Over the last decades the European fisheries sector has increasingly struggled with a number of structural issues. Efforts to decrease a significant overcapacity of the fleet since the 1980s have at best been partially successful. Modernisation of the remaining vessels requires important investments in order to improve product quality for an increasingly competitive world market, ensure compliance with ever stricter environmental and quota regulations, and maintain adequate safety and working conditions for the sector’s workforce. Although the sector is comparatively well positioned to deal with these challenges, greater ability to compete in the future will hinge on the ability to adjust to resource and market constraints.
The objective of this study is to provide the Committee on Fisheries with a clear and detailed description of the potential impact of WTO and other trade negotiations and instruments on the EU fisheries and aquaculture sector. For this purpose, the study shall review and analyse international trade negotiations conducted by the EU that are relevant for the sector. The study analyses ongoing trade negotiations on fish and aquaculture products with regards to their impact on the EU fisheries and aquaculture sector.
It provides an overview of the most important issues in fisheries trade, such as trade barriers, fisheries subsidies and environmental/socio-economic concerns. For this purpose relevant information on international trade flows; tariff and non-tariff trade barriers as well as the use of relevant trade defence instruments; and WTO, bilateral and regional trade negotiations are presented in the course of the document.
The negotiations conducted in the international WTO framework, particularly the current Doha Round and negotiations on non-agricultural market access (NAMA) constitute a special focus of the study.
Levels of world and EU trade
The study reaffirms that fish and derived products are one of the most traded commodities in the world today. World trade value of imports amounted to 57 billion Euros in 2006. Thus, almost 40 per cent of total world fisheries production enters international trade.
While Non-LDC developing countries supply 65 per cent of world trade, the share of LDCs has remained stable at a very low level of one per cent. The EU is an exception to that trend, with imports of (semi-)processed fish from LDCs having doubled since 2000. Trade flows between non-LDC developing countries and developed countries have increased by 25 per cent since 2000. China is now the largest exporter of fish products and has emerged as a major player in fish processing.
The study underlines the significance of trade in fisheries for the EU-27 as the leading import market for fish products in the world, followed by the USA, Japan and China.
The EU-27 share of world import amounts to 30 per cent in value. Imports originate mainly from Norway, China, Iceland and the USA. Around 10 per cent of EU-27 imports (1.7 billion Euros) are imported from ACP countries. Japan, Switzerland, Russia and, Norway are the main clients of fish products exported from the EU-27. Exports to Norway mostly consist of fishmeal for aquaculture.
Tariffs and non-tariff barrier's
In general, traditional barriers to trade such as tariffs and quantative restrictions have been reduced considerably under the GATT. On average, tariffs for fish have been reduced to 4.5 per cent for developed and below 20 per cent for developing countries.
Among the major importing countries, the USA applies the lowest tariffs, while China and the EU impose average tariffs close to 10 per cent. These two regions also exhibit the highest occurrence of tariff peaks.
EU tariffs on processed products which compete with EU production are high, e.g. tariff peaks amount to 24 per cent for processed tuna, 20 per cent for shrimp, and 12 per cent for canned sardines. Another important characteristic of the EU tariff structure is the wide variety of applied tariffs by country of origin, based on different preferential regimes applicable to different trading blocks.
Only an estimated 5 per cent of imports are charged the full MFN tariff rate. 45 per cent of imports benefit from tariff free arrangements. Also, the EU has highly transparent structures as it applies tariffs as ad valorem duties. In return the tariff structure of emerging and developing markets may pose problems for EU exporters. Extremely high or no bound tariffs are applied by India and Brazil.
In light of the current tariff structure tariff reductions are expected to have only moderate economic impacts given the relatively low tariff levels at present. However tariff reductions could severely hit specific sectors inside and outside the EU, in cases where tariff peaks or tariff escalation still exist.
With the decline of traditional barriers to trade, the importance of non-tariff barriers (NTBs) has grown. The large developed importing economies, including the EU, have set up a web of stringent standards and regulations for public health or environmental reasons (e.g. protection of endangered species). For example the number of WTO SPS-notifications for fish products have doubled since 2000.
The EU is generally perceived to be at the forefront of developing food safety standards and, consequently, wields substantial leverage on the development of the seafood export industries in developing countries. A practical problem to be addressed by the EU regards the uniform implementation of its standards, so as to prevent “port shopping”, that is the selective landing of imports at European ports that are perceived as “less strict” with regard to the enforcement of food safety standards.
WTO framework on trade in fisheries
The international legal and policy frameworks governing trade in fish and fish products is largely shaped by the WTO. With China’s entry in 2001, all major fishing nations are now WTO Members, except for Russia who is in the process of negotiating membership. In the current Doha Round of negotiations, fisheries are dealt with at five different levels:
- Market access for non-agricultural products (NAMA);
- the Agreement on Subsidies and Countervailing Measures (ASCM);
- Trade and the environment, in particular as regards multilateral environmental agreements (MEAs);
- the Anti Dumping Agreement (ADA) and
- the General Agreement on Trade in Services (GATS).
NAMA
NAMA negotiations were launched with the goal “to reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries” (WTO 2008a).
According to the current NAMA modalities draft tariff reductions for fish and fishery products will be subject to the so-called “Swiss formula” with separate coefficients for developed and for developing Member States. It has been agreed that developing countries will be allowed to choose certain flexibilities. The current version of the draft modalities fixes a coefficient of eight for developed countries and 20, 22, and 25 respectively for developing countries. For the European Union, this would mean a maximum tariff of eight per cent, possibly resulting in an average tariff of below three per cent and constraints on tariff peaks even for the most sensitive products.
The impact on the formerly relatively protected market for certain fishery products, particularly shrimp, tuna, and sardines, would be quite substantial. This fact initially triggered requests from within the sector for exemptions from the formula. However, this was perceived as too great a risk for the overall success of the NAMA negotiations, so that the stance of the EU has been to support the current proposal in return for the obligation on developing countries to work progressively towards binding their tariffs.
Some WTO members have engaged in sectoral negotiations aiming at achieving deeper tariff reductions in some non-agricultural sectors, among them fish and fishery products. Disagreement on the issue of sectoral negotiations is considered one of the reason for the failure of the Doha Round negotiations in July 2008.
The rigorous position held by the USA, who demand that developing countries commit to sectoral negotiations in return for exemptions in the application of the Swiss formula, strongly contributed to the situation. The EU is an opponent of sectoral negotiations on fish and fishery products. Existing commitments to tariff cuts are considered far-reaching enough and further cuts are considered contrary to the interests of maintaining a competitive fisheries sector in the EU.
Fisheries subsidies
Currently, there are no special WTO provisions relating to fisheries subsidies. These subsidies are disciplined only by the general subsidies rules found in the current WTO Agreement on Subsidies and Countervailing Measures (ASCM).
The ASCM provides a framework for defining, reporting and disciplining subsidies that create trade distortions. At the WTO Ministerial Conference in Doha in 2001 agreement was reached to make fisheries subsidies part of the Doha Development negotiations. While in the first years the negotiation process was marked by substantial disagreement as to the scope and the strength of the mandate, the 2005 Hong Kong Ministerial renewed the mandate calling for an enforceable ban on harmful subsidies, clearly including environmental and development criteria.
At the end of 2007, a draft text on fisheries subsidies was circulated taking the form of a new Annex to the ASCM. The list of subsidies proposed for prohibition was fairly broad. The proposal met strong objections - also from the EU. In December 2008 a new draft consolidated chair text was issued containing only a “roadmap for discussions” for fisheries subsidies. The chair advised to “take a step back and reflect on the fundamental issues raised by the mandate” once again (WTO 2008b).
However, some characteristics of a new emergent fisheries subsidies regime are already perceivable. Subsidies for fisheries management, research as well as monitoring, control and surveillance purposes are most likely to be exempted from disciplines. Also, LDCs will very likely not be affected too much from new disciplines. Disciplines on subsidies directly resulting in overcapacity are widely accepted, in principle. However, the question if subsidies for operating costs should be disciplined is highly controversial. Another issue that is as of yet unresolved relates to the question if exemptions from disciplines should be linked to fisheries management requirements.
The EU has shown a preference for restricting disciplines to subsidies contributing directly to enhancement of overcapacities over restrictions on contributions to operating costs and processing activities. In addition the EU has a special interest to exclude its money transfers in the context of fishing agreements opening third countries’ fisheries to European fleets from the scope of the ASCM. If access fees were to be paid entirely by fishing fleets this would seriously impair the competitiveness of distant fleets in all likelihood.
Trade and environment
Some Multilateral Environmental Agreements (MEAs) contain a number of trade or traderelated measures. As regards fisheries, trade-related measures in MEAs seek to promote fishery products complying with sustainable management and conservation objectives. An example is the use of trade measures in the fight against illegal, unregulated and unreported (IUU) fishing. In this context, trade-related measures may target certain national vessel registers (“flags of convenience”) or certain catching methods (e.g. through eco-labelling schemes).
Relevant MEAs include inter alia the International Convention for the Conservation of Atlantic Tunas (ICCAT), the UN Fish Stocks Agreement (UNFSA), or the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). To ascertain the coherence between the WTO and MEA regimes, the EU has been a proponent of defining more specifically and generally clarifying the MEA-WTO relationship within the Doha negotiations.
However, the mandate for these negotiations is rather limited: a negotiated amendment to the WTO rules or any other outcome altering the legal status quo are likely to be perceived as exceeding the Doha mandate. Thus, it is conceivable that negotiations will rather lead to the adoption of a brief statement endorsing existing elements of the WTO-MEA relationship, i.e. the conclusions reached by the Committee on Trade and Environment (CTE) for the purposes of the WTO’s Singapore Ministerial Conference in 1996. This would presuppose, however, unanimous acceptance of the Singapore conclusions, which in itself is not likely to be reached.
Negotiations on reduction or elimination of tariffs and non-tariff barriers for environmental goods and services (EGS) are also taking place under the heading of “Trade and Environment”. Generally speaking, this issue is of a limited interest for trade in fisheries at best. Goods and services concerned are either directly related to pollution control or natural resource management, relying to a great extent on capital-intensive technological solutions to environmental problems. The only fisheries related products suggested for inclusion in the list of EGS are fishing nets that incorporate turtle excluder devices. Discussions to include products derived from sustainable activities (e.g. fish caught through sustainable practices) are not taking place.
Anti-dumping measures
Trade defence instruments have developed as a means of correcting trade distorting effects of uncompetitive or unfair practice in international trade. Economists criticise that these instruments usually delay the structural change needed for protected domestic industries to survive in the long term.
The EU has made use of trade defence instruments, mainly targeting imports of farmed salmon from Norway and Chile. Intermittent trade defence measures have been in place from 1993 until 2008.
The most recent case has lead to the adoption of a WTO panel report in January 2008. The panel found that the European Commission had made errors in conducting its investigations, in calculating the dumping margins, and in the assessment of the injury to the EU salmon industry. The measure was consequently repealed by the European Commission in summer 2008.
The Doha agenda also includes the mandate for negotiations on Anti-Dumping with the aim of clarifying and improving disciplines while taking into account the needs of developing and least-developed Member States. A quite ambitious chair’s draft circulated in the end of 2007 proposed to include into negotiations measures concerning circumvention, zeroing practices and sunset reviews.
The 2007 draft was replaced by a less ambitious document in the end of 2008. While elements to strengthen important procedural aspects such as the provision for more meaningful information disclosure during investigations have been retained, the most controversial ones have been proposed for re-negotiation. Important elements of a revision of the ADA are still missing. However, the general assumption is that the amendment will nonetheless raise the bar on international trade regulation. The use of ADM will most likely be more difficult in the future.
GATS
The request-offer process remains the main method of GATS negotiations under the DDA. Any new commitments will most likely weigh most on developing countries. Impacts on the European fisheries sector will only be minor as Europe, along with other net-importers of fish products and related services already have largely liberalised markets and because they committed to higher requirements as regards the trade in services negotiations during the Uruguay Round.
However, one issue of concern to the EU is the chartering of vessels. Liberalisation in this respect might be conducive to re-flagging of fishing vessels, which would result in an increase of European vessels flying “convenience flags” and employing crew from low wage countries. As large-scale reflagging is not a frequent phenomenon up to date this concern is regarded as purely hypothetical at the moment.
WTO case law
The survey of fishery related WTO case law shows that use of the dispute settlement system is mostly related to the application of defence instruments, as well as alleged NTB. Cases involving the European Communities are the Chile-Swordfish case, (DS 193), Definitive Safeguard Measures on salmon (DS 326 and DS 328), Trade description of Sardines (DS 231) as well as Trade descriptions of Scallops (DS 7, DS 12, DS 14).
While in many cases no formal decisions have been taken, the cases demonstrate that the WTO dispute settlement procedures have an important corrective role to play in the enforcement of WTO trade law in general. Usually, conflicts are resolved by mutual agreement among the parties concerned. However, if decisions are taken within the WTO dispute settlement system, i.e. if formal reports are adopted, their effect is not necessarily limited to specific cases. If and insofar as a stringent body of case law is established, it may contribute to setting overarching standards for national trade practices.
Bilateral and regional trade negotiations
Beyond its involvement in the development of the global trading system under the umbrella of the WTO, the EU engages in regional and bilateral trade negotiations. Currently, 121 countries are linked to the EU by regional trade agreements, many of them negotiated in the 1990s. Moreover, the EU maintains the most extensive network of preferential trade agreements of any WTO Member State. The EU concludes different kinds of bilateral trade agreements:
- Economic Partnership Agreements in negotiation with ACP countries as a follow-up of the Cotonou Agreement,
- Free Trade Agreements, notable examples include negotiations with EU-MED and Mercosur.
Bilateral and regional fisheries trade negotiations have had an increasingly important role to play in the EU’s trade policy over the past years. With the backdrop of the stalled Doha Round negotiations, this trend is most likely to continue.
March 2010