On 30 November, Uruguayan Ambassador Guillermo Valles Games and chair of the fisheries subsidies negotiations at the World Trade Organization (WTO) released a first draft of a text outlining possible disciplines to regulate fisheries subsidies. While the details are likely to change in the coming months, the overall structure and ambition of the draft provides an important first step towards striking the delicate balance between environmental sustainability and livelihoods priorities. If refined and implemented, it holds the potential to not only limit particularly harmful subsidies, but also contribute to strengthening national fisheries management systems, encouraging regular stock assessments and enhancing the transparency and sustainability of fisheries-access agreements.

During negotiations in mid-December and late-January, the draft text garnered widespread support as a good basis for discussions, although, not surprisingly, views differed on the specifics. Also, while there seems to be general willingness to move this issue along quickly, progress and country positions are likely to be influenced by deep divisions over the draft text on anti-dumping which, like fisheries subsidies, falls under the umbrella of the Rules negotiations.

Environmental considerations and conditions are strongly reflected in the draft disciplines. The draft text lists a wide range of specific fisheries subsidies that WTO members would be prohibited from providing. Among them are subsidies for vessel construction and modernisation and for operating costs of fishing or service vessels. Subsidies for port infrastructure (such as landing, storage and in- or near-port processing facilities) would be prohibited if the facilities were used predominantly for activities related to marine wild capture fishing. Subsidies for income and price support related to marine wild capture fishing would also be banned.

In addition, the draft would prohibit all subsidies (with the exception of those provided by least-developed countries) that benefit fishing vessels or activities affecting fish stocks that are "in an unequivocally overfished condition" (Article I.2). What such a condition would be, and how it could be determined, is as yet undefined. Subsidies benefiting vessels that engage in illegal, unreported or unregulated fishing would also be prohibited.

The draft text goes on to set out a number of exceptions to the prohibitions, including "general exceptions" for all countries and specific exceptions for least-developed and developing countries. As a ‘general discipline', the use of a subsidy shall not result in "depletion of or harm to, or creation of overcapacity in respect of" (a) straddling or highly migratory fish stocks whose range extends into the national waters of another Member; or (b) stocks in which another Member has identifiable fishing interests.

In addition, members granting permitted subsidies are required to operate a fisheries management system "designed to prevent overfishing". The system shall be based on "internationally-recognised best practices" reflected in relevant international instruments and include regular science-based stock assessments, as well as capacity and effort-management measures. These systems would need to be anchored in domestic legislation and administrative or judicial enforcement mechanisms, which together with the stock assessment would be subject to peer review by the relevant body of the United Nations Food and Agriculture Organization (FAO). Only subsidies to small-scale operations (as defined in the text) would be exempt from this requirement, although the implementation of a management system would be encouraged.

Development provisions aim to balance livelihoods and environmental considerations

Under the special and differential treatment (S&DT) provisions, the text proposes various exceptions for developing countries. Least-developed countries would be exempt from the prohibitions, although they would still be subject to the ‘general discipline' applying to shared fish stocks. Other developing countries would be allowed to provide otherwise prohibited subsidies if they are used to support small-scale operations, as well as subsidies to port infrastructure, and income and price support.

Moreover, subsidies for operating costs of fishing and service vessels would only be allowed for vessels of a certain length. The same would apply to subsidies for the construction and modernization of vessels. In addition, such subsidies would be permitted for vessels engaged in fishing activities directed at "identified target stocks" in national waters, provided that a peer reviewed stock assessment had been conducted. As noted above, the provision of almost all of the subsidies covered by the S&DT provisions (other than those paid to small-scale operations) would be conditional on the general requirement to have a fisheries-management system in place (which in the case of developing countries can be implemented at the regional level).

How to deal with government-to-government access agreements - i.e. agreements that provide foreign fleets access to a country's national waters against agreed fees - has been a particular bone of contention for the small island and coastal states which rely on access fees as an important source of government revenue. The draft text provides an interesting approach to responding to these concerns while offering a mechanism to address two criticisms that have often been levelled at access agreements: namely the lack of effective measures to ensure that fishing under these agreements is within sustainable limits and the limited transparency of the agreements' provisions.

Significantly, the text states that the payment made by the ‘payer' government to the host nation to obtain access rights for its fleet would not constitute a subsidy. Moreover, while "subsidies that arise from the further transfer" of such rights by the payer government would be prohibited, the draft provides for extensive exceptions. Specifically, it stipulates that where the country granting the access is a developing country (as is usually the case), such subsidies would be allowed provided that the access agreement includes provisions to prevent overfishing (including requirements for regular stock assessments) and is made public. In addition to these specific disciplines, such subsidies would likely be subject to the ‘general discipline' since both the host nation and the payer government have fishing interests in the host nation's stocks.

Incentives for transparency

The draft text provides a number of ‘incentives' that could help increase the transparency of fisheries subsidies, stock data, relevant domestic legislation and access agreements. Thus, any subsidy that has not been notified is presumed to be prohibited and it is up to the subsidising member to show that it is indeed allowed. The same is true for subsidies related to access agreements whose terms have not been made public. Moreover, the text stipulates that subsidies can only be granted once information on a subsidising member's management system (including the result of the stock assessment, domestic legislation and administrative or judicial enforcement mechanisms) has been peer-reviewed by the FAO and notified to the WTO.

Mixed reactions foreshadow the need for further debate

The ‘Friends of Fish' (such as New Zealand, Australia and the United States), as the advocates of disciplines on fisheries subsidies are known, have welcomed the text, although acknowledging that certain aspects remain to be refined. Environmental groups have largely echoed these positive sentiments, supporting the overall direction of the text, while calling for some of the provisions to be further clarified. As World Wildlife Fund Senior Fellow David Schorr noted, "now we must reduce the text's ambiguities without reducing its ambition".

Japan, Korea and Taiwan are less impressed that some of their previous proposals, such as excluding port infrastructure and processing subsidies, and allowing developed countries to also subsidise small-scale operations, had not been reflected in the text. They take particular issue with the broad prohibition under Article I.2 and to a lesser extent the ‘general discipline' related to shared stocks. The EU also expressed concern over the broad scope of the prohibitions.

The small island and coastal states seemed largely satisfied with the language on access agreements, but are looking for greater flexibilities on S&DT, such as permission to subsidize operating costs of all vessels (not just those of a certain length) and of processing activities as well as the construction and modernisation of longer boats. While generally supporting the requirement to operate fisheries management systems, they felt that their constraints in implementing and enforcing these mechanisms would need to be recognised in the text, as well as their need for technical assistance.

Some of the larger developing countries, such as Brazil, India and China, also felt that conditions placed on S&DT were too burdensome. Some expressed concern that the peer-review process would go beyond the FAO mandate and could be hijacked by political interests of the more powerful fishing nations. The question of whether developing countries should be allowed greater flexibility in the provision of subsidies for the construction and modernisation of vessels, for example by allowing subsidizations of vessels fishing on the high seas, also attracted considerable attention at the January meeting.

After mainly focusing on the provisions dealing with prohibited subsidies and exceptions (Articles I-III) in the January meeting, members are expected to turn their attention to other outstanding issues - such as fisheries management, the general discipline, and notifications, transition and dispute settlement - at the next meeting of the Negotiating Group on Rules. Several countries have asked Ambassador Valles Games to submit a revised draft text as soon as possible.

Heike Baumüller (hbaumuellerATyahoo.com) has been working as an independent consultant in Cambodia since 2007, undertaking and coordinating policy research on issues related to trade and environment, agriculture and WTO accession for IISD, WWF and the GTZ. Previously, she was the Programme Manager, Environment and Natural Resources and Managing Editor, Bridges Trade BioRes at the International Centre for Trade and Sustainable Development (ICTSD).