OECD 19404

1
Economic aspects and drivers of IUU fishing
building a framework

• David Agnew and Colin Barnes

RRAG, Imperial College
2
Methodology

• Concentrate on high seas/FOC IUU fishing
• Identify economic and regulatory drivers that
  create opportunities and incentives for IUU
  fishing
• Markets and trade
• International regulation/management
• National management
• Fishing activities
• Company/vessel operations
• Identify ways of manipulating these drivers that
  impact more on IUU vessels than legitimate
  vessels

3
Basic incentive equation

• IUU incentive profit from IUU fishing
• Benefit from IUU fishing Cost of IUU fishing
• We must attack both ends of this economic
  equation (cost and benefit)
• We must find ways of doing this that do not
  impact on legitimate fishing costs

4
Basic costs longliner for toothfish

• 1.2M to buy
• Operating costs 2M / year (incl crew)
• Fishing opportunities 200 days (4 trips) _at_ 4
  t/day processed _at_ 8000/t for IUU fish 6.4M
• Profit assuming vessel 1 trips catch loss
  1.6M
• Still in profit if only manage two trips

5
Market control

• Currently access to markets is equal for most
  fish species
• Limiting access to markets (trade measures)
  should increase cost of fraud, decrease benefit
  of IUU
• Increase costs of legitimate fishers through
  obligation to engage in market measures

6
Product value

• Incentive to engage in IUU where supplies
  restricted and demand high high value species.
  IUU leads to decreased legitimate supply and
  higher prices. Even if there are market controls
  this may lead to higher prices for IUU fish.
• Target MCS resources at high value vulnerable
  stocks increase cost to IUU.
• No increased cost to legitimate

7
World economic outlook

• Disparity between consumer and producer states
  fuels IUU (increased benefits and decreased
  labour costs for IUU vessels, decreased health
  safety demands)
• Alleviation of poverty should reduce pool of
  cheap labour, increasing costs
• No (or little) impact on legitimate fishers who
  already conform to standards

8
International regulation

• Regulation currently disadvantages legitimate
  fishers, creating high costs for them and low
  costs for IUU competitive /economic
  disadvantage. Costs of legitimate operations
  increasing through environmental concerns. IUU
  catch may be taken into account setting
  legitimate TAC, further reducing legitimate
  benefit and increasing costs.
• Regulation of legitimate fishers is likely to
  increase, but the increased costs may force them
  into loss-making activities increasing the
  incentive to become IUU (eg cod bans in N. sea,
  blackfish landings can be considerable).
• Industry must be involved in identifying
  solutions, to avoid pushing legitimate fishers to
  IUU. Increasing universal (maritime) costs
  (eliminating FOCs, universal VMS/observers) would
  impact IUU vessels more than legitimate vessels.

9
International cooperation

• Treatment of high seas waters in UNCLOS. 2
  problems
• 1. Poor implementation of obligations by some CPs
  (to CCAMLR, UNCLOS/Straddling Stocks, Compliance
  agreement etc).
• - eg. most recent arrests of vessels by
  Australia and France have been on CCAMLR CP
  vessels (Eternal Lena, Volga Viarsa 1,
  Lugalpesca, Maya V). Draft lists of IUU vessels
  contained 8 CP and 7 NCP vessels).
• - difficulty of getting some CCAMLR CPs and
  Straddling Stocks signatories to implement CDS.
• 2. Patchwork of RFOs reliance on flag state
  responsibility leads to regulatory/enforcement
  problems for RFOs. IUU vessels can increase
  benefits by moving between N. hemisphere and S.
  hemisphere RFO areas to avoid detection
• Harmonising activities of RFOs reciprocal
  agreements for activities against IUU including
  global IUU lists. Wide-ranging agreements on
  non-flag state MCS activities would significantly
  increase costs (risk of arrest) of IUU. No effect
  on legitimate vessels.

10
Vessel flag transfers FOC

• FOC flags require lower costs than other flags.
  Currently very easy (Dec 1999 San Rafael 1
  (Belize) -gt Anyo Maru 22 (Belize) -gt Sil (Belize)
  -gt Amur (San Tome Principe) June 2000).
• Difficulty in acting on vessel under new
  flag/ownership. Eg. Strela reflagged (Bolivia
  -gtRussia) while at sea 20 days before arriving in
  Jakarta went on to land IUU catch. Proceeds of
  sale of IUU fish went to previous owners. No
  costs of IUU activity levied against IUU company
  on transfer to flag of CCAMLR CP. Change of
  ownership/flag led to vessel not being on IUU
  list.
• Eliminate possibility of rapid transfer of flags
  at sea and use of FOC would considerably reduce
  opportunities for IUU and increase costs (through
  easier prosecutions)
• No impact on legitimate vessels

11
National maritime policy

• Creates opportunities for IUU vessels to contract
  nationals. Pool of IUU active nationals and
  repeat offenders (Maya V arrests some repeat
  offences).
• Tightening up domestic laws (cf IPOA) will impact
  on IUU but should not impact legitimate vessels.

12
Limited opportunities/Overcapacity

• Limited legal opportunities, coupled with
  overcapacity, will fuel IUU, especially if it
  creates negative profit (loss making) for legal
  vessels. Poorly restricted effort in national
  fisheries leads to overcapacity, financial losses
  and declining stocks. These all affect legitimate
  fishers. IUU (in national waters and outside
  national waters capacity leakage) is then
  relatively profitable. Vessel prices are also
  depressed because companies/banks have to sell
  them.
• Limited IUU opportunities forces IUU operators to
  sell vessels. Purchase by legitimate operators is
  a financial gain to IUU companies.
• Purchase of ex-IUU vessels by legitimate
  companies (and reflagging to other states) should
  be prohibited. All ex-IUU vessels should be
  scrapped. Measures will increase legitimate
  vessel costs but have even more effect on IUU
  costs. Overcapacity should be avoided, and excess
  capacity scrapped or sale allowed under very
  strict scrutiny.

13
Restricted access

• Restricted access/opportunity creates similar
  negative profit issues as previous slide.
• Resource allocation issues (allowing opportunity
  to states currently not allowed that opportunity
  in an RFO or other) will decrease legitimate
  vessel benefits while reducing the benefits of
  IUU activities.

14
Subsidies

• Subsidies not initially available to IUU
  operators. But artificial support of the cost of
  fishing (subsidised entry or exit) creates
  artificial profitability (negative real profit)
  and contributes to overcapacity. Also reduces the
  cost of IUU vessels (subsidised transfers).
• Removal of subsidies and destruction of excess
  fishing capacity (prohibition of export, leakage
  of capacity or sale at reduced prices) will
  significantly increase IUU vessel costs.

15
Control surveillance and prosecutions

• Increasing surveillance should increase IUU costs
  but might also displace it into lower
  surveillance areas or into jurisdictions where
  penalties are not so high. Financial penalties
  alone unlikely to be enough of a deterrent (see
  previous costed example)
• Uniform, targeted approach to surveillance and
  prosecutions, adopted by all RFOs, would remove
  unevenness in approach and stop IUU reducing
  costs by moving to low penalty environment.
  International cooperation, prosecution in
  international courts.
• Legitimate vessels unaffected.

16
Juxtaposition of high seas and EEZs

• Possibility of escape behaviour decreases IUU
  costs.
• Hot pursuit limited to hails. Agreements between
  EEZ states and flag states to allow inspections
  on adjacent high seas, and for median line
  patroling, would significantly increase IUU
  costs. International agreement on inspections?
• No cost to legitimate vessels

17
Companies

• Many IUU companies hold legitimate fishing
  licences. Costs are reduced (dont pay for
  licences from IUU vessels) and benefits increased
  (launder IUU catch with legitimate catch to get
  higher price). Their size and ownership
  complexity creates difficulties in tracing and
  prosecuting.
• Companies caught engaged in IUU fishing should
  have all legitimate fishing opportunities removed
  from them. Eg actions of Uruguay expelling
  Navalmar SA (Viarsa 1 Maya V). The restriction
  is demonstrating effective company ownership etc.
  Company should be eliminated from operations in
  any other state.
• No impact on legitimate vessels.

18
Conclusions

• Examination of drivers markets, global economics
  international regulation, national management,
  fishing opportunities, company and vessel
  operations allows identification of whether
  drivers affect benefits or costs of IUU fishing.
• Action to reverse the driver, removing the
  incentive to fish IUU, can then be suggested.
  Solutions often affect the profitability of
  legitimate operations, so legitimate operators
  must be included in their design and
  implementation.
• Objective, consistent and statistically rigorous
  monitoring of IUU activity must be undertaken to
  see which of our actions is having an effect.
• The high seas are vulnerable. To protect them we
  are currently attempting a closure of the last
  marine commons. Universal right of access without
  responsibility (i.e. outwith obligations of
  UNCLOS/HMS) must be challenged through
  international concerted effort and in the
  international courts.