Special and Differential Treatment to LDCs under Article 6 of Fisheries Subsidies Agreement

Introduction

Least Developing Countries (LDCs) and developing countries account for more than 70% of worldwide marine capture, which has become a primary justification for demanding special and differential treatment for LDCs. Fisheries are a critical and vital means for LDCs to achieve food security. Subsidies on fishing should not be a barrier to achieving this objective. These LDCs are responsible for ensuring that the fisheries subsidies agreement does not impose an undue burden on the rights of coastal states and other domestic fishing regimes. On the other hand, LDCs are responsible for ensuring that small-scale global fish producers and those engaged in artisanal fishing are not restricted and that their livelihoods are protected. As a result, special and differential treatment becomes an important aspect of fisheries subsidies agreements.

Emergence of fisheries subsidies agreement

In 1990, a need to control fisheries subsidies under international trade was realized, not only for greater equitableness but also to preserve natural resources from depletion. Many reports published during WTO negotiations between 1992 and 1998 suggested that the effectiveness of fisheries management had been harmed by the provision of subsidies to sustain the fishing sector’s income. In 1999, the Committee on Trade and Environment addressed the impact and implications of fisheries subsidies on the environment. In 2002, the United Nations World Summit on Sustainable Development proposed the elimination of subsidies that contribute to illegal, unreported, unregulated (“IIU”) fishing and overcapacity.

Drafting of the agreement

The group negotiating on disciplines was directed to speed the process up of presenting a complete draft in the mandate stating the regulation for fisheries subsidies during Hong Kong’s sixth ministerial conference in 2005. The ratification of the UN Sustainable Development Goals in 2015 boosted discussions to eliminate subsidies contributing to overcapacity, overfishing, and IUU fishing. In 2019, countries ramped up their negotiations on the drafts, debating several issues, including special and differential treatment for LDCs and developing countries. Members of the WTO presented a revised fisheries subsidies negotiation draft and agreed to wrap it in the 12th WTO Ministerial Conference, Geneva, 2022.

Special and Differential Treatment under World Trade Organization

In the 4th WTO Ministerial Conference, Doha, all special and differential treatment provisions were declared an intrinsic component of WTO agreements, and such provisions were reviewed for effective operation. Special and differential treatment provisions were reinforced and constituted an important component of WTO agreements in paragraph 44 of the Doha Declaration of 2001. Further, the Bali Ministerial Conference developed a framework to assess and evaluate the implementation of special and differential treatment provisions. The system will allow members to examine and evaluate all issues of implementing special and differential treatment provisions in multilateral WTO agreements. WTO members agree that providing flexibility to developing economies for fulfilling WTO obligations and commitments is a good idea. However, they disagree with the extent to which these flexibilities have been granted. The members feel that such flexibility under special and differential treatment should be restricted to a certain level, and the focus should be on the LDCs’ specific needs. However, developing countries backed the treatment, claiming that such exemptions are vital for countries with limited resources and underdeveloped fishing sectors.

Necessity of Special and Differential Treatment to LDCs

It is a well-known fact under the WTO that member nations can choose whether they want to be classified as developing or developed countries, and this decision is subject to the objections of other WTO members. Countries choose developing country status because it comes with various advantages, such as longer transitional periods and technical help from developed countries. Special and differential treatment is provided to LDCs by developed nations. However, the developed economies, already in a strong position to dominate the international trade market, abuse poorer countries.

The notion of special and differential treatment is based on the fact that most treaties are geared toward developed member countries, which has negative consequences for the poorer or least developed countries. As a result, LDCs have been granted special and differential treatment to make international markets accessible and available without infringing on their international trade interests. At the same time, it protects LDCs from policies that directly impact their economies.

The provision of special and differential treatment to LDCs, on the other hand, was not desirable for developed countries. However, the development policies are desirable, and the costs of setting them in place are significantly higher, due to the high cost of finances, human resources, and other necessities. LDCs have no stake in world trade, because of which the cost of non-implementation is minimal.

Drawbacks of Special and Differential Treatment to LDCs

The claim of WTO status is a self-determinative procedure. The nations that choose to be developing receive discriminatory benefits from privileges that would not otherwise be granted. The main rationale for offering special and differential treatment to the least developed countries is their weak economic power and capacities. These advantages and privileges have been given to those countries with low-income levels, who will benefit from special treatment to integrate into the international trade. However, rather than aiding LDCs’ economic needs, the focus has shifted to assisting them in implementing their trade commitments. Experts disagree about the degree of differentiation across LDCs and reject the “One Size Fits All” approach to special and differential treatment. Furthermore, there are no explicit objectives that serve as a determining element or yardstick for the LDC status of the member nation in the WTO.

Issues with LDCs

It is a well-established fact that the interests of LDCs in these fisheries subsidies have been evaluated in various ways and reasons. Job creation, fisheries livelihood, economic growth, poverty reduction, revenue generation through fisheries licensing, expanding their global catch share, exploiting viable stock in international waters for commercial purposes, and so on are some of them. Yet, the fundamental point of disagreement is why every LDC should receive the same special and differential treatment when they have an unequal or extremely little part of global trade in fish products. For LDCs with a large proportion of global fish capture, tighter norms or disciplines should be implemented. Developing countries that do not meet the specified criteria or have a small proportion of the global fisheries trade may be allowed to provide subsidies for vessel operating costs and all sorts of fishing activities.

Another critical problem was related to subsidy restrictions and exemptions, transparency, capacity-building support, and training requirements for LDCs. Moreover, there is the issue related to the subsidies granted to fishing activities that are artisanal, small-scale, or subsistence in nature. These fishing activities should be subject to more flexible laws than large-scale commercial fishing activities because they create less environmental impact. 

LDCs in relation to the restriction of subsidies

In today’s world, the majority of LDCs rely on the fisheries sector for their livelihood, food security and protein needs. Since these LDCs have wide exclusive economic zones, they are more interested in fisheries subsidies. This is also an essential source of income for LDCs. It contributes to national income through its exports. For LDCs, one of the most pressing challenges was the need to restrict subsidies that encourage illicit, unregulated, and unreported fishing and overcapacity. Technical assistance to LDCs is required to ensure that no IUU vessels enter the nation’s territorial limits, and such surveillance mechanisms must be in place with LDCs. The LDCs stressed that any discipline under subsidies should not impede their fisheries industry, particularly at the small-scale commercial or subsistence level, as this would limit the sector’s development.

LDCs focused on the importance of safeguarding trade and export. They also protect them against tariff increases. This can be accomplished by processing, marketing, and regulation of fisheries subsidies on the international market. On the other hand, LDCs urge WTO Rules to deal with the problem of distant fishing activity in their exclusive economic zones. Subsidies are the primary source of distant water fishing. However, it is not a feasible choice for LDCs because of the high costs of vessels & equipment.

Some nations address this argument by charging access fees to LDCs in the territories where they have entered and exploited fishing industries. However, this is not sustainable based on present trends of overexploitation of fisheries resources. LDCs with extensive access to the ocean frequently lack the capacity to exploit their fisheries resources on the high seas and in their exclusive economic zones. As a result, improving the capacity of LDCs is critical for ensuring sustainability and assisting them in adequately harnessing fisheries resources.

Discussing Articles 6 of the Fisheries Subsidies Agreement

Technical support, capacity building, transparency, and other institutional mechanisms for developing nations are all covered by Article 6 of the Fisheries Subsidies Agreement. Article 6 refers to LDCs receiving special and differential treatment and expressly exempts LDCs from the prohibition imposed by Article 5. Article 6 discusses the transition time after the LDC has graduated from the acquired status. It is identical to Article 5.4(a), and the time period has not yet been determined because it is subject to WTO member country discussions and negotiations. The only variation from Article 5.4(a) is that the transition period will begin when such LDCs graduate.

Article 6 requires member nations to use caution when addressing or reporting any issue involving LDCs, as well as when exploring solutions to the problem at hand, taking into account the special status of LDCs. At the same time, this makes LDC members responsible for ensuring that any exemptions from Article 5.1 and subsidies do not contribute to overfishing or overcapacity. Article 5.1.1 qualifies Article 5.1, which mentions permitted subsidies by member countries provided they are used to maintain stocks and promote biodiversity. LDCs and other developing nations are likewise exempt from the prohibition in Article 3.1 of the fisheries subsidies agreement. It exempts subsidies provided or retained by developing country Members, including least-developed nations, for low-income, resource-poor, or livelihood fishing or fishing-related activities inside 12 nautical miles of the baselines for a period of two years. 

Conclusion

The Fisheries Subsidies Agreement has been the first multilateral trade agreement to be finalized under the WTO, and it has been the top priority of LDCs. It will provide an opportunity to finally reach a global agreement to restrict harmful fisheries subsidies. Moreover, it will also provide an opportunity for the WTO to develop trust in multilateralism. This is because the new disciplines on fisheries subsidies are the only multilateral trade negotiations currently ongoing. The next ministerial meeting should focus on the areas where the parties have reached an agreement, and then the issues of subsidies leading to IUUs and overcapacity can be carefully explored. However, the clauses of Article 6 and Article 3, exempting countries from responsibilities, are problematic because many major subsidies providers disagree on such broad exemptions. In this regard, India has expressed dissatisfaction with this proposal. It has requested a balanced policy space for all concerns, fearing that negotiating along these lines would delink fisheries from other discussions.


Sanket Das and Bhanu Pratap Samantaray are students at National Law University, Odisha.


Image: Financial Express

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