Present knowledge of the nature and magnitude of impact of subsidies on trade
Conclusions
Recommendations
Strategy for acquiring a better understanding of impact
Methodologies
Conclusions
Recommendations
60. The experts considered that, as a threshold question, it would be useful to consider what was meant by the reference to “the effects on trade” of subsidies. In the broad sense, it could be concluded that subsidies have an effect on trade whenever they have an impact on the volume of fisheries products moving across international frontiers, on the prices at which those products were traded, or some combination of the two. In more practical terms, however, the experts assumed that the FAO Committee on Fisheries was interested primarily in the state of knowledge regarding the extent to which producers in a particular country were able to improve their position relative to competing industries in other countries as a result of subsidies, whether through increased exports or the displacement of imports.
61. The experts noted that, as expressed in layman’s terms, fisheries subsidies could be expected to effect trade primarily where they reduce the costs or increase the revenues of producers, thereby allowing them to increase their market share in the export or domestic market or to offer their product at a lower price, relative to their situation absent the government intervention. Thus, the experts considered that, when seeking to assess the potential effects upon trade of various of the types of subsidies upon trade, it would be useful to consider the extent to which the subsidies had such revenue enhancing or cost reducing effects.
62. The experts considered, however, that the extent to which such cost or revenue effects actually impacted on trade would of course depend upon any conditionalities associated with the subsidies. For example, subsidies could be conditioned upon the voluntary acceptance of environmentally appropriate fishing practices and merely offset the costs associated with such techniques. In addition, a variety of factors could impact the extent to which decreased costs or increased revenues impacted fishers’ behaviour. For example, where producers were subject to effective and fully utilized catch limitations, subsidies that reduced costs or increased revenues might simply increase producers’ income without impacting volume of production or prices charged. Finally, and importantly, the experts recalled that, to the extent that subsidies resulted in unsustainable fishing practices, they might in the longer term result in stock depletion and consequent declines in production and export.
63. The experts observed that certain subsidies are designed specifically to impact trade. For example, a grant or income tax exemption conditioned upon export performance could reduce costs or increase revenues exclusively in relation to exported goods, with the likely effect of increasing export sales and/or decreasing export prices. On the basis of the limited empirical evidence before the experts - and in particular the APEC study - it did not appear that these types of subsidies were highly prevalent in the fisheries sector. The experts were however highly conscious of the limitations of the information available.
64. Of course, the extent of the impact of subsidies on trade will depend not only on the nature of the subsidies but also on their prevalence in terms of how common the subsidies are and their magnitude. For example, certain types of subsidy might have a potentially important impact but not be widely used. At the same time, a subsidy could be widely used but which have a low value relative to the overall value of the catch concerned. When considering the types of subsidies on which further analysis might be warranted, both the potential impact of difference types of subsidies and their prevalence/relative value may be useful considerations.
65. For the purposes of this section, subsidies may:
i. reduce the cost of investment: such as grants to purchase vessels, favourable loans to invest in new technology.66. While the above categories do not exactly correspond with the available quantitative estimates of subsidies, it is, nevertheless, possible to identify the more significant categories. The recent OECD (2000) study estimates that 77 percent of transfers (noting that the OECD study did not include market price support, tax concessions, support to the building industry and regional/local government expenditures) was spent on general service such as fisheries research, enforcement, management, enhancement and infrastructure. Subsidies to infrastructure and management are the most significant categories in the APEC economies (APEC, 2000). The proportion of infrastructure and management subsidies are roughly equal to unbudgeted subsidies in the Milazzo's (1998) study. In summary, category 5 would appear to account for the greater share of subsidies.ii. reduce the relative price of inputs: such as reducing the tax on fuel, the price of access, payments for employment moving.
iii. increase output prices: such as import quotas, price support systems.
iv. reduce fishing effort: such as vessel decommissioning, retraining fishers.
v. involve management and regulatory measures: such as catch limits and environmental regulation.
67. With these categories in mind, it is possible to derive some conclusions as to current ability to analyse and derive qualitative conclusions about the effects of subsidies on trade. Models of fisheries management and policy are considered to be sufficiently well-developed to provide a solid foundation for:
68. Although the appropriate analytical tools exist, the current knowledge of the magnitude of the effects of subsidies on fisheries trade is quite limited. Not only have there been limited applications of the appropriate analytical tools to existing data but there are serious shortcomings in the qualitative and quantitative data on subsidies.
69. The conclusions follow:
70. It was recommended that:
71. Table 3 below shows an assessment for further research. Clearly the priority for study are those types of subsidies that result in a reduction in costs or increase in revenues and therefore have the potential for impacting the production, volume and price with consequential effects on trade. In some cases, particular programs will fall into the categories of subsidies that reduce costs or increase revenues, such as fuel tax exemptions or the provision of bait services but the studies do not suggest that these subsidies are quantitatively important. Equally likely to impact costs are a variety of programmes that lower investment costs, such as grants or loans to purchase vessels and equipment.
72. The studies suggest that a very substantial share of government resources goes towards the provision of management services and infrastructure. Supply of these services at less than their opportunity cost could have significant trade effects and is thus worthy of further study. Large expenditures are directed at reducing fishing effort; however little is known of their actual impact on effort and trade.
Table 3: Assessment of priorities
|
Category |
Priority |
|
Reduce the cost of investment |
Medium |
|
Reduce the relative price of inputs |
High |
|
Increase output prices | Medium |
| Actions to reduce fishing
effort | High |
| Management and regulatory actions |
High |
73. With regard to methodologies:
74. The conclusion was that:
75. It was recommended that:
