RFMOs and the New Member Problem: From Theory to Policy

Gordon MunroUniversity of British Columbia, Vancouver; University

of Portsmouth, UKGTP 8, Riverside, CA

July, 2011

Introduction

This paper is about Practice, not about new developments in Theory

marked shortage of equations

Designed to answer the 2008 question of Albiac, Sánchez-Soriano and Dinar:

“--- has game theory developed sufficiently to assist in evaluating policies in improving management of shared natural resources and amenities?”

Quick answer – YES ! -

at least in fisheries

Changing Opinions

• At GTP 6 and GTP 7, I argued that game theory has great relevance to the management of internationally shared fisheries, but also argued that game theory (GT) concepts poorly understood by policy makers.

• little influence on policy -much work to be done

• Now seeing clear signs that GT concepts are, in fact, having an influence on policy makers in this area; that our work is beginning to pay off.

• the long lag between advances in GT and impact on policy

RFMOs Reviewed

• Previous paper in this session has shown that Regional Fisheries Management Organizations (RFMOs) designed to manage fishery resources to be found both in EEZs and adjacent high seas– explicitly include coastal states and so called distant

water states (DWFSs) - e.g. Japan, Spain

• Key international treaty law – 1982 UN Convention on Law of the Sea; 1995 UN Fish Stocks Agreement (1995 UNFSA)– particularly the latter

Unregulated Fishing and Free Riding

• Under 1995 UNFSA, a RFMO open to all states with “real” interest in relevant fishery(ies).

• No state to fish in high seas under RFMO jurisdiction, unless it abides by RFMO management plans– but ambiguity of international treaty law, has led to

unregulated fishing in RFMO high seas areas – free riding, pure and simple

– the GT message about consequences of rampant unregulated fishing has got through to policy makers – vigorous measures now being taken to curb such fishing

– move to customary international law

The New Member Problem

• Left with New Member problem – under 1995 UNFSA, “charter” members of a RFMO have to be prepared to welcome prospective new members, who agree to abide by RFMO management regime.

• Legal experts in the 1990s maintained that new members must be given “just and reasonable” share of the economic returns from the RFMO fisheries– an example – a tuna RFMO – Western and Central

Pacific Fisheries Convention (WCPFC)

WCPFC

• WCPFC covers the largest concentration of tropical tuna stocks in the world – extensive DWFS activity – traditional DWFSs – USA, Japan, China, Taiwan, ROK

• After Convention negotiated, prospective “new members” appeared from the other side of the Pacific expressing a “real” interest in the resources- Mexico, Panama, Ecuador– how to explain emergence of new members: Answer-

shifting comparative advantage– issue not yet resolved

The New Member Problem Analyzed

• Kaitala and Munro were the first to analyze the New Member Problem in1997 – a simple model

• 2 member RFMO, coastal state, C, and DWFS, D1,, rebuilding a fishery resource - target biomass reached at t = TR >0. No harvesting until t = TR Then faced with flood of new members. Pure symmetry; Nash egalitarian rule for sharing global payoff. Denote “just and reasonable” equal share as ω – PV of economic returns from fishery discounted back to TR..

• can find a number of new members such that:

• where LHS denotes Threat Point payoffs of “charter” members, i=C, D1, x denotes biomass level, N denotes non-cooperation, and δ the common discount rate.

1

( (0), , RTN NC Di

x E E eJ

The K - M Inequality

• The K-M inequality implies that influx of new members could completely undermine the RFMO cooperative game.– implicit free riding ,or what we might now call the public good

problem

• Li (1998) countered with Fair Sharing rule. – drop symmetry assumption and Nash egalitarian rule and take a

c-game approach. K- M inequality would not hold – new members granted allocations based on their contributions to the “economic pie”

– Li rule does not work with large numbers, which is typical of RFMOs – “ in the end full utilization of the stock might have to be declared” (Li, 1998) – contrary to the spirit of the 1995 UNFSA

The Waiting Period Solution

• Let new members into the “club”, but inform them that will have to go through a waiting period, before receiving any payoff.– in practice, RFMOs do have cooperating non-

members – 2nd class citizenship – transition

• Analytically issue unresolved. Pintassilgo and Costa-Duarte (2000) argue that the waiting period can work; K&M have counter example, in which the waiting period solves nothing.– if P & C-D are right, then have to say that a solution

that works only from time to time will not do

Transferable Membership Solution

• What this solution really comes down to is having the “charter” members being allocated national harvest quotas, which they can sell/lease, in all or part, to new members

• New members would then effectively have to “buy” their way in. The K-M inequality would then not hold – “charter” members have de facto collective property rights to resource(s)– the approach is fully compatible with international law – Pintassilgo and Costa-Duarte (2000) assess the three

solutions that we have discussed and declare the Transferable Membership to be the most efficient.

What Has Been Done Up to This Time?

• The two most common solutions to the new member problem:

– 1.declare resources to be fully utilized – “slam the door” on new members (recall Li’s Fair Allocation rule)

• guaranteed to intensify unregulated fishing problem

– 2. grant new members harvest allocations ,which are then added on to existing TAC(s)

• excellent chance of intensifying resource overexploitation

Independent Panel on RFMO Governance

• London based 2006/2007Independent Panel (IP) established due to recommendation of OECD High Seas Task Force– IP’s report (Chatham House Report) now used

extensively by OECD

• IP report, inter alia, recommends that:– “in each RFMO, members should seek means of

accommodating new members that will not undermine --- the RFMO, such as allowing new members to purchase or lease fishing opportunities from existing RFMO members”

• how was this recommendation arrived at?

Commission for the Conservation of Southern Bluefin Tuna (CCSBT)

• One RFMO, in which the Transferable Membership solution is being seriously discussed, is the CCSBT –centered on Australia and NZ

• resource in need of extensive rebuilding• RFMO plagued with new members – previously granted

allocations added on to TAC –expected results– From recent OECD case study on the CCSBT: “---

quota trading may occur in the not too distant future.---it makes sense where the stock is being rebuilt and there is no scope to increase global TAC for states wishing to enter the fishery ---- “

– Once one RFMO adopts the solution, others certain to follow.

http://www.fao.org/fishery/rfb/ccsbt/en#Org-GeoCoverage

Some Conclusions

• GT does have very useful insights into the management of internationally shared fishery resources

• Eventually, these insights make their way into policy circles – but be prepared for long lags. K & M, for example, first wrote about the new member problem in 1993!

• There remain some unresolved GT new member problems – go back to K&M, 1997.

PayoffD1, D2

0

Payoff C

Pareto Frontier

TP2

TP1

A1

A2

TP1 – Threat point payoff – C and D1

TP2 – Threat point payoff – C and D2

A1, A2 – cooperative solution payoffs

Effect of New Member, D2, Buying Out D1