Case studies on the allocation of transferable quota rights in fisheries

In 1986 New Zealand introduced management by individual transferable quota (ITQ) for 26 of the country's most economically-significant fishery species. The system has since been expanded and extensively modified, and remains the most comprehensive and perhaps most robust example of ITQ management in the world today. The system was born of dual motivations: (a) concern for the stress on stocks being imposed by rapidly expanding effort in the inshore fin-fisheries; and (b), the desire for a mechanism to allow the domestic industry to capture rents and build capacity in the deep-water sector, dominated in the past by foreign fleets.

This paper summarises the policies and processes encompassing the initial allocation of ITQ fishing rights in New Zealand. Both primary data and existing published sources have been used in compiling this account. Although a reasonable volume of published material exists on the New Zealand quota-management system, much of this is only generally descriptive of the policy process, focusing more on accounts of system features and, more rarely, on outcomes. This paper assembles existing material on the establishment of the system, reconciles some of the disparity in these accounts, adds supplementary data where useful, and provides some analysis and commentary on the processes and outcomes of the allocation of ITQ in New Zealand.

The following (Section 1.2) gives some background to the fisheries and a synopsis of management history leading up to the adoption of the quota system. Section 2 then outlines the nature of the ITQ harvesting right implemented in New Zealand. Section 3 deals with the method used in allocation of quota, discusses the objectives of the allocation process, the consultative and policy process by which that method was determined and the method itself. Section 4 deals with the data and computational issues for quota allocation, and Section 5 with the appeals processes for addressing the concerns of fishers with regard to their entitlements. Section 6 touches on the administrative resources required to manage and implement the allocation process, and Section 7 provides a brief evaluation of the process and outcomes. The final Section (8) reflects on the general issues raised by the case study.

New Zealand is an island nation in the South-west Pacific. It was settled by Polynesians (the Maori) from about 800 AD, and by Europeans from the late 18th Century. Fishery resources have always been significant as a food source and as trade goods, but are only moderately abundant in international terms. The estimated maximum sustainable yield for the Exclusive Economic Zone (EEZ) of 4.1million km2 is something over half a million tonnes, with about one third of the zone fishable by modern `industrial' demersal methods. Early Europeans were attracted to the exploitation of seal and whale populations, but these resources were well depleted by 1900. The first government regulation of commercial fishing came with the passing of the Fisheries Act 1908, and active policies encouraging judicious exploitation were adopted in 1914 following advice from a Canadian consulting academic, Professor E.E. Prince (Riley 1982).

Foreign fishing began in New Zealand's coastal waters in the 1950s, when Japanese vessels first appeared outside the three-mile Territorial Sea. At this time domestic fishing had been under a conservative management strategy since the 1920s, and a strict licensing authority regime since 1945, based on concern for conservation of fish stocks. Entry was limited, gear controlled, area and seasonal closures were used, fish and mesh size minima imposed, and ports for operation and landing of fish were fixed for each boat (Riley 1982). The appearance of large foreign vessels only three miles off the shore prompted the government to commission a Parliamentary Select Committee inquiry into the fishing industry in 1961 (AJHR 1962). Either this new foreign effort would soon destroy New Zealand fish stocks, or the domestic industry was being denied use of a valuable resource without cause. The inquiry resulted in a new policy to expand and develop the local fleet to compete with the visitors for economic benefits from the fisheries resources. In 1963 the previously restrictive licensing policies were overturned, opening domestic access to all-comers, and a period of government subsidy and unconstrained growth took place through to the 1980s.

In 1965 New Zealand extended its management jurisdiction to twelve nautical miles, and by 1970 had moved the Japanese long-liners out of this zone (Sharp 1997). Between 1967 and 1977, the domestic fleet expanded from 2161 fishing vessels to 5178, encouraged by government tax and loan concessions, with the highest growth in vessel classes under 12m (163%) and over 21m (122%) in length. Landings consequently grew rapidly in both the inshore and the deepwater sectors. More than 100 species were fished commercially using a large number of gear types and methods. However foreign catches grew more quickly, and by 1977 90% of the 476 000t known demersal finfish catch from the EEZ area was being taken by foreign vessels, mainly from Japan, Korea and the Soviet Union (Sharp 1997).

Responsibility for the management of New Zealand's fisheries lay with the Ministry of Agriculture and Fisheries (MAF).1 Initially, following the declaration of the EEZ, the fisheries outside the twelve-mile limit were managed separately from the inner zone, now the Territorial Sea. Total allowable catches (TACs) were struck for the deeper-water species, and these were allocated preferentially to the domestic industry, and only then to the foreign fleets under licence and government bilateral agreements. The policies offered the foreign fleets less of the prime species and areas than they had been fishing, changing the economic balance and resulting in a much reduced total catch for the next few years (OECD 1997).

Government policies also provided incentives for domestic companies to invest in onshore processing plants and vessels for deepwater fishing, but the main initial domestic involvement in deep-water fishing was developed through joint ventures with foreign companies and foreign vessel charter. Joint ventures brought local crew onto the big vessels and direct involvement of domestic companies in the management of fishing operations and marketing, paving the way for further domestic expansion. Foreign vessels began delivering large catches to onshore processing. By about 1982 local companies had learnt what they needed to know from joint ventures, and arrangements with foreign vessels moved towards simpler contracts in order to charter fishing capacity to catch against domestic company quotas. Foreign vessel charter has remained an important part of deepwater fishing in New Zealand since that time, gradually diminishing as domestic companies have invested in large freezer trawlers. Both arrangements brought greatly increased cash flow to the domestic industry, foreign exchange from exports, and employment in processing.

Throughout the 1960s and 1970s the New Zealand Government had been providing financial assistance to accelerate development of the fishing industry. This increased with the declaration of the EEZ. Concessionary loans were provided for buying and building vessels and establishing and expanding shore-based processing facilities, and suspensory loans were granted for developing export markets and vessel construction (NZDoS 1983). In addition, import duty exemptions were made for purchase of vessels from outside New Zealand, and other favourable tax treatments were applied to the industry. Figure 1 shows the dramatic increase in numbers of larger vessel and in tonnage of the domestic fleet after 1976. Both the number of 24-33m vessels and their total capacity increased by nearly 500% in the decade leading up to implementation of the quota system in 1986, while the number of vessels over 33m in length increased by an order of magnitude. Some of these large vessels, imported under duty concessions to increase domestic participation in the deep-water species, had also been fishing inshore, increasing pressure on stocks (Riley 1982, Martin 1984).

It was at this time that the inshore fisheries began showing signs of stress, and management gradually moved into crisis mode. New powers to declare controlled fisheries were introduced in 1977 and a moratorium on issuing new scallop and rock lobster permits followed in 1978. Alarming fluctuations in catches of the most economically important inshore species: snapper (Pagrus auratus), and rapidly increasing catches of vulnerable species of sharks and gropers, brought a total moratorium on the issue of new fishing permits in 1982. These fish stocks were believed to be already over-fished and a review of inshore management provisions was initiated under the auspices of the newly constituted National Fisheries Management Advisory Committee (NAFMAC). Figure 2 shows the long-term trend in the snapper catch, which had been at high levels since the mid-1960s and underwent abrupt fluctuations under increasing fishing effort in the late 1970s before declining sharply. As the most valuable export species and most popular domestic eating fish and recreational catch, the crash of the snapper catch caused grave concern. Figure 3 indicates trends for most of the other significant inshore finfish species, indicating that the catch of these more than doubled between 1975 and 1984.

Both management and industry had recognised that there were economic as well as stock problems in the inshore fisheries (Riley 1982). Five per cent of the fleet was taking two thirds of the catch, and there were large numbers of part-time operators. From a total of 5184 licensed vessels in 1978, 2942 are reported to have earned less than $NZ500 from fishing (National Research Advisory Council 1980, cited in Wallace 1997). In August 1983 the NAFMAC produced a discussion paper, "Future policy for the inshore fishery," in which they estimated that the inshore fleet was overcapitalised by about $NZ28 million (NAFMAC 1983). The surplus capacity was mainly concentrated on the north-east coast of the North Island.

Figure 1
Domestic fleet - Numbers and capacity of large length classes 1974 to 1998

Figure 2
NZ reported domestic catch for snapper (Pagrus auratus) 1960-s1986

Figure 3
Catch histories for selected NZ inshore finfish species: 1974-1986 (snapper and red cod excluded)

The NAFMAC document identified that there were poor, and in some cases negative, returns to larger vessels fishing inshore, and this was taken as a further indication of over-fishing of stocks (Sharp 1997), but this is not the whole story. From 1975 until the late 1980s New Zealand had one of the highest inflation rates in the OECD. At the beginning of the 1980s, official interest rates rose to 18% before being constrained by regulation. The industry was investing heavily in larger vessels and processing facilities at this time, with associated high finance costs, thus it faced inflation-driven cost increases particularly for fuel, and a rapidly declining real price of export fish to 1981 (see Figure 4). The economics of fishing were bound to be tough regardless of the state of stocks. In fact, the general economic conditions squeezing the larger operators may have made a substantial contribution to the crisis for the inshore, as vessels increased their fishing effort to make businesses profitable.

Also in 1983, the first comprehensive rewrite of New Zealand fisheries legislation since 1908 was passed into law, the Fisheries Act 1983, creating a new management framework. Despite discussion of quota schemes in policy circles since 1980 (Muse and Schelle 1988), the new Act was based around establishing formal regional fishery management planning, extending the controlled fishery framework, and establishing a special licensing authority for close regulation of fisheries. The planning framework included the division of the EEZ into 10 Fisheries Management Areas (FMAs), and the institution of a process for the establishment of Fisheries Management Plans (FMPs). The preparation of plans was to be a consultative process to be run by the Ministry's regional offices, using networks of local Port Liaison Committees, and a Fisheries Management Advisory Committee (FMAC) for each regional plan.

Some administrative innovations in the Act were to prove particularly fateful. A new definition of the term "commercial fisherman" in the interpretation section of the Act had the effect of permanently excluding 1500-1800 part-time fishers from renewing their licences. To be eligible for a commercial fishing permit, an operator's reported catch during 1982 had to indicate that fishing was essentially a full-time occupation, contributing at least 80% or $NZ10 000 of income.2 This was perceived as inequitable, particularly by Maori (Waitangi Tribunal 1992:219)3, but also later by the Ministry itself, the part timer exclusion had negligible impact on landings4 - a result acknowledged by the Ministry at the time as expected (MAF 1984). Full-time fishers argued that if they were to have their effort cut back, this should only happen after the part-timers had been eliminated (Belgrave 1983). A key rationale for the policy, at least in retrospect, was to prevent expansion of effort through the full-time deployment of these under-used permits. This was to help curtail the over-exploitation of fish stocks and to protect the livelihood of those who were wholly, or substantially, reliant on the commercial fishery (Dobson 1988). The move certainly reduced administrative loads and the size of the group of fishers to be dealt with in the later implementation of quota.

Figure 5 shows the expansion in numbers of small boats in the late 1970s and the sharp reduction subsequent to the 1983 legislation.5 The underlying area plot shows the minimal effect on the capacity of the inshore domestic fleet (under 33m length), with increasing numbers of the larger vessels more than compensating for the capacity lost through exclusion of small boats. Figure 6 shows the long-term fate of small-boat capacity, with the line plot indicating again the close matching of expanding capacity in larger classes filling the gap as small boats exited. Total numbers and capacity of vessels in the intermediate sizes (12 to 24m) have not varied more than 10% from the early 1970s to the late 1990s. This core capacity of the inshore fleet comprises about 560 vessels with a total capacity of 20 000 gross registered tons (GRT).

Section 89(g) of the 1983 Act provided for regulations to be promulgated prescribing TACs and empowering the Minister to allocate quota in a discretionary manner to any specified commercial fishers. This was the statutory basis of what was to become the pilot program for quota management in New Zealand. It was put to work immediately for its intended purpose in the deep-water sector, where nine commercial entities, including two consortia, were allocated enterprise quotas for seven species. The significant and increasing magnitude and value of the pelagic and deep-water catch taken by the domestic fleet can be seen in Figures 7 and 8. Catch of inshore finfish species in 1983/4 contributed around 56 000t, i.e. less than half of the total finfish shown.6

Meanwhile the NAFMAC was developing a range of options for management of the inshore fisheries under the new FMP framework. ITQs were an option included from the beginning, and, through an extensive consultative process lasting nearly two years, much of the fishing industry became convinced that this was the path management should take. By mid-1985 the government had made its decisions and the Fisheries Amendment Act 1986 brought the Quota Management System into force on 1 October 1986.

Figure 5
New Zealand domestic fleet capacity: vessels less than 33m length - 1974 to 1998

Figure 6
New Zealand small boat sector: Capacity (GRT), and proportion of inshore fleet capacity - 1974 to 1998

A significant issue in the lead up to the introduction of ITQs in New Zealand was the change of government in 1984. This ended a long period of intensive economic regulation, and signalled the beginning of one of the most rapid and intense periods of market-oriented regulatory reform experienced anywhere in the world. This was the perfect political climate for the introduction of ITQs, and was coincident with a high level of concern, within both industry and the regulatory agency, to see changes in the management framework to protect failing inshore stocks and build investment in the deep-water sector.

The basis of the legal right to engage in commercial fishing in New Zealand before the introduction of quota management was, and remains today, a fishing permit issued by the government department responsible for fisheries management - then the Ministry of Agriculture and Fisheries (MAF or the Ministry), reformed as the Ministry of Fisheries (MFish) in 1994. Permits were issued pursuant to the Fisheries Act 1908, replaced by the Fisheries Act 1983, and were subject, in addition, to attached conditions such as area, method and quantity restrictions (required to be substantially the same for all permits of a given class) and to regulations promulgated under the Act. Permits could be legally issued for up to five years but have always been made renewable annually and had never been tradable. From 1963 to 1982 (1978 for rock lobster and scallops) there was no restriction on the number of permits available, and hence there was no need for trade. The system was that of regulated open-access. From March 1982 there was a moratorium on the issue of new permits for the inshore finfish fisheries. The provisions of the 1983 Act regarding the definition of a "commercial fisherman", which excluded part-timers, demonstrated that the permit did not comprise a secure ongoing right to fisheries access, despite the expectation of annual renewal.

During 1983 the deep-water enterprise allocation scheme was also put in place. This program was applied to seven species or species groups7 of finfish caught in quantity mainly in the greater EEZ outside the 12 mile Territorial Sea8. The domestic portion of the TAC for each of these species was allocated as quota to the seven largest companies and two consortia of smaller companies fishing for them. A further amount was to be fished by "others" (mainly owner-operators) as a competitive TAC. Modelled on the then recently-established Enterprise Allocation program for offshore trawlers in Atlantic Canada, the quotas applied to the company, not to the vessel or individual, and were initially valid for ten years. Companies were free to catch their allocation in any way they wished, including joint ventures and foreign vessel charter arrangements. These quotas were transferable with the administrative collaboration of the Ministry, although there was no statutory basis for transferability. This system served as a precursor to the more generalised quota system, giving MAF staff valuable experience with setting TACs and dealing with changes in quota ownership, and the industry a taste for secure quantified access rights (MAF 1982; Clark and Duncan 1986). The same companies were major players in the inshore fisheries and their experience with the deep-water allocations made them firm advocates for development of the ITQ system.

On the introduction of the quota management system (QMS) in October 1986, a new right was created: the individual transferable quota (ITQ). ITQ was to be a perpetual right to a part of the fish harvest, designated in metric tonnes for a particular species or species group to be taken annually from a specified quota management area (QMA). Each QMA comprised one or more Fishery Management Areas (FMAs), based on the understanding of biological stock distributions at the time (see Figures 9 and 10 for an example). So each species was split into one to ten quota stocks nationally. The 26 species or species groups initially introduced formed 153 stocks, and comprised 83% by weight of all finfish taken in the commercial fishery in 1985 (Boyd and Dewees 1992). These rights were allocated free of charge to existing participants in the fisheries. Free transferability and lease was subject to reporting of all transactions, and transaction prices, to the Ministry, and to aggregation limits of 20% for inshore or 35% for deep-water stocks. Only New Zealand residents, or companies at least 75% New Zealand owned, could own or hold quota. The ITQ allocated rights to utilise the resources, but the fishing permit remained as the right of access. Under the QMS legislation, a fishing permit was to be granted to anyone who fulfilled the minimum quota holdings requirement of five tonnes for finfish. The enterprise allocation system that had been in use for deepwater species since 1983 was unified with the new QMS, with enterprise quota being converted directly into ITQ.

The rhetoric of ITQs at the time of the introduction referred to them as exclusive and perpetual property rights (for example see MAF 1984:9). However they were not referred to directly as property in the Fisheries

Figure 9
New Zealand Exclusive Economic Zone, showing the 10 fisheries management areas

Amendment Act 1986, but were characterised by the attributes and conditions imposed by Section 10 of the amendment that created a new Part IIA in the principal Act. Key among these, ITQs were:

These characteristics establish the character of the ITQ as private property in the right to harvest fish from a given stock - not in the fish stocks themselves - and a clear understanding of this character has become generalised in New Zealand since 1986. There was no legal impediment to the use of ITQ as security for bank loans, but the Ministry did not make provision for the registration of liens or caveats against the title to ownership and this in many cases prevented such use.

The nature of the ITQ right underwent a major change in 1990. The original specification of ITQ in tonnes of fish required the government to enter the quota market to buy or sell quota when it wanted to alter the total allowable catch (TAC). When faced with potential for stock collapse in orange roughy and the need to reduce this valuable quota by large percentages, the system was changed so that ITQ were denominated as a percentage of the TAC, rather than as a specific tonnage. Adjustment then implied merely the automatic pro rata adjustment of all ITQ holdings at the beginning of each season to match the TAC.

The two systems have different effects on who bears the burden of uncertainty in fisheries management. In the initial system the government incurred all of the consequences of the uncertainties surrounding stock assessments, species biology, environmental change, impacts of fishing practices and so on, that in other commercial areas are borne by the industry. In the proportional system the industry faces the uncertainty. This may have consequences for levels of investment, but should also improve incentives for industry to invest in supporting science and management information in order to reduce uncertainties concerning stock size and dynamics, and therefore future TAC levels. This new industry interest in research reinforced the need for industry and management to engage in policy dialogue and may thereby produce more coherent management policies.

Arguably, the proportional system implies something closer to ownership rights to the fish stock, as quota owners are able to capture any changes in the value of the whole stock. If new information reveals stocks to be larger or more productive than previously thought or restraint leads to stock size increase in previously overfished stocks, the value of an individual holding increases accordingly. The ability for someone to capture changes in asset value is a significant test of ownership applied by law courts. Under the original New Zealand system of tonnage-designated quotas, the government captured such changes in value.

The other key issue in the nature of ITQ rights in New Zealand has been the presumption of Crown (state) ownership of the resource, and thereby an ability of the Government to create exclusive rights of access. The indigenous people of New Zealand, the Maori, challenged this presumption immediately following the Cabinet decisions in May 1985 to implement the quota system. The challenge was eventually successful in achieving recognition that the quota system as initially conceived contravened both the Treaty of Waitangi and the Fisheries Act 1983 itself. Two High Court injunctions were granted in late 1987 preventing further implementation of the system pending negotiations between the parties, but not before the major allocations of quota were completed. The issue of Maori commercial fishing rights was not finally settled until 1992. In the interim, the only additional species added to the QMS was rock lobster (and the associated packhorse-cray) in 1990. By agreement among the parties, rock lobster quota was limited in term to 25 years, but was subsequently converted to a perpetual right following the final settlement of Maori claims.9

As is usually the case with fisheries management, there was a multiplicity of objectives sought by the introduction of the ITQ system in New Zealand. The unification of the deep-water and inshore management systems was an objective in itself, but the aims for the two sectors were far apart.

Two major objectives for the introduction of the QMS in the inshore fisheries were to provide a viable means to halt effort expansion, to reduce catches immediately so as to allow over-fished stocks to recover and to promote rationalisation of the over-capitalised fleet. The strategy adopted in allocating ITQs reflected both the economic logic by which the system had been advocated, and the need to gain and maintain the support of fishers for the management system. That catch reductions would be compensated by government was a principle agreed early in the discussion of quota management. The Government's condition for providing compensation was that reductions in fishing pressure were to be binding and permanent. Compensation reinforced the concept that quota represented an explicit quantified property right and implied a discipline on the regulator to fully justify cuts before acting. It also offered a means by which fishers could determine themselves who would contribute to the reduction of effort, and provide a dignified exit from the fishery for those who chose to retire.

For the government's part, they had one eye on the future, particularly of the deep-water fisheries, where this principle would pay a handsome dividend: they would be able to tender large quantities of quota to the industry as domestic capacity expanded. The goals for the deep-water fisheries were the rational development and "New Zealandisation" of harvesting without getting into the trap of over-capitalisation, and for the government to realise revenues through quota auction sales and resource rentals. It was this combination of outcomes, which would allow the government to cover compensation costs for inshore restructuring by selling quota for the deep-water species, that drove the choice of tonnage-based quota. The original deep-water enterprise allocations had been proportional, but were switched to fixed tonnages for the introduction of the more comprehensive QMS (Clark et al. 1988).

For the inshore fisheries, the policy discussion document published by the new Government in September 1984 listed the following objectives and aims:

The main objectives of this generic list distil down to stock conservation, economic efficiency and equitable allocation. The overall economic allocation objective of the ITQ policy was to maximise the net economic return to the nation (Annala 1996). On the other hand, the objectives of the initial allocation process were to ensure that entitlements were equitably based on fishermen's commitment to the industry at that time, and to financially assist the harvesting sector to restructure its operations to achieve the overall economic allocation objective.

At the operational level the objectives for the allocation process boiled down to putting in place the ITQ system while maintaining and enhancing the support of fishers. This was constrained by a requirement for catch reductions in what were believed to be threatened inshore stocks and a limited budget for compensation.

The management planning structure and process mandated in the Fisheries Act 1983 established a framework for Ministry consultation with the industry and other interest groups at the regional (FMP) level. This comprised a network of local Port Liaison Committees and regional Fishery Management Advisory Committees (FMACs) to work with MAF staff in each regional centre to build the fisheries plans. In addition, a National Fisheries Management Advisory Committee (NAFMAC) was established to advise on national policies, with representation from all industry sectors including processors, fishers, share-fishers, the New Zealand Fishing Industry Board (FIB) and government.

The NAFMAC, supported by MAF and FIB staff, reviewed the state of the inshore fisheries and released a detailed discussion document in August 1983 (NAFMAC 1983). This set out an analysis of the problems - over-exploitation of stocks and overcapitalisation, and supplied a detailed account of the state of the fisheries, divided into 14 regions, of industry structure, and proposed a range of policy alternatives including ITQs.

A large haul of orange roughy taken within the New Zealand EEZ

Photo credit: NIWA, Wellington, New Zealand.

In September twelve Port Liaison consultative meetings were held by the NAFMAC around the country for discussion of the review. Some 1500 people including 900 full-time fishers attended these meetings. Discussion revolved around: MAF resource yield estimates and the degree of their correspondence with fisher perceptions; a means of immediate effort reduction including removal of part-timers fisheries and cancellation of `sleeper permits' and unused method endorsements; and long-term management policies. There was general consensus on the need to stop inshore effort expanding, and that the moratorium on permits and further species endorsements of existing permits should be maintained. Fishers viewed ITQs as having merit but were sceptical of the ability of the Ministry to monitor compliance with such a system, and feared increased dominance of large companies through concentration of quota ownership (Cooper 1983). At this stage quotas were one of a range of options being considered, all of which were viewed as potentially working within the FMP framework. Following these discussions with industry and further review by MAF and FIB staff, the NAFMAC made their report to the Minister of Fisheries in late 1983 (Belgrave 1983).

The NAFMAC documents included both interim and long-run yield estimates (prospective TAC levels) produced by the Ministry for inshore species. The interim estimates represented major reductions for some species of high economic importance thought to be over-fished. MAF scientists reviewed the figures again in April 1984. This review attempted to define natural stock boundaries for the quota system, and attempted to separate the issues of long-term sustainable yield, from the management problem of how to get there by setting lower interim TACs (McKoy 1986). Two further reviews were carried out in March 1985 and 1986 before final TACs were set. These assessment reviews were the precursors to the annual stock assessment rounds later carried out by the Ministry as part of the QMS.

In the meantime, the New Zealand Government was heading for a fiscal crisis, culminating with Prime Minister Muldoon calling a snap election in July 1984. Policy decision-making had gone into recess to the frustration of the fishing industry (Martin 1984). However, the Government changed with the election. The new Cabinet had a reformist economic agenda and accepted the policy recommendations of MAF and NAFMAC quickly, publishing a proposal in September 1984 setting out policy for the quota management system, more or less in the form it would be implemented two years later (MAF 1984). Consultation meetings with industry continued. A two-month tour by several teams of MAF and FIB staff in early 1985 put the proposals to commercial fishers through a country-wide series of some 65 public meetings (Muse and Schelle 1988). Two "mini-summit" meetings were held between industry leaders and the Minister of Fisheries, and the Federation of Commercial Fishermen conducted a referendum of all licensed fishers in March 1985 before approving the policy in principle (Anon. 1985). Final proposals were aired at an industry conference, before Cabinet approved the quota system policies in May 1985 including the allocation process.

Conspicuously absent from the process to this point was effective consultation with Maori. Although Maori had mandated representation within the FMP liaison network, no systematic attempt was made to consult with established Maori decision making and information networks by, for example, seeking MAF representation. A two-day National Fisheries Hui (meeting) - Te Runanga a Tangaroa - was held in October 1985, well after decisions were finalised, but this did not directly address commercial fishing issues or the quota system. Maori fisheries interests were conceived generally as non-commercial "traditional" fishing along with cultural and spiritual values. They were therefore not seen by the Government as in conflict with the incipient QMS (e.g. the speech by Ken Shirley MP, reported in Cooper 1987:17).

The basic principle of both allocation schemes was that quota entitlements should reflect established commitment to the fishery. For the deep-water fishery in 1983, catch levels were combined with the companies' degree of investment in on-shore processing, employment and fishing capital to determine commitment. Allocations of quota were only to be made where this commitment would provide at least 2000t per company. The smaller operators were allowed to combine into consortia to achieve this level and attract allocations. The remaining smaller participants were to continue to fish under competitive TACs comprising more than the sum of their historical catches, to allow for further development by these operators. Investment in vessels was assessed separately for mid-depth and deep-water quotas, with vessels less than 30m in length excluded from the assessment for deep-water species such as orange roughy, as they are unable to fish at the required depths (Muse and Schelle 1988).

In the inshore allocations, the primary criterion for judging commitment was to be catch history over the three years 1982-84. The need to reduce catch levels of some stressed inshore species had been openly discussed in all the consultation meetings from 1983 and was accepted by the key parties. The government was committed to compensate reductions and proposed to finance a quota buy-back scheme. The allocation

proceeded in a series of steps, firstly assessing catch histories, followed by a buy-back tender round, and thirdly administ-rative adjustments were made to match quota holdings to TACs. Appeals were provided for at two stages of the allocation process.

The catch history assessment step entailed an initial appraisal by the Ministry of landings records for the three qualifying years, and the reporting of these to each fisher in mid-1985. They were then asked to choose two of these three years to be used to establish their quota entitlements, and were able to request an administrative review if the figures were believed to be inaccurate or unrepresent their usual fishing activity. The reviews were undertaken by six regional objections committees coordinated by a national overview committee. These committees provided the Director General of MAF with recommendations for changes to assessments.

Following the reviews, final averaged best-two-of-three-year catch histories were calculated and notified to fishers in April 1986 as Provisional Maximum ITQ (PMITQ) for each fish quota stock. Fishers also received notice of their Guaranteed Minimum ITQ (GMITQ), which represented the amount of quota they would be allocated if the proposed new lowered TAC for that stock was split proportionally across all the assessed catch histories. That is, if the TAC for a stock were to be set at say 60% of the total of all PMITQ, then each individual's GMITQ would be 60% of their PMITQ. Each fisher then knew they would eventually be allocated an amount of quota that was between these two figures.

The proposed TACs for some inshore species required a large reduction in catches, with cuts varying by area and species (see Table 1 aggregates by species). In the Auckland Fisheries Management Area the overall average of proposed reductions was 28%, with individual species reductions of up to 64% (Fairgray 1986).

Table 1

Aggregate catch reductions proposed for inshore species in 1984 policy proposal

Data source: MAF 1984: page 28.
Catches include those by domestic, foreign charter and foreign licensed vessels.
TBD = To Be Decided.

In addition, the totals of PMITQ for many species were appreciably higher than the actual catch in any of the years immediately preceding the quota system, due to the averaging of best years, declining catches in some stocks and extenuating circumstances accepted in the reviews.10 Table 2 shows the prior catches, total of PMITQ and new TAC levels for species suffering the main reductions.

To adjust allocations down to the new TAC levels, a quota buy-back scheme was used. This was part carrot and part stick. The stick was the threat of uncompensated administrative pro rata reductions of quota - potentially down to GMITQ levels - if carrots were not taken up voluntarily. The carrots comprised an opportunity to tender to have part or all of a PMITQ bought back by the government. Each fisher was invited to submit bids of amounts that they would be prepared to accept as compensation for giving up a specified package of quota. Effectively this invited operators to cash out of the fishery, or to adjust their catch mix by selling down depleted stocks, at an agreed price, and from a higher level of quota than they would otherwise end up holding.

The Government had a budget limitation on compensation and a heuristic algorithm was to be used to optimise clearing prices for each stock in the tender round, with all fishers tendering up to the clearing price paid at this rate for giving up PMITQ (Clark and Duncan 1986). However, bids by fishers were too high to fulfil the objectives within budget. At bid prices, $NZ100m would have achieved only 60% of the required reductions (Muse and Schelle 1988). Following some attempts at valuation of the critical stocks with the aid of a bioeconomic model (Geen 1987), the government set clearing prices for the tender round so as to attain about 25% of required cuts. A second chance was then offered all remaining fishers to sell further PMITQ back to the government, or be faced with administrative cuts. This time the offer was at a fixed price set about 20% below the prices paid in the first round. A strong response was received, but all TACs were not yet satisfied (Clark and Duncan 1986; Clark et al. 1988). A total of 15 800t of quota had been bought back out of a target reduction of 21500t, at a cost of $NZ42.5 million, of which 85% was paid out for four of the 19 species (see Table 2).

Table 2

Allocation of inshore quota species

All units are tonnes except for "Government Revenue" in New Zealand Dollars. Ling and Red Cod were included in the buy-back, but had large proportions of their catch taken by charter and foreign vessels that make the TACCs non-comparable with earlier domestic catch. In1998, the buy-back portfolio of quota in the table was valued on the quota market at approximately $NZ150m.

Data sources: Catch - MAF 1984, King 1986, Annala and Sullivan 1997; Quota, TACC, Buy-back, QAA - Ministry of Fisheries QMS Data.

As promised, pro rata cuts were then applied for the remaining 5700t. These cuts were calculated only on the proportion of holdings still above each fisher's GMITQ. Hence no one was left with less than their original guaranteed minimum. Those suffering administrative cuts were guaranteed to have these restored at no cost in the event that the TACs were raised again in the future. In 1987, paua, jack mackerel and squid were brought into the QMS, with paua TACs being reduced by a further $NZ 1.4 million quota buy-back round.

As Sissenwine and Mace (1992) point out, the buy-backs cost the government more than the real catch reductions achieved were worth, as the total PMITQ was greater than actual catch levels. This can be argued to be the price of acceptance of the system by fishers. Unfortunately not all were satisfied by the outcome of the allocation process and many appealed to the specially constituted Quota Appeal Authority. The appeals processes are discussed further in Section 5. Figure 11 summarises the allocation process.

In New Zealand the need for systematic collection of catch and effort data from individual fishers had been recognised before the QMS was mooted, and during the 1970s and early 1980s efforts had been made to improve data collection and storage. Statutory provisions required fishers and fish receivers to keep accurate records of all activity and to furnish returns as required by the management agency. In 1974 a new and detailed data collection form was introduced but proved unworkable and this was followed by a simplified version in 1975. This was used until 1982 without modification, providing a reasonable series of detailed landings data. In 1982 the Fisheries Statistics Unit (FSU) was formed to deal with data collection and management, and summaries of data began to be published, presumably reflecting a new level of activity. The 1974-82 data were published together (King 1985), and this was followed by separate reports for the following years, before the FSU was overtaken by the QMS (King 1986; King et al. 1987). The data covered landings by ports and areas as well as by species and method. Hence, at the time of the resource assessments in 1983 and the later assessment of catch histories, data-bases were in reasonable shape. However, during the administrative review of catch history assessments, testimony of fishers revealed that considerable under-reporting had occurred in the qualifying years in order to reduce traceable income tax obligations. In the initial analyses on which the inshore policy process leading to ITQs was based, the New Zealand Fishing Industry Board worked with the Ministry. The NAFMAC discussion document provided resource assessments with estimated levels for interim and long-term TACs as well as an analysis of over-capitalisation by region. Once the consultation process was a year down the track and government had proposed a quota policy with an expectation of implementation within twelve months, analysis began of individual catch histories. As discussed above, these were notified in mid-1985. As reporting had been legally required and the allocation formula itself was merely the average of two designated years of recorded catch history, there was little to go wrong. As noted, two appeals processes were provided - one for catch history assessments, and one for overall fairness of final allocation - and these processes took care of the inherent complexities of equitable allocation. The cost was in time but, for the protracted "fairness" hearings, this was incurred after the system was up and running.

A more complex computation was required for the quota buy-back tender round as explained above. Fishers were asked to nominate amounts of quota of a range of species held, and to tender a single amount they would be prepared to accept for the package. Multiple bids could be submitted, allowing fishers to propose different species mixes or prices. While accepting or rejecting whole bid packages, the objective was to offer every fisher at least the amount of their tender while the amount paid per tonne for any given species was consistent across tenderers. At the same time the budget constraint of government for the buy-back had to be respected and as much of each of the target reductions met as possible. When bid prices proved too high to satisfy the constraints, a bioeconomic model was used to attempt valuation of quota for each species in perpetuity. The acceptance prices decided upon meant that only about 25% (5000t) of the required reductions were met. The more pragmatic second round offer of 80% of the tender acceptance prices, as a last chance before uncompensated administrative reductions, bought out another 10 000t of quota. Later assessment showed that the average prices paid in the buy-back for each species, with two exceptions, were lower than the average prices of quota during the first year of market trading under the QMS (Sharp 1997). In many cases they were much lower, but for the major buy-back species: snapper, groper and tarakihi, the prices were within about 10% of market price.

As noted above, two avenues for appeal were established as part of the allocation process: (a) an administrative review of catch history assessments, and (b), a formal tribunal appeal of final allocations of quota. The first was available once the preliminary catch history assessments were notified on which quota allocations were to be based. Fishers who believed their assessments were inaccurate or unfair were able to appeal to have them modified. Six regional objections committees of three persons were established, often with an ex-government official as chair, and two industry members who were familiar with the local fisheries and had been recommended by industry associations. A national overview committee was to provide coordination. The committees were relatively informal and did not have decision-making power, but provided recommendations to the Director General of the Ministry of Agriculture and Fisheries who held the authority to alter assessments (Muse and Schelle 1988).

Grounds for review included errors in statistics, changed fishing patterns, or special circumstances such as vessel breakdowns or illness that might affect catch histories such that they were unrepresentative of real levels of activity in the fishery (Clark and Duncan 1986). Specific criteria for changes were left quite vague in order to encourage fishers to bring forward any problems they had with the assessments. However, the high rate of objections that occurred was not expected, and the implementation of the QMS had to be postponed for a year as a result. About 1500 applications for review were received from a total of around 2400 assessments notified to fishers (Muse and Schelle 1988), and consideration of these took some eight months to complete. Most of the objections were on the basis of special circumstances, and tighter criteria for objections may have reduced the number of ambit claims. Adjustments to assessments added to the total PMITQ and therefore to the required cuts.

Once the buy-back was completed and final allocations notified, the quasi-judicial Quota Appeal Authority (QAA) was established in early 1987. This formal three-member tribunal was chaired by a lawyer with an ex-Fishing Industry Board administrative manager and a retired Comptroller of Customs filling the other positions (Anon. 1987). They had the power to decide cases and award extra quota to appellants where thought justified, and QAA decisions could be further appealed to the regular court system on points of law. Appeals had to be lodged within 28 days of the notification of quota allocation to the fisher, or for anyone not receiving an allocation that felt they should have, within 28 days of the publication of allocations for their area.

Grounds for appeal to the QAA focused on fairness of allocations. The basic principle on which allocations were based was the commitment to, and dependence on, fishing of the individual or company. Catch history for the qualifying years was taken as a general proxy for this, but specific circumstances meant that many individuals felt that their quota allocations did not fairly reflect their situation. Such issues as financial commitments already made to fishing before or during the qualifying years, but which had not yet flowed through to catches were common bases for appeal. A major source of appeals was a provision in the legislation that was perhaps drafted more with a view to its application to future additions of fisheries to the QMS, than to the primary allocations. Section 28E(3) of the Fisheries Act as amended in 1986 to introduce the QMS, says that allocations are to reflect commitment and dependence at the time that the Minister declares that the fishery is to be managed under ITQs. As the Minister can only do that pursuant to the legislation, and the legislation was only passed into law in 1986, this declaration was made some two years after the period over which catch histories were assessed had ended. Many appeals were thus made on the basis that allocations set according to catch history over the qualifying period, did not reflect the appellants level of commitment to and dependence on the fishery in 1986, because these had increased in the interim two years (Muse and Schelle 1988).

About 1100 appeals were made, with around 10% of them from persons not receiving any quota allocation. Some declined the opportunity for a formal hearing and a significant number of cases were settled with the support of the Ministry. Ministry officials attended all hearings to provide evidence and views on the cases. The QAA awarded extra quota where they believed the appellant had been unfairly treated, and these awards automatically increased the effective TAC. More precisely, QAA awards actually increased the PMITQ total allocated to the fisher in question. If this stock had been subject to pro rata reductions following the quota buy-back process, then the extra PMITQ would be reduced by the appropriate amount before quota was allocated against it. Such reductions also qualified for restoration in the event that TACs were subsequently increased. Formal TACs were eventually adjusted to take account of the extra quota resulting from QAA awards.

For the stocks that were included in the buy-back scheme, the Authority eventually awarded over 13 000t back to fishers, in many cases increasing TACs to levels above the original PMITQ total. Squid (a species not subject to quota buy-back) had the largest QAA awards of any species - some 54 000t, representing 45% of the TAC in 1987/8. All but nine of the 155 stocks for which it was possible to lodge claims had quota eventually awarded on appeal. The addition to the QMS of paua, squid and jack mackerel in 1987, and rock lobster in 1990, gave the QAA further cases to hear, but appeals over some of the original species were still being settled as late as the mid-1990s. Table 2 shows total QAA awards by species for the main inshore species involved in the buy-back.

As noted, the policy process leading up to the allocation of quota was a consultative one, with particularly active roles played by the Economics Section in the Ministry and the Fishing Industry Board. In many ways this made the allocation process itself easier as stakeholders were reasonably well informed and in general agreement about what was to happen.

The administrative tasks of implementation themselves were largely carried out by departmental staff. Given the agreed procedures for allocation (see Figure 11) initial tasks involved computer-based assessments of catch history and notification of fishers. However, the subsequent request for review of assessments by the majority of stakeholders bogged down the process and extended the allocation stage by a full year. These reviews were carried out by MAF staff and industry representatives with final decisions made by the Director General of the Ministry.

A major aspect of the administration of the quota policy is the computer system upon which it depends. This system was developed internally by MAF staff. This approach was to have a negative impact on the flexibility of the whole policy system by locking it into a monolithic and largely undocumented technology. A key example of the problems experienced was the issue of monthly quota balancing, whereby clients are informed by statement of their catch against quota balances. The order of processing for calculating balances was established without consultation with the industry and led to ongoing conflict between industry groups and the Ministry. Once an agreement on procedures was finally reached in 1990, monthly balancing was not fully implemented or up-to-date for another four years, largely due to problems with the data-processing system. These problems would likely have been avoided though the use of an external contractor to provide data-processing services, although this may have imposed an unacceptable cost in 1986, given the uncompetitive state of the information technology sector in New Zealand at the time.

Following implementation of the system, the administrative legacy of the allocation process was the ongoing processing and hearing of appeals to the Quota Appeal Authority. This was the single most expensive part of the allocation process in terms of staff resources. During the peak years of the QAA hearings, up to six full-time staff were employed by the Ministry to prepare cases. This work continued for a decade, with at least two Ministry staff assigned full-time to the task.

In general terms, it is difficult to distinguish the additional administrative resources demanded by pursuing ITQ policies from the levels that may have been required by some other policy system. Preserving the management system status quo of the early 1980s was certainly not widely supported - change was required. Other options for change would have imposed their owns sets of unknown administrative demands - possibly greater, possibly lesser. The consultation processes between 1982 and 1985 were undertaken largely in order to come to a decision about the direction to be taken and utilised institutions established for an alternative, or at least complimentary framework. There was a recognised need for improved information systems for management, regardless of the policy instruments adopted, and an understanding that higher standards of management require more stock assessment and biological research. These require investment in systems and in skilled staff. The level of educational qualification of Ministry staff has risen dramatically over the past two decades with the demand for management performance, and this parallels the increase of a professionalisation in the industry at both operational and organisational levels.

As already discussed, the financial cost of the quota buy-back scheme for the inshore were more than balanced by the income achieved through the lease and sale of deep-water quota during the first years of the system. In terms of the ongoing costs of administration, in theory ITQs allow the attribution of management costs to stakeholders on a pro rata basis, and hence their equitable recovery. However, this places even greater demands on the administration to be accountable and transparent, and thereby to some extent results in increased costs. This can be balanced by the elimination of redundancy and better targeting of resources, but inevitably invites stakeholder demands to be involved in setting priorities and in management scrutiny at a detailed level, requiring new consultation processes and further costs.

The achievement of the key objectives of the management changes undertaken in New Zealand's fisheries in the mid-1980s relied on the inherent properties of the individual transferable quota scheme itself. Initial objectives were to relieve the pressure on inshore fish stocks and to prevent over-capitalisation in the developing deepwater fisheries. But ITQs were chosen as a strategy because it was believed that this management arrangement would provide the basis of a future fishery where such problems would not recur. The government specifically wanted to avoid short-term solutions that might ease the immediate situation, only to be faced with similar circumstances in a few years time.

Hence, the problem became one of how to introduce ITQs in the least disruptive manner while achieving the required catch reductions. Although problems were encountered, particularly in the buy-back scheme, which led to delays and some mistrust and resentment of the regulator by some fishers, the program was introduced in reasonable time and without any great disruption to the industry. However, the success of efforts to reduce catches was somewhat mixed. For the initial implementation of the program these two goals can be viewed as being traded-off against each other. Ensuring equitable allocations would be straight-forward if there were no need to constrain or reduce catch levels. What can be viewed the generous action of the objections committees and the QAA, smoothed the path for the implementation of quota, but to some extent this undermined the urgent and immediate objectives of catch reductions that were key to the rationale for introducing quota in the first place.

Similarly, the process of consultation with fishers over stock assessments created a sense of involvement with decision-making and brought local knowledge of stock conditions into the TAC-setting calculus. But it also brought to the table considerable self-interest in reducing the severity of cuts. The several revisions of proposed TACs over three years almost invariably pushed the quotas up. At the same time actual catches for some species were still increasing. Catches for those species of most concern were fairly stable over the 1983-86 period (snapper - after its crash, groper, rig), except for school shark, which increased by an order of magnitude in the six years 1979-85 (see Figures 2 and 3). These four species accounted for 86% of the total buy-back expenditure (snapper 46%, rig 18%, school shark 10%, and groper 12% - refer Table 2).

Despite the upward pressure on what had been proposed over the policy discussion time, significant cuts from 1983 catch levels were made for critical species, although less than originally proposed, in fact considerably less so for groper, school shark and trevally. The eventual TACs for seven species in 1986/87 were significantly lower than their 1983 catches including the above `big four'. Only two species that were proposed for cuts in the 1984 policy had TACs higher than the 1983 catch (see Table 3). For all inshore species, the actual TACs for 1986/7 were higher than the sum of GMITQs; 13% higher on average, with stargazer set at over twice its GMITQ (refer Table 2).

Table 3

Proposed and actual TACs with respect to 1983 catch

When the assessment of stocks was made in 1983, little was known about even the basic biology of many target species let alone their stock size and dynamics. Resource estimates were based mainly on catch histories as indicated by comments of the then Assistant Director of MAF's Fisheries Research Division, John McKoy, that it was thought reasonable to increase proposed TAC levels when it became apparent that past catches had been significantly under-reported (McKoy 1986). A rule-of-thumb of 80% of PMITQ levels seems to have been applied when there was no direct evidence of resource decline. McKoy also comments on the high demand for information of an ITQ (read TAC/MSY) system, and that this information was just not available for many important New Zealand species. Catch figures for some species showed a good reason to be concerned, but some of the language used at the time exaggerated the known facts, no doubt in order to stir up commitment to some action (see for example the Minister's foreword in MAF 1984). The data at the time certainly did suggest that control of the snapper catch was warranted and probably on an urgent basis, and nearly half of the buy-back money went to reducing snapper entitlements, and in that sense was well-targeted.

Figure 12 shows the long-term catch trends for the inshore stocks. The four primary targets of the buy-back have had their catches reduced by the QMS and have been relatively stable since. Red Cod is shown separately as it contributes the greatest proportion of the variability in the overall catch. Since 1986 catches of the remaining 13 species have expanded to just balance the reductions in the `big four' such that the variation in the total catch of these 17 species from 1976 to 1998 is quite small (mean of 43 546t; coefficient of variation 7.35%). Figures 13 and 14 compare the mean of 1983 and 1984 catches for all eighteen buy-back species, with the catch for 1998 and the 1998 commercial TAC. Total catch for the group differs by about 0.2% between the two periods. However the catch mix has changed, and the relationship of that change with the degree to which catch is now constrained by the TAC is informative. It can be seen that catches of snapper, school shark and rig have all been effectively reduced and are within a few percent of the TACs in 1998, indicating the binding nature of the constraint. The gropers on the other hand have had the catch reduced but this is well under the TAC in 1998. This seems to be due to the regional variability in the popularity of the fishery, in that the quota system has distributed quota among the stocks in different proportion to the traditional areas of catch. Some areas are constrained by quotas much lower than their pre-QMS catch, while in others areas the catch is considerably less than the TAC. Catches of other species in the mix have expanded from the pre-QMS years, and some of these are constrained by quota while others are not. As with the example of the groper species, the story can be more complex when broken down by stock.

One impact on catches that was perhaps not anticipated was that of the change of the rules themselves. Although the total of inshore TACs in 1986/7 was actually higher than the total of catches in 1985, total catch in 1986/7 dropped by 40%. Snapper catches, for example, were more than 20% under the TAC for 1986/7. This may be attributed to a range of short-term factors such as lack of an initial mechanism for mediation of bycatch balancing, general unfamiliarity with the system, and lack of information on who has what quota for lease or sale, in addition to the kind of distributional issues affecting groper.

However, for most high value species this was a short-lived respite for the stocks. For example, in the second year of the system the snapper catch was back up against the TAC and has stayed there ever since. Quota appeals led to the gradual topping up of the TACs, with snapper gaining 22% over the first five years. In 1992-3 a cut of this same order was made to snapper in the problem northern QMA 1 area, but the total TAC still remained above that set in 1986, with stock assessment continuing to reinforce the view that the resource remained overfished. Snapper stocks are still under pressure after 15 years of ITQs, with the industry firmly opposed to commercial TAC reductions without some mechanism to effectively constrain recreational catches. Figure 15 shows the long-term trend and current outcome for snapper catches. The proportion of the curve above the long-term estimated commercial MSY line (just below 10 000t) gives some indication of the possible degree of over-fishing11. The temporary impact of the information-deficit regarding the new system can be seen in 1987; the fast rebound the following year; and the expansion due to QAA awards until the TAC was lowered again in 1993.

The policy of market interventions by government to adjust TACs was in practice a one-way street. In its four years of operation after the initial buy-back, and before conversion to proportional quota, no TACs were further lowered through government purchase of quota. However, the government did take about $NZ84.2 million in revenue from sales of deep-water quota to the industry, thus achieving a surplus of around $NZ40 million net of the buy-back costs (refer Table 2). This does not take into account, and is in fact dwarfed by, the eventual cost of settling Maori claims to a share of the resource, brought to a head by the implementation of the QMS. However, this outcome can be characterised as a benefit of the quota system, in that an injustice that existed before the system was introduced was eventually addressed effectively, in large part because of the strong rights-framework of the QMS.

Figure 13
Long-term impacts of institutional change on catch of inshore species

In summary, the process of allocation succeeded in introducing ITQs with the general support of the fishing industry, and this has been largely maintained over time. For valuable overfished inshore species, the system brought the expansion of effort under some control, reduced catch levels during the allocation, and provided an ongoing means to directly control catch levels. However, the system has not subsequently proved powerful or complete enough, against the concerted will of the industry to implement the level of TACs recommended by government sponsored stock assessment research.

As noted above, one of the programme's objectives was to build and retain the support of fishers for the QMS. This seems to have reasonably successful, and was undoubtedly facilitated by the close working relationship between the New Zealand Fishing Industry Board (FIB), the Ministry, and fisher associations. The FIB pointed out the economic plight of the industry while the Ministry provided the assessment of biological resources under stress. The use of fisher organisation representatives on the NAFMAC committee to mitigate the consequences of presenting the "bad news" about the inshore fisheries to fishers, was probably of great assistance in the acceptance of the need for management change.

Figure 14
Total catch for selected New Zealand inshore fin-fish species - 1974 to 1998

Figure 15
Reported New Zealand domestic catch for snapper (Pagrus auratus): 1960-1998

However, Fairgray (1986) notes that fishers in small communities remote from Wellington felt that they were not kept well-enough informed, highlighting the difficulties in communication and consultation where there is a highly dispersed stakeholder group. This study of fisher attitudes carried out at the time of the QMS planning and consultations, revealed a general but guarded support for the system, by fishers in the area most under threat through resource depletion and excessive fishing effort. Fishers were somewhat fearful of what the cuts would mean to their own livelihoods, but agreed that ITQs would provide stability and be preferable to open competition under reduced TACs, or a continuation of overexploitation.

Dewees (1996) reports that a majority of Auckland fishers surveyed during 1987 were unhappy with the level, accuracy and timeliness of information supplied during the policy development phase, but felt this had improved markedly following implementation. The initial NAFMAC discussion document was fairly hefty - more than 100 pages - due to the detailed stock, catch and economic assessmenws it contained. The document might have been more useful if a summary of the policy implications and suggestions had also been circulated. The 1984 policy proposal (MAF 1984), referred to as the "Blue Book," was more widely read, but it was in the progress of decision-making that fishers felt cut-off. "Catch," the monthly Ministry publication to the industry was the main organ for dissemination of news and views. In 1986, just as the new system was being finalised, the Ministry began publishing "Fisheries Bulletin" jointly with the FIB, and the trade magazine "New Zealand Professional Fisherman" was also established. This multiplication of channels is likely to be partly responsible for Dewees' findings regarding an increased satisfaction with the information-flow following implementation, along with reduced levels of uncertainty, and therefore of anxiety, about the future.

Dewees points out that it would have only taken a small percentage of the $NZ 42 million spent on the quota buy-back to make a big improvement in communication with fishers, and this may have resulted in better policies and compliance. But it must also be remembered that the process of consultation on this scale over government policy-making was a relatively new practice in New Zealand at the time. Fishers at the grass roots level were not used to being part of management decision-making, and government officials were not used to running such processes. Expectations about what is possible in such circumstances were likely to take a battering. Having the co-operation of the main fishers associations helped greatly, as they consolidated representation and provided another channel for keeping their members informed of progress.

Another issue here is to what extent the policy ideas were essentially fixed before consultation began. The ITQ scheme did not change much in the two years prior to its activation, a notable exception being the 20% aggregation limit on inshore stocks - the result of fisher input. Economists in government had been discussing the ideas since 1980 and had run a successful pilot scheme in the deep-water fisheries. ITQs represent a significant shift in thinking about fisheries management, and a equally significant change in the nature of incentives for fishers. It must be expected that at least some of the proponents of the policy saw the consultation process as an exercise in selling the ideas, rather than one of bottom-up policy development.

Fishers also felt some bitterness over the tendering process, which was for them a crucial decision point in their working lives, feeling that they had been misled (Dewees 1996). This points to dangers with elaborate and seemingly elegant "optimal" solutions to allocation problems, especially in fisheries. Again, the buy-back tender process was innovative but untried. Without any history of license trading, many fishers may have had little real idea of the value of perpetual rights to fish for particular stocks, or how to work it out through a net present value calculation. The limitations of the standard model of rational economic decision-making by individuals participating in a market really do matter in these circumstances. Huge uncertainties prevailed as the whole basis for regulation of the industry was changing, with high expectations of a prosperous future. When MAF economists were faced with somewhat irrational valuations in the tender round it still took a fair amount of computing power to figure some fair prices. The second round offer - fair price less 20% - certainly produced a response, but was hardly a generous offer, and probably contributed to resentment by fishers who had missed out in the first round through over-estimating values. Prices for quota of many stocks in the following years were well above the prices paid in the buy-back, although as mentioned earlier the prices paid for the `big four' buy-back species were close to subsequent market valuations.

It is to be expected that those feeling disenfranchised by changes, such as the introduction of quota management, would generally be small operators, part-timers fishermen, and other groups not strongly represented in the consultative process. The two-phase appeals provision of the scheme gave a great many the opportunity to have their case heard, and many were to benefit by an award of further quota. The number of appeals might be seen as an indication that many were dissatisfied with the basic allocation process, or it may be seen as largely opportunistic behaviour by fishers. Whichever way it is read, the process allowed the Ministry to deal with the basic data errors before ITQ allocations were made, but kept the inevitable post-implementation equity complaints confined, through a controlled process that dealt systematically and fairly with each one, without holding up the progress of the new system.

In a study of a sample of Auckland fishers conducted in 1987, immediately following implementation of the QMS, Dewees (1989) found that they were more optimistic about the future of fishing than they had been two years before, and that a large majority were making changes to their businesses because of ITQs. Some were reducing financial commitment or selling out (31%) and some increasing commitment (22%). Most were altering fishing methods, target species, and/or factors that reduced costs and maximised net benefits (77%). Fishers believed ITQs were better for conservation of resources and provided a valuable financial asset, but were concerned about the effect of the new system on discarding and the difficulty of enforcement of the new rules. Other concerns included the cost of entry for young fishers, and the potential for increased control of fisheries by the big companies. Overall, 69% of the fishers interviewed thought the new system to be at least as good, or better than the old management system.

Since the implementation of ITQs the industry has been in constant dialogue with the Ministry over adjustments to the system. The structure of the industry has changed, as has the representation system. This has much to do with the economic benefits generated from the deep-water fisheries since 1986 (see Figure 16). The relatively small number of companies involved in the deep-water sector means that both the focus of policy and the influence of the industry has shifted toward the larger companies. In these circumstances it would be unusual not to be able to find smaller operators who feel they have been penalized by the system. On the other hand the general view expressed by both government and industry representatives, is that the quota system has transformed fishing in New Zealand from a small-time and unprofitable business to a major and highly professional export industry enjoying high returns. In 1995 a further study of fisher attitudes found high support for the benefits of the system from the larger companies, and mixed feelings from the smaller operators (Dewees 1998). Many of these smaller fishers were dependent on the snapper fishery in Auckland which, as noted above, was still under pressure, and at the time was the subject of government attempts to lower the TAC.

The initial objections of the Maori people to the quota system have largely been resolved. Maori now collectively control around half of the New Zealand commercial fishing industry through the ownership and management of quota. Maori traditional gathering of seafood other than for sale is managed by local Maori communities, while being reported to the Ministry for inclusion in resource assessments. A minority of Maori still maintain a literal interpretation of the Treaty of Waitangi that guarantees full, exclusive and undisturbed possession of fisheries resources, but politically the issue is effectively settled. Maori have thus become major players in the industry and are active in the policy process as economic as well as political actors. However, it is a mistake to see Maori interests as a unified single, and hence dominant, player in New Zealand fishing. Although quota and other fishing assets have thus far been held and managed together, this is about to change with the allocation of these assets to 78 individual tribal groups or Iwi. The economic and political outcomes of this move remain to unfold.

Conservation groups remain critical of the QMS and fisheries management in general, as well as of the industry. They believe the system to be "... insufficient to provide good environmentally safe fisheries management" (Wallace 1998). A central concern is the movement toward greater industry influence on setting the agendas for research and management, and the role of government in the protection of the public interest in biodiversity conservation values. Environmentalists are critical of many of the same aspects of the process of allocation of quota, as others are (for example, Sissenwine and Mace 1992), aspects such as the exclusion of part-timer fishermen, the gifting of quota, and the lack of information on which to base TACs. Representatives of environmental groups are active in many of the regular consultative forums of the policy and management processes. Although the environmental lobby has been effective in encouraging action by industry and government on some issues such as seabird and marine mammal bycatch, the effort to affect policy is confined to a small number of individuals.

Wallace (1997) however, highlights an important bioeconomic issue that has been consistently ignored both in policy analysis and by the optimistic commentary on the New Zealand system in practice: that of the potential for incentives to mine resources even under sole ownership (Clark 1973). This blemish on the smooth patina of the property-rights theoretical visage, has been conspicuous in the lack of attention it has received, but threatens to attain greater practical significance as the New Zealand system evolves toward expanded industry involvement in management.

Consideration of the history of the New Zealand ITQ system requires a recognition of the generally high level of complexity of fishery management issues and the unique nature of each set of circumstances. New Zealand adopted a systems-approach to the reform of its fisheries management, addressing each necessary component from allocation to enforcement with innovation and vision, and with commendable attention to process issues. Constraints on financial, institutional and human resources meant that all bases were not covered as well as they might have been, but the lightweight bureaucracy and powerful government system made for relatively adaptive and fast decision-making. Perhaps critical to the success of the policy was the political opportunity afforded by the reformist economic policies of the new Government (elected in 1984), which strongly favoured restructuring and privatisation of government functions and assets across the board.

Many of the components of the QMS and the policies for its introduction have interacted in ways that do not allow the complete separation of cause and effect linkages. Aspects of the policy package, such as the consultation and appeals processes, made a significant contribution to the acceptance of the system, preventing the formation of possible large-scale opposition by fishers. The continuation of the dialogue established in the consultation phase after the implementation rapidly identified and addressed operational problems such as bycatch issues, although this did not guarantee resolution.

Although not planned, the fixed-tonnage allocation and buy-back, followed by conversion to the proportional ITQ system, produced a relatively smooth transition from regulated open-access to flexible-quota management. The fact that the original tonnage-based policy and the subsequent turn-around were both motivated largely by government fiscal considerations, rather than sound fisheries management policy principles, draws attention to several important points. The first is the primacy of politics in institutional change; second is the pioneering nature of this system in the historical context of the 1980s - there were no models; and the third is the potential for positive emergent outcomes in complex institutional settings. In seeking to learn from experience, it is important not to overlook insights from such serendipity, although its purposeful reproduction in other circumstances may present problems. The flexibility of policy system parameters is likely to be more important to success than a flawless policy blueprint.

The uncompensated exclusion of part-time fishers in 1983, although not strictly part of the QMS strategy, is difficult to view as equitable in light of the subsequent adoption of ITQs. Although it would have incurred greater transaction costs, these fishers could have been included in the quota allocation process, without substantively affecting the achievement of its objectives, producing a more equitable outcome. In the years following implementation, the quota system has not been particularly kind to smaller vessel operators. A lack of understanding of the nature of quota assets by banks and the lack of a lien registry, meant that smaller operators were disadvantaged in their access to capital in the initial adjustment phase, and some may have been squeezed out of the fishery through lack of quota. There was a brief resurgence in numbers of smaller boats in the late 1980s, but the decline of the under-12m boats then resumed and accelerated in the 1990s (see Figures 5 and 6).

A major question hanging over the QMS policy process is the lack of consideration given to the issue of Maori rights. It would be easy with hindsight to condemn this as arrogant and short-sighted, but at the time the issues were not clear to many Maori or pakeha (non-Maori New Zealanders). Although the claims against the system were quick to emerge following the initial policy decisions, the understanding of the issues involved was restricted to a few scholars of the Treaty of Waitangi and of the history of Maori fishing in the early 1800s. The courage of the Maori leadership, to take action when they did to prosecute their claim, commands respect. For pakeha, it was only after fishing access had been transformed by the state into an exclusive right akin to property, that it became possible to recognise the possibilities of the validity of Maori claims, and their settlement. The creation of commercial property rights forced the consideration of the nature of the rights guaranteed in the Treaty of Waitangi, and the subsequent recognition of distinctions between commercial and development rights, other traditional rights to gather seafood for cultural purposes and rights to participate in fisheries management.

It is clear that, although the allocation process itself catered reasonably well to equity issues within the boundaries of the stakeholder group it had defined, distributional issues per se are not part of the framework of objectives for New Zealand fisheries management. Given the small size of the country, the relatively high levels of education and a reasonably healthy economy, a key assumption behind the market-based ITQ policies is that, as the industry adjusts to become more economically efficient, those that leave the industry will be able to find other work and investment opportunities. This assumption has tended to encourage the view that those that are not doing well are "marginal"operators - i.e. the least efficient - and they should take the hint and get out. On the other hand, as long as the large companies are making good profits, the assumptions are that they are efficient and that the market system is working according to the original assumptions. Little attention has been paid to such issues as the differential effect on smaller operators of increased transaction costs associated with the management system, or how the market power of large integrated companies may affect the distribution of rents between the catching and processing-export sectors.

In conclusion, the processes of development and selling of the QMS and the allocation of rights must be viewed as a relatively successful policy exercise, even if some of this was fortuitous rather than planned. However, there has been a lack of follow-up studies of the impacts of the quota system on the economic or social aspects of New Zealand fisheries, making assessment problematic. On the surface, the industry seems prosperous. The exploitation of deep-water resources and value-added processing and export of the catch have enabled this, and the quota regime has ensured that the rents have not been dissipated through fleet expansion. High-value inshore species such as paua, rock lobster, scallops and snapper have retained an important place in the industry, with rock lobster in particular enjoying some real management success under quota. Rising quota values seem to indicate increasing returns to fishing and good economic performance of the QMS. However, the fate of what was the majority of the industry existing in 1980, in terms of boats and people, is not so clear. Nor have the newly-developed socio-economic relations and dynamics of the industry attracted much scrutiny. It seems the system has to date not been so secure in its success as to be able to provide for much in the way of independent assessment of its socio-economic impacts.

The New Zealand quota management system for fisheries is a generally successful implementation of a management modality advocated by some for adoption more widely throughout the world. As such it deserves further detailed assessment and documentation. However, a few points are worth noting here regarding the major factors distinguishing the political economy of fisheries management in New Zealand in the mid-1980s from other situations.

First, the importance of political and economic opportunity for change should be noted well. In New Zealand favourable political circumstances arose at just the time that change was widely recognised as required by the industry and management. This coincided with the consolidation of ideas emerging from the global debate on fisheries management institutions and the emergence of ITQs as a mature concept. At the same time, the rapid expansion of domestic involvement in the deep-water sector enabled by the declaration of the EEZ and subsequent "nationalisation" policies, created significant economic opportunities for larger companies and a consequent drive to economically restructure the whole industry. Hence the big stakeholders became major advocates for the change to a quota-based process.

Second, the issue of scale is important in many ways in introducing change. Fortuitously, from an administrative standpoint, the population of commercial fishers in New Zealand was slashed in the three years prior to implementation by the revocation of licences of part-timers. However, even at previous levels New Zealand's fleet was hardly large by world standards. This small size of the national industry (and the unitary government) made it possible to deal with all economically significant fisheries in one process, avoiding potential problems of displacement of fishers and vessels to other fisheries. The task of allocation of quota to less than two thousand fishers was achievable in reasonable time, preventing extended uncertainty about outcomes that could undermine confidence in the system.

Last, the issue of historical circumstances is important to understanding the potential for successful change in property rights for access to fisheries. Cultural traditions of long standing are important factors in fisheries in many areas of the world, with local economies and social structures often based around fishing activity and access rights. Such rights systems are informal in many cases. That is they are defined by local communities rather than by the legal system of the state, although a legal regime may exist on paper. Community social structure may in some cases be integrated with these fisheries access-rights systems, and externally imposed change may have severe social impacts. Such systems did not pertain in New Zealand to a significant extent. The right of central government to control resource access was universally acknowledged by the industry, and the challenge to that right by Maori served to highlight the recent development of commercial fishing by European settlers. Hence, although some smaller vessel-owners may consider that they have been disadvantaged by the quota system relative to large companies, restructuring and change in the industry has not resulted in massive social impacts on small coastal communities, which generally have mixed agricultural and fishing economies. New Zealand is a young country economically and socially, and is therefore at some advantage in being able to adapt both through, and to, institutional innovation.

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QMS species code	Common name	Scientific name	TACC 1998
			(tonnes)
Inshore fin-fish species
BCO	Blue cod	Parapercis colias	2 665
BNS	Blue nose	Hyperoglyphe antarctica	2 490
BYX	Alfonsino	Beryx splendens;
		B. decadactylus	2 727
ELE	Elephant fish	Callorhinchus milii	715
FLA	Flatfish	Rhombosolea leporina;
	(group of 8 species)	R. plebeia; R. retiaria;
		R. tapirina;
		Pelotretis flavilatus; Peltorhamphus
		novaezelandiae; Colistium guntheri;
		C. nudipinnis	6 670
GMU	Grey mullet	Mugil cephalus	1 086
GUR	Red gurnard	Chelidonichthys kumu	5 143
HPB	Groper	Polyprion oxygeneios;
	(2 species)	P. americanus	2 181
JDO	John dory	Zeus faber	1 107
JMA	Blue moki	Latridopsis ciliaris	604
JMA	Jack mackerel	Trachurus spp.	60 546
RCO	Red cod	Pseudophycis bachus	16 066
SCH	School shark	Galeorhinus galeus	3 106
SNA	Snapper	Pagrus auratus	6 495
SPO	Rig	Mustelus lenticulatus	1 888
STA	Stargazer	Kathetostoma giganteum	4 972
TAR	Tarakihi	Nemadactylus macropterus	5 992
TRE	Trevally	Pseudocaranx dentex	3 932

Rock lobster species
CRA	Rock lobster	Jasus edwardsii	2 927

Other Invertebrates
PAU	Paua	Haliotis iris	1254
SQU	Squid	Nototodarus spp.	123 332

Mid-depth fin-fish species
BAR	Barracouta	Thyrsites atun	34 233
HAK	Hake	Merluccius australis	13 997
HOK	Hoki	Macruronus novaezelandiae	250 010
LIN	Ling	Genypterus blacodes	22 113
SKI	Gemfish	Rexea solandri	2 211
SWA	Silver warehou	Seriolella punctata	9 512
WAR	Blue warehou	Seriolella brama	4 512

Deep-water fin-fish species
OEO	Oreos	Allocyttus niger;
	(group of 3 species)	Neocyttus rhomboidalis;
		Pseudocyttus maculatus	25 654
ORH	Orange roughy	Hoplostethus atlanticus	21 330

¹The Ministry of Agriculture and Fisheries was reformed in 1994 as the Ministry of Fisheries (MFish). In this document the agency will be referred to as MAF or the Ministry.

²At this time, average incomes over all sectors in Northland fishing towns was approximately $NZ11 000 (Fairgray 1985).

³The exclusion of part-timers was cited as a breach of the Treaty of Waitangi in the Ngai Tahu Sea Fisheries Claim.

⁴Figures from the National Fisheries Advisory Council (1983) published in Sharp (1997) suggest that less than 2% of catch was being taken by this number of the least productive boats.

⁵The range of data sources available covering the transition period between 1982 and 1987 show considerable discrepancies. Some data show a more gradual reduction in vessel registrations in 1983-85 than is illustrated in Figure 1. Prior to the exclusion of part-timers fishermen the total number of small boats was starting to decline, but the net loss from exclusions was still around 2000 boats. The dip in the capacity plot in 1983 is split about equally between vessels under, and over, 12m in length, with the rebound, sustained past 1986, due entirely to larger boats.

⁷In the deep-water fisheries three oreo species are managed as a group - that is subject to the same quota (see Appendix 1). In the inshore fisheries, eight species of flounder and sole are managed as the species group flatfish, and two groper species as hapuku/bass.

⁸These were the deep-water orange roughy and oreo species, hoki, hake, ling, barracouta and silver warehou. See Appendix 1 for a listing of species common and scientific names, quota codes and Total Allowable Commercial Catch (TACC).

⁹For details of Maori claims to fishery resources and the settlements reached see (Waitangi Tribunal 1988; Memon and Cullen 1992; Waitangi Tribunal 1992; Munro 1994; Wickliffe 1995; Hooper and Lynch 2000).

¹¹This is likely to be an exaggeration to the extent that recreational catches have been increasing.

INITIAL ALLOCATION OF INDIVIDUAL TRANSFERABLE QUOTA IN NEW ZEALAND FISHERIES

R. Connor
Centre for Resource & Environmental Studies
Australian National University, Canberra, ACT 0200 Australia
<[email protected]>

INITIAL ALLOCATION OF INDIVIDUAL TRANSFERABLE QUOTA IN NEW ZEALAND FISHERIES

R. ConnorCentre for Resource & Environmental Studies Australian National University, Canberra, ACT 0200 Australia<[email protected]>

R. Connor
Centre for Resource & Environmental Studies
Australian National University, Canberra, ACT 0200 Australia
<[email protected]>