Topic Area: Individual Transferable Quotas (ITQ) in
Geographic Area: New Zealand
Focal Question: How successful has the introduction of ITQs been
(1) Memon, Pyar and Cullen, Ross, "Fishery Policies and their Impact on the New Zealand Maori." Marine Resource Economics. VII No. 3 (1992): 153-67.
Reviewer: Betsy Burleson, Colby College '96
Individual Transferable Quotas (ITQ) were proposed for New Zealand fisheries in 1983 and finally introduced in 1986. These quotas are permanent but restricted to a given species and location. Together the ITQs add up to a Total Allowable Catch (TAC) which ensures that only a sustainable number of fish are caught. Within this restriction, however, tradable individual property rights create the flexibility to lower production without large scale sacrifices in profitability. The latter is possible because vessels can minimize costs instead of having to overinvest to outcompete other vessels. The TAC can be increased or decreased by the government depending on the health of the fish stock.
The establishment of the ITQ system in New Zealand was based on the assumption that the fisheries were part of a common property resource that was ultimately under government control. This was not a valid assumption, however. While the government had solicited support from the commercial fishing industry, it ignored the Maori people.
Through the Waitangi Tribunal, the Maori were able to challenge the ownership issue that ITQ system presented. This forum was established in 1975 but initially only addressed issues dating after its creation. When the Labor party won in 1984, they widened the mandate of the tribunal to include grievances dating back to the Treaty of Waitangi. This enabled the tribunal to address the fisheries ownership problem. The Maori noted that they had not given up their fisheries rights guaranteed to them under Article II of the Treaty.
The Treaty of Waitangi, negotiated in 1840 between England and Maori tribal leaders, established exclusive Maori rights over fisheries. Today roughly nine percent of the New Zealand population are Maori. This is a far cry from the ratio of 70 Maori to one European at the signing of the Treaty. By 1860 there were as many Europeans as Maori and by 1921 only 4.5 percent of the population was Maori. (Pyar Ali Memn and Ross Cullen, 1992) While the Maori are arguably better off than they were in the 1920s, their status has significantly declined since the signing of the Treaty of Waitangi in 1840.
Before settlers came from European, fishing was not only important to local Maori diets, it played a large role in inter-tribal trade. In fact, the Waitangi Tribunal has proved that, prior to European settlement, there was an extensive fishing industry. In contrast, fishing did not become important to the New Zealand economy as a whole until very recently.
By 1882 refrigeration technology had enabled New Zealand to establish a lucrative export industry of meat and dairy products. While fish could have been included in this export venture, the country became a grasslands based economy instead. Prior to the 1930s, the government merely supported fishery exploitation, condoning free market operations. In 1937 a licensing restriction was established in reaction to overfishing but this was done away with by 1963. Since fisheries did not appear to be as profitable as land, the government did not pay much attention to fishing.
Until the 1970s fishing was primarily a small scale enterprise. While there were many small boats, they did not venture beyond inshore fisheries. In general, the industry did not account for a very large sector of employment or profitability in the economy. The 1970s marked a rapid expansion of New Zealand's fishing operations. The combination of Britain's entry into the EC and the OPEC oil shock, caused New Zealand's economy to suffer badly in the early 1970s. In an attempt to bolster the economy, the government introduced a variety of ways to increase exports. These initiatives included incentives to expand fishing.
In 1977 New Zealand joined the increasing number of countries to claim sovereign rights over coastal waters. On the basis of international agreements signed at the Third United Nations Conference on the Law of the Sea, New Zealand established an Exclusive Economic Zone. The government contributed to overuse of this resource, however, by subsidizing entry into the fishing industry and encouraging fishery exploitation through duty free imports, loans, investment allowances, export tax incentives and price supports. The government also encouraged joint venture arrangements with foreign firms. In addition to rapidly increasing fishing technology and expertise, this provided wider access to international markets. The policy changes countered a long-standing Maori culture of taking only what one needed and having a diversified livelihood beyond fishing. Thus, it became hard for part-time Maori fishers to compete with an increasingly large and technological fishing industry.
Following the common property trend of overexploitation, commercial fleets continued to overinvest, producing widespread overcapitalization in the market. The areas of greatest overfishing were along the East and North Coasts of the North Island, precisely where large populations of Maori lived. In 1983, the governments' efforts to curtail overfishing of inshore fisheries involved the involuntary exclusion of fishers earning less than 80 percent of their income or $10,000 per year from fishing. (Pyar Ali Memn and Ross Cullen, 1992) Beyond doing little to reduce overcapitalization, this ill-conceived policy had a disproportionate effect on the Maori.
This distribution equity issue continues to be a problem despite the fact that the ITQ system has apparently in general protected fish stocks. Small fishers are disadvantaged by the fact that banks will not consider quotas as collateral for lending. A small scale fisher without a large allotment of quotas nor a large bank account finds it hard to acquire more quotas when TAC is reduced. Small-scale fishers can not borrow against other assets as larger companies are able to do. This makes it easier for large firms to buy up many of the tradable quotas.
The Treaty of Waitangi guaranteed Maori ownership of New Zealand fisheries that could only be transferred through willingly selling the rights. According to the Treaty, the government's only function should be to protect tribal fishing rights. In today's politically climate, however, the governent is unwilling to grant these rights. A long legal battle has left the Maori with only ten percent ownership of their original fishery rights.
Hopefully this controversy provides a lesson for other countries to consider. Despite the imperative of establishing sustainable fishing practices, management systems that lead to consolidated markets often concentrate wealth and severely impact small-scale fishers. Whether these individuals are members of indigenous populations or not, their needs must be considered in the process of controlling overfishing.
In an ITQ system, market forces can determine the allocation of quotas. In theory this can lead to economic efficiency. ITQs are beneficial in enabling individuals to leave the industry without making a loss. On the other hand, an ITQ system can allow companies to buy control over the fishery. This merely rewards the group of people responsible for unsustainable fishing practices in the first place. At the same time, it forces smaller fishers out of the industry. Consolidation can be confronted by placing restrictions on transferability of ITQs. One such limitation would put an upper bound on how many quotas a single person or firm can hold. Regardless of the approach, it is important to establish an equitable ownership allocation process in achieving the final outcome of sustainability.