Today, 5 June 2020, is not only the International Day for the Fight against Illegal, Unreported and Unregulated (IUU) fishing, but also marks the 4th anniversary of the Agreement on Port State Measures (PSMA) – to prevent, deter and eliminate IUU fishing – entering into force. Planet Tracker applauds the 66 coastal countries who are parties to the treaty. These countries support the treaty because illegal, unreported and unregulated fishing creates a global economic loss of $10 billion to $23 billion annually. The large loss decreases tariff and tax revenue to key developing nations who are reliant on this revenue to fund government services. With one out of five fish estimated caught under IUU fishing,[i] the PSMA treaty is one approach towards stopping these illegal and unlicensed activities while supporting economic growth.
For every fishing vessel that wishes to dock at a port, signatories to the PSMA treaty are obliged to inform the port about its fishing operations, with permission denied if unregulated fishing has occurred. PSMA’s purpose is to prevent illegal, unreported and unregulated wild-catch fish from entering into domestic and international trade.
On this International Day highlighting the problem of IUU fishing, we need to remember that 3.2 billion people rely on seafood for their protein supplied by a sector that employs more than 50 million people around the world.
Furthermore, as shown in Table 1, Table 2 and Table 3, nations throughout Latin America, Africa and Asia are dependent on tariff revenue from processed fish which is harvested and transported via supply chains which often include IUU risks.
Demand Side Growth, Supply Side Risks
Fish has been the fastest growing animal protein by volume over the last 55 years, growing 3.2% annually from 1961 to 2016, compared to 2.8% for meat protein.
In 2018, total global trade for processed fish was $17.8 billion having grown year-over-year by 21.5%, with average global tariffs at 14.2%. The top exporters of processed fish are China ($3.17 billion), Thailand ($2.98 billion), and Ecuador ($1.23 billion).
At the same time, on the supply side, global wild-catch fisheries are declining. They plateaued at around 90 million tonnes in the 1990s and have now declined to 79 million tonnes as of 2016. About 90% of global fisheries are at maximum levels, depleted or overfished.[ii]
Authorities suggest that IUU catch accounts for more than 15% of global wild-catch seafood.[iii] That level of IUU catch will lead to distortions at the local level, especially in communities highly dependent on income from wild-catch industries.
The scale, diversity of products and geographic scope of the global seafood industry provides a clear opportunity for economic gain from IUU fishing. The problems that IUU fishing present globally can be summarized in three overall categories:
- IUU fishing threatens ecosystem health and hinders conservation.
- IUU fishing creates health risks when IUU fish enter markets. By bypassing health safety regulatory mechanisms, when mislabelled or fish not fit for consumption is eaten it can create health risks for individuals including consumption of high levels of mercury and various pathogens.
- IUU fishing has negative economic impacts by distorting pricing of legal seafood trade and creating unfair competition
Emerging Market Investors Need to Be Aware
With processed fish a significant portion of many nations’ economic base, a key source of labour demand, a generator of tariff-linked treasury tax receipts and a contributor to nutrition and ultimately natural capital maintenance, it is important for asset managers and analysts to be aware of IUU fishing and its negative impact on regional economies.
This is why today we encourage responsible investors, and in particular sovereign investors, who are aligning their investment policies with the UN Sustainable Development Goals to consider SDG 14: Life Below Water as this SDG’s metrics include:
- By 2020, effectively regulate harvesting and end overfishing and IUU fishing and destructive fishing practices and implement science-based management plans, in order to restore fish stocks in the shortest time feasible, at least to levels that can produce maximum sustainable yield as determined by their biological characteristics.
- By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to IUU fishing and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the World Trade Organization fisheries subsidies negotiation.
Emerging market investors need to know that they have a clear opportunity to support these national governments and the related economies in which they are investing by raising their own awareness regarding the detrimental economic impacts that IUU fishing has on their investments through the lens of missed tariff-linked treasury tax receipts.
Having analysed more than 9,100 tariffs for the 26 countries listed below representing 63.9% of the process fish export market worth $11.4 billion in 2018 and assuming the median tariff rate lost on 20% of all processed fish exports, initial estimated lost tariff revenue losses are $280 million. For example, for Thailand, this lost tariff revenue from illegal, unreported and unregulated fishing is estimated at $127 million in 2018.
[i] FAO (2020).
[ii] FAO (2016). The State of World Fisheries and Aquaculture 2016. Contributing to food security and nutrition for all.
[iii] National Intelligence Council (2016). Global Implications of Illegal, Unreported, and Unregulated (IUU) Fishing.
[iv] Planet Tracker and Massachusetts Institute of Technology (2020). Observatory of Economic Complexity.
[v] Planet Tracker and Massachusetts Institute of Technology (2020). Observatory of Economic Complexity.
[vi] Planet Tracker and Massachusetts Institute of Technology (2020). Observatory of Economic Complexity.