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Economics and
Management
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The American Fisheries
Act (AFA) enacted by Congress in late 1998 identifies
which catcher vessels, factory trawlers, motherships
and in-shore processors are eligible to participate in
the BSAI pollock fishery. The Act shifted nearly 10
percent of the BSAI pollock TAC from factory trawlers
to in-shore processors, which include processing
plants on land and floating processors anchored near
shore (Figure 3a and 3b above). The Act also
permanently removed nine factory trawlers from the
offshore fleet along with the implicit catch rights
attached to them. A profound change
brought by the AFA was the creation of a pollock
factory trawlers cooperative. The formation of the
cooperative allows the factory trawlers, and catcher
vessels that deliver to them, to divide up the
group’s pollock quota during each of the next 6
years. Each factory trawler and catcher vessel
is allocated a certain amount of the group’s overall
quota, thereby allowing them to fish at a slower pace
since they no longer compete against one another for
their share of the total catch. The result is
lower operating costs and greater product quality and
value.
The results of this new management approach are in
sharp contrast to those of the recent past when each
company attempted to put as much catching and
processing capacity on the fishing grounds as it could
muster. During the 1999 pollock A season from
late January to late March, 4 of 20 eligible pollock
factory trawlers were voluntarily left at their
moorings in Seattle. The average haul size for
pollock factory trawlers dropped by roughly 20 percent
from the 1998 A season, and the average catch per day
for individual vessels dropped almost 30 percent. In
light of declining surimi prices due to economic
problems in Japan and Korea, the slower pace of
fishing has allowed factory trawlers to shift
production from surimi to fillets, which are higher
valued but also take longer to produce (Figure 4
below). Until recently because of production times,
the factory trawlers’ ability to produce more
fillets and less surimi was limited as vessels raced
against each other to catch and process as much fish
as possible before the overall quota was caught and
the season closed.
While the AFA is
designed to bring more flexibility to participants in
the pollock fishery, recent regulations designed
to protect the endangered Steller sea lions have
restricted the pollock fleet’s ability to fish
near the shoreside processing plants in the Aleutain
Islands region and closed the pollock fishery there.
In addition, the BSAI pollock A season was split
into two seasons, with a mandatory 5-day stand down
in between. Similar regulations designed
to reduce the amount of pollock taken from the sea
lions’ critical habitat will be in place for future
pollock seasons. Some industry members have argued
that such regulations will increase their operating
costs as boats will have to travel farther and fish in
less productive areas and that a longer distance to
the fishing grounds will also lower product quality
since the delivered fish will not be as fresh.
Current events in the pollock fishery illustrate a
variety of ways that regulations impact a fishery’s
value. With insufficient data, the National Marine
Fisheries Service (NMFS) had a very limited ability to
predict the economic impact of alternative
options for achieving conservation goals for sea
lions. Had NMFS been able to provide an accurate
assessment of the relative economic impacts of
different proposed options, the costs to participants
in the pollock fishery and to the Nation of protecting
the sea lions might have been substantially reduced.
Towards Optimal Management
What responsibilities and what capabilities does NMFS
and the AFSC have to assess the impact of regulations
on the level and distribution of economic benefits
derived from fishery resources? The Magnuson-Stevens
Fisheries Conservation and Management Act (MSFCMA)
includes a number of national standards for fishery
conservation and management that are at least
partially concerned with the economic benefits derived
from U.S. fisheries. National Standard One instructs
fishery managers to implement management plans that
will achieve the “optimum yield from each fishery
for the U.S. fishing industry.” Optimum yield is
defined as that which “(A) will provide the greatest
overall benefit to the Nation, particularly with
respect to food production and recreational
opportunities, and taking into account the protection
of marine ecosystems; (B) is prescribed as such on the
basis of the maximum sustainable yield from the
fishery, as reduced by any relevant economic, social,
or ecological factor; and (C) in the case of an
overfished fishery, provides for rebuilding to a level
consistent with producing the maximum sustainable
yield in such fishery.” Though its language is
somewhat ambiguous, the MSFCMA also has some
instructions for fisheries managers regarding the
objectives of economic efficiency and allocative
fairness. National Standard Five instructs managers
that “conservation and management measures shall,
where practicable, consider efficiency in the
utilization of fishery resources; except that no such
measure shall have economic allocation as its sole
purpose.” National Standard Seven states that
“conservation and management measures shall, where
practicable, minimize costs and avoid unnecessary
duplication.” Lastly, National Standard Eight states
that “conservation and management measures shall,
consistent with the conservation requirements of this
Act (including the prevention of overfishing and
rebuilding of overfished stocks), take into account
the importance of fishery resources to fishing
communities in order to (A) provide for the sustained
participation of such communities, and (B) to the
extent practicable, minimize adverse economic impacts
on such communities.”
As the legal guardians of public resources, NMFS and
the fishery management councils have a statutory
obligation to implement management systems that will
promote economic efficiency while ensuring the
conservation of fishery resources. Thus, the
responsibilities of fishery managers extend beyond
setting the optimal TAC and ensuring the conservation
of fishery resources and habitat. Fishery managers are
required to consider the economic impacts that
regulations have on the individuals and communities
which benefit from the use of fishery resources. For
example, how, when, by whom, and under what conditions
the TAC is taken.
Currently management lacks the type of economic data,
including fishery revenue, cost, and employment data,
that is necessary to perform basic analyses.
Management has some revenue and production data, but
it is incomplete. NMFS collects data on the quantity
of fish caught, production of fishery products, and
the state of Alaska collects information on revenues
for on-shore and near-shore seafood processors.
However, prices for products produced at-sea are
collected only from the processors that supply them
voluntarily, and none of the product prices are
available by product grade. There is even less cost
and employment data. In fact, no data on the
costs of production and very little on employment are
routinely collected. Without information about costs
it is not possible to determine whether the industry
is making a profit or a loss, much less the magnitude
of the profit or how it has been or might be impacted
by regulatory changes. The absence of employment data
means that it is not possible to state the number of
individuals employed in the fishery, their earnings,
and how they are impacted by management decisions.
The AFSC Cost, Earnings, and Employment Data
Collection Project
In an attempt to remedy the deficit of economic
information, the Socioeconomic Assessment Program, in
cooperation with the Pacific States Marine Fisheries
Commission and the North Pacific Fishery Management
Council, has initiated a data collection effort that
will attempt to collect detailed economic data from
companies involved in harvesting and processing
groundfish in the Federally managed fisheries off
Alaska. The information will be collected
through voluntary surveys that will be administered to
different sectors of the groundfish fishery. Catcher
vessels, factory trawlers, motherships and in-shore
processors involved in the pollock fishery will be
surveyed in 1999. Factory trawlers that
participate primarily in the bottom trawl fisheries,
as well as participants involved in fixed-gear
groundfish fisheries, will be surveyed early in
2000. Groups to be surveyed in 2001 and beyond will be
identified later this year. It is envisioned
that the collection of economic data will become
routine and will be divorced from particular
policy issues such as inshore-offshore quota
allocations. Each industry sector will be resurveyed
periodically and, if possible, annually.
The surveys are designed to provide data necessary to
evaluate the economic performance of the groundfish
fisheries, including the net profits derived from
them. Processors and harvesters will be asked to
provide detailed information about their costs,
earnings and employment. The surveys will
include questions about operating costs and the value
and costs of capital. Respondents will be asked
to provide information about revenues for the
different products they produce as well as objective
information about product quality. Information
about the numbers of employees and their compensation
will also be collected. Over time, the
accumulated data will allow managers to assess the
impacts of regulations and to differentiate regulatory
impacts from impacts resulting from changes in
seafood markets, technology, and the environment.
The eventual goal of the data collection project
is to provide the information necessary to evaluate
the relative economic impacts of alternative
management measures and to aid in planning management
systems that maximize the sustainable benefits
provided by the fisheries.
Currently, neither NMFS nor the North Pacific Fishery
Management Council (NPFMC) has statutory authority to
require firms to report economic information. In fact,
the MSFCMA specifically precludes the NPFMC from
requiring harvesters or processors to supply
“information that would disclose proprietary or
confidential commercial or financial information
regarding fishing operations or fish processing
operations.” Thus, participation in the data
collection effort is voluntary. Without the
authority to require firms to provide economic data,
NMFS must convince industry members that it is in
their best interest to provide this data and must
address industry members’ concerns about how the
data will be maintained and used.
To this end, AFSC economists have met with
representatives of most of the companies involved in
processing pollock, several owners of catcher vessels,
and industry association representatives. This
interaction was motivated by a desire to develop more
effective and efficient survey instruments as well as
to convince industry of the importance of the project.
It also provided an informal forum to address
industry members’ concerns about the data collection
effort. It is instructive to point out some of these
concerns. Perhaps the foremost concern is the
security and confidentiality of the data being
provided. NMFS already collects and maintains a
variety of confidential data on catch and production,
but data on production costs and revenues is
considered even more sensitive by industry members.
Some industry members are leery that the
information collected will be used to justify
regulations that essentially redistribute benefits
from one group to another. Nevertheless, industry
members are keenly aware of the economic impacts of
regulations, and many of them have expressed a
willingness to provide the data that will be necessary
to assess these impacts.
Economic Models and Analysis
The economic data collected through the data
collection project will be used to calculate a number
of measures of economic performance. These include
standard financial performance measures that can be
used to assess the profitability and financial health
of firms engaged in the fisheries. These
measures will be tracked over time to assess the
impacts of regulatory and other changes in the
fisheries, and will strengthen managers’ ability to
predict outcomes of future changes. The Socioeconomic
Assessment Program will also be preparing physical and
economic measures of capacity and capital utilization
to support national and international efforts to
develop fishing capacity management plans. Economic
data will eventually be used to develop models to
predict how revenues, costs, and employment will
change with changes in regulations, markets, and
environmental conditions.
Successful implementation of the cost, earnings, and
employment data collection project is designed to
provide the economic information necessary to the AFSC
in its mission as steward of the Federally-managed
marine resources off Alaska. The data collection
project should help the region’s managers
quantify the benefits derived from the Alaska
groundfish fishery and how regulations have impacted
those benefits. It is hoped that the project will also
enable managers to predict the impacts of regulations
before they are implemented and to identify management
systems that will maxmimize the sustainable benefits
of the Alaska groundfish complex.