Fisheries Subsidies at the World Trade Organization: It’s a (re) balancing act…

With just one week to go until trade ministers gather virtually to take stock of the World Trade Organization (WTO) negotiations to discipline harmful fisheries subsidies—and provide crucial guidance that could help take these talks across the finish line by the end of this year—a new text released by the negotiating chair on 30 June shows where things have advanced and where sticking points remain.

My commentary from May 28 provided an overview of the balances and compromises struck in the earlier Chair’s text from May 11. Since then, the talks have moved forward, albeit incrementally, in the lead-up to the July 15 virtual trade ministerial meeting. The new Chair’s text from June 30, together with two key questions released on July 2 by the WTO Director-General, is what will be on the table when ministers convene in the coming days.

So what’s changed in the text and what can we expect on the 15th? There are three important substantive changes in the revised text that give a sense of where the weight of opinion may be shifting on key issues. There are also several smaller changes designed, it seems, to incorporate solutions to respond to particular concerns that some delegations have raised.

As a refresher, the final outcome is meant to tackle subsidies that fund illegal, unreported, and unregulated (IUU) fishing, contribute to overfished stocks, and enable overcapacity and overfishing. This is line with a mandate agreed back in 2001, with the talks receiving a boost in urgency partly due to SDG target 14.6, which set a 2020 target for reaching a deal and for already eliminating subsidies to IUU fishing. While a complete fisheries subsidies agreement is not expected on July 15, it will be a vital marker in the negotiations overall—and will be an opportunity to provide the political push that negotiators need to close a deal.

The three important changes in the June 30 text are as follows:

1. The Chair has included language that would widen the exception to the rule prohibiting subsidies to fishing of overfished stocks.

Some Members have argued that they should be allowed not only to provide subsidies that promote the recovery of an overfished stock, but also to provide any kind of subsidies—including those that are commonly considered the most risky from a sustainability perspective—as long as they have other measures in place that aim to promote the recovery of the stock. The provision responds to these concerns, but, as the Chair himself acknowledges in his accompanying note, it raises another problem.

With this new language, the disciplines applicable to subsidies to already overfished stocks (which, by definition, need more stringent restrictions on fishing effort) are now more or less the same as the discipline applicable to all other stocks. The addition raises questions from a broader sustainable development perspective, too. Statistics from the Food and Agriculture Organization of the United Nations (FAO) indicate the proportion of global stocks fished beyond sustainable limits has gradually risen over the decades and stood at over 34% of assessed stocks in 2017. Allowing all subsidies for fishing of overfished stocks to continue, on the condition simply that complementary measures are in place to rebuild the stock without requiring at least that those measures be effective, doesn’t appear to respond well to the need for a much more careful approach in these situations.

2. The Chair has replaced two exceptions in the rules on subsidies to illegal, unreported, and unregulated (IUU) fishing and to overfished stocks with “peace clauses.” In other words, instead of allowing two-year exemptions for otherwise prohibited subsidies provided to small-scale fishing close to shore in developing countries, the revised text establishes only two-year grace periods for subsidies to this fishing, during which time the rules would apply but their implementation could not be challenged in the WTO’s dispute settlement process.

This change responds to some Members’ push-back on the idea of two-year exemptions from these rules, in particular for subsidies that would be provided to small-scale fishers that had been found to have been engaged in IUU fishing. This new direction reflects, it seems, the arguments of several developing country Members that what they most need in terms of flexibility under these provisions is time to adjust and implement the new obligation, not a complete carve-out.

3. Regarding the envisaged prohibition of subsidies that contribute to overfishing and overcapacity, the Chair has removed the time limitation on an exemption for subsidies to small-scale fishing close to shore in developing countries, but also slightly limited the range of fishing to which the exception applies.

This change responds to concerns raised by many developing country Members who wanted most subsidies to their small-scale fisheries to be excluded more or less permanently from these disciplines, arguing that they require flexibility to continue providing subsidies where few other support options are available.

Looking at the changes specifically for small-scale fisheries between the May 11 and June 30 texts, then, the obligations under the IUU and overfished stocks disciplines apply 2 years earlier for small-scale fisheries, but the much broader obligation not to provide subsidies that encourage overfishing would not apply at all.

This shift is likely to meet a key defensive interest for many developing country Members, and thus may help to unlock the broader debate on what appropriate and effective special and differential treatment (SDT) would look like in this agreement. At the WTO, special and differential treatment encompasses a range of possible approaches including different obligations for developing country Members, additional time or support for implementing those rules, or other more favorable treatment.

In the context of a more open discussion on how a future fisheries agreement’s flexibilities can support sustainable fishing, Members could perhaps come back to the question of how to ensure that the subsidies provided to small-scale inshore fisheries preserve their sustainability.

Small changes: a mix of clarifications and tweaks to balances struck

The revised Chair’s text also includes a number of smaller changes that respond to specific concerns raised about language in the last version:

• The Chair has removed brackets around the word “operator” in the prohibition on subsidies in cases of IUU fishing, which means the obligation could apply to both vessels and vessel operators that are the subject of an IUU fishing determination, increasing the potential impact of this rule;
• The Chair has placed new brackets around an exception for subsidized access rights purchased by a fleet’s government, which would otherwise be affected by a prohibition on subsidies contingent on fishing in areas beyond national jurisdiction. Brackets in draft texts normally indicates that the language is not yet final, suggesting concerns had been raised around this exception.
• The text’s article on Technical Assistance and Capacity Building now contains specific language that would establish a “voluntary WTO funding mechanism” to support implementation of the new agreement, in cooperation with other international organizations. The absence of funding for subsidy reform efforts has been a recurring concern for many developing country Members.
• The Chair has made more flexible the language in Footnotes 9 and 10. These footnotes indicate how Members should establish the “biological sustainable level” of a fish stock for the purposes of establishing that measures are in place that would allow subsidies to continue. The changes make it slightly easier for Members to show that they have measures implemented to keep stocks at a sustainable level and can therefore provide otherwise prohibited subsidies to these fisheries.

On balance, the revised text provides some more flexibility for developing country subsidies. Short exceptions from the IUU and overfished stocks rules are replaced with peace clauses, but developing countries gain a permanent, albeit narrow, carve-out for small-scale inshore fisheries and a more accessible sustainability test for commercial scale fisheries.

But several changes also mean more flexibility for WTO Members overall. On the one hand, the text expands the scope of the IUU prohibition to include operators and hints that the exception for subsidized access rights for distant water fishing doesn’t enjoy wide support, although it’s clearly important for some Members. On the other hand, however, the text includes (albeit in brackets) important language that would considerably widen the exception for subsidies to already overfished stocks, an addition which may also be perceived to be a particular advantage for developed country Members.

So what can we expect from the virtual Ministerial on July 15?

In the lead-up to next week’s meeting, WTO Director-General Dr. Ngozi Okonjo-Iweala has circulated two questions for ministers to consider. Ministers won’t be negotiating the text of the agreement themselves, then, but are asked to provide guidance for the final negotiating push.

The first question asks whether Ministers agree to provide Heads of Delegation with flexibility to close the negotiations and whether they agree that the existing text contains the basic elements of landing zones. It’s probably reasonable to expect most ministers to answer broadly ‘Yes’ to this combined question, although some may underline specific topics not reflected in the text that they would like to keep in play.

The second question asks ministers whether they agree that flexibility for subsidies to poor and vulnerable fishers is the central component of special and differential treatment in this agreement. The answers to the second question are less predictable, but signals so far suggest most Members would be comfortable at least agreeing that flexibilities for policies to support the poorest fishers should be a key component (if not the only key component) of special and differential treatment.

As always, it’s a constant balancing, and re-balancing, act.