CATCH SHARES UNDER FIRE

 

Commercial fisheries were once a free-for-all.

Fishermen faced few restrictions, whether with respect to licensing or to the fish that they could catch; there were some size limits, but few trip limits or annual quotas.  For most of the industry, it was a matter of going to sea and bringing back as full a hold as ocean conditions and the fishermen’s skill would allow.

But there were a lot of skillful fishermen, and a limited number of fish.  Inevitably, fish stocks waned and the need for regulations became apparent.  State and federal regulators imposed size limits on more species.  They developed gear restrictions to protect small fish, and seasons to protect spawning aggregations.  Trip limits were imposed, to limit landings, along with annual quotas intended to prevent overfishing.

Even so, faced with too many fishermen chasing too few fish, more action was needed.  In many fisheries, managers developed limited entry programs to cap the number of boats participating in a fishery; new fishermen could only enter such a fishery if they purchased the permit of another fisherman, or entered a lottery in the hopes of winning an exiting fisherman’s license.

All of those measures helped to conserve fish stocks, but in some fisheries, overfishing still occurred as vessels raced out to see in a so-called “derby,” trying to catch as much as they could before the overall quota was reached and the fishery was closed for the year.

Derby fisheries proved undesirable for many reasons.  They led to flooded markets, as fishermen raced to land as many fish as possible before the season closed; because of such concerted effort, supply often exceeded market demand, leading to lower prices and, at times, the waste of unsalable product.  Often quotas were caught, and seasons closed, early in the year, leaving no fresh product to meet late-season demand.  And fishermen would risk their lives in bad weather, rather than waiting out a storm, out of fear that if others fished, the season might close before they could bring a good catch to market.

To address such problems, fishery managers developed “limited access privilege programs,” often referred to as “catch share programs,” which create individual, rather than sector-wide, annual quotas, and typically allow such quotas to be leased, traded, or permanently transferred to others by participants in the program.

The Magnuson-Stevens Fishery Conservation and Management Act defines a “limited access privilege” as

“a Federal permit, issued as part of a limited access system…to harvest a quantity of fish expressed by a unit or units representing a portion of the total allowable catch of the fishery that may be received or held for exclusive use by a person; and includes an individual fishing quota; but does not include community development quotas…  [internal formatting deleted]”

Magnuson-Stevens closely governs the creation and operation of limited access privilege programs, dedicating an entire section of the statute to the subject, likely because such programs have proven to be highly controversial, with some fishermen, particularly small-scale fishermen, arguing that they make it difficult to remain in business.  But limited access privilege programs have also proven to be very effective fishery management tools that can completely eliminate overfishing.

For many years, Gulf red snapper were badly overfished by both the commercial and recreational sectors.  By 1990, the spawning potential of the Gulf’s red snapper stock was only 2% of that of an unfished population; fishery managers believe that, in order for the stock to be sustainable in the long term, such spawning potential should be increased to at least 26%.  To help achieve that 26% goal, the Gulf of Mexico Fishery Management Council created a limited access privilege program for the commercial red snapper fishery, which became effective in 2007.

Since that time, the commercial sector has not overfished its quota in even one year, while the recreational fishery still chronically exceeds its harvest limit.

I’ve had the opportunity to speak, and even to fish with, commercial fishermen in the Gulf, and to hear their thoughts on the red snapper catch share program.  Generally, such comments were favorable.  One of the things that they point to is their accountability to the red snapper resource:  Before they embark on a trip, they must call in and report their intentions, and they must also notify regulators when they begin their return trip to shore.  Once they land their fish at the fish processor, they must immediately report their landings to the National Marine Fisheries Service, which deducts such landings from the fisherman’s quota.  A small fee is levied against the price received for the fish, in order to help pay for the program’s costs.

Under such a system, exceeding one’s quota is virtually impossible.

Fishermen also like the program because it allows them to plan their trips around market demand.  Prior to the catch share program, when a derby-style fishery prevailed, fishermen had to race out and catch fish while the season remained open, despite the weather and regardless of market demand.  They never knew the price that they would receive for their fish until they dropped them off at the buyer, and under such circumstances, the price could be lower than expected.

Now, the fishermen can still make speculative trips but, knowing that they are free to use their quota whenever they choose, they don’t need to leave the dock until they know that they have both a buyer and an agreed-upon price.  Thus, an astute fishermen can maximize the economic value of his catch, while never taking more fish than the resource can withstand.

It seems like a win for both fish and fishermen, but catch shares have long been criticized by those who argue that they create a small group of “haves” and a larger group of “have nots” who are excluded from the fishery.  It’s a difficult argument to understand, as a more typical limited access fishery, where the derby format still prevails, is no less exclusionary, while someone who wishes to enter a catch share fishery always has the option of purchasing someone else’s unwanted or unneeded quota, even if they have no previous history in the fishery.

Having said that, limited access privilege programs do tend to reduce the size of the fishing fleet, as fishermen with low levels of landings often opt to sell or rent their quota, instead of investing time and money into trips that, in the end, may prove less profitable than merely monetizing their share of the quota.  That can be a benefit to fishermen trapped in marginally successful operations who need to pay off business loans, and can then liquidate their businesses and settle their debt with the proceeds received from transferring their individual quotas.

Still, some complain.

Anglers’ rights organizations have expressed a near-irrational opposition to limited access privilege programs, with Scott Whittaker of the Coastal Conservation Association saying

“Coastal Conservation Association (CCA) is opposed to the concept of catch shares, particularly in mixed-use fisheries in which there is both recreational and commercial participation.  Catch shares have created tremendous user conflicts in fisheries pursued by both recreational and commercial fishermen.  Limiting access and discouraging recreational use of public marine resources should never be the goal of federal fisheries management, and that is the inevitable outcome of catch shares.”

That’s a difficult statement to reconcile with reality.  Given that catch shares only apply to the commercial fishing quota that is already off-limits to recreational fishermen (although, in theory, recreational catch shares could be developed), it’s impossible to understand how a limited access privilege program would create any commercial/recreational conflict at all, nor how such program would limit access or discourage recreational use any more than would the commercial quota itself.

The anglers’ rights crowd also likes to invoke the ominous threat of

“large foundations who want to further privatize our fisheries through catch shares,”

even though Magnuson-Stevens clearly states that

“Limited access privilege, quota share, or other limited access system authorization established, implemented, or managed under this Act…may be revoked, limited, or modified at any time in accordance with this Act, including revocation if the system is found to have jeopardized the sustainability of the stock or the safety of fishermen…shall not create, or be construed to create, any, right, title, or interest in or to any fish before the fish is harvested by the holder; and shall be considered a grant of permission to the holder of the limited access privilege or quota share to engage in activities permitted by such limited access privilege or quota share [internal formatting omitted],”

language that clearly maintains the government’s sovereignty over fish stocks and negates any claims of private ownership of public resources.

Recently, we are seeing new attacks on limited access privilege programs coming from the commercial sector as well.  An article appearing on the website Civil Eats saw a fisherman and fish market owner from Mississippi complain that

“a feature of all U.S. catch share programs to date is that these rights can subsequently be traded, bought, sold, and leased like private property in open markets…

“This catch share approach differs from previous management strategies because it turns the right to fish into a tradeable economic asset.  In fact, in many cases the rights to fish are worth more than the fish itself.  Increasingly, catch share fisheries look like private markets, similar to what we see playing out in housing, farmland, and other sectors that have been taken over by private equity.”

While such observations are undoubtedly true, it’s difficult to see why consolidation in the fishing industry is either surprising or problematic.  Commercial fishing is, after all, a business, and is not immune from the same economic trends that impact other businesses.  In a generally free market, capital will always flow toward its most efficient use, and for many years, the fishing industry has found itself in a position where there was

“too much money chasing too few fish.”

Catch share programs help to correct that problem.  Just as larger, national institutions have for the most part replaced the local drug store, bank, and hardware store, we should expect larger, more efficient businesses to dominate the fishing industry.

It's just how capitalism works.

After all, no one forces smaller fishing operations to sell their catch shares to larger businesses.  They do so because it makes economic sense.

And no one prevents smaller fishing operations from using their original catch shares as collateral for loans, and using the loan proceeds to purchase additional shares, which can, if the operation’s business plan is sound, help turn a smaller operation into a larger one.

Sure, doing so requires the fisherman to take on more risk, but taking on reasonable levels of risk is how any business grows, whether in the fishing industry, or in the “housing, farmland, and other sectors” that the author of the Civil Eats article describes.  Businesses that make good bets in the marketplace grow; businesses that fail to expand and gain market share generally get bought out by those that do.

Thus, when we see another member of the Gulf seafood industry quoted in a National Fisherman opinion piece, complaining that

“I don’t want a system that forces me to get big or get out.  A lot of guys like me don’t want to be millionaires.  We just want to make a living,”

what we’re really looking at is someone trying to deny the realities of our capitalist, free market system, where successful businesses grow, doing so, in part, by either out-competing or purchasing smaller, less profitable operations. 

Limited access privilege programs lead to more efficient fishing fleets, reducing the amount of capital needed to land the same quantity of fish.  And they do so while also creating a more easily regulated fishery management system, which not only makes it harder to cheat, but also reduces the incentive for doing so.  Thus, catch shares not only promote the long term sustainability of the fishing industry, but the long term sustainability of fish stocks as well.

The traditional system of derbies and/or open access promotes neither.