By Saheli Wikramanayake
When the Agreement on Fisheries Subsidies was adopted at WTO’s 12th Ministerial Conference (MC12) in June 2022, it was a remarkable moment for several reasons. Firstly, it is the first WTO agreement to look beyond trade and consider the environment. Secondly, it was remarkable for how long it took.The commitment to negotiate disciplines on fisheries subsidies was undertaken in the Doha Development Agenda in 2001, 21 years before the Agreement was finally adopted. Like many things in the WTO these days, fisheries subsidies are a highly contentious topic, which explains why these negotiations were particularly tough. While the Agreement deals with issues of sustainability, negotiations also must deal with tough questions surrounding development and the burden on developing countries in the move towards sustainability. Sri Lanka is a prime example of both sides of this debate. This blog will examine how the current Agreement can benefit Sri Lanka and why fisheries subsidies themselves are important for Sri Lankan fishermen. The experiences of Sri Lankan fishermen in the north, who have found their livelihoods impacted by illegal trawling by Indian fishermen in Sri Lankan territorial waters, and the economic crisis, serve as a clear example of both sides of the argument.
Overview of the Agreement
Article 1 of the Agreement borrows the legal definition from Articles 1 and 2 of the Agreement on Subsidies and Countervailing Measures (SCM) to define a subsidy as a 1) financial contribution, 2) by a government or any public body within the territory of a Member, 3) that confers a benefit. The Agreement then goes on to detail the rules on certain types of fisheries subsidies. Article 4 prohibits subsidies for fishing or fishing-related activities regarding an overfished stock. Article 5 covers “other subsidies,” including a prohibition and obligations to take special care and exercise due restraint with two types of subsidies. The Agreement also provides special and differential treatment to developing countries in the form of a two-year grace period.
This blog will focus on Article 3 of the Agreement, which is of particular interest to Sri Lanka. This prohibits subsidies to vessels or operators engaged in illegal, unreported and unregulated (IUU) fishing/fishing-related activities. Article 3 provides detailed procedures to be followed in instances of such subsidies. The concept of IUU fishing is not a new one. The Food and Agriculture Organisation of the United Nations (FAO) calls it one of the “greatest threats to marine ecosystems” and says that, amongst other issues, it can destroy fisheries resources available to bona fide fishers, leading to the collapse of local fisheries (in particular, small-scale fisheries in developing countries). The experiences of Sri Lankan fishermen in the north of the island demonstrate the dangers of IUU fishing.
Illegal Fishing in Sri Lanka’s Territorial Waters
The illegal trawling by Indian fishermen in Sri Lankan waters has been a long source of tension between the countries. Fishermen in the north of Sri Lanka, who were adversely affected by the civil war, now find their livelihoods affected by fishing boats illegally crossing the maritime boundary between India and Sri Lanka and fishing in Sri Lankan territorial waters. This is because the Sri Lankan territorial waters provide better fishing opportunities than in India (partially because of overfishing on the Indian coastline). Particularly problematic is the disparity between the methods used by fishermen in each country. While many Sri Lankan fishermen use traditional methods of fishing Indian fishermen commonly engage in bottom trawling, which is more effective at catching large amounts of fish but can deplete fish stocks. This method of fishing was banned in Sri Lanka in 2017 through the amendment of the Fisheries and Aquatic Resources Act No 11, though it remains legal in India.
Most Indian fishermen entering Sri Lankan waters come from Tamil Nadu and Andhra Pradesh. These two states, along with Kerala and Karnataka, account for more than 50% of fish landings in India. Both states give extensive subsidies to local fishermen, including fuel subsidies. A risk associated with fuel subsidies to the fisheries industry is the potential for overfishing. The government bears much of the cost of fishing, which in turn increases the capacity of the fishermen. When the method of fishing is unsustainable, as bottom trawling is, the risk becomes all the more acute.
So, arguably this method of fishing is unsustainable. Importantly, it is also illegal. As per the International Plan of Action to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing (IPOA-IUU), adopted by the FAO Committee on Fisheries in 1999, IUU fishing (specifically, illegal fishing) can include fishing “conducted by national or foreign vessels in waters under the jurisdiction of a State, without the permission of that State, or in contravention of its laws and regulations.” Under this definition, Indian fishermen trawling in Sri Lankan territorial waters can be classified as IUU fishing under Article 3 of the Agreement on Fisheries Subsidies.
The WTO is not going to be where this long-standing issue between India and Sri Lanka is resolved (not least because of the current legal status of the Agreement). Yet, what this demonstrates is why disciplines on fisheries subsidies can be beneficial for Sri Lanka. Our fishermen cannot compete with fishermen subsidised by bigger, richer governments, and our coastline needs protection from unsustainable and illegal fishing.
The Need for Fisheries Subsidies
On the other hand, it cannot be said that fisheries subsidies are only detrimental to Sri Lanka. For small-scale fishermen, subsidies can be necessary. Many fishermen in Sri Lanka complain that due to the economic crisis, kerosene is either unavailable or unaffordable. Without kerosene to run their vessels, they are unable to fish. This threatens their livelihood and, more broadly, contributes to the rise in the cost of food across the island. In August 2022, Minister of Power and Energy Kanchana Wijesekera tweeted that with the price of kerosene matching market prices, direct cash subsidies would be provided to the fisheries sector that is dependent on kerosene. For small-scale fishermen, subsidies can play an important role in ensuring their livelihoods and allowing them to continue to fish.
This issue was brought up at the WTO level by India, who noted that developed countries (and China) grant far more subsidies to the fishing industry than developing countries. The following paragraph sums up their stance.
“India’s stand is that we are one of the lowest fisheries subsidisers despite such a large population and one of the disciplined nations in sustainably harnessing the fisheries resources. India does not exploit the resources indiscriminately like other advanced fishing nations, and India’s fisheries sector primarily depends on several millions of small-scale and traditional fishers. Therefore, those WTO Members who have provided huge subsidies in the past, and engaged in large-scale industrial fishing, which is responsible for the depletion of fish stocks, should take more obligations to prohibit subsidies based on the ‘polluter pay principle’ and ‘common but differentiated responsibilities’.”
As well as flagging the issue of small-scale fishermen, India’s statement also asks the question of who should bear the brunt of the shift towards sustainability. Their argument seems to be that developed countries, who benefitted from subsidising their fisheries industries, now want to prohibit subsidies to developing countries and their growing fishing industries. While it is perhaps slightly ironic for Sri Lanka that India is flagging this issue, it is undoubtedly a concern that has to be accounted for. Any discipline on fisheries subsidies needs to account for this balance of responsibility, and account for the concerns and needs of small-scale fishermen. India’s statements after the adoption of the Agreement on Fisheries Subsidies suggest that they will not back down on the issue. And indeed, the adoption of the Agreement does not signal the end of this debate in the WTO. Article 12 contains a sunset clause (or an “exploding review” clause), stating that if comprehensive disciplines on fisheries subsidies are not adopted within four years, the Agreement will stand terminated. This means that negotiations must continue, and if previous experience is anything to go by, this will be a long process with no easy answers. For Sri Lanka, it will remain an important one.
The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench
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