I will tell you about the fisheries subsidies negotiations that are currently underway within the World Trade Organization. I will be speaking in both French and English because the draft text that I have here is written in English. I have been told that there is a French version, but I have been unable to locate it. I believe that it has just been published.
As you are no doubt aware, a draft text on the current fisheries subsidies negotiations within the WTO has just been made public. Of course, it is only a draft text; it has not been adopted as an agreement. We don't know if it will eventually lead to an agreement. That will, of course, depend on the outcome of the Doha Round. So this is a virtual text that may become an agreement, but that is not its current status.
There are boxes in this text. At the outset, we wondered what this agreement would look like: would it resemble an agreement on agriculture, or would it be a completely separate sectoral agreement on fisheries? In the end, that is not what happened. It is important for you to be aware of that, since the operational consequences could be far-reaching.
A decision was made to add an annex to the WTO Agreement on Subsidies and Countervailing Measures, also known as the SCM Agreement. From an official point of view, the draft text has now become Annex 8 of that agreement. It is not a separate agreement, like the Agreement on Agriculture, for example. This annex is now part and parcel of the SCM Agreement. If it is adopted, it will be interpreted in relation to the agreement.
What you would like to know is what subsidies will be targeted, and which ones will be subject to some type of disciplinary action. As is the case for the agriculture agreement, a traffic light approach has been adopted; this involves red, green, blue, etc. coloured boxes. There are three boxes in this agreement, and I will tell you what is in each one of them.
The first box contains the prohibited subsidies. Picture it as a red box, within it the subsidies that are not allowed. Then we have the box of subsidies that are not prohibited. The vocabulary for this category is somewhat strange. It doesn't mean that they are allowed under all circumstances, but in most cases, they would be acceptable. Nevertheless, there are still some restrictions. That, essentially, is the green box. Then there is a box for what is known as the special and differential treatment approach, namely, all of the special treatment afforded to developing countries.
The red box is the most important one since it includes the prohibited subsidies. There are a number of subsidies that are banned and absolutely prohibited.
I will even tell you that in cases of disputes arising over the subsidies, the end of the annex states that the dispute settlement mechanism used will be the same as that used for prohibited subsidies in the subsidies agreement. This is a separate mechanism, a very specialized one and one that moves very quickly. It reflects the seriousness of that prohibition.
One important point is that we're not just talking about fishing vessels, we're also talking about service vessels, for example vessels that bring fuel to fishing vessels. It is interesting to note that there are references to both fishing vessels and service vessels. This does not deal strictly with fishing vessels. What do those prohibitions include? They include any subsidies for the acquisition, construction, repair, renewal, and modernization of fishing vessels.
The second item in the prohibited red box includes any subsidies for the purposes of transferring vessels to third countries. If Canada wants at some point to transfer or sell surplus fishing fleet vessels to other countries, any subsidies to achieve that, to sweep the dust under the rug, are totally prohibited. It is forbidden to transfer any part of Canada's fleet to third countries, because the goal is to ensure that global supply does not increase. Therefore, if Canada's dust is swept under the carpet, then that does not work. Therefore, any assistance for any transfers to third countries is prohibited.
As expected, any assistance for the operating costs of vessels is prohibited. The simplest example would be a subsidy for the purposes of purchasing fuel at a special price; that would be absolutely prohibited. Any assistance for operating costs is also prohibited. Any subsidy whose purpose would be to cover fishing vessel losses would also be absolutely prohibited.
Another equally important item is subsidies for ports or port infrastructures for activities related to fishing. If you want to repair a dock that is used by fishing vessels to unload their catch, then any subsidies related to fishing activities in that port will be prohibited.
Another item that might be very important for you is the one covering income support for fishers. Let us suppose that you decide to set a minimum income level, whether that be through prices or through income. Any policy whose purpose is to guarantee incomes directly through the use of targets, whether they be income or prices to fishers, would be absolutely unacceptable and considered to be a prohibited subsidy.
Another important point I would make is this. Let us suppose that Canada acquired access rights for fishing in another country's offshore zones. If the Government of Canada were to transfer its rights to Canadian fishers, with no compensation, at the same price it paid, then that would be called a transfer of rights and would be a prohibited subsidy.
I should make an important distinction. The fact that Canada is purchasing access rights from a developing country in order to fish in the Caribbean, for example, and is doing this government-to-government, does not constitute a subsidy in itself. Countries were concerned for a very long time about whether or not that type of contract between countries was already prohibited. It's not prohibited. When Canada transfers to fishers the rights that it purchased without making them pay for those rights, that constitutes a subsidy. But the purchase of rights by Canada from another country does not constitute a subsidy in itself.
In World Trade Organization agreements, usually all the effects that are used for subsidy criteria are trade effects. They are called trade effects. But for the first time in the fisheries sector, something completely new is happening within the World Trade Organization. For the first time, ecological effects will be used to determine disciplines for certain trade practices. For example, with respect to the red box, any time a subsidy's purpose is to stimulate fishing of a stock that is clearly threatened, then that subsidy will be absolutely prohibited. I would like to draw your attention to the fact that for the first time practices are being prohibited for considerations other than trade considerations. For example, something could increase the market share but could have ecological effects.
What is in the box of subsidies that are not prohibited? As I already pointed out, the term is somewhat ambiguous because it implies that they are absolutely allowed. Not necessarily, because the texts overlap and in the end marginal means may be used. Overall though they are actually allowed.
Thank you very much for inviting me to be here.
To start with, when I talk here about subsidies, I'm talking about payments coming from the government, and therefore from taxpayers, to the fishing sector. These can be direct payments or indirect—say, through tax rebates and the like.
There are three key reasons people are concerned about subsidies. One of them is that it has been estimated that these are quite substantial amounts—I'll give you figures later—so it's a lot of money that goes to the fishing sector. Economists usually are concerned about the proper use of taxpayer money and whether this is the best use of it or not. This is one reason people are concerned about subsidies.
The second reason is the trade implications of subsidies. Marc touched on that. If one party gets subsidies and the other doesn't, then the one that doesn't get them is disadvantaged. That is the second reason.
The third reason, which has become very important recently for the WTO, is the effects of subsidies on the sustainability of resources. That's the ecological impact, which the WTO has taken on since the last Hong Kong meeting.
With regard to fisheries, more than a billion people worldwide depend on fish as a key source of protein. Fishing activities support coastal communities and hundreds of millions of people who depend on fishing for all or part of their income and livelihood. Yet according to the Food and Agriculture Organization of the United Nations, more than 75% of the world's fisheries are now either over-exploited, fully exploited, significantly depleted, or recovering from exploitation. So the ecology is quite an issue here.
Now, according to a report my colleagues and I put up, global subsidies are estimated to be around $30 billion to $34 billion a year. That's quite a big amount of money. These large subsidies have helped to produce a worldwide fishing fleet that is estimated to be up to 250% more than what is required to fish these stocks sustainably.
I have to say this. Some subsidies support sustainable fisheries, such as moneys we spend on management and research, because they help us to manage the resources sustainably through time. They are classified as good subsidies.
Our study, however, shows that up to about $20 billion are subsidies that go to support overcapacity and therefore overfishing. This is really the part of subsidies that needs to be looked at closely, and that's what I think the WTO is also looking at.
This $20 billion amount is estimated to be about 25% of the total landed value of the fish we land globally—25%, quite a big percentage. The total landed value is estimated to be around $80 billion or $90 billion or $95 billion a year.
This is important for Canada: subsidies that promote fishing capacity are concentrated in relatively few countries of the world—there are not many countries that do it—putting other non-subsidizing nations at an economic disadvantage. Among the world's top providers of these destructive subsidies are the European Union, Japan, and China.
Comparatively, while Canada provides substantial subsidies for programs such as fisheries management, social and community benefit, and capacity reduction effort, the country provides relatively few capacity-enhancing subsidies.
Fisheries subsidies are not only environmentally destructive, as I said earlier, but they preserve uneconomic and inefficient practices, and therefore it's important to eliminate them wherever possible.
The long-distance water fleets of countries such as China, Spain, and Japan are highly subsidized for their operations. Our recent study actually shows that a lot of the fleets that fish in the deep sea and the high seas wouldn't make profits without subsidies.
I think this is also important for Canada, given that sometimes these boats come into the Canadian EEZ and cause a lot of pain and help to deplete the resources.
One other area where fishing subsidies have been shown to be big and influential is in terms of illegal fishing. There are reports showing that a lot of money goes to illegal fishing operations around the world. Most of the operations will again not be that profitable, if these subsidies are taken out.
Here is an example. It has been reported that the Spanish government has given at least 1.7 million euros, or more than $2 million Canadian, of subsidies to a businessman with well-known connections to pirate fishing. This businessman is currently facing legal action for illegal fishing by at least four countries, and he was recently held by the United States.
With respect to fish populations off the west coast of Africa, I'll go to the developing countries, because I think this is important for Canada. A lot of the subsidies go to support fishing, and they weaken developing countries with huge consequences for the people and the resources. It has been estimated that the fish stocks off the coast of west Africa have declined by about 50% in the last few decades, starting in 1950.
There is constant conflict between traditional fishermen and foreign vessels from countries with access agreements with some west African countries. The Europeans are quite big on this. China and South Korea are also buying access. There are a lot of problems attached to this.
Concerns about the decline in world fish populations and the relationship of subsidies to overcapacity and overfishing led to the inclusion of fisheries subsidies in the current WTO negotiations, as mentioned by Marc. The fisheries subsidy negotiations are historic, in that it is the first time that conservation considerations, in addition to trade issues, have been taken up by the WTO. We actually took issue on this one from the Fisheries Centre. Daniel Pauly and I just had correspondence in Nature magazine, where we highlighted the need for the WTO countries to support the WTO in dealing with the bad subsidies because of these effects.
In late November 2007, the WTO rules group chairman, who is from Uruguay, released a draft. I think most of your topic came from this WTO draft. The draft text contains a strong prohibition on subsidies that increase overcapacity and encourage overfishing, including subsidies for vessel construction and operating costs. The text also reflects the importance of sustainability and fisheries management for any exemptions to the broad prohibitions. The chairman's text forms a strong basis for ongoing negotiations among the WTO members.
In mid-2007, 125 scientists from 27 countries, led by fisheries experts from the University of British Columbia and Dalhousie University, warned the WTO director, Pascal Lamy, that unless the WTO acts to significantly reduce worldwide subsidies to the fishing sector, global overfishing and other destructive fishing practices will likely result in permanent damage to the world's ocean ecosystems. The group of scientists asserted, and I'll quote:
||An ambitious outcome in the ongoing WTO fisheries subsidies negotiations is vital to the future of the world's fiisheries. We urge you to use your skill and leadership to significantly achieve a successful outcome in the fisheries subsidies negotiations and demonstrate to the world that the WTO can play a constructive role in solving problems of global consequence.
I think this is a big one for the WTO. We all know the image of the WTO when it comes to global issues like conservation, so this may be their big chance to prove to the world that they can help sustainability. The scientists said that the world's oceans are at the tipping point, and they identified reducing fisheries subsidies as one of the most significant actions that can be taken because of the strong economic incentives they create to overfish.
We can try lots of management arrangements to deal with overfishing. One of the biggest ones to use is the market. One way to do it is to take out incentives that encourage people to fish when they don't make profits.
I'm about to get to the end here.
With respect to elements of successful WTO fisheries subsidies, a broad prohibition of the subsidies is the only approach that will effectively help curtail global overfishing. To the extent that some subsidies are prohibited, they should remain subject to WTO review and discipline, to check against the risks they might cause. Subsidies that are not prohibited need to have some rules to make sure that when they're given they don't lead to overfishing.
There has also been recognition in the WTO negotiations that some flexibility should be given to developing countries in the fishery subsidies rules. And I think maybe for Canada, this is one outlet for some of Canada's concern regarding aboriginal people and social safety networks and so on. We could look at what has been given to the developing countries to see whether some can be adapted to take care of some key concerns in this country.
Critical issues in this area include defining the circumstances under which developing country subsidies should be allowed, the types of subsidies that would be permitted, and further criteria for ensuring that currently underexploited resources do not become depleted in the future. One argument put across by developing countries is that they have resources but don't have the capacity to fish, so they need subsidies. It's the same story that was given in Canada, too. Right? It's very easy to build up capacity, but taking it down is usually quite difficult.
So making the rules clear, how to avoid this buildup, is important.