Memorandum by the New Zealand Seafood
Industry Council
SUMMARY
This submission is on behalf of the New Zealand
seafood industry. Our interest in submitting arises from the fact
that the EU is now our leading export market and the New Zealand
seafood industry is encountering competition for distant water
fishing resources from vessels originating from the Community
fishing in the Pacific area.
The submission responds to most of the questions
in the context of New Zealand fisheries and our experience of
operating under a strictly enforced quota management system that
manages fisheries primarily by controlling catch limits. Fishers
have strong economic incentives to operate responsibly through
their access rights being expressed as Individual Transferable
Quota that has the legal character of being a tradeable, perpetual
property right.
INTRODUCTION
1. The New Zealand Seafood Industry Council
welcomes the opportunity to comment on progress of the Common
Fisheries Policy since its reform in 2002.
2. The New Zealand Seafood Industry Council
is a company formed by representative organisations of commercial
stakeholders in the fisheries and aquaculture sectors in New Zealand
to advise them and represent their common interests to government
and wider publics in New Zealand. The Council supplies policy
and technical advice to its shareholders and advocates on their
behalf. Its governance structure as a limited liability company
has been chosen as it imposes high levels of transparency; however,
the Council performs functions for its stakeholders that are similar
to those provided by Associations representing the fishing and
aquaculture sectors in other jurisdictions.
3. The context of the evidence provided
is that the countries that make up the European Union now collectively
provide the leading export market for New Zealand fish and fish
products—and have done so for the last decade. New Zealand
is a small producer of fish and fish products. It accounts for
less than 1% by volume of global production and supplies less
2% by value of the fish and fish products in global trade. But
it is significant to the New Zealand economy, as it is the fifth
largest export goods sector and more than 90% by value of landings
and production of fish and fish products are exported.
4. In addition to the European Union being
the leading export market for New Zealand companies, New Zealand
fishing companies are encountering competition for access to resources
from distant water fishing operations from the European Union
in the Pacific Ocean and Antarctica. There is some evidence of
co-operation between New Zealand fishing companies and fishing
companies from the European Union. One example is cooperation
between New Zealand companies and a UK company in fishing in the
South Atlantic Ocean and in the Antarctic zone.
5. The New Zealand commercial fishery operates
under a strictly enforced quota management system (QMS). Fishers
access the fishery through individualised access rights founded
on Individual Transferable Quotas (ITQs). These are proportional
rights to fish stocks that have private property characteristics
of being in perpetuity and being tradeable between rights owners.
ITQs are expressed annually as shares of the Total Allowable Commercial
Catch called Annual Catch Entitlements (ACE). Catches of fish
stocks that are included in the QMS must be accounted for with
ACE or penalty payments made to the Ministry of Fisheries. There
is a very active trading market for ACE, as a result. Trading
of ITQ is less frequent.
6. ITQ is a property right and is recorded
as an asset on the balance sheets of fishing companies. Company
law in New Zealand requires that Directors act in the best long
term interests of their companies and imposes a fiduciary duty
to look after the assets of the company. Thus there is a legal
intersection between the obligations of company law and the Fisheries
Act that provides strong incentives for fishing rights owners
to behave responsibly.
7. New Zealand is an isolated country surrounded
by the fourth largest Exclusive Economic Zone (EEZ) in the world.
The New Zealand EEZ contacts the Australian AFZ at two points
only; otherwise the border of the EEZ is the high seas of the
Pacific and Southern Oceans. Only a very small part of the stocks
of the EEZ straddle the boundary to the high seas and due to its
southerly position, the EEZ is visited by a relatively small proportion
of the highly migratory fish stocks of the western Pacific Ocean.
We are conscious that this is a very different resource and ocean
context to that faced by the United Kingdom and the European Union
at large. We do not presume that the solutions that New Zealand
has chosen for fisheries management will be appropriate in all
circumstances for the European Union. However we do, in large
part share a cultural and institutional heritage and the mechanisms
that have been employed in fisheries management in New Zealand
have a strong rooting in British legal and social heritage.
CONSERVATION AND
MANAGEMENT
8. The New Zealand QMS requires that Total
Allowable Catches (TACs) are set for all stocks in the system.
After provision is made for non-commercial catch interests in
each TAC (for Customary Maori and recreational proposes) the remaining
TAC is available for commercial catch and is called the Total
Allowable Commercial Catch (TACC) In the last 10 years there has
been a significant expansion of the number of species and stocks
in the QMS and therefore stocks managed through the setting of
TACs and TACCs. Currently there are 96 species or groups of species
and over 600 stocks in the QMS.
9. TACCs are applied to all key target stocks
and most bycatch stocks with commercial value. All catch of QMS
stocks must be retained and counted against ACE. If a TACC for
a stock is fully utilised and the stock is still being caught,
it must be retained on board and a penalty payment (Deemed Value)
made to the Crown that has the effect of removing any commercial
benefit. Deliberate overcatch of a TACC is an offence. The result
of this policy is that a large proportion of mainly bycatch stocks
are not fully caught—and none of the key target stocks is
systemically overcaught. Legalised dumping of overcatch, which
is a feature of the EU management system at present, does not
occur in New Zealand as it is illegal.
10. The commercial sector strongly supports
the QMS, the access and property rights that it provides through
ITQ and ACE, and is strongly committed to fisheries management
using scientific and other evidence-based TAC setting. The industry
is confident that output controls that limit fishing mortality,
translated to an individual enterprise/fisher level, is the most
appropriate way to manage fisheries for long term sustainability
in the New Zealand context. The capacity for directly linking
evidence from fishing, backed by scientific analysis, to catch
limits on resources provides strong incentives for responsible
individual and collective behaviour and strong incentives for
stakeholders to want to take greater responsibility for fisheries
management decision making. There is a growing body of evidence
of commercial stakeholders calling for more conservative catch
limits and actively cooperating with the government in ensuring
that catch limits are set appropriately to ensure long term fish
stock sustainability, even when the economic impacts of those
decisions are known to be significantly negative for stakeholders.
11. Effort limitation has no industry support
as a primary tool for management, although some effort based tools
are deployed for a variety of secondary management purposes. One
example is to limit access for larger (over 43metre) vessels to
coastal fisheries, which acts a protective measure for smaller
vessel operators. In general however, effort controls are not
regarded as effective tools in controlling fishing mortality in
the absence of TACs.
12. Spatial management tools have a place
as secondary management tools to manage fishing related impacts
on identified geographic or biodiversity features. They are not
supported as core tools for managing sustainable utilisation of
fisheries resources.
13. Fish stocks fluctuate naturally in response
to variations in the ecosystem and fisheries management is an
exercise in controlling human impacts on fish stocks within bounds
that can deliver long term sustainable utilisation. Therefore
if one of the impacts on ecosystems is climate change (or fluctuation)
the fisheries management system that controls human impact must
be flexible and be able to take account of exogenous impacts on
fish stock abundance. The New Zealand experience to date suggests
that managing fisheries by instruments that directly control output—ie
TACs and TACCs—is more effective than indirect input controls
including capacity management tools.
CONTROL AND
ENFORCEMENT
14. It has already been noted that ITQ is
a property right under New Zealand law. It is a logical step in
the New Zealand context to punish fisheries transgressions in
the context of other crimes against property. The penalties that
can follow even simple failure to meet statutory reporting requirements
are heavy. Deliberate flouting of the Act can result in fines
of hundreds of thousands of dollars, imprisonment and forfeiture
to the Crown of physical property such as vessels and vehicles
used in the committing of the offence.
15. Respect for property in capitalist societies
thrives when it can be defended at law. The New Zealand industry
experience of others lack of respect for fishing quotas and allocations
has been most apparent in its experience with regional fisheries
management agreements. For example under the Convention for Conservation
of Southern Bluefin Tuna, New Zealand has an annual allocation
of 420 tonnes that is managed in New Zealand through the QMS system
with the distribution of ITQ in the fishery to individual fishers
in New Zealand. The Convention has been challenged recently by
instances of significant and systemic overcatch of other member
states' quotas by their fishers. Such overcatch, if it had occurred
in New Zealand, would have led to the individuals being investigated
and criminally prosecuted and they would very likely have suffered
severe penalties personally and so would their businesses. No
similar penalties have been exacted on the individuals and firms
that overcaught southern bluefin in the other member states and
while the quota for one member has been reduced, there has been
no attempt made to pursue the overcatch action to the individuals
and firms that caused it.
16. The differences in treatment of illegal
fishing between countries that share interests in the same resource
is a significant issue. Capital is mobile and will move to the
jurisdictions where the costs are least and the benefits are greatest,
all other things being equal. It is of fundamental importance
that illegal fishing is dealt with firmly and that fishers are
provided with strong incentives—such as secure access rights—that
will encourage responsible and compliant behaviour.
STRUCTURAL POLICY
17. Most of the questions the Committee
asks on the impacts of structural policy are outside our experience
and we are unable to comment effectively. However the Committee
asks "What are your views on the possible impact ...of WTO-level
discussions as regards subsidies in the fishing sector?"
18. The New Zealand fishing industry has
strongly backed the position that New Zealand has taken at the
WTO to develop comprehensive rules under the Subsidies and Countervailing
Measures Agreement that will reduce and eliminate subsidies to
fishing industries. Our industry focus is on subsidies that have
the effect of undermining the New Zealand industry's competitiveness
in international markets.
19. Our competitive reality is that fishing
industries that can supply markets with fish products that have
been assisted to those markets with the aid of subsidies that
reduce their operating costs—eg subsidised fuel, bait, vessel
modernisation, subsidies to assist vessels to move to distant
water fisheries, crew support etcetera—can supply fish at
lower prices for longer than New Zealand.
20. The New Zealand fishing and aquaculture
sectors receive no direct subsidies from Government. Rather they
are levied for the full attributable costs that the Government
incurs in managing fisheries—including the research costs
incurred to determine advice on TAC setting. The cost recovery
levies amount to more than NZ$30 million annually and represent
more than 5% of the landed value of fish.
21. The fishing industry the world over
is suffering high fuel costs, a weak US dollar that is the international
currency that the fish business is conducted in. The New Zealand
industry has also had to face up to some significant quota cuts.
It has coped with these challenges by reducing costs, reducing
vessel numbers and personnel and moving a significant part of
the processing sector off-shore. The New Zealand fishing industry
does not have any overcapacity as the ITQ system ensures that
the sector is able to rationalise readily by trading to take account
of resource and market changes. The harsh down-side of this is
that fishing businesses are permitted to fail and the employees
of failed businesses can find themselves unemployed. But the companies
that remain are financially secure, conservatively managed and
collectively confident of their long-term survival.
CONCLUSION
22. This submission has promoted the benefits
that the New Zealand seafood industry is convinced have arisen
from a property rights-based, fisheries output management system.
We acknowledge that implementing such a management regime would
be very much more complicated when the resources are shared among
several nations with differing compliance and enforcement regimes.
February 2008
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