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The Case of the North Atlantic Cod
by Rognvaldur Hannesson

Available to purchase from
Blackwell Scientific Publications, Oxford, 1996, hard cover, 160 pages, 3 tables, 30 figures, US$49.95, ISBN 0 85238 243 X
Reviewed by
Ussif Rashid Sumaila, Chr. Michelsen Institute, Bergen, Norway, and Fisheries Centre, University of British Columbia, 2204 Main Mall, Vancouver, B.C. V6T 1Z4, Canada

This is one of professor Hannessonís numerous contributions to the fisheries economics and management literature in the last two decades or so. The present piece is made up of nine chapters. It kicks off with a discussion of the tragedy of the commons in Chapter 1. This so-called "tragedy" captures the following situation: "the individual fish that swims around in the sea is not the property of anyone; ownership to the fish is established only upon capture Ö It therefore makes limited sense for any single fisherman to catch less fish now in the hope of being able to catch more later due to enhanced growth of fish that remain (Page 2)."

The tragedy of the commons is accepted by most fisheries economists as the root cause of many problems faced by fisheries the world over. I dare to say that many other fisheries scientists will agree that this, indeed, is a major problem facing fisheries managers. I think most of the disagreement would center on how to tackle the problems it generates--is the solution in individual transferable quotas (ITQs) and other rights-based instruments? Is it community-based management or a "command-control" regime that is more appropriate? Clearly, Hannessonís position, as expressed in this book, is that ITQs appear to be the best way to deal with the problem of "racing" for the fish, which stems from the common property nature of fishery resources.

The next four chapters of the book document the experiences of four political jurisdictions in managing (or mismanaging?) their cod stocks: Norway in Chapter 2, Faeroe Islands in 3, and Iceland and Newfoundland in Chapters 4 and 5, respectively. Chapter 6 then provides a summary of the main conclusions of the analysis in the preceding four chapters.

In the case of Norway, a general conclusion of the book is that she scores well on the resource management side but not on economic efficiency, and that the main reason for the lost economic opportunity in the fishing sector is Norwayís huge oil riches. Faeroe Islands, on the other hand, fared poorly both in terms of resource conservation and economic efficiency. This poor performance is "caused by over-exploitation of fish stocks encouraged by a particularly irrational economic policy" (Page 52). The main thrust of the irrational policy alluded to is subsidy: at its worst, subsidization of the fishing industry drained away no less than 30% of the Islandsí budget. Danish financial support to the Faeroe Islands, which is equal to the entire fishing industry subsidy, or 15-20% of the Islandsí GDP, is cited as the main culprit (Page 57).

Turning to Iceland and Newfoundland, we see that the experience of the latter is similar to that of Faeroe Islands, with biological and economic waste present. In fact, the biological waste here is more disastrous, with the fisheries in question closed to all fishing in 1992 due to stock collapse. Two related reasons are advanced by the book for the sorry state of the cod stocks off Newfoundland; namely, the fact that the ultimate responsibility for managing the stock lies with the Federal Government of Canada not Newfoundland itself, and that Newfoundland, being part of the larger Canadian economy, has received a helping hand whenever the fishing sector has run into problems. The consequences of these factors are similar to those that have applied in the case of the Faeroe Islands and Denmark.

With respect to Iceland, the analysis finds that even though her management is not perfect, she comes out best in terms of bioeconomic management of her resources. She has come furthest with the implementation of ITQ management regimes, which are already showing positive results: Iceland recently won a Nordic award for best fisheries management in the Nordic countries, to the chagrin of the Norwegians. Hannessonís reason for the relative success of Iceland is that the fishing sector really matters to the Icelanders, giving them no room for complacency.

Chapter 8 moves the focus of the discussion from the four jurisdictions to the common fisheries policy of the European Union, which according to the book, serves as an obstacle in the way of EU membership for Norway, Faeroe Islands and Iceland.

Finally, Chapter 9 presents three major challenges currently facing world fisheries, which are to: (i) change the institutional framework in which the fisheries operate; (ii) achieve adequate control over high seas fisheries; and (iii) find ways of coping with natural fluctuations in fish stocks. One challenge that I miss on Hannessonís list is distribution--how do we share the benefits from efficient management? Most people can see that the institution of proper incentives, through, say, ITQs, will enhance efficiency. I think the main concern for most will be on how to capture and distribute the benefits. Hence, a discussion of this issue under the list of challenges would have been of help to the reader.

To improve the institutional framework, Hannesson argues correctly that it has to be designed to provide the appropriate incentives to conserve the fish stocks and limit fishing capacity to what is strictly needed. The way to do this, the book asserts, is to institute ITQs. Some fisheries scientists will disagree with Hannessonís prescription of ITQs as the answer to the incentive problem, preferring other management arrangements such as co-management, non-transferable quotas and community-based management, to mention a few. The key point to note here is that whatever management regime is put in place, for it to be successful, the incentive structure under which the fishers operate must be such that depletion of the stock and the use of too much fishing capacity is not economically beneficial from the individual fisherís perspective. If co-management succeeds in doing this, fine, but professor Hannessonís point is that ITQs have the best chance of success among all possible management options.

The author predicts that the new agreement on fishing on the high seas developed under the auspices of the United Nations is likely to be a toothless paper tiger because it simply lacks the right institutional framework to protect the fish. Hannesson believes that with time, the world will have no alternative but to extend the current 200-mile Exclusive Economic Zone (EEZ) to include the waters of the continental shelf and possibly beyond.

With respect to stock fluctuations, Hannessonís main suggestion is to allow fishing fleets to move between the EEZs of different countries so that fishing capacity that has become temporarily redundant in one place can be profitably used in another. This can be accomplished, the book argues, by instituting internationally tradable ITQs. Another possible solution, not mentioned in the book, is to encourage the establishment of domestic or international rental firms for fishing vessels. This would give fishers some flexibility in the choice of the size of fishing effort to employ, depending on estimates of the fluctuating stock sizes each fishing season.

The work in Fisheries Mismanagement is driven by two questions. First, has "the 200-mile EEZ brought with it an appreciable improvement in the management of fish stocks enclosed within the zone, with depletion being reversed wherever it had gone too far"? Second, "is fisheries management more responsible, more forward-looking and sustainable if it is the responsibility of countries or regions particularly dependent on the fishing industry (Page 7)"? Hannesson examines these two questions by looking at the management of the cod stocks in Norway, Faeroe Islands, Iceland and Newfoundland. He concludes that the 200-mile EEZ alone has not proved sufficient to bring about efficient management of the cod stocks, mainly because it does not automatically lead to the proper institutional framework domestically. With respect to the second question, the analysis answers in the affirmative.

Professor Hannesson has made a great effort to reach out to a wide audience, as is evident from the use of a non-technical approach throughout the book. For this reason, I have no hesitation in recommending the book to anyone with an interest in fisheries management, and in particular, an interest in issues related to the North Atlantic cod fisheries.

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