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WTO

A deal on fish will break the WTO’s negotiating deadlock


Published 30 November 2021

After seventy-six meetings (and counting) in the last two years, WTO Members are the closest they have ever been to getting a deal on fisheries subsidies in two decades. An agreement is needed not only for the health of the world’s oceans, but also for the credibility of the organization's consensus-based approach.

The postponement of the World Trade Organization’s 12th Ministerial Conference has resulted in one certainty: Negotiations on fisheries subsidies, launched two decades ago, will drag on a little longer. This is a small setback for an organization that has long since struggled to negotiate new trade rules.

But there is still reason for optimism. When the meeting gets back on the calendar, these may be the talks that break the deadlock. A successful conclusion to the fisheries negotiations is critical to both the credibility of the WTO’s consensus-based approach, and for the health of the world’s oceans, food security, and the livelihoods of fishers that make up 10 percent of the global population.

The state of global fisheries is concerning. From 1974 to 2017, the proportion of fish stocks that can be considered to be at biologically sustainable levels has decreased from 90 percent to 65.8 percent.[1] This means that 34 percent of existing stocks are fished at biologically unsustainable levels. Over 3 billion people depend on fish for 20 percent of their average per capita consumption of animal protein. In countries such as Bangladesh, Cambodia, the Gambia, Ghana, Indonesia, Sierra Leone, Sri Lanka, and some small island developing states, fish make up 50 percent of animal protein intake. For these countries, the stakes could not be higher.

Subsidies encourage overfishing

Subsides are a major contributor to the depletion of the world’s fish stocks. Governments spend US$35 billion annually, or approximately 30 to 40 percent of the value of all fish landed by marine vessels worldwide, subsidizing fishing.[2] The lion’s share goes towards fuel subsidies, which make up 22 percent of the total – and make it cheaper for fishing vessels to engage in distant water fishing, sometimes infringing on stocks in or near the exclusive economic zones of other, often poorer, countries. Subsidies promote overfishing where it would otherwise be unprofitable, thereby creating incentives that directly impact the sustainability of our oceans.

The WTO can curb this problem. With all 164 Members involved in these multilateral negotiations, these new rules would have a broader reach and larger impact than any other agreement on fisheries that currently exists in a trade agreement. It would go beyond what’s in the United States-Mexico-Canada agreement (which, as the name suggests, only covers North America), and beyond the disciplines in the Comprehensive and Progressive Agreement for Transpacific Partnership, which excludes four of the top five subsidizers – China, the European Union, the United States, and South Korea (which, with Japan, account for 58 percent of all global fisheries subsidies). A multilateral deal on fisheries that includes all the major players is the only way to generate a meaningful outcome on this issue in the long run.

The negotiations also provide an opportunity for the WTO to adapt to contemporary trade challenges that sit at the intersection of trade and environmental sustainability – an area of growing concern among WTO Members. By fulfilling the United Nation’s Sustainable Development Goal 14.6, the negotiations also show that progress on the SDGs is possible, particularly following setbacks prompted by the COVID-19 pandemic.[3] The WTO’s ability to tackle these issues is essential, and its experience in addressing subsidies make it the right place for these talks. By offering a way to think about updating subsidies rules more broadly, the momentum that could be generated by concluding these talks can help WTO Members revitalize efforts at reform.

So, what is being discussed in the fisheries negotiations? They are focused on creating new disciplines organized around three pillars of fish subsidies:

  1. subsidies that support illegal, unreported, and unregulated (IUU) fishing,
  2. subsidies for fishing on overfished stocks, and
  3. subsidies that contribute to overcapacity and overfishing.

WTO Members agree that these subsidies need to be addressed. However, they have disagreed on the scope of the rules and how much flexibility should be granted. Ambassador Santiago Wills, who chairs the talks, explained in the note that accompanied the latest draft text that “the macro issues not only needed to be resolved on their own,” but they “were interlinked in various ways such that resolving one would have implications for others, technically, politically, or both.” [4]

An updated text of progress

Released on November 8, an updated draft text strikes a careful balance between WTO Members’ competing concerns and presents a solid structure that all Members could support.[5] While it carries over much of an earlier draft[6] released in June 2021, it makes substantial changes to the IUU fishing pillar, the overcapacity and overfishing pillar, and on notifications and transparency. On IUU fishing, the prohibition has been strengthened, which will go a long way to curtailing the most harmful subsidies.

According to Penelope Ridings, legal expert in fisheries, the text aligns with existing fisheries management frameworks by using “consistent concepts to ensure that there is no inadvertent overlap or fragmentation of international legal requirements.”[7] This is important because the WTO is not a fisheries management organization. It also shows how the WTO can provide solutions to complex trade-related issues that it can’t address on its own. It is important to note that many Members did not initially believe rules were needed for overfished stocks. Therefore, their inclusion reflects Members’ commitment to sustainability. Though these provisions include an exception, they allow flexibility if the subsidies “are implemented to promote the rebuilding of the stock to a biologically sustainable level” – a strict test for granting an exemption to the rule.

Members have settled on a hybrid approach for the final pillar.[8] First, there is a broad prohibition on subsidies that contribute to overcapacity and overfishing, and there is a specific list of the most problematic subsidies, such as: subsidies to construction, acquisition, modernization, renovation or upgrading of vessels; and income support of vessels or operators or the workers they employ.

There is also a provision for subsidies tied to distant water fishing (beyond the subsidizing Member’s jurisdiction) that was in a previous version of the text. Brackets around this language (to signify text where convergence has yet to be reached) were recently removed. While this does not change anything substantively, the commitment is important yet narrow enough to bring hesitant Members on board for its inclusion, as a careful reading of the language in its footnote reveals.

In addition, the exception to the list of prohibited subsidies includes a sustainability requirement that puts the burden of proof on the subsidizing Member to demonstrate that its measures are not harmful but instead maintain fish stocks at biologically sustainable levels. This is subtle but important language.

Article 5.2, which addresses fishing in the high seas, is another negotiating victory and is not subject to an exception. This notable obstacle to wrapping up talks last year[9] now appears to be resolved.

An innovative development is the text’s treatment of notifications and transparency in Article 8. Several members, including the US, have consistently expressed concern over a lack of timely and detailed notifications, and have pushed for penalties on failures to notify.[10] Specifically in the area of subsidies, Members have aired frustration over lagging notifications, which make it difficult to conduct reviews of government measures.[11] The current fisheries text provides detailed, specific, and time-limited reporting requirements that can help ensure greater transparency on fisheries subsidies across the board. This will assist in reining in noncompliant behavior and allow Members to discuss potential issues of friction within the committee and resolve some matters without escalating disagreements to a formal dispute.[12]

According to the updated draft released on 24 November,[13] Members appear to support making the fisheries text a standalone agreement, as opposed to an annex to the Agreement on Subsidies and Countervailing Measures. This will provide for a strengthened committee function that can be tailored to address the specific challenges associated with implementing the agreement and fostering regular dialogue between Members on its performance.

In addition, the draft text contains a bracketed provision requiring annual notifications of “any vessels and operators for which the Member has information that reasonably indicates the use of forced labor.” In the long run, this provision could help embed discussions on trade-related labor issues at the WTO while also allowing Members to submit counternotifications when concerns arise over the forced labor practices of another Member.[14] US concerns about forced labor in fisheries has been a source of friction among some Members – and now there is a balanced and practical solution.

Increasing commitment to sustainability

All these advancements in negotiations and the text itself do not mean that the deal is done. Some issues cannot be resolved in advance of MC12 simply because delegates may not have the authority to take decisions on especially sensitive provisions and will leave those issues for their ministers.

For instance, on special and differential treatment (SDT), which are the flexibilities granted to developing countries, the bracketed text is likely to stay in place. This may not be what some Members want going into the meetings.[15] But it does not mean that the disagreements cannot be resolved.

The flexibilities currently in the text address many longstanding concerns over the grant of SDT, by tying flexibility to a concrete sustainability goal. It also employs a data-driven approach to exceptions in the overcapacity and overfishing pillar. For instance, Article 5.4 (b)(i) only allows countries whose annual share of global marine capture production is under 0.7 percent to maintain subsidies listed under that pillar. The most recent data provided by the Food and Agricultural Organization[16] shows that developing countries with a large share of the global volume of marine capture production – China, Indonesia, Peru, India, and Vietnam – would not be eligible for SDT. In addition, there is an exception for low-income, resource-poor, and livelihood fishing within a certain distance to ensure that only the most vulnerable benefit from flexibilities.

The 24 November revision also adds a footnote to Article 5.4(a), which excludes “Members whose annual share of the global volume of marine capture production is at or above 10 per cent” from maintaining subsidies within their exclusive economic zone. This ensures that developing countries making up a large share of global fishing would not receive SDT.

This is a significant step towards fairer rules, recognizing that a country might be “developed” in one sector of trade though it can still be considered “developing” in another.[17] Thus being granted SDT in the context of fisheries only has bearing on these rules, and does not prejudge future negotiations on other issues.

Crucially, technical assistance and capacity building are also included in the latest draft, although in brackets. Developed countries should strongly support these efforts and provide any resources necessary to ensure that the timeframes for implementation can be met by all Members, regardless of development status.

It is true that WTO Members have struggled to conclude multilateral talks. It is also true that the broader crisis facing the organization has hung like a dark cloud over all other efforts. The fisheries talks offer a reason for hope. Negotiators have brought a tremendous energy to these discussions. Perhaps for the first time, this momentum may just get these negotiations across the finish line. Failing to conclude the talks is not likely to kill discussions on fisheries subsidies entirely, but it would be a great disappointment to the membership.

After seventy-six meetings (and counting) in the last two years, WTO Members are the closest they have ever been to getting a deal on fisheries subsidies. No negotiated outcome is ever perfect, not least with so many voices at the table. But that is not the point. The current state of talks reflects a delicate balance of Member interests, and marathon discussions signal that the WTO negotiating function is alive and well. But an agreement is needed. The fate of the organization, and the world’s fish, may depend on it.

 

[1] - Food and Agriculture Organization of the United Nations, The State of World Fisheries and Aquaculture 2020: Sustainability in Action (Rome: FAO, 2020), https://www.fao.org/3/ca9229en/CA9229EN.pdf. See, “Maximum Sustainable Yield,” FAO Fishery Glossary, FAO Fisheries and Aquaculture Department, last updated 2014, https://www.fao.org/faoterm/viewentry/en/?entryId=98610.

[2] - U. Rashid Sumaila et al., “Updated Estimates and Analysis of Global Fisheries Subsidies,” Marine Policy 109 (2019), https://doi.org/10.1016/j.marpol.2019.103695.

[3] - United Nations, The Sustainable Development Goals Report 2021 (New York, NY: United Nations Publications, 2021), https://unstats.un.org/sdgs/report/2021/The-Sustainable-Development-Goals-Report-2021.pdf.

[4] - World Trade Organization, Negotiating Group on Rules, Fisheries Subsidies, Revised Draft Text: Chairs Explanatory Note Accompanying TN/RL/W/276/REV.2 –Addendum, TN/RL/W/276/Rev.2/Add.1, 8 November 2021, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/TN/RL/W276R2A1.pdf&Open=True.

[5] - “Revised Fisheries Subsidies Text Kicks Off Intensified Negotiations Ahead of MC12,” World Trade Organization, 8 November 2021, https://www.wto.org/english/news_e/news21_e/fish_08nov21_e.htm.

[6] - World Trade Organization Negotiating Group on Rules, Fisheries Subsidies: Revised Draft Text, TN/RL/W/276/Rev.2, 8 November 2021, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/TN/RL/W276R2.pdf&Open=True.

[7] - Penelope Ridings, “WTO Fisheries Subsidies Negotiations: Aligning Trade with Sustainability,” Trade Experettes, 21 June 2021, https://www.tradeexperettes.org/blog/articles/wto-fisheries-subsidies-negotiations-aligning-trade-with-sustainability.

[8] - Alice Tipping and Tristan Irschlinger, “WTO Negotiations on Fisheries Subsidies Update: What’s the State of Play,” GSI Policy Brief, International Institute for Sustainable Development, June 2021, https://www.iisd.org/system/files/2021-06/wto-negotiations-fisheries-subsidies-update-state-play.pdf.

[9] - Emma Farge, “WTO Fails to Agree Rules to Stop Over-Fishing, but Will Try Again,” Reuters, 14 December 2020, https://www.reuters.com/article/trade-wto-fish-int/wto-fails-to-agree-rules-to-stop-over-fishing-but-will-try-again-idUSKBN28O1DO.

[10] - Inu Manak, “The U.S. Pushes for Penalties on Failure to Notify at the WTO,” International Economic Law and Policy (blog), WorldTradeLaw.net, 14 November 2017, https://worldtradelaw.typepad.com/ielpblog/2017/11/the-us-pushes-for-penalties-on-failure-to-notify-at-the-wto.html.

[11] - “Members Express Concerns on Lack of Transparency at WTO Subsidies Committee Meeting,” WTO News, World Trade Organization, 27 April 2021, https://www.wto.org/english/news_e/news21_e/scm_27apr21_e.htm.

[12] - Inu Manak and Paul Mertenskötter, “WTO TBT Committee and Regulatory Measures: Prevention, Not Litigation,” World Trade Organization, 2 September 2020, video recording, https://www.wto.org/french/tratop_f/tbt_f/tbt_t40_20920_f.htm.

[13] - Agreement on Fisheries Subsidies, Draft Text, WT/MIN(21)/W/5/Add.1, 24 November 2021, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN21/W5A1.pdf&Open=True.

[14] - Inu Manak, “Latest Fisheries Draft Addresses US Concerns on Forced Labor,” International Economic Law and Policy (blog), WorldTradeLaw.net, 11 November 2021, https://ielp.worldtradelaw.net/2021/11/latest-fisheries-draft-addresses-us-concerns-on-forced-labor.html.

[15] - James Bacchus and Inu Manak, The Development Dimension: Special and Differential Treatment in Trade (New York, NY: Routledge, February 2021).

[16] - “Fishery Statistical Collections: Global Capture Production,” FAO Fisheries and Aquaculture Division, updated 2021, https://www.fao.org/fishery/statistics/global-capture-production/en.

[17] - Anabel González, “Revisiting ‘Special and Differential Treatment’ in the WTO,” East Asia Forum, 26 March 2019, https://www.eastasiaforum.org/2019/03/26/revisiting-special-and-differential-treatment-in-the-wto/.

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Author

Inu Manak

Inu Manak is a Research Fellow in the Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute, Washington DC.

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