By Tyler Omichinski
Under the Canadian regime, an individual receives employment insurance (EI) when they find themselves unemployed under a complex criterion that we will not cover here.
The previous Ministerial Declaration of this round of negotiations took place in 2005. A group of nations, calling themselves “Friends of Fish”, is calling for a reduction in subsidies for fishing around the world on the grounds that subsidies lead to over-fishing. This issue last arose in Canadian politics in 2008 when the last round of announcements were made in regards to the development of the discussion.
This issue has not yet been resolved, and it came to my attention during my research on Employment Insurance and family fishers for the FLC, which indicated that the latest movement of the fisheries subsidies negotiations was the election of a new chair in 2010.
What is a subsidy?
The WTO Subsidies and Countervailing Measures (SCM) Agreement includes a definition of what a subsidy is for the purposes of the agreement. A subsidy must be:
- a financial contribution
- by a government or any public body within the territory of a Member
- which confers a benefit
If something meets all three of these criterion, it is a subsidy. This definition, however, is extremely broad. Each of these has been broken down into a few different aspects to determine what each specifically means. The WTO has a non-exhaustive list of examples of subsidies including: grants, loans, equity infusions, loan guarantees, fiscal incentives, the provision of goods or services, and the purchase of goods.
The term “conferring a benefit” is vague and is seen by many to be broad in meaning. The SCM does not provide guidance on these issues, but “the Appellate Body has ruled (Canada – Aircraft) that the existence of a benefit is to be determined by comparison with the market-place (i.e., on the basis of what the recipient could have received in the market).”
Beyond the verbiage, these rules appeal to the general principle of the prevention of the distortion of market mechanisms. This is actually addressed in the SCM agreement to a degree through the specificity requirement. Where a subsidy is “widely available within an economy” a distortion is presumed not to have occured.
As a counterpoint, it is interesting to note that the more narrow view of subsidy held by some economists is more in line with a definition which would be used in everyday discussions. As quoted from Triest, “a subsidy is a form of assistance provided by the government to a subset of the public that lowers the cost of producing a good or the price the consumer pays for a good.” This largely meets the same definition as the above, but provides a deeper view as to the effects of the subsidy than the SCM agreement. In addition, it focuses more on the subset of the population.
Issue: Does EI meet this test?
Technically speaking, yes. Employment Insurance is a financial contribution; it is a cash outlay from the government, soon to be an arm’s length corporation, which confers a benefit to the individual fisher. Under this definition, however, EI of any kind could confer such a benefit to the individuals. Thus it is saved, presumably, under the specificity aspect of the agreement.
The counter argument to this presumably is that though EI is widely available throughout the economy, even amongst some nations from “Friends of the Fish”, it takes on a different cast when viewed through a seasonal industry like fishing on the East Coast in Canada. Many fishers have admitted that such seasonal fishing would not be economically viable or possible without the support of EI.  Under this situation, the continuation of EI allows the industry to continue in a situation where it might otherwise be unable to. In alluding to the principles guiding the WTO and agreements under it, the question is whether EI will lead to distortions in the market. By allowing fishing to continue where it might otherwise not be economically viable, this could be portrayed as a subsidy and thus warrant limitation.
This line of argumentation, however, does not address the specificity problem: EI is not a specific benefit for fishers.
Do Subsidies lead to Over-Fishing?
The premise that subsidies can lead to over-fishing is based upon sound economic theory. When under no other regulatory regimes, subsidizing an economic activity provides additional incentives for individuals to enter the industry and increases competition in the market.
There are a few nations who favour what has been called the “no need” approach, including Japan, South Korea, and Canada. The view is that fishing and fisheries are, ostensibly, not inherently different than other industries in regards to subsidies. Japan, for example, has pointed out that there are a variety of factors which determine whether a fishery is over-exploited or not, including catch quotas, licensing, and the enforcement of these measures. There are several in this group who examine the issue in far better detail, as well as making a far better defense of the position. In short; there are a variety of other factors which ought to be considered before subsidies given the complex and multifaceted nature of fisheries. If environmental protection is the true intention of the negotiation, the elimination of employment insurance resulting in the removal of social safety nets does not seem to inherently follow the stated goal.
What about these “Friends of the Fish”?
A brief examination of the “Friends of the Fish” demonstrates a couple of things. As a group, these nations generally rely upon larger commercial vessels rather than small independent fishing outfits or are genuinely interested in the environmental protection of fisheries. Argentina, for example, can be considered to fit both of these groups. In the 1990s, liberalization of fisheries led to a significant level of overcatch and environmental stress, culminating in a moratorium on fishing in certain areas in 2008.
Examining the latest available report from the FAO on the global fleet may provide a clue as to the motivation of the “Friends of the Fish”. As of 1997, the latest available report, both Argentina and the USA were approaching or already had over 500 vessels in their fleets of vessels over 100 tons. Where Canada, Japan, and South Korea all have fleets reported to be reducing their fleets of vessels over 100 tons, several of the “Friends of the Fish” nations, including Australia, Argentina, Chile and the USA, have been increasing or holding steady the proportion of large ships in their fleets . Pakistan and Colombia did not have information available in this report. From this we can deduce that those who are still fishing in Canada, Japan, and South Korea are utilizing smaller vessels while the “Friends of the Fish” appear to have been largely transitioning towards fleets which require either corporate or well heeled backers who would not require EI to operate.
Even if the WTO, currently which appears to be still in consideration of the substantive proposals submitted by the delegations, decides that EI is a subsidy this is not necessarily the end of EI. The softwood lumber dispute, for example, demonstrates an example of an instance where Canadians were able to repeatedly appeal a decision successfully. While it is not entirely similar to the softwood lumber dispute, it represents a reality of international law that a nation cannot be bound against its will. The decision remains deadlocked at this time between key groups. With the WTO’s aim of having decisions made by consensus is seems unlikely that there will be significant movement on this issue until someone is willing to compromise. Given the effects that such a decision could have upon family fishers in Canada, it remains an issue which should be watched.
1 A rhetorically weighted name for Argentina, Australia, Chile, Colombia, the United States, New Zealand, Norway, Iceland, Peru and Pakistan.
2 Fisheries subsidies archive, WTO, http://www.wto.org/english/news_e/archive_e/fish_arc_e.htm.
3 Taken from http://www.wto.org/english/tratop_e/scm_e/subs_e.htm or “Subsidies and Countervailing Measures Overview”, WTO, taken from wto.org
4 Robert K Triest, “The Economics of Subidies for Community Development: A Primer”, as provided by the Federal Reserve Bank of Boston on their website, http://www.bos.frb.org/commdev/smart-subsidy/10-triest.pdf .
5 North Coast Steelhead Alliance, “EI and Fishermen”, first published May 17, 2012.
6 J Atsu Amegashie, “The Economics of Subsidies”, Crossroads, 6.2, 7-15.
7 Marc Benitah, “Ongoing WTO Negotiations on Fisheries Subsidies”, American Society of International Law, http://www.asil.org/insigh136.cfm.
8 WT/CTE/W/226, Analysis on the Relationship between Fisheries Subsidies and Over-exploitation of Fisheries Resources. Submission by Japan.
9 UNEP Country Projects: Round II: Argentina, UNEP, 2000, http://www.unep.ch/etu/publications/Synth_Argentina.PDF
10 “Argentina Bans Commercial Fishing to Protect Wildlife”, Environmental News Service, first published October 10, 2008.
11 FAO Fisheries Circular No 949: Analysis of the Vessels Over 100 Tons in the Global Fleet, ftp://ftp.fao.org/docrep/fao/005/x4360e/X4360E00.pdf
12 Ibid, figures 4.4 and 4.5. It is also key to note that Japan’s fleet was shrinking at the time of the report.
13 Fisheries Subsidies Introduction, WTO, http://www.wto.org/english/tratop_e/rulesneg_e/fish_e/fish_intro_e.htm, from the bottom of the page.