Executive Summary *
Since 2001, the World Trade Organization (WTO) has been developing rules to prohibit certain subsidies toward fishing operators. Fisheries subsidies accelerate fish stock depletion, causing both economic and environmental harm to countries that rely on fish as a source of income and sustenance. After years of negotiations, the WTO Negotiating Group on Rules (NGR) recently committed to finalizing a fisheries subsidies regime by the end of 2019. In preparation, groups of WTO Members submitted proposed rules that would prohibit certain subsidies toward fishing operations.
Despite the NGR’s recent progress, none of its proposals meaningfully provide for remedies necessary to induce violating Members to comply with the agreement’s prohibitions. Without a remedies framework tailored to fisheries subsidies, the new agreement will likely default to the remedies framework contained in the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), which provides baseline rules regulating the use of subsidies. As this paper will outline, the SCM Agreement’s remedies framework in its current form is largely unworkable as applied in the fisheries subsidies context.
Members are unlikely to bring fishery subsidy challenges in the Dispute Settlement Body (DSB) to begin with given that fisheries subsidies primarily cause global environmental harm, not harm attributable to particular countries. Furthermore, neither remedy available under the SCM Agreement’s prohibited subsidies regime, which would govern fisheries subsidies prohibitions, adequately captures the unique challenges fisheries subsidies present. Subsidy withdrawal is the primary remedy available in response to a prohibited subsidy. Yet, fishing operators often channel fisheries subsidies into vessel upgrades and other equipment, allowing fleets to continue benefiting from the subsidy long after it is withdrawn. If a violating Member fails to withdraw its subsidy, the complaining Member may impose countermeasures, which are traditionally based on the subsidies’ trade effects. But calculating the trade effects fisheries subsidies cause is complex and unlikely to lead to meaningful amounts attributable to individual claimants. WTO jurisprudence permits tailoring countermeasures to fit a particular case, which could encompass countermeasures based on the level of environmental harm a fisheries subsidy causes. But countermeasures are meant only to induce subsidy withdrawal, not compensate for past harm, so even countermeasures based on environmental harm will not fully address the harm fisheries subsidies cause.
Adapting remedies available under the SCM Agreement to the fisheries subsidies context can address some of these challenges. To increase the effectiveness of withdrawing a subsidy toward vessel construction and equipment, the new fisheries subsidies agreement could require violating Members to pay back the subsidy value prorated over the remaining average useful life (AUL) of the equipment or the full value of the subsidy instead of simply discontinuing subsidies prospectively. The new agreement could also provide for remedies that require violating Members to pay compensation based on the level of environmental harm their subsidies cause, which a neutral body would direct toward fishery restoration efforts. Alternatively, the WTO could require violating Members to reduce their fish catch in proportion to the additional fishing their unlawful subsidies enable.
New approaches beyond merely adjusting the SCM agreement are also necessary. The NGR proposals begin to outline a transparency and notification mechanism, which the NGR could augment with provisions allowing Members to challenge inadequate subsidy notifications without resorting to dispute settlement and that would impose penalties on Members for egregious notification violations. Furthermore, the new agreement could require Members to codify Illegal, Unreported, and Unregulated (IUU) fishing prohibitions and stiffen penalties for violations under their domestic laws, along the lines of domestic enforcement provisions in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). To address the limited incentives Members have to challenge prohibited fishery subsidies in dispute settlement proceedings, the new agreement could authorize the WTO Committee on Subsidies and Countervailing Measures (WTO Subsidies Committee) to initiate suits. In addition, the agreement could introduce a class action provision permitting complaining Members to certify a class of affected states, which could reduce the cost and increase the benefit of fishery subsidy litigation.
Whatever approach it takes, the NGR cannot simply default to the SCM Agreement’s existing remedies framework. Should it do so, the WTO may struggle to induce Members to comply with the new fishery subsidy prohibitions, which have been almost twenty years in the making.
The full link to the project is available here.
* Image Credit: https://tradevistas.org/fisheries-subsidies-wtos-new-years-resolution/