluefin tuna fishery in Australia (vessels down 70 per cent in two years); the halibut fishery in British Columbia, Canada (employment down 32 per cent); and the surf clam and ocean quahog fishery in the USA (employment down 30 per cent in four years) (Greer 1995: 100; Guyader amp; Thebaud 2001: 107).

In addition, the reduced demand for experienced crew can keep wages down and increase working hours, particularly when the industry is dominated by large corporations. For example, in the surf clam and quahog fishery remaining crew work longer hours for less wages, and in the British Columbia halibut industry the remaining workers have to work longer hours and more days for the same pay. Those who lost their jobs generally received no compensation, unlike the boat owners who could sell their quotas if they left the industry (Buck 1995; Duncan 1995: 102; Guyader amp; Thebaud 2001: 107-8).

Similarly, in Iceland, 'where fisheries contribute 70 per cent of exports and employ 12 per cent of the working population, severe layoffs in fisheries since quota markets have been implemented have prompted great concern' (Walker 2005). Wages have been halved in some cases because there are so few other employment choices. Fishing crews went on strike several times during the 1990s in an unsuccessful attempt to rectify this state of affairs (Eythorsson 2000: 488; Guyader amp; Thebaud 2001: 108).

Quota owners often pass on the cost of buying quotas to their crews rather than to consumers in order to remain competitive. In other words, wages are reduced to take account of the cost of the quotas and contract crews are paid for the price of the fish minus the cost of the quota (Eythorsson 2000: 488; Guyader amp; Thebaud 2001). In Iceland:

Vessel owners expect the fishermen to share in the cost of buying additional quotas, and in fact, they do so by reducing the fishermen's pay. There are even examples of owners who have sold their own quota, pocketing the profit, and then had the fishermen share with them the cost of buying a quota to replace the one they sold. (Hannibalsson 1995)

The ITQ system has also thwarted the career path from crew to boat owner. In Tasmania, for example, the market value of lobster pots went from $10 000 in 1997 to over $25 000 in 2002, so that a full 40-pot licence was worth over $1 million, taking it beyond the reach of a worker's savings:

There is a trend toward increased ownership of quota units by non­fishing investors and increased ownership by non-Tasmanians.

Fishing communities

The impact on local fishing communities of concentration in the industry and loss of employment has been massive. Each fishing job is thought to be responsible for three more jobs in the community, and each dollar earned through fishing earns three more in the community (Duncan 1995: 102). Fishing has also become a far more centralised activity as a result of this concentration, causing rural unemployment. In New Zealand:

Crews are recruited from city offices and cheap labour comes from overseas. Administrative structures are rationalised and landings have become concentrated in ever fewer ports. Rural slipways and harbours have lost the vast majority of their commercial trade while rural engineers, net and pot makers, and other fishing industry sup­pliers have all diversified and shrunk, or shut down altogether. (SFN 2003)

Icelandic fishing has traditionally been 'a strictly regulated industry with units of production embedded within local communities' (Eythorsson 2000: 490). But it is those local communities that have suf­fered from the introduction of tradeable fishing quotas. Remote villages with populations of less than 500 people, which were dependent on fishing for their livelihood, have tended to lose more quota than larger villages and towns as a result of vessel owners selling their quotas or moving elsewhere. The shift of fish-processing to onboard processing facilities or to other regions and even other countries has exacerbated this problem (Duncan 1995: 103): 'The livelihood of the coastline fishing communities depends entirely upon the fish being landed and processed there'. In such small communities there is little else to employ villagers or provide an income, and the 'drastic event of losing the right to fish has a strong demoralising effect' (Eythorsson 2000: 489; Hannibalsson 1995).

The allocation of quotas to fishing boat owners 'does not recognise the traditional composite role of all parties in creating an historic catch record' (Buck 1995). While the boat owners get compensation for selling their quotas, their crews and the communities which supported them get nothing in return for their financial investments in homes and com­munity infrastructure, or for their emotional and cultural investment in the communal life of the village. In Iceland, 'The quota owner has assets that allow for a comfortable retirement in Reykjavik or by the Mediterranean, while his neighbour has lost both his livelihood and his lifetime savings placed in a house which is now impossible to sell.' (Eythorsson 2000: 489)

In 1998 the Supreme Court of Iceland found that the handout of exclusive and permanent rights to publicly owned fisheries to people who happened to own fishing vessels at the time of the 1990 Fisheries Act was not in the best interests of the public nor the best way to con­serve fisheries resources. It ruled that the Act was unconstitutional because the Icelandic constitution incorporated the principle of equality. However, only two years later, the same court ruled that the allocation of quotas was constitutional because quotas were not defined as private property in the Act (Eythorsson 2000: 490).

The ITQ system has generated more controversy in Iceland than any­where else as a result of the large inequities it has created in a nation very largely dependent on fishing. Most people are critical of the system and a single-issue anti-ITQ political party even got two candidates elected to parliament in 1999 (Eythorsson 2000: 490).

In the Tasmanian rock lobster industry, quota trading was introduced to make fishing more efficient and therefore more profitable for boat owners - but this came at the expense of crew, regional economies and social equity: 'Tasmania could have a large fleet maximising employ­ment and lifestyle opportunities, each limited to a low annual catch, or a more quot;efficientquot; smaller fleet producing more economic surplus' (Phillips et al. 2002: 464).

The new quota owners 'are increasingly influenced by financial interest, rather than by identification with the values of industry tradi­tions and sympathy with the concerns and interests of fishworkers' which often characterised the previous owner-operators (Phillips et al. 2002: 465). The wealth of the new quota owners, who are often not based in fishing communities, is spent in other towns and cities.

In South Africa the new tradeable fishing quota management system has provided access to new commercial entrants and allowed many more black people into the industry, but traditional fishers have been marginalised. Traditional subsistence fishers are generally organ­ised in a communal way 'where fishers are fishing co-operatively as a part of longstanding cultural tradition'. This does not fit with the indi­vidual rights paradigm, which is designed to enhance economic effi­ciency rather than equity or sustainability, and many small-scale fishers have lost access to their livelihood (van Sittert et al. 2005; Sowman 2005: 11-12).

In the case of a capital-intensive fishery it may be most appro­priate to adopt an individual rights system. On the other hand, in a coastal fishing community, where there is geographic clarity of the community, cohesiveness and a level of organisation amongst the fishers, a collective rights approach may be more appropriate. In such situations, fishers usually have an interest in the longterm sustainability of the resource, and through community moral pressure and the creation of appropriate management institutions and support from government, could create collective incentive for resource stewardship and effective compliance. (Sowman 2005: 11)