by
B.S. Brochmann
Director of Planning
Ministry of Fisheries
Oslo, Norway
Has licensing (limited entry) any purpose after the introduction of quotas?
The harvesting of all important fish stocks in Norwegian waters is restricted by quotas, i.e. total allowable catch (TAC). For some species, TACs are determined solely by Norwegian authorities; for others this is done in cooperation with neighbouring countries.
In cases where the fishery is stopped when the quota is exhausted, which is the case in most Norwegian fisheries, vessel licences become invalid because of fear or over-exploitation.
What purpose does licensing have then? The question is appropriate as licensing systems (limited entry) still play an important role in Norwegian fishery policy.
The original argument for imposing licensing schemes has differed from case to case. I shall give you two examples:
Example 1: Restricting trawling for cod through a licence scheme (1936) had at least three purposes: (i) protection of the coastal fisheries; (ii) large and costly trawlers meant that foreign capital gained entry into the fishery; (iii) trawling, it was said, was a threat to juvenile cod.
Today these arguments have only limited validity. The catches taken by Norwegian trawlers do not influence to a significant degree prices on the world market for fish. The extended mesh size in the cod-trawl (minimum 135 mm from 1 January 1983 in the Norwegian zone north or 64°N) means that trawling no longer has the same negative effect on the young cod. In addition, since 1974, cod-trawling has been regulated through a separate quota fixed for trawlers. Even without licensing, the catch taken by trawlers would remain at the same low level.
Nevertheless, a licence scheme is maintained. Why? (1) Since there is excessive capacity in relation to the quotas fixed for trawlers, the situation would be even worse if new trawlers were allowed to enter the fishery. Present economic conditions, however, make the possibility of new projects seem remote anyway. But conditions often change and licensing is maintained as a form of “insurance”. (2) The geographical distribution of licences provides an instrument to ensure a certain supply and distribution of raw fish to regions that are particularly dependent on fish as raw material for processing.
Example 2: The licence scheme for the purse-seiner fleet was implemented in 1973 following a remarkable increase in catching capacity from 1970 to 1972. The central authorities feared over-exploitation of the most important stocks. It was also felt that, if the high rate of investment in this sector were to continue, economic disaster would follow, either because of depleted stocks or (if quotas were to be implemented and respected) because of severe over-capacity.
Biological considerations are no longer an important argument for imposing the licence scheme, however, because every year since 1977 a total quota (TAC) for capelin, which is the most important stock for the purse seiners, has been negotiated with the Soviet Union. As anticipated, quotas have meant that over-capacity would be a prominent feature of the purse-seiner fleet.
Nowadays the licence scheme for purse-seiners has two main purposes: (1) To improve the economy of this fishery by limiting the number of vessels involved in taking the quotas. (In fact, the number of vessels is steadily decreasing, since concentration of the cargo capacity of two small or medium size vessels in one larger one is permitted.) (2) The cargo capacity registered by the licence is the basis for dividing the capelin quota between the participating vessels.
Many fishery politicians refer to a third purpose for the licensing of purse-seiners: that is, to influence the regional distribution of such vessels, in order to allocate job opportunities to coastal areas which seem to have greatest need for them. The possibilities for steering the geographical distribution of licences, however, are in practice very limited.
One argument for having a licensing arrangement is of a more political nature: it is far easier to enlist fishermen's support for the necessary quota regulations when the fishing fleet is not expanded excessively in relation to the proposed quotas.
On account of protests from fishermen, substantial over-capacity in relation to the national quotas may force the fishery authorities to seek increased TACs (beyond the level recommended by biologists) when international negotiations over TACs take place. If over-capacity prevails in several countries, the pressure for higher TACs may become dangerous. This can be avoided to a certain degree by implementing limited entry.
For the period 1979-82, the Norwegian Government adopted a scrapping programme for certain groups of fishing vessels, in an attempt to get rid of over-capacity. The purpose was not only to make it easier for the politicians to fix more restrictive quotas, but also to lower costs in fishing. This would reduce the need for government support. The scrapping programme included only vessel groups subject to limited entry. Without entry control, new vessels could be expected to replace the capacity withdrawn through scrapping. Licensing thus has a legitimate use also in cases like this.
Still important groups of vessels in the Norwegian fisheries are not subject to limited entry. The fleet of small and medium-size coastal vessels operating in the cod fisheries in northern Norway is regulated through other measures such as a ban on fishing during certain periods spread over the year. This fleet is also subject to gear control (maximum number of nets per vessel). The purpose of these measures is to reduce the catch to the level fixed on the basis of international agreements.
This illustrates that we are able to restrict fishing effort by administrative means other than licensing; but, if our objective is to restrict the amount of production factors involved in taking the quotas, in order to increase profitability, licensing schemes can be an appropriate instrument. In another paper, which will be presented later, I shall discuss the appropriateness of using licensing as a means of furthering profitability in the fisheries.
Can limited entry replace a quota system?
I shall now turn to the following question: can a comprehensive licensing system replace a quota system? Is it possible for a licensing scheme to achieve biological (conservational) objectives in addition to the economic and distributive objectives already mentioned? The answer is that, for stocks which might migrate between the zones of several nations, licensing, even when used by all relevant nations, is not sufficient to avoid depletion of such stocks. The nations must in addition cooperate and agree on a TAC and on the sharing of it.
If we know our national share of the TAC, however, can licensing then be an appropriate instrument to avoid over-fishing of the national quota? The same question of course applies when we consider stocks found within the zone of one nation only and solely fished by vessels from that State. My answer to this question is: “Yes, it is possible to use licensing as a measure to keep the catch within national quotas; but, at the same time, it is far from an advisable policy if not combined with measures of an economic nature”.
I shall give you some arguments in support of this view:
The typical case is that a licence scheme is imposed after a stock has been too heavily harvested, in order to prevent its further depletion. The introduction of a licence scheme normally means that licences are issued to the vessels already active in this fishery but not to newcomers. Restoring the stock, however, requires reduced fishing effort. To achieve this (disregarding the auctioning of an appropriate number of licences), you must introduce a system of quotas, causing some or all of the vessels to be laid up for certain periods of the year or transferred to other (less profitable) fisheries.
Even if the licence scheme is implemented at such an early stage that over-utilization of the stocks has not yet occurred, continuous technological progress will increase the catching capacity of the fleet. Sooner or later even the restricted number of vessels will be able to deplete the stock or over-fish the national quota.
TACs and national quotas will often change from year to year, depending on the stock situation. The catching capacity of licensed vessels, however, obviously will not change in conformity with changes in the recommended catch volume. Instruments other than a licence system, therefore, are needed. The same kind or argument is valid even if the national quota remains stable, as the catch rate may vary from year to year irrespective of the size of the stock.
A licence scheme has several disadvantages. It retards the flexibility of the fleet, for example, reducing its ability to adapt to new conditions. It also renders the recruiting of new and young fishermen into the fishery more difficult.
The management of a licence scheme is often a vast administrative under-taking. One well-known difficulty is the handling of applications for replacing a licensed vessel with another, better suited (and always a little bit larger) vessel. I may also mention the questions which arise in connection with buying and selling licensed vessels. Should a licence be transferable?
So much for the disadvantages and shortcomings of a limited entry system. Combined with quotas and monetary measures, however, a licensing system may be very appropriate. A levy on catch or a licence fee, in some cases combined with a buy-back programme, may possibly solve most of the problems mentioned.
Licensing: Still a necessary supplement?
Licensing systems are still considered to be very important instruments in Norwegian fishery policy. The Fishermen's Association has even suggested that all types of fishery should be subject to licensing as a means of regulating the fisheries. In recent years, however, the central authorities have become more aware of the many disadvantages connected with licensing as a regulatory measure. In addition, the original purposes for imposing the several licence schemes are nowadays to a large degree served by an array of new instruments, mainly quotas.
As long as over-capacity prevails, however, and the level of investment is not controlled in one way or another, the licensing programmes are instruments which may be convenient to have at hand in order to restrict increases in capital and running costs. In addition, I may remind you of the convenience of implementing a licence scheme before the introduction of a scrapping programme, and of the pressure for increased TACs that may arise when catching capacity is not restricted through licensing.
Licensing means that administrative bodies make decisions which would otherwise have been determined by market mechanisms. Were it feasible to consider a licence as a commodity, subject to buying and selling, the serious disadvantages connected with licensing probably could be avoided.
