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Using Property Rights To Regulate Fish Harvest

To alleviate harmful fishing practices, some governments grant individual fishermen tradable interests in the catch

By Donald R. LealDonald R. Leal is senior research associate with the Political Economy Research Center in Bozeman, Mont., and co-author of "Free Market Environmentalism." / July 30, 1992



ONE issue largely bypassed in the Earth Summit negotiations at Rio de Janeiro in June was how to protect our ocean resources. Ironically, it's one area where hope for the future is emerging.

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Overfishing has plagued the oceans for centuries. In areas where no limits are set on harvest, fish populations dwindle because fishermen have no incentive to preserve fish for the future. Indeed, off the coast of New England, groundfish populations - that is, cod, haddock, and flounder - have been falling fast, costing the region $350 million and 14,000 jobs, according to a 1990 report by the Massachusetts Offshore Groundfish Task Force.

Governments, national and local, often deal with the problem of overfishing by setting a limit on the overall catch of certain fish in their jurisdictions. Theoretically, such a limit will protect future catches by leaving enough fish to propagate.

But such a limit can cause havoc among fishermen. Knowing that the season can end as soon as the annual harvest level is reached, fishermen race to the fishing grounds and try to catch as many fish as possible. To stay competitive, fishermen are forced to invest in expensive equipment and bigger and faster boats and to take dangerous risks. They can suffer financial disaster if an equipment breakdown occurs on opening day.

Governments also try other techniques such as gear restrictions and split seasons. But fishermen typically find ways around these restrictions and the race to fish continues. In the end, both fishermen and consumers suffer. With seasons lasting a few hours or a few days, the markets are flooded with fish, lowering the price fishermen receive.

Instead of fresh fish, consumers have to eat frozen fish for most of the year.

In recent years, however, a new technique - in fact, a new system of ownership - has emerged to manage fisheries. These are called "individual transferable quotas," or ITQs. They can protect ocean and freshwater resources while letting fishermen decide how they want to fish.

The idea is that each fisherman has a property right in a fixed proportion of the total allowable catch each year. These rights in the total harvest can be freely traded in the marketplace.

ITQs eliminate the race-to-fish atmosphere plaguing fisheries. With a secure right to a specific amount of fish each year, each fisherman can focus on harvesting that amount of fish as inexpensively as possible and at a time when it should bring the highest value.

The fisherman's right, his ITQ, can be sold, all or in part, to another fisherman who wants to enter a fishery or expand his current share. Freedom to buy and sell these rights allows fishermen to operate at the scale they are comfortable with. Some may purchase additional rights and buy bigger boats. Others may want to sell part of their share and run a smaller operation, or they may sell out completely to retire or enter another business.

ITQs are being used in New Zealand, Australia, Iceland, Canada, and the United States. Increased profits have been documented in ITQ fisheries in Iceland and New Zealand, and in the Australian southern bluefish tuna and Wisconsin's yellow perch fisheries. Profits rise because fish quality is higher and market gluts are avoided.

In Iceland, where the industry was initially skeptical of ITQs, fishermen soon urged the government to adopt the system permanently. Other fishermen claim that ITQs are the best thing to happen in fishery management.

In spite of these good reports, expansion of ITQs is slow, and lengthy debates usually precede adoption of an ITQ program. Why? ITQs represent a major change in the way of doing business and can be frightening to people who have grown up in the winner-takes-all tradition. Furthermore, inefficient fishermen are likely to get out of the business because their quotas are worth more in someone else's hands (of course, they will be compensated for selling them), and this idea may be disturbing. Some fishermen

have invested heavily in equipment to harvest lots of fish in a very short time; such investments could lose value once the need to fish so fast and so intensively disappears.

While change can be difficult for some, most of the problems disappear once ITQs are established and the expensive race is over. A staff member of the Mid-Atlantic Fishery Management Council says, "Before the program went into effect, fishermen were calling the council to complain about something every working day. Now fishermen never call."

To date, there are just over a handful of fisheries in the US that use ITQs, although the federal government will soon implement ITQs for wreckfish in the South Atlantic and possibly halibut and sablefish in Alaska. Hundreds of fisheries in the US could use ITQs. We will all be better off if the trend to ITQs accelerates.