“Trade in fishing services: Emerging Perspectives on Foreign Fishing Arrangements” by the World Bank. A review by CFFA.

In advance of a global meeting on rights based approaches to fisheries to be held in Cambodia on the 23rd of March, CFFA has produced the following review of a major World Bank study on fisheries access agreements that will be presented at this meeting. The review contributes to a wider debate on the problems asociated with the World Bank's "Wealth Based Approach" to fisheries reforms

In December 2014 the World Bank released a new report on fisheries access arrangements. It is intended to provide new thinking on how access agreements can be improved for the benefit of developing countries. It is presented as an important report, representing several years of work by many of the leading thinkers on fisheries attached to the Bank.

Although there is a large literature on fisheries access arrangements, a new report on this theme is welcomed. Many critical issues remain unresolved. The nature of fishing investments and the activities of foreign fishing companies in developing countries is evolving in a context of financial instability, dwindling resources and in some places greater competition with local fishers and fish markets. To what extent are these fisheries arrangements working to help advance the welfare and food security of fishing dependent communities and citizens in developing countries? This is a significant theme in fisheries debates.

Yet this latest report is underwhelming. It offers no new empirical data on fisheries access arrangements and their impacts. More importantly the report contains numerous questionable assumptions and dubious policy advice, and fails to tackle some of the most important policy challenges.

Here we provide a brief review of the Bank’s study to encourage more critical reflection on its policy advice. There are seven key points:

1] A limited understanding of the political economy of fisheries access arrangements

Although the report introduces itself as being interested in understanding the costs and benefits of fisheries access arrangements, it does not offer any insights into this. Instead, the report attempts to explain the factors that determine choices made by states and by what it calls the “providers of fish harvesting and processing services” – i.e. fishing companies. 

This leads to a description of principle agent theory, whereby the negotiation of access agreements is modelled as the outcome of competitive bargaining between the principal (the state who owns the resource) and the agent (the company that is providing it service to exploit the resource for the state). In doing so, the report relies on an abstract model that offers inadequate insights into what actually informs decisions and behaviours in access arrangements.

Throughout the report, there is emphasis given to why host country institutions are the most important in understanding the disappointing outcomes of foreign fisheries access arrangements, but it says nothing about the behaviours of foreign companies, their investors and home governments, and how these foreign actors influence the institutions that govern fisheries in developing countries.

The report doesn’t answer the basic question of how costs and benefits are distributed in access arrangements, who are the winners and losers, and what is the role of power, as well as conflicts of interest etc., in influencing these outcomes. Indeed, the report failed to provide a discussion on its methodology or research process.

2] The dangers of market fundamentalism 

The report advances the idea that host countries can only achieve effective fisheries access arrangements if they think as rational economic actors, determined to maximize resource rents.

This in turn involves providing secure property rights for foreign fishing companies – now termed “the service providers”, and ensuring that decisions are made on the basis of understanding the law of “comparative advantage” – it makes sense to give access to fishing for foreign companies if domestic fisheries can not offer better terms of trade. It warns about irrational decisions, such as promoting a domestic fishery when more rents can be derived from getting a foreign company to provide the services.

The authors present an unwavering belief in market competition, where states must chose to give rights and contracts to companies based entirely on profit maximization. The report offers no reflection on the hazards to this policy advice.  Yet the single pursuit of profit maximization could lead to a ‘winner takes all’ scenario, and will inevitably disadvantage smaller operators that may provide better environmental and social outcomes.

The report also repeats the advice that developing countries should consider working together to increase their bargaining power, without reflecting on why they might not want to do this, and how foreign fishing companies attempt to undermine this collective action.

We cannot understand the dynamics of access arrangements without looking into financial instability within the sector, and how the dictates of profit maximization can drive unsustainable practices, depleting the resources that are needed to sustain profits, and disregarding social welfare in the process.  

Market fundamentalism is inappropriate for complex discussions on how foreign trade can support sustainable welfare gains in poor countries.

 3] The narrow understanding of “wealth”

According to this report, the wealth from fisheries comes only from “exchange value”, or private profits and state rents. Yet the wealth from natural resources also involves “use values”, public benefits that do not involve the private accumulation of money from buying and selling.

Economists have long been interested in the inherent tensions between exchange value and use value, or private riches and public wealth. An increase in the exchange value from nature often comes at the detriment to the use values. What’s good for private capital accumulation is often detrimental to societal wealth and the environment (originally conceptualised as the  "Lauderdale Paradox")

The report does acknowledge that fisheries have other importance than just being a source of cash. In a footnote the authors say that that fisheries is linked to health as well as wealth, but we are told the wealth component is the most important to concentrate on.

Because of this narrow vision on wealth, the report is not capable of discussing the full range of benefits and costs that derive from the fishing sector, and the complex trade-offs between government revenues, company interests, food security, community wellbeing and so forth. Ultimately this means the study cannot comment on the basic question of whether fishing arrangements are working for human welfare. 

4] A failure to interrogate the link between growth and wealth 

One of the key assumptions in the report is that the value of fisheries lies in the income it can provide to states, which is then reinvested in the national economy to benefit everyone. We are told that a focus on policies that help fishers is too narrow, and it excludes the important role fisheries can play in macro-economic development in developing countries.

Underpinning this advice is the belief that national improvements in GDP are a guaranteed route to improving human development: “that social welfare depends on sustained economic growth is well established both theoretically and empirically” (p. 2).

Yet, in many countries the costs involved in managing fisheries are high, and these costs are rising given demands placed on host countries to implement improved scientific studies and monitoring of fishing vessels. Because of this, commercial fishing in many developing countries does not offer a potential stream of government rents that can have a meaningful impact on national growth.

Moreover, where countries do receive revenues from commercial fisheries that can contribute to national budgets, many of these countries have a dreadful track record of using resource rents for the benefit of their citizens. The Bank provides no insight into this either – how are rents derived from trading fisheries harvesting and processing services used by states? Unless there is a major effort to ensure these rents are used well, the key policy advice made by the Bank is based on wishful thinking.

As it is, the positive welfare value of fisheries in many developing countries has little to do with the rents derived from fisheries access agreements between their governments and foreign companies. The obvious value lies in fishing being an activity that provides direct income and food security.

5] The superficial treatment of democratic reforms

The report highlights the need for transparency in reforming the management of fisheries access arrangements. This is a welcome point and is a recommendation that has been made for decades by civil society and small-scale fishing organizations.

The report mentions the idea of an initiative for fisheries based on a transparency initiative that exists for mining (EITI), although it doesn’t elaborate on how this could work in practice. It also recommends that small-scale fishers should be represented in the decision-making process when governments provide fishing access to foreign companies.

Merely stating these general aims is not advancing political reforms in fisheries. The report falls short of offering any new insight into the barriers facing civil society and small-scale fisheries in having an informed voice on fisheries governance.

We need to improve our understanding on why fisheries access arrangements are confidential in so many countries – how does this relate to the rational economic interests of investors, ‘service providers’ and host governments? We also need to recognise that resistance to the destructive tendencies of short term profit maximisation comes with democratic accountability, so political reforms in fisheries need to be prioritised.  

Moreover, given the power of the World Bank in influencing fisheries reforms in developing countries, there is a need to scrutinize what is being done by the World Bank and other donors to promote transparency and accountability in countries that receive their aid. The EU is gradually promoting transparency in fisheries arrangements with developing countries, and this report could have discussed this and highlighted the need for other fishing nations to follow the same path. 

6] A tokenistic approach to human rights

The report has a brief section on human rights. It offers a weak position, first pointing out the dangers of enforcing human rights on labor conditions as these may distort free markets, and then suggesting that more information and data on trade in fish harvesting services could help. How is more data going to help? Unfortunately, human rights are left out of the report’s final policy recommendations.

The implications of human rights in fisheries access arrangements is a critical debate, including not just on labor standards but on the right to food and political rights such as freedom of expression and access to information. The EU has quite recently inserted a human rights clause in its fisheries access agreements with developing countries. This is important to reflect on for a report that discusses how foreign fishing arrangements can support development. The EU’s new clause is not mentioned at all.

This superficial treatment of human rights in a major publication on fisheries access arrangements is regressive. The authors imply that property rights for companies and the imperatives of wealth creation are more important.

7] The focus on aid for improving "human capital" and institutional reforms in developing countries 

The report argues that the most important factor in getting fisheries access arrangements right lies with the host country’s institutions.  We are told that examples of positive reforms show the transition to better fisheries management is a long and complex process. Apparently developing countries succeed when they accumulate better knowledge and increased “human capital”.

There is no empirical evidence for this, just supposition. The report fails to consider why fisheries access agreements in some countries improve and why in others, despite having decades of experience in dealing with foreign fishing fleets, the situation is less positive.

The focus on getting “the institutions right” in developing countries encourages a narrow understanding where the performance of fisheries is conditioned by what host country governments do. The behaviours and interests of foreign investors, companies and governments of fishing nations is not factored in.

The report ends by recommending donors to prepare for increased aid commitments in helping developing countries improve their human capital.

Yet this recommendation contrasts with the findings of other World Bank reports that argue aid to fisheries development has often failed to improve fisheries management. It can have negative impacts in terms of marginalizing small-scale fishers and encouraging over fishing. It is well known that fishing nations often use aid to influence fisheries access arrangements. Some aid may also have a corrosive effect on fisheries institutions in developing countries, exacerbating corruption and acting as a disincentive for reforms. 

The final recommendation to increase aid to help developing countries increase the wealth from fishing access arrangements is therefore unsatisfying. In many developing countries, revenues from selling fishing licenses to foreign companies is less than revenue for fisheries reforms being provided by donors through grants and loans. If we follow the logic being presented in the rest of the report, then it is reasonable to question why more development aid is needed to help host countries become rational economic actors that maximize resource rents from fishing?

The answer to this confirms that the report does not advance a valid understanding of the political economy of fisheries access, which would help us understand how aid can be used more wisely to ensure fisheries access is beneficial to the wealth of citizens in developing countries. 

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