The fisheries sector needs re-orientation to face LDC graduation challenges
Bangladesh has had excellent achievements in the fisheries sector and thus it is imperative to retain this production trend after LDC graduation
In Bangladesh, fish constitutes about two-thirds of total animal protein consumption. It also creates employment for about 20 million people, of which 1.4 million are women. The sector produces about 47.58 lac metric tons of fish, which contributes 2.43% to the GDP.
Bangladesh is number one in the world for Hilsa production, third in inland open catch, fourth in tilapia production, fifth in inland aquaculture and eighth in marine catch.
Fish export was approximately half a billion USD in 2021-22, while marine fish production was 6.81 lakh Metric Tonnes (MT), as per the annual report of the concerned ministry. Bangladesh has scored excellent achievements in the fisheries sector and thus it is imperative to retain this production trend after LDC graduation.
Presently, Bangladesh provides some subsidies on export performance of frozen fish, crab, ocean trawlers, etc. After graduation, the sector may face challenges, and jobs will be at stake, a significant proportion of which are held by women.
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As per the World Trade Organization (WTO) agreement on Subsidies and Countervailing Measures (SCM) Article 1.1, there are two types of subsidies - those that are prohibited, those that are actionable (i.e., subject to challenge in the WTO or to countervailing measures).
However, as per Annex-7, if the per capita income of a country is less than $ 1000 (Article VII) (in 1990 constant dollar terms), then that country will not come under the purview of Article 3.1(a) on the prohibition of subsidies. In this context, Bangladesh can continue subsidies for some time as the threshold per capita income is still lower than the amount, as per the WTO agreement. Nonetheless, Bangladesh should be ready to maintain the growth of its huge fisheries sector and withstand the challenges.
There are some non-actionable subsidies such as - assistance for research activities conducted by firms, higher education or research establishments on a contract basis are allowable. However, some other provisions do not apply to fundamental research activities independently conducted by higher education or research establishments. The term fundamental research refers to research on general scientific and technical knowledge that is not linked to industrial or commercial objectives.
Assistance can also be given to disadvantaged regions within the territory of a member and to help existing facilities adapt to new environmental requirements imposed by law and/or regulations, which result in greater constraints and financial burden.
In the 12th Ministerial Conference (MC12), there was some discussion on fisheries subsidies and a new agreement was agreed upon and circulated on 17 June 2022. All the discussions of the agreement could not be completed and the remaining issues will be brought up in the MC13, to be held in February 2024. Considering the pledges on the sector for Bangladesh, the new agreement if concluded will have an impact on the sector and thus we need to be prepared accordingly.
There are different provisions in the new WTO Fisheries agreement tabled in the MC12, and in article 12, it is mentioned that if a comprehensive discipline is not adopted within four years of the entry into force of this agreement, and unless otherwise decided by the general council, the agreement shall be terminated.
The agreement will require the ratification of two-thirds of its members, i.e. at least 109 WTO members. So far, 40 members have ratified the agreement. WTO agreements are complex and have to pass through several processes; fisheries subsidies are thus a critical issue. According to several sources, it was found that the amount of subsidy for this sector is about USD 35.4 billion, of which China (21%) dominates and the other countries are the United States, United Kingdom, South Korea etc. There has been a mixed reaction to the upcoming agreement.
Fisheries subsidies became a subject of work in the WTO's negotiation group in 2001. The adoption of UN SDGs in 2015 has created a new mandate through SDG 14.6 where the prohibition of fisheries subsidies for overcapacity and overfishing to Illegal Unreported and Unregulated (IUU) fishing was mentioned.
The subsidies in the new agreement are meant for marine wild capture fishing and fishing-related activities at sea only, and not for domestic inland aquaculture. Any form of government-to-government contract will also remain out of the purview of the agreement.
Fish stocks are at risk of collapsing in several parts of the world due to overexploitation. As per the Food and Agriculture Organisation (FAO), an estimated figure shows that about 34% of global stocks are overfished compared to 10% in 1974, on the other hand about 50% of the assessed stocks are overfished.
Fisheries subsidies specifically address illegal, unreported, and unregulated (IUU). Some parts of the negotiation such as overcapacity, overfishing, and special and differential treatment(as part of SDG 14.6) will need further discussion in the upcoming ministerial. The implication of the agreement in the context of Bangladesh needs to be discussed and well understood before ratification.
Several countries are providing subsidies in different ways - these could be in the form of packaging, processing, or transporting of fish in different ports. For fishing in the deep sea, there is a requirement for different types of vessels, boats and similar other equipment. Skilled operators are also needed to control these vessels. Bangladesh has limited capacity to provide such a type of subsidy. However, cash incentives for fish export and export credit guarantee schemes may be questioned after graduation.
In the WTO's upcoming fisheries agreement, IUU has been defined clearly as activities conducted by national or foreign vessels without the permission of the state, in contravention of its laws and regulations, or by those flying the flag of a state not party to that state.
Unreported or misreported fishing is defined as fishing undertaken in the area of competence of a relevant regional fisheries management organisation or arrangement (RFMO/A) in contravention of reporting procedures, unregulated fishing that is not consistent with or contravenes the conservation and management measures of that organisation.
Proof of IUU will be based on scientific evidence( Article 4.2) that fish stock is overfished. It means that no members shall grant subsidies for fishing or fishing-related activities outside the jurisdiction of a coastal member and the competence of a relevant RFMO/A. Coastal members, in some cases, use flags of another country, in which case a subsidy will not be allowed. Reporting port state would need to be ascertained. In case anybody fishes in the EEZ of Bangladesh, it would need to be reported.
There is Special and Differential Treatment (S&DT) for LDCs in the agreement; it is also mentioned that for a certain time after graduation, this will continue. Developing country members - outside of a certain portion of shares as fixed by FAO - can get S&DT treatment. Developing countries will also be kept out of the purview of fishing beyond the adjacent areas as defined by FAO.
With regards to the new agreement for marine fisheries catch, Bangladesh does not have much stake, as until now, marine catch of the country is much less than the leading countries. In 2021-21, it was only 14.47% of the total catch, of which Hilsa catch is significant. We have many unexploited opportunities and we have still not been able to exploit our blue economy.
Thus far, the cash incentives and support given by a country will be treated as prohibited subsidies after LDC graduation. National diesel fuel subsidies for all consumers (USD 91 million) will be at stake; and even domestic price, if it is less than international price, may also be prohibited as a non-specific subsidy. Ocean trawlers, as an export sector enjoying concessional tariffs, taxes, duties and concessional credit (about USD 21 million) may face challenges in the future. Cash incentives for shrimp and frozen fish export, depending on the type and nature of work, can come under review, as per the WTO agreement on SCM.
Given the above analysis, it is clear that in preparing for LDC graduation, the subsidy issues have to be analysed clearly. Bangladesh needs to develop a reporting system; for this, a number of unregistered artisans need to be registered.
Assessment of stocks in our EEZ areas for having a maximum yield of different species will be required. Bans in fish nursery areas that include more species along with hilsa need to be ensured to address overcatch. More focus should be given to improving sanitary and phytosanitary measures, quality controls, certification and required targeted assistance, instead of direct subsidies, to retain our competitiveness in domestic aquaculture.
Ferdaus Ara Begum is the CEO of BUILD, a Public Private Dialogue Platform that works for private sector development.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
