At the recently concluded WTO Ministerial Conference, one of the key negotiating outcomes was a new agreement on fisheries subsidies. China is a leading provider of these subsidies, so the scope of the disciplines in this new agreement is of great importance to Chinese policymakers. At one point in the negotiations, the United States was pushing for provisions on forced labor in the fishing sector, which would have had implications for China as well. CTM spoke with Inu Manak of the Council on Foreign Relations about a number of key elements and implications of this new agreement.

CTM: In terms of the total amount of fisheries subsidies and the most harmful kinds of fisheries subsidies, which countries are the biggest problem?

Manak: The top five providers of fisheries subsidies are China, the European Union, the United States, South Korea, and Japan. These countries make up 58% of all global fisheries subsidies. Total government subsidies worldwide are estimated to be around $35 billion annually, and 22 percent of those are fuel subsidies. Fuel subsidies have been of particular concern because they allow vessels to fish for longer and to venture further out from their territorial waters and into the high seas.

It is important to keep in mind that while these five subsidizers make up the lion's share of subsidies, the others still contribute to reductions in the sustainability of global fish stocks. Since fish don't observe borders, this is a global problem that requires every country to be on board.

CTM: During the WTO negotiations, what were the different categories of fishing subsidies for which rules were considered?

Manak: The draft negotiating text tabled for ministers ahead of MC12 covered three categories of subsidies: 1) subsidies for illegal, unreported and unregulated fishing (IUU fishing); 2) subsidies for overfished stocks (where a determination is made by a relevant fisheries management organization that a particular stock is overfished); and 3) subsidies for overcapacity and overfishing (which cover a broad range of subsidies, such as for: vessel construction or upgrading, fuel, machinery, costs of personnel, price supports, at-sea support, operating losses, high-seas fishing).

CTM: In the end, where did we end up with these obligations? Which subsidies are covered, and which are not?

Manak: The deal that came out of MC12 covers IUU fishing, subsidies for overfished stocks, and other subsidies, such as a prohibition on subsidies for fishing on the high-seas.

A large part of the text carries over from the draft presented by the chair, Amb. Wills, though some elements were taken out in the final negotiations. Mainly, subsidy prohibitions in the overcapacity and overfishing pillar were substantially pared down. This is due to objections from India and others about the scope and content of exceptions to those subsidy rules. Developing country Members have generally pushed for broad exemptions from the rules, but India's demands were unworkable, including a 25 year phase-out for subsidies in this pillar.

Members did, however, agree to continue negotiations for up to 4 years to expand the disciplines to include more comprehensive rules. That should allow some time to find a compromise among the different viewpoints on the appropriate exceptions.

That said, what is impressive is that members agreed to a new set of actionable subsidies. The prohibitions on subsidies for IUU fishing and overfished stocks are also strong, and only include a 2 year phase-in period for developing countries and LDCs. A funding mechanism to support developing countries and LDCs in the implementation process was also agreed, which could help accelerate implementation timelines.

Notably, the agreement is a standalone agreement and creates a WTO committee on fisheries subsidies to which Members must submit notifications. The value of the committee cannot be overstated, especially for an issue area where data has remained a significant obstacle to reining in harmful fisheries subsidies. For example, Members must notify, on an annual basis, a list of vessels and operators engaged in IUU fishing. Members can also ask each other questions about their notifications and submit counternotifications. This added transparency will provide Members with more information about fish subsidies and help them to better understand and target those that contribute to the depletion of marine resources.

Note here that there is differentiation among developing countries so as to require that China abides by the strict notification requirements -- footnote 13 reads:

"For LDC Members, and developing country Members with an annual share of the global volume of marine capture production not exceeding 0.8 per cent as per the most recent published FAO data as circulated by the WTO Secretariat, the notification of the additional information in this subparagraph may be made every four years."

CTM: You mentioned “a 2 year phase-in period for developing countries.” Does this apply to all developing countries, including relatively high income ones such as China?

Manak: On special and differential treatment, for the provisions in the agreement at the moment, there is equal treatment for developing countries and LDCs on IUU fishing and on overfished stocks. Here's the provision for IUU:

"3.8 For a period of 2 years from the date of entry into force of this Agreement, subsidies granted or maintained by developing country Members, including least-developed country (LDC) Members, up to and within the exclusive economic zone (EEZ) shall be exempt from actions based on Articles 3.1 and 10 of this Agreement."

And for overfished:

"4.4 For a period of 2 years from the date of entry into force of this Agreement, subsidies granted or maintained by developing country Members, including LDC Members, up to and within the EEZ shall be exempt from actions based on Articles 4.1 and 10 of this Agreement."

There are no exemptions in Article 5 "other subsidies."

Article 5.5 in the draft would have differentiated between developing Members, but that's one of the items that held up the deal, so that, along with many other provisions in that pillar, were withdrawn for now. Differentiation would have been in the form of a 7-year phase-in (India asked for 25) as well as exemptions for countries whose share of annual global volume of marine capture production does not exceed 0.8 percent. India contested this too, saying it was too low (India would not receive an exemption at this level).

China is the world's top fishing state, so it would not be exempt from subsidies in the overcapacity and overfishing pillar if the language in the draft text were adopted.  

However, the fact that the current deal includes a prohibition of high-seas fishing is a big achievement, because other countries have long complained about China's fishing activities on the high-seas, close to the territorial waters of other countries.

CTM: When will this agreement actually go into effect? What timeframe are we looking at for implementation of the agreement?

Manak: Entry into force will be in accordance with para. 3, Article X of the WTO Agreement. Implementation of the agreed provisions is immediate for developed country Members, and a 2-year phase-in applies for developing countries and LDCs.

CTM: Finally, at one point, the U.S. was pushing for provisions that addressed forced labor in the fishing sector. Those provisions were not ultimately included in the final text. Do you expect the U.S. to push this issue in other fora?

Manak: The US pushed for language on forced labor both within Article 8 (notification and transparency) and in Article 3 (IUU fishing). The chair's draft of June 10, 2022 includes the language of Article 8.3(b) in brackets. That language did not make it into the current agreement.

Article 3.1 of the November draft read "No Member shall grant or maintain any subsidy to a vessel or operator4 engaged in illegal, unreported and unregulated (IUU) fishing [or fishing related activities in support of such fishing]."

The brackets have been removed in the final text. This provides for broader coverage of the discipline to capture forced labor practices that support IUU fishing. (I wrote about the bracketed text when it came out, here). So the US still got something that may address forced labor related to one aspect of fisheries subsidies. IUU vessels and operators tend to have lower labor standards and are more likely to use forced labor. Indirectly, therefore, this provision can help address this issue.

I would expect that the US will push for including forced labor in the transparency requirements in the next round of negotiations, but the language may need to be tweaked to avoid an explicit reference to forced labor, as this was one of the sticking points in negotiations last week. I do think it is likely the Biden administration will push for language on forced labor in some form in all future trade agreements it is involved in.