Written By Valerie Hughes, Darrel Pearson and Jessica Horwitz
In June 2022, the World Trade Organization (WTO) concluded negotiations on the Fisheries Subsidies Agreement (FSA), an important multilateral pact addressing state-sponsored subsidies that are a key factor in the widespread depletion of the world’s fish stocks. States contribute some US$22 billion per year in capacity and effort-enhancing subsidies (such as financial support for vessel modernization), which enable fishing fleets to operate longer and farther at sea. Fishing practices fueled by harmful state subsidies have contributed to marine life decline—34 percent percent of global stocks are overfished, compared with 10 percent in 1974, leaving self-replenishment for some stocks in doubt.
The FSA will make fishing more sustainable by prohibiting subsidies to fishing overfished stocks, to subsidies that contribute to illegal, unreported and unregulated fishing (IUU fishing), and to subsidies provided to fishing on the unregulated high seas. The pact will come into force once two-thirds of WTO members (110 of 164) formally accept it. The United States filed its acceptance on April 11, serving as an important impetus for other WTO members to follow suit.
Which Countries Provide Fisheries Subsidies?
The top five providers of harmful subsidies—funding that encourages fishing capacity to develop to a point where resource exploitation exceeds the maximum sustainable yield—are China, the member states of the European Union, Japan, South Korea and Taiwan. The United States is also a major contributor to worldwide fisheries subsidies, but the majority of U.S. funding goes to “beneficial” subsidies such as promotion of fisheries management and conservation. New Zealand directs 100 percent of its fisheries subsidies to environmentally friendly programs, including subsidies that help to offset the costs of determining sustainable catch limits.
What Is Canada’s Position on Fisheries Subsidies?
Canada subsidizes its fishers and fishing industry, but directs more funding to beneficial than capacity-enhancing subsidies. According to the Organization for Economic Co-operation and Development (OECD), Canada spent about a billion dollars in 2018 on income support to fishermen, infrastructure and fisheries management, although not all of these funds would necessarily constitute a subsidy in WTO parlance.
Canada participated actively in the WTO negotiations leading to the conclusion of the FSA, with International Trade Minister Ng participating in the Ministerial Conference where the Agreement was successfully concluded. It is likely that Canada will accept the FSA given that Canada already prohibits subsidies for IUU fishing and for fishing overfished stocks through its commitments in the Canada-United States-Mexico Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
How Is the FSA an Important Achievement?
Conclusion of the FSA was the culmination of more than 20 years of negotiation at the WTO. Undoubtedly, it represents an important achievement for its contribution to making fishing more sustainable. It also serves the interests of the 260 million people worldwide who depend on marine fisheries, not least of which are the millions of people in small communities who are dependent on fishing for their livelihoods and food security.
In addition to these very practical benefits, the FSA debunks the view that WTO rules and environmental considerations cannot coexist. In fact, the FSA is the first ever binding, multilateral agreement on ocean sustainability. Moreover, conclusion of a fisheries subsidies agreement was one of the United Nations sustainable development goals, adopted by world leaders in 2015. Finally, the successful conclusion of the FSA puts paid to the belief that the WTO is ineffective and unable to deliver concrete results on a multilateral level.
Why Is the U.S. Acceptance of the Agreement Significant?
U.S. acceptance of the FSA is a welcome signal that the United States actively supports the WTO—a fact often called in to question in recent years. U.S. support for the WTO has been in question since former President Trump threatened to withdraw from the organization in 2018. Despite a change in government, a perception has lingered that U.S. engagement in the work of the organization has waned considerably compared to its traditional leadership role in evidence following establishment of the WTO in 1995. Moreover, the United States is responsible for shutting down the WTO Appellate Body in 2020 through its consistent veto of WTO members’ efforts to nominate individuals to replace appellate body members whose terms had expired, leaving the Appellate Body unable to hear appeals. The United States opposes reinstatement of the Appellate Body, asserting that it ignored its mandate by exceeding timelines for delivering appellate rulings, responding to questions it was not asked, and by treating its earlier rulings as precedent. Closing off appellate review has undermined the binding nature of WTO dispute settlement and, by some accounts, damaged the credibility of the WTO more generally. The U.S. early acceptance of the FSA—only the second multilateral agreement negotiated under the WTO flag (the first being the Trade Facilitation Agreement) – may demonstrate that the United States is once again ready and willing to show leadership in the WTO.
In addition to the United States, the Republic of Seychelles, Singapore and Switzerland have also deposited instruments of acceptance of the FSA. The Agreement needs 106 more acceptances before it comes into force, which could take some years to come.
In the meantime, the WTO membership has already begun negotiating a follow-on agreement to address a different set of subsidies—those that contribute to overcapacity and overfishing. These include subsidies related to vessel acquisition; the purchase of fishing equipment, fuel, ice, and bait; the costs of personnel, income support, support to cover operating losses; and support targeting fishing beyond the subsidizing member’s exclusive economic zone (i.e., 200 nautical miles off the coast). Provisions addressing these subsidies were included in earlier drafts of the FSA, but it was not possible to reach consensus on them during the Ministerial Conference in June 2022. Members decided to set those types of subsidies aside for the conclusion of the FSA, provided that negotiations on them would resume and be completed within four years of the coming into force of the FSA. They also agreed that if the negotiations on these additional subsidies were not completed within the four-year deadline, the FSA itself would terminate unless members agreed otherwise. The incentive is a creative one, but whether it will work is a big question.
The Bennett Jones International Trade and Investment group is available to provide expert advice and assistance on the WTO as well as on international trade issues generally.