WTO Needs New Rules to End Harmful Fisheries Subsidies

At the World Trade Organization’s headquarters in Geneva, Switzerland, negotiators are pushing hard to reach an end-of-2019 deadline set by trade ministers for an agreement to end harmful fisheries subsidies—payments governments make to fishers that often end up enabling overfishing. Among the issues still up for debate are the kinds of subsidies that will be prohibited and the special treatment that may be given to developing countries.

Comparatively little attention has been paid to the pivotal issue of “remedies”—that is, what might be done if a WTO member pays subsidies in violation of any future agreement. One thing that makes the WTO so effective is its power of the purse: Members can impose trade restrictions on any other member that has breached its WTO obligations. But the organization has yet to clarify how that broad policy would apply to an as-yet-unfinalized fisheries subsidies agreement.

For help forecasting this issue and examining solutions, Pew reached out to TradeLab, a trade-focused clinic at the Georgetown University Law Center in Washington. Under the guidance of Georgetown faculty and Peter Allgeier, a former U.S. ambassador to the WTO, law students researched the existing WTO framework and evaluated additional measures that might help enhance implementation of an eventual subsidies deal.

“It is very useful to explore ‘out of the box’ approaches because, unlike [some other] subsidies, fisheries subsidies damage a common resource as well as another country’s competitive position,” Allgeier said. “An agricultural subsidy hurts my competitive position but doesn’t by its nature deplete my agricultural capacity, but a fisheries subsidy depletes the common resource on which all fishing countries depend.”

The WTO’s remedies for members’ noncompliance are insufficient to support new rules on fisheries subsidies. First, these remedies are geared toward encouraging the offending member to stop subsidizing, yet many capacity-enhancing subsidies cause harm long after they are paid, so withdrawing the subsidy does not fully mitigate the past or future impacts. A subsidy applied to vessel construction, for example, might increase fishing capacity beyond sustainable levels for that vessel’s life, which could span decades. Subsidies for other capital costs, including gear and equipment, or those used for ports and infrastructure, pose the same challenge.

Second, WTO countermeasures are set up to address economic harm to a member country rather than a diffuse environmental impact such as overfishing. Because a government might have trouble quantifying an injury and linking it to a prohibited subsidy, WTO rules may not allow one member to impose trade restrictions on another for a subsidy breach. Even with more permissive rules, members may lack incentives to pursue a remedy where their stake in a fishery is only one among many bilateral or multilateral trade interests.

Finally, while nothing prohibits members from cooperating in bringing a complaint, the WTO does not facilitate that cooperation either. Allowing a joint complaint (like in a class-action suit under U.S. law) might encourage more aggressive enforcement of the rules.

The TradeLab report suggested several approaches that could be integrated into the existing framework through amendments or, perhaps more easily, incorporated into a new separate agreement on fisheries subsidies. These included:

• Obligating members to secure repayment of fisheries subsidies that are found to have violated WTO rules, particularly where those subsidies have long-term impacts.
• Empowering members to notify the WTO membership when they believe subsidies have been misreported or unreported by another member. This would enhance the current rules on “counter-notifications” so that limited information about fisheries can be aggregated from multiple sources.
• Requiring members to pursue legal action against owners of vessels used in illegal, unregulated, and unreported (IUU) fishing when those ships are under their jurisdiction or control. This approach, which would be in addition to prohibiting subsidies to vessels that have engaged in IUU fishing, focuses more on law enforcement than trade and has an analogue in the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights, which also requires members to provide national remedies for intellectual property theft.
• Allowing numerous members to aggregate their claims, pool evidence, and use their collective injury as a basis for retaliation against violators.
• Empowering the WTO Secretariat to report on fishery subsidization practices (including potential violations) at the request of capacity-constrained members.

The full text of the TradeLab report is available here.

Andrew Friedman is an officer with The Pew Charitable Trusts’ international conservation unit, and  Ernesto Fernandez Monge is an officer with Pew’s project on reducing harmful fisheries subsidies.