A group of 125 scientists have recently written an open letter to Pascal Lamy, head of the World Trade Organization (WTO). Here, they warned: “The majority of the world’s fish population is in jeopardy from overfishing and, if current trends continue, will be beyond recovery within decades.” The scientists said WTO should push for a cut in global fishing subsidies, the main cause of overfishing.
What is interesting in this letter is the fact that these scientists went to the WTO chief for help and identified subsidies as the main reason why “fish population, as well as many other ocean species, have been depleted to a fraction of their historical level”.
In short, the problem has been caused by bad economics and WTO can do something about it. This is in stark contrast with the general belief that global trade and market pricing are responsible for various human and environmental problems. It is often quite the opposite, which is why centrally-planned economies such as the former Soviet Union often poison air and water with incomparable zest.
Governments, the world over, lavish their fishing industries with subsidies of around $35 billion. Of this, nearly $20 billion is spent directly on increasing fishing capacity, by underwriting buying of boats, fuel and meeting other operating costs—helping put more boats out at sea. The revenues of the fisheries industry are $80 billion or so. This means that subsidies are a quarter of revenues. Take them away, and much of global fishing will become uneconomic. Subsidies directly promote overfishing by artificially suppressing costs and making a mockery of the discipline of the market.
The Food and Agriculture Organization (FAO) says fish provide 19% of the world’s supply of protein. “Many of us remember a time only decades ago when the oceans were viewed as vast storehouses of protein, able to provide food to an increasingly hungry world, food that could be provided by fishermen relying on technology and scientific management. At the same time, many of us started to observe the decline of some fish population,” the scientists wrote in their letter to Lamy.
By some estimates, the fishing industry is currently pulling out twice the amount of fish that can be replenished by nature. In short, too many fishing boats are chasing too few fish. There may be no fish in the sea by the year 2050, a disaster for not only those who find bliss in a plate of sizzling Bombay Duck, but also for the estimated 200 million people who depend on fishing for their livelihoods.
Scientists and economists at the University of British Columbia in Canada have estimated subsidies given by 144 coastal countries.
Interestingly, India has the largest subsidy bill in the world.
Our government spends $4.3 billion every year, says this study. The other two big subsidizers are Japan ($4 billion) and the EU ($3 billion). In a classic example of unintended consequences, some studies show that the generous rush of aid that came in after a tsunami hit Asia in December 2004 led to the overcapitalization of many fishing activities in the region, thus exacerbating the problem of overfishing.
But subsidies are not the only problem.
Overfishing is a classic case of what economists call the tragedy of the commons. Nobody owns the world’s oceans, so they are an “open access” system. While countries have exclusive right to “their seas” within 200 nautical miles off the coast, there is no concept of private property in the oceans. So nobody has an incentive to nurture or replenish what is essentially a limited resource. The lack of property rights is perhaps inevitable, at least in the foreseeable future. The only alternative then is a global deal to limit fishing—much on the lines of the proposed global deals on limiting pollution.
The crisis in the oceans tells us a lot about similar situations in other natural resources that are limited in supply, where production cannot be increased over the long term in response to price signals. A rise in the prices of, say, tomatoes will act as an incentive for farmers to produce more of them. This cannot happen to the supply of fish over the long run. Short-run incentives to increase supply, which is what the $35 billion of subsidies actually amount to, will lead to a quick depletion of that resource.
The same logic applies to the problem of underground water. Free electricity and the lack of any ownership rights on ground water have led to a destructive race to pump out as much of it as possible. There are striking parallels between what is happening to the world’s fish and India’s underground water.
Subsidies, a lack of functioning markets and the absence of private property rights can wreck havoc with natural resources. A lunch of fish curry and rice could soon be an expensive affair, because of bad economics out at sea.
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