Taking Ownership
How to Make the Atlantic Fishery An Engine of Economic Growth

The Atlantic fishery is hit by a major crisis about once every 10 years. Yet little has been done since the most recent crisis to resolve the industry’s underlying problems, a situation which calls out for fresh thinking. To help met this need, AIMS just published a book on the fishery, Taking Ownership: Property Rights and Fishery Management on the Atlantic Coast, to examine alternative regimes for the Atlantic fishery. It features contributions from some of the world’s leading experts. As well, AIMS organized late last year, in St. John’s, Newfoundland, a high level conference which brought leaders of industry, labour, government, and environmental groups together with researchers and academics to discuss alternatives for the Atlantic fishery. The following article reflects some of the new thinking explored in the book and at the conference.

by Fred McMahon, AIMS Senior Policy Analyst
The Atlantic fishery has never delivered on its economic promise to become an engine of growth for Atlantic Canada. In fact, it is often an expensive drag on public resources with businesses and individuals in the fishery too often dependent on government support.

A number of questions need serious study if one of Atlantic Canada’s most important resources is to meet its potential in improving the lives of Atlantic Canadians.

Why do crises—economic and ecological—so frequently arise in the Atlantic fishery?
Why is the fishery too often a drain on our resources rather than a productive contributor to the region’s economic life?
Is something fundamentally wrong with our management system?
Are long-term solutions, rather than short-term bandaids, available?
“Even before the current crisis, the economic performance of the fishing industry was well below its potential,” Peter Pearse, University of British Columbia Professor of Resource Management, told the AIMS fishery conference in his summary of conference proceedings. “It would be irresponsible to continue with the traditional management regime. We need to find a better approach. But five years after the cod stocks collapsed, remarkably little has been done to change things.”
Alternate Regimes

Atlantic Canada’s fishery, like others, evolved as a common property resource, open to all who wished to fish. (See box on page below.) This regime succeeded so long as stocks were plentiful but, as overfishing began to threaten the stocks, regulators adopted a pot-pourri of strategies to reduce the catch: limiting the number of fishers; narrowing the length of the fishing season; and putting restrictions on technology and the length of the fishing boats.

An alternative regime, now in place in many parts of the world, is based on individual property rights. This is often implemented with individual transferable quotas (ITQs), which assign each fisher a share of the total allowable catch (TAC). Fishers themselves determine when to harvest their share, so the harvesting effort is not concentrated in an arbitrarily short season. (Anthony Scott, professor emeritus at the University of British Columbia, provides an overview of property rights in the fishery in Taking Ownership.) In their strongest form, ITQs can be bought, sold, traded, rented, etc. Fishers who might wish to leave the industry are no longer penalized by the loss of a valuable license. Instead, they can sell their quota. The most efficient fishers and those who can add the most value to their catch become more of a force.

Ecological Consequences

Under the common property regime, fishers’ economic rewards are determined by how much fish they can pull from the sea in whatever short season is permitted. The race to fish is on and—in the escalating contest between regulators to limit the catch and fishers to increase their share—the ingenuity of the fishers inevitably outpaces the regulators, resulting in an ever increasing plethora of regulations to hold back the threat to the fish stocks.
“No one has any incentive to reduce their fishing effort, since any fish left in the water will not be allowed to reproduce, but will likely just be caught by the next boat,” AIMS president Brian Lee Crowley writes in his introduction to Taking Ownership. The outcome is a classic tragedy-of-the-commons problem, in which what is rational for each fisher individually (catch as many fish as one can today) is irrational for all fishers taken together and for society as a whole (since it must lead to the exhaustion of the resource).

Now, imagine a fisheries with property rights established under ITQs. The race to fish is eliminated since fishers can harvest their quota at the optimum time and cannot boost their share of the catch by an increased harvesting effort.

Fishers have a powerful incentive to support and invest in conservation measures. Anything which preserves and, in the long run, expands the TAC increases the individual fisher’s share of that catch. In New Zealand and other jurisdictions where individual quotas have been established, fishers have funded research programs, lobbied for strict enforcement of quotas (sometimes even for quota reductions), and have taken an active role in enforcing regulation.

“In some cases, quota holders have found it in their collective interest to take conservation measures like larger mesh sizes, to co-operate in surveillance and enforcement, and even contribute to the cost. They are assisting in data collection and research. And groups of fishers who previously fought with government regulators have begun to co-operate with them and to support them,” Pearse said.

As well, fishers’ legal ability to protect fish stocks is increased under this regime by the ownership right they have in the fish stocks, as Elizabeth Brubaker, executive director of the Toronto-based Environment Probe, shows in “The Ecological Implications of Establishing Property Rights in Atlantic Fisheries”, a chapter in Taking Ownership.

Economic Consequences

Even leaving aside ecological questions, the common property regime weakens the fishery economically in several ways. The race to fish leads to overinvestment to increase the catch during the arbitrarily short fishing season. This creates a double whammy—revenues are earned for only part of the year, while payments must be made on investments that lie idle for the rest of the year.

This damages the eco-nomic health of the industry—economic crises in the past have been caused by overbuilding—and puts a heavy burden on government to provide support during the off season. As well, the common property regime focuses fishers’ attention on the quantity of fish they can harvest, rather than on preserving quality and adding value to increase the price. In fact, many regulations, particularly those restricting new technology, actually limit quality improvement as does the need to fish intensively during the short season.
And, these short fishing seasons often produced gluts of fish, reducing the landed value of the catch. With ITQs, and other forms of property rights, the race to fish is off—since a fisher’s share of the catch is pre-set—and incentives shift to quality and adding value to the catch.

‘No one has any incentive to reduce their fishing effort, since any fish left in the water will not be allowed to reproduce, but will likely just be caught by the next boat.’

Where individual quotas have been established, overinvestment has been dampened, and the value and the quality of the catch have been improved. And, the increased emphasis on quality, better care in handling and cleaning, and in value-added products often boosts employment.

We now have a good deal of experience with individual quotas around the world, Pearse says. The evidence, in general, is impressive. Where individual quota systems have been adopted in their most unadulterated forms, notably in New Zealand and Iceland, it is hardly an exaggeration to say the fisheries have been revolutionized, and much improved in terms of resource management and economic performance.

(An overview of Atlantic Canada’s experience with property rights in the fishery can be found in Taking Ownership, in a chapter by University of Ottawa economist, R. Quentin Grafton, “Performance of and Prospects for Rights-based Fisheries Management in Atlantic Canada.” Ragnar Arnason, University of Iceland, examines the international experience with property rights in “Property Rights as an Organizational Framework in the Fisheries: The Cases of Six Fishing Nations.”)

Although a number of fisheries in Atlantic Canada already operate under some form of property rights, a change in regime in common property fisheries will cause dislocations. Grafton, in his chapter on Atlantic Canada, urges government to use some of the $2 billion, earmarked for the Atlantic fishery restructuring, to help with the introduction of property rights and ease any resulting dislocations.

Concerns often arise about how initial quotas are established since not all fishers will feel they have been fairly treated. Worries are also voiced about the concentration of rights, and the dislocation of fishers and fishing communities.

Yet, as shown by Grafton and Arnason, in practice these challenges are often less difficult than they seem in theory.

“Individual quotas have led to such an improvement that the onus has shifted from those who advocate them to those who oppose them,” Pearse said. “We should be asking why individual quotas should not be adopted: more specifically, why particular fisheries present difficulties that make quotas inappropriate. Are there any systems that will work better?”