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Sinking fishing industry seeks net gains
Catches continue to dwindle, but a market-based fix could fill nets again
 | Workers trim halibut in a fish processing plant in Alaska. |
Businessweek |
It's an unseasonably warm June day on the Alaskan island of Kodiak as skipper Dan Miller pulls the Anna D up to a quiet concrete pier beside a seafood wholesaler. The hold of his fishing boat is loaded with 9,000 pounds of freshly caught halibut, and the lanky former biologist is as happy as a seal soaking in the sun. Halibut is selling for almost $4 a pound, a record, and Miller's gross take will be nearly $33,000.
Some 4,000 miles to the southeast, Maine fisherman Craig Pendleton, 46, is spending much of the summer sitting in a dark office over Norm's TV in Saco, a former mill town south of Portland, pondering the fishing industry's future. Since early May, his boat, the 54-foot Susan & Caitlyn, has been sitting at a dock collecting barnacles because of federal rules that limit Pendleton to only 48 days at sea. He likely won't go out again until October to trawl for cod and haddock in the Gulf of Maine.
So why is Miller dancing on the docks while Pendleton is moaning in his beer? The short answer is ITQs.
Miller doesn't have to worry that the high-priced halibut will be depleted by other fishermen. Only holders of permits known as "individual transferable quotas" are allowed to catch halibut in the Gulf of Alaska. The 52-year-old Miller holds ITQs giving him the right to catch 45,000 pounds of halibut. He can use those rights eight months of the year, sell them to others, bequeath them to heirs, or even elect to leave his halibut swimming in the sea. In effect, Miller "owns" those fish.
Today, Alaskan halibut. Tomorrow, Pacific Northwest salmon, Gulf of Mexico red snapper, Atlantic scallops? Surprising as it may be, this controversial free-market system for parceling out individual property rights to fish in the sea may be the future for the troubled U.S. commercial fishing industry. Beset by overfishing and falling catches and battered by imports from Asia, Europe, and Latin America, the old way of American fishing no longer seems sustainable. The result: growing support for congressional action to enforce widespread use of individual transferable quotas, a radical move that could help restore U.S. fisheries to health and make them more competitive in a global marketplace.
The size of the problem is enormous. Even in the face of ever-tighter rules, the list of overfished species that may not be commercially viable for decades has barely budged. Of 67 depleted fish stocks a decade ago, 64 remain scarce, despite a law Congress approved in 1996 mandating 10-year rebuilding plans. "Half of these species are still being overfished, even now," says Andrew Rosenberg, a University of New Hampshire professor who spent 10 years at the National Marine Fisheries Service, which oversees the industry. "All of the incentives are to get around the rules."
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Of course not every fishery is doing poorly. New England's scallop industry is booming. A marketing campaign promoting wild Alaskan salmon has created demand for premium-priced fish from the Copper River. And if the new electronics on the commercial boats in Bass Harbor, Me., are any indication, lobstermen are enjoying a profitable season.
But as nets come up emptier and emptier, the irony for freedom-loving fishermen is that the regulatory system most have so far chosen to stick with tries to limit their every move, dictating where and when they can fish and the size of boats, nets, and gear. The rules of commercial fishing, which vary by locale and species, are set by eight regional councils made up of industry, state, and federal regulators, scientists, and environmentalists. The rules are cumbersome and convoluted, and many fishermen exploit loopholes. "Communism isn't dead," says University of Rhode Island professor Jon Sutinen. "Central planning is still thriving in our fisheries management."
It's a classic case of the tragedy of the commons, the economic textbook description of why farmers overgraze on public lands. Each farmer seeks to maximize the benefit of letting his cattle graze. So with no individual incentives to conserve, in the end, the grass on the commons is destroyed for all.
The same is true in fishing. Individual fishermen have an incentive to fish as quickly as possible because under the rules in place in most coastal areas, an entire fishery is closed when the total catch quota is reached. "Everyone is trying to maximize their catch," says Harvard professor Robert Stavins, a pioneer in the design of economic solutions to similar problems in air- pollution control. "There's no private-property right."
That results in lower-quality product and the ecologically harmful practice of discarding "bycatch," fish other than those being sought that are accidentally hauled in. A great many of those fish are either thrown back dead or don't survive. And in the fishing frenzy, boats collectively often exceed the quotas. In New England, long the poster child for limp enforcement, cod limits were set above scientific recommendations for years, and fisherman still blew past them. The haul in 2001, for example, was over 40 million pounds, almost three times the quota.
The diminishing catch has left America's fishing industry vulnerable to two gale-force economic storms. Better air transportation has allowed fish retailers to purchase fresh fish from almost anywhere on the planet. Darden Restaurants Inc., owner of the Red Lobster chain, buys fish in 30 countries. Boston-based Legal Sea Foods Inc. has served Dover sole from the North Sea, cod from Iceland, and haddock from Norway. "Now we can have fish buyers all over the world who see catches come in and hand-pick select stuff at auction," says Roger Berkowitz, CEO of Legal, a restaurant chain started in 1950 that grew out of his grandfather's grocery.
The second storm is the spread of fish farming in Asia, Latin America, and Europe. Aquaculture has massively increased the supply of the most popular foods from the deep, such as salmon and shrimp. Over 80% of the seafood eaten in the U.S. was imported in 2004 (the most recent numbers available), much of it from shrimp farms in Thailand, Vietnam, and China and salmon farms in Norway and Chile. In 2005, America's $8 billion fish-trade deficit was the largest among natural-resource products after oil and natural gas. So even though Americans ate a record 12 pounds of fresh and frozen seafood per person in 2004, 20% more than a decade earlier, it's dogfish days for U.S. fishermen: The commercial catch has declined 1% by weight in the same period, or 33% by dollar value, adjusted for inflation; imports have doubled.
One bright side for the men in slickers: Demand has pushed prices up, keeping some in business even with depleted supplies and high costs. The wholesale price of cod rose 44% from 1998 to 2004, halibut 58%, tuna 38%, crab 57%, and bay scallops 220%. "The price is keeping the fleet afloat," says John Our Jr., whose boat, the Miss Fitz, fishes for cod out of Chatham, Mass. "If we had the same price as 10 years ago, we'd all be down the toilet."
Still, as dismal as the outlook seems, one big answer may be in the Anna D's hold. Under the system of individual transferable quotas, Alaska's Miller is allotted a 45,000-pound share of the overall halibut limit: 53 million pounds. So he can take his boat out virtually any time he wants, avoiding the mania and waste that fishing on designated days encourages. And the ITQs can be bought and sold as easily as old comic books on eBay. That encourages consolidation, improving catches for those who remain. The long-term rights also give fishermen an incentive to not to overfish. "We could have more sustainable fisheries with less risk," says Harvard's Stavins. "Ultimately, consumers would see a decrease in price and greater variety."
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