USA: fisheries subsidies and WTO Trade Policy Review

Hereunder is an extract of the Minutes of Meeting on the WTO's TRADE POLICY REVIEW of the U.S.. The meeting took place on 9 and 11 June. The document can be found at the WTO's website. It has the reference T/TPR/M/200/Add.1 of 9 September 2008.

US Report, page 25, para. 119 and page 26, para. 121

In its Report the US asserts that on the multilateral front, the United States has been a global leader in seeking to discipline harmful fisheries subsidies and eliminate barriers to trade in environmental technologies and services through the WTO as part of the Doha Development Agenda (DDA). Furthermore, the Report states that in the Rules Negotiating Group, the United States continues to lead in pressing for stronger disciplines on fisheries subsidies that contribute significantly to global overcapacity and overfishing. In March 2007, the United States submitted a far-reaching textual proposal for a fisheries subsidies agreement, which included a broad prohibition of the most harmful subsidies. Has the US adopted legislation that would prevent, in fact or in law, the provision of all forms of subsidies, at all levels of government, federal, state, local, that would directly or indirectly contribute to overcapacity and overfishing? If not, is it planning to do it in the future?

ANSWER: As noted above, the United States supports an ambitious result in the WTO fisheries subsidies negotiations that will discipline harmful subsidies that contribute significantly to overcapacity and overfishing, and we call on others to do the same. Current U.S. practice is fully consistent with such a result.

One of the United States' textual proposals (WTO doc. TN/RL/GEN/145) for a fisheries subsidies agreement, referred to in paragraph 121 of the Government Report includes the following provision:"2. This Annex does not cover government-to-government payments to obtain access for a Member's distant water fishing fleet to fisheries resources within the exclusive economic zone of another country. The further transfer of those access rights to the Member's fishing fleet is covered by this Annex but is not prohibited under Article 1, provided that:(i) the Member's fishing fleet pays compensation comparable to the cost the fleet would otherwise have to pay for access to the fisheries resources; (ii) the terms and conditions of access, including the compensation paid by the fishing fleet, are published; and (iii) the access arrangement provides for a science-based assessment and monitoring of the status of the fisheries resources in question and for compliance with applicable fishery management systems."

One of the most significant fisheries access arrangements in the South Pacific is the Treaty on Fisheries between the Governments of Certain Pacific Island States and the Government of the US. This agreement, last extended in 2003, regulates access of US purse seine vessels in the EEZs of the South Pacific Island States which are members of the Forum Fisheries Agency. The financial terms of the Treaty, which include an annual payment by USAID of approximately US$14 million, stipulate an annual industry payment of US$3 million, which shall cover (i) licence fees for up to 45 vessels; and (ii) technical assistance. Furthermore, paragraph 3 of Schedule 2 to Annex II of the Treaty, 3 foresees that: "In order to increase the benefits to the Pacific Island parties under the Treaty, the United States industry will develop with the Pacific Island parties a system for revenue sharing where the ex-vessel price is at or above a mutually agreed level. Payments made under such a system will be made quarterly and will be in addition to the amount specified in paragraph 1(a)." Could the United States provide information about the yearly value of the catches effected by U.S. vessels, since 2003, under the Treaty?

ANSWER: Due to a marked contraction of the U.S. fleet since 2000, and considerable inter-annual variation in the fish price, the approximate annual value of U.S. catches under the Treaty ranges between $100-200 million USD. We note that the correct figure for the amount provided in assistance by USAID is $18 million USD annually (not $14 million).

Could the United States provide details about the revenue sharing system between the United States industry and the Pacific Island parties, including the yearly amounts paid under this system since 2003?

ANSWER: Under the terms of the Treaty between the United States and the Pacific Island States, the United States tuna industry makes an annual payment of US$3 million to the Forum Fisheries Agency (FFA), which is distributed to the FFA member states. In addition, amendments to the Treaty in 2003 provided that the U.S. industry would develop with the Pacific Island Parties a system for revenue sharing. This system has been developed and provides that when the average price of skipjack (Katsuwomus pelamis) delivered by US vessels licensed under the Treaty to the canneries in American Samoa averages $800 per short ton or higher for an agreed period (calculated twice per Treaty year), the industry will provide the Parties with as an additional 1% of the total value of the catch, above and beyond the annual payment. This latter provision was not triggered until 2007, as fish prices were below the threshold level. Since 2007, the U.S. industry has provided over 1 million USD to the Pacific Island Parties under this arrangement. It is estimated that in 2008 the first six-month payment could be as high as 2 million USD.

Could the United States provide detailed information on scientific assessment and setting of catch limits for fish stocks fished by U.S. vessels under the Treaty?

ANSWER: U.S. vessels operating under the Treaty are subject to a strict management and monitoring regime, including use of satellite-based vessel monitoring systems, observers, full reporting of all catches on a weekly basis, notification of entry and exit from zones of each Party, port sampling and monitoring as well as other requirements. Data provided by these U.S. vessels provides one of the largest source of fisheries data used by the South Pacific Commission’s Oceanic Fisheries Program (SPC/OFP) in its work to conduct science-based stock assessments for Pacific stocks of skipjack, yellowfin and bigeye tunas, as well as other associated species. The data from U. S. vessels, most of which are provided by catch and effort logs, are unique in that they are verified by observers and port sampling programs. These vessels also operate in full compliance with applicable measures (including catch limits) adopted by the Western and Central Pacific Fisheries Commission, the regional fisheries management organization (RFMO) responsible for adopting conservation and management measures for highly migratory species in the Western and Central Pacific Ocean. The stock assessments conducted by the SPC/OFP, based on data provided by the United States, form the basis of conservation and management recommendations to be considered by that RFMO.

The United States' textual proposal (WTO doc. TN/RL/GEN/145) for a fisheries subsidies agreement, referred to in paragraph 121 of the Government Report foresees a total ban on subsidies, inter alia, for the construction of new vessels. The EC notes that the website of the National Marine Fisheries Services (Office of Management and Budget) includes information about the Capital Construction Fund Program. In a dedicated webpage the programme is described as follows: "The purpose of the Capital Construction Fund (CCF) Program is to improve the fishing fleet by allowing fishermen to accelerate their accumulation of funds with which to replace or improve their fishing vessels. Created by the Merchant Marine Act of 1936, as amended (46 U.S.C. 1177), the CCF Program enables fishermen to construct, reconstruct, or under limited circumstances, acquire fishing vessels with before-tax, rather than after-tax dollars. The program allows fishermen to defer tax on income from the operation of their fishing vessels. Under the CCF Program, the amount accumulated by deferring tax on fishing income, when used to help pay for a vessel project, is, in effect, an interest free loan from the Government." Is this programme still available to US fishermen? If so, how do the US authorities ensure that the fishing capacity that results from the use of this subsidy does not negatively impact fishery resources?

ANSWER: Capital Construction Funds are governed by section 607 of the Merchant Marine Act of 1936 and section 7518 of the Internal Revenue Code. The CCF program is currently available not only to U.S. citizens that own or lease fishing vessels but also to those who own or lease the wide spectrum of other commercial vessels (for example, tugs, barges, bulk cargo vessels, container vessels, tankers, cruise vessels and ferries). The U.S. Department of Transportation’s Maritime Administration (MARAD) administers the program with respect to commercial vessels other than fishing vessels; the National Oceanic and Atmospheric Administration (NOAA) in the U.S. Department of Commerce administers the program with respect to fishing vessels. All funds contributed to the program come from the CCF account holders themselves, without any form of matching contributions. The benefit to the account holder is limited to the deferral of income tax on contributions to the fund and earnings on those amounts until the funds are withdrawn by the fisher. When funds are withdrawn for approved purposes, the tax basis of a qualified vessel (used for the computation of depreciation allowances or gain or loss) is reduced by the amount of any withdrawal.

With respect to fishing vessels, licensing and other requirements ensure that vessels are eligible to participate in a particular fishery only if the associated fishing is sustainable. Because many U.S. fisheries are in the process of stabilizing or withdrawing capacity, a large percentage of CCF accounts for fishing vessels are inactive, i.e., those account holders are not withdrawing the funds in their accounts. Legislative proposals to allow withdrawal of the funds for other purposes (e.g., retirement, purchase of quotas under market-based limited access privilege programs) are currently before Congress.

Could vessels having benefited from this subsidy be used in waters outside the jurisdiction of the United States?

ANSWER: The program does not place specific limitations on where fishing vessels will be used. Please see the answer to question 9.

Does the United States maintain a register of vessels having benefited from such subsidy? Could the US indicate the total amount of the subsidy provided to the US fishing sector under this programme?

ANSWER: NOAA maintains a database that lists all the fishing vessels qualified under the program. We estimate that the annual total benefit conferred from tax deferrals pursuant to the program is approximately $5 million. This estimate may overstate the benefit because it does not account for the fact that the tax basis of a qualified vessel is reduced by the amount of any withdrawal which represents amounts previously excluded or deducted from taxable income. It is difficult to estimate the amount that goes back into the fishery; as noted in the response to question 9, a large percentage of CCF accounts are inactive in light of the restrictions on capacity in many U.S. fisheries.

Has the United States notified this subsidy to the WTO?
ANSWER: No. Please see the response to the European Communities’ previous question on this topic in G/SCM/Q2/USA/20 (April 1999).
As this subsidy programme would be prohibited under the proposals made by the US contained in its textual submission TN/RL/GEN/145, does the US plan the removal of such programme? If so, could the US provide an indication of the timing for such removal?

ANSWER: The United States supports an ambitious outcome in the WTO fisheries subsidies negotiations and will comply with any new rules that are adopted, including rules that may have originated in a U.S. fish subsidies proposal. Therefore, if such rules were to have the effect suggested by the EC, affected U.S. policies would be modified accordingly.

Concerning subsidies granted by the US in the fisheries sector, a "commercial fisheries failure" was declared by the U.S. Secretary of Commerce in 2006 for the Klamath River Fall Chinook Salmon Fishery. According to publicly available information the US Congress appropriated $60 million in disaster assistance that was distributed during 2007. Could the United States provide details on whether these funds were allocated to fishermen involved in wild capture fisheries, and if so, how much and for which specific purposes?

ANSWER: The Klamath Disaster Funds were allocated to the following programs and groups: to commercial fishermen for lost income ($35 million) and for vessel maintenance and safety ($7 million); to affected businesses ($14 million); to the states, tribes and industry organizations for outreach and administrative support ($2 million); and to states, tribes, universities and commercial fishermen for research ($3 million).

A similar "commercial fisheries failure" was declared for the West Coast Salmon Fishery on 1 May 2008. According to publicly available information the “Farm Bill”, as agreed by the Senate-House conference committee, includes $170 million in disaster assistance to help commercial fishers and businesses affected by the salmon closure in Oregon, California, Washington and Idaho. Could the United States provide details on whether these funds will be allocated to fishermen involved in wild capture fisheries, and in the affirmative how much and for which specific purposes?

ANSWER: The funds will not only be allocated to affected commercial fishermen and related businesses but also to affected recreational businesses. Precise allocation figures and other information are not yet available.

In relation to the aforementioned questions, under Section 312(a) of the Magnuson-Stevens Act, the Commerce Secretary can declare a commercial fishery failure if requested to do so by a governor, or at the Secretary's discretion. The Secretary must determine that the commercial fishery failure resulted from a fishery resource disaster due to natural causes, man-made causes beyond the control of fishery managers, or undetermined causes. Could a "fishery resource disaster" be declared as a result of, for example, cuts by fisheries managers in the fishing quotas?

ANSWER: No. Only “fishery resource disasters” resulting from regulatory restrictions put in place to protect human health or the marine environment are eligible for consideration; reduction in fishing quotas does not qualify.

Concerning the determination of a fisheries failure, do economic and/or social factors play a role in making such a determination?

ANSWER: Yes. Severe economic impacts must be shown, and must also be logically traced to a disaster.

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