In examining the management of transboundary fish stocks, we proceed as follows. We commence with an overview of the relevant legal regime, and then turn to a discussion of the basic economics of the management of such resources. We conclude with a discussion of questions of surveillance and enforcement, and of institutional matters pertaining to cooperative resource management arrangements in practice.
The 1982 UN Convention contains but one provision pertaining to the management of transboundary fish stocks, namely Article 63(1), which reads as follows:
Where the same stock or stocks of associated species occur within the exclusive economic zones of two or more coastal States, these States shall seek, either directly or through appropriate subregional or regional organizations, to agree upon the measures necessary to coordinate and ensure the conservation and development of such stocks without prejudice to the other provisions of this Part [V] (UN, 1982, Article 63(1)).
The Convention imposes a duty on the relevant coastal States to negotiate over arrangements for the management of transboundary stocks. Importantly, however, it does not impose a duty on the States to reach an agreement. If the States are unable to reach an agreement, then each State shall manage that segment of the transboundary stock occurring within its EEZ. It shall do so in accordance with the rights and duties relating to fisheries management and conservation by a coastal State within its EEZ, as set forth by the Convention. We might refer to this as the default option.
Beyond this, the 1982 UN Convention says little. The Convention does not elaborate on management and conservation objectives, on principles of allocation of the catch among the relevant States, nor, more generally, on how cooperation is to be achieved. Indeed, the American legal expert on Law of the Sea issues, William Burke, comments (somewhat caustically) that “the substantive obligation imposed by Article 63(1) cannot fairly be described as awesome, imposing, or, even perhaps, very consequential” (Burke, 1983, p. 36).
We can, however, at least offer an interpretation of the duty to negotiate, implied in Article 63(1), and of the term “development” appearing in that article. In the North Seas Continental Shelf cases[7], the International Court of Justice dealt with the duty to negotiate in the context of maritime boundary limitations:
... the parties are under the obligation to enter into negotiations with a view to arriving at agreement, and not merely to go through a formal process of negotiation ... they are under the obligation so to conduct themselves that the negotiations are meaningful, which will not be the case when either of them insists upon its own position without contemplating any modification of it[8].
These observations on the substantive standards, which negotiations must meet, are in fact applications of the principle of good faith to specific circumstances (Molenaar, 2000).
With regards to the term “development”, Nandan, Rosenne and Grandy (1993, p. 647) state that:
The reference to “development” ... relates to the development of those stocks as fishery resources. This includes increased exploitation of little-used stocks, as well as improvements in the management of heavily-fished stocks for more effective exploitation. Combined with the requirement in Article 61 of not endangering a given stock by overexploitation, this envisages long-term strategy of maintaining the stock as a viable resource.
Next, we can note that, while the 1982 UN Convention provisions directly pertaining to transboundary stocks appear to be limited, there are provisions of the 1982 UN Convention, which, at the very least, are potentially relevant to the management of transboundary stocks. These include the provisions relating to the settlement of disputes (Part XV), the “Good Faith and Abuse of Rights”, Article 300, those pertaining to marine scientific research, inter alia Articles 246(3), 246(5)(a) and 249, and the articles relating to coastal State rights (UN, 1982).
Finally, we should also take note of the FAO Code of Conduct for Responsible Fisheries (FAO, 2003b), even though it is not a binding instrument. The Code’s provisions on fish stocks are generally relevant, along with those more specifically aimed at shared stocks (see: paragraphs 7.1.3, 7.3.2 and 12.17 [FAO, 2003b]).
The economics of the management of transboundary fish stocks, as well as addressing transboundary stock issues, provides the foundation for the economics of the management of the other three categories of shared fish stocks. In part, this is due to the history of shared fish stock management. The significance and importance of the problems of managing transboundary stocks was recognized well before the close of the UN Third Conference on the Law of the Sea, while the importance of the problems of managing straddling and highly migratory stocks did not gain recognition until the late 1980s. Only limited recognition has been given to date to the problems of managing discrete high seas stocks. Thus, the development of the economics of the management of transboundary stocks can be traced back to the late 1970s (Munro, 1979), while the development of the economics of the management of straddling and highly migratory stocks only dates back to the early 1990s (Kaitala and Munro, 1993). At the time of writing, there is nothing in the academic literature on the economics of the management of discrete high seas stocks, although one can draw certain conclusions from the economics of the management of the other three categories of shared fish stocks.
The fact that the economics of transboundary stock management precedes that of the management of the other categories of shared fish stocks is also a reflection of the relative difficulty in managing transboundary, as opposed to straddling/highly migratory, and discrete high seas stocks. The management of transboundary stocks is a considerably less complex task than that of managing the other three categories of stocks. In the case of transboundary, as opposed to the other categories of shared fish stocks, the states involved are, with few exceptions, fixed through time, and the shared, or joint, “property” rights to the relevant resources are reasonably straightforward (McRae and Munro, 1989). Furthermore, the number of states involved is usually relatively small. In the economic analysis of the management of these transboundary stocks, one can often make do with models of just two countries.
The basic economics of the management of transboundary fish stocks, which is now reasonably well developed, has moved well beyond the realm of academic economists. It is finding its way into official publications, as exemplified by the 1997 OECD publication, Towards Sustainable Fisheries (OECD, 1997), and the study, Managing Transboundary Stocks of Small Pelagic Fish, prepared by M. Agüero and E. Gonzalez for the World Bank (Agüero and Gonzalez, 1996). It is also being discussed by specialists in fisheries, from disciplines other than economics. The 1997 paper by John Caddy (Caddy, 1997), which has been, and which will be, cited extensively, provides a case in point.
The economic model, which is used in the analysis of the management of transboundary fishery resources, is a blend consisting of two components. The first consists of the now standard bioeconomic model, used in the analysis of fisheries confined to the waters of a single coastal State (see: for example, Clark, 1990; OECD, 1997; Bjørndal and Munro, 1998), while the second consists of the theory of strategic behaviour, more popularly referred to as the theory of games.
Fisheries economics is, in the context of capture fishery resources confined to the waters of a single coastal State, concerned with the inherent open access, or “common pool”, nature of such resources, which is, in turn, a reflection of the absence of, or the inadequate implementation of, “property” rights to the resources. The “common pool” nature of the resources can lead easily to serious overexploitation of the resources, and to substantial economic waste. Much of fisheries economics is concerned with means of countering the baleful effects of this “common pool” nature of these resources.
One useful concept, dating back to the advent of modern fisheries economics, is that of Bionomic Equilibrium (Gordon, 1954). This is the equilibrium, which the resource and the industry achieve simultaneously, when the fishery is a “common pool” fishery, à outrance, with a complete absence of both clearly defined “property” rights to the resource and national, or international, fisheries regulations. Bionomic equilibrium is characterized by overexploitation of the resource from society’s point of view[9], and by fleet capacity, far in excess of that which would be required, if the resource were exploited optimally. As such, Bionomic Equilibrium can be seen as a benchmark of undesirability in fisheries management.
While the standard bioeconomic model of capture fisheries is reasonably well understood, the theory of strategic behaviour - theory of games - is not. On the assumption that most readers are not familiar with this second component of the economic model of transboundary fisheries, we turn now to a review of the essentials of the theory of games.
The theory of strategic behaviour is concerned with situations in which the wellbeing of an “individual” depends, not only on the actions of the “individual” itself, but also on the actions of other “individuals”, with which the “individual” in question is interacting. The “individuals” may be persons, firms, political parties, states, et cetera. In any event, the “individual” is compelled to take into account that its wellbeing will be affected by the actions of others, and vice-versa. The theory is popularly referred to as the theory of games, because games (e.g. card games) provided convenient examples, in the early stages of the development of the theory.
One field of economics, where game theory has come to play a major role, is Industrial Organization, which is generally devoted to the study of industries dominated by a few large firms. Let the airline industry serve as an example. The fare structure, and other policies, implemented by a major airline, such as Lufthansa, are bound to have an impact upon rival airlines. The rivals can be expected to react. Lufthansa will, of course, anticipate such reactions, and will factor these expected reactions into its planning.
Industrial Organization is only one of numerous fields, in which one can anticipate interactions between and among “individuals”. Many fields of economics are influenced by game theory, as now are many areas outside of economics, such as international relations and legal studies. The use of game theory is also to be found in some natural sciences. Game theory does, for example, play a major role in evolutionary biology.
Cooperative resource management between, or among, coastal States sharing a fishery resource becomes worthy of consideration, we have now argued, if the harvesting activities of one coastal State have a significant impact upon the harvesting opportunities of the other State(s) sharing the resource. If this condition is met, then strategic interaction between “individuals”, in the form of coastal States sharing the resource, becomes inescapable. Early attempts by economists to analyse the management of transboundary fisheries, without the aid of game theory, quickly degenerated into incomprehensibility. Little progress in the development of the economics of the management of transboundary fish stocks was made, until the analytical tools provided by the theory of games were brought to bear. It might be noted, in passing, that natural resource/environment economists studying other shared resource management issues, e.g. water resources, global warming, find themselves compelled to employ game theory (see, for example: Barrett, 2003).
Perhaps the greatest drawback, from which the theory has suffered, is its popular name - the theory of games, which creates the impression that the theory is frivolous. It is not. In recognition of the theory’s rapidly growing application, the 1994 Nobel Prize in Economics was awarded to a trio of game theorists, one of whom, John Nash, can be seen as the founder of modern game theory, as applied to economics.
In the terminology of game theory, the “individuals” are referred to as “players”. The “players” are assumed to be rational and to have various courses of action open to them, which are referred to as “strategies”. The expected return to a player, in following a particular strategy, is then referred to as a “payoff”. The size of the expected return or “payoff” will, needless to say, be dependent upon the known, or expected, reactions of other “players”. The interaction between, or among, the players, as they execute their strategies, is the game. The stable outcome of a game, if it exists, is termed the “solution” to the game. Finally, the game may be a “once only” affair, or it may be repeated.
There are two broad categories of games, these being competitive, or noncooperative, games, and cooperative games. In a cooperative game, the players are assumed to be motivated entirely by self interest, but have some incentive to endeavour to cooperate. Of prime importance is the fact that players are able to communicate with one another effectively. In competitive, non-cooperative games, the lines of communication between and among the players are, more often than not, faulty, or are simply non-existent.
Having said all of this, however, it must be emphasized in passing that open lines of communication, between and among players, do not, in of and by themselves, guarantee a stable solution to a cooperative game. As we shall see, effective communication among players is a necessary, but not sufficient, condition for a stable outcome (solution) to the cooperative game.
In analysing the economics of management of transboundary fishery resources, economists have asked themselves two fundamental questions. The first is what the consequences will be, if coastal States claim that they are unable to cooperate in the management of the resource. The implication is that the States would adopt the default option, which we discussed with reference to Article 63(1) of the 1982 UN Convention. That is to say, each coastal State would go its own way and manage the segment of the resource within its EEZ, as best it could. If the answer to the question is that the negative consequences of non-cooperation will prove to be trivial, then one need proceed no further.
If, on the other hand, the answer to the question is that the negative consequences of non-cooperation are severe, then cooperation does matter and the second fundamental question must be asked. The second question is: what requirements must be met for a cooperative resource management regime to be stable and sustainable over the long run? It might be mentioned, in passing, that the second question raises the issue of equity. Cooperative management regimes, perceived, by one or more players, to be inequitable are, by definition, unstable.
The first question, that of the consequences of non-cooperative management of a shared fishery resource, is addressed, not surprisingly, by bringing to bear the theory of non-cooperative games. Consider a two “player” (coastal State) game. Those who have investigated the question usually assume that each of the two players has full and effective resource management powers within its own waters, although we shall want to comment on this at a later point.
One must concede, from the outset, that there do exist cases in which the default option is perfectly acceptable. The 1980s Georges Bank scallop fishery, shared by Canada and the USA, provides a case in point (Munro, 1987). The chief characteristic of the fishery, however, was that economic benefits Canada extracted from the fishery were essentially independent of American harvesting activities, and vice-versa. Hence, there was no effective strategic interaction between the two coastal States, as far as the fishery was concerned. Thus, the theory of strategic behaviour (games) was simply irrelevant in this case.
Let us then turn to the many transboundary stock cases in which the harvesting activities of any one coastal State do affect the economic wellbeing of the other coastal State(s) sharing the resource, and in which the theory of non-cooperative games is indeed relevant. A stable solution to a non-cooperative game was defined by John Nash (1951) as a situation in which each player has no incentive to change, given the strategies being followed by the other player(s). Two independent investigations of the non-cooperative fisheries game were published in 1980 (Clark, 1980; Levhari and Mirman, 1980). Both came to the same conclusion. A stable solution to the game would involve, except in unusual circumstances, mismanagement of the resource from society’s point of view. Clark (1980) argues that, if the players are symmetric, i.e. identical in all respects, the outcome will be similar to that encountered in an unrestricted open access domestic fishery, i.e. Bionomic Equilibrium (Gordon, 1954), which we have characterized as a benchmark of undesirability in fisheries management. The overall outcome to the fisheries game is an example of what is probably the most famous of all non-cooperative games, known as the “Prisoner’s Dilemma”.
The point of the “Prisoner’s Dilemma” game is that the players in the noncooperative game will be driven to adopt strategies, which each recognizes as being undesirable. The name comes from a story told by the author of the game to illustrate the point (Tucker, 1950). Two men are arrested on suspicion of having committed a major theft. The suspicions are, in fact, entirely valid. The two suspects, A and B, are kept completely separate from one another. The impossibility of communication between the two acts as a perfect barrier to cooperation.
Prisoner A is interviewed by the chief prosecutor, who admits that the evidence, which he has, is limited. A is told that if both he and B plead not guilty, they can each expect to receive a six month sentence on a lesser charge. If both A and B plead guilty, they will each receive a five year sentence. If A pleads guilty, but B pleads not guilty, A will be released for having assisted the prosecution. If A pleads not guilty, but B pleads guilty, then it will go very hard with A, and A will get ten years. The chief prosecutor holds exactly the same interview with B.
A and B are the players. Each player has two alternative strategies: to plead guilty, or to plead not guilty. If A and B could communicate, and importantly, could enter into a binding agreement (i.e. an agreement in which each would be assured that the other could not, and would not, cheat), they would both plead not guilty, and would look forward to being out of prison in six months time. They cannot communicate, however. The best strategy for A, regardless of which of the two strategies B might choose, is to plead guilty. What is true for A is true for B. Hence, both plead guilty and end up with the decidedly inferior outcome of serving five year sentences[10].
Now let us apply the concept of the “Prisoner’s Dilemma”, to a somewhat different fisheries situation. Let A and B be two “symmetric” coastal States sharing a resource. Assume that neither A nor B had, in the past, engaged in serious management of its respective share of the resource. The resource is, consequently, overexploited, at the common Bionomic Equilibrium level, a fact which is recognized by both A and B. A and B are now admonished by an outside international body to undertake meaningful management of their respective portions of the resource. There is, however, no thought of cooperation between A and B.
Consider A, which has two “strategies” before it: undertake and incur the cost of a management programme, or do nothing. Suppose that A does incur the cost of a serious management programme, and that the resource, for a time, rises above the Bionomic Equilibrium level. In the absence of cooperation, the outcome is not stable, and the resource will be driven back down to where it started. B would have the pleasure of enjoying some temporary benefits from A’s management efforts, at no cost to B. We would refer to B, in these circumstances, as a “free rider”. For A, undertaking the cost of management, is likely, at best, to be little more than an exercise in futility. If A does nothing, and, if B is foolish enough to engage in resource management, A will enjoy the rewards of being a “free rider”. Obviously A’s best strategy will be to do nothing. B is faced with the same set of strategies. What holds true for A, holds true for B. Thus we can predict that A and B will do nothing, while continuing to recognize the consequences of the absence of effective management.
Economists have long come to the conclusion that the predictive power of the economic theory of non-cooperative management of transboundary stocks is high. Case studies presented at the Norway-FAO Expert Consultation reinforced that conclusion. The authors of the case study on the transboundary hake stocks, shared by Angola, Namibia, and South Africa, estimate that the absence of effective cooperative management of the resource has led, through time, to the dissipation of approximately 25 percent of the potential net economic benefits (resource rent) to be derived from the resource (Sumaila, Ninnes and Oelofsen, 2003).
The case study presented at the Expert Consultation, providing the most vivid example of the consequences of non-cooperative management of a transboundary stock, was that on Pacific salmon, shared by the United States and Canada (Miller, 2003).
The Pacific salmon species, being anadromous, are produced in fresh water rivers, streams and lakes. Then, after a time, the fish migrate to an ocean environment, and subsequently return to their fresh water habitats to spawn and die. The fish are normally harvested as they approach the river mouths on their way to spawn.
Pacific salmon, in the Northeast Pacific, are found from northern California to Alaska. The Pacific salmon resource is an inherently shared one. It is inevitable that Canadian fishers capture, “intercept” some American produced salmon. It is equally inevitable that American fishers “intercept” some Canadian produced salmon.
While many Pacific salmon move into the high seas during part of their life cycle, the Pacific salmon is, nonetheless, a transboundary resource to all intents and purposes. This is due to Article 66 of the 1982 UN Convention. The article, which was included in the Convention due to the joint efforts of Canada and the United States, has had the result that direct high seas fishing of Pacific salmon is deemed to be contrary to international law (Burke, 1994; Miller, 2003; UN, 1982).
The two coastal States were in no doubt that cooperative management of the resource would be mutually beneficial. Moreover, the two, priding themselves on the quality of their respective fisheries management, clearly had the joint capability to manage the resources effectively.
Cooperation initially focussed on the Fraser River, wholly in Canadian territory, which was, and is, arguably the most important Pacific salmon river in the Western Hemisphere (Munro and Stokes, 1989). In the 1960s, it was decided that the focus on the Fraser River was insufficient. Negotiations on cooperative resource management were extended to include all Pacific salmon resources, from northern California to the Gulf of Alaska.
The negotiations led ultimately to the signing of the Canada - US Pacific Salmon Treaty in 1985 (Treaty, 1985). The negotiations, leading up to the Treaty were difficult. While the arrangements pertaining to the Fraser River remained in place, noncooperative management governed the other salmon stocks. During the years, prior to the signing of the Treaty, there was a constant threat of damaging “fish wars” - deliberate overexploitation of the resources - erupting. Furthermore, it was recognized that both countries had opportunities to enhance the size and strength of the stocks produced in their salmon rivers, through various enhancement projects. Each country held back on initiating such projects, for fear that the other would “free ride” (Munro and Stokes, 1989). Indeed, it was the combined threat of “fish wars”, and the continued blocking of enhancement projects, which served as a prod to drive the negotiators on, until they finally achieved (temporary) success.
The Treaty, while initially successful, encountered serious difficulties (for reasons to be explored at a later point), and seized up. The two countries retreated to what we have referred to as the default option, i.e. managing the share of the resources within their respective EEZs, as best they could. During this period, the two countries reverted to competitive behaviour. The “Prisoner’s Dilemma” returned with a vengeance, to the great detriment of the resources. The two coastal States eventually “patched up” the Treaty by signing an Agreement in 1999. While the Agreement has many critics, even the severest critics, with the thought of “fish wars” in mind, concede that an agreement, however flawed, is better than no agreement at all (Miller, 2003; Miller, Munro, McDorman, McKelvey, and Tyedmers, 2001).
The implication of the analysis is straightforward. Even if coastal States sharing a resource have the capability of managing effectively fishery resources within their domestic waters, one has no justification in assuming that, in the absence of cooperation, the resource management outcome will be “adequate”, that what we have referred to as the default option will be sufficient. The risk exists that the outcome will be disastrous. Other than in exceptional cases, cooperation does matter. Moreover, cooperation is not to be seen, merely as a useful supplement to resource management by individual states. Rather, it is to be seen as a fundamental prerequisite for effective resource management.
Consider the following example. FAO Members have approved an International Plan of Action for the Management of Fishing Capacity (FAO, 1999). The IPOA-Fishing Capacity does, inter alia, talk about the importance of addressing the problem of excess fleet capacity in the management of shared fish stocks (FAO, ibid., p.2). One can be confident that, if shared fish stocks plagued by excess fleet capacity are managed non-cooperatively, the excess capacity will continue indefinitely, IPOA, or no IPOA.
In examining cooperative management of shared fishery resources, one brings to bear the theory of cooperative games. Moreover, just as reference was made to Nobel Laureate John Nash’s theory of non-cooperative games, so extensive reference will be made to John Nash’s theory of cooperative games (Nash, 1953).
The theory of cooperative games is to be seen, first and foremost, as a theory of bargaining. It is, to repeat, assumed that each player is motivated by self-interest alone. If the players agree to cooperate, it is because each is convinced that it can gain more from cooperation, than it could by engaging in competitive behaviour.
In cooperative games, numbers are important. Once the number of players exceeds two, the analysis becomes much more complex. One has to allow for the possibility of sub-coalitions forming among the players, and acknowledge the fact that the greater is the number of players, the more difficult it is to achieve a stable solution to the game. For the discussion to follow on transboundary stocks, we can safely restrict ourselves to the more tractable two player games. When we come at a later point, however, to discuss the management of highly migratory, straddling and discrete high stocks, we shall have no choice, but to deal head on with games having more than two players, and the complications arising therefrom.
Next, given that a cooperative agreement is arrived at, one has to be able to ensure that the provisions are effectively enforced - the issue of compliance. If communication between and among the parties to the agreement - the players - is excellent, but each lacks the assurance that the others will not cheat, the cooperative arrangement will not hold, in spite of the excellent communication.
The legal expert Daniel Owen maintains that the great majority of cooperative arrangements concerning transboundary stocks take the form of treaties (Owen, 2001). He goes on to point out that treaties are legally binding on the contracting parties. He then qualifies this statement, however, by saying that, at the end of the day, the effectiveness of the treaty will be dependent upon the political will of the contracting parties (Owen, ibid.).
In a similar vein, Scott Barrett (2003), while agreeing that treaties are legally binding upon the contracting parties, insists that the treaties must be “self-enforcing”. He means by this that, in contrast to domestic contractual arrangements, the contracting parties cannot, in spite of dispute settlement provisions and the International Court of Justice (ICJ), really rely upon third party enforcement of the provisions (Barrett, 2003). The Norway-FAO Expert Consultation, as we shall see, did appropriately devote considerable time and effort to analysing the question of implementation and enforcement of cooperative arrangement provisions.
A closely related issue is whether participants in the cooperative resource management arrangement are protected against non-participants sharing in the fruits of cooperation free of charge, as it were. Such non-participants are aptly referred to as “free riders”.
If “free riding” by non-participants is rampant, the cooperative arrangement will have great difficulty in surviving. Indeed, Barrett argues that non-participant “free riding” is the binding constraint upon international cooperation (Barrett, 2003, n.1, p. 271).
Non-participant “free riding”, in the case of transboundary stocks, could conceivably arise in one of two ways. First, a coastal State sharing the transboundary stock might stay out of the cooperative arrangement, and “free ride” on the fruits of the cooperative endeavours of its neighbouring coastal States. While this form of “free riding” is certainly not out of the question, the authors would be hard pressed to come up with significant real world examples. Secondly, vessels of other states (i.e. DWFSs) could enter the EEZs of the cooperating coastal States without permission, and exploit the transboundary stock in question. The vessels would, however, be deemed to be engaged in illegal fishing (see: FAO, International Plan of Action to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing (IPOA-IUU, hereafter), 2001, para. 3.1.1). The affected coastal States could, under international law, take vigorous measures to repel the intruders.
Of course, some “free riding” of the second form does, nonetheless, occur. It should be pointed out, however, that the problem is, in principle, no different from that faced by any coastal State attempting to protect its intra-EEZ fishery resources against poachers. In any event, we see the problem of “free riding” as being a relatively minor one, in the case of transboundary fish stock management. This stands, as we shall see, in stark contrast to the management of the other three categories of shared fish stocks.
Following upon questions of number of players, compliance and “free riding”, we must also consider the goals of resource management. In the Shared Fish Stocks: An Overview section, it was noted that the FAO recognized, well before the conclusion of the UN Third Conference on the Law of the Sea, that there is no necessary reason why the States, sharing a fishery resource, should have the same management goals. If the States have identical management goals, then the theory tells us that the States will attempt to institute a resource management programme, which will maximize the global economic returns from the fishery over time, and will then bargain over the division of the returns. If management goals differ, then the added problem has to be faced of developing a compromise resource management programme.
Finally, in this list of preliminaries, is the question of so called “side payments”. A side payment, in its simplest form, is a type of transfer, where the term transfer is defined broadly. While the transfer may be monetary in form, there is no need whatsoever for it to be so. Moreover, a non-monetary transfer may extend beyond the fishery itself, e.g. trade concession on products other than fish. We shall define, for our purposes, a transboundary fisheries cooperative game without side payments, as one in which one coastal State’s return from the shared fishery is determined solely by the harvests of its fleet(s) within its own waters.
The importance of side payments has become increasingly recognized over the past few years (see: Caddy, 1997). The use of side payments was, as we shall see, discussed at some length at the Norway-FAO Expert Consultation, (where some participants preferred the more connation free term, “negotiations facilitators”). It will be seen that one role, which side payments can play, is that of mitigating some of the difficulties arising from coastal States having differing resource management goals.
There are two conditions, which must be met as an absolute minimum, if there is to be a stable solution to the cooperative game. Both are straightforward, and both seem entirely compatible with common sense. The first requires some additional economist’s jargon. The late 19th/early 20th century Italian economist, Wilfred Pareto, put forth the proposition that in trade, or in other dealings between, and among, “individuals”, the outcome was certain to be less than optimal, if it were possible by a rearrangement of the dealings to make one individual better off, without making the other individual(s) worse off. This proposition gave rise to the expression “Pareto Improving”, and the concept of “Pareto Optimality”. Any change, or adjustment, which makes at least one individual better off, without making the other individual(s) worse off, is deemed to be “Pareto Improving”, in nature. “Pareto Optimality” denotes a situation, in which the opportunities for “Pareto Improvement” have been exhausted, and in which it is not possible to make one individual better off, except at the expense of the other individual(s).
The first requirement for a stable solution to the two player cooperative game is that it be “Pareto Optimal”. Suppose that the cooperative game consists of two players, coastal States I and II, and that the “solution” to the cooperative game consists of an agreed upon cooperative resource management regime. If changes could be made to the cooperative management regime, which would make both I and II better off, then the “solution” to the cooperative game can hardly be regarded as stable. Once the two States realized that, by altering the cooperative management regime, both would be made better off, the two would, if rational, do just that. What could be more straightforward?[11]
The second requirement for a stable solution to the cooperative game has equal appeal to common sense. The requirement is sometimes referred to as satisfying the Individual Rationality Constraint. It states that a solution to the cooperative game will not be stable, unless the payoffs arising from the solution make each and every player at least as well off as it would be under conditions of non-cooperation. If the cooperative management arrangement is such that any given player (a coastal State) finds that its expected economic return from the fishery will be less than what it could have expected under non-cooperation, the player’s willingness to cooperate will evaporate. The Report of the Norway-FAO Expert Consultation noted, that, while this requirement should be obvious to all, it is often ignored in practice (FAO, 2002a, p. 8).
Those potential solutions to the cooperative game, which satisfy both requirements, are said to constitute the “core” of the game[12]. This immediately raises the question as to whether one can always be certain that such a “core” exists. The answer is no, the “core” can be empty. If that is the case, then there are no solutions, which will satisfy both requirements. Attempts to establish cooperation will prove to be futile, and the players will revert to competitive, non-cooperative, behaviour, with all that that implies.
We now turn to a widely used figure (Figure 1) illustrating the conditions necessary for a stable solution to the cooperative game. The figure appears, for example, in the aforementioned 1997 OECD publication, the 1996 World Bank publication, and appears, as well, in the 1997 paper by John Caddy (Agüero and Gonzalez, 1996; Caddy, 1997; OECD, 1997).
The figure is meant to represent a two player, (two coastal States, I and II), cooperative fisheries game. The axes are the “payoffs” to the two respective players. A given payoff to Player I measures the stream of economic returns through time to Player I, arising from a given resource management programme. Correspondingly, a given payoff to Player II measures the stream of economic returns to that player from a given resource management programme. The two streams of economic returns are measured in terms of Present Value.
It is assumed, in this example, that: i) the two players are not symmetric, they do not have identical management goals; ii) if a cooperative arrangement is achieved, it will be binding in the sense that an absence of cheating and “free riding” is assured; and iii) there is no allowance for side payments. The solid curve represents the Pareto Frontier, in that it shows the sets of payoffs from cooperative management regimes, in which it is not possible to make I better off, except at the expense of II, and vice versa.
If we commence at the top of the curve at b = 1, we would have a cooperative management programme, which would maximize the benefits from the fishery to Player I. As we move down the curve, Player II would become successively better off, but only at the expense of Player I. By way of contrast, if we were at any point below the Pareto Frontier, both Players I and II could be made better off by adjusting the cooperative resource management programme. The parameter b, to which we have referred, is, in fact, a bargaining parameter, 0 £ b £ 1. If b = 1, then the management preferences of I are wholly dominant, while the management preferences of II count for nothing. If b = 0, the reverse is true.
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FIGURE 1 Cooperative game without side payments
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The payoffs, q0 and g0, are the payoffs, which I and II would enjoy respectively, if there was no cooperation. They might be thought of as the payoffs associated with the solution to a non-cooperative game. John Nash referred to this set of payoffs as the “Threat Point”, as they represent the minimum payoffs, which each of the two players must receive for the solution to a cooperative game to be stable (Nash, 1953).
That part of the Pareto frontier segmented by the dashed lines emanating from the Threat Point payoffs represents the “core” of the game. In the example shown, the “core” is positive, so that a stable solution can be achieved. We shall not discuss the theory underlying the determination of the ultimate solution (see: Nash, 1953). It will only be noted that a unique solution does exist, and that, in this example, the management preferences of both players will play a role, i.e., the solution b lies between 1 and 0. A solution, in which the management preferences of either player are wholly dominant, is not feasible. If, for example, the solution to the game was such that b = 1, the “solution”, the cooperative agreement, could not last, since Player II would be worse off than it would be, had it refused to cooperate.
Turn now to Figure 2. In this figure, allowance is made for the possibility of side payments (“negotiation facilitators”)[13].
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FIGURE 2 Cooperative game with and without side payments
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When side payments (transfers) are allowed, a particular player’s returns from the fishery are not dependent wholly upon its fleet’s harvest of the resource within its own waters. The Pareto Frontier in this case becomes a 45° line, which is tangent to the Pareto Frontier Without Side Payments, at the latter’s highest point. The significance of the 45° line is that, at any point on the line, the sum of I and II’s payoffs is equal to the sum of those payoffs at any other point on the line. The implication of all of this is that the players seek to maximize the global returns from the fishery, without regard for differences in management objectives. Bargaining then takes place over the division of the global returns.
It is at this point that a key question must be raised, namely what benefits from a fishery are in fact being divided between the coastal States sharing the resource. Is it harvested fish per se, or is it the economic (and perhaps social) benefits arising from the fishery? If it is the latter, then sharing the harvest must be seen as only one of several ways of sharing the economic benefits from the fishery. If the relevant coastal States insist that the benefits be divided only through harvest shares, which each coastal State is to take exclusively within its EEZ, then they are imposing a constraint upon themselves. In some instances, the constraint could prove to be crippling. Side payments serve to relax that constraint.
Side payments become particularly significant, when the management goals of coastal States sharing the resource differ. Munro (1987) has argued that, when there are differences in management goals, it is invariably the case that one player places a higher value on the fishery than does the other. It might, for example, be that one player has lower harvesting costs than does the other, or it may be that one player discounts the future economic returns from the resource less heavily than does the other. When side payments are possible, then the optimal policy is one in which the management preferences of that player placing the highest value on the resource should be given full reign. That player should, in turn, then proceed to compensate its fellow player, or players through the use of side payments. The side payments can, as we have indicated, take any number of forms. In another context, Munro referred to this as the “Compensation Principle” (Munro, 1987)[14].
Consider Figure 2, yet again. In this example, Player I places the highest value on the resource. The Pareto Frontier With Side Payments is tangent to the other Frontier at the point where b = 1, i.e., at the point where the management preferences of I are wholly dominant. The implication is that the global economic returns from the resource through time will be maximized by allowing Player I to manage the resource, unimpeded by the management preferences of Player II. Player I will then have to compensate player II through side payments, i.e. transfers of some form.
Ignore, for the moment, the payoff g'0 on the horizontal axis. Player II will obviously be better off with side payments, than without. What about Player I, however? Figure 2 provides the answer. In the absence of side payments, the solution to the cooperative game would have to lie within the “core”, shown as that segment of the Pareto Frontier Without Side Payments segmented by the dashed lines emanating from q0 and g0. Suppose, for the sake of argument, that the solution to the cooperative game was at point A. The introduction of side payments would clearly be “Pareto Improving”, in that Player I, as well as Player II, could be made better off. The reason lies in the fact that, in the absence of side payments, the players would, in the example before us, be forced to a position, in which the global benefits from the fishery were less than the maximum. Side payments, to the benefit of both players, allow that maximum to be achieved.
Now let us recognize the payoff g'0, and recognize, as well, that Figure 2 presents us with two alternative cases. In the first case, (Player II’s Threat Point payoff is g0), which we have discussed, it would be possible to achieve a stable solution to the cooperative game, without side payments. The introduction of side payments has the effect, as we have seen, of making both players better off, by allowing superior management. In the second case (Player II’s Threat Point payoff is g'0), the consequence of side payments being disallowed, is that there will be no solution to the cooperative game, because there is no point on the relevant Pareto Frontier at which both Players I and II would be better off than if they had refused to cooperate. The “core” of the game is empty. With side payments, the scope for bargaining is increased, and a stable solution to the game is achievable. Thus, in the second case, side payments make the difference between a successful cooperative arrangement and attempts to achieve cooperation ending in certain collapse.
The two dimensional figures, to which we have referred, do not allow us to portray the full benefits of side payments. The side payments, or “negotiation facilitators”, can lead to “Pareto Improvements”, even when there are no clear differences in resource management objectives between, or among, cooperative arrangement participants. Consider the key issue of allocation of the TACs among these participants.
The Report of the Norway-FAO Expert Consultation concludes that, historically, the primary criteria for allocation of TACs for cooperatively managed transboundary stocks have been historical catches within individual coastal State EEZs, and zonal attachment of these resources. History has revealed, the Report argues, that there are strong advantages to having the percentage TAC allocations, based on such criteria, being stable over time. Seemingly capricious variations in the percentage allocations are certain to undermine the arrangement. The Report then remarks, however, that, in order to make the system work, side payments may be required. This is particularly true when the cooperative arrangement, as is commonly the case, covers multiple species (FAO, 2002a).
Consider the following two cases, examined at the Expert Consultation. The first involves fishery resources shared by Norway and the Soviet Union/Russia, in the Barents Sea (Stokke, 2003). A cooperative resource management arrangement between the two countries dates back to the mid 1970s, and has continued to the present day.
Fixed percentage allocations of the TACs for two key resources in the area, Arctic cod and haddock, were agreed upon early in the history of the arrangement, and were adhered to thereafter. Side payments, or their equivalent, were introduced, however, to provide flexibility. To begin, the two states are not restricted to taking their quotas within their respective EEZs. Groundfish, such as cod, spawning in the Russian zone, reach their adult stage in the Norwegian zone. It makes far greater economic (and biological) sense to harvest the groundfish at their adult stage. Under a Mutual Access Agreement, the Soviets/Russians were/are enabled to take a substantial part of their quota in the Norwegian zone, a decidedly Pareto Improving step (Stokke, ibid.).
Secondly, it was almost inevitable that the two countries would place different valuations on the resources, with the consequence that a mutually profitable opportunity to trade quota appeared. Thus, for example, while Norway has had a fixed percentage allocation of the Arctic cod quota, it has effectively “bought” cod quota from its partner by swapping quota in other species (Stokke, ibid.). The cooperative arrangement, which, as we have noted, commenced in the mid 1970s, when the Cold War was very much ongoing, has proven to be remarkably stable over time.
The second example involves the Convention on Fishing and Conservation of the Living Resources in the Baltic Sea and the Belts (Ranke, 2003). The Convention, which dates back to 1973, has proven to be successful, in spite of the fact that the membership of the cooperative arrangement has, since its origins, been in a state of almost constant flux[15]. When the Convention initially came into force, coastal States members had access to fisheries throughout the Baltic Sea. The 1982 UN Third Conference on the Law of the Sea meant that TAC allocations had to be made under a new set of legal conditions.
The TAC allocations for the four major species (herring, sprat, cod and salmon) were made on a fixed percentage basis. Since there was an absence of clear rules, or parameters, the TAC allocations were close to being arbitrary in nature (Ranke, 2003). The system has been made workable by allowance for quota swaps, and reciprocal access arrangements (Ranke, ibid.)[16]
The Report of the Norway-FAO Expert Consultation did take note of the fact that side payments, as well as increasing the efficiency and flexibility of TAC allocations, can be used to reconcile differences in management goals, i.e. the Compensation Principle (FAO, 2003a). An illustration is provided by the case study on Norwegian Spring Spawning Herring, presented to the Expert Consultation (Bjørndal, 2003).
The resource, which has historically been the most abundant fishery resource in the North Atlantic, crashed in the late 1960s-early 1970s, due to overexploitation. A harvest moratorium was imposed. By the mid 1990s, the resource had recovered. It is now managed cooperatively by Norway, Russia, Iceland, the Faroe Islands and the EU[17].
It is easy to demonstrate that, if the costs of harvesting differ among the joint exploiters of a resource, the harvesting cost differentials can lead to differences in resource management goals (Munro, 1979). Harvesting costs are not uniform among the exploiters of Norwegian Spring Spawning Herring.
In his paper, Bjørndal presents the results of a simulation study on the management of the resource. For the purposes of the study, the partners are placed into three groups, Norway and Russia - “Norway”; Iceland and the Faroe Islands - “Iceland”; and the E.U. “Norway” constitutes the lowest cost harvester of the resource. After demonstrating the predictably disastrous consequences of non-cooperation, the simulation study analyses two cases of cooperative management, these being (i) the “Cartel” case, and (ii) the “Monopoly” case. Under the “Cartel” case, each of the three receives a TAC allocation and proceeds to harvest that allocation to the best of its ability. Under the “Monopoly” case, the lowest cost partner “Norway” does all of the harvesting and determines the resource management policy. “Norway” would have to compensate the other two partners through side payments. As one would anticipate, the global economic returns from the fishery in the “Monopoly” case are considerably greater than they are in the “Cartel” case. Moving from a “Cartel” to a “Monopoly” exploitation and management of the resource would be “Pareto Optimal”, in that all three partners could be made better off, in economic terms, by the move (Bjørndal, 2003).
It is reasonable to say that, while the Norway-FAO Expert Consultation participants found the “Monopoly” case to be of interest, they found the case to be of theoretical interest only, i.e. unrealistic. Yet, history has provided us with an example of cooperative resource management, which mirrors the “Monopoly” case very closely. The example is that of the fur seal fishery of the Northeast Pacific, commencing in the first part of the 20th century. The fishery was shared by four countries, Canada, Japan, Russia and the United States. When the fishery became significant in the late 19th century, there was no cooperative management. The “Prisoner’s Dilemma” played itself out, and the resource was subject to severe overexploitation. Fearing the outright collapse of the resource, the four countries came together and transformed the non-cooperative game into a cooperative one, which took the form of the 1911 Convention for the Preservation and Protection of Fur Seals, which was to last, with one lengthy hiatus, until 1984 (Burke and Christy, 1990; Barrett, 2003).
The four players were not identical. Two, Russia and the United States, were low cost harvesters, harvesting the seals on land (Pribiloff Islands), while the other two, Canada and Japan, were high cost harvesters, harvesting the seals at sea. Moreover, Russia and the United States received higher prices for their seal skins than did the other two countries. Needless to say, Russia and the U.S.A. placed a higher value on the resource than did the other two. Under the terms of the Convention, Canada and Japan were each to receive a certain fixed percentage of the TAC. However, Canadian and Japanese harvesting activities were to be reduced to zero. All harvesting was to be done by Americans and Russians, with the Canadians and Japanese receiving their shares of the TAC in the form of seal skins, each season. The United States and Russia did, of course, determine the resource management regime.
This pure side payments cooperative arrangement proved to be profitable for all four players. Moreover, it also had beneficial conservation consequences. It was estimated that, between 1911 and 1941 (when the hiatus in the Convention, referred to earlier, commenced), the seal herds had increased eighteen fold (FAO, 1992).
There are two additional requirements for stable cooperative resource management arrangements, which require our attention. Both are linked to the fundamental requirements of Pareto Optimality and satisfying the Individual Rationality Constraint. They are:
a) effective implementation and enforcement measures
b) resiliency of the cooperative resource management arrangement through time
Effective implementation and enforcement measures
To this point we have assumed implicitly that participants in a cooperative resource management arrangement all comply fully with the provisions of the arrangement. In practice, of course, there is no justification for assuming that compliance will emerge on its own. It then becomes difficult to argue with John Gulland’s statement that “... without adequate implementation and enforcement the best [fisheries] arrangements can be useless” (Gulland, 1980, p. 17).
If compliance within the cooperative arrangement is lacking, the obvious risk arises that one, or more, player(s) will determine that it is not rational for it (them) to cooperate. A player, if not bound by moral consideration, may decide that it would be better off in economic terms, by breaking the rules. A player, which is bound by moral considerations, may calculate that cheating by other players will result in its expected payoff being below its “Threat Point” payoff, and simply withdraw from the cooperative arrangement.
The Report of the Norway-FAO Expert Consultation deals with the issue of implementation and enforcement in some detail and examines it in terms of four possible scenarios:
Scenario I: This, the simplest of the scenarios, is one in which there are two coastal States sharing a transboundary resource, in which the resource is exploited only by the fleets of the two coastal States, and in which all boundary delimitation disputes have been settled. Effective implementation and enforcement of fisheries management regimes requires the following measures, as a minimum (FAO, 2002a):
i. Maintenance of a register for vessels authorized to fish the stock;
ii. Use of a system to monitor fishing activities (including, as appropriate, ready access to records relating to the authorization to fish, the amount and species of quota, the area of operation, trip duration, fishing logs, etc.), and
iii. Port inspections of vessels, catch on board and catch offloaded.
Scenario II: The second scenario is the same as the first, except that there are disputed boundaries between the two States, giving rise to a disputed area for management. It is obviously eminently desirable that the two States develop an “area of joint management”, which includes the disputed area.
An example is provided by the previously cited case of the joint Norwegian-Soviet/Russian management of fishery resources in the Barents Sea (Stokke, 2003). There is an unresolved boundary delimitation dispute between the two countries, involving an area of 155,000 square kilometers, rich in fishery resources. The Norwegians and the Soviets resolved the resultant resource management problem by establishing a Grey Zone Agreement, under which the two agree upon harvest quotas, and under which each coastal State regulates its own vessels. The Agreement has continued in force, following the end of the Soviet Union (Stokke, ibid.).
The Report maintains that, in addition to the minimum measures put forth in the first scenario, the following measures are required for the Grey Zone type of area:
Special reporting requirements for fishing vessels when they operate in the said fishing area, including the provision of simultaneous reports to both coastal States; and
Reciprocal monitoring and surveillance schemes for each coastal State with respect to vessels flying the flag of one of the Parties and operating in the said area, or primarily flag State responsibility for monitoring and surveillance (e.g. boarding, inspection, arresting and bringing into port, etc.).
Scenario III: The third scenario is the same as Scenario I, except that one, or both, of the coastal States, establishes access arrangements to fisheries within its EEZ, to third parties (e.g. distant water fishing states, DWFSs). The following additional measures, designed in part to prevent possible “free riding”, are then required;
Fishing activities by a third party fishing vessel, authorized to fish in the EEZ of one of the coastal States, should be controlled and subject to surveillance by that coastal State;
Third party fishing vessels should be subject to at least the same terms and conditions of licence (including boarding, inspection and enforcement requirements) when they are operating in either or both EEZs, as the terms and conditions imposed on national vessels from the coastal States; and
The flag State legislation should include control measures (e.g. an authorization procedure) for its vessels fishing in the EEZ of another State.
Scenario IV: The fourth scenario, of particular importance, in light of our discussion of the importance of side payments, is identical to Scenario I, except that the coastal States grant reciprocal EEZs access to each other’s fleets. The minimum measures required are those set forth in Scenarios I and III, plus the following:
Special reporting requirements (e.g. for catch, area of operation, entry and exit from the EEZ, notification, etc.) that would serve to reinforce coastal State management measures. As appropriate, such a requirement could involve real time reporting;
Collaboration between the coastal States to create a culture to sensitize fishers and to encourage them to abide by the terms and conditions of their licences;
A means that can be invoked by the coastal State (Party in the agreement or arrangement) in the event that its vessels commit an offence in the adjacent EEZ;
Observer programme(s) for scientific and enforcement purposes; and
As appropriate, education and awareness creating programmes addressed to all fishers, where institutional differences (capacity, means of control, etc.) exist among the coastal States Parties to an arrangement.
(FAO, 2002a).
Resiliency of the cooperative resource management arrangement through time
The world of fisheries is not static. In recognition of this fundamental fact, the Report of the Norway-FAO Expert Consultation places considerable stress on the importance of the cooperative arrangement being able to withstand the shocks of unanticipated changes, which can, in turn, arise from environmental, economic, political and other factors. The Report maintains that management plans for shared fish stocks need to recognize the dynamic nature of the systems they are managing and take these into account in their specifications of management targets (e.g. changes in distribution, abundance and/or migration patterns of target species). Past experience has shown that plans not incorporating this flexibility often fail to deliver. The plans should incorporate a review schedule, so that they can be evaluated and updated, as required (FAO, 2002a).
On-going research and monitoring of the changing natural, social, economic and political conditions should underpin the plans, so that adjustments in harvesting activities and management measures can be made. One element, which will be important in this regard, will be the ongoing cooperative scientific efforts to understand better the linkages between the changing biophysical conditions and the stock dynamics and the geographic distribution of the target species. In addition, changes in the relevant social, economic and political conditions should be routinely tracked and openly communicated among the cooperating parties (FAO, ibid.).
In some instances, cooperation in research and monitoring may not be sufficient to achieve the required flexibility. It may be necessary, in addition, to broaden the scope for negotiating, by using tools that reflect changing circumstances, including linkages with non-fishery concessions, provision for quota trades and access arrangements, and other forms of side payments (“negotiation facilitators”) (FAO, ibid.).
Among the case studies discussed at the Expert Consultation, the study presenting the best example of the need for resiliency, and the possible consequences of its absence, is that of Pacific salmon in the Northeast Pacific, shared by Canada and the United States (Miller, 2003), which we discussed in the context of the consequences of non-cooperation. It will be recalled that, in the salmon fisheries in the Northeast Pacific, Canadian fishers invariably “intercept”, i.e. capture, American produced salmon, and vice-versa. It will also be recalled that, in 1985, the two countries signed a treaty governing the cooperative management of salmon resources from northern California to the Gulf of Alaska.
At the time the Treaty was signed in 1985, there was a rough balance between Canadian and American “interceptions” of each other’s salmon. A climate regime shift occurred, however, which had a decidedly negative impact upon salmon stocks in Washington, Oregon and southern British Columbia, and equally decidedly positive impact upon salmon stocks in Alaska and northern British Columbia. The rough “interception” balance was thrown into disarray.
The Treaty proved to lack the resiliency to withstand the shock. By 1993, the cooperative arrangement, although legally intact, effectively seized up. As noted, the two coastal States reverted to competitive behaviour. As also noted, the two States signed an Agreement in 1999 in an attempt to repair the damaged Treaty (Miller, ibid.).
Since we have emphasized the importance of side payments (“negotiation facilitators”) in enhancing the flexibility, and thus the resiliency, of cooperative resource management arrangement, it is worth observing that the Canada-U.S. Pacific salmon cooperative management arrangement, prior to the 1999 Agreement, was noteworthy for its complete absence of anything remotely resembling side payments. The 1999 Agreement, by way of contrast, does contain provisions for de facto side payments, although they are not specified as such (Miller, ibid.).
No cooperative fisheries management arrangement can survive without a sound institutional and organizational structure. It therefore behooves us, at this point, to ask what lessons can be draw from the history of cooperative transboundary fisheries management arrangements, pertaining to institutional and organizational structures.
The first (and obvious) point to be made is that there is no single ideal structure. Several different forms, or approaches, have been implemented, depending upon circumstances. John Caddy (1997) remarks that formal cooperative resource management bodies come at a cost, both financial and, for coastal States at least, in terms of a possible diminution of State sovereignty. In some cases, these costs can be avoided, or at least mitigated, through the use of informal structures. In other instances, nothing less than formal bodies will suffice.
With this in mind, we note that R.R. Churchill and A.V. Rowe, in their study on the Law of the Sea, identify four categories of forms and institutions developed for the cooperative management of transboundary stocks (Churchill and Rowe, 1988).
They are:
A. a set of agreements taking the form of a periodic (usually annual) arrangement negotiated under a pre-existing framework treaty;
B. a set of arrangements, whereby a bilateral commission is set up for the specific purposes of management of transboundary stocks;
C. regional fisheries organizations;
D. general cooperation agreements for the management of transboundary stocks on an ad hoc basis, but with the likelihood of the management measures being adopted continuing to be uncertain.
Category A: an example is provided by the series of annual arrangements agreed upon between Norway and the EU, within the framework of the Fisheries Agreement of 27 February 1980, whereby the two countries yearly conduct consultations on management measures and allocation of mutual fishing rights for the coming year. The consultations are based on the recommendations from the International Council for the Exploration of the Sea (ICES). Total allowable catch (TACs) are established for the relevant transboundary stocks, with the TAC allocations being based upon zonal attachment of the resources. Provisions are made for Norway to take parts of its quotas in the European Union (EU) zone, and vice-versa. The two parties have developed increasingly close cooperation in the field of monitoring, control and surveillance, and, in addition to a cooperative arrangement with the EU, Norway has entered into control arrangements with the relevant member States of the EU. In this respect, the exchange of inspectors/observers on Coast Guard vessels and at landing sites are of particular importance. More recently, Norway and the EU introduced a satellite based (vessel monitoring system) VMS system and have entered into a specific arrangement on VMS to harmonize initiatives and regulations (Engesaeter, 1993; Wage, 2001).
Another example is provided by the 1989 Agreement between Denmark, Iceland and Norway concerning the capelin stocks in the waters between Greenland, Iceland and Jan Mayen. Under this agreement, yearly consultations and negotiations are held to decide on unilateral/bilateral quota arrangements, licensing arrangements and other management measures.
Yet another example arises in the Treaty between Australia and Papua New Guinea on Sovereignty and Maritime Boundaries, ratified by the two countries in 1984. Under the Treaty, the parties adopt management measures for the fisheries of the Protected Zone in the Torres Strait, including the setting of TACs allocated between the Parties in fixed percentages (depending on the area concerned) (Staples, 2003)
Category B: the first example is taken from the case of the Barents Sea fishery resource, shared by Norway and Russia, which we have already discussed at some length. Cooperative management of the resources commenced, it will be recalled, in the mid-1970s. Within the framework of the Norway-Soviet Union Fisheries Agreements of 1975 and 1976, yearly quota consultations are undertaken by the Joint Norwegian Russian Fisheries Commission, established by the Agreement of 1975. The Commission consultations are scientifically based upon recommendations from ICES. The primary task of the Commission is to agree on the TACs for the shared stocks, covering the whole migration area of the stocks. Unlike the consultations between Norway and the EU, the Joint Norwegian Russian Fisheries Commission consults, not only on the quota allocation between the parties, but also on quota allocations to third States. Rules on how fish caught by licensed third States vessels are to be deducted from the parties’ allocations are laid down in the arrangement.
The cooperation between the two countries has resulted in two major achievements: the establishment of a so-called Surveillance Program in the Barents Sea and the implementation of measures to improve the selectivity of fishing gear. The Program, introduced in the late 1980s, allows for fishing grounds to be continuously surveyed with a view to closing areas, where fish below a prescribed minimum size are abundant. The Program is viewed as an arrangement for closing and opening of fishing grounds on a real time basis. For the purposes of improving the selectivity of fishing gear, the parties have centered on the development of grid sorting systems in the trawl fishery. The creation in 1993 of the Permanent Committee on Management and Control of the Fisheries Sector has provided a basis for cooperation in the field of Monitoring, Control and Surveillance (MCS). Control both at sea and on land has been improved, procedures have been put in place between the Parties’ Coast Guard and Control Authorities, including the exchange of information on catch and landing data, exchange of inspectors/observers on board of Coast Guard vessels and in ports have occurred. A satellite based VMS in Parties’ economic zones has also been established. In the year 2000, the basis for the cooperation on MCS was further formalized between the Parties, when an Arrangement on MCS was entered into. On the Norwegian side, the Directorate of Fisheries and the Coast Guard have signed the Arrangement (Stokke, 2003; Wage, 2001).
The International Pacific Halibut Commission, set up by the 1953 Convention on the Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea, as amended by a Protocol of 1979, is another representative example of this group. The Convention applies to the waters under the “exclusive fisheries jurisdiction” of each party, collectively known as “Convention waters”. The Commission deals with commercial and sport fisheries for Pacific halibut. Interestingly, it has the power to hold annual meetings with representatives of the halibut fishery industry. It generally alternates its regular annual meeting, and its mid-year meeting, between Canada and the United States, and may hold other meetings, if the need arises. The Commission may also hold public hearings, if it so desires. It establishes allocation percentages for halibut stocks shared by Canada and the USA in the North Pacific and Bering Sea.
Other management measures adopted include closed seasons, minimum fish size and gear regulations. The Commissioners consider reports from three groups in total (i.e. the Board, the Processor Advisory Group and the Commission staff) when making final decisions. Article III(1) of the Convention states that “all decisions of the Commission shall be made by a concurring vote of at least two of the Commissioners of each Party” (Convention, 1953). They are advisory in nature and conservation and management measures decided by the Commission require the approval of the parties (Art III(3)). The trigger for decision of measures is that “investigation has indicated such action to be necessary”. The measures may be decided with respect to (a) national and fishing vessels of the parties and (b) fishing vessels licensed by the parties.
A third example is provided by another case, which we have discussed at some length, namely Pacific salmon, shared by Canada and the United States. The 1985 Treaty, referred to previously, established the Pacific Salmon Commission, having equal representation from the two countries.
The Commission has as its objective and role the conservation of the relevant salmon stocks, and the allocations of harvests of these stocks. The Commission is assisted in its work by three panels, namely a Southern Panel, a Northern Panel and a Fraser River Panel. Like the Commission, each panel has equal representation from the two Parties.
The Treaty, when signed in 1985, had a set of short term management plans for six specific sets of fisheries, in the form of an annex. Originally, the primary function of the Commission involved negotiation of new management plans, as old ones expired. Following the Agreement of 1999, which called for long-term management regimes, the Commission’s focus shifted, away from short term management regimes, to the implementation of the called for long-term regimes (Miller, 2003).
Category C: regional fisheries management organizations, normally associated with straddling and highly migratory stocks, have also been established for transboundary stocks. This is exemplified by yet another case, which we have already discussed, namely the International Baltic Sea Fisheries Commission, established by the 1973 Convention on Fishing and Conservation of the Living Resources of the Baltic Sea and Belts. Contracting parties to the Convention as amended by Protocol are: Estonia, European Community, Latvia, Lithuania, Poland, and Russia (having succeeded the USSR as a party). The Convention applies to “all fish species and other living marine resources in the Convention Area”. The Convention Area includes all waters of the Baltic Sea and the Belts, excluding internal waters. The Commission, based in Warsaw, under Article IX(1), is to: (a) coordinate resource management “by collecting, aggregating, analysing and disseminating statistical data;” (b) promote coordination, “as appropriate”, of scientific research; (c) prepare and submit recommendations “concerning measures referred to in Article X” (see the Commission website, http://www.ibsfc.org) for consideration by the parties; and (d) to examine certain information submitted by the parties (Convention, 1973).
Except where the Commission decides otherwise, its sessions are to be held every two years. In practice, the Commission meets annually (Rules of Procedure for the Commission, rule 6.1). To perform its functions the Commission may set up working groups or other subsidiary bodies and determine their composition and terms of reference. Examples of bodies established include the following: Standing Working Group on Regulatory Measures; Standing Working Group on Finance and Administration; Working Group on Control and Enforcement; IBSFC Salmon Action Plan Surveillance Group; Working Group on Long-Term Management Objectives and Strategies for Herring and Sprat; Working Group on Fishery Rules. Each Party is to have one vote. Decisions and recommendations of the Commission are to be adopted by a two-thirds majority of votes of the Contracting States, present and voting at the meeting. However, any recommendation relating to a Party’s waters shall only enter into force for that party, if that Party votes for it (Art VIII(3)). The Convention, under Article XI, establishes an objection procedure. Thus, though recommendations are binding on the Parties, a recommendation will not become binding on a Party that had objected to it. A Party may at any point withdraw its objection. There is also under Article XI a termination procedure. Following the date of entry into force of a recommendation, a Party may notify its termination of acceptance, whereupon the recommendation will cease to be binding on that party one year later.
In practice, the Commission has established a consolidated set of Fishery Rules. This is updated after each Commission meeting. They include rules on inter alia: inter-annual TAC flexibility; quota exchange (e.g. herring against cod) and quota transfers (e.g. cod); catch reporting; refusal of landings; log books; prohibitions on certain types of fishery (end use of fish; method; species); prohibitions on certain species or sizes of fish on board; gear stowage; permissible bycatch; discarding; gear characteristics; marking of fishing gear; and closed areas and seasons. The TACs themselves are listed separately from the Fishery Rules. The TACs are established each year at the Commission meeting for the following year, for the main four commercially exploited specie, i.e. cod, herring, salmon, and sprat. The Commission website reports that “TACs have been the main tool or basic tool of the management procedure and they have been introduced first in 1977 for cod, sprat and herring, and in 1988 for salmon” (http://www.ibsfc.org).
Long-term management schemes have been adopted. The Commission website states that these include: (a) the 1997 Salmon Action Plan; (b) the 1999 Long Term Management Strategy for Cod Stocks in the Baltic Sea; and (c) the 2000 Long Term Management Strategy for the Sprat Stock; a Long Term Strategy for the Herring Stock was further discussed in 2001 (http://www.ibsfc.org).
Finally, illegal fishing and underreporting have, over the past few years, become important issues. This has caused the Commission to adopt control measures such as port/landing controls, a yearly established record of licensed fishing vessels in the Baltic Sea on country basis and more recently a Joint Inspection/Observers Scheme.
Category D: this final category concerns a set of agreements under which parties undertake, in a general way, to cooperate in the management of transboundary fish stocks on an ad hoc basis. A typical example is the Convention on Fisheries Cooperation Among the States Bordering the Atlantic Ocean adopted in 1991. There are ten contracting parties in the Convention. The objectives of the Convention include, inter alia, the promotion of regional cooperation on fisheries management, and the enhancement, coordination and harmonization of the parties’ efforts and capabilities for the purpose of conserving and exploiting fishery resources, considering in particular fish stocks occurring within the waters of more than one party. The geographical area covered is assumed to be waters under the sovereignty and jurisdiction of the contracting parties. Parties are to adopt protocols addressing measures, procedures and standards aimed at implementing the provisions of the Convention.
Another example of this group is the Nauru Agreement Concerning Co-operation in the Management of Fisheries of Common Interest of 1982. The scope of the agreement is to coordinate and harmonize, and to cooperate on, monitoring, control and surveillance of fisheries (notably those carried out by foreign fishing vessels) for common stocks in waters under the fisheries jurisdiction of the Parties. An annual meeting of the parties is to be convened preceding or following the regular session of the South Pacific Forum Fisheries Committee in order to promote the implementation of this Agreement.
The Parties are to seek the assistance of the South Pacific Forum Fisheries Agency (FFA) in providing secretariat services for implementing and coordinating the provisions of the Agreement, for instance in establishing procedures and administrative arrangements for the exchange and analysis of inter alia catch and effort statistics regarding vessels fishing in the Parties’ waters for common stocks; for the exchange and analysis of inter alia information on vessel specifications and fleet composition. The Parties are to seek to standardize their respective licensing procedures and in particular: (a) to seek to establish and adopt uniform measures, terms and conditions, and procedures relating to the licensing of foreign fishing vessels, including application formats, licensing formats and other relevant documents; and (b) to explore the possibility of establishing a centralized licensing system for foreign fishing vessels.
Throughout much of the discussion, up to this point, considerable emphasis has been given to the difficulties to be encountered in establishing effective cooperative management regimes for transboundary stocks. Emphasis must also be given, however, to the fact that there are, and have been, cases of successful cooperative management of transboundary stocks, which can serve as examples to others about to engage in cooperative resource management endeavours. Among the case studies presented at the Norway-FAO Expert Consultation, perhaps the most striking example of successful cooperative management of transboundary stocks is to be found in that on the tuna resources shared by the Pacific Island States of the Western and Central Pacific - the South Pacific (Aqorau, 2003). Let us examine this case, to which we have already referred in passing, in more detail.
The South Pacific
Within the Pacific Islands Region of the South Pacific are to be found the most important tropical tuna resources in the world (Aqorau, 2003; Gillett et al., 2001). In 2001, the latest year for which complete statistics are available at the time of writing, the reported harvests in the region of the four main tuna species (South Pacific albacore, skipjack, yellowfin and bigeye) was just under 2 million tonnes, with a landed value of roughly US$2 billion (Aqorau, ibid.; Gillett et al., ibid.). The resources are, at one and the same time, transboundary and highly migratory in nature. In this section, we will consider the resources in terms of their transboundary aspects alone. A later section will examine some of the highly migratory aspects of the resources.
In any event, the tuna resources were, and are, of fundamental economic importance to the Pacific Island States. Consequently, it could be maintained that the Pacific Island States were, collectively, one of the big “winners” from the advent of Extended Fisheries Jurisdiction (EFJ), in 1982. Having said this, however, it was not at all clear at the time that the economic benefits, which these countries would enjoy from EFJ, would be other than ephemeral.
The Pacific Island States are small, and are spread over an immense ocean space of 35 million square kilometres. The landmass of the Island States is but two percent of the total area of the region (Aqorau, ibid; Gillette et al., ibid.). Most of the Pacific Islands States intra-EEZ harvests of the resources - 80 to 90 percent - were, and are, taken by DWFSs. Finally, at the advent of Extended Fisheries Jurisdiction, the Pacific Island States were generally at low levels of development. Hence, these countries faced what appeared to be insurmountable monitoring and surveillance problems.
These difficulties were compounded by the following. First, the Pacific Island States effectively were faced with but one DWFS, Japan. As a provider of harvesting services, this economically powerful nation was in the position of a monopolist within the Pacific Islands Region. Secondly, the right of coastal States to assert management jurisdiction over tuna resources, within their EEZs, was bitterly contested at the close of the UN Third Conference on the Law of the Sea.
The Pacific Island States had an incentive to cooperate. Without cooperation, Japan, the one single DWFS, would have had the opportunity to play one Island country off against the other, and if so, was likely to do so successfully (Aqorau, ibid.; Munro, 1991). Achieving effective cooperation was, however, very difficult.
The Pacific Island States attempted to cooperate in 1979 through the establishment of the South Pacific Forum Fisheries Agency (FFA), to which we have already made reference. The FFA was to report to the Pacific Islands Forum Leaders.
There were, at the inception of the FFA, fourteen States involved, varying greatly in size, and spread over vast distances. The commonplace observation about the difficulty of attempting to achieve a stable “solution” to a cooperative game increasing exponentially as the number of players increases will be recalled. Outside observers, in the late 1970s, and early 1980s, were generally pessimistic about the future viability of the FFA (Munro, 1982).
The tuna resources in the South Pacific are, however, not evenly spread, tending to concentrate around the Equator. The consequence is that there are, in relative terms, “haves” and “have nots”, among the Pacific Island Nations. Seven of the fourteen could be regarded as “haves”. Concerned about the lack of progress in the FFA, the seven met on the island of Nauru (one of the seven) and signed a formal agreement, the Nauru Agreement, which we discussed under the heading of institutional structures. The seven became known as the Nauru Group thereafter. The Nauru Group made it known that, while the Group had no wish to see the FFA disintegrate, the Group would go it alone unless the others engaged in serious cooperation. The others decided that serious cooperation was indeed in their best interest.
In the discussion of cooperative games with many players, it was pointed out that, in such games, the formation of sub-coalitions is a common occurrence. In the case of the FFA countries, two sub-coalitions were thus formed, the Nauru Group (“haves”), and the “have nots”. It helped that there are two major Pacific Island States, Papua New Guinea (PNG) and Fiji, which were in different sub-coalitions. PNG was in the “haves” sub-coalition, and became its leader, while Fiji became the leader of the “have nots” sub-coalition. An intractable fourteen player game had evolved into what amounted to a two player game (Munro, 1991).
Predictably, the management goals of the two sub-coalitions were not the same. The Nauru Group was much more concerned about the long term stability of the resources, than the less well off sub-coalition. Clearly, the Nauru Group placed the higher value on the resource. The theory tells us that the optimal outcome would be for the management preferences of the sub-coalition placing the higher value on the resource to be made dominant, and for that sub-coalition to compensate its fellow sub-coalition, the Compensation Principle once again.
The predictive power of the theory in this instance proved to be strong. The Nauru Group became the cutting edge in terms of formulating management policy. Various forms of side payments emerged, through which the “have not” sub-coalition was compensated (Aikman, 1987; Munro, 1991). These compensations continue up to the present day. Moreover, the “have nots” sub-coalition has played an increasingly important role in the cooperative management of the resource (David Doulman, personal communication), which attests to the growing strength of the cooperative resource management arrangement.
The Pacific Island States (South Pacific countries), through the vehicle of the FFA, have achieved effective cooperation in such matters as fisheries management, the establishment of minimum terms and conditions of access for DWFSs - so that DWFSs cannot play one State off against another - and in monitoring, control and surveillance. While there have undoubtedly been incidents of poaching - “free riding” by non-participants - these have never been great enough to threaten the stability of the cooperative arrangement.
The success of the Pacific Islands Region cooperative transboundary resource management can be attributed to the following factors:
the South Pacific countries all share a common interest and objective for the conservation and management of shared fish stocks;
the objectives of the South Pacific countries are explicit;
the object and purpose of establishing an organization was to assist South Pacific countries deal with their lack of resources in dealing with DWFSs;
the strong links between the FFA and the South Pacific Islands Forum ensured fisheries problems received the highest political consideration;
member countries had a clear role in providing policy and administrative guidance in the work programmeme of the FFA;
the flexible role and functions of the FFA enabled it to respond to different management challenges in a timely and effective manner; and
the clear delineation between the functions of the technical Secretariat, headquartered in Honiara, Solomon Islands, and the governing council of the FFA enabled it to operate effectively as an organization.
(Aqorau, 2003, pp. 65-66).
With the review of the issue of the conservation and management of transboundary fish stocks now complete, we turn next to the question of the conservation and management of Categories (b) and (c) (highly migratory, and straddling) stocks.
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[7] International Court of
Justice, Reports 1964, p. 3 [8] International Court of Justice, Reports 1964, p. 3. [9] In the case of some fishery resources, there will be no Bionomic Equilibrium this side of extinction. [10] The "Prisoner’s Dilemma", and its relevance to fisheries, is discussed in detail in the appendix to this paper entitled: "The Prisoner’s Dilemma and Fisheries". [11] Barrett (2003) prefers to use the term Collective Rationality. [12] Barrett (2003) adds a third requirement, "fairness". While we do not deny the importance of fairness, or equity, we are not really certain that this third requirement is independent of the other two. Consider a two player cooperative resource management arrangement, free from the possibility of cheating, but in which one player finds that its expected return from the fishery under cooperative management, is less than what it could expect under non-cooperation. The player will deem the arrangement to be "unfair", and refuse to participate. We could, just as easily have said, however, that the arrangement violates the requirement of individual rationality from the perspective of this player. [13] Some participants in the Norway-FAO Expert Consultation thought that the term "side payments" had a somewhat unseemly ring to it. [14] The Compensation Principle, although not labelled as such, found its way into an FAO publication a decade ago, FAO Fisheries Circular No. 853, Marine Fisheries and the Law of the Sea: A Decade of Change, 1992. The author, after introducing a Compensation Principle type of example, states that: "The basic principle is the treatment of the fishery resources as resources that have value in situ; a value definable in monetary terms. The model is that of an international regime that achieves stability by the sharing of the benefits deriving from the use of the resource and providing compensation for those members who are less well endowed. (FAO, 1992, p. 41)". [15] This has been due largely to a combination of the expanding membership of the EU, and the ending of the Cold War. [16] The precedent has now been set in the Baltic of going beyond quota swaps, to the actual buying of quota (Ranke, 2003). [17] The resource spawns in Norwegian waters. When the resource is in a healthy state, it migrates as far as Iceland. When it is in a depressed state, the resource is confined to Norwegian waters. Norway introduced the harvest moratorium for the remnants of the resource, in the early 1970s. Upon the resource’s recovery, the moratorium was lifted. It became necessary to manage the resource cooperatively, since the resource had resumed its pattern of migrating beyond Norwegian waters (Bjørndal, ibid). |
