GeoJournal 39.2: 179-184.

© 1996 (June) Kluwer Academic Publishers. Printed in the N~therlands.

Exclusive rights to fish:

Towards a rational fisheries policy
Hannesson, R6gnvaldur, Centrefor Fisheries Economics, the
Norwegian School of Economics and Business Administration,
Helleveien 30, N-5035 Bergen-Sandviken, Norway

ABSTRACT: Discusses "the tragedy of the commons" with regard to fish resources in the
North Atlantic, and points to the fact that the Atlantic cod has now been so heavily exploited
that a strong regulation of fisheries is needed to preserve an exploitable stock. The author
argues for exclusive economic zones dividing up the remaining "loopholes" among coastal
nations and individually transferable quotas.

The "tradgedy of the commons" mile zone which excluded all foreign vessels except
in joint ventures with the Americans. The Americans
The expression "tragedy of the commons" has long quickly built up their own fishing fleet, however,
since become commonplace. This is not without and catches of Alaska pollock rose to a peak in the
reason. The tendency to overharvest common prop- mid-1980s but have fallen ever since, possibly and
erty resources has been confirmed over and over probably because of overexploitation.
again, from the extinction of the American buffalo to Another and a no lesser tragedy is that the fish
the depletion of the Atlantic herring stocks. catches are typically taken by many more fishermen
As to fish, the overexploitation is not immediately and fishing boats than necessary. This implies a
obvious from looking at aggregate figures. The world tremendous waste of productive resources. The
catch of fish increased almost fivefold from 1945 to excess manpower and capital could be employed for
1993; or from less than 20 million tonnes to more some gainful purposes in other industries rather than
than 80 million tonnes. But if we look closer the to no good and sometimes even a counterproductive
picture changes. The yield of the most valuable purpose in the fishing industry.
stocks has declined for years and some stocks have
been almost totally depleted, like the northeast
Atlantic herring stocks. The expansion has come
C a t c h ~ ot Alaska pollock and Ah~anflc cod
from previously unexploited stocks, some of which
~tl).
now seem headed for a fate similar to the traditional
stocks.
A comparison of the Atlantic cod and the Alaska
pollock is instructive. The catches of Atlantic cod
peaked in the late 1960s, and the trend has been
downwards ever since (see Figure 1). In the north- §~.
east Atlantic, which traditionally was more heavily
exploited, this happened as early as the mid-1950s.
I(111 -
In the northwest Atlantic the catch peaked later but
much more markedly (Figure 2). The northwest q I [ I I ' ' I I
t963 1968 1973 1978 1983 1988 1993
Atlantic stocks have by now almost vanished and a
fishing moratorium has been in effect for years. The Atlantic ~ I
Alaska pollock was very lightly exploited until the
1960s. Then catches rose rapidly, but the expansion
was temporarily halted in the late 1970s, probably Figure 1. Catches of Alaska pollock and Atlantic cod in
because of the establishment of the American 200 the years 1958-1993.
 180
Calches of Ananflc cod
2500
2O00
j 15~0 ¸
~ 11300¸
~0-
0 I I I
1964 1969 1974 1979
N[ Agoa~e
Figure 2. Catches of Atlantic cod in the northwest
Atlantic and the northeast Atlantic 1964-1993.
National claims to fish resources
Any solution of the overexploitation problem must
necessarily involve restricting the access to the
resources. This requires that rights of access be
established, that instead of being common property
the resources be made the exclusive property of
firms, individuals or groups of individuals. A first
step towards establishing such rights is to establish
national jurisdiction over the areas where the fish
stocks are located. This is precisely what has been
taking place, in large and small steps, over the half
century since World War II.
Up until the end of the Second World War the
jurisdiction of sovereign states at sea was limited
to three nautical miles from the coastline. This
rested on the idea of the freedom of the seas, an idea
vigorously supported by the leading maritime power
at the time, Great Britain, which benefited from free
navigation and free access to distant fishing grounds.
A major inspiration for coastal states to claim
extended fisheries jurisdiction was the Truman
Declaration of 1946 which claimed exclusive rights
for the United States to extract mineral resources
from underneath the seabed on the continental shelf
off the coast of the United States. The claim did not
extend to fish swimming in the sea above, but nations
that were dependent on fish drew an immediate
analogy. Some Latin American states claimed a 200
mile jurisdiction already in the late 1940s. Iceland
passed a law in 1948 claiming jurisdiction over
fisheries in the waters above the continental shelf but
did not at that time take any practical steps to put this
into effect. Needless to say, this development would
not have happened unless it was becoming increas-
ingly clear that the fish resources of the oceans are
limited and that expanded catch by one country's
fishermen can only be obtained at the expense of
others.
R. Hannesson
In 1952 Iceland took the first step towards
acquiring the waters o f the continental shelf by
drawing so-called baselines across fiords and bays
and between outlying islands and extending the
fishing limits to four nautical miles from those base-
lines. This brought Iceland into conflict with the
British who imposed a ban on landings of Icelandic
fish. Globally fishing limits and territorial waters
were becoming of increasing importance, and in 1958
the first UN conference on the law of the sea was
held in Geneva. This conference resulted in a con-
I t vention on the continental shelf, on the basis of
1984 1989
which the floor of the North Sea and many other
areas containing petroleum and other minerals were
divided between the adjacent coastal states. No
consensus was reached on fishing limits, but twelve
miles, with some recognition of historical fishing
fights, had much support. This inspired Iceland to
extend its fishing limits to twelve miles in the fall
of 1958. This brought about the first cod war, as the
Royal Navy was sent to the Icelandic waters to
protect British trawlers. The "war" did not result in
any bloodshed and was in part conducted by the
highest commanders on both sides quoting passages
from the Bible. These two gentlemen later became
good friends and paid mutual visits to one another.
Another conference was held on the law of the sea
in 1960 but failed to resolve the fishing limits issue.
Nevertheless the twelve mile limit rapidly gained
recognition after 1960.
The twelve miles did not make any big difference.
Most fish stocks were accessible outside twelve
miles, and fishing technology was rapidly making it
easier to catch them there. Iceland, for one, was
getting increasingly restive. In 1972 she extended her
fishing limits to 50 miles, a number without prece-
dence and void of any international recognition. This
led to the second cod war, with the Royal Navy again
being sent to Iceland.
Things were, nevertheless, moving in Iceland's
favour. In 1973 a third UN conference on the law of
the sea was convened. This conference lasted for
almost 10 years, being concluded with the Law of the
Sea Convention in 1982. This is a comprehensive
text, containing rules on navigation, the continental
shelf, deep sea mining, and fisheries. Early on during
the conference it became clear that there was much
support for a 200 mile exclusive economic zone in
which the adjacent coastal state had exclusive fishing
fights. Already in 1977 many states established the
200 mile exclusive economic zone, but Iceland
jumped the gun already in 1975.
How economic interests dictate positions
As an aside, it may be noted that the positions vari-
ous countries have taken on the law of the sea illus-
gates well how positions on international issues are
A rational fisheries policy 181

dictated by economic interests. Since the law of

the sea has gone through such a rapid and funda-
mental change, national governments have sometimes
changed their positions abruptly over a short period
of time. The 200 mile zone virtually destroyed the
British distant water fishing fleet, and Britain was
left with negligible interests in distant water fishing.
At the same time she acquired an important interest
in the waters within 200 miles off her coasts. She
came up, then, against the right of free access of
fishermen of all states in the European Community
to the waters of the Community, a rule that had been
established by the original member states of the
then European Common Market to obtain access to
the twelve mile zone of Denmark, Norway, Great
Britain and Ireland, which had applied for member-
ship. This action was one reason, and a major reason,
why the Norwegian referendum of 1972 went against
membership of the Common Market. For years the
British minister of fisheries frustrated successive
meetings in the Council of Ministers of the European
Community by demanding special rights for Britain
within the 200 mile zone, not unlike what Iceland had
claimed for itself a few years earlier.
Iceland changed her position on the law of the sea
abruptly in the summer of 1993 when her trawlers
started fishing in the so-called Loophole, and area
outside the 200 mile zone in the Barents Sea (Figure
3). Iceland had up to that point been a staunch
advocate of extended jurisdiction of coastal states but Figure 3. The economic fishery zones in The North Sea,
argued now for fishing rights in distant waters, in part the Northern Atlantic and the Barents Sea. Double hatcing:
the ,Loophole" in the Barents Sea. Single hatching: the
on the basis of historical rights which seem tenuous
"Loop Sea" north of the Faeroes.
at best. The gains for Iceland from a further exten-
sion of her own exclusive economic zone are limited
but not negligible; there are some important deep conserving fish stocks and improving profits in the
water fish resources southwest of the island that now fishery would have been self defeating by inviting
are in international waters. That notwithstanding, the others to share in the gains without making any
200 mile zone has given Iceland virtually full control sacrifices. The number of such third countries was
over the waters of her continental shelf. This is in fact indefinite. As fishing technology improved,
very different from the case off Atlantic Canada countries could send their fleets further and further
and northern Norway where the continental shelf to fish, and so there was no geographical limitation
stretches far outside 200 miles. Norway, on her part, as to who had an interest in fishing in a certain area.
has tried to close the Loophole while retaining rights The Soviet Union and other East European countries
to fish off other countries' 200 mile limit. started fishing on a large scale on the banks of
Newfoundland in the 1960s. Vessels from Bulgaria
and Rumania operated in the Barents Sea.
The new framework for fisheries management The exclusive economic zone enclosed many fish
stocks within the zone of a limited number of states,
The exclusive economic zone has fundamentally and in some cases within the zone of just one. This
changed the framework of fisheries regulations. made it possible for a limited number of states to
Before the zone was established and most fish control the fishing of shared stocks in their own
stocks were accessible on the high seas, fisheries interest, without risking that those gains would be
regulations had to proceed by consensus among the eroded by an unspecified number of third states
states involved. This was not easily accomplished. claiming free access to the resources. Norway and
Agreements were constrained by having to satisfy the Soviet Union assumed control of the Arcto-
those who wanted the least radical measures, and the Norwegian cod stock and the capelin stock, the
measures agreed proved largely ineffectual. More two most important fish stocks in the Barents Sea,
fundamentally, however, this regime was flawed in immediately after extended jurisdiction in 1977.
that any progress that countries might have made in Norway and the European Union likewise cooperate
182
in setting catch limits l~0r shared stocks in the North
Sea. Countries like Ieeland whose zones enclose
some stocks entirely ~tre able to exercise as full a
control over the stocks as nature permits.
There ~e, however, two major unresolved prob-
lems in attaining a better utilization of fish stocks
on the basis of the framework provided by the exclu-
sive economic zone. First, .many fish stocks are
accessible outside 200 miles and hence not fully
controlled by any subgroup of coastal states. Second,
the common access problem remains unresolved
unleSS eour~tries limit the access of their own fisher-
men to stocks within their zone in some meaningful
way.
Fishing on the high seas
Let us consider, first, the problem of fishing on the
high seas. This was regarded as a minor problem
during the third UN conference on the law of the sea
1973-82. At that time only five percent of the world
catch of fish was taken outside 200 miles. In recent
years this has been more like eight percent, due to a
technological development that has made it easier to
catch fish outside 200 miles. One place where such
fishing takes place is the aforementioned Loophole
in the Barents Sea, where the Arcto-Norwegian cod
is accessible certain times of the year. In 1993
Icelandic trawlers started fishing in this area and
have continued to do so ever since. The amount
caught in the Loophole is about five percent of the
total catch and much resented by Norway and Russia.
The Arcto-Norwegian stock reached a low point in
the late 1980s, and the cod fishery was subjected to
tighter regulations than ever before around 1990, a
regime that brought a number of bankruptcies in its
wake. This regulation was probably necessary to
rebuild the stock, but that process has also been
greatly helped by an improved ocean climate in the
Barents Sea. However that may be, it is clear that
third countries, Iceland in particular, have been able
to benefit from the restraint shown by Norwegian
fishermen around 1990 without making the slightest
contribution themselves.
Quantitative fisheries models indicate that the
incentives for coastal states like Norway and Russia
to keep down catches in the short term for the
purpose of improving future catches are reduced to
a considerably greater extent than indicated by the
percentage of the total catch taken outside the 200
miles. That is a conclusion reached by looking only
at economic returns. Politically it is likely to become
more difficult still to persuade one's own fishermen
to show restraint when they know that this will
benefit third country competitors who do not need
to make any effort towards conservation.
There are other areas around the world where the
problems are similar to the ones in the Loophole. A
R. Hannesson
large part of the Grand i~anks off Newfoundland is
outside the 200 mile limit, and fishermen from the
European Union in particular have fished in that area.
The European Union has repeatedly refused to agree
to limititig the catches of groundfish on the Grand
Banks outside 200 miles. This has undoubtedly con-
tributed to the crash of the groundfish stocks in the
area, even if that sad event is mainly a Canadian
responsibility. In the North Pacific there are two areas
Similar to the Loophole, the Donut Hole outside the
Russian and the American economic zones and the
Peanut Hole which is wholly enclosed by the Russian
economic zone. The main species in these areas is
the Alaska pollock. An agreement has been reached
on fishing in the Donut Hole, but only after the
pollock stock in the area had been depleted to a level
where continued fishing was hardly profitable.
The UN agreement on fishing on the high seas
The need to get fishing on the high seas under control
need not be doubted, but the question is how. In
August 1995 a UN conference on fishing on the high
seas was concluded ~ith an agreement assigning the
responsibility for controlling fisheries in this area to
regional fisheries organizations. Two such organiza-
tions are long since established in the North Atlantic,
the North Atlantic Fisheries Organization (NAFO),
which is responsible for regulating fisheries on the
Grand Banks and elsewhere outside 200 miles in
the northwest Atlantic, and the Northeast Atlantie
Fisheries Commission (NEAFC), which has similar
responsibilities for the Northeast Atlantic° A novelty
in the agreement is that countries will no longer be
able to opt out of agreements reached within these
organizations; even countries that do not belong to a
regional organization have to abide by the rules it
sets. All those with a "real interest" in fishing in an
area covered by a regional organization have the right
to join, and are encouraged to join. What constitutes
"real interest" is not defined in the agreement,
however. Neither does it say anything about how an
agreement is to be reached within an organization,
whether this is to be done by consensus or by a
simple or qualified majority vote. Much will hinge
on what becomes established practice. Agreement by
consensus is not unlikely to emerge as the only legit-
imate rule, given that sovereign states are cooperating
in these organizations. The likelihood that they will
come to an agreement will diminish with the number
of participants involved, since the costs of not coop-
erating are borne by all in common while the benefits
of defecting will accrue to the defector and might
outweigh the losses despite their transitory nature.
Another novelty in the agreement is that any
country that is part to the agreement now has the right
to inspect boats at sea that are suspected of breaking
the rules, even if the boat is not flying the flag of
A rational fisheries policy
the inspecting state. Only the flag state can, however,
take action against violators. The likelihood that a
flag state will do so depends on the sanctions that
its partners can apply against those who neglect to
take such action. That such sanctions might not
always be possible seems more than likely. It remains
to be seen, therefore, how effective the new rules on
high seas fishing will be. It is by no means unlikely
that we will see continuing failures to come to grips
with these problems and new conferences on the
subject until the exclusive economic zone has been
extended further.
Individual use rights
Then to the other challenge, that of limiting the
access of fishermen from the coastal states to the
resources within the exclusive economic zone. Most
states have not handled this very effectively. The
management of stocks within the exclusive economic
zone has been disastrous in some places and seldom
particularly successful. Focusing on the Atlantic cod,
the most successful management effort in recent
times is probably that of the Arcto-Norwegian stock.
The stock has recovered from an all time low, most
likely due to a combination of determined regula-
tion and improved ocean climate. In economic terms
Norwegian fisheries management has not been suc-
cessful, however. In the 1970s and 1980s the fish-
eries were subsidized by public money on a grand
scale; at their worst the subsidies amounted to about
70 percent of the value added in the industry. The
subsidies have now been largely eliminated but the
industry still makes no contribution to covering its
management and enforcement costs, which are of the
order of 10-15 percent of the landed value. Instead
these costs are paid out of general government
revenue. The point can therefore be made that the
fishing industry is still being subsidized.
The management of the stocks off Atlantic Canada
and the Faeroe Islands has been nothing less than
disastrous. The stocks off Atlantic Canada have been
almost totally depleted, due to faulty methodology
applied by fisheries biologists and a neglect to cut
catches in a timely fashion once that fault had been
exposed. The reason for the latter was a desire to
maintain workplaces in the fishing industry. Before
long the workplaces disappeared anyway, and for an
indefinite future. The Faeroese stock has been pushed
to an all time low through the combination of uncon-
trolled expansion of fishing capacity and adverse
environmental conditions. The Icelandic cod stock
has also hit an unprecedented low and the catch limits
recommended by Icelandic fisheries biologists have
consistently been exceeded. The productivity of the
Icelandic fishing industry is higher, however, than
in any of the other countries mentioned here. This is
most likely due to the fact that Iceland is the only
183
country which has taken the logical step of estab-
lishing private use rights for her fish stocks. Since
1990 the Icelandic fisheries are controlled by indi-
vidual transferable quotas of an indefinite duration.
This has halted the expansion of the Icelandic fishing
fleet and is one of the factors behind the invasion of
the Loophole; new vessels added to the Icelandic
fleet did not have access to the Icelandic fish stocks
unless their owners had the required quotas. Trawlers
bought at bargain prices from Newfoundland were
directed to the Loophole and other areas outside 200
miles. This activity in fact succeeded in turning the
Icelandic economy around from seven years of stag-
nation to a small growth in 1994. The most successful
Icelandic fishery is probably the herring fishery,
which has been controlled by individual transferable
quotas since 1979. The stock has been built up
successively, catches have increased, and the number
olf ¥,essels has fallen ever since.
![ is not likely that these countries will succeed in
getting their fishing capacity down to what the
resources can support and make their fisheries as
profitable as they could be unless they go for systems
based on private and transferable use rights such as
individual transferable quotas. There are three steps
that are needed to obtain a profitable fishery that does
not waste resources on boats and manpower that are
not needed. First, the total catch must be limited to
what the stocks can support from a long term per-
spective. All the above mentioned countries have
mechanisms in place to set such limits annually.
Second, the total catch must be divided among the
boats in order to avoid a counterproductive and costly
race for the fish. Third, boatowners must be given
incentives to catch their fish as cheaply as possible.
This is what individual transferable quotas accom-
plish. Those who can pay the highest price for a catch
quota are the ones who can make the most valuable
product, be it through better quality of the fish or
through less costly catching methods. Quotas that are
transferable in the short term will lead to savings in
operating costs when there is less fish around than
there is capacity to take, something that will happen
from time to time even with a fishing fleet of an
optimal size. Transferability for the long term means
that boatowners can obtain quotas that make it
possible for them to fully utilize the capacity of their
boats and to attain an optimal scale of operations.
Until a system based on long-term and transfer-
able use rights to fish is in place, govemments will
continue to fail to obtain the highest possible value
from their fisheries. They will instead continue to
waste capital and manpower on unnecessary fishing
boats, resources which otherwise could be applied for
a more productive purpose. They are particularly
likely to do so as long as fisheries management
remains a political and not a market driven process.
The outcome of political processes is determined
by the number of votes, not by the profitability of
184
different kinds of firms or fishing methods. Small-
scale but unproductive fishermen therefore stand a
good chance to curry favours in regulatory processes
that are driven by politics. One may speculate
what kind of economic development would have
taken place if other sectors of the economy had
been regulated along those lines. The conclusions
emerging from such speculation are not encouraging,
at any rate for those who put a high priority on
economic growth and rising real incomes.
R. Hannesson
References
Amason, R.: The Icelandic Fisheries. Fishing News Books (1995).
Hannesson, R.: Fisheries Mismanagement. The Case of the North
Atlantic Cod (in press). Fishing News Books (1996).
Hardin, G.: The Tragedy of the Commons. Science, Vol. 162,
pp. 1243-1247 (1968).
United Nations: The Law of the Sea (1983).