1. INTRODUCTION

1.1 Background

Many of the major fishery resources of the world are currently being exploited by an excess number of vessels and are in a state of decline due to overfishing (FAO, 1997). This has been caused, in part, by the historically unrestricted expansion of fishing effort permitted under open access regimes, which characterized fisheries management between 1950 and 1990. Even after the widespread adoption of various controlled access schemes, effective fishing effort still increased as vessels adopted new technology. New and larger vessels and the adoption of more sophisticated technology have enhanced the ability of many of the world’s fishing fleets to harvest fishery resources. The combination of increases in the number of vessels, improvement in efficiency and expansion of effort has resulted in excess capacity in many world fisheries. Fishery resources, although renewable, are finite or limited in size, and only so much can be removed without jeopardizing the resource. Once the rate of removal reaches a certain level or biological threshold, the resource declines in abundance or experiences other problems. Alternatively, even in the absence of biological problems, an excessive rate of removal may subsequently cause serious social and economic problems.

Fisheries management measures are applied in most fisheries around the world in an attempt to counter the propensity to overexploit the resource. Until recently, most regulations used to manage fisheries have been command and control type. These types of regulations specify not only how much is to be caught, but also how to catch it. The more common types of command and control regulations include catch quotas, size limits, and restrictions on fishing effort or some aspect that influences effective fishing effort. In general, these types of restrictions may be considered as output or input controls. Such restrictions, while possibly realizing biological objectives of management^[1], do not address the open access nature of fisheries, and thus do not generally reduce excess capacity. Indeed, failure of these restrictions often leads to the imposition of even more restrictions, which increases production costs for fishers while failing to address the underlying problem of excess harvesting capacity.

Early attempts to directly address excess capacity in fisheries included limited access or controlled access schemes (Scott, 2000). Typically, limits were imposed on the number of operating units or vessels allowed to operate in a fishery. These limited entry programmes, however, also were found to be inadequate for controlling expanding capacity. Fishers simply engaged in capital stuffing by increasing their capital stock (e.g. larger engines, more electronics and more efficient gear). Capacity reduction programmes were subsequently introduced into many fisheries, generally in the form of publicly funded buyback programmes. These programmes offered temporary respite from the problems of excess capacity, but as the underlying problem of inadequate property rights was not addressed, capacity would again increase through increased capital investment.

Individual transferable quotas, or ITQs, which represent a quasi-private property right management regime, were subsequently offered as a way to address excess capacity and biological problems (Anderson, 2000). ITQs, however, are not without problems, and for some fisheries and social institutions, ITQs either may not resolve the problem of excess capacity or may prove inappropriate (Scott, 2000; Arnason, 2000; Anderson, 2000; McCay, 2000; Shotton, 2000). Given the extent of excess capacity in most fisheries, it is unlikely that many regulatory regimes will realize stated management goals and objectives without experiencing at least some social and economic costs, especially in the short run.

Although there is increasing evidence indicating that excess capacity has begun to diminish because of alternative management and regulatory regimes, there also remain many fishing fleets with substantial excess capacity (FAO, 1997). These fleets have the capability to harvest well in excess of sustainable levels. The imbalance between the ability of the world’s fishing fleets to harvest fishery resources and the ability of fishery resources to sustain such harvest levels is the major problem currently facing world fisheries. With harvest levels in many fisheries exceeding the maximum sustainable yield (MSY) or other desired target levels, managing fishing capacity is critical to ensure continued sustainability of resource and harvest levels.

In 1995, the Code of Conduct for Responsible Fisheries (CCRF) was adopted by the FAO Conference. The Code of Conduct for Responsible Fisheries recognizes that excess capacity is a major impediment to sustainable fishing. In particular, Article 6.3 of the CCRF recommends that “States should prevent overfishing and excess fishing capacity and should implement management measures to ensure that fishing effort is commensurate with the productive capacity of the fishery resource and their sustainable utilization.” Further, Article 7.1.8 of the CCRF states that “States should take measures to prevent or eliminate excess fishing capacity and should ensure that levels of fishing effort are commensurate with the sustainable use of fishery resources as a means of ensuring the effectiveness of conservation and management measures” (FAO, 1995).

In 1998, a technical working group (the La Jolla working group) was convened by the FAO to consider the management of fishing capacity (FAO, 1998; Gréboval, 2003). Subsequent to the La Jolla working group meeting and several FAO technical consultations, the Committee on Fisheries (COFI) adopted an International Plan of Action (IPOA) for the Management of Fishing Capacity (FAO, 1999a). The plan calls for all member states to achieve efficient, equitable and transparent management of fishing capacity by 2005 (and preferably, by 2003). Guidelines on the “Management of Fishing Capacity” have been developed separately to assist in this process (Cunningham and Gréboval, 2001).

A major action specified by the IPOA was the assessment and monitoring of fishing capacity. In particular, the IPOA recommended that states should perform the following (FAO, 1999a):

• proceed, by the end of 2000, with a preliminary assessment of the fishing capacity deployed at the national level in relation to all the fleets of principal fisheries and update this exercise periodically (Section 1, Paragraph 13);

• proceed, by the end of 2001, with the systematic identification of national fisheries and fleets requiring urgent measures and update this analysis periodically (Section 1, Paragraph 14); and

• cooperate, within the same time frame, in the organization of similar preliminary assessments of fishing capacity at the regional level (within the relevant regional fisheries organizations or in collaboration with them, as appropriate) and at the global level (in collaboration with FAO) for transboundary, straddling, highly migratory and high seas fisheries, as well as in the identification of regional or global fisheries and fleets requiring urgent measures (Section 1, Paragraph 15).

In December 1999, a Technical Consultation on the Measurement of Fishing Capacity was held in Mexico City to define capacity and develop methods for measuring and assessing fishing capacity (FAO, 2000). Fishing capacity was subsequently defined as follows: the amount of fish (or fishing effort) that can be produced over a period of time (e.g. a year or a fishing season) by a vessel or a fleet if fully utilized and for a given resource condition. Full utilization in this context means normal but unrestricted use, rather than some physical or engineering maximum.

The FAO (2000) concept of capacity is a technical concept and relatively void of economic content; that is, it is not directly related to economic decision making behaviour (e.g. cost minimization or profit maximization). This concept, however, does implicitly reflect economic decision-making behaviour because empirical data used to estimate this notion of capacity reflect the consequences of decision-making behaviour. Kirkley, Morrison-Paul and Squires (2002) term this concept of capacity as a “technological-economic” measure of capacity output.

1.2 Key concepts used in the document

In many industries, concepts relating to capacity are well defined. For example, the capacity of a car factory is the total number of cars that could be produced if the factory was fully utilized. That is to say, both capital and labour were operating at their maximum level, the latter being defined in terms of normal working practices (e.g. in terms of hours per shift and number of shifts per day). A particular problem arises in fisheries management tied to the fact that a key input into the production process - the fish stock itself - is not controllable by the individual producer and can change over time. A further problem unique to fisheries is that the use of this input is generally costless to the fisher. In the absence of well defined property rights, such as those partially existing under ITQs, incentives are created for individuals to try to increase their share of the limited resource. Such incentives not only affect their own future production, but the future production of others in the industry. These incentives lead to an increased level of capital in the industry over and above that which might be expected to develop in non-resource-based industries and a situation in which increased levels of investment decrease, rather than increase, longer term output. This leads to the often used description of the state of many fisheries: too many boats, not enough fish.

These unique problems have led to the standard concepts of capacity as adopted in most industries being confused in fisheries literature, and new terms introduced to try and overcome the definitional problems arising from variable fish stock. As a result, the concepts of capacity in fisheries (as will be seen in this document) involve subtleties that are not required in the analysis of capacity in most industries, and a number of definitions are often used that may not exist or may differ from those used in the traditional literature on capacity. In particular, the need to distinguish between short- and long-term measures of excess capacity has resulted in different terminology being adopted. In the case of fisheries, these have been defined as excess capacity and overcapacity, respectively. Similarly, the concept of target capacity is unique to fisheries. Conventions also exist in fisheries to measure capacity in terms of inputs as well as outputs. In this document the concepts often used in fisheries literature are adopted, which can differ from those used in studies of capacity in other industries. In this section, a simple intuitive outline of these key concepts as they relate to fisheries is provided. More precise specifications are given in the following chapters.

The concept of capacity, defined in FAO (2000) and generally adopted in the fisheries literature, is primarily a short-run concept as it relates to the underlying resource base (i.e. the state of the stock). In its basic form, capacity output is the maximum level of output that can be produced by the capacity base if it is fully utilized. The capacity base represents the fixed inputs used in the harvesting process, and also could be considered an input-based measure of capacity. Fixed inputs are those that cannot be readily adjusted in the short term (e.g. the fishing season). At a basic level, these might be the number of vessels, but in some fisheries the number of traps or nets may also form part of the capacity base. The capacity base is also associated with the level of capitalization in the fishery. This is a measure of the total investment, which is presented in terms of vessels, gear, or other equipment.

In simple terms, capacity output can be interpreted as the maximum catch that could be taken by the current fleet (the capacity base) if it was fully utilized (i.e. operated at the maximum level of fishing effort that could be expected under normal working conditions). Implicit in the measure are current stock conditions. With higher or lower stock levels, the maximum catch would be higher or lower also, and capacity output would rise or fall.

The utilization rate can be associated with the effort level. If a vessel is under-utilized, it is employing less effort (e.g. days fished) than it could, relative to other boats of the same size. As a consequence, its catch is less than would occur if it was operating at the same level of effort as other, similar boats. The rate of capacity utilization, therefore, at a very basic level is related to the level of effort employed by the vessel and also the difference between the current catch and the catch if fully utilized. Different measures of capacity utilization are related to these different aspects (i.e. effort levels or catch levels), as will be seen in subsequent chapters.

Catch in most fisheries depends upon the total level of fishing effort, normally expressed as a combination of vessel numbers and days fished. If many boats are operating at less than full capacity, similar levels of effort can be produced by fewer boats operating at full capacity. As a result, not all vessels are required to take the allowable level of catch if they operate at full capacity. The concept of excess capacity relates to the difference between the potential catch if all vessels are fully utilized and the current catch. For management purposes, excess capacity also can be interpreted as the difference between the number of vessels that exist in the fishery at the moment and the number that could take the same level of catch if fully utilized.^[2] It is a short-term measure only, because it is related to current stock conditions. Under different stock conditions, a different number of vessels may be required to take the optimal catch level.

The concepts of capacity, capacity utilization and excess capacity are short-term measures, because they are related to the current stock level. The objectives of fisheries management are often more long term in nature. For example, objectives may include obtaining the maximum sustainable yield from the fishery. If this differs from the current yield, then it is likely that stock conditions also vary, and hence, measures of capacity, capacity utilization and excess capacity tell us little about how much adjustment may be needed in the fishery in the short run to achieve management objectives. An alternative concept - target capacity - relates to the level of output and/or levels of effort and capital that achieve the longer term goals of fisheries management. A concept unique to fisheries analysis - overcapacity - has been introduced in the literature to describe the longer term concept of excess capacity. Overcapacity relates to the difference between “current” capacity (either in terms of effort, vessels, or expected catch given the long-term stock level) and the target level of capacity. It is a longer term indicator of how much adjustment may be required in the fishery, and it takes into account the changes in stock levels that would occur as a result of this adjustment.

The link between the concepts of excess capacity and overcapacity is not clear and the concepts are often confused. In other industries, there is no distinction between the two. However, in the case of fisheries where, unlike many other industries, production is influenced by an input over which the fisher has little control - the fish stock - some distinction needs to be made. It is possible for excess capacity to exist in the short term given current stock conditions, particularly if stocks are depleted, but all vessels may be required to catch the optimal yield when stocks have recovered. Conversely, it is possible for all vessels to operate at full capacity in the short term (so no apparent excess capacity exists), but the number of vessels may still be too high to take the target catch level at full capacity over the long run if fish stocks are at optimal levels (so overcapacity still exists).

The terms short term and long term have been used throughout the document. For purposes of this document, short term refers to the current fishing season or year. During this period, only some inputs are variable (e.g. days fished or crew number). The long term refers to the period over which both the stocks have adjusted to their target level, and inputs that are fixed in the short term (e.g. vessel numbers) also are able to vary.

The measurement of these concepts introduces additional complications. Further, the concepts may take on different meanings when considered from different perspectives. These complications and alternative interpretations are detailed in the chapters following.

1.3 The need for consistent estimates of capacity

Fisheries management involves balancing inputs and outputs in order to achieve a particular objective or set of objectives. These objectives may include sustainability of the resource, economic efficiency and social considerations (e.g. preserving fishing communities). The process of balancing inputs and outputs requires links to be made between each. If such links can be established, theoretically the level of outputs from a fishery could be controlled through limits on the level of inputs, or the level of inputs employed in a fishery could be controlled through restrictions on the level of output. Establishing such links, however, is not straightforward; different combinations of inputs can be used to produce a wide variety of outputs. Restricting some inputs may lead to expanding the use of other unrestricted inputs, resulting in an inefficient mix of inputs and little output, or catch, reduction (Dupont, 1991). Restricting outputs directly may lead to a reduction in some inputs, and the underutilization of other (fixed) inputs, resulting in inefficient input usage. Fisheries managers therefore need to continually assess the level of inputs and outputs employed in fishing, and manage such levels accordingly to balance associated responses with the potential of the resource.

The measurement of capacity provides an estimate of the productive potential of the fleet and the extent to which the current level of inputs is being fully utilized. Many countries have developed a range of capacity indicators, mostly based on physical attributes of the fleet. Key indicators of capacity that have been applied are measures such as gross tonnage (a measure of the volume of the vessel), engine power, and number of boats. In some countries, engineering measures such as vessel capacity units, generally based on a combination of characteristics, also have been developed. However, for countries with large artisanal fleets where the use of physical capital is limited (e.g. canoes rather than large mechanized vessels) and of less importance than labour inputs, such measures may have little meaning. The role of fixed versus variable factors must be carefully considered in their interpretation.

More generally, a difficulty in using these measures is that they are not consistent between countries, making international comparison problematic. This is particularly relevant where several countries and several heterogeneous fleet types (e.g. canoes and trawlers) share common stocks. Identifying a common measure of fishing capacity that can be aggregated over different fleet segments, and potentially different species in multispecies fisheries, is consequently essential for sound management of shared stocks.

1.4 Objective of the document

The objective of the document is to help national fisheries agencies and administrations derive appropriate measures of capacity and assess the level, if any, of excess capacity in their fisheries. Measures of capacity and assessment of excess capacity offer information critical for determining appropriate capacity management programmes. To this end, the document provides a conceptual framework for measuring and assessing fishing capacity, and it introduces and explains approaches for measuring fishing capacity, which likely will have the greatest empirical applicability, particularly given the limited fisheries data typically available.

The conceptual framework provides a non-technical description of how different measures of capacity and capacity utilization may be used to assess the degree (if any) of overcapacity and excess capacity in different types of fisheries. This foundation will help resource managers better determine which fleet segments or fisheries are most in need of management action. In this overview, key concepts briefly alluded to above are more fully elaborated, and their roles in understanding capacity issues discussed, for the purpose of allowing managers, biologists, technicians and economists to use a common language when assessing capacity and developing capacity management plans.

The methods for measuring capacity discussed in the second part of these guidelines are based on the methods recommended by the Mexico City consultation and more recent developments. Both simple (i.e. pragmatic but potentially less reliable) and somewhat more complex methods for capacity measurement are overviewed. Even more complex methods for estimating capacity are also available, but because of data limitations, these methods generally cannot be used to estimate fishing capacity (e.g. one might use a dual cost function to estimate a formal economic measure of capacity). These more complex measures are mentioned in the document, but details of the methods are omitted. References for further exploration of these methods are provided, however, to allow individual states to gain a more thorough understanding of alternatives. It is anticipated that the measures described in this document will better enable states to more easily comply with the reporting requirements of the “International Plan of Action for the Management of Fishing Capacity.”

Measures presented in this document should enable states to undertake a “stock-take” of the levels of capacity in each of their fisheries. These measures, however, provide only a snapshot of capacity, capacity utilization and excess capacity at the fishery and national level. This is because the measures are static and do not directly incorporate uncertainty (e.g. what appears as excess capacity today or given current conditions may not be excess capacity tomorrow, or under a different set of circumstances than expected).^[3] It is difficult also to impute what would happen if environmental or economic conditions or regulatory strategies in a fishery - which affect the measures and assessments of capacity and excess capacity - were to change. For example, price or stock level changes may result in a reallocation of fishing activity to other stocks or fisheries, or regulations imposed on one fishery may result in a transfer of fishing activity into another fishery.

Although methods that bring dynamics and expectations into these models and allow direct consideration of the impact of reallocation on a fishery (or at national level) may be developed, they are typically quite complex to implement. This is especially the case for latent effort (effort that could be expended in a fishery, but is not because of other reasons). When a vessel can operate in more than one fishery, it may be extremely difficult to assign effort to a particular fishery, and thus, more complicated to assess capacity and capacity utilization. Using methods that incorporate both dynamics and expectations as a base to guide policy also requires incorporating explicit knowledge about constraints on fisheries, since their direct application may generate infeasible solutions. For example, Färe, Grosskopf and Li (1992) offer one approach for estimating capacity of an industry when fixed and variable factors can be changed or reallocated. Without imposing realistic constraints on reallocation, however, the approach yields estimates consistent with proposing extremely large capital platforms (e.g. a fishery with one very large vessel). Imputing potential expected technological, economic and environmental conditions from observed data might, therefore, be somewhat arbitrary. Using simpler static methods, updated over time to accommodate changes and thus trace dynamic adjustments, seems a desirable solution.

The measures outlined in this document have limitations, as do any measurement methods. Within our discussions of various approaches to the conceptualization and measurement of capacity and capacity utilization, we attempt to identify these limitations in order to facilitate the most justifiable possible construction, interpretation and use of the measures. Fisheries managers should view the measures as overall indicators and additionally consider possible dynamics and other complicating factors (e.g. the potential allocation of fishing activity) when developing capacity management plans.