Commercial Fisheries: Effectiveness of Fishing Buyback Programs
Can Be Improved (10-MAY-01, GAO-01-699T).
Fish populations in many commercial fisheries are declining,
resulting in a growing imbalance between the number of vessels in
fishing fleets and the number of fish available to catch.
Federally funded fishery buyback programs are one tool available
for managers to bring the number of vessels and the number of
fish back into balance. Buyback programs need to be carefully
designed if they are to be effective in helping to ensure
sustainable fisheries. If buyback programs are not accompanied by
other measures that reduce incentives to reenter a fishery,
capacity reductions resulting from buybacks will erode. Unless a
buyback program prevents it, fishermen can use previously
inactive vessels or permits and reenter the buyback fishery. By
themselves, the buyback programs do not address a root cause of
overfishing, which is called the ''race to fish.'' In most
fisheries, fishermen have an incentive to increase their fishing
capacity to catch fish before someone else does or use their
existing capacity more intensely. Plans for evaluating the
results of buybacks should also be considered when these programs
are being designed. Measuring and evaluating results can identify
important lessons that can improve the effectiveness of future
buybacks. The federal government has done little to evaluate
whether recent buyback programs have achieved their intended
benefits. This testimony summarizes the October 1999 report,
RCED-00-8R; and the June 2000 reports, RCED-00-120.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-699T
ACCNO: A00976
TITLE: Commercial Fisheries: Effectiveness of Fishing Buyback
Programs Can Be Improved
DATE: 05/10/2001
SUBJECT: Fishery legislation
Fishing industry
Marine resources conservation
Program evaluation
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GAO-01-699T
COMMERCIAL FISHERIES
Effectiveness of Fishing Buyback Programs Can Be Improved Statement of Barry
T. Hill, Director Natural Resources and Environment
United States General Accounting Office
GAO Testimony Before the Subcommittee on Fisheries Conservation,
Wildlife and Oceans, Committee on Resources, House of Representatives
For Release on Delivery 9: 30 a. m., Thursday, May 10, 2001
GAO- 01- 699T
GAO- 01- 699T Mr. Chairman and Members of the Subcommittee:
We are pleased to be here today to discuss our October 1999 and June 2000
reports on the costs and effectiveness of recent buyback programs for
specific U. S. commercial fisheries. 1 As the Subcommittee is well aware,
fish populations in many commercial fisheries are declining, resulting in a
growing imbalance between the number of vessels in fishing fleets and the
number of fish available to catch. Federally funded fishery buyback programs
are one tool available for managers to bring the number of vessels and the
number of fish back into balance. In response to this growing imbalance, the
federal government has provided $140 million since 1995 to purchase fishing
permits, fishing vessels, and related gear from fishermen, thereby reducing
the capacity of fishermen to harvest fish. Generally, the government
designed these buybacks to achieve multiple goals, such as reducing the
capacity to harvest fish, providing economic assistance to fishermen, and
improving the conservation of fish. Our two reports focused on the principal
buyback programs that have taken place in U. S. commercial fishing waters
since 1976.
In summary, Mr. Chairman, we found that buyback programs need to be
carefully designed if they are to be effective in helping to ensure
sustainable fisheries. For example, as we reported, recent U. S. experience
shows the following:
If buyback programs are not accompanied by other measures that reduce
incentives to reenter a fishery, capacity reductions resulting from buybacks
will erode. Unless a buyback program prevents it, fishermen can use
previously inactive vessels or permits and reenter the buyback fishery.
Buyback programs, by themselves, do not address a root cause of overfishing,
which is called the ?race to fish.? In most fisheries, fishermen have an
incentive to increase
1 Commercial Fisheries: Information on Federally Funded Buyback Programs
(GAO/ RCED- 00- 8R, Oct. 20, 1999) and Commercial Fisheries: Entry of
Fishermen Limits Benefits of Buyback Programs
(GAO/ RCED- 00- 120, June 14, 2000). A fishery is one or more stock (defined
as one species or several species in a geographical area) of fish managed as
a group.
GAO- 01- 699T 2 their fishing capacity to catch fish before someone else
does or use their existing
capacity more intensely.
Plans for evaluating the results of buybacks should also be considered when
these programs are being designed. Measuring and evaluating results can
identify important lessons that can improve the effectiveness of future
buybacks. The federal government has done little to evaluate whether recent
buyback programs have achieved their intended benefits.
Background
The management of commercial fishing waters in the United States is divided
among coastal states and the federal government. Coastal states issue
permits and develop and enforce regulations for fishing in waters that are
near their shores. In areas outside state jurisdiction, the National Marine
Fisheries Service (NMFS), within the Department of Commerce, is responsible
for issuing permits and developing and enforcing regulations for harvesting
fish. NMFS works with eight federally established regional councils
consisting generally of federal, state, and private- sector representatives
to develop plans and propose measures that attempt to balance the economic
benefits of fishing with the need to protect the environment.
Commercial fishing is a major industry in this country. In 1998, commercial
fishing vessels in U. S. marine waters landed 9.2 billion pounds of
commercial fish in domestic ports, with an estimated value of $3.1 billion.
However, also in 1998, the federal government reported that of the 300
species of fish for which it had data, 100 were either overfished or
approaching an overfished condition.
U. S. Buyback Programs? Experiences
As of our October 1999 report, the 10 buybacks implemented since 1976 were
expected to cost a total of about $160 million, when completed, from
federal, state, and private
GAO- 01- 699T 3 sources. About $140 million (87 percent) of these costs are
for buybacks implemented
since 1995, an indication of the increasing use of buybacks. The remaining
$20 million were incurred during the 1970s and 1980s for programs to assist
fishermen in the Northwest salmon industry.
The features, costs, and objectives of the buybacks vary.
The most costly buyback, involving Bering Sea pollock, began in 1998 under
the authority of the American Fisheries Act of that year. The act required
NMFS to purchase 9 of 30 factory trawlers 2 working in the fishery and their
associated fishing permits. The total cost of the buyback was $90.2 million,
with $15.2 million from federally appropriated funds and the remaining $75
million from a federal loan to Alaskan pollock fishermen to buy large
fishing vessels. The loan is repayable over 30 years based on a fee tied to
the amount of pollock caught by those left in the fishery.
The next most expensive buyback, involving New England groundfish, took
place in two phases between June 1995 and May 1998 under the authority of
the Emergency Supplemental Appropriations Act of 1994 and the
Interjurisdictional Fisheries Act. NMFS spent $24.4 million to remove 79
fishing vessels, the fishing permits that allowed these vessels to catch
groundfish, and all other federal fishing permits associated with these
vessels. NMFS also required that the vessels it purchased be scrapped, sunk,
or transferred to activities other than fishing.
The longest running buyback effort began in 1976 and involves five separate
programs since 1976 for reducing the number of salmon fishing vessels and
fishing permits in the Northwest. Three of the programs, costing a total of
$20.5 million, mostly in federal funds, were in effect between 1976 and 1986
under the Interjurisdictional Fisheries Act. The remaining two programs,
costing a total of $14 million, were implemented from 1995 through 1998
under this act and the Magnuson
2 A factory trawler catches fish by dragging a large net through the water
and then processes the fish onboard.
GAO- 01- 699T 4 Stevens Fishery Conservation and Management Act. All five of
the programs were
administered by the state of Washington, which purchased state fishing
permits. One of the programs also purchased vessels, while another also paid
some vessel owners not to commercially fish for salmon for 10 years.
Other buybacks have involved efforts to reduce the number of Texas state
shrimp fishing permits in the Gulf of Mexico and to eliminate commercial
crab fishing in some parts of the Glacier Bay National Park and Preserve in
Alaska. These buybacks cost a total of about $10.4 million, mostly in
federal funds.
Lessons Learned From Recent Buybacks
We believe recent U. S. experience demonstrates three important lessons that
should be factored into the design of any future buyback program. The first
lesson is that, unless a buyback is designed to restrict reentry of
fishermen, gains from a buyback will erode. Our June 2000 report examined
the capacity gains from buybacks in three diverse fisheries- New England
groundfish, Bering Sea pollock, and Washington State salmon. These buybacks
initially removed from 10 to 24 percent of each fishery?s respective
capacity. However, the prospects for maintaining these gains is different
for each of these fisheries, largely because of each buyback?s design. For
example, while the New England buyback initially eliminated vessels from the
fishery, additional vessels subsequently became active because the buyback
did not take steps to prevent fishermen from using previously inactive
vessels and permits. We found that the $24.4 million New England buyback
removed 79 vessels; however, because of the number of unused fishing permits
in the fishery, 62 previously inactive vessels began catching groundfish
after the buyback. These fishermen have begun to erode the capacity
reductions made by the buyback, replacing fishing capacity by as much as
two- thirds of that purchased through the buyback. In contrast, capacity
removed through the Bering Sea program has not returned, in part, because
the buyback legislation prevented the entry of additional fishing vessels.
With respect to the recent Washington State programs, while no steps were
taken to prevent additional fishing vessels from entering
GAO- 01- 699T 5 the fishery after the buyback, significant declines in
salmon stocks have made this
impractical and fishing capacity has declined. In some cases, however, this
capacity has shifted to fisheries in other states.
The second lesson focuses on the economic forces that, unless addressed,
drive fishermen who remain after a buyback to increase their fishing
capacity, called the ?race
to fish.? This race leads fishermen to invest in more fishing capacity, such
as adding fishing gear, increasing their time at sea and number of crew, and
replacing older vessels with bigger and more productive ones in order to
catch as many fish as quickly as possible in an attempt to maximize their
individual incomes. Economists conclude that left unchecked, this race to
fish will lead to overall higher costs and lower profits, economic hardship
for fishermen, and harm to fish populations and habitat.
The Bering Sea pollock buyback addressed the race to fish that had
previously existed among factory trawlers by facilitating the creation of a
fishing cooperative by the owners of the remaining trawlers. This
cooperative was designed to eliminate the race to fish by assigning a
specific amount of fish, or an allocation, to the cooperative, which divides
the allocation among its members. Because of this allocation, members of the
cooperative have no incentive to expand fishing capacity to catch the
available fish before someone else does, as they have in another fishery.
Members are able to catch their individual fish allocations at their own
pace, at lower capital and operating costs, while increasing product
quality. These changes resulted in higher profits and longer fishing seasons
for the remaining factory trawlers.
The third lesson is that evaluating the results of a planned buyback should
be built into the design of any future programs. In June 2000, we reported
that NMFS has made limited efforts to evaluate whether buyback programs have
achieved their intended benefits. As required by the Interjurisdictional
Fisheries Act, NMFS evaluated the effects of the New England buyback program
on fishing capacity. Aside from this congressionally mandated effort,
however, NMFS has not evaluated how any other buyback programs have affected
fishing capacity. Prudent management suggests that
GAO- 01- 699T 6 buyback programs be evaluated to identify lessons learned
that might help improve
future programs. Planning for such evaluations, including developing
measures to evaluate program results, should be an important part of the
design of future programs.
Actions Recommended in Our Previous Report
Mr. Chairman, buyback programs can and should be designed to be more
effective. In our June 2000 report, we recommended that the Secretary of
Commerce direct NMFS to
design future buyback programs to (1) restrict buyback participants from
entering a fishery that has fishing capacity problems ; (2) restrict the use
of previously unused fishing vessels and permits in a buyback fishery with
such problems; and (3) identify mechanisms to minimize the incentives to
increase fishing capacity in a buyback fishery;
develop performance measures for buybacks that relate to program goals and
broader legislative goals, such as the need to better manage fishing
capacity and sustain fish stocks; and
evaluate the results of future buyback programs against the performance
measures. The Department of Commerce generally agrees with our
recommendations that it should design future buyback programs to take into
account these entry and evaluation issues. Since our report, the Department
has continued initiatives to assess capacity levels in federally- managed
fisheries. For example, the Department issued a preliminary report in March
2001 that provides qualitative assessments of capacity in domestic
fisheries. In addition, buyback proposals being developed by industry and/
or NMFS are considering various approaches to address issues raised in our
report. This week NMFS started a series of public meetings on its proposal
for a $10 million permit buyback for the
GAO- 01- 699T 7 Northeast groundfish fishery, which includes a provision
intended to discourage
reactivation of previously inactive permits. This concludes our statement.
We will be happy to respond to any questions from you or other Members of
the Subcommittee.
GAO Contact and Staff Acknowledgment
For further information on this testimony, please contact Barry Hill at
(202) 512- 3841. Bob Lilly, Timothy Minelli, and Peg Reese also made key
contributions to this testimony.
(360082)
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