Research On Fisheries Subsidies Under WTO

The whole world is facing the problem of fisheries depletion. Overcapacity and overfishing are closely related to the huge value of governmental subsidies. Governments and Non-governmental Organizations have paid much attention to fisheries subsidies. Formally, Doha Ministerial Declaration decides to cover the issues of fisheries subsidies into new trade negotiations and the Negotiating Group on Rules now attempts to reach consensus on a new binding international agreement on reducing and elimination of fisheries subsidies among WTO members. The paper aims at presenting the existing rules and negotiations on fisheries subsidies under the WTO, analyzing the attitudes of WTO members towards this issue and making some suggestions on how to resole the problem of fisheries depletion and improve the Agreement on Subsidies and Countervailing Measures (ASCM).This part includes the definition of 'subsidy', the aim and principles of ASCM, types of subsidies, remedial measures, notification, special treatment of developing countries and countries in transition and fisheries subsidies. The Negotiating Group on Rules is mandated formally by the Doha Ministerial Declaration to "clarify and improve" disciplines on subsidies. The Group has three mandated areas: disciplines on subsidies, compensatory measures and fisheries subsidies. Subsidies are seen as undermining fisheries sustainability and hence new disciplines have a strong environmental foundation. However, any new negotiations and disciplines in the area will depend in large measure on the parties political and commercial interests.The negotiations on fisheries subsidies have been strongly influenced by the environmental NGOs. By introducing environmental criteria the environmental NGOs have created a matrix approach, taking the place of the traffic light approach based on cost/revenue. The matrix approach complicates and potentially undermines the WTO multilateral trading system.Prior to Cancun, the United States proposed an architecture for fisheries subsidies based on a traffic light approach to the Negotiating Group on Rules. The Unites States proposed that "red light" subsidies provided in Article 3 of ASCM should be extended and applied to those subsidies that directly contribute to overcapacity and overfishing or those that have trade distorting effects. The US proposal to develop a category of "dark amber" subsidies also contains elements that introduce an environmental hierarchy in multilateral trade issues. The US in effect proposed a legal hierarchy of obligations where a subsidy or trade measure would presumably be deemed to be actionable, that is, trade distorting, but that this could be rebutted by the demonstration of environmental sustainability. More significantly the thrust of the US proposal would allow the use of the WTO Dispute Settlement Mechanism to enforce environmental sustainability in the fishery.Japan and Korea rejected any additional disciplines, based on the argument that there was insufficient evidence of the need for fisheries-specific disciplines. Japan was also of the view that the WTO, as a trade body, would be going outside of its scope and area of expertise by examining the environmental effects of subsidies.The EU approach would prohibit capacity-enhancing subsidies and allow those subsidies that smoothen the effects of changes in the fisheries sector. It supported provisions for the special treatment of developing countries. Chile proposed to prohibit commercial subsidies that lower costs and increase production and the "amber" category would cover other subsidies not listed as prohibited. China sought further clarification of the US proposals on methods of classifying different types of subsidies; like the EU, China proposed the creation of a "green light" category for subsidies helpful to trade and environment sustainability.A joint proposal made by a group of small island and coastal developing countries echoed China's proposal regarding special and differential treatment foe developing coastal countries and called for special and differential treatment in specific areas in the fisheries subsidies. They also argued that fisheries management should be addressed by the appropriate institutions outside of the WTO.Much of the post-Cancun discussions have been based on New Zealand's proposal. New Zealand proposed that disciplines should rule the "red light" subsidies primarily, including all the financial supporting programs that may contribute to over-investment, overfishing and trade distortion. It does not advocate a green light, but notes that if one is included it should be limited and well defined. The New Zealand proposal responded to the difficulty of quantifying overcapacity and overfishing by introducing the cost/revenue impacts test to estimate how subsidies affect lower production costs and increase revenues of the industry.Japan has circulated two papers in response to the New Zealand proposal. The first paper called for examination of which subsidies caused illegal, unreported and unregulated (IUU) fishing and those that could further sustainable development goals. The second paper called for a move from "fruitless discussions on trade distortion caused by fisheries subsidies" to a WTO focus on "conservation and sustainable utilization of fisheries resources" and argued that trade distortion caused by fisheries subsidies should be resolved through general, trans-industrial improvement of the ASCM.Korea questioned the fundamental basis of the New Zealand proposal, requesting further research of the linkages between the cost revenue impacts of subsidies and overcapacity or overfishing; the application of subsidies, including in underexploited fisheries; and, rationalization of the cost/revenue impact test and the ASCM.A group of Small Island Caribbean and Pacific States proposed that ASCM Article 3 should not apply to small economies; non-actionable subsidies, which are not subject to dispute or countervailing measures, should be reactivated for small economies.In the Negotiating Group on Rules, Canada has proposed general improvement to the ASCM with a specific focus on the "serious prejudice" provisions. The Canadian approach is focused on market effect and attempts to write more systematic methodology into the ASCM, which, if successful, should reduce the abuse of the dispute settlement mechanism. It also leaves room for the use of subsidies that are not significantly trade distorting.The extent to which developing and least developed countries utilize subsidies in the fisheries sectors is less documented than in developed or some middle-income countries. The type of subsidy or subvention found in developing countries is often in the form of bilateral or multilateral development projects. Developing countries generally use subsidies for the development of the sector.If the new fisheries subsidies disciplines are to be adopted, there would need to be adequate provision to meet the development needs of least developed countries and small vulnerable economies. Special and differential treatment will have to be through endorsement from the entire WTO membership. It may cover five aspects. Although China's proposal called for provisions on special and differential treatment in new disciplines, it did not articulate the application of or eligibility for special and differential treatment.Now the problem is not whether the fisheries subsidies disciplines should be improved through international cooperation, but how to ruled fisheries subsidies through international cooperation. The current architecture proposed by the large developed countries for new disciplines is not convincingly justified by evidence and may miss the target of conservation. It may encourage costly trade disputes, as well as limit the ability of developing countries to promote sustainable growth in the fisheries sector. Developing countries should consider responses to the challenges posed by these new disciplines, continue striving for special and differential treatment and propose new disciplines that address the overcapacity of distant water fleets and potential overfishing in the open seas. Proposals from the EU and US for the traffic light architecture constitute a dramatic introduction of environmental conditionality. A traffic light approach that relies solely on the simple cost/revenue formulations that is within the traditions of the ASCM limits the threat to the multilateral trading system. It is only when the "traffic light vector" becomes a "matrix" with environment criteria over and above the cost/revenue formulation that the WTO will venture beyond its traditional competencies. The ability of WTO members to fashion meaningful trade disciplines without directly introducing environmental conditionality into the WTO in a potential destructive way will depend on the fact-based decision-making and the participation and appropriate consideration of developing countries.