Fishing for Better Policy

An analysis of how catch shares increase the value of federally-managed fisheries, in turn creating greater value for the public. Ed Puccerella Adjunct Fellow
August 16, 2012

Executive Summary
Federal fisheries management is stricken with a failure of imagination, with very real consequences. When regulators are chasing after fishermen in an attempt to micromanage their lives and businesses, the problem of overfishing worsens significantly. With the economy currently stagnant at the same time food prices are rising, an inefficientlymanaged command and control bureaucracy is a needless burden crying out for reform. A promising solution is an innovative framework known as catch shares that could revitalize traditional fisheries management. Catch shares refer to fishermen gaining ownership of actual shares of a seasons catch. While regulators still set the overall tonnage of fish to be caught, fishermen have property rights over a percentage of the total catch. These shares, also called Individual Fishing Quotas, can be sold, bought, or leased. This catch shares framework invests the fishermen in protection and management of the fishing resource. While they have the ability to sell their shares, that fixed percentage is something they own in perpetuity. A 5% quota this year is 5% next year, and the year after that, and the year after that. This means that the fishermen are enlisted in the cause of not overfishing and potentially depleting the stock. Congress has the opportunity to help catch shares along in instructions given to the federal fisheries coordinator, the National Oceanic and Atmospheric Administration, an agency within the Department of Commerce.

Fishing for Better Policy, Ed Puccerella, August 16, 2012

Introduction
Nobel Prize winning economist Milton Friedman is credited with saying If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand. Considering the federal government has long had its hand in managing our nations fishing industry - and since 1975 has taken a commanding role in managing our coastal fishing waters - I guess we should consider ourselves lucky that we can still get a filet-of-fish at McDonalds without taking out a long-term bank loan. Anytime you distort market forces and increase the governments responsibility to regulate, its only a matter of time before what seemed like a perfectly simple issue becomes a mess that the taxpayer ends up getting stuck paying for. Lets hope our national fisheries policies can be addressed before the taxpayer is left holding the bill for another federal bureaucratic mistake. Im going to let you in on a little secret. Members of Congress come in countless flavors, but they all share a specific trait. Each one wants to be considered a wise and thoughtful voice. While they may win praise for deft political maneuvering or achievement in other areas, its on public policy that a congressman or senator can most directly seem wise.

Legacy Considerations
An earmark may get you a highway or building named after you, but when a public servant changes the direction of long-term policy and thinking, they move to a different level, one where his or her name often becomes known beyond their time in the legislative branch or sometimes long past their time on earth. Do you or do people close to you have Roth IRAs? Sen. Bill Roth of Delaware may have been defeated for reelection in 2000 and passed away in 2003, but his policy contribution can still be felt today, especially if Figure 1 you happen to be contributing to a Roth Every constituent buys food, but this chart suggests which individual retirement

members should be most concerned with getting this policy right.

2

Fishing for Better Policy, Ed Puccerella, August 16, 2012

account and enjoying the tax benefits. This is logical enough, since effecting policy is the job members of Congress are actually hired to do by the public. But how do congressmen actually get smart on policy, particularly on the more abstruse issues? The purpose of this paper is to provide education applicable in a congressional setting; with any luck, this will provide some context that can help. The topic is an issue federal fisheries management that is increasing in importance not just for the economies of coastal areas and other areas directly affected by the fishing industry, but also for the broader economy. With the explosive growth in seafood consumption in recent decades, coupled with rising food prices in recent years due to corn ethanol usage and this years drought crisis, a potent cocktail is brewing. The outmoded nature of federal oversight of fisheries is a drag on the economy that cries out for attention. Current fisheries management is bad for local communities, bad for fishermen, bad for the US economy, bad for those of us who have the occasional fish-n-chips, and its even bad for the fish. To highlight the relevance of seafood consumption, we note some data from the federal fisheries regulator, the National Oceanic and Atmospheric Administration. Even as the U.S. population rose 37% from 1980 to 2010, per capita annual seafood consumption rose 26% (from 12.5 lbs annually to 15.8 lbs) thats a substantial synergy. This essentially means an increase in total seafood consumption by 73%, 2.82 billion lbs to 4.87 billion lbs.1 Federal fisheries management, to put it bluntly, is among the most parochial of issues. Elected officials representing areas where fishing is not a substantial portion of the economy typically dont know or care how the industry is regulated. On the other hand, officials where fishing is a major part of the economy or simply a major part of that officials personal background tend to be so close to the issue they have difficulty in understanding the shortcomings of the current regulatory regime. In other words, fisheries management is an area where a little bit of due diligence can put a member of Congress substantially ahead of his or her colleagues, since the average level of understanding of the issue is low. And it could be an issue ready to pop into prominence.

A Rock and a Hard Place

Much of federal fisheries management is caught in a vicious cycle of centralized bureaucratic tail-chasing. Fishing is essential to local economies and to the food supply, so commercial fishing must be allowed. However, the arms race between fisheries regulators and fishermen, in most cases, is actually exacerbating overfishing and declining fish stocks. One example of an afflicted area is coastal North Carolina. A report from the John Locke Foundation summarizes:

Fishing for Better Policy, Ed Puccerella, August 16, 2012

The N.C. Division of Marine Fisheries 2011 Stock Status Report lists 12 groups of fish as viable or recovering, 13 groups as stocks for which there are concerns, and seven that are depleted. Statuses for another seven stocks are unknown. While red drum and monkfish are considered to be recovering stocks, overfished stocks include southern flounder, snowy grouper, red porgy, red snapper, red grouper, spotted seatrout, and several species of shark. Landings of shad, spot, and weakfish were at very low levels. Harvest of river herring in the Albemarle Sound was prohibited, the bay scallion season wasnt opened in 2011, and possession of Atlantic sturgeon was banned.2 Despite the unfolding mess, weakening or abolishing the regulators is not a feasible solution, due to what ecologist Garret Hardin dubbed the tragedy of the commons.3 When a resource, in this case the fishing grounds, are considered open to all held in common the result is a mad dash to grab up as much of the resource as humanly possible. This results in the eventual exhaustion of the resource the tragedy. In other words, both regulation and lack of regulation results in overfishing. Does that mean were doomed? No, it does not. We need to unleash the power of the free market and private property rights. Whats needed is simply a new paradigm.

Light Bulb: Catch Shares

The light bulb here is a concept known as catch shares. It changes the frame of fisheries management in a way that either eliminates or substantially reduces the threat of overfishing. The core concept is that if fishermen themselves have an ownership stake in the fishing grounds, they will manage it more judiciously than a government agency working at cross purposes from a group of individual fishermen racing each other to the fish. Fishermen under catch shares are assigned individual fishing quotas on a one-time basis. In some jurisdictions, regulators would assess which fishermen had met a certain threshold over several previous years. From there, fishermen are assigned quotas. These quotas can then be sold, bought, leased, or borrowed like any other commodity. Fishermen in a given region become holders of a right to fish a certain amount of that seasons haul, and that amount constitutes a property right, protected under law. This gives fishermen a stake in the management and protection of the natural resources. Rather than racing for whatever share they can grab, they own their own quota, which theyre responsible for harvesting.

A Dangerous Business
Commercial fishing is a dangerous business. According to the CDC: Commercial fishing is one of the most dangerous occupations in the United States. Many commercial fishing operations are characterized by hazardous working conditions, strenuous labor, long work hours and harsh weather. During 2000-2010, an annual

Fishing for Better Policy, Ed Puccerella, August 16, 2012

average of 46 deaths occurred (124 deaths per 100,000 workers), compared with an average of 5,466 deaths (4 per 100,000 workers) among all U.S. workers4 Knowing what a dangerous business commercial fishing is under the best circumstances, the federal governments current fisheries management policies have often added stress to an already hazardous situation. For many fisheries, the current federally-managed system negatively impacts fishermans lives, local communities economy and the fish resources. The limited fishing seasons that often cause fishermen to race against the clock to make enough profit to maintain their livelihoods is a result of big government command and control, distorting private property rights and market forces. This literally means that fishermen will disregard hazardous weather or other factors that would typically counsel delay, if they are in open season. Under catchshares, fishing seasons can be much broader, giving greater latitude to safe fishing conditions.

[Catch shares] has been a phenomenal success for the fish, and when you take care of the fish, you take care of the fishermen Gulf of Mexico fisherman David Walkerv
5

However, by making fishermen shareholders to harness property rights, fishermen can be motivated by greater profitability. The value of the fisheries increases and the public benefits from both a bettermaintained resource and one that brings in more revenue to local communities.

In the tragedy of the commons, 6 no one entity has property right to the resource (fish). Thus, fishermen act for their own short-term economic interest, which injures the long-term interest of everyone involved. Its a similar situation to the way the buffalo hunters of the old west hunted the buffalo to near-extinction, thus also ending their own livelihoods. Fishermen under the current race to the fish system in place across most of the United States dont have any assurance that theyll be allowed access to the resource that they rely on for their livelihood in the future. They dont have any incentive to manage the resource for any longer-term gains and all of their peers and the government are

Figure 2

Geographical overlay of NOAAs current catch shares programs

Fishing for Better Policy, Ed Puccerella, August 16, 2012

telling them to get what they can get now and do it as soon as possible. One doesnt need a PhD in economics to see how this is a bad situation with a system that seems to be reinforcing bad decisions.

The Current System...and a Little History

In 1966, Congress enacted P.L. 89-454, The Marine Resources and Engineering Development Act, creating the Commission on Marine Science, Engineering and Resources. They were given a broad charter: "develop, encourage, and maintain a coordinated, comprehensive, and longrange national program in marine science for the benefit of mankind, to assist in protection of health and property, enhancement of commerce, transportation, and national security, rehabilitation of our commercial fisheries, and increased utilization of these and other resources."7 The commission was chaired by Julius A. Stratton, a former president of MIT. Three years later, in 1969, the Stratton Commission published Our Nation and the Sea: A Plan for National Action, suggesting the need for Congress to act and suggesting the creation of the National Oceanic and Atmospheric Administration (NOAA), which was eventually done under the aegis of the Department of Commerce. The report led to the passage of the Fishery Conservation and Management Act of 1976. The law is more commonly known as the Magnuson-Stevens Act, named for then-Sens. Warren Magnuson (D-WA) and Ted Stevens (RAK). The law was designed to protect U.S. waters from foreign fleets and is the basis for much of the commercial fishery laws we have today. The Magnuson-Stevens Act was amended in 1996 and reauthorized in 2006. Since 1976, the coastal fishing management in the U.S. has been a command-and-control affair where targets are put in place by the NOAA. Its irrelevant how well-intentioned Washington bureaucrats may be towards fishermen and local fishing communities. Central planning simply does not work as effectively as letting those fishermen and local fishing communities, who spend their lives on the water, take an active role in the management of their local resources. Its not much of a stretch to see this kind of command-and-control method hearken back to the five-year plans of the Soviet Union. NOAA has set fishing limits by estimating what the given fish population is. Then a fishing freefor-all takes place until the government decides that the designated limit has been caught. For some species this has meant the fishing season has been shortened to only a few hours and some seasons have been suspended entirely. In addition to limiting the length of the fishing season, NOAA has tried a variety of other restrictions to prevent overfishing. These include regulating access to fisheries, boat size, fishing methods, types of fishing gear, how the fish are caught and fish size. Its not clear if the fish themselves care if a big boat or a small boat is catching them, or if they object more strenuously to being caught on a line or a net. The command-and-control method
6

Fishing for Better Policy, Ed Puccerella, August 16, 2012

used by NOAA uses all these restrictions and more to effect the outcome, in a Rube Goldberg attempt to fulfill its mandate: control of our fisheries. NOAAs own description of its role: NOAA's National Marine Fisheries Service is the federal agency, a division of the Department of Commerce, responsible for the stewardship of the nation's living marine resources and their habitat. NOAA's National Marine Fisheries Service is responsible for the management, conservation and protection of living marine resources within the United States' Exclusive Economic Zone (water three to 200 mile offshore). Using the tools provided by the Magnuson-Stevens Act, NOAA's National Marine Fisheries Service assesses and predicts the status of fish stocks, ensures compliance with fisheries regulations and works to reduce wasteful fishing practices. Under the Marine Mammal Protection Act and the Endangered Species Act, NOAA's National Marine Fisheries Service recovers protected marine species (i.e. whales, turtles) without unnecessarily impeding economic and recreational opportunities. With the help of the six regional offices and eight councils, NOAA's National Marine Fisheries Service is able to work with communities on fishery management issues. NOAA's National Marine Fisheries Service works to promote sustainable fisheries and to prevent lost economic potential associated with overfishing, declining species and degraded habitats. NOAA's National Marine Fisheries Service strives to balance competing public needs. [emphasis added] Note that while NOAA is a division of the Department of Commerce, the emphasis on NOAAs mission is conservation and other environmental goals. These ends may be laudable on their own, but they ought to come secondary to the needs of an industry that supplies a substantial part of the global food supply.

Catch Shares...Unleashing the Power of the Market and Property Rights

Thankfully NOAA has started to acknowledge the limitations of the command and control model, thanks in part to the 2006 reauthorization of the Magnuson-Stevens Act. By allowing the power of market forces into the equation, fishermen are able to use their own judgment to help manage the resources of the sea in the most beneficial way for society. From NOAAs Office of Sustainable Fisheries page on catch shares: "Catch shares" is a general term used in several fisheries management strategies, which include Limited Access Privilege Programs (LAPP) and individual fishing quotas, that dedicate a secure share of fish to individual fishermen, cooperatives or fishing communities for their exclusive use. The first catch share program in the U.S. was implemented in 1990 in the Mid-Atlantic Surf Clam and Ocean Quahog Fishery. Catch
7

Fishing for Better Policy, Ed Puccerella, August 16, 2012

share programs are currently used in 15 fisheries managed by six regional fishery management councils, with additional programs in development. In the United States and world-wide, catch shares are helping to eliminate overfishing and achieve annual catch limits, produce more fish at lower costs, improve fishermens safety and profits, and reduce the negative biological and economic effects of regulated fisheries that don't use catch share programs... Catch share programs are but one management option Councils can choose to meet their management objectives. Catch shares are not required by the Policy or appropriate for every fishery. NOAA Fisheries Service will provide technical and administrative support to Councils and stakeholders wishing to consider, design and/or implement a catch share program for their fishery.8 [emphasis added] The middle paragraph makes the most interesting point, which is that catch shares help ease the pressure on fisheries and even stocks within the same fishery that are still stuck on a central planning model.

Congressional Action
The annual budget and appropriations cycle, as with so many other issues, is where this battle will be waged in Congress. Congress has already agreed to a continuing resolution (CR) for the first half of Fiscal Year 2013, which runs through March 31 of next year. Because of this, there will be several opportunities in quick succession for members of Congress to wrestle over fisheries management. The first will be the resolution of the balance of FY13. That presumably will happen in March or April of next year, either before the March 31 deadline or in April after a brief extension. The next issue will be the budget for FY14, which will likely be debated in April, although a contentious resolution of FY13 spending could push that back by a month or more. Should the Senate pass a budget next year (it hasnt since 2009), its consideration could also drag on into May, and reconciliation between the two houses could go even later. The annual appropriations process also bears watching. NOAA is funded within the CommerceJustice-Science appropriations bill, one of twelve that Congress in theory should agree on annually to fund the government. In reality, we all know Congress typically waits until the end of the year and often just decides to roll most or all of the measures into an omnibus bill. But NOAA funding could be seen as a place to either limit or expand the use of catch shares.

Fishing for Better Policy, Ed Puccerella, August 16, 2012

Given the debt crisis we face, the looming sequestration and the every uncertain appropriation process, I would suggest that those who study catch shares may find themselves with the proverbial ace in their sleeve when the upcoming negotiations take place. The ability to allow Americans opportunity and access to increased private property rights and free markets has always help to increase the size of the pie. So with catch shares increased value of fishing stock, fishermen and fishing economies also lends itself to increased revenue to the federal government or as has often been said before a rising tide lifts all boatseven those of the tax man. And I would be remiss as a former committee staffer on an authorizing committee to not at least mention the opportunities that the authorizing committees have in encouraging the use of catch shares. It only takes one member with a good idea to introduce a bill that could help change the way in which we manage our fisheries.

Cap and Tra Duh?

Some members of Congress have remained wary of catch shares. In a misguided attachment to traditional fisheries management, some have criticized catch shares as being a cap and trade scheme of government regulation. These critics are hoping that the floundering effort to impose an unpopular carbon trading scheme on the U.S. economy will taint the catch shares concept simply by applying the same label to it. Its a silly critique, for two reasons. Not because its not a cap under any scheme, the regulator does set seasonal targets. But do these critics really mean to argue that there should be no fishing seasons, no overall catch limits, and all fishermen allowed to fish in the common waters to the extent they choose? This would seem to guarantee that fisheries would be fished out within a few seasons the modern technology available to fishermen would see to that. Or should I just say remember the wild buffalo, driven almost to extinction by mismanagement. The second obvious problem with the analogy is the question of value. Seafood is a tangible product that people are willing to pay money for. Regardless of the economic regime surrounding consumers and fishermen, people want their fish and chips and will pay money to get them. Carbon trading credits, meanwhile, are not tangible, and there is no demand for them that isnt artificially mandated by the government. So regardless of how you feel about eating fish - I prefer mine deep fried - please dont fall for the idea that any free-market, property-rights-based plan for dealing with our fisheries has anything to do with the created markets that have been set up and suggested under cap and trade schemes.

Fishing for Better Policy, Ed Puccerella, August 16, 2012

Conclusion
Not every public policy issue owns the airwaves on a regular basis like taxes or national security. Some issues come and go almost without warning. They may benefit one political party dependably for decades at a time before shifting harshly in reverse. In the event of federal fisheries management, a spike in prominence would hardly be without warning. A stagnant economy with food prices on the rise cant afford to pass up opportunities to fix the supply chain. In the case of the fisheries, a huge opportunity exists to shore up a major inefficiency in the regulatory regime. Members of Congress or their aides who take the time to get spun up on this issue early can reap the benefits when the crisis strikes. These benefits could be both political and altruistic in nature a win-win.

FIGURE 1 HTTP://WWW.ST.NMFS.NOAA.GOV/ST1/FUS/FUS10/02_COMMERCIAL2010.PDF ...............................................2 FIGURE 2HTTP://WWW.NMFS.NOAA.GOV/SFA/DOMES_FISH/CATCHSHARE/CATCHSHARE_REGION.HTM ..........................5

Authors calculations based on consumption data from here: http://www.st.nmfs.noaa.gov/st1/fus/fus10/08_perita2010.pdf. John Locke Foundation paper here: http://www.johnlocke.org/acrobat/spotlights/CatchShares.pdf; North Carolina Division of Marine Fisheries, 2011 Stock Status Report from here: portal.ncdenr.org/web/mf/2011-stock-statusreport
33 2

Article from Garrett Hardin, The Tragedy of the Commons, from Science Magazine, December 13, 1968: http://www.sciencemag.org/cgi/reprint/162/3859/1243.pdf
4

US Department of Labor, Bureau of Labor Statistics (2012). Injuries, illnesses, and fatalities: Census of Fatal Occupational Injuries (CFOI) current and revised data. Washington, DC.
5

NOAA release, 11-4-10, retrieved from here: http://www.noaanews.noaa.gov/stories2010/20101104_catchshare.html

6

Article from Garrett Hardin, The Tragedy of the Commons, from Science Magazine, December 13, 1968: http://www.sciencemag.org/cgi/reprint/162/3859/1243.pdf
7

http://www.gc.noaa.gov/gcil_history.html http://www.nmfs.noaa.gov/sfa/domes_fish/catchshare/index.htm

10

Fishing for Better Policy, Ed Puccerella, August 16, 2012

About the Author

Ed Puccerella is an adjunct fellow at American Commitment and director of government relations at Artemis Strategies. With nearly two decades of political and legislative experience, Ed has demonstrated success in key positions in government and the private sector dealing with complex, multifaceted legislative, technical, policy and political issues. Prior to joining Artemis Strategies, Ed was the Director of Congressional and External Affairs for the Office of Inspector General at the Amtrak. He previously served for eight years with the House Budget Committee and later the House Oversight and Government Reform Committee. Eds legislative experience gives him a deep expertise in all areas of the Congressional budget and appropriations processes as well as Congresss oversight activities and day-to-day operations of the federal government. In addition to Eds Congressional background, Eds political experience includes stints as Iowa Director of Special Projects for Steve Forbes Presidential Campaign, John Kasichs National Political Coordinator, Regional Field Coordinator for the Republican National Committees (RNC) and Director of Communications, Office of Strategic Planning and Congressional Affairs at the RNC.

About American Commitment

Dedicated to restoring and protecting the American commitment to free markets, economic growth, Constitutionally-limited government, property rights, and individual freedom, American Commitment engages in critical public policy fights over the size and intrusiveness of government through direct advocacy, strategic policy analysis, and grassroots mobilization. Working with key partners, American Commitment delivers timely, effective public policy research to the broader free-market movement. American Commitment is designed to fill the capabilities gap between think tanks engaged in pure public policy work and grassroots organizations engaged in mobilizing citizen activists. On the web at www.AmericanCommitment.org.

11