RESPONSIBILITIES AND RIGHTS-BASED MANAGEMENT - Chairman: Alain Bonzon, Food and Agriculture Organization, Rome

Making Fishing Rights Worthwhile - Sustainable Fisheries - K.Truelove
Evolution of Self-Governance within a Harvesting System Governed by Individual Transferable Quota - M. Arbuckle and K. Drummond
Stronger Rights, Higher Fees, Greater Say: Linkages for the Pacific Halibut Fishery in Canada - G.S. Gislason
Property Rights and their Role in Sustaining New Zealand Seafood Firms' Competitiveness - R. Bess

Making Fishing Rights Worthwhile - Sustainable Fisheries - K.Truelove

K.Truelove
Marine Group, Environment Australia
GPO 787, Canberra ACT 2601, Australia
<[email protected]>

1. INTRODUCTION

This paper is not about who should get property rights, nor about the principle upon which they should be granted or withdrawn. Instead, it deals with the issue of the value of a property right in terms of longterm sustainability. My point of view is simply that the value (to the owner and the community) of a right - any right - which is dependent upon the use of a natural resource is directly proportional to the long-term sustainability of that resource and the environment in which it exists. The key issue here is the phrase “long-term”.

Two serious questions have been raised in the pursuit of property rights: (a) What are they? and (b) who should have them? I have no doubt that there is a plethora of explanations given as to what constitutes a property right. To take a relatively simple definition, property rights are “varying degrees of ownership of a resource by particular individuals or associations” (Cooke 1984, quoted in Harden Jones 1994). In the fisheries context they may include licences to fish, gear entitlements, individual transferable quotas (ITQs), and they basically are predicated upon a limited-access fishery since where there is no limit there is no preferential right of access.

“Who should have them?” is perhaps the most vexed question of them all. At a philosophical level, there is concern at the concept of property rights over a common property resource. Van der Elst et al. (1997) suggest that a consensus is emerging that the owner of the fisheries resources of a country is the community, with government charged with the task of allocating those resources. Fish and the environment in which they exist are a community resource to which commercial fishers obtain a form of preferential access, through such devices as licences. Conditions are placed upon those with the “right” to fish by the managers, in response to the community preference that the common resource be maintained through time.

It could be seen in terms of the community as a whole relinquishing a proportion of its right to the resource to the fishers. So in a sense the commercial fisher has an inalienable right, as a member of the community, to access the community resource plus that fragment of the overall community right which implicitly has been ceded to him through the tacit agreement that he be allowed to fish for profit. Meantime, every member of the community retains that inalienable right of access. To extend the analogy, the question arises: does the commercial fisher then have two rights to the resource - a commercial right (i.e. that proportion of the community right ceded to him) plus his community right? My argument is no: instead, he has an enhanced right of access through the tacit agreement of the community; not twice the rights of any other member of the community.

These are deep philosophical issues and it would take someone with a great understanding of human behaviour to unravel them. This paper, rather, concentrates on the fundamental principle that fisheries should be sustainable if properly managed in the ecological context and recognises that not even a natural, unfished system is inherently sustainable.

2. THE RIGHTS AND RESPONSIBILITIES OF STEWARDSHIP

2.1 Community property and the commercial fisher

Assume there is a community of 200 with access to a single species of fish. If rights are distributed evenly throughout the community, this would logically mean each person has right to 1/200^th of the resource that is available and can be harvested sustainably - note, not to the overall resource but only the portion that can be harvested sustainably. Of course, everyone’s use of the resource will not be the same. For some it may be a matter of fishing for dinner once a week; others may prefer simply to go into the aquatic environment and observe it; still others may not use the resource in any physical way but “use” in the sense of having a warm feeling because the resource is there. These all are legitimate uses of a resource.

Now let ten members of the community become commercial fishers, and to make a living they need 1/20^th of the available resource. To maintain the overall harvest at a sustainable level, the community must cede to each commercial fisher a proportion of the community right so that 1/20^th is available to each fisher. If each commercial fisher “ceded” the same proportion from his own community right to fish (but retained that right for his commercial operation), then ten operators would take up the entire resource available for sustainable harvest: 200/200 (I assume that the community does not wish to harvest the resource and is content to let the commercial fishers do that). If a commercial fisher did not cede that proportion of his right which the community as a whole has decided should be ceded, access rights reach 210/200.

This is not so sustainable. Still, it’s easier to let the commercial operator continue making his profit, and keep the own recreational rights to fish or other forms of access. Everyone keeps their rights, and if the commercial fisher makes a profit, well good luck to him; everyone is happy. Besides, the commercial fishers have paid the community for the rights to exploit the resource for private commercial profit.

So things in the community of 200 can go along swimmingly until the numbers game changes: an eleventh commercial fisher starts operating, the community grows, the resource starts to fail. In all of these scenarios, the value of the right starts to fall. Eleven fishers means that each cannot have access to 1/20^th of the resource any more, yet 1/20^th is needed for their ventures to survive economically; a community of 201 means that the initial right of each member is reduced to 99.5% of the original (with consequent impacts on the proportions available for commercial operators); a decline in productivity of the resource means fewer fish make up the 1/200^th of the resource that is the initial right, with consequential economic and ecological implications.

This is a simplistic argument and the pundits will rightly argue that the whole issue is a great deal more complicated. My scenario does not take into account factors such as the cost to commercial fishers (licences, fuel, gear, etc.); the benefit to the fishers in making a living; the benefit to the community through employment generated by commercial operations; the benefit generated in terms of licence fees; the cost to the community in having the management authority; and so forth. These are all social and economic issues, and are critical in our socio-political world; yet in an environmental sense they are almost at the level of the non-sequitur. Our approach on the environmental front has been uncoordinated and leaves much to be done while we are at an unknown point on the sustainability curve.

Whatever the argument, it is hard to avoid from the reality that fish and the environment in which they live are finite; we cannot parcel them up into property rights to an infinite number of people without reducing the size, quality and value of those property rights. We can parcel up the resource explicitly, as part of a controlled management arrangement; or we can do it implicitly, by allowing pressure (fishing, pollution and degradation, etc.) to increase beyond the capacity of the aquatic environment and then deal with the social, economic and ecological decline that inevitably must follow.

2.2 For every right there is responsibility

I do not believe many would disagree that for every right there is a responsibility. If you get your driver’s licence, you also get the responsibility of driving safely for yourself, your passengers, other users of the road and the community. Sometimes that responsibility will outweigh the benefits of the right; sometimes the responsibility is quite light; but the two go hand-in-hand.

In the community of 200, in the initial case, each person has the responsibility to ensure their use of the resource does not exceed a 1/200^th share of the resource. With the advent of the commercial fishers, each member of the community continues to have the same responsibility to ensure their use does not exceed their right, which in the 10-fisher scenario equates to nil because they have ceded that right to the commercial fishers. The community as a whole also has the responsibility for minimising its impact on the aquatic environment, e.g. sewage outfalls and other forms of pollution, as well as the usual forms of social, political and economic responsibilities such as voting, driving on the correct side of the street, and paying for what they obtain.

These responsibilities also lie on commercial fishers, yet they have additional responsibilities flowing from their preferential access to the resource. They must ensure their use does not exceed the 1/20^th that is their right. They must satisfy additional responsibilities brought about through mechanisms such as management arrangements - reporting their catch and providing the relevant information sought by the community as part of the cost of access to the 1/20^th of the resource and, because they are the ones working physically in the aquatic environment, a responsibility to minimise their impact on that environment. These impacts can be in terms of unintended catch, lost or discarded gear, excessive removal of prey or predator species, polluting discharges, translocation of pest species, and so forth.

2.3 The umpire’s decision is final: but who is the umpire?

If a property right is not going to be handed out to fishers unfettered by regulation and community expectation, we must assume that there will be an umpire to control the exercise of the right and attendant responsibilities. Who is that umpire? The community as a whole, which has ceded to fishers' preferential access? The management agency, which has been created by the community to establish the degree of right and undertake the oversight role? Or is it, ultimately, the aquatic environment which must carry the overall brunt of the exercise of that right?

One cannot fish without having an impact. Thus, defining the point at which the community is willing to bear the cost associated with that impact and where it is not, becomes an exercise in clairvoyance. Management agencies with the assistance of scientists and with the increasing involvement of fishers and members of the general community, are engaged in developing estimates of this point. Sometimes these are target reference points, such as a total allowable catch, or an individual transferable quota; more critically it may be a limit reference point, the point in a decline in biomass where a management action is required.

Management agencies have the most onerous responsibility - they must be able to determine what proportion of the total resource can be harvested sustainably within the context of all impacts upon the resource and supporting aquatic environment. They do not do this without scientific help; as Garcia (1994a) notes, fishery scientists are expected to: (a) determine the theoretical potential production of a stock; (b) calculate as a benchmark the corresponding level of fishing effort; (c) determine appropriate size at first capture; (d) recommend means whereby these can be achieved and the trade-offs involved; and (e), assess the effects of fishing and forecast impacts of management options. Once that is done, management agencies must determine how the proportion available for fishing should be distributed and to whom; then they must ensure that each of the rights holders discharge their responsibilities for the use of the right. What is more, they must do this in a climate of chronic and continuing uncertainty about the state of the fish stocks and the aquatic environment. Whatever the approach, there always is a risk that the reference point is wrong and fisheries management is a process of risk management as much as anything else.

In an anthropocentric sense, once the community cedes preferential rights of access to fishers, the next level of umpiring is the community, through decisions taken by the government as the community representatives (tempting though it may be to equate the management agency with the government, it would not be accurate. The former is an instrument of the latter, but the two are not synonymous and governments legitimately may take decisions against the advice of management agencies). On a less anthropocentric scale, the final umpire, the one we avoid calling upon, is the environment itself.

3. WHAT IS THE WORTH OF A FISHING RIGHT?

3.1 What is sustainability?

The first question must be: what is sustainability? In our human time scales coal is an exhaustible resource, rather than a sustainable one and the most acceptable approach is to treat it as such by managing mining impacts so that they are ecologically sustainable on the surrounding environment - an approach consistent with the National Strategy on Ecologically Sustainable Development.

Fisheries are quite different. They are based upon a renewable biological resource. They have the potential, if properly managed, to be one of the most long-term sustainable industries; they provide a relatively swift turnover in biomass, faster than many forest resources and infinitely faster than mineral resources which take millennia to develop. Many aquatic ecosystems appear to be remarkably resilient to perturbations, and in comparison with many of our terrestrial systems are relatively undamaged.

In accepting fishing - be it recreational, artisanal, indigenous, commercial or heavy industrial - the community is implicitly accepting that the aquatic environment in which the fishing is taking place will be affected, the scale of which will depend upon the scale of fishing. In the case of full-scale commercial fishing or wide-spread, heavy recreational fishing, removal of a large number of select species from an ecosystem would have an impact on the ecosystem (small-scale, artisanal fishing may be a different case). Further, there may be a significant time delay before those effects become clear. At the same time one needs to accept that ecosystems are dynamic; with or without fishing, they continually change from one point of transition to another. Thus, the trick in fisheries management is to ensure that the ecology, amended as it is by fishing (and other factors which may be beyond the control of the agency or of fishers), can continue to change over long periods of time, without a nett overall loss in quality.

I regard this as “sustainability”. It is a definition as vexed with problems as any other - what, for instance, is “a nett overall loss in quality”? More importantly, how is it measured? These are questions fisheries agencies continue to grapple with them, as they battle with operationalising the principles of ecologically sustainable development (ESD). There are no neat explanations, no tidy definitions.

3.2 The strategic approach to sustainability - Australian style

Australia has a National Strategy for Ecologically Sustainable Development (Commonwealth of Australia 1992). The National Strategy recognises that there is no universally accepted definition of ESD and defines ESD as “using, conserving and enhancing the community's resources so that ecological processes, on which life depends, are maintained, and the total quality of life, now and in the future, can be increased”. The Strategy clearly recognises that there is no identifiable point at which ESD can be said to have been achieved and that some key changes to the way we think, act and make decisions will help ensure Australia's economic development is ecologically sustainable. Two main features are identified which distinguish an ecologically sustainable approach to development:

i. consideration, in an integrated way, of the wider economic, social and environmental implications of decisions and actions (nationally, internationally, and in terms of the biosphere) and

ii. taking a long-term rather than short-term view when taking those decisions and actions.

i. integration of short and long-term economic, environmental, social and equity considerations in decision making processes

ii. where there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation

iii. recognition and consideration of the global dimension of environmental impacts of actions and policies

iv. recognition of the need to develop a strong, growing and diversified economy which can enhance the capacity for environmental protection

v. recognition of the need to maintain and enhance international competitiveness in an environmentally sound manner

vi. adoption of cost-effective and flexible policy instruments (e.g. improved valuation, pricing and incentive mechanisms) and

vii. broad community involvement in decisions and actions on issues affecting the community.

The Report on the Implementation of the National Strategy for Ecologically Sustainable Development 1993-1995 (Commonwealth of Australia 1996) indicated that a significant amount of work has been done since the finalisation of the National Strategy to achieve these objectives. Most action appears to have occurred in areas of resource stewardship, such as fisheries. One indication of this has been the promulgation of fisheries legislation embracing the basic principles of ESD in all States (other than South Australia) and the Northern Territory; South Australian fisheries legislation, promulgated in 1982, already encompassed the concepts of equity and sustainability, as does the 1991 Commonwealth fisheries legislation.

But new legislation and a national commitment merely provide the framework within which sustainability may be achieved. Further, after the adoption of the National Strategy there remained an emphasis in fisheries management upon the social and economic aspects contained in point i. above, with the environmental aspect addressed sporadically and in response to pressure. Dovers and Mobbs (1997) suggest that Australia’s disjointed and ad hoc approach to environmental policy “can only be addressed by institutionalising environmental and sustainability concerns on par with social and, especially, economic concerns”.

The draft report of a recent review of the adoption of ESD in Commonwealth departments suggested that it had varied widely across agencies, and stated that implementation has been best in areas of natural resource management: “In the area of natural resource management and environment protection, the integration of economic, environmental and social considerations has been seen as a core policy concern. These areas provide the best examples of ESD implementation. A common model in these areas is various forms of partnerships among key stakeholders to achieve mutually agreed, integrated ESD outcomes. However, in some cases action has been taken in response to a looming problem” (Productivity Commission 1999). Five main impediments to implementation of ESD are identified:

i. a lack of clarity or understanding as to what constitutes ESD-related policies

ii. the complex issues associated with the implementation of ESD and the information and data requirements

iii. failure to adopt good policy-making practices

iv. deficiencies in intra- and inter-governmental coordination in policy-making and

v. insufficient attention to longer-term sustainable development issues.

Biologically a fundamental error may have been made in assuming there should be no hierarchy between the economic, social and environmental implications of decisions, since if the environmental safety-net fails, economic and social considerations will collapse as well. I am not sure that the reverse is true, but if a society is so pressured by the need for short-term survival it is unlikely to pay attention to long-term issues such as environmental sustainability. I am equally uncertain whether Australians are faced with this particular conundrum; but it is an issue facing less fortunate nations.

3.3 Granting of property rights as a means of achieving sustainability

The argument has been raised that ill-defined or inappropriate property rights to resources can lead first to, overcapitalisation and economically inefficient exploitation, as fishers in open-access fisheries seek to increase their share by fishing more, and then to over-fishing of the resource (Commonwealth of Australia 1989; National Research Council 1999). The argument can be made that granting property rights should ensure the resource is looked after by its “owners” because they have a stake in the future of the resource. In the case of fisheries, this may be a measure for achieving sustainable exploitation.

But there are two main troubles with this assumption: (a) who are the “owners” of the resource, of the right, and who has the right to distribute the rights; and (b) whether many “owners” of the same property can collectively assure its sustainability.

On the first, Van der Elst et al. (1997) make it clear that an emerging consensus is that resource owners are the community as a whole.

Can the grant of a property right vest some form of ownership of the resource in the person receiving the right? I think it more likely that granting of the right merely gives ownership of the right (and its attendant responsibilities), not ownership of the resource per se. Admittedly, the right itself can be seen as that portion of the resource the community has granted to the fisher for his exclusive use, and as such there is a form of ownership of the resource involved. But it is not ownership of the total resource and should not be interpreted as such.

If the community is the owner of the resource, it follows that the community as a whole is the owner of the right to distribute rights. By creating management agencies vested with the responsibility for ensuring conservation and sustainable use of the resource, the community grants to the agencies the right to distribute rights. The management agency becomes the agent for the community, distributing rights on the community’s behalf.

In the case of right-holders assuring sustainability of the resource, this may be relatively easy if only one individual or organisation exercised the right. Where a fisher had exclusive access to a fishery, he would fish at the level to maximise the profit. As the effort required to take maximum economic yield (MEY) is less than that required to take the maximum sustainable yield, exploitation at this level would not result in biological overexploitation (Commonwealth of Australia 1989). The fisher is happy - he is making a bomb - and the resource is not overly stressed. All going well, the aquatic environment in which the resource exists is also not overly stressed.

However, the situation is far less clear when you have a large number of individuals who have rights. A lot will depend on the nature of the property right. For example, the theory regarding ITQs is that because each fisher has a right to take a specified quantity of a certain species, he or she is under no obligation to race for fish and can exercise that right at a time which maximises his return. This may be an excellent theory for a species which is uniformly distributed across a fishery in time and space, but may not be so when a fishery depends on periodic aggregations of the fish unless there is a method of establishing total allowable catches (TACs) that takes account of the aggregating behaviour.

A classic example of this is eastern gemfish (Rexea solandri). The fishery for this occurs in early to mid-August, during migration to a spawning site off central and northern New South Wales. Although ITQs were introduced in 1989, concerns about recruitment led to successive reductions in the TAC and culminated in a zero allowable catch in 1993 that remained in place until 1996. Of course, the decline in TACs and the poor performance of the fishery even under a rebuilding strategy cannot be assumed to be the result of only ITQs and the preferred method of targeting the fish. There may be environmental factors, such as poor weather conditions hampering fishing, and scientists suspect that during the period of the zero TAC, discarding may have been a serious problem (Tilzey and Chesson 1998). But even under an ITQ system the catch rates of a stressed species continued to decline, apparently as a result of poor recruitment. Even now, ten years after ITQs were introduced, the species is considered overfished. The property right did not automatically mean the fishery was sustainable!

ITQs are perhaps an unfair choice - they may have excellent application in fisheries where there are a limited number of species with similar life histories and even distribution in space and time, and for species not prone to large natural fluctuations. But one of the main rationales for the use of ITQs is that they are an economically efficient means of distributing the fishing right. The argument is that the more-efficient operators buy out less-efficient operators, at prices exceeding the earning capacity of the less-efficient operators (Commonwealth of Australia 1989). Result: same number of ITQ in the hands of the most economically efficient fishers, less waste of inputs such as fuels and gears, ideally only the least polluting vessels in use, maximum economic return to the community (each ITQ being used to its fullest extent), etc.

This may work for fishers who are driven by economic considerations. But it may not be a good theory if fishing is a lifestyle choice or for subsistence purposes and not necessarily to make money. Social and cultural forces operate in communities, and it cannot be assumed that everyone will behave in an economically rational manner. And it is uncertain that a few highly efficient operators only is necessarily the community’s choice - the issue may be either: (a) many fishers eking a living; or (b) a few efficient operators making a good living and the remainder, bought-out, surviving on social security or similar support mechanisms (assuming the alternative employment market is tight) - with consequent social and political implications. I am unaware of that question ever being put to the community, although studies on the sociological impacts of ITQs are becoming more in vogue.

ITQs have resulted in a few unexpected behavioural problems such high-grading. Scientific advice provided to management is usually from fishery-dependent sources, such as logbooks. Discards are unlikely to be recorded in logbooks, which makes accurate measurement of the impact of fishing on target stocks difficult. Accurate assessment of fishing mortality is a serious issue in ensuring sustainability. None the less, ITQs, because they purport to guarantee the holder the right to take a specified quantity of fish, are probably one of the strongest forms of property-rights currently in the fisheries manager’s toolbox today. They provide a great deal more certainty for the fisher than property-rights based on gear controls, which offer little indication of the amount that might be taken and hence the likely economic return.

Another form of property-right is the delineation of geographic areas with exclusive rights to harvest. This approach may be useful for sessile organisms such as oysters where clear boundaries can be identified and policed (Commonwealth of Australia 1989). The approach also is being pursued in Queensland in the management of the coral fishery, where licences to take coral are tied to specific, identified sections of the reef and management arrangements limit the proportion of the licensee’s area which can be harvested.

Certainly some form of rights-based allocation can provide incentives for better conservation and management of the resource. Open-access merely encourages a fishing free-for-all, in which the aquatic environment, the fish, and the fishers are the ultimate victims. A more rights-based allocation approach that removes or reduces the competition among participants and provides for access privileges is needed to encourage more sustainable fishing.

3.4 At what level do fisheries property rights exist?

While much of the debate seems to be at the individual fishery or fisher level, it goes all the way from the individual to the national or even global level. Article 2 of the United Nations Convention on the Law of the Sea (UNCLOS) establishes that the coastal state has sovereignty over its territorial sea (including, by inference with the use of the term “sovereignty”, the living resources contained within the territorial sea); Article 56 establishes that the coastal state has sovereign rights “...for the purposes of exploring and exploiting, conserving and managing the natural resources...” of the exclusive economic zone (EEZ); and Article 61 vests in the coastal state the right to determine the total allowable catch of living resources within the EEZ. Are these property rights, on a national scale? - I argue that they are. UNCLOS also recognises that there should be responsibilities attached to the rights: within the EEZ, under Article 62 the coastal state has an obligation to identify surplus stocks and make them available to other fishing nations 'if" it is unable to harvest the stock, while Articles 63 and 64 place obligations on the coastal states to cooperate in the conservation and optimum use of straddling stocks and highly migratory stocks respectively.

Even on the high-seas UNCLOS attributes rights and responsibilities on fishers; Article 87 provides for the freedom to fish the high-seas, and at the same time stipulates that this freedom should be “exercised by all States with due regard for the interests of other States in their exercise of the freedom of the high-seas”. More rights and responsibilities are associated in the freedom of the high-seas through Article 94 (the duties of the flag State), Article 116 (the right for nationals to fish on the high-seas, subject to various obligations), and Article 119, which outlines the responsibilities on States regarding the conservation of living resources of the high-seas.

Van der Elst et al. (1997) identify five broad categories of property: common, private, communal, State or national, and global or international. They recognise that current fisheries management practice is usually a mixture of these regimes. Within their framework, I argue that UNCLOS provides for the latter two categories while the first three are forms of property internal to a State; but most fisheries management is a mixture of all categories.

This means that in terms of sustainability the responsibility attached to the right of access, the ultimate responsibility of ensuring resource use for now and the future, lies at all levels.

3.5 What is needed to ensure long-term sustainability?

3.5.1 Management, uncertainty and related issues

Fishing rights and management are inseparable, because unless a fishery is sustainable the full value of the fishing right will not be realised. To get the sustainable fishing right, you need a sustainable environment - and that requires management. There needs to be an explicit mechanism to ensure that any fishery subject to fish-rights is sustainable in ecological, social and economic terms, and most importantly, in ecological terms. This mechanism needs to incorporate equity among users, setting of TACs (or similar management measures) for target and byproduct species which are environmentally sustainable; establishing the total allowable impact on non-target species and the aquatic environment, management rules for exercising of rights, protection for sensitive areas, cooperative approaches to management and time.

One theme running through this list is management. Sustainable property rights require environmentally sustainable management. Environmentally sustainable management requires active consideration of all who affect the resource and the aquatic environment: the commercial fisher, the recreational fisher, the artisanal/subsistence fisher, the tourist, transport systems, non-aquatic sources of pollution; targeted species, bycatch species, discards, physical impacts on the aquatic environment, etc. To address these issue requires a commitment to transparent precautionary risk assessment and management and genuine commitment by the stakeholders to abide by the management regime.

Since fisheries management exists in uncertainty, and since it is difficult politically, economically and socially to recall or reduce property rights, management needs to be adaptable. It must adjust for changing perceptions of the carrying capacity of both the resource and the aquatic environment. It must be ready to deal with unexpected environmental perturbations, including those that may not initially appear to affect the target species. Of course, since fishery managers cannot control all such factors, it needs to include some accommodation to deal with these aspects.

Where does this lead? - to me it looks like adaptive management - about which much has been written. According to Dovers and Mobbs (1997), adaptive environmental management is a learning process, “management-as-experiment”, that moves managers away from crisis management, which frequently results in only partial solutions that tend to lock-up systems. As Johnson (1999) notes, “if we hope to improve management, we must learn as we go”. The approach is to view management actions as experiments, design them to produce critical information to reduce uncertainty and provide broader knowledge and experience.

Dovers and Mobbs suggest it requires seven elements:

i. actively sought information (research, monitoring and communication) which is more appropriate that much which currently is obtained, through adequate resourcing so that the collection can persist in time

ii. intellectual collaboration across disciplinary and professional boundaries, which may need new methodologies, forums and modes of communication and requires widening the management advisory group to include multiple scientific disciplines, policy-makers, managers, etc.

iii. creative legislative reform, which creates effective institutions - rather than command-and-control approaches

iv. incorporation of ecology into management, i.e. factors such as temporal scales, functions of different components, potential “spare” ecological capacity

v. greater participation by the public and stakeholders, including valuing of local and traditional knowledge, over long periods of time

vi. committment from politicians, policy makers, communities, companies, non-government organisations and scientists, even when the task is long and difficult

vii. appropriate and effective institutional arrangements that, have the life-span to address adaptive issues, integrate research/information and policy that operate through participatory processes, accommodate action in uncertainty and recognise the experimental nature of decisions, are properly resourced to deal with ecosystem-scale issues and have an appropriate statutory base.

3.5.2 Equity among users

To be sustainable, fisheries property rights have to take account of the total use of the resource - commercial, recreational, artisanal/subsistence, indigenous, and aquacultural. If those rights are not distributed equitably (not necessarily evenly), are not recognised and supported by the community, do not include rights to recreational, artisanal or subsistence and indigenous operators, etc., it is hard to see how the existence of those rights can assure sustainability. Taylor-Moore (1997) provides a useful schematic of the allocation mechanisms available to fisheries managers. He notes that each mechanism has positive and negative aspects and that the current approach to fisheries allocation touches upon only some of these aspects.

But in our community of 200, who are the stakeholders? and are they all users? The answer depends on what is “use” and whether it should be confined to a physical interaction, or whether existence-value is also a use. I argue that it is, but that does not mean that those who value the resource for its existence-value need access to a part of the TAC.

As Van der Elst et al. (1997) note, whatever system of granting rights is used it must be “legitimate and enjoy the support of all participants”. Further, the existence of fishing rights as a management tool does not necessarily denote exclusive rights of access (National Research Council 1999) - Ballantine (1997) notes that ‘the public no longer accepts as an axiom that existing user groups should control whole ecosystems’. The right may relate to specific components of the aquatic resource, but does not relate to the marine environment per se.

3.5.3 Total allowable catches for target and byproduct species

One of the most fundamental issues in ensuring that property-rights are set at levels so that long-term sustainability is assured, is sufficient knowledge of the biological resource to allow a TAC to be set. It is much easier for management agencies to increase or hold steady quotas or TACs than to reduce them and thus affect the short-term economic wellbeing of the fishery.

Qualitative stock assessments can be made for valuable, well-established fisheries because usually there is enough knowledge about the target species and the fishery. The status of the resource is usually assessed against biological reference points; a trend has been to focus on limit reference points (LRPs) or undesirably low levels of the resource. Assessments dealing with LRPs tend to assess the probability that the stock is, or may fall, below the reference point at current fishing levels. Alden (1999) notes that reliance on stock assessment approach leads to two major problems: the focus on removals does not take into account other measures related to sustainability, such as age at capture and critical habitats and the lack of political credibility because of continuing uncertainty about the stock.

More recently, fishery assessments have evaluated harvest strategies and assessed them against a range of performance measures which include sustainability of the resource. Harvest strategies generally comprise (a) data collection and monitoring, (b) stock assessment, and (c) the decision rules used to set management measures (e.g. quotas and effort restrictions). The extent to which different combinations of data, assessment and decision rules achieve the prescribed objectives of management are assessed, and adaptive strategies identified that should achieve management goals over time. This approach can be undertaken for fisheries where normal stock assessment is limited by lack of information, e.g. in newly developing or low value fisheries (Smith 1994).

Important components in both approaches to stock assessment include assessing the status of the resource relative to explicit reference points. Where this cannot be done directly, or inferred from stock assessment methods, proxies or sustainability indicators may be used to measure changes in resource status over time. Reference levels or trigger points, for such indicators often form an important component of harvesting strategies for species so managed.

Underlying whatever mechanism is used to allocate fishing-rights is the need for understanding the biology of the fishery. Much has been done on this aspect, for example Fisheries Assessment Groups provide advice to the Commonwealth Management Advisory Committees or Consultative Committees on the status of target stocks and similar mechanisms exist in State and Territory fisheries. These mechanisms are working reasonably well although in some cases the assessments seem to have missed the mark, as a result of the uncertainty issue. And, in many cases we are far from having the confidence to state categorically that a target catch is sustainable in the environmental context, i.e. it can be maintained without detriment to the aquatic environment and despite natural fluctuations.

Targeting itself is a vexed term. Some gears are quite species and/or size specific, while others are less discriminatory, e.g. in trawling the fisher draws his net across the floor after fish, any fish, while some hook and line methods can be size-selective, although they may take a range of species in that size. Perhaps the only truly targeted fishing method is hand collection. But without knowing what is targeted, can one say what is being taken is ecologically sustainable?

3.5.4 Total allowable impact on non-target species and the aquatic environment

Fundamental to the search for asustainable fishing-right is information on the environmental impact of fishing. Sadly, little effort has been directed at non-target species, the impact of fishing on the aquatic environment and the aquatic environment itself. There are no “standard” procedures for dealing with the wider ecological impacts of fishing. While some approaches dealing with threatened and endangered species have started to appear, agreed methods for assessments are generally lacking. Apart from limited research on the effects of spatial fishing closures and bycatch reduction devices, there has been little progress in dealing with threats to habitats and food chains, let alone whole ecosystems. Management will have to deal with higher levels of uncertainty about basic ecological processes, even less-adequate data than for target species, and the difficulties of differentiating effects of fishing from other impacts on marine ecological systems. One approach may be to use indicators for various components of marine ecological systems. Reference levels for the indicators could be chosen with regard to the acceptable levels of change to aquatic ecosystems (as defined by the community).

Fisheries management needs to recognise that bycatch is a management issue and in Australia, measures are being introduced to deal with bycatch mitigation. The National Policy on Fisheries Bycatch (Ministerial Council on Forestry, Fisheries and Aquaculture 1999) provides a framework for coordinating efforts between government, fishers and the community to tackle this problem. The policy will support continuing research into methods minimising bycatch and will foster cooperation between stakeholders to ensure complementary management practices across all fisheries. The policy is intended to balance short-term needs with long-term goals, so management practices are starting to deal with this aspect of the environmental equation.

But, bycatch is arguably the easiest part of the environmental equation to tackle; there is a growing body of research into effects on non-target species and bycatch mitigation measures seem to be proliferating at near-exponential rates. The challenge is to deal with the less tractable problems where a technological fix is less likely.

Ideally fisheries assessments should consider total removals in determining what proportion of the estimated removable biomass should be made available to fishers. Total removals should mean, on the human side, commercial, recreational, subsistence/artisanal, indigenous; and on the ecosystem side, predators and the food web as a whole. This is a tall order; most management agencies can calculate commercial removals and may have some concept of recreational take, and perhaps artisanal subsistence and indigenous removals. At a minimum, they can ask fishers, and use the results in stock assessments. The reality is that estimates of the ecosystem components require a level of knowledge bordering on god-hood, and proxies (or sustainability indicators) may be the only option. The development and use of indicators and associated reference levels would provide a formal basis for evaluating possible impacts of fishing, and a starting point for the evaluation and development of strategies to deal with such impacts.

But, sustainability indicators have their own problems, e.g. what are the right indicators? What do they actually indicate? Are they being used properly? Are they flexible enough to accommodate constantly shifting ecological balances? The Food and Agriculture Organisation of the United Nations is in the process of developing a number of technical guidelines for responsible fisheries. Among these are guidelines on the development and use of indicators for sustainable development of marine capture fisheries, initially drafted at the Technical Consultation on Sustainability Indicators in Marine Capture Fisheries held in Sydney, Australia, 18-22 January 1999 (FAO 1999).

3.5.5 Management rules for exercise of the right

Though fisheries management occurs in a climate of uncertainty, arrangements are needed to ensure that the fishery remains sustainable. This requires that property rights are appropriate to the resource and the aquatic environment and that there is a clear and agreed mechanism for dealing with problems. For example, should the species prove to be over-exploited, management arrangements should facilitate stock recovery by restraining fishing effort to a previously agreed level at which it is believed the stock may recover (Commonwealth of Australia 1989).

Another issue for sustainable fishing rights is the need to ensure that fishing capacity does not exceed the carrying capacity of the aquatic resource. The OECD (1997, quoted in National Research Council 1999) noted that if capacity is held at levels at or below that necessary to obtain the MSY or MEY, then potential for overfishing is reduced. Thus management based on input controls needs to take account of technological creep around rules aimed at controlling fishing effort, or contain a mechanism, for example a limit on net lengths, which is deliberately set low to ensure that technological creep does not undermine the sustainability of the fishery. As the National Research Council (1999) noted: “fishers are ingenious in circumventing regulations to limit entry and fishing power.” One way for management rules to deal with this is to address the fisher’s incentives and formulate a system which reduces, or removes, the short-term rewards arising from overcapitalisation and increase likely future returns.

One important element in adaptive management is the use of appropriate performance criteria. Performance criteria measure the success of management strategies against specific management objectives. For sustainability purposes they frequently use biological reference points. Indicators also can be used in the development and evaluation of different management strategy options. Smith (1997) outlines approaches used with performance criteria in three Commonwealth managed fisheries to: (a) establish targets, such as maintaining spawning biomass above a pre-determined level, with a series of management responses dependent on the probability of achieving targets or limits within a specified time; (b) achieve stock rebuilding; and (c) calculate effort-reduction to achieve a pre-determined rebuilding target. To be effective, performance indicators should include commitment to staged management responses.

In Figure 1, the unbroken curved line represents fishing mortality, the shaded lines represent indicators (used here as triggers), the optimal yield (within the ecosystem context) and the “biological bottom line” below which only draconian management options are available such as total or partial fishery closures or massive effort reductions.

3.5.6 The precautionary approach

To ensure sustainability (in the environmental sense) management must apply the Precautionary Principle: “where there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation” (Commonwealth of Australia 1992). As noted, fisheries management proceeds in a situation of scientific, managerial and operational uncertainty. The Precautionary Principle relates to situations where there are serious threats of environmental damage, and an argument can be mounted that they may not necessarily apply to overall fisheries management.

The difficulty with pursuing this point of view is that those “threats of serious or irreversible environmental damage” are not likely to advertise themselves as such, and are unlikely to be known until the damage becomes clear. It may then be too late for management agencies to manoeuvre and may require draconian measures. So an application of the Precautionary Principle is to assume it relates to all situations, not just those under threat of serious environmental damage. The Principle should only aim at reducing impacts to a level acceptable to the community, not at the elimination of all impacts.

Garcia (1994a) notes that “a major property of the Principle is that it inverses the course of action, requiring that measures are taken first and, subsequently, relaxed if research demonstrated convincingly that they are not necessary”. He suggests that the Precautionary Principle could appear to be an attempt to fill in the gaps created by the UNCLOS regime guiding utilisation of marine resources, but argues that in fisheries where scientific data, management and monitoring regimes are available, the UNCLOS approach should prevail and decisions should be taken on the basis of the best scientific evidence available. Both Garcia (1994b) and Taylor-Moore (1997) suggest that an over-precautionary application of the Precautionary Principle may have serious social and economic ramifications. Taylor-Moore suggests that a precautionary approach to resource allocation “places production within an acceptable level of ecological risk and uncertainty, with resource failure as the bottom line”.

The difficulty with this approach is that the mechanism for accurately identifying an “acceptable level of ecological risk” seems to be missing, or at best is in slow development. So for the moment application of the Precautionary Principle is another balancing act. In light of the way fisheries have developed in the past and the emphasis placed upon the economic and social side of the equation, the application of the Principle may need to be revised to make it more rigorously precautionary and less 'in principle', to achieve long-term sustainability. One approach may be the philosophy of the ICES Advisory Committee on Fisheries Management for “stocks where, at present, it is not possible to carry out any analytical assessment with an acceptable reliability...precautionary TACs to reduce the danger of excessive efforts being exerted on these stocks” (Serchuk and Grainger 1992, quoted in Garcia 1994a).

More, the National Strategy for ESD may fail. The Precautionary Principle is one of the guiding principles, but the National Strategy states that the core objectives and guiding principles should not be interpreted so that one has precedence over the others. However, Garcia (1994a) notes the following “preventative” management approaches (which I regard as precautionary) may be particularly relevant for developing fisheries:

i. staged development with impact monitoring

ii. early effort limitations

iii. institutional or financial controls to avoid explosive development

iv. precautionary quotas for species where proper assessments are not available

v. use of pessimistic models for stock where low resilience is suspected

vi. multispecies management

vii. experimental management to test systems responses

viii. development targets below MSY

ix. adoption of the concept of “safe biological limits”

x. modelling systems response across the range of uncertainties and cautious management thresholds (e.g. minium spawning biomass) and

xi. course of action to be taken before crises occur.

One avenue for bringing the concepts of sustainability and the Precautionary Principle into an operational framework, within finite financial and human resources, may be the development of sustainability indicators. Garcia (1994a) suggests that new indicators will be required to address species sustainability (e.g. minimum reproductive biomass, safe biological limits, maximum statistical probability of ecological or economic collapse) and ecosystem management (global stress indicators, resilience factors, habitat conditions). He suggests that criteria should be developed for assessing impacts of developments, taking into account reduction of target and associated species, levels of risk to species caused by combinations of fishing and environmental variability, and the degree of reversibility of observed or forecast impacts. The FAO work suggests that sustainability indicators enhance communication, transparency, effectiveness and accountability in natural resource management. In particular, indicators provide information about activity at a given scale and enable comparisons at other scales (e.g. local fishing community impact against overall pressure on the stock).

But, sustainability indicators are not an end in themselves. They are one tool that may be useful for developing fisheries where the costs of data collection and analysis may be prohibitive and where a carefully selected set of indicators may simplify evaluation and reporting. They would require intelligent use and the support of all stakeholders to achieve desired ends. They may also be a useful tool in monitoring the appropriateness of fishing rights.

3.5.7 Protection for sensitive areas

One mechanism for helping fisheries achieve environmental sustainability may be the use of protected areas. Fishery closures have existed for some time. They are used to protect spawning or nursery areas at specific times of year, to protecting vulnerable bycatch species throughout the year and to allow target species the opportunity to grow to an optimal marketing size.

Some Australian fisheries management agencies are declaring marine protected areas (MPAs) with a view to protect fish habitat in areas of special environmental importance. NSW Fisheries, for instance, has created eight MPAs; each is unique, and the type of protection varies - in some, only diving and observation are permitted while others may allow multiple use including fishing. Similarly, Queensland’s Department of Primary Industries has declared Fish Habitat Areas, under the Queensland Fisheries Act 1994, which are established for the protection and management of fisheries resources and wetland habitats to ensure the continuation of productive recreational, commercial and traditional fisheries in the region.

MPAs declared by nature conservation agencies may be established for biodiversity conservation measures rather than fishery protection measures, and may prove useful for fisheries management as well. Ballantine (1997) suggests that ‘no-take’ marine reserves would be a practical, effective addition to the fisheries management toolbox. He suggests that as fishing may have serious and complex effects, it would be useful to minimise all of those effects in some places. In effect the protected area becomes an insurance policy. He postulates that a network of such reserves would be needed to provide sustainability. The National Research Council (1999) goes further in suggesting that a significant proportion of the total area could usefully be a protected area. They suggest 20% because the marine environment is more open than the terrestrial environment and has greater geographic exchange, thus a greater area is required for the same effect.

There is a growing trend towards engaging fishers and management agencies closely in the development of MPAs and seeking solutions which allow multiple use of those MPAs. The National Research Council (1999) suggest that, for sustainability, protected areas should be used as part of the management regime as they are less susceptible to error. Perhaps in future fishers and management agencies will look at “conservation” MPAs in view of their fishery benefits, rather than bodies of water excluding fishing operations. Certainly fishers have expressed fears that “conservation” MPAs may be declared over existing fishing grounds so that they will lose access to those grounds. But, it would be a strange “conservation” MPA that was declared over a stretch of water which has been subjected to heavy fishing operations - particularly trawling - for several decades.

MPAs may be a legitimate management tool in the search for environmental sustainability. However, as with any management tool, they have implications for the allocation of fishing rights and vice-versa. Most obvious is the situation where a protected area is declared in an area where there are pre-existing fishing rights. Even where the protected area is intended to be, by providing refuge, a fisheries management tool, it could be argued that the protected area inhibits the fisher in the exercise of his right.

3.5.8 Cooperative approach to management

Management of a common property resource, such as fisheries and the aquatic environment, requires cooperation between the commercial, recreational, artisanal/subsistence and indigenous fishers; the environmental movement; the fisheries management agencies; the scientific community; the environmental management agencies; and the community as a whole. Cooperation requires transparency in decision-making, so that all parties understand and support decisions which affect their community resource. To be effective, decision-making processes need to be transparent, efficient, robust and supported by all.

The trend in Australia is towards co-management arrangements, whereby commercial and recreational fishers and conservation groups are represented on management bodies such as Management Advisory Committees and Consultative Committees along side scientists and managers. Fishers, managers and fisheries scientists have a legitimate role in such arrangements, but they are not the only ones with such a role. Recreational fishers also may make substantial use of the resource, and conservation organisations are increasingly becoming involved in fisheries management either as part of management bodies or through the political arena. A relatively new trend on the part of the conservation movement is to seek the inclusion of ecologists, as well as fishery scientists, on management advisory bodies in order to provide a more ecological view of fisheries management.

These co-management arrangements work with varying degrees of success, hinging upon the confidence and support of each sector. One impediment to support for the outcomes may be a perception that the whole process is skewed toward the needs of commercial fishers, particularly where a significant proportion of management costs are recovered from them. While it is reasonable to assume that those making the greatest use (and profit) from the resource should pay for its management to ensure its sustainability, it is also reasonable to assume that management agencies, being dependent upon cost-recovery to operate, will find themselves between the rock of hard management decisions, and the hard place of disaffected stakeholders, the fishers.

Another issue in cooperative approaches is the peculiar role of scientists in fisheries management. Scientists form the backbone of fishery assessment work and their advice is critical to management decisions. And Australia's view is that management decisions should be based upon good science. Yet management decisions, while informed by scientific advice, are value judgements and can be taken for political or economic reasons. As a consequence they may not reflect the scientific advice - for example, the fishing industry often uses scientific uncertainty and/or natural variability to argue against a reduction in catch, even where a precautionary application of the Precautionary Principle requires reduction of fishing effort.

Property rights should not undermine these cooperative mechanisms; instead they need to acknowledge the legitimacy of issues raised by other sectors and accommodate management responses. The support of fishers is critical in ensuring that management arrangements work; the National Research Council (1999) noted that pressure on the part of fishers for liberal catch quotas is often strong and spills over into political arenas. Certainly adaptive management arrangements will have limited effect if they do not have the support of the rights-holders, i.e. fishers. To quote from FAO (1993), “Implicit to the use of an LRP is that negotiation between the parties concerned in the fishery pre-establishes the response to be taken automatically once the fisheries assessments indicate that a “red zone” is being approached or has been entered, where pre-agreed long-term conservation objectives are endangered”. This need for pre-agreement is not confined to the operation of a limit reference point but holds for any management strategy and any stakeholder in that management strategy. Similarly, pressure on the part of conservation organisations in the past frequently has been expressed through the political arena, rather than directly at the level of management agencies, causing political “intervention”. And, political decisions, which should be expressions of community desires, happen at the domestic levels and in international fisheries arenas alike.

Property rights also need to be established to accommodate situations where communities want certain species to be for recreational, artisanal/subsistence, or indigenous use. For example, Australia may need consider allocations in response to native title (though native title is not as clear-cut as in New Zealand, through the Treaty of Waitangi, because no such treaty was made during white settlement of Australia).

Legal recognition in Australia of customary (indigenous) fishing rights, or native title, to the seabed is unclear at the moment. However, in the opinion of some justices, a ‘right-to-fish’ based upon traditional laws and customs is a recognisable form of native title defended by the common law of Australia, but its evidentiary requirements are exacting. The Commonwealth Native Title Act 1993 expressly permits native title holders to hunt, fish, gather, carry out a cultural or spiritual activity, or do any other kind of prescribed activity for their personal, domestic or non-commercial communal needs, and does not link these activities with native title to land. The Act also exempts native title holders from requiring a licence or permit to take game if it is taken for personal, community or other non-commercial and traditional purposes. Certainly indigenous peoples in Australia are becoming more active in pursuit of sea rights, as demonstrated by the recent convening in Hobart of the first National Indigenous Sea Rights Conference.

3.5.9 Time

Environmental sustainability is a long-term objective and our National Strategy for ESD clearly indicates that long-term considerations are valid. Property rights also should be long-term to allow the holder to develop a sense of ownership and stewardship for the resource (Van der Elst et al. 1997). Long-term access rights also encourage fishers to develop strategic approaches to the exercise of the right, whereas short-term property rights may encourage cut-throat fishing because the right to fish might be negated at the end of the year.

However, extending a long-term right to fishers places additional responsibilities upon management agencies and scientists to “get their sums right”, because it may be difficult to reduce the access right if the initial allocation was too great. So, in granting property rights management agencies need to look at staged progressions, starting off short-term but on the understanding that longer-term access is the ultimate goal. When that longer-term access becomes available may be contingent upon increasingly effective adaptive management arrangements, so that the danger of over-estimating the carrying capacity of the aquatic environment is reduced incrementally.

4. RECENT COMMONWEALTH GOVERNMENT INITIATIVES, SUSTAINABILITY AND THE USE OF PROPERTY RIGHTS

The issue of sustainability in policy is not new - one of the first Commonwealth government policies to address the issue of sustainability was the 1989 fisheries policy New Directions for Commonwealth Fisheries Management in the 1990s, and a National Strategy for ESD had been published in 1992. However, there has been a resurgence of policy activity directed towards the sustainability question. The most substantial is Australia’s Oceans Policy, released in December 1998. The policy is directed towards an integrated planning and management regime that will allow government and community to ensure the conservation of Australia's marine biodiversity while providing security for marine-based industries and other ocean users. At the core of this policy is a commitment to ecosystem-based management, to be implemented through a new Regional Marine Planning process. Based on large marine ecosystems, it will integrate sectoral commercial interests and conservation requirements.

Oceans Policy contains a number of commitments relevant to environmental sustainability in fisheries. Specifically, the policy seeks ecologically sustainable fishing practices through a variety of mechanisms including bycatch policies; a network of fisheries extension officers to promote environmentally sound fishing practices; plans to reduce the threat of fishing on protected marine life and enhance its recovery; and development of performance and sustainability indicators for fisheries. Other fisheries-specific activities include structural adjustment to remove excess capacity in over-capitalised fisheries, and measures to improve the management of recreational and charter fishing including the development of ESD mechanisms for recreational fishers.

Among other actions under the Oceans Policy is the creation of new marine reserves in Commonwealth waters. Since the release of Oceans Policy, MPAs have been declared for the Tasmanian seamounts and Macquarie Island, and are in development for a number of other sites.

Oceans Policy also commits the government to accelerated development of a National Representative System of Marine Protected Areas. This involves Commonwealth, State and Territory governments working to expand existing marine parks and reserves. The intention is to set up a national system of protected areas to protect areas which represent all major ecological regions plus the communities of plants and animals they contain. In establishing the National Representative System of Marine Protected Areas, Australia is contributing to the development of the Global Representative System of Marine Protected Areas.

Another aspect of Oceans Policy is a revision of Schedule 4 of the Commonwealth Wildlife Protection (Regulation of Exports and Imports) Act 1982. Specifically, the Minister for Environment and Heritage is proposing to remove an existing exemption under this Act that allows native marine fish species to be exported from Australia without export controls. The proposal is that all fish species intended for export should be assessed to determine if they are managed in an ecologically sustainable manner before the exemption is applied. All management regimes in which the species is taken must be assessed, and exemption will only be granted if all regimes are assessed as being demonstrably sustainable. However, exports may continue under an export-authorisation regime. Work is underway on developing appropriate guidelines for undertaking those assessments, based upon those developed by the Marine Stewardship Council.

A second environmental action has been the promulgation of the Environment Protection and Biodiversity Conservation Act 1999, replacing the Commonwealth Environment Protection (Impact of Conservation) Act 1974; National Parks and Wildlife Conservation Act 1975; Whale Protection Act 1980; World Heritage Properties Conservation Act 1983; and Endangered Species Protection Act 1992. The new Act will come into effect in July 2000 and requires that management arrangements for all Commonwealth managed fisheries not previously assessed under the Environmental Protection (Impact of Proposals) Act 1974 be strategically assessed by the Minister for Environment and Heritage. Where fisheries are not subject of formal management plans (as defined in the Fisheries Management Act 1991), assessment must start within five years. Work has commenced on implementation of the strategic assessment side of the Act. These last two initiatives, while arousing concern in fisheries circles, are the government’s response to growing concern at the sustainability of Australia’s fisheries and management arrangements. The assessments to be undertaken will provide an external review of fisheries sustainability.

At the same time external reviews may increase transparency in fisheries decision-making. A complaint, often made, is that fisheries management is a closed loop between fishers, fisheries management agencies and fisheries scientists, to which the community has limited access. While the trend towards co-management models with wider representation on management advisory bodies is a start, it does not appear to meet all community expectations. For example, some in the community feel that co-management bodies should more accurately reflect the numerical proportion of the community with an interest in the fishery.

The existence of an external body explicitly recognising a fishery as being demonstrably managed in a sustainable manner has potential benefits for fisher and fisheries management through recognition that the fishery is well-managed, as fishers may be able to extract market premiums while reducing conflict with community groups. A more explicit recognition would be through an arrangement such as the certification process being developed by the Marine Stewardship Council,

Finally, although it is not a Commonwealth initiative, during 1999 the Standing Committee on Fisheries and Aquaculture, comprising the heads of fisheries agencies throughout Australia, commenced a process to agree a set of national ESD criteria and indicators for use in Australian fisheries. In this will be the development of cost-effective and practical indicators for fisheries, including research programmes for those fisheries where data are not readily available. None of these initiatives are directed specifically towards fish rights, but they touch upon the issue of sustainability in fisheries, and so influence those rights if they are to be sustainable in the long-term.

5. CONCLUSION

To be worthwhile, a fisheries property right needs to be sustainable. There would be very little point in fishers paying for the right of access if the resource cannot support the level of exploitation. Short-term sustainability may suit operators who intend to move out of the fishery fairly swiftly, but may not suit the majority of fishers who are in the fishery for the long haul. Accordingly, fisheries property rights need to be directed towards the long-term sustainable user.

There are no neat fixes to achieving that sustainability, just hard work in a multiplicity of fields: management, science, technology, operations, public relations. While all are important, underpinning them is a need for effective and participatory management regimes that incorporate distinct management-decision rules and contingency plans, established through transparent and agreed processes. These rules need to be adaptive and accommodate natural and anthropogenic fluctuations, so that the resource and the aquatic environment do not become destabilised by the exercise of the right. Distinct performance and sustainability indicators need to be an integral part of the management rules, and triggers need to be used more widely to improve management response time.

Management arrangements need to be risk-averse and contain agreement on acceptable levels of risk. Ideally, management rules should be established before rights are issued, so that rights holders avoid unpleasant surprises. In circumstances where rights already exist, innovative ways are needed to bring about consensus without excessive compromise to the aquatic environment and minimum economic and social disruption.

Management rules should be based on an appropriate mix of good science and an effective monitoring regime, using fishery-independent and fishery-generated sources of information. In data-poor fisheries, management rules have to be precautionary, giving time for the science to develop to a robust level. Monitoring needs to address all sources of fishing-related mortality, whether it be target, bycatch, discarded or fish never hauled on board but killed none the less.

Wherever possible, management should avoid reliance on any one management arrangement and make full use of all management options. Most important, management rules need to be precautionary in approach and use existing “insurance policy” type tools, such as protected areas and closed seasons, to reduce fishing impacts. To achieve this fishers, management agencies and the community must have a common view on, and support for, property rights. In particular, developing fisheries may provide an ideal opportunity for the community to address the question of what socio-political and environmental, as well as economic, terms it wants of the fishery and the industry. Underlying this is a need for active information dissemination - Australia is far from a common view on the state of its fisheries, yet until there is such a view it is hard to see how the different sectors affected by fishing in general and property rights in particular can support those rights. If the rights are not supported, they will become a battlefield.

Adaptive management is a start, but it is not the whole answer. Johnson (1999) identifies a number of problems in the implementation of adaptive management which include: difficulties in developing acceptable predictive models; conflicts regarding management goals and ecological values; inadequate attention to non-scientific information; and unwillingness to implement long-term policies. One critical factor to be taken into account in the use of adaptive management approaches is the resilience of the natural system - it would be highly undesirable to start experiments on a system so stressed, either naturally or through anthropogenic forces, that it is already unstable. As Gunderson (1999) notes “if there is no resilience in the ecological system, or flexibility among stakeholders in the coupled social system, one simply cannot manage adaptively”.

The jury is still out on whether it is better for a fishery to fish selectively or to take a broad swathe through the ecological continuum. Ecologically, the latter may be more sustainable as it may not throw the bulk of the impact on a few of the organisms fulfilling ecological niches. Garrod (1973, discussed in Garcia 1994a) suggests that a reasonable approach in managing ecological impacts of a multi-species fishery would be to exploit all species proportionally to their abundance. Operationally that may be a challenge, particularly where multiple species are taken in each fishing operation and the mix of species varies in time and place. Economically it may be quite a different story, unless markets will accept a greater mix of species with lower tonnages of some species.

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Evolution of Self-Governance within a Harvesting System Governed by Individual Transferable Quota - M. Arbuckle and K. Drummond

M. Arbuckle
Challenger Scallop Enhancement Company Limited
Private Bage 24901 - Wellington, New Zealand
<[email protected]>
and
K. Drummond
Ministry of Fisheries
Private Bag 14 - Nelson, New Zealand
<[email protected]>

1. INTRODUCTION¹

¹ The views expressed in this paper are those of the authors and are not necessarily those of Challenger, or the Ministry of Fisheries, New Zealand.

"In many fisheries the ITQ will be less a new instrument of regulation, less a kind of individual property right, than a membership card in a self-governing fishery group. Compared to the old scattered voluntary inshore groups, this new type will have access to information, will indeed produce it itself. It need not be homogenous, for its distributional problems will be largely resolved by the prior distribution of ITQs."

"...three reasons stand out for change from a commons to a full owner framework once the tragedy point is reached.

They are:

i. The imperative to exploit the resource before someone else does.

ii. The imperative to take the most valuable species first.

iii. The imperative to forgo investment that would improve productivity of the resource."

"... marine fishery resources are almost all wild animal species, many of which range over wide areas. The habitat of any one resource species overlaps in part or in full the habitats of several others. Rights to the habitats of one wild stock or species cannot be assigned without creating a potential for conflict with owners of the habitats of other stocks or species."

Challenger undertakes a wide range of commercial and fisheries responsibilities for the Challenger group of companies (incorporating scallops (Pecten novaezelandiae) dredge oysters (Tiostrea chilensis) and 20 finfish stocks). Those responsibilities include the development of policy and management plans for fisheries, and the implementation of those plans with statutory force and effect. The plans are developed to integrate commercial rights between fisheries and with the interests of recreational and customary fishers. To facilitate that integration Challenger, along with Government, support and service a number of advisory groups.

This paper provides an analysis of the highly developed fishery management regime in the inshore fisheries in the Challenger area, that culminated in the establishment of the Challenger Group. Our analysis is not exhaustive and we acknowledge that there are a large number of individuals and organisations within government and industry that have influenced and, at times, driven the developmental steps we describe. Rather, we have focussed on the main imperatives driving the development of fisheries management and self-governance in the Challenger fisheries. We have concentrated on the evolution of self-governance in the Challenger scallop fishery, which provides the foundation for the establishment of the wider Challenger group. We conclude by summarising the imperatives motivating the development of a self-governance capacity and we reflect on the problems and the opportunities available to further progress in self-governance initiatives in the Challenger area.

2. EVOLUTION OF SELF-GOVERNANCE IN CHALLENGER FISHERIES

2.1 Structure

Clarke and Clough (1998) have categorised the evolution of the fisheries management framework in New Zealand into three distinct phases; limited entry (1908-1963), regulated open entry (1963-1983), and the evolution of a property rights-based system (1983 onwards). For the purposes of describing initiatives within the Challenger Group of fisheries in this paper, the first two phases of Clark and Clough are combined and the final phase is classified according to four key themes: (a) effort restriction (1983-1986), (b) development of the QMS (1986-1990), (c) institutional respecification (1990-1996), and (d) self-governance under environmental standards (1996 onwards).

2.2 Limited and regulated open entry (up to 1983)

2.2.1 General environment

At the turn of the century the first substantive legislation governing the harvest of wild fisheries was passed. The 1908 legislation favoured regulatory control of fisheries (based on biological considerations) rather than rights-based management (Ackroyd et al. 1990). In the 1960s the Government concluded that capture fisheries had considerable development potential that was not being realised. As a consequence commercial coastal fisheries were de-licensed in 1964. The fishing industry, along with other primary industries in New Zealand, developed in the 1960s and 1970s in a climate of central government support, subsidy and investment. The statutory New Zealand Fishing Industry Board (NZFIB) was established to promote the development of the fishing industry in 1963. Fisheries licensing systems were de-regulated and access protected by the establishment of an exclusive economic zone. Direct subsidies to the industry focused on building catching and processing capacity. Subsidy support ranged from government guaranteed mortgages for the purchase of new fishing vessels to subsidised vessel ownership savings schemes and the direct allocation of funds for development.

Just as subsidies for pastoral farming were leading to over-capitalisation on farms and development of sub-marginal land, so too they stimulated over-investment in fishing in New Zealand's inshore stocks and the status of a range of these stocks reached crisis level in the early 1980s. Government moved to re-regulate fisheries in 1977 by introducing fisheries licensing - initially into some shell-fisheries. At the same time development of deepwater fishery resources was becoming the focus of a number of New Zealand fishing companies. This interest was stimulated by the declaration of the 200 nm Exclusive Economic Zone (EEZ) in 1977 together with the prevailing national protection and support for domestic investment in fishing capacity. The Government responded to the deepwater development opportunities by designing and implementing a prototype for the QMS in the form of Deepwater Enterprise Allocations.

2.2.2 Challenger fisheries management

Under the open access regime, vessel numbers in the Challenger scallop fishery increased to about 200 by 1975. Catches then began to decline from their peak of 1246t (meatweight) reached in the same year. Successions of controls designed to limit fishing were introduced (often at the request of the commercial fishery) in an attempt to manage expanding effort. The Challenger scallop fishery was the first fishery to be licensed in New Zealand and the licensing system introduced in 1977 reduced the number of vessels to 136. In spite of these steps thescallop catches continued to decline. By 1980, the size limit had been removed and landings fell to 40t. In addition, the commercial fleet had moved into inshore areas not previously fished and this created tensions with the recreational sector. The scallop fishery was subsequently closed to commercial fishing for two years (1981 and 1982). When the fishery reopened for the 1983 season only 48 boats were issued with licences to harvest scallops.

2.3 Effort restriction (1983 to 1986)

2.3.1 General Environment

The QMS prototype was not necessarily seen to be the answer for the full range of problems in the inshore fishery. Instead new legislation was enacted in 1983 that provided for the establishment of government administered fishery management plans. The Act also provided for the administrative removal of a large number of commercial fishers who were considered not sufficiently reliant on fishing for their income. But, the difficulties in addressing the issue of over-capitalisation in the inshore fisheries within the context of a regulatory environment soon became apparent. In 1984 the Government agreed to fund a scheme to reduce capital and effort in the industry, along with the introduction of ITQ, into the inshore fisheries. The opportunities for Government subsidies for fisheries development subsequently ceased.

2.3.2 Challenger fisheries management

Management of the scallop fishery under the boat-licensing regime continued. Under this regime, the government allocated a defined, and equal, catch limit for each vessel on an annual basis. Recommendations for management of the fishery, prepared by the Ministry of Agriculture and Fisheries (MAF), were implemented by a Controlled Fisheries Authority established as a statutory body. Also in 1983, MAF, with the support of industry representatives, were successful in obtaining funding and assistance from the Overseas Fishery Co-operation Foundation of Japan to establish a scallop enhancement programme, using Japanese techniques.

The 48 boat licence holders assisted in providing advice on enhancement trials and management of the scallop fishery through an informal committee set up by the NZFIB. This form of co-operative approach was atypical of inshore fisheries management at that time. Some management rules were also adopted by this group, which included the maintenance of daily catch limits for each vessel. Before, such measures had only been implemented under regulation.

2.4 Development of the QMS (1986 to 1990)

2.4.1 General environment

On 1 October 1986 the Government introduced the QMS into both the deepwater and the inshore finfish fisheries, the former prior to substantive development, and the latter after many stocks had been over-fished. Crothers (1988) stated that the QMS was introduced to achieve two broad goals: (a) conservation - to limit catches to levels that will result in the maximum production of the stock; and (b) allocation - to maximise the net economic return of the nation. Luxton (1997) documents the following founding aims of the QMS for inshore fisheries;

i. Rebuild inshore fisheries where required and ensure that catches were limited to levels that could be sustained over the long term

ii. Ensure that catches are harvested efficiently with maximum benefit to the industry and to New Zealand

iii. Allocate catch entitlements equitably, based on individual permit holder's commitment to the fishery

iv. Integrate management of inshore and offshore fisheries

v. Develop a management system that can be applied both nationally and regionally and

vi. Enhance the recreational fishery.

In 1987 Maori successfully sought an injunction against the Crown that prevented additional fisheries being introduced into the QMS. The basis of the injunction was that under the terms of New Zealand's founding document, the Treaty of Waitangi, Maori had not authorised the Crown to allocate individual rights to fishery resources. This led to uncertainty within the industry with regard to their existing property rights and their future under the QMS (Annala 1996). An interim solution to Maori commercial fishing claims was negotiated between the Crown and Maori in 1989. This provided a cash sum and guaranteed Maori 10% of any ITQ. Access to fisheries for customary purposes remained a right over and above ITQ allocation. The 1989 interim solution enabled rock lobsters to be added to the list of stocks managed under the QMS, but initially ITQ was only issued for a fixed term.

2.4.2 Challenger fisheries management

Twenty inshore finfish stocks were introduced into the QMS in 1996. A number of industry participants in the inshore finfish fishery chose to sell their catch-history entitlements to the Government and left the fishery. Management continued to be regulatory-based and subject to TACC constraints for those fishers who chose to stay.

The Challenger scallop fishery was retained under the separate restricted licensing structure. Initial seeding trials proved successful and the first seeded scallops were harvested in 1986 (Bull 1994). Over the period 1986 to 1989 the scale of scallop-seeding steadily increased. Scallops seeded onto the seafloor were harvested to fund the further development of the enhancement programme. Funds were voluntarily contributed by licence holders and were paid into a Trust Account, which was administered by MAF.

With the growing success of the scallop enhancement programme a rotational fishing regime was introduced into the fishery, under which the fishing grounds in Tasman and Golden Bay were divided into 9 sectors. Each year an agreed number of sectors were opened to commercial fishing and after being fished each sector was then seeded with scallop spat caught on longlines at spat-catching sites located within the fishery. The commercial size limit was reduced from 100 to 90mm to allow stocks in rotational open areas to be fished at economically optimal levels. At the same time the recreational daily limit was increased from 20 to 50 scallops per person per day to provide better access to recreational fishers. Industry participation in the management of the fishery remained in the form of an informal advisory group. Recreational fishing interests remained independent of this group.

Industry representatives reached agreement with MAF to continue to provide funds (by way of a voluntary levy on all scallops landed) for managing and implementing the enhancement programme in 1989. To support this arrangement, MAF agreed to recommend that the Government place the scallop fishery under quota management. The reform 'agreement' incorporated a proposal whereby any annual catch allocation above 576t (which represented a 12t allocation for each of the 48 boat-licences) would belong to the Government to be sold by public tender and/or be used to settle Maori quota claims. The 'agreement' was entered into at a time when Maori commercial fisheries claims under the Treaty of Waitangi were still to be finally settled and this uncertainty motivated Government to retain an interest in the yield of the fishery.

The 'agreement' also recorded the industry's desire to secure the right to manage the enhancement scheme if MAF was required to retire from direct involvement through a change in policy or government direction. Cost-recovery arrangements specified in the 'agreement' were implemented voluntarily before the fishery was introduced into the QMS and in effect the scallop fishery became the first fishery in New Zealand to operate under a form of cost-recovery although voluntary. This has continued. Early industry co-operation and involvement in the management of the scallop fishery was driven by the growing success of enhancement and the opportunities that quota rights provided to an industry stagnating under a fixed vessel-licensing regime.

2.5 Institutional re-specification (1990 to 1996)

2.5.1 General environment

In 1990 all quota rights were made proportional, with the risks and costs of quota reductions being borne by the industry. The revised system, prompted by the catch reductions required for deepwater stocks, had the effect of reducing the financial liability on Government. It also stimulated calls for greater involvement by the industry in the management of the harvesting rights. Subsequent 'fine-tuning' of the QMS regime and associated regulatory framework has had a similar effect and has lead to further specification of the ITQ right (Annala 1996, Batstene and Sharp 1999).

A more lasting settlement of Maori commercial claims was required, but this did not occur until 1992. At that time a full and final discharge of the Crown's commercial fisheries obligations under the Treaty of Waitangi was achieved. The settlement provided the following benefits:

i. NZ$150 million for the purchase of 50% of New Zealand's largest fishing company, which had 25% of total allocated fish quota and achieved NZ $247 million in sales in the year until March 1992

ii. The transfer of 20% of the quota for all new species entering the QMS to Maori and

iii. Regulations to recognise and provide for the customary food-gathering and the special relationship between Maori and those places which are of customary food-gathering importance to the extent that such food-gathering is not conducted in a commercial manner.

"Within the limits of official conservation prescriptions, those who hold the rights to fish should be encouraged to manage resources and their fishing operations, taking account of all the costs and benefits of their actions. This will involve making collective decisions about fishing patterns and fishing rules, projects of enhancement, exploratory fishing and research, financing these activities and administering their arrangements with the Government, among other things.

To enable quota-holders to engage in this kind of collective action in an orderly fashion, they should have legal authority to organise themselves. ..."

The Government's response to Pearce's report was to establish a Ministerial Task Force to initiate the simplification of New Zealand's fisheries management framework. The improvements described by Pearce were ultimately carried through into the report submitted by the Fisheries Task Force (Wheeler et al. 1992). This report provided the foundations for the legislative framework to come into effect in 1996. In the interim, a number of amendments to existing legislation were required to implement the more urgent changes.

A further important feature of the period 1990 to 1996 was the establishment and implementation of a fisheries management cost-recovery regime. When ITQs were initially introduced, the Government established a system of resource rentals which were set for each quota stock on the basis of the quota held. Resource rentals were established, in principle, to provide a return to government of some of the economic surplus derived from ITQs. In practice the resource rentals collected were used to offset the costs of quota reductions implemented in a number of fisheries.

Resource rentals were one of the most contentious elements of the fisheries legislation. Batstene and Sharp (1999) recorded that industry vigorously opposed them, and noted that even if ITQs created an economic surplus in the fishery the problem of determining the Government's share of the surplus was not straight forward. They concluded that resource rentals contributed to commercial uncertainty in the fishery. The resource rental debate was ultimately resolved by a decision to replace that system with a regime that recovered the Government's cost of fishery management through a levy.

In addition to the overwhelming industry opposition to resource rentals, the decision to move to cost-recovery can be linked to a number of other factors. First, the settlement of Maori claims raised the question as to whether Maori should be expected to pay resource rental on ITQs; if this was to be avoided it would lead to difficulties in differentiating between Maori and non-Maori ITQs in a fully tradeable environment.

Legislation to provide for greater government efficiency and accountability in the form of The State Sector Act 1988, The Public Finance Act 1989 and The Fiscal Responsibility Act 1994 also provided strong imperatives on Government to recover costs of fisheries management from industry. The cost-recovery regime introduced in 1994 was applicable only to commercial fisheries, and the Government continued to meet the costs of managing non-commercial fisheries. The original cost-recovery regime was based on the principle of avoidable cost.²

² The principle of avoidable cost implies that the costs of services required by Government should be recovered from those who necessitate the provision of those services. Since few fisheries services would be required if there was no fishing industry, under avoidable cost principle the industry has had to pay the full cost of most of the fisheries management services the Government provided. More recently, the Government has moved to adopt the attributable cost principle for fisheries management. This states that the costs of services should be recovered from those who benefit from the services. The application of this principle has lead to a reduction in the costs recovered from the fishing industry, and a corresponding increase in the costs incurred by Government on behalf of the non-commercial sectors.

The Fisheries Policy and MAF Fisheries (operational) arms of MAF, including fisheries enforcement, were split off and formed into Mfish which became responsible for purchasing research, using funds largely recovered from industry. The former research functions of MAF Fisheries were transferred into the National Institute of Water and Atmosphere (NIWA), a Crown-owned agency, in an effort to ensure better transparency and accountability in the new cost-recovery environment. MFish became a purchaser of research services rather than a provider.

2.5.2 Challenger fisheries management

Between 1989 and 1991 scallop seeded into rotationally harvested areas in the Challenger scallop fishery increased from 81 million to 630 million spat. Scallop catches increased from 240 to 672t (meat-weight) over the same period.

The general principles of the quota allocation and levy arrangements agreed to in 1989, including provision for allocation of funds for other enhancement activities, were carried through into legislation in 1992. The Challenger scallop fishery was introduced into a modified form of the QMS and the QMA for the fishery was defined in law as the Southern Scallop Fishery (SSF). Each of the 48 licence holders was provided with a fixed tonnage ITQ allocation of 12t (meat-weight). This quota was allocated in perpetuity but was not made proportional like quota in other fisheries. An additional 64t (10%) was allocated to Maori as an interim settlement of fishery claims made against the Crown.

Provision was also made to allocate any quota available in excess of 640t to the Crown. The Crown was required to lease 10% of this quota to Maori without charge. The remaining quota was required to be allocated by the Crown as leasehold rights at a market price with preference being given to existing quota holders. Any reductions below 640t were to be effected by way of a proportionate reduction across all quota holdings. The Government effectively legislated to capture the upside benefits of the enhancement programme. The downside risks and the costs of enhancement remained with quota holders. Under the legislation this arrangement was to be discontinued in 1997 at which time all quota in the fishery would become proportion-based on the catch limit set at that time.

A compulsory levy was established under the 1992 legislation to fully fund the enhancement programme in accordance with a plan determined by the Minister of Fisheries. The legislation required that the fishery be enhanced to achieve the maximum economic yield by 1997, make specific provision for enhancing recreational-only areas, and take into account impacts of the enhancement programme on other fisheries. A new statutory body, the Southern Scallop Fishery Advisory Committee (SSFAC), was established under the legislation. It replaced the informal NZFIB advisory group.

Faced with competing demands for marine farm space, the scallop industry, initially through a NZFIB administered scallop advisory committee, became actively involved in protecting their fishing and management rights. By October 1993 applications to place marine farm structures in areas fished and enhanced in the scallop fishery exceeded 4000 hectares. With the establishment of the levy, it became apparent to the scallop industry that they would need to provide an alternative funding and administrative structure to protect fishing and management rights. The quota holders established the Challenger Scallop Quota Holders Association for this purpose in late 1993.

Maori quota was allocated equally to eight Iwi (or tribal groups) located within the boundaries of the SSF and represented the first and, so far, the only commercial fisheries settlement made directly between the Crown and Iwi. The 1992 introduction of the fishery into the QMS coincided with the signing of the final Deed of Settlement with Maoridom over claims for commercial fishing rights. The Minister, on introducing the legislation into the House, acknowledged the SSF as a post-settlement fishery and one that would require a 20% quota allocation to Maoridom in terms of the Deed.

Over the next three years, catches in the SSF increased from 710t in 1992 to a high of 850t in 1994. The effort to catch spat using bags set in the water expanded from around 200 000 bags to over 500 000 and the number of spat caught and area seeded increased proportionately. High seeding-success rates experienced in the early 1990s did not, however, continue. In particular, very low survival rates were recorded from seeding efforts undertaken in 1992/93. Adult scallops taken in 1993 were also in poor condition. Other problems with enhancement such as over-settlement of other species on spat-catching equipment were also becoming significant. The industry and government were faced with a productivity crisis in the fishery and this stimulated investment in research to identify the extent and nature of the problem. The SSFAC, along with MAF and local government, commissioned a scientific review of the enhancement programme in the context of the total marine environment.

In 1993 the costs of the enhancement programme were also increasing markedly with operational expenditure exceeding NZ$1.6 million in the 1993/94 financial year. Trust funds were being managed on a non-accrued basis consistent with financial accounting in the state sector as a whole. This cash-based budgeting system provided only a limited ability to manage levy and cash flow requirements between years. This approach was particularly risky given the prospects of poor future fishery performance (and potential levy income) resulting from the 1993 seeding failure. Also in 1993, the programme itself was reliant on vessels contracted by MAF from the aquaculture industry to undertake harvesting activities. This approach was found to be costly and it provided only limited ability to develop specialised equipment designed to improve spat-handling and seeding techniques.

Management of the scallop fishery itself during 1992 and 1993 was the subject of considerable contention and disagreement between government and the industry. This disagreement was stimulated by the complex and perverse set of management objectives and financial incentives established in the 1992 legislation. Government, for its part, was required to ensure that the fishery was being utilised in a sustainable manner, to provide adequately for non-commercial fishing interests and to ensure that impacts of enhancement on other fisheries were taken into account. It also needed to balance these roles with obtaining a return from selling leasehold rights to Crown quota by ensuring that the fishery was enhanced to its full potential within five years. In contrast, the scallop-quota owners had been disenfranchised from the benefits of any investment in enhancement. They were required to fund not only the development of the scallop fishery but also other enhancement programmes with funds levied from their scallop landings. They did, however, retain a right of preference to any quota fishing rights leased by the Crown when purchased at a market price.

Local Maori had also started proceedings at the start of the 1993 scallop season which claimed that they should be allocated an additional 10% of quota, in line with the Deed of Settlement and the Minister's Hansard address made in 1992. They were successful in an application to the Court, which stopped the Crown from leasing any additional quota until their claim for an additional 10% could be reviewed. By 1994 it also became apparent that further expansion of the enhancement programme was unlikely to provide any expanded catches by the end of the five-year transitional period.

Cost-recovery and the restructure of MAF were additional factors driving the establishment and operation of Challenger. The enhancement programme, cost-recovered through a specific levy and delivered by MAF, did not fit into the accountability structures and new role of the Ministry. A new way of delivering the enhancement programme, as well as funding programme activities, within the wider cost-recovery environment was therefore sought. Contracting the service out to an external provider was an option consistent with MAF's new, and wider, purchasing roles.

The scallop-quota owners, with the support of the NZFIB, set about designing an organisation that could implement such a contract. It was not a realistic option to contract the programme out to a scientific provider since it was now a significant, and specialist, commercial operation in its own right. Challenger was designed and established for that purpose. It was set up as a company given the need for strong commercial accountabilities in an organisation that would be holding significant assets and financial responsibilities. Company law provided protections for minor shareholder interests. Shareholding was linked to quota ownership to ensure that management of the fishery was directly accountable to long term investments in the fishery. Shareholding was allocated initially on a tonnage basis to reflect the fisheries framework in place at the time. The Company was incorporated in May 1994 and industry members on the SSFAC were appointed as establishment Directors to the Company.

Three years on, much of the legislative and institutional framework, and the rights needed to realise the opportunities identified by Pearce in 1991 were in place in the Southern Scallop Fishery. Only the legislative support, identified by Pearce as a precursor to collective action in a quota fishery, had not been carried through into law. This meant that any collective arrangements adopted and implemented amongst quota owners and other industry participants would require 100% voluntary participation.

In April 1994, the Minister of Fisheries and the SSFAC agreed to a set of reforms to address the range of issues and problems affecting the fishery. These reforms included the early introduction of proportional quota into the fishery at a catch level of 850t, allocation of an additional 10% of quota directly to Iwi and a direct role for the industry in the management of the fishery. The reforms were effected by civil contract and legislation.

In July 1994, Challenger signed an Agreement for Provision of Services (Agreement) with MAF to implement an Enhancement Plan (Plan) approved by the Minister of Fisheries. Levies collected by the Ministry, and held in Trust for the purpose of implementing the Plan, were used to fund the Agreement. The Agreement was in essence an operational plan for the enhancement of the scallop fishery but also included requirements to collect information for research, provide advice on management of the fishery and review the enhancement planning framework. It also specified consultation requirements with recreational interests to implement these responsibilities. Rights to catch spat in the scallop fishery to service the enhancement programme were transferred to Challenger.

The Agreement was entered into for a term of three years ending in June 1997. MAF had discretion to terminate the Agreement in the event that legislation was passed that removed its ability to levy quota holders for the purpose of implementing the Plan. The Articles of Association of Challenger specifically provided shareholder-based funding mechanisms for the implementation of the Plan in the event that such a circumstance arose.

In early 1995 Challenger established a recreational advisory group for the scallop fishery serviced at its expense. All management proposals developed by Challenger in consultation with this group were approved by the Minister for implementation. These decisions included a reduction of the TACC to 720t, which under the legislative amendment meant that the Government's interest in the TACC ceased. Low seeding successes experienced in 1993 resulted in a significant catch reduction to 521t in 1995, down from 850t (equal to the full TACC) the previous year.

In May 1995 Challenger took possession of the Tasman Challenger a purpose-designed vessel for the enhancement programme constructed at cost of about $NZ1 000 000. The first Annual General Meeting of the Company was held on 4 August 1995. Share certificates were issued to all quota owners at this meeting. Over the 1994/95 summer period, the enhancement programme continued to be implemented pursuant to the Agreement.

Between June and October 1995 legislation was introduced to change the SSF into a proportional quota management system and provide for the allocation of additional quota to Maori. Provisions allowing the catch limit in the SSF to be set at a level other than at the MSY, which applied to other fisheries, were established. Statutory imperatives to enhance the fishery to obtain the maximum economic yield were retained in the interim. The 1995 legislation also provided for the repeal of the Government-imposed levy supporting the scallop enhancement programme. As a consequence the Agreement funding the implementation of the programme through the administrations of Challenger became uncertain. This decision placed considerable financial risks on Challenger activities and threatened the future viability of the enhancement programme given that the only alternate source of funding was to resort to a voluntary framework (albeit supported to an extent by the constitutional provisions of Challenger).

The Government, however, provided a solution by reforming legislation enabling the establishment of a compulsory levy by majority vote (subject to various checks and balances) of quota holders of a fishery. This reform represented the final step in the process of change from government-managed funding to industry, or self, funding but was separate, both in principle and practice, from the wider cost-recovery regime applicable to the industry as a whole.

Challenger was nonetheless well placed within the new and wider cost-recovery environment. Recovery of research costs and the costs of enhancement were already internalised within Challenger's operations and this was recognised by Government. The main cost-recovery issues faced by Challenger in the wider regime were related to costs of fisheries management advice, administration of the quota management system (including catch registry systems), lack of provision for government-sharing of research costs and, most critically, the recovery of enforcement costs. These were contentious issues not so much because of the actual costs incurred by Government, but rather the process used for distributing these costs amongst the industry. A formula linked to tonnage and landed value across a grouping of fisheries was used for allocation. This meant that high-valued fisheries attracted a greater share of the costs and that the cost-recovery regime was not sensitive to self-regulation and the cost savings that such initiatives created for Government.

In December 1995 the size limit of scallop for amateur fishers was reduced from 100 to 90 mm. Recreational fishers were also able to fish in rotational sectors closed to the commercial fleet. In normal growing conditions the scallops that are sown or naturally settle into the fishery grow to 90 mm in 18 months. This important decision, supported by Challenger, enabled fully integrated recreational fishing and indirectly, the aspirations of customary Maori fishers, into the rotational seeding and enhancement programme applying to the commercial sector.

The Agreement was retained through the 1995/96 spat-catching period. Around 660 million spat were caught and released over Golden and Tasman Bay. The Tasman Challenger had been fitted with on-board equipment designed to process spat and improve seeding operations. Trials using this equipment on a commercial scale were done during these spat-seeding operations. Over-settlements of mussel spat, however, continued to cause difficulties during harvesting operations. Catches from the fishery dropped further to 231t in 1996, placing additional pressures on levy and cash flow requirements to support the enhancement and management programme. Most catches were, however, from enhancement stock not natural settlements and the imperative to maintain and improve the programme remained.

2.6 Self-governance under environmental standards (1996 onwards)

2.6.1 General environment

New fisheries management legislation was introduced in 1996. The new Act provided a purpose and principles for fisheries management, which in turn set standards and specifications that had to be met by all agencies that wished to assume a role in managing fisheries. In addition to developing the new Fisheries Act, in its first year the newly formed MFish also developed a strategic direction for managing fisheries. This work included establishing the Ministry's role in the process of fisheries management and ways in which the new direction should be identified and achieved. The document 'Changing Course - towards fisheries 2010' set out the framework for developing the strategy to manage fisheries in the future, based around four major themes:

i. An ecosystem based management approach was required to effectively manage fisheries in the context of the environment in which they exist

ii. Long-term goals for the management of fisheries were required and there needed to be an agreed understanding of how to achieve those goals

iii. Effective management of fisheries was vital to the community, and successful management depended on the involvement, co-operation and support of all those with an interest in the fishery and

iv. Sustainable fisheries contribute to economic growth.

i. ensuring ecological sustainability
ii. meeting Treaty of Waitangi and international obligations
iii. enabling efficient resource use and
iv. ensuring the integrity of management systems.

Growing concern about lack of progress and cost associated with implementing the new Fisheries Act 1996 stimulated MFish and the Minister of Fisheries to commission an independent review of the Act in early 1998. The Independent Reviewer's Report completed in September 1998 recommended the following (Hartevelt 1998):

i. a fundamental realignment of the roles of Government and fisheries stakeholders and the implementation of transparent consultation and decision-making processes

ii. a simplified and less prescriptive operating regime than exists under the Fisheries Act 1996 and

iii. devolving to fisheries-rights holders the responsibility for fisheries management at the discretion of the Minister.

By the end of 1999, the QMS was confirmed as a system that limited the total take and provided quota owners with an ongoing right to a share of the total catch in the fishery. Further, the QMS reforms had provided an opportunity for quota holders to have more control over their future, and change from maximising their individual share of the catch to managing the fishery for collective benefit.

Luxton (1999) noted that the Government viewed the marine environment as a precious and finite resource and, accordingly, the use of it needed to be as efficient as possible in order to generate maximum returns for the economy with minimum impact on the environment. Upton (1999) declared that the Government's quest was to establish a framework where laws set the framework for business to operate most efficiently, enabling outcomes that are both economically and environmentally sustainable.

2.6.2 Challenger fisheries management

In April 1996 Challenger carried out a ballot among scallop quota holders proposing that a compulsory levy be established by vote of quota holders. With the prospects of such a funding-framework Challenger prepared a comprehensive plan for the management of the 1996 commercial scallop season. That plan included an analysis of scallop enhancement and survey data, recommendations for management, projected budgets and funding requirements for management of the fishery for the next twelve-month period. The plan contained a draft civil contract that contained binding rules for the management of the fishery. All management arrangements, including a proposal to introduce a 20% levy and the compliance plan, were approved in principle by shareholders at an Extraordinary General Meeting of the Company. Under the plan Challenger established a daily catch-balancing system and a dockside-monitoring programme to ensure compliance. Penalties were established within the contract for any catch taken in excess of the daily limits.

The contract also provided for Challenger to exclude commercial scallop vessels from all, or parts, of the scallop fishery if scallop yields were poor or for purposes of managing biotoxin risks. The contract established penalties (subsequently, and more effectively, defined as "agreed damages") for breach of rotational fishing closures and area agreements implemented to provide better access to the recreational fishing sector. Catch reports provided under the contract were used to monitor compliance with total catch limits set for parts of the fishery.

The Minister of Fisheries and MFish approved, and where appropriate, implemented the annual management plan. Importantly for the self-governance of the fishery, the Minister agreed to retain the TACC at 720t even though available yields were much lower. The quota owners in turn agreed to lease excess quota (being 51.39% of the quota available) above estimated catch levels, to Challenger to be held and not fished. The Minister provided approvals to exempt Challenger and its Directors from aggregation limits to effect this management decision.

In July 1996 the compulsory levy order came into effect. This enabled Challenger to fund management activities directly and ultimately led to the dis-establishment of the Government levy as well as the Agreement. A new set of Articles of Association for the Company was developed, and adopted by shareholders, that changed the shareholding base of the Company to better reflect the proportional quota system. Under the new Articles all quota owners qualify for one share in the Company. Shareholder voting rights for appointment of Directors and management of other Company business are exercised in proportion to the total quota owned by shareholders. These provisions are consistent with the requirements for setting the levy, by majority vote at a general meeting, as specified under the compulsory levy order.

Industry participants invited to Challenger's Annual General Meeting (AGM) in August 1996 included fishermen, quota holders and processors as well as shareholders (the quota owners). All parties endorsed and signed the 1996 Compliance Contract, which specified management rules for the upcoming season which had been approved by the Minister. The successful introduction of this contract with full support demonstrated that it was feasible to establish collective management agreements in this fishery even without the statutory support envisaged by Pearce back in 1991.

A meeting of permit holders in the closely associated dredge oyster fishery was also held during the AGM to update permit holders on progress with introducing this fishery into the QMS. In consultation with dredge oyster permit holders, Maori interests, and MFish, Challenger facilitated a quota allocation proposal which was ultimately endorsed by those parties. Challenger supported this initiative because of the need to start integrating catching and management arrangements between the two fisheries. Until that time, scallop and oyster dredging activities proceeded in an uncoordinated manner so that oyster fishing often occurred across scallop beds within a month of the newseeding operations being completed.

The Fisheries Act 1996 provided a framework for the development of standards and specifications for management of the enhancement programme (and ultimately the fishery) by Challenger. Rather than specify the goals of the enhancement programme in legislation as the previous statute had done, the programme was integrated into the wider fishery management framework. Importantly, the SSF remained exempt from normal sustainability criteria (based on MSY) on the basis that the purpose and principles of the legislation were better delivered by rotational fishing and enhancement in the fishery.

The Act also introduced the dredge oyster fishery into the QMS. This was the second fishery after the scallop fishery to be introduced since the settlement of Mäori claims to commercial fishing. The Challenger Dredge Oyster Fisheries Management Company was subsequently incorporated in February 1997. Challenger was immediately contracted to provide management and fisheries services to this new Company. Challenger established itself as the Shellfish Quality Assurance Programme Delivery Centre for both the scallop and dredge oyster fisheries to manage and enforce biotoxin and sanitation requirements specified in legislation and detailed in government-approved Shellfish Quality Management Plans.

The role of the Challenger Scallop Recreational Advisory Group was expanded to include dredge oysters. This Group, along with the two Challenger companies, supported removal of the amateur season applying to the dredge oyster fishery at the same time that the commercial dredge oyster season was rationalised so that it opened during the scallop season.

Management recommendations for the 1997 scallop season had to be developed under the umbrella of the purpose and principles of the new Fisheries Act 1996. In anticipation of this Challenger commissioned a study in 1997 to explore the use of reference points or "environmental bottom lines" to underpin the sustainability framework for the SSF. This work modelled the effectiveness of rotational fishing and enhancement as compared to other, more traditional, fishing strategies designed to ensure sustainability. The modelling study helped confirm the statutory basis for the SSF exemption from sustainability measures applying to other fisheries under the Act. This information underpinned the management plan sent to the Minister by Challenger following the completion of the annual scallop abundance survey in 1997.

In 1997 the annual scallop survey was further expanded and refined. In particular, a new analysis was undertaken to obtain estimates of commercial yields. Challenger needed accurate estimates to set catch limits ando allow more effective utilisation of the fishery through the leaseback arrangements. The information was also critical for budgeting purposes. Research activities were expanded to include assessments of the population distribution (i.e. scallop numbers at different sizes). This information added greater certainty to the process of setting sustainability measures and gave Challenger and MFish added security in determining appropriate harvesting strategies.

The Fisheries Act 1996 also placed different consultation requirements on Government and these were co-ordinated with Challenger's role in the development of harvesting plans for the fishery. Initial management proposals developed by the Board for consultation included a proposal to harvest a fixed tonnage from an area of the fishery, out of phase with the planned rotational fishing cycle. Challenger successfully proposed to establish a daily catch-balancing and reporting regime to ensure compliance with these provisions.

The Minister of Fisheries subsequently endorsed the rotational programme as the primary means of ensuring sustainability in the scallop fishery. He approved all management plan proposals for the 1997 season including the right to harvest outside of rotation in the circumstances described. That decision was important for future self-governance of the fishery for a number of reasons. First, it provided Challenger with the opportunity to demonstrate its ability to undertake micro-management roles that could not be effectively implemented by Government. Second, it demonstrated the value and effectiveness of the new legislation in providing for management under a self-governance framework. Third, it allowed Challenger to demonstrate to other sector groups, and in particular the recreational sector, its ability to manage the fishery, leading to a greater level of acceptance of the flexible management regime that had evolved.

Catches in 1997 increased to 300t. The levy was maintained at 20%, but even so it was insufficient to fund scallop seeding targets set in the previous year. Problems in programme operations were also encountered and in particular the seeding approach developed was leading to loss of equipment. Challenger determined to cut back seeding and harvesting operations to operate within the processing capacity of the Tasman Challenger. In taking this step Challenger was able to fully process all spat on board and remove the risk of loss of spat bags during seeding. This also enabled Challenger to improve the quality of processing operations thus increasing the chances of seeding successes. Even with the reduced spat-catching capacity, 403 million scallops were caught and seeded.

In January 1998, the Minister of Fisheries approved a revised Enhancement Plan developed by Challenger. This Plan established targets for enhancement but also identified constraints on areas and amounts seeded per unit area as well as information-reporting requirements designed to meet the purpose and principles of the legislation. The Minister's approval was subject to a range of reporting conditions addressing these issues.

Against the backdrop of its strategic direction, and its new structure and purpose, MFish took steps to formalise management arrangements in the scallop fishery. A comprehensive Memorandum of Understanding (MOU) was entered into with Challenger in March 1998 to enable better use of resources in the scallop fishery, within environmental constraints. Under the MOU, Challenger agreed to provide MFish with information and advice on enhancement and management of the scallop fishery. The MOU records, inter alia:

"The MOU is intended to contribute to the ability of [Challenger] to continue to develop opportunities for responsible self-management of the Southern Scallop Fishery. The relationship between [MFish] and [Challenger] has been characterised by the high quality of routine information provided to [MFish] by [Challenger]; the Chief Executive is authorised to enter into the MOU through his powers set out in Part III of the State Sector Act.

[MFish] records its objective of maximising the ability of stakeholders to act in a collective manner and develop opportunities for self-management. Providing such opportunities is said to be consistent with the Government's role in enabling efficient resource use by providing the framework to allow owners of harvesting rights to make decisions regarding the operation of those rights.

[MFish] seeks to safeguard its ability to deliver its core responsibilities: ensuring and fulfilling environmental principles, meeting Treaty of Waitangi and international obligations, enabling efficient resource use and ensuring the integrity of management systems."

i. Financial results of the prior financial year as outlined in the 1998 Annual Report (pursuant to compulsory levies legislation the Minister was required to table this Report in the House of Representatives)

ii. The 1998/99 Business Plan and levy (set at 17% for the 1998 season)

iii. A summary report on all scallop enhancement activities relevant to harvesting in 1998 and future years

iv. Information available from the annual scallop abundance survey

v. A report on consultations undertaken

vi. Other information relevant to the management of the fishery (including additional survey data)

vii. Recommendations for management of the scallop and dredge oyster fisheries and

viii. A draft 1998 Compliance Contract.

During 1999 over 325 million scallop spat were caught and seeded over sections of the SSF. Seeding activities were targeted at the most productive areas and away from areas with high numbers of naturally recruited scallops as identified from extensive pre-release surveys. Post-release surveys have shown very high survival rates. As a result of the research commissioned on seeding techniques Challenger is introducing processing operations this year to further improve survival of scallop spat when seeded. Challenger also monitors water quality to assess productivity and algal events and is in the process of establishing a more intensive monitoring programme to assess productivity on the seafloor as well as in the water column. Challenger has also commissioned a modelling study on behalf of the Challenger Dredge Oyster Fishery Management Company to assess options for better management of that fishery.

A survey of scallop stocks was carried out in May and June 1999. Results of this survey were used for developing a management plan for the fishery, which was discussed with recreational fishers, Iwi and environmentalists. This year (1999), responsibility for management of rotationally closed areas was devolved to Challenger which ensures compliance with these closures, as well as a range of other management measures under a contract, once again signed by all industry participants (including those in the dredge oyster fishery). MFish has appropriately retained an audit role to ensure that the management outcomes established by Challenger and implemented by Challenger to achieve the purpose and principles of the Fisheries Act 1996, are realised. Scallop catches this year (1999) are predicted to reach 720t. Management measures adopted to meet quality targets (i.e. yield and colour) are proving successful and current information indicates that catches will further improve in the future.

In addition to managing shell fisheries, Challenger is now developing a collective structure for the management of inshore fin-fisheries in QMA 7 and 8. Challenger is in the process of incorporating the Challenger Finfisheries' Management Company (CFC) and allocating shares to quota-owners. In contrast to the scallop and dredge oyster companies, each of which has less than forty shareholders, CFC has 416 quota-owners who qualify for shareholdings covering 20 fish species. The costs of administering such a structure are much higher, but not insurmountable, given that 75% of the quota is held by as little as thirteen individual companies. In the interim, Challenger has already taken a number of steps to develop self-governance frameworks for this fishery. In 1998, with the agreement of the Minister, Challenger established a monitoring, reporting and effort-split regime³ designed to reduce fishing effort in the rig (Mustelus lenticulatus) fishery within the boundaries of the SSF.

³ The term effort-split regime is best described as a scheme designed to ensure that a specified maximum catch of species within the TACC set by the Minister is taken from a sub-area of the wider QMA for this fishery. The purpose of the effort split is to reduce fishing pressure on one component of what is thought to be two stocks of a species within a single QMA.

Part way through the process of fishery management integration, Challenger and Government are being faced with a more pervading crisis of adjustment. Various interests are seeking opportunities for spatial and productive use of the environment on a significant scale. New applications for marine farming within areas where the scallop fishery now operates exceed 10 000 hectares. The situation faced by Challenger and Government is how to place the rights and responsibilities allocated and devolved to Challenger and quota holders within the management of the Coastal Marine Area (i.e. within 12 nautical miles of the coast) as a whole.

The management of the environment (including fisheries) is controlled by both local and central government under different political accountabilities and within differing legislative, legal and spatial jurisdictions. The extent to which the roles of central and local government overlap in terms of their mandates under separate legislation and within the Coastal Marine Area (CMA) is an unresolved issue. From a resource management perspective, the debate is about the extent of external effects created by any new uses that are authorised and about how these should be managed.

Under legislation, the rights of commercial fishers are protected against certain undue adverse effect from other users of fisheries in the QMA. This legal constraint provides a threshold against which other claims for access to fisheries resources must be measured. It applies to the establishment of exclusive recreational fishing zones, marine farming operations, and no-take marine reserves. In each case the legislation provides, among other things, that such allocations cannot be made if there is an undue adverse effect on the ability of commercial fishers to harvest their entitlement. In the context of Challenger, the commercial fishing rights are expressed as ITQs, able to be exercised subject to a regulatory framework ensuring sustainability.

Ways to resolve these problems are simple in resource-economics theory. The potential externalities created by proposed new uses should, as far as possible, be internalised through better specification of the rights and management structures already established. Alternatively, Government will need to centralise the management of these effects within a regulatory environment. The latter approach potentially involves reallocation or attenuation of the rights already issued in the marine environment. This approach is a retrograde step from Challenger's perspective.

3. CONCLUSION

A complex set of biological, financial and institutional imperatives have driven increased self-governance by quota owners and other industry participants in the Challenger area. These include the following:

i. over-exploitation of fish stocks and the limitation of participants

ii. development of commercial enhancement technology and infrastructure demonstrating the presence of management opportunities

iii. establishment of perpetual quota rights allowing transfer and security for investment

iv. fishery-productivity failures and fish-quality demands requiring management attention

v. introduction of proportional quota and the resolution of Maori claims to fisheries resources providing opportunity for development

vi. enactment of government financial accountabilities and introduction of cost-recovery providing incentives for management efficiency

vii. restructure of fisheries law, and the government management agency providing opportunity for self-governance

viii. the establishment of funding streams and collective frameworks for self-governance and

ix. competition for use of coastal space and productive capacity in the marine environment stimulating collective action to protect investments and rights from reallocation.

The authority of Challenger to undertake fishery management responsibilities is devolved and delegated to Challenger within the context of a number of planning documents and permit authorities. For the scallop fishery, these include a statutorily-approved Enhancement Plan, an annually-reviewed fishery management plan (including a harvest strategy and compliance programme), a Memorandum of Understanding between Challenger and MFish outlining information needs for the fishery, Shellfish Quality Management Plans, and various permit and consent authorities to effect these responsibilities. Information needs and management for the dredge oyster fishery are integrated into these documents.

The pattern of development has occurred differently in the Challenger fin-fisheries. The centralised process of management has limited opportunities for self-governance in these fisheries. Devolution of the management of QMS registries to SeaFIC has provided opportunity for progress, but this depends on how responsive this new centrally-based system is to the needs of fisheries management. Further development of management in Challenger fin-fisheries is also faced with the difficult job of organising the interests of a much larger number of quota holders, fishers and processors without statutory support.

Challenger is now positioned as a regulator of fisheries-use in the marine environment under the watchful eye of Government. It is an organisation sensitised by management of fisheries within the constraints of that environment. It has the incentives, the capacity and the responsibility to preserve and improve its role and the interests of its shareholders within that environment.

Challenger has recently initiated Environment Court and High Court proceedings in opposition to local government planning proposals for the CMA which include provision for marine farm uses. Challenger is defending its management role and the rights of its shareholders within the context of spatial use and the life supporting capacity of the environment it operates within. The difficulties of allocating rights in fisheries in the marine environment identified by Keen (1988) are a reality in the Challenger CMA.

An underlying issue to be resolved is how to allocate any super-profits that might be created from allowing the marine environment (including its productive capacity) to be utilised in alternative ways. The politics of fairness, envy and environmental management that have pervaded the allocation of ITQs are being revisited on the marine environment as a whole. Challenger is being seen as the barrier to progress by many of the new aspirants for these benefits.

4. LITERATURE CITED

Ackroyd, P., R.P. Hide and B.M.H.Sharp 1990. New Zealand's ITQ system: prospects for the evolution of sole ownership corporations, Report to MFish, pp. 86.

Annala, J.H. 1996. New Zealand's ITQ system: have the first eight years been a success or failure? Reviews in Fish Biology and Fisheries, pp.43-62.

Batstene, C.J. and B.M.H. Sharp 1999. New Zealand's quota management system: the first ten years, Marine Policy, pp.177-190.

Bull, M.F. 1994. Enhancement and management of New Zealand's "southern scallop" fishery. In Bourne, N.F., Bunting, B.L., and Townsend, L.D. (eds), Proceedings of the 9^th International Pectinid Workshop, Nanaimo, B. C. 1994. Canada, April 22-27, 1993, Volume 2, pp.131-136.

Clarke, M. and P. Clough 1998. New Zealand's fisheries: co-management and property rights, working paper 98/16, New Zealand Institute of Economic Research, pp. 50.

Crothers, S. 1988. Individual transferable quotas: the New Zealand experience, Fisheries pp.13(1), 10-12.

Hartevelt, T. 1998. Fishing for the Future: Review of the Fisheries Act 1996: Report of the Independent Reviewer of the Fisheries Act 1996 to the Minister of Food, Fibre, Biosecurity and Border Control, Report to the Minister of Food Fibre Biosecurity and Border Control, pp. 91.

Johnston, R. 1995. Implications of taxing Quota Value in an Individual Transferable Quota Fishery, Marine Economics (10), pp.327-340 (see p.337).

Keen, E.A. 1988. Ownership and Productivity of Marine Fishery Resources: An Essay on the Resolution of Conflict in the Use of the Ocean Pastures, The McDonald and Woodward Publishing Company, Virginia, pp.122.

Luxton, J. 1997. (Minister of Food Fibre Biosecurity and Border Control), Stakeholder management of recreational fisheries, Address to the New Zealand Recreational Fishing Council, Annual General Meeting, Bay of Islands. July 1997.

Luxton, J. 1999. (Minister of Food Fibre Biosecurity and Border Control), Sustainable development of ocean resources, Address to Our Oceans Conference, Te Papa, Wellington. October 1999.

Ministry of Fisheries (New Zealand) 1996: Changing course - towards fisheries 2010, pp.24.

Ministry of Fisheries (New Zealand) 1998: Five year strategic plan 1998-2003, pp.24.

Pearce, P. H. 1991. Building on Progress: Fisheries Policy development in New Zealand, A report prepared for the Minister of Fisheries, pp.28.

Scott, A. 1998. Development of Property in the Fishery, Marine Resource Economics (5), pp.289-311 (see pp.305-6).

Scott, A. 1993. Obstacles to fishery self-government, Marine Resource Economics (8), 187-199.

Upton, S. 1999. (Minister of the Environment), Corporatisation and sustainable management, Address to resource management law association conference, Christchurch. October 1999.

Wheeler, B., J. Bradford, C. Collins, A. Duncan, B. Wilson and H. Young 1992. Sustainable Fisheries (Tiakina nga Taonga a Tangaroa): Report of the Fisheries Task Force to the Minister of Fisheries on the Review of Fisheries Legislation. pp 75.

Stronger Rights, Higher Fees, Greater Say: Linkages for the Pacific Halibut Fishery in Canada - G.S. Gislason

G.S. Gislason
GSGislason & Associates Ltd.
PO Box 10321, Pacific Centre, 880 - 609 Granville Street
Vancouver, BC, Canada V7Y 1G5
<[email protected]>

1. INTRODUCTION

Commercial halibut licence holders in British Columbia, Canada gained much stronger rights under the Individual Vessel Quota (IVQ) fisheries management programme introduced in 1991. Licence holders have to pay substantial fees to fund a dockside monitoring programme (DMP) for offloading catches, a dedicated enforcement presence, and other fisheries management services. As well, the Halibut Advisory Board (HAB) comprised of elected licence holders, was formed to advise the Canada Department of Fisheries and Oceans (DFO) on the halibut industry and, by implication, to ensure accountability to industry.

This paper outlines the evolution and linkages between rights, fees and accountability for the Pacific Halibut Individual Vessel Quota (IVQ) Programme in British Columbia, Canada. The paper focuses on one aspect of the many changes in industry relationships that inevitably occur when licence holders attain stronger rights, in this case the new relationship between rights (licence) holders and government (DFO) fishery management.

2. BACKGROUND

2.1 History

Pacific halibut is the largest of all flatfish and among the largest fish in the world. Pacific halibut inhabits the continental shelf of the US and Canada, ranging from California north to the Bering Sea (Bell 1981). The International Pacific Halibut Commission (1998) outlines the development of the commercial halibut fishery along the Pacific Coast of North America. The fishery was pioneered by fishermen of Norwegian ancestry and started in the late 1880s.

The commercial halibut fishery started in 1888. Fishermen used sailing vessels to fish off Washington State, USA, landed the halibut in Tacoma, Washington and shipped the iced fish by the newly-completed transcontinental railway to Boston. After railway service to Vancouver and Prince Rupert in British Columbia connected the West Coast of Canada to Eastern Canada, these two locales became important West Coast landing ports. In fact, Prince Rupert became known as "The Halibut Capital of the World".

From the beginning in the 19^th century, Canadian and US boats fished on common grounds as there were no international boundaries pertaining to fishing at the time. Both fleets gained port privileges to land halibut and take on supplies in the other country.

Initially, sailing vessels and then steam-powered vessels fished with several dories. Two men in each dory pulled the lines by hand. These were replaced in the 1920s by diesel-powered schooners designed to mechanically haul longline gear directly from the deck. Over the next 50 years, several other technological innovations were adopted including the replacement of natural fibre lines by nylon lines, the introduction of snap-on gear, and the conversion to circle-shaped hooks from J-shaped hooks (IPHC studies concluded that circle hooks were 2 to 3 times more efficient at catching halibut).

2.2 Fishing methods

The directed halibut fishery uses setline gear where a skate, the basic unit of gear, consists of groundline, gangions or branch lines, and baited hooks. The gear is set, left to 'soak' for several hours, and then retrieved by a power-driven gurdy. Bait used includes octopus, herring and other fish. Snap-on gear has gained favour on those boats that participate in other hook and line fisheries beside halibut (snap-on gear differs from traditional setline gear in that the gangions are attached to the groundline with metal snaps, rather than being tied to the groundline with wire).

Halibut are dressed on-board by removing the viscera and gills and the body cavity is filled with ice. The head is not removed until the catch is delivered at dockside and sold. The halibut then is beheaded in the plant and graded by weight according to trade categories.

Today, the vast majority of BC halibut is sold as fresh, headed and gutted whole fish into the US market. Halibut is a popular food fish as it can grow to 200kg¹ or more (although the average landed size would be in the 5 to 20kg range), is firm-textured and white-fleshed and has relatively few bones. The fish, if well iced, keeps for an extended period of time without spoiling. Figure 1 displays the catch in tonnes and the real, inflation-adjusted catch value over the past 35 years.

¹ In this paper, all halibut catches are reported in dressed, head-off weight.

Appendix 1 summarizes the evolution of fisheries management for the Pacific halibut fishery of Canada. The halibut fishery initially was unregulated by season, catch or any other constraints. By 1910, the halibut fleets of both countries had expanded and overfishing became apparent. The industry asked the governments of both the US and Canada for international management of the resource.

Figure 1: British Columbia commercial halibut catch and landed value, 1965 to 1999

In 1923, the US and Canada signed a Convention under which the International Fisheries Commission was formed in 1924. The Commission was mandated to regulate by closed season alone, but it soon became clear that the three-month closure imposed was inadequate to protect the resource. A new convention was signed in 1930 under which the Commission could institute other conservation measures such as catch limits and gear regulations.

The convention was further modified in 1953 so separate fishing seasons by area could be established. The commission also changed its name to the International Pacific Halibut Commission (IPHC). The IPHC conducts basic research and stock assessment to develop and maintain stocks at a level which would permit maximum sustainable yield.

Halibut catches in both US and Canadian waters declined in the 1960s and the early 1970s due to a combination of factors including poor recruitment and increasing halibut bycatch by trawlers. In Canada, during the late 1960s and early 1970s many former halibut longline vessels were retrofitted to participate in the BC salmon fishery using seine gear. By 1974, the combined US-Canada catch had declined to under 10 000t, or less than one-third of the average catches in the mid 1960s (see Figure 1).

Both the US and Canada extended their coastal jurisdiction to 200nm in 1977. This resulted in an amendment to the 1953 Halibut Convention, termed a protocol, which was signed in 1979. The Protocol called for the phaseout of the fishing by one country's fleet in the other country's waters. At this time, the Canadian fleet caught much more halibut in US waters than did the US fleet in Canadian waters.

To this day, the IPHC continues to conduct Pacific halibut stock assessment work, set Total Allowable Catches (TACs) for both the US and Canada and enact other regulatory measures. The Federal Government of Canada paid about $C1.2 million to support the activities of the IPHC in 1998. Canada's Department of Fisheries and Oceans manages the Canadian portion of the fishery within IPHC parameters.

2.4 Limited entry in Canada 1979

The 1979 Protocol also enabled the individual governments to make regulations concerning their own fleets which did not interfere with 1979 Commission regulations. In 1979, Canada immediately imposed limited entry on the halibut fleet and those 435 vessel owners who had participated in the fishery in recent years received halibut "L" licences. The US fishery remained an open access fishery.

3. THE INDIVIDUAL VESSEL QUOTA SYSTEM: 1991 TO DATE

3.1 The setting

Turris and Sporer (1994) outline the development of the individual quota system for Pacific Halibut in Canada. Several problems emerged during the 1980s under the "derby" or competitive fishery format whereby licensed vessels competed for the available TAC. The fleet had become unmanageable and catches in most years exceeded the halibut TAC set by the IPHC. The length of the season became shorter each year with the result that by the late 1980s, the season was less than ten days long. In November 1988, a small group of licence holders approached DFO to explore the possibility of adopting an individual quota management system.

In 1989 DFO released a discussion paper of problems and prospects for the halibut industry. In 1990 DFO held a referendum of licence holders who voted in favour of implementing a two-year, trial Individual Vessel Quota (IVQ or IQ) programme. DFO adopted a system of non-transferable IVQs for a two-year trial period for the halibut fleet in 1991.

The commercial halibut fishing season under IVQs is usually mid-March to mid-November. Licence holders are free to catch their IVQ at any time during the season. Vessels must 'hail-out' their intention to fish and 'hail-in' their intention to land and unload their catch at designated landing ports.

3.2 Initial allocation

In 1991 each of the existing 435 "L" licence holders in 1991 received an Individual Vessel Quota where the quota level comprised a percentage of the TAC. DFO based the IVQ formula on a combination of recent vessel catch history and vessel length (70% catch history and 30% vessel length).

3.3 Transferability and new entry

For the initial two-year trial period, quota consolidation, or "stacking" of more than one quota on a single vessel, was not permitted (but a new industry entrant could buy a licence and quota from an existing licence holder). A 1992 review of the IVQ programme (EB Economics 1992) indicated industry support for the continuation of the individual quota system but that stacking, on a temporary basis, should be allowed. Industry endorsed the concept in a vote in the fall of 1992.

DFO made IVQs stackable on a temporary basis for the 1993 halibut fishery but at the end of the season any transferred IVQ reverted back to the original licence holder. To guard against the possible concentration of quotas in a few hands each initial halibut quota was split into two equal shares and quota shares could transfer freely so long as no more than four shares were held or fished by any one licensed halibut vessel. In essence this imposed a minimum fleet size of 218 vessels (half the 435 "L" licensed vessels). These rules persisted over the 1993 to 1998 period.

Starting in 1999, both permanent and temporary transfers were allowed. Any level of transfer was allowed so long as:

i. no one vessel had more than 1% of the TAC (unless it had fished greater than this amount from 1993 to 1998) and

ii. each "L" licensed vessel held a minimum amount of permanent IVQ set at 0.01149% of the TAC (5% of the average initial allocation for the 435 "L" licensed vessels). The minimum could be temporarily reallocated during the year.

3.4 Industry user fees

At the outset of the IVQ programme in 1991, the industry agreed to pay the incremental costs associated with the programme (prior to this, each of the 435 licence holders paid only $C10/yr for a basic "L" licence).

Table 1
Overview of British Columbia Halibut Fishery under individual vessel quota management

	Year
	1991	1992	1993	1994	1995	1996	1997	1998	1999a
Fishing activity
TAC (tonnes)	3357	3629	4763	4536	4318	4318	5670	5897	5489
Catch (tonnes)	3250	3459	4789	4490	4314	4312	5589	5847	5540
Value ($C million)	21.6	21.7	30.2	37.4	34.0	34.1	41.6	30.9	38.7
No. of licences	435	435	435	435	435	435	435	435	435
No. of licences fished	433	431	351	313	294	281	279	288	265
No. of offload events	1173	1150	1255	1148	1177	1094	1211	1335	1284
% TAC transferredb	0	0	19%	34%	39%	44%	49%	50%	61%
Fees paid ($C000)
Flat rate feec	109	109	109	109	109	109	109	109	109
Management levyc	652	652	697	620	625	625	820	853	794
Economic rent levy	0	0	0	0	0	951	1249	1298	1200
Total	761	761	806	729	734	1685	1878	2260	2103

Source: GSGislason & Associates (1999) and information from Archipelago Marine Research Ltd.

^a Rent fee is estimated.

^b No quota transfers were allowed from 1991 to 1992; only temporary quota transfers allowed from 1993 to 1998; temporary and permanent quota transfers allowed in 1999.

^c Flat rate fee plus management levy to fund dockside monitoring, enforcement and other fisheries management activities (economic rent levy goes to general government revenue and does not fund specific fisheries management activities)

The initial cost recovery mechanism consisted of a two-part licence fee paid to DFO before the season - a flat fee of $C250 per licence holder plus a fee per-tonne of TAC (the per tonne fee has been set at $C144.70 since 1995). The intent was that the revenues realized would go to fund halibut fishery management activities.

In 1996, DFO started to collect, in addition to the two-part licence fee, a quota fee of $C220.30 per tonne of TAC that was not tied to fisheries management. This latter fee represented a "resource rent" that flowed into the federal government's central treasury, the Consolidated Revenue Fund (CRF). The federal government changed the resource rent fee to $C310 per tonne TAC in 1999 (less a 40% credit up to a maximum of $C1,000). The resource rent fee is pegged to a percentage of halibut landed value in a base period.

In 1999, the total of all fees paid comprised an estimated $C2.1 million, or about 5.4% of the estimated $C38 million in halibut fleet landed value.

3.5 The Halibut Advisory Board

The HAB was created in 1991 to provide "wide ranging advice to DFO to assist in the overall planning, management and enforcement of the Canadian Halibut Fishery". The Board presently consists of 21 individuals - one DFO non-voting chairman, 11 elected halibut licence holder members, and nine appointed members (representing processors, the provincial government, and aboriginal and recreational interests). The Board meets four or five times a year for one to two days each.

The HAB provides advice to DFO in three main areas (a) fisheries management regulations, (b) enforcement and (c) dockside monitoring/tagging. DFO provides fisheries management and enforcement services directly to the industry and a third party contractor provides dockside monitoring and halibut tagging services. The halibut management fees pay for these services.

4. LINKAGES - RIGHTS, FEES AND ACCOUNTABILITY

4.1 Stronger rights

The halibut IVQ programme gives licence holders predetermined shares of the available catch and, as a result, has strengthened and more clearly defined access rights to the resource. But these rights are not property rights per se as the rights do not entail all of the attributes of pure property such as security, durability, exclusivity, transferability, etc. Fish are subject to the "rule of capture" whereby a fisherman does not have ownership to individual fish until the fish are caught. Accordingly, the rights of halibut licence holders are access rights rather than strict property rights.

There is a continuum of rights regimes with "open access" at one end and "pure property" at the other. The 1979 limited entry programme moved the industry away from open access and further across the spectrum. The IVQ programme of 1991, and its refinements since then, most notably the move to transferability, pushed the bundle of rights closer to the pure property end of the spectrum.

Nevertheless, the position of the Canadian Department of Fisheries and Oceans has always been that a commercial fishing licence is a privilege, granted annually, not a property right. The absolute right to issue, suspend, cancel and refuse issuance or reissuance of any licence is at the sole discretion of the federal Minister of Fisheries and Oceans.

However, DFO's actual behaviour is at odds with this stance given that: (a) halibut licences and quotas do trade in the open market at substantial sums without objection by DFO and (b) DFO has purchased halibut licences and quotas and then reissued the licence and quota as communal halibut "F" licences to aboriginal bands under their Aboriginal Fishing Strategy. The evidence is compelling that the rights of halibut licence holders do entail some of the key attributes of property, i.e. certain segments are excluded from use (i.e. exclusivity) and the rights can be sold (i.e. transferability).

The nature of rights with respect to security of tenure can also be changed through legislation. For example, Gislason (1999) indicated that individual quota holders for the Lake Winnipeg commercial fishery in Central Canada, subject to provincial, not federal, management, had their property rights entrenched in legislation as "the allocation of an individual quota entitlement to a fisherman...constitutes a property interest of the fisherman in a right to fish the specified quota".

The value of access rights to the fishery depends on several factors including: (a) the revenue potential of the fishery (expected catch and prices); (b) the costs of harvesting (normal returns to capital and labour, the costs of purchased inputs); (c) levies for management fees and economic rent charges; (d) the strength of rights and security of access to the resource which affects the business planning time horizon; and (e) other factors (e.g. government taxation policy re capital gains).

Reviews of the halibut IVQ programme by EB Economics (1992) and Turris and Sporer (1994) show that revenues increased and costs decreased because of the programme. These two benefits plus the value of stronger rights have more than compensated for the increase in industry levies. The result has been a substantial increase in the market or trading value of halibut licences in the 1990s. Presently halibut quota may sell for up to $C40/kg and the aggregate value of quota rights may be $C200 million or more. Not all of this amount represents a potential capital gain to existing licence holders as many have bought into the industry at substantial cost since 1991.

4.2 Higher fees

These stronger rights of halibut licence holders under IVQs have come at a cost. A condition placed by DFO on the move to IVQs in 1991 was that the industry fund all incremental costs associated with managing the fishery. The new "user pay" costs were substantial as a monitoring programme for individual catches/offloads had to be incorporated, five enforcement positions staffed and a management team put in place.

These "cost-recovery" fees have increased from $C761 000 in 1991 to an estimated $C903 000 in 1999. These fees comprise the deemed revenue of the "Halibut Program" on which the Halibut Advisory Board provides advice to DFO as to how to spend. However, Gislason (1999) noted the following:

i. HAB can only advise DFO as to how to spend the money. The money is DFO's money.

ii. DFO does not have a separate bank account or accounting system for the "Halibut Program". It normally does not provide a final financial statement of revenues and expenditures for each fiscal year.

iii. DFO enforcement officers and DFO management charge substantial time and salaries against the "Halibut Program" but these individuals, up to the end of 1998, did not keep formal time sheets. The HAB could not determine if the allocated costs borne by industry were reasonable.

iv. Since 1996 and irrespective of the size of the TAC, the halibut management levy of $C144.70/t has been fixed in regulation. It is virtually impossible, therefore, to match revenue generation in any year to needed programme expenditures, i.e. to be revenue-neutral.

v. Until recently any surpluses from the "Halibut Program" in a given year were not carried forward to the next year (the "Halibut Program" has generated a surplus in every year since 1991). The surpluses remained in general government revenue.

The DFO introduced a "rent recovery" fee in 1996 to capture some of the private benefits accruing under restricted access to a public resource (Gardner Pinfold Consulting Economists Ltd. and GSGislason & Associates Ltd. 1999). The fact that industry pays both cost-recovery and rent-recovery fees gives the halibut licence holders a substantial say in fisheries management as discussed below.

4.3 Greater say - the last link in the trinity

The Halibut Advisory Board process has given halibut licence holders substantial say in fisheries management. The HAB helped to usher in the initial halibut IVQ Programme and was instrumental in the move to making licences transferable. HAB and DFO, without a formal legal agreement, have successfully practised co-management.

The HAB and the halibut industry have taken a greater interest in fisheries management, have extended their planning horizon, have co-operated with DFO and with each other and have accepted greater responsibility for their future. And, the interests of DFO and halibut fishermen have been more closely aligned. In essence, halibut licence holders have become "shareholders" not merely "stakeholders".

A key underpinning of the ascension to "shareholder" status has been the fact that industry pays both cost recovery and economic rent fees. Industry pays the full costs of IVQ programme management and in addition pays a return to the general public purse. Gislason (1995) has argued that fishermen are willing to pay more in fees if they receive a say in how the money is spent, and if they receive increased tenure, security or rights. The halibut fishery in British Columbia exemplifies this view.

Just as there is a continuum of rights, there is a continuum of accountability. The problems noted previously with the lack of financial control over industry levies and the limitations associated with the advisory role of HAB indicate that the halibut industry is constrained in its ability to achieve greater accountability.

To address this issue, the halibut licence holders created the Pacific Halibut Management Association (PHMA) in 1997 as a registered non-profit organization. The PHMA, in theory, will provide the institutional structure to further empower the industry and have a greater say over management of the halibut industry. The intent is to enter into a formal co-management agreement with DFO in the future, to receive industry cost-recovery levies directly and to authorize co-management spending. In recent years, DFO has provided "Halibut Program" surpluses as start-up money to the PHMA.

This PHMA initiative is consistent with the broad trend across Canada to institute industry co-management or partnerships through formal agreements (There is, however, confusion about the definitions of co-management and partnerships and how, if at all, they differ). DFO has indicated in its presentations to the Senate of Canada (1998) that the proposed amendments to the federal Fisheries Act: (a) help formalize the role of industry in decision-making ("greater say"); (b) share the costs of management ("higher fees"); and (c) provide greater security of tenure ("stronger rights"). That is, the move to partnering, or co-management, is consistent with the theme of this paper. In addition, the move to co-management blunts the criticism by Savoie (1998), Chairman of the Partnering Panel, and others that micromanaging has created a culture of paternalism in fisheries management in Canada. Co-management and accountability give industry greater say and responsibility for their future.

5. CONCLUSIONS

The Canadian experience with the Pacific halibut individual vessel quota (IVQ) programme demonstrates that the trinity of stronger rights, higher fees and greater say or accountability are inextricably linked. The move to an IVQ management system created much stronger rights and industry value, but also created new demands for catch monitoring, a dedicated enforcement presence and fishery management structure. The halibut industry embraced the "user pay" philosophy and agreed to pay for all incremental management costs at IVQ programme inception in 1991. Since 1996 the industry has contributed a resource rent to the general federal treasury. In return, the industry, through an Advisory Board, received a say in fisheries management. And the Board has been instrumental in modifying the IVQ programme design over time.

Under IVQs the industry became "shareholders" and not merely "stakeholders". Shareholders have rights, pay the price of admission to the decision-making table and, in return, have a say in how the entity operates. The halibut industry also has shown much greater interest in the management of the fishery and the long-term health of the resource, co-operated with one another and with the Department of Fisheries and Oceans and assumed much greater responsibility for their future. These desirable outcomes are inevitable from the move to industry co-management.

The Pacific halibut example also demonstrates that new institutional structures may be needed to give industry the accountability that they will expect and demand. In particular, industry input or say that is purely advisory and does not entail direct control over spending of their fisheries management fees may be deemed inadequate.

6. ACKNOWLEDGEMENTS

The author has benefited from discussions and information from several people, namely: Greg Clapp, John Secord, Chris Sporer, and Bruce Turris. Edna Lam provided valuable comments on a draft of the paper. Notwithstanding this assistance, the author has final responsibility for the analysis and conclusions of the study.

7. LITERATURE CITED

Bell, F.H. 1981. The Pacific Halibut: The Resource and the Fishery, Alaska Northwest Publishing Company. Canada Fisheries and Oceans 1999. Pacific region integrated fisheries management plan: halibut.

EB Economics 1992. Evaluation study of individual quota management in the halibut industry, Evaluation report prepared for Canada Department of Fisheries and Oceans and BC Ministry of Agriculture, Fisheries and Food, November.

Gardner Pinfold Consulting Economists Ltd. and GSGislason & Associates Ltd. 1999. Cumulative impact of federal user fees on the commercial fish harvesting sector, Report prepared for Canada Fisheries and Oceans, March 1999.

Gislason, G.S. 1995. You pay, you say: an assessment of DFO's proposed new licence fee structure, Report prepared for Canada Fisheries and Oceans, April 1995.

Gislason, G.S. 2000. From social thought to economic reality: the first 25 years of the Lake Winnipeg IQ management programme. In Use of Property Rights in Fisheries Management. Proceedings of the FishRights99 Conference. Fremantle, Western Australia, 11-19 November 1999. FAO Fisheries Technical Paper No. 404/2. pp.118-126, FAO, Rome.

GSGislason & Associates Ltd. 1999. Halibut Advisory Board review, Prepared for Halibut Advisory Board, February 8, 1999.

International Pacific Halibut Commission 1998. The Pacific Halibut: Biology, Fisheries and Management, Technical Report No. 40.

Savoie, D.J. 1998. Chair, Partnering the fishery: report of the panel studying partnering, Report prepared for Canada Department of Fisheries and Oceans, December 1998.

Senate of Canada 1998. Privatization and quota licensing in Canada's fisheries, Report of the Senate Standing Committee on Fisheries, December 1998.

Turris, B. and C. Sporer 1994. Halibut IVQ program, in Experience with individual quota and enterprise allocation (IQ/EA) management in Canadian fisheries 1972-1994, Canada Fisheries and Oceans, November 1994.

Appendix 1
The evolution of property rights in the Pacific Halibut Fishery of Canada

Era		Fishery management regime
The unregulated fishery	1867	Canada becomes country under the British North America Act
	1871	British Columbia joins Dominion of Canada
	1888	Commercial halibut fishery starts, is open access and is unregulated
Regulation under the IPHC	1923	Formation of International Fisheries Commission by US and Canada to manage halibut fishery (by closed season)
	1930	New Convention signed to extend management tools to catch limits, gear restrictions
	1953	Commission changes name to International Pacific Halibut Commission (IPHC) and gains mandate to have separate seasons by management area
	1977	Both the US and Canada extend their respective coastal jurisdictions to 200nm
	1979	Amendment or protocol to the 1953 Halibut Convention calls for phaseout of the fishing of one country's fleet in the other country's waters
Limited entry	1979	DFO implements limited entry through "grandfathering" of licence holders (435 new "L" halibut vessel licences created).
	1988	Discussions between industry and DFO commence on individual quotas
	1990	Licence holders vote in favour of two year, trial Individual Vessel Quota (IVQ) Programme
The IVQ Program	1991	IVQ programme introduced
			- each of existing 435 licence holders gets a percentage share of the TAC where share based on 70:30 rule of catch history: vessel length
			- non-stackable for two years
			- industry pays much higher licence fees to pay for dedicated enforcement officers, a dockside monitoring programme (DMP), DFO management etc.
			- licence fee set at $C250 flat rate plus variable rate per tonne TAC (variable rate stabilizes at $C144.70 per tonne TAC in 1995)
		Halibut Advisory Board (HAB) consisting of halibut licence holders created
	1992	Programme review indicates support to make the temporary programme permanent and to allow temporary quota transfers
	1993	IVQs made transferable on a temporary (1 year) basis
			- each initial halibut quota split into two equal shares
			- licence holder can transfer 1 or 2 shares for the season
			- a licensed halibut vessel can have a maximum of four shares
	1996	New economic rent fee of $C220.30 per tonne of TAC introduced
	1999	Both permanent and temporary transfers of IVQs allowed subject to:
			- no one vessel having more than 1% of total TAC
			- each "L" licensed vessel maintaining a minimum amount of permanent IVQ of 0.1149% of the TAC (5% of the average initial allocation for the 435 licensed vessels). But the minimum can be temporarily reallocated for the year
	1999	Economic rent fee changed to $C310 per tonne of TAC (less a 40% credit up to a maximum of $C1000)
	1999	Partial on-board observer coverage of fleet

Property Rights and their Role in Sustaining New Zealand Seafood Firms' Competitiveness - R. Bess

R. Bess
School of Business, Nelson Polytechnic,
Private Bag 19, Nelson, New Zealand
<[email protected]>

1. INTRODUCTION

The primary concern of the field of strategy is to determine how firms can acquire superior performance and the challenge for strategy researchers is to develop normative prescriptions on how firms can enhance their performance (Montgomery 1995). Gaining a competitive advantage remains a fundamental prerequisite to acquiring superior performance, while its absence is seen as the precursor to a firm's ultimate failure (Porter 1980). According to Hall (1993:610) firms have a sustainable competitive advantage 'when they consistently produce products and/or delivery systems with attributes which correspond to the key buying criteria for the majority of the customers in their target market'. The resource-based view argues that in highly competitive environments, these attributes, and the ability to align them with customers' key buying criteria stem from enduring firm-specific tangible and intangible resources. Strategy then becomes the art of creating value by reconfiguring new roles and relationships for those resources that really matter to a firm (Normann and Ramirez 1993).

There is growing awareness among contributors to the resource-based view that the most theoretically interesting variables are the least identifiable and measurable, eliciting increased interest in intangible resources, such as knowledge and interaction among individuals and groups (Godfrey and Hill 1995; Spender and Grant 1996). However, in the case of natural resource based industries, tangible resources, particularly secure property rights, can be a source of competitive advantage. Security of tenure in rights to natural resources could well be the fundamental basis to the development of firm-specific resources that in combination sustain a firm's competitive advantage.

This paper argues that in the case of New Zealand's seafood industry, the implementation of the Individual Transferable Quota (ITQ) system has been an important first step in the sustainable management of fisheries and the establishment of secure property rights, which provide the basis for firms' success in international markets. The security of rights to the fisheries resources and potential involvement in some fisheries management services provide individual firms with opportunities to enhance their competitiveness by reconfiguring value chain activities from harvesting to marketing. It is important to place this discussion on firm-specific resources within New Zealand's historical context. Beginning in the mid-1980s significant and rapid changes occurred in New Zealand due to the implementation of economic reforms and the transformation of the fisheries management system.

For this reason, following the discussion in Section 2 on the resource-based view, Section 3 outlines New Zealand's economic reforms, which began in 1984. The late 1980s and early 1990s have been referred to as a period of radical change; some refer to it as a revolution. It was during this period that the ITQ system was implemented. Section 4 describes the implementation of the ITQ system, including the legislation that brought the ITQ system into effect, the initial ITQ allocations, changes in quota ownership and subsequent legislative changes. Section 5 synthesises the statements made by several top managers of seafood firms about their firms' development and deployment of tangible and intangible resources to reduce reliance on commodity trading and enhance international competitiveness by offering value-added products and superior customer service.

2. THE RESOURCE-BASED VIEW

According to Barney (1991, 1995), tangible resources are considered unique and have a constrained supply while intangible resources consist of tacit knowledge or know-how that is culturally based, and therefore embedded within a firm, creating barriers to competitors understanding the source of advantage. Tangible resources, however, are viewed as becoming increasingly difficult to use as a basis for competitive advantage. Very few tangible resources have the uniqueness and supply limitations required to sustain an advantage, since their origin is typically from outside the firm. Therefore, the focus on firm-specific resources as a competitive advantage has remained primarily on intangibles, specifically the knowledge held by individuals within the firm, and the firm's ability to create and integrate knowledge into its production of economically viable products and services. Barney's (1991) VRIO framework, outlined in Figure 1, is perhaps the best description of an ideal firm-specific resource as a source of advantage. Barney suggests that heterogeneous and immobile resources that are rare, valued and embedded within the firm create barriers that impede competitors' ability to acquire, imitate and substitute the source of the firm's competitive advantage. Intangible resources come closest to meeting Barney's characterisation of the ideal resource.

According to Barney, managers must address four important questions about their resources and capabilities to understand internal sources of competitive advantage.

Figure 1: The relationship between resource heterogeneity and immobility, value, rareness, imperfect imitability, substitutability, and sustained competitive advantage (Source: Barney)

First, do a firm's resources and capabilities add value by enabling it to exploit opportunities and/or neutralise threats? The second question concerns rareness. A resource or capability is unlikely to provide a competitive advantage if numerous competing firms control it. And so the question is asked, how many competing firms already possess these valuable resources and capabilities? The third question addresses competitors' ability to imitate resources and capabilities that generate sustained competitive advantage. According to Barney, imitation can occur by duplication, where an imitating firm builds the same kinds of resources, and substitution of some resources for other resources. Imitation can be costly for competitors for three reasons: (a) the importance of history in creating firm resources; (b) the importance of numerous 'small decisions' in developing, nurturing, and exploiting resources; and (c) the importance of socially complex resources. A firm's competitive advantage not only depends on the value, rareness and inimitability of its resources and capabilities, but also on the firm's ability to exploit its resources and capabilities. The fourth question is then, is a firm organised to exploit the full competitive potential of its resources and capabilities? Barney's VRIO framework is addressed again in the last section.

3. NEW ZEALAND'S ECONOMIC REFORMS

The period of radical change, beginning 1984, should be seen in the context of New Zealand's early history and events leading up to the mid-1980s. In brief, New Zealand's economic and social environment began in the mid-1800s when New Zealand became a British settler state. In some ways, New Zealand's legacy of colonial dependence on Britain became permanent (Haworth 1994). New Zealand's economic links with Britain were the strongest and most lasting form of colonial dependence as Britain provided assured access to its markets for virtually all New Zealand export products, which historically have been primary product commodities. New Zealand's cultural and economic dependence on Britain remained in place until Britain's entry into the European Community in 1972. At that time New Zealand was thrust into the international trade arena while its economy remained strongly dependent on exports of primary product commodities. New Zealand's economic policies continued to subsidise primary product commodity exports and protect the growing domestic manufacturing sector from imports. High demand overseas for wool, meat and dairy products had produced euphoric dependence on agricultural exports (Carew 1987). New Zealand's exports had traditionally the highest concentration of commodities of all OECD nations, excluding Iceland (OECD 1983).

The unfavourable effects of New Zealand's prolonged reliance on a primary products-based economy began to surface as early as the 1960s. It became increasingly clear that New Zealand's continued reliance on agricultural exports, which were subsidised by the non-farming sectors, could not generate the earnings required to finance the nation's imports and the prices of protected domestic manufacturers' goods.The generous farm subsidies had translated into increased costs in land, equipment and services rather than increased rewards (Russell 1996). Low international prices for agricultural commodities resulted in the price of New Zealand's agricultural exports falling in real terms relative to the price of manufactured goods, causing the terms of trade to continually fall (OECD 1975). The New Zealand economy required significant structural changes before an economic recovery was possible and by the early 1980s the forces for change were strong. New Zealand's prolonged dependence on commodity exports and its continued use of central government controls prompted the Labour Government in 1984 to swiftly launch dramatic and sweeping economic reforms.

From 1984 to 1990 New Zealand experienced a redirection from its long history of centralised government control and an isolated economic system to a decentralised, market-based and outward-oriented economy. This period transformed New Zealand both economically and socially, and some refer to it as a time of revolution (Russell 1996). The major aim of the economic reforms was to revitalise the nation by removing subsidies and distortions while encouraging economic growth, efficiency and competition in a price stable environment (Carew 1987). All direct controls reintroduced by the National Government between 1982 and 1984 - plus previous policies on import quotas, subsidies and massive borrowing to sustain living standards - were reviewed by the Labour Government, which emphasised removing distortions and encouraging greater competition in the financial sector (OECD 1985). The Labour Government then implemented one of the most broad-based and rapid reforms of financial policy ever undertaken (Harper and Karacaoglu 1987). Conventional economic wisdom, however, holds that stabilisation of an economy should begin by reforms to the goods, trade and labour markets and continue with reform of the financial sector. Since financial markets adjust fairly quickly, when they are reformed first they reinforce distortions in those markets not yet reformed. Contrary to this conventional wisdom the Labour Government liberalised New Zealand's financial sector well ahead of other sectors and with as much speed as possible (McNelis and Bollard 1991). The Government took on a 'blitzkrieg' approach towards the reform process (Easton 1994), and with almost 'evangelical fervour', it set about redesigning the economic and social structure of New Zealand (Kelsey 1995). The swiftness with which the Government moved to change the economy reflected its view that the best solution was to aim straight for the cause of the problem rather than try to paste over the symptoms as had been done by the previous National Government (Carew 1987).

It was at this time that the Government approved implementation of the ITQ system. This climate of favouring market forces as the solution to economic and social issues strongly affected the options available for managing fisheries (Harding 1991). The mid to late 1980s was perhaps the optimal time period for the implementation of ITQ in New Zealand. Previous, and possibly subsequent, political and legal environments may not have approved the ITQ system. Beginning in 1990 the National Government acted swiftly to continue the momentum behind the economic reforms begun by the Labour Government. The National Government was resolved to address the welfare state from the start, acting quickly to introduce reforms to employment relations, social assistance, education and health care. However, the introduction of the Mixed Member Proportional (MMP) system in 1996 led to a slowdown in the reform process. The next national election was due in November 1999.

During the first phase of economic reforms only a minority of firms were able to emerge beyond the 'survival' mode of adaptation to the market-driven environment, while most firms required more time to respond effectively to the tougher market conditions (Campbell-Hunt, et al. 1993). Evidence of economic recovery and transformation beyond the survival stage of adaptation was not apparent until the early 1990s. By the mid-1990s some firms displayed evidence of specialising in aspects of the value chain where they had some competitive advantage and becoming internationally competitive (Campbell-Hunt and Corbett 1996). While the seafood industry experienced dramatic growth during the late 1980s and early 1990s, its export focus had to contend with the effects of finance sector liberalisation, such as severe fluctuations in interest rates and exchanges rates and elimination of import restrictions.

'There is quantitative evidence ... [that] New Zealand now has perhaps the least-interventionist or, equivalently, the most market-based economy in the OECD' (Lloyd 1997:118). New Zealand has been a world leader in implementing policies that have accelerated the closure of inefficient, uncompetitive firms, industries and government businesses. However, New Zealand has not had the same success in developing new economic growth. The Government's marginal changes to economic policies have not increased the nation's rate of innovation and investment necessary to create new growth industries (Alexander 1999). Arguably, the seafood industry is an exception. However, Section 4 demonstrates, the legislation surrounding the ITQ system continues to bring uncertainty and change that affects the industry's growth potential.

4. IMPLEMENTATION OF THE ITQ SYSTEM

4.1 Legislative effect to ITQ system

The New Zealand seafood industry experienced several problems initially in implementing the ITQ system. Initially, disagreement existed over the level of consultation required by the industry and the Ministry of Agriculture and Fisheries (MAF). Disagreement made the task of setting annual total allowable commercial catches (TACCs) a laborious process. Further, the legislative framework of the time rendered the new management system difficult to operationalise. Delays on critical issues, such as compensation to the industry for initial reductions in TACCs, led the industry to file a $NZ150 million lawsuit against the Government in October 1989. The lawsuit was later suspended as negotiations improved with a change in Government and a new Minister of Agriculture and Fisheries (FIB 1990).

Implementation of the ITQ system began with the Fisheries Act 1983, which first introduced significant changes to the fisheries management administrative system and statutory framework. The 1983 Act introduced individual quota allocated under regulations to participants in the seven main deepwater fisheries. The 1983 Act also outlined a framework for regional fisheries management to conserve the fish stocks, promote commercial and recreational fishing, limit access to fisheries and provide for optimum yields from fisheries (Cunningham 1983). The 1983 Act remained focused on regulations that limited access to fisheries to reduce catching effort, which had increased during the previous two decades due to Government implementing a regulated open entry system to encourage greater domestic participation. A permit scheme was implemented which led to a dramatic reduction in the numbers of part-time fishers, removing 2260 permits. This accounted for almost half of the commercial fishers in the early 1980s (Harding 1991). The 1983 Act did not provide any means of compensation for those exiting the industry. The permit scheme was not intended as a long-term management control. The 1983 Act was intended to implement a new regime that utilised long-term planning in controlling commercial fishing effort. The MAF divided the 200-mile Exclusive Economic Zone (EEZ) into ten fisheries management areas (FMA) with each area having its own set of controls. Long-term fisheries management control and planning was introduced by way of Fisheries Management Plans (FMP) for each FMA.

After consultation with the industry through public meetings, the National Fisheries Management Advisory Committee (NAFMAC) recommended to the Minister of Agriculture and Fisheries implementation of an ITQ system in combination with FMP (NAFMAC 1983). While some individuals and groups in the fishing industry pushed the Government to implement ITQ, initially there was not unanimous industry support. The Fishing Industry Board submitted a report (FIB 1984) outlining the industry's view on ITQ at that time, which emphasised that: ITQ would not be appropriate for some fisheries; that the administration system, including required documentation, should be kept as simple as possible; and ITQ should be allocated for a minimum of ten years so that investments could remain secure.

It was with some risk that the Labour Government, after lengthy consultation with the industry, considered the implementation of the ITQ system. It is important to recall that, to date, private property rights had been applied to fisheries management in theory only, so implementation of the ITQ system was an extreme departure from current fisheries management regimes throughout the world. The Fisheries Amendment Bill, which gave legislative effect to the ITQ system, encountered relatively little resistance in Parliament and became law on 25 July 1986. Perhaps the Fisheries Amendment Bill's radical nature was its attraction during this time of radical change.

The intended functions of the 1986 Act were: (a) to control the quantity of fish extracted from fisheries to sustainable levels by way of TACs (total allowable catch) and TACCs; (b) to maximise benefits from the fisheries to the nation by creating appropriate economic incentives for investment in fisheries, including the implementation of the ITQ system which would bring about rational industry restructuring; (c) to allocate ITQ to quota holders, and for quota to be a fully tradeable or leasable property right; (d) to maintain an efficient government-based monitoring system to keep track of catch against quota; and (e) to allow quota holders the right to catch up to their quota at any time during the fishing year, thus removing the 'race for fish' (Shallard 1997). However, the 1986 Act retained several aspects of the Fisheries Act 1983, including the Ministry of Agriculture and Fisheries, now the Ministry of Fisheries (MFish), retaining the power to impose various input controls such as restrictions on fishing gear, fishing methods, landings, fish size, fishing seasons, and fishing areas. These input controls were still required for management of non-ITQ species. The traditional input controls implemented under FMP, as required under the 1983 Act, contradicted the basis of ITQ where quota owners are able to determine the most efficient timing and means of catching their quota. Under FMP, however, a TACC managed in part with input controls could potentially impinge on quota owners' rights as created by the ITQ system. The need to run dual management systems has led to inconsistencies in management practice, and has made it more difficult to achieve the ITQ system's intended degree of efficiency and co-ordination (Falloon 1993).

4.2 Initial allocation of ITQ

Since the Government had already set in place an informal quota arrangement for some deepwater fisheries, beginning in the late 1970s, ITQ was first implemented for deepwater fisheries. In 1982 eleven firms were allocated quota which was then transferred to ITQ in 1986 (Clement and Pfahlert 1996). The industry supported the implementation of deepwater ITQs as there was concern that these fisheries could be quickly fished to destruction (Falloon 1993). Annual quota and harvest rights were allocated by means of 'the level of domestic investment, quantity of deepwater catch that had been supplied for onshore processing, onshore investment, and the extent to which this investment was committed to the processing of deepwater species' (Sharp 1997:510). The setting of initial TACs for the over-fished inshore fisheries was estimated conservatively, set between 25 to 75% lower than the 1983 catch levels (Sissenwine and Mace 1992). The quota for inshore fisheries were allocated with a provisional maximum assessment of quota based on each qualifying permit holder's catch history of the best two out of three years: 1981/82 1982/83 and 1983/84. However, in many cases the initial allocations of quota were significantly below fishers' catch histories resulting in substantial losses incurred by the industry (Clement and Pfahlert 1996). The initial allocation of quota was made in specific tonnage with the Government intending to buy and sell quota on the open market as a means of adjusting required changes in TACCs.

It is of interest to note that the Government retained ownership of substantial amounts of quota at the start of the ITQ system. In 1986 the TACCs totalled 520,901t: 60.8% of the TACCs, or 316 769t, was allocated to 1472 permit holders; 49% of the ITQs, or 255 241t, went to the 12 largest seafood firms. The Government retained the remaining 39.2% of ITQs, 204 132t. The Government has sold most of its quota by way of competitive tender on the open market. As early as December 1986, the Government sold 140 183t of ITQ, primarily hoki and orange roughy quota, for $76.6 million. In addition, the tender sale was conditional on the purchaser agreeing to lease the quota from the Government for five years and pay an additional annual lease payment to the Government, with ownership transferred at the end of the five years (Clement and Phahlert 1996).

Since the initial implementation of ITQ, the quota holding profile has changed considerably. The late 1980s and early 1990s was a period of consolidation in the industry. Some seafood firms with large quota holdings exited the industry while others purchased quota and other assets. These changes were a natural outcome of the large reductions in TACCs made during that time, particularly for the deepwater hoki and orange roughy fisheries (FIB 1990). Another reason given for these changes was the intention by some seafood firms to concentrate on 'core business activities' (Reorganisation, August 1991). Table 1 outlines the larger quota holdings at 1986 compared with ownership at 1991, 1996 and 1999. The seafood firms listed in Table 1 include their subsidiaries.

In 1991 Sealord Products Ltd held 136 180t of quota, 24.1% of the overall quota; Sanford Ltd held 93 972t of quota, 16.6%; and Amaltal Fishing Co Ltd/Talleys Fisheries Ltd. became the third largest non-government quota holder with 65 953t, 11.7%. The Government remained the largest quota holder with 185 420t, 32.7% of overall quota. By 1996 Sealord Products Ltd's overall quota holdings increased to 145 433t, 25.5%; Sanford Ltd's quota holdings increased to 115 298t, 20.2%; and Amaltal Fishing Co Ltd's quota holdings fell to 56 118t, 9.8%. This consolidation of ITQ holdings among the top three firms is mostly concentrated in the deepwater fisheries, which reflects the substantial investment necessary to efficiently harvest these fisheries (Sharp 1998). By 1996 the Government had reduced its quota holdings to only 874t, 0.2% of overall quota. The Government's substantial quota holdings were sold on the open market and allocated to the Treaty of Waitangi Fisheries Commission in accordance with the Mâori Fisheries Act 1989 and the Treaty of Waitangi Settlement Act 1992, which are described later. The Treaty of Waitangi Fisheries Commission became the third largest quota holder with 56 624t, 9.9% of overall quota. By 1999 the three largest quota holders remained unchanged. Sealord Products Ltd held 149 462t of quota, 22.1% of overall quota. Sanford Ltd held 141 243t of quota, 20.9%, and the Treaty of Waitangi Fisheries Commission's quota holdings increased to 72,235t, 10.7%. Amaltal Fishing Co Ltd increased its quota holdings to 62 333t, 9.2%.

Table 1
ITQ ownership at 1986 compared with 1991, 1996 and 1999
(Sources: FIB 1990; Clement and Pfahlert 1996; MFish 1999)

Quota Owners	December 1986		April 1991		August 1996		June 1999
	tonnes	%	tonnes	%	tonnes	%	tonnes	%
Fletcher Fishing Ltd	56 675	10.9
Sealord Products Ltd	55 796	10.7	136 180	24.1	145 433	25.5	149 462	22.1
Sanford Ltd	49 412	9.5	93 972	16.6	115 298	20.2	141 243	20.9
Amaltal Fishing Co Ltd	25 204	4.8	58 117	10.3	56 118	9.8	62 333	9.2
Skeggs Investments Ltd	19 432	3.7
Independent Fisheries Ltd	13 622	2.6	19 032	3.3	27 815	4.9	37 224	5.5
Wanganui Trawlers Ltd	12 273	2.4	17 073	3.0			1 358	0.2
Wattie Fishing Ltd	8 887	1.7
South Island Deepwater Fishing Ltd	6 207	1.2	7 343	1.3
Southfish Co-Operative Ltd	4 101	0.8	9 968	1.8	8 836	1.5	685	0.1
United Fisheries Ltd	1 149	0.2			19 397	3.4	15 048	2.2
Talleys Fisheries Ltd	83	0	7 836	1.4	11 950	2.1	16 536	2.4
Moana Pacific Quota Holding Ltd					7 189	1.3	7 568	1.1
Simunovich Fisheries Ltd			5 106	0.9	6 553	1.1	7 284	1.1
Vela Fishing Ltd			14 782	2.6	27 863	4.9	31 839	4.7
Crown	204 132	39.2	185 420	32.7	874	0.2	9 303	1.4
Aotearoa Fisheries Ltd			3 956	0.7
Treaty of Waitangi Fisheries Commission					56 624	9.9	72 235	10.7
Other	63 927	12.3	7 439	1.3	87 439	15.2	124 866	18.4
Total TACC	520 900	100	566 224	100	571 389	100	676 984	100

Initial expansion of the deepwater fisheries relied heavily on joint venture partnerships and charter arrangements. The domestic fleet lacked the the larger vessels and technology to fish deepwater fisheries. The United Nations Law of the Sea Convention requires New Zealand to allow foreign licensed vessels to fish within the EEZ in the event New Zealand-controlled vessels cannot catch the annual TACC. In 1986, 18% of the catch from the EEZ was taken by foreign licensed vessels and by 1993 New Zealand-controlled vessels, including joint ventures and charters, took 99.8% of the catch (Dynamic Year 1993). As some New Zealand seafood firms expanded their efforts into the deepwater fisheries they purchased their own vessels. The 'New Zealandisation' of the fishing fleet was needed to meet firms' objective to further develop the deepwater fisheries and process product at sea to improve quality and add value.

4.3 Subsequent changes to fisheries legislation

Although the New Zealand ITQ system is regarded as one of the most innovative and successful fisheries management options in the world, the industry overall views subsequent legislative changes as having resulted in a complex, bureaucratic administration system that causes the industry to incur expensive compliance costs. The industry contends that the increasing complexity and bureaucracy of the QMS has imposed unnecessary financial costs on individual fishers and fishing firms and has not provided the industry overall with corresponding benefits (Horton 1997). Recently, the fishing industry 'angry about the red tape and delays that they said were strangling their industry ... [joined in a] flare-waving protest ... before they came ashore in Lambton Harbour and marched on Parliament' (Anon. 1999:3). The level of frustration within the industry over fisheries management bureaucracy explains the industry's interest in adopting management alternatives that would simplify and preserve the integrity of the original QMS, as outlined in the 1986 Act. This section briefly outlines some of the legislative amendments which include addressing claims by indigenous Mâori, an issue that remained unresolved until after the introduction of the ITQ system.

A significant number of part-time fishers were excluded from the initial allocation of quota, many of whom were Mâori. The ITQ system also excluded any reference to Mâori fishing rights, which Mâori argue were secured under the Treaty of Waitangi 1840. It should be noted that, at the time the ITQ system was implemented, a growing resurgence in Mâori culture and language and awareness of Mâori rights under the Treaty was occuring. While the ITQ system initially prompted indigenous claims to large areas of fisheries, it also proved an effective means of resolving Mâori fishing rights claims (Sullivan 1998).

Soon after the ITQ system was implemented, Mâori obtained a series of injunctions issued by the High Court against further ITQ allocations. Following protracted disputes between Mâori and the Government, the Mâori Fisheries Act 1989 was passed. This Act was considered an interim settlement, which required the Government to buy back and transfer 10% of TACCs to the Mâori Fisheries Commission before 31 October 1992. The Commission would administer fishery assets on behalf of Mâori. The Treaty of Waitangi Settlement Act 1992 was intended to be the full and final settlement of all Mâori fishing rights claims as secured under the Treaty of Waitangi 1840. The Settlement Act, otherwise known as the 'Sealord deal', resulted in substantial assets, primarily as quota holdings and half ownership of Sealord Products Ltd., being allocated to Mâori. The Settlement Act also included the Crown recognising that (a) commercial fishing was important to Mâori, (b) some coastal areas were of significance to Mâori for customary food gathering and (c) Mâori would participate in the Government's fisheries management processes. Henceforth, the taking or possession of fish by Mâori was to be in accordance with the Fisheries Act 1983 or any further regulations.

The Mâori Fisheries Commission was reconstituted as the Treaty of Waitangi Fisheries Commission Te Ohu Kai Moana to administer both pre and post-settlement assets, and was empowered to devise, in consultation with Mâori, a scheme to distribute its pre-settlement assets pursuant to the Settlement Act 1992. Since the Settlement Act also provides that Mâori gain 20% of the quota holdings for all new species placed under the QMS, Mâori will continue to have a major influence in the industry's development.

The Fisheries Amendment Act 1990 brought about perhaps the most important change to the QMS, the basis of ITQ from a fixed tonnage to a proportional basis (Luxton 1997). During the late 1980s the MAF fisheries scientists became concerned about the level of some fish stocks, which led to large reductions in some TACCs, particularly for orange roughy. The inherent fluctuations in fish populations and uncertainty of stock assessments could not ensure a constant amount of quota by tonnage from one year to the next. Any reduction in TACCs would require that the Government repurchase quota on the open market. To avoid substantial outlays for quota repurchasing, the Government implemented a swap of quota from quota management areas (QMAs) where the fish stocks were stressed to QMAs where the fish stock remained plentiful. The MAF announced that effective, 1 October 1989, ITQ would change from a specified or fixed tonnage per year to a proportion of the TACC adjusted each year for sustainability measures. The implications of this change were that the MAF avoided substantial costs to repurchase quota from ITQ owners and from that point on could vary TACs and TACCs each year, with no compensation to ITQ owners.

The Fisheries Amendment Act 1994 implemented a replacement for resource rentals, which were payments made by ITQ owners that went towards paying some of the costs of fisheries management. The Government implemented a full cost recovery levy on 1 October 1994 with the intention that resource users would pay the full cost of fisheries management and research. The cost recovery levy fit within the MFish's intention to simplify its administration by focusing on the delivery of core services and devolving non-core services to the private sector. The MFish's core services would include the allocation of harvest rights, liaising and disputing resolution, enforcement and prosecution, while all other services would in time become contestable. It was envisioned that relevant stakeholder groups, through consultation, would determine needed non-core services, and those who benefitted from the services would then pay for them. The Government proposed these changes with the view that it could not deliver the needed flexibility, responsiveness and diversity the industry required. The intended outcome would be lower costs for the MFish's services, which would then be paid in full by the industry by way of full cost recovery (Kidd 1994).

However, the cost recovery regime has imposed a cost of $NZ37 million on the industry for 1998/99, which includes $NZ7 million for the implementation of the Fisheries Act 1996. The Minister of Fisheries has called for a review of the 1996 Act to, in part, reduce business compliance costs.

The Fisheries Act 1996 brought about several significant changes. Several sections of the 1996 Act were in line with the 1992 Fisheries Task Force's recommendation that fisheries management adopt an 'ecosystem approach' to ensure the sustainability of the environment as well as fish stocks. This macro-management approach intends that the industry accept more responsibility for managing resource use while consulting with relevant stakeholders. The Minister of Fisheries' intentions were exemplified in his speech at the 1997 Fishing Industry Conference.

'It [Fisheries Act 1996] provides for more explicit environmental standards and gives further opportunities for the users of the fisheries to accept increasing responsibility for managing the resource... The new Fisheries Act makes considerable advances in issues relating to sustainability, expanding the opportunities for stakeholder participation in fisheries management and in better defining the role of Mâori' (Luxton 1997:4).

'It is my clear view that we have reached a point in the development of fisheries management in New Zealand when it is vital that the fishing industry begin to assume a far greater level of responsibility to collectively manage fisheries within appropriate sustainability parameters. To progress co-management strategies it is necessary for you as an industry to begin to develop effective associations of users to assume the duties and responsibilities associated with property rights.

My challenge to you is to continue to develop such associations so I can work with you to advance further the management models currently available to us and thus ensure a healthy future for your industry' (Luxton 1997:5).

The main reasons for the industry having responded favourably to this challenge were first, the industry acknowledged that the functions undertaken by the former Fishing Industry Board (FIB) and some trade associations duplicated efforts and led to unnecessary complications. Second, industry growth, recent investments and cost recovery have led quota owners to specialise their planning and operations along 'associations of users', as encouraged by the Minister. The industry has developed the Seafood Industry Council (SeaFIC) which took over several generic services and functions formerly undertaken by the FIB and some functions that had been the responsibility of various industry associations. It is the intention of SeaFIC to change its offering of services as associations, referred to as quota owning companies (QOCs), take increasing responsibility for providing their own administration, research, compliance, consultation, and development of management plans.

'As it stands, the 1996 Act is very centralised and prescriptive... [and] the Act would have been expensive to implement and inflexible to manage, and may have led to poor management and environmental outcomes... In addition, the 1996 Act does not allow for the devolution of non-core Government fisheries services (approved in principle by Cabinet), it lacks a robust cost recovery scheme and provides few incentives for fisheries rights holders to take a constructive role in managing their share of the fisheries resource. Aquaculture rights are uncertain and recreational rights are poorly defined' (Luxton 1998:2).

i. a fundamental realignment of the roles of Government and fisheries stakeholders and the implementation of transparent consultation and decision-making processes

ii. a simplified and less prescriptive operating regime than currently exists and

iii. devolving to fisheries rightholders the responsibility for fisheries management at the discretion of the Minister.

i. enabling the Minister to devolve fisheries management functions to rightholder groups

ii. enabling the Minister to approve fish stock management plans developed by representative and accountable quota owner associations and

iii. providing for regulations designating appropriate specifications and standards for devolved management functions and the elements required in a fish stock management plan (Pricewaterhouse Coopers 1998).

5. FIRM-SPECIFIC RESOURCES

There is general recognition that the QMS has improved the biological status of the fisheries resource and commercial return to fishers and fishing firms (Annala 1996). Overall, the seafood industry has experienced dramatic growth in the volume and value of production. However, since around 1993 the value of production has remained fairly constant. The gradual appreciation of the New Zealand dollar from 1992 to 1997 exacerbated poor international trading conditions and reduced returns to seafood firms. During this time catch levels declined due to reductions in some TACCs (FIB 1996). It is beyond the scope of this paper to analyse the financial performance of the industry and individual firms. Such analyses are difficult to undertake due to the lack of aggregated industry data, particularly during the last few years, and the commercial sensitivity of information on privately held firms. However, financial analysis based on historical data has little direct relevance when trying to assess a firm's strategic health. For example, low profitability measurements may, in fact, provide valid evidence of a strategically healthy firm seeking to make long-term investments. As mentioned, several seafood firms have made significant capital investments in vessel capability and quota holdings to enhance their ability to meet international market demand.

This section synthesises comments made by several top managers of seafood firms during interviews on the development and deployment of various resources that in combination act to enhance individual firms' competitiveness. As mentioned, researchers have been noting the increasing importance of intangible resources since tangible resources are viewed as becoming increasingly difficult to use as a basis for a sustained competitive advantage. Few tangible resources have the uniqueness and supply limitations required to sustain an advantage. However, in the case of some New Zealand seafood firms, several top managers have consistently stated that secure property rights by way of the ITQ system are the fundamental basis to their firms' international competitiveness. As mentioned, 49% of the initial ITQ was allocated to the 12 largest seafood firms. ITQ's transferability allows these firms the option to increase and alter the makeup of their quota holdings to better suit their strategic direction and international markets. Furthermore, firms' security of tenure in transferable property rights has provided incentives for investments in the catching and processing sectors. As the industry experienced dramatic growth, several firms made substantial capital investments in vessels and processing facilities, reducing their reliance on charter and joint venture arrangements. At the same time, several firms have focused on developing high-quality and high-value products and on improving customer relations in international markets.

By now most medium- and large-sized seafood firms are highly vertically integrated, having the majority if not all of their value chain activities within the boundaries of the firm. This ability to align virtually all activities in the value chain, (catching/harvesting, intermediate and final stage processing, sales and distribution and after-sales service) within the firm provides opportunities to focus on each activity and the best possible links between them. Some vertically integrated firms have developed these value chain activities and linkages between them, so they are, according to Barney's (1991) VRIO framework, valuable, rare and costly-to-imitate, factors which can enhance and sustain competitiveness when firms are organised to exploit the full competitive potential of their resources. These valuable, rare and costly-to-imitate intangibles are predominately the relationships firms have with their customers. It is understandable that since the initial allocation of ITQ, individual firms have concentrated first on their own value chain activities and how they are linked. Historically, there has been little evidence of inter-firm linking of value chain activities. However, there are now more reasons for some firms to consider inter-firm links: increased competitive pressures; acknowledged benefits of co-operative efforts, such as reducing costs and resource enhancement, as displayed by the Challenger Scallop Enhancement Company. And, the industry has already restructured along property rights, which is a first step towards co-operation. Co-operative efforts and more involvement in fisheries management by resource users is often referred to as co-management, defined by Jentoft, et al. (1998:426) as:

'... a social system that changes the nature of the game, the relationships between players and what each of them strives for. Co-management means an ongoing collaborative and communicative process, where resource users and other actors are in an entrepreneurial and creative role'.

Figure 2 outlines the value chain and VRIO frameworks for a vertically integrated New Zealand seafood firm, which reflects the intention that firms and their respective associations have responsibility for some fisheries management services, including, to some extent, research and enhancement. Figure 2 shows the importance that secure tenure in tradeable property rights has for firms' establishing value chain activities and the links between them. According to the VRIO framework, the secure rights to fisheries resources are valuable, rare and costly for competitors to imitate, for two reasons. First, firms that received the initial ITQ allocations have higher barriers to imitation, since allocated quota was not purchased at market rates, as would be required of would-be competitors. Second, security of rights to fisheries resources remain rare elsewhere in the world, providing New Zealand firms with an advantage. Secure property rights provide firms with options for when, where and how to catch/harvest the fisheries resources, adjusted for sustainability measures and management of non-ITQ fisheries. Secure property rights provide ITQ owners with appropriate incentives to invest in specialised fishing vessels and gear that reflect the expected return on investment. In a vertically integrated firm, investment in vessels and gear are considered valuable for the purpose of ensuring supply and meeting quality standards, but these investments are not rare or costly to imitate because they generally lack uniqueness and supply limitations. Firms have also made substantial capital investments in processing facilities to ensure that product is processed quickly and reliably, and that processes incorporate innovations developed within the firm. The ability to process product quickly and reliably is valuable to firms, but it is not considered rare or costly to imitate. Some in-house innovations, however, have increased the value and speed of processing while increasing the difficulty and cost competitors have in imitating the process. At the same time, some firms have developed consistency of product and quality while improving flexibililty in meeting varied product specifications. Again, this ability is potentially of great value in meeting customer requirements, however, it is not rare since competitors can imitate this ability at similar cost.

Some firms' sales and distribution activities have developed speed and competence in meeting customer requirements, not only in terms of product requirements but also in terms of agreed delivery times and locations. This activity is considered valuable, rare and costly to imitate since it is linked back to secure rights to fisheries resources and the linking up of all downstream value chain activities. Upstream value chain activities are further enhanced with the application of appropriate and relevant research undertaken in collaboration with various research institutes both in New Zealand and abroad. The combining of these various tangible and intangible resources provide firms with the ability to build enduring customer relationships, which are valuable, rare and costly to imitate. Several top managers have noted that their customer bases have remained fairly constant as firms have been able to consistently meet their requirements for products, delivery and service and after-sales service. In so doing, seafood firm managers have built up relationships over the years that have been improved with reciprocal visits to each others' locations to understand better customer needs and how to meet them. Customer feedback has been vitally important in aligning all upstream actitives and has the potential to influence the start of the value chain, fisheries enhancement programmes. It is the combination of all the value chain activities and their links that have brought about the success of some New Zealand seafood firms, and this success is based on the secure rights to the fisheries resources. Further, a potentially highly valued source of competitiveness could come about with legislative changes that provide legitimacy to the co-operative efforts of resource user associations. These efforts could enhance the sustainability of fish stocks and result in developing innovative sources of advantage that sustain firms' international competitiveness.

Figure 2: Value chain and VRIO frameworks applied to a vertically integrated New Zealand seafood

6. CONCLUSION

As this paper demonstrates, the history of New Zealand's seafood industry shows continuous challenge and change. Now that the ITQ system has been operative for 13 years, the property rights it established remain secure and irreversible. The ITQ system clearly has the support of Government which has frequently held it up as the principal example of successful application of property rights to fisheries management and one of the most innovative approaches to managing wild fish stocks. Government support was expressed by the Minister of Fisheries in his speech to the United Nations Food and Agriculture Organization in Rome on 11 March 1999. 'The most advanced form of fisheries property rights so far developed is the individual transferable quota, or ITQ' (Luxton 1999:1). The consultative process concerning the next Fisheries Act will be carried into the new millenium. The industry anticipates that the new Act will take steps toward resolving the cost to the industry for fisheries management and research services, reaching agreement on issues surrounding Mâori, recreational and marine farming rights, and changing legislation to reflect co-management principles. It appears that the time is right for further development of the New Zealand fisheries management system by the adoption of co-management principles. If upcoming legislation fails to progress the implementation of co-management principles, the industry remains intent on simplifying the QMS by reducing administrative and compliance costs and providing fishers with appropriate economic incentives, while ensuring the sustainability of the fisheries. If upcoming legislative changes establish co-management principles, the next significant change to the QMS could well be the development of innovative and co-operative efforts among ITQ owners and other property rights holders and stakeholders. Although several New Zealand's seafood firms have already demonstrated enhancement of value chain activities, co-operative efforts could benefit individual firms by developing innovative and creative ways of reconfiguring value chain activities. As resource users organise to exploit the full competitive potential of their property rights, other value chain activities can be developed to decrease costs, increase quality, improve product development, marketing and distribution. Other benefits may arise through resource users' involvement in some fisheries management services that help ensure the sustainability of the fisheries through collaborative research and stock assessment efforts and enhancement programmes. The combination of these efforts could assist the industry to build further on the greater certainty and security of supply that is provided them by the ITQ system, more than is the case in most other nations.

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