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July 2000 No. 15
The European Association of Fisheries Economists



The Review of the CFP in 2002 - an opportunity for fisheries economists (speech by Mr. Steffen Smidt)





Thank you for your invitation to speak to you today. I am very happy to have this opportunity to meet the "European community of fisheries economists", if I can call you that. This is only the 5th outing from Brussels that I have allowed myself since I took over as Director General for Fisheries last October - that is an indication of my keen interest in your association and the work that each of you are doing in your own institutes and universities.


Economics could be called the Cinderella of fisheries management: the younger sister who always gets pushed aside when anything important is happening. Looking at the history of fisheries management in Europe as a newcomer, I am struck by how little attention the economic dimension of fisheries has received compared to other aspects of policy-making in this sector.


Of course, these other aspects of fisheries policy are important. The biological dimension is an essential starting point for fisheries conservation. Limits on fishing activity and technical measures to reduce damage to fish stocks have their place, as well as controls on what fishing vessels are actually doing. Concerns about the impact of fishing on the environment must also be given a high priority.


What is surprising, however, is how seldom policy-makers in the fisheries sector ask themselves the questions that policy-makers in other sectors never stop asking. How is this sector performing compared to its competitors? What are the implications of globalisation for the future of this industry? Is the public money being spent on this sector helping or hindering the necessary adaptation to long-term economic realities? What is the real cost of the financial support to the fishing industry that has hitherto been justified by "political reasons"?


Economists are there to help policy-makers answer these questions. And we in the Commission want to continue our partnership with you in order to bring some of the right questions more to the forefront of policy-makers' minds. The review of the Common Fisheries Policy in 2002 provides an opportunity to do just that.


As you know, the Commission has encouraged fisheries economics in many ways over the past few years. We helped to set up this Association. We have financed two major FAIR "concerted action" research projects bringing together economists from all over the Union. We continue to fund studies on economic aspects of fisheries management; this year, for example, we are conducting studies on subsidies to the fishing industry in the EU and other major fisheries countries, on the impact of the Euro, and on employment in the fisheries sector. And we are currently pressing the Council to ensure that economic data is included in a future Council Regulation on the collection of data essential for fisheries management. (The fact that some Member States actually disagree with that idea is a sign of the problems we are facing!)


In the near future, however, and particularly in the context of the 2002 Review of the CFP, there will be plenty of opportunities to try and convince policy-makers that economics cannot be ignored if we are to achieve our basic objective in fisheries policy.


I would now like to give you a preliminary overview of how we are approaching the 2002 Review, and then highlight some of the key economic questions we will be hoping to address. I am sure that you will be able to make a useful contribution to the debate that we are preparing.



The 2002 Review


Work has already begun inside the Commission on designing the 2002 Review. Following our wide consultation of interested parties between October 1998 and June 1999 (on which we have recently submitted a report to the other European institutions) we are now planning the political debate, which will be handled in two separate stages.


The first stage will take place next year, on the basis of a Commission Green Paper (or discussion document) to be issued in the first quarter. That Green Paper will present, as required under the basic Regulation establishing the Common Fisheries Policy, n° 3760/92, the Commission's analysis of the state of the fish stocks, the state of the fisheries sector and the effectiveness of the CFP. We also intend to present in that paper policy options for the future, in order to stimulate public and institutional debate in the following months.


In the light of that debate the Commission will come forward at a second stage with legislative and other formal proposals towards the end of 2001, in order to leave plenty of time for decisions before the end of 2002. Now I am sure you would all like me to tell you what the Green Paper is going to say. I can't do that. We are still in the process of identifying and prioritising the key issues to be dealt with in our Report; Commissioner Fischler will decide on the structure of the Report this summer and we will spend the next six months writing it.


At the level of the Commission services, however, the current thinking is that the 2002 Review provides an opportunity for a serious look at the challenges facing the European fisheries sector today and for consideration of changes in the Common Fisheries Policy to take account of them. At the formal level, the only decision that has to be taken by the Council before 31 December 2002 concerns the future of the legal derogation which restricts access for fishing in the twelve-mile zone. The Commission will certainly address that issue but it will probably go further, to ask a number of searching questions about the kind of sustainable fishing policy we want and to suggest how we can better reach that goal.


Let me give you a few illustrations of the questions uppermost in our minds, under seven broad headings:


1. Has the CFP succeeded in halting or reversing the over exploitation of fisheries resources in Europe? And if not, why not?


2. Are the current mechanisms of the CFP, such as annual single-species TACs, technical measures or fleet management mechanisms such as the Multi-Annual Guidance Programmes, the best we can do to ensure sustainable fisheries? What would be the advantages (and costs) of a more pluriannual approach? Do some of the existing mechanisms need strengthening, or abandoning?


3. What is the present economic state of the EU fisheries sector? Is it economically sustainable at its present size? If not, what can governments do to ensure adjustment towards sustainability?


4. Is regional "dependence" upon the fisheries sector a myth or reality? And if such dependence still exists, then how should policy-makers react: by encouraging the dependence or encouraging alternative economic activity?


5. What is the future for European fishing activity outside Community waters? And what can and should the Community do to promote it?


6. How does European fisheries management, characterised by significant government intervention and subsidies, compare with that of some other major fisheries powers? Is there anything we can learn from some of our international partners? How far have market forces stimulated adjustment of the fisheries sector elsewhere in the world? And what have been the drawbacks?


7. Is there any room for decentralisation of decision-making or decision-preparing under the CFP? To what extent are we obliged, with the prospect of a Union of close to 30 Member State in the future, to distinguish between the fisheries management decisions that must be made at Community level and those that can be made regionally?


By any standards, that is a challenging list of questions. And this is before we come to other, more technical questions relating to the detail of management measures. I can give you no guarantee that the Commission will be able to supply clear and simple answers to all of them. And I am not sure that the Member States will eagerly respond to proposals for change that might be made by the Commission. What is important, however, is that the questions are asked and that a serious attempt is made to provide answers. It will then be up to our political masters to chose the path they wish to follow. Any other approach would, in my view, be a missed opportunity.



The Economic Dimension of 2002


From what I have said so far you will already have understood that the 2002 agenda presents some specific challenges for economic analysis. I would like to draw your attention to a few of them, in the hope that in the coming months your association will be able to assist us, either by identifying existing research in these areas that may be of interest or, indeed, undertaking new work that may be useful to us.


Our first challenge is to assess the state of economic health of the fisheries sector in the Union, measured in terms of profitability and ability to sustain its own renovation. We already have some useful information on the profitability of some European fishing fleets from the current FAIR concerted action on this subject, but we would be interested to know of other relevant work. When it comes to the processing industry, unfortunately there appears to be much less information than for the fleet. We would also be interested in any data that compares the economic performance of the EU fisheries sector with fisheries industries in other parts of the world.


A second challenge is to measure the impact of globalisation on the fisheries sector. Technological change, growing international trade and more favourable production conditions in third countries are clearly putting the European fisheries sector under greater competitive pressure. This trend will continue and Community policy-makers need to take full account of it. It would be useful to know of research work which illustrates the impact of global competition and to be able to determine more precisely which parts of the European industry are most likely to remain competitive in global terms.


The third and fourth areas I would like to mention are already well-documented but it may be necessary to take the analysis further. They are the effects of public subsidies and the impact of alternative management systems on the fisheries sector.


As far as subsidies are concerned, the Commission has already asked for four separate studies to be completed later this year, which will examine aids to investment and employment respectively in the Member States, on the one hand, and aid in OECD and non-OECD third countries, on the other hand. The results of these studies, in conjunction with the work of the FAIR concerted action on economics and fisheries which addresses the subsidies issue, should provide a solid basis for our analysis.


As to alternative management systems, a substantial part of the 2002 debate may turn around the question of whether market mechanisms, including the development of tradable fishing rights in various forms, can contribute to adjustment in the fisheries sector more effectively than public aid. This is, of course, more a question of national than Community competence. Nevertheless the Commission may wish to point out the potential contribution which alternative management systems could make. We would therefore be interested to know of national case-studies (either within the Union or outside it) which would illustrate the effects, positive and negative, of such market-based management systems.


It is important, however, that such research work be as objective as possible. This is an area in which ideological positions and prejudice often impair the usefulness of research. We need facts, which demonstrate the actual experience, with its advantages and disadvantages, of a given management system, rather than selective propaganda advocating this or that approach. Leave advocacy to the politicians, and give us the facts!


Finally, I would like to mention a fifth subject that may be relevant to the 2002 exercise, the economic implications of different types of adjustment aid. If we were to conclude that the current system of Community financial support for the fisheries sector, which mainly takes the form of investment subsidies, should be replaced by other kinds of support, then we would have to consider what form such alternative support might take. Take direct income support as an example: we would be interested to know how such support has been given in the past, and whether it has been effective in facilitating structural adjustment. We would also need to look at how structural adjustment has been managed in other sectors and the relevance of the adjustment mechanisms to the fisheries sector. Again, it would be helpful if your association could point us towards relevant research work.





In a sense, Chairman, this last part of my intervention could be seen as a Commission "shopping list" of economic research. We are certainly interested in your advice on economic matters falling within our 2002 agenda. If your organisation would like to organise in the coming months specific discussions on any of the subjects I have mentioned, in order to prepare some input to Commission thinking, we would welcome that (and could contribute to the costs of organising such meetings, up to a limit, of course). Perhaps you could consider this suggestion further and let us know.


But the main message I would like to leave with you is that the Commission considers that economics can no longer be ignored in European fisheries management. This is not only a question of ensuring that public money is well spent, although that is certainly important. "Getting the economics of fisheries right" is one of the preconditions for achieving the objectives of the Common Fisheries Policy, namely, the effective conservation of the resources and a sustained employment and a decent standard of living for those who work in the sector. To put it more bluntly, we won't be helping those who work in this industry if we continue to ignore economics, as the Ugly Sisters ignored Cinderella.


This is not to say that there is no place for public support for a locally important industry such as fisheries that is undergoing significant transitional problems. Such support is probably unavoidable over the next few years. But it needs to be carefully designed, it needs to be helpful rather than harmful to the policy objectives of the Common Fisheries Policy, and its true cost must be made clear to policy-makers and to society as a whole.


You as economists can help the Commission, and through us those who will decide on the future development of the Common Fisheries Policy after 2002, understand these issues better. I look forward to our continued cooperation towards this common goal.


Steffen Smidt, Director-General (DG Fisheries)

DG Fisheries, European Commission


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