Fishing Capacity in Europe: Special Issue Introduction

Transcription

1 University of Southern Denmark From the SelectedWorks of Niels Vestergaard 2005 Fishing Capacity in Europe: Special Issue Introduction Niels Vestergaard, University of Southern Denmark Available at:

2 Marine Resource Economics, Volume 20, pp /00 $ Printed in the U.S.A. All rights reserved Copyright 2005 MRE Foundation, Inc. Fishing Capacity in Europe: Special Issue Introduction NIELS VESTERGAARD University of Southern Denmark Over the last two decades, management of fishing capacity has been a central focus of the Common Fishery Policy (CFP) of the European Union (EU). At the global level, the capacity issue was given high priority on the political agenda by the Food and Agriculture Organization of the United Nations (FAO) in the late 1990s. A series of studies and meetings aimed at defining and measuring capacity ended with the formation of an International Plan of Action. The issue of overcapacity has its roots in the well-known market failure in fisheries, where too many firms enter the fisheries using excessive inputs, resulting in excess capacity. With overcapacity in the sector, the profit margin of the firms is usually very small, which may make it even more difficult for politicians to address the problems effectively, often leading to new problems. The hands of the industry and the authorities are, in many cases, tied since short-term measures taken by two parties dominate. In the fisheries economics literature, Munro and Scott (1985) divided these fisheries problems into two classes: class I, where the lack of regulation results in dissipation of rent; and class II, where authorities set a total allowable catch (TAC), but at the same time fail to prevent the race for fish that leads to rent dissipation. However, Warming (1911) discovered this nearly 100 years ago (see Andersen (1983) for an English version of the article). Therefore, with a failed fishery policy, traditional regulation is supplemented with measures aimed at limiting and controlling the development of capacity. Understanding the measurement and definitions of capacity are necessary conditions for designing an effective capacity management plan. When defining capacity, concepts such as capacity output and capacity base are central. Capacity output is the maximum potential harvest that a fully utilized fishing fleet can produce given the fish stock and the present state of technology; capacity base is the level of fixed inputs. Capacity utilization then is the actual production divided by the capacity output. The CFP does not recognize these distinctions, because it focuses on Multi Annual Guidance Programmes, where reductions in the fleet are determined based on two fishing inputs, namely nominal gross tonnage (GT) of the vessel and engine kilowatt power (kw). The reduction goals are based on long-term assessment of the fish stocks leading to target fishing mortalities for different stocks. These target fishing mortalities are then transformed to reductions in the size of different fleets using linear relationships. Hence, the CFP does not consider capacity output and capacity utilization of the fleets; thus the reduction in capacity base is not (necessarily) targeted towards the fleet segments with Niels Vestergaard is professor in the Department of Environmental and Business Economics and leader of the Centre of Fisheries & Aquaculture Management & Economics (FAME), University of Southern Denmark, Niels Bohrs Vej 9, DK-6700 Esbjerg, nv@sam.sdu.dk. I, the guest editor, along with the authors thank the anonymous referees whose comments and suggestions have greatly improved the quality of the papers. Finally, we thank the staff at Marine Resource Economics for help in the production of this special issue. 323

3 324 Vestergaard the highest overcapacity. In the article, Role of Subsidies in EU Fleet Capacity Management, Erik Lindebo touches on these issues. The FAO, in its process of defining and measuring capacity, examined different estimation methods. Two methods were identified as the most promising, namely stochastic production frontier (SPF) estimation and Data Envelopment Analysis (DEA). See Kirkley, Morrison Paul, and Squires (2002) for an overview of the issue of capacity in fisheries. The articles in this special issue are an outcome of a project entitled, Measuring Capacity of Fishing Industries using the Data Envelopment Analysis (DEA) Approach, supported financially by the European Commission, Directorate-General Fisheries. As the title indicates, the aim of the project was to use the DEA approach to measure the capacity and capacity utilization of selected EU fishing fleets. In particular, the following questions were put forward: What is the maximum amount of output a vessel or a fleet can produce given available input stocks? What is the technical efficiency and productivity of the fleet and vessels over time? What portion of total fishing effort is redundant or unnecessary relative to present levels and biological and economic allowable catches (TACs) ensuring sustainable fisheries? What is the balanced or target structure of the industry and the utilization of inputs? In their article, Van Hoof and de Wilde show that, on average, the Dutch beam trawlers are operating in an efficient manner, indicating a moderate overcapacity. In a second-stage analysis, the variance in the level of capacity is analysed based on environmental factors. Although these factors do not explain much of the variance in capacity, the home port factor seems to play a significant role, indicating important regional differences. The main French seaweed (kelp) fleet in the Brittany region is analysed by Guyader and Daurès in their paper. They are interested in the issue of scale efficiency; i.e., to what extent the size of the operation is not at the optimal scale. Analysis of scale efficiency with the DEA approach shows that either large vessels or a few small vessels operate at the optimal scale. The optimal scale seems to be influenced by regulatory measures, especially the number of trips. Trip regulation gives fishermen incentives to buy or build larger vessels in order to benefit from scale efficiency. As a conclusion, the allocation of individual quotas could benefit the fishery by reducing the race for kelp and by providing incentives to increase vessel size. Evaluation of a recovery plan implemented in the Strait of Gibraltar red seabream fishery in 1999 is the topic of the paper by Castilla Espino, Garcia del Hoyo, and Sharp. 1 The capacity of the entire fleet fishing in the Strait of Gibraltar was on the order of 755 tonnes in 2000 and 652 tonnes in Overcapacity of the fleet is significant relative to the TAC fixed in 2002 at 270 tonnes for the period As the authors emphasise, the results highlight a failure of the recovery plans in controlling fishing capacity due to the fact that technical efficiency increased. The new recovery plan implemented in 2002 did not significantly reduce fishing capacity. Reforms that focus on the underlying institutional structure of this fishery, particularly those that adequately combine property rights regimes with 1 The paper was not part of the EU supported project, but added to the special issue at a later stage.

4 Fishing Capacity in Europe: Special Issue Introduction 325 management systems, are necessary to create incentives for fishers to invest in the preservation of this fishery and perform efficiently. The next three papers use what is called a short-run industry capacity approach. The observation is simply that the overcapacity issue is noticeable and relevant to address at the sector level, where the industry capacity can be compared to the sustainable production of the fish stocks; i.e., in quota managed fisheries at the TAC level. This is, in many cases, the most meaningful comparison. Therefore, a model was developed using the basic methodology from Dervaux, Kerstens, and Leleu (2000), which combines capacity at the individual firm and industry levels (see Kerstens, Vestergaard, and Squires 2004). This helps to evaluate overall capacity reductions through reallocation of inputs at the industry level. For the first time in the literature, Lindebo compares capacities of EU fleets across nations fishing for the same fish stocks, namely flatfish (e.g., plaice) in the North Sea. The analysis shows that the North Sea fleet, composed of Danish, Dutch, and United Kingdom vessels, on average, requires a 23% reduction in fixed inputs to reach full capacity. The United Kingdom fleet requires the largest cutbacks of between 38 40%, whereas the Danish and Dutch fleets need reductions of around 23% and 15 18%, respectively. This result highlights a problem with the uniform EU fleet reduction programme, where the reductions are equal across nations. In their article, Tingley and Pascoe look at the effects of different catch developments on the industry capacity and structure of the Scottish fishing industry. The result is that overall capacity is reduced by more than 10% depending on the reduction of the TACs. In the last article on industry capacity, Kerstens, Squires, and Vestergaard relax the implicit assumption concerning the convexity of the production possibility set. However, non-convexity of the production set has important policy implications in renewable resource economics, including fisheries, allowing for increasing returns to scale, pulse fishing, etc. Convexity of technology is ultimately an empirical issue, and numerous empirical analyses of fishery production frequently fail to establish convexity. When non-convexity of the production set is empirically established in a fishery, important implications emerge for estimating the short-run industry model. Not only are there more vessels under non-convexity than under convexity in the solution, but in some cases there are other vessels than those found in the convex solution; i.e., the fleet composition differs. For example, the number, and even composition, of vessels remaining in the fleet under vessel decommissioning programs (such as vessel buybacks) can differ depending on whether or not convexity of technology is maintained. The special issue is closed by Lindebo. As shown in his article, the role of subsidies with respect to capacity management is rather comprehensive and may be highly influential. Despite the best intentions of EU authorities, little success has been realized in regards to achieving a long-term, sustainable balance between the fishing fleet and available resources. The continued call for stock recovery plans and emergency scrapping measures is clear evidence of this. The rather fundamental issue of capacity definition needs to be addressed. Defining capacity as an input of production rather than the common output definition of capacity means that capacity reductions cannot be directly related to catch output in an analytical framework. That is, it is difficult to gauge which effects, if any, the removal of vessel inputs through decommissioning schemes will have on the resource base. Since the main aim of policymakers has been to reduce fishing pressure on stocks, establishing the linkage between vessels and catch output is of the utmost importance, and remains a serious obstacle to managers.

5 326 Vestergaard References Andersen, P On Rent of Fishing Grounds: A Translation of Jens Warming s 1911 Article, with an Introduction. History of Political Economy 15: Dervaux, B., K. Kerstens, and H. Leleu Remedying Excess Capacities in French Surgery Units by Industry Reallocations: The Scope for Short and Long- Term Improvements in Plant Capacity Utilisation. Public Provision and Performance: Contribution from Efficiency and Productivity Measurement, Blank, ed., pp Amsterdam: Elsevier. Kerstens, K., N. Vestergaard, and D. Squires Adapting the Short-Run Johansen Industry Model for Common-Pool Resources: Planning the Danish Fisheries Industrial Capacity to Curb Overfishing. Labores. Document de travail no Lille, France: Universite Catholique. Kirkey, J., C.J. Morrison Paul, and D. Squires Capacity and Capacity Utilization in Resource Industries. Environmental and Resource Economics 22: Munro, G.R., and A.D. Scott The Economics of Fisheries Management. Handbook of Natural Resource and Energy Economics Volume II, A.V. Kneese and J.L. Sweeney, eds. Amsterdam: North Holland. Warming, J Om Grundrente av Fiskegrunde. Nationaløkonomisk Tidsskrift 49: