The Great Pacific Tuna Cartel – WSJ

Appeared in the Wall Street Journal – OPINION ASIA March 21, 2013

Bloomberg News

Bloomberg News

With China’s support, eight remote island states have imposed fishing limits and closed international waters.

By DAVID WALTER

Koror, Palau

“You know the oil cartel, OPEC?” a Palauan fisheries official confided three years ago. “We want to be the OPEC of tuna—OTEC.”

Now Palau is making progress toward that goal. Palau and the seven other members of the Parties to the Nauru Agreement control 5.5 million square miles of national waters in prime tuna fishing grounds. They have extracted considerable financial and environmental concessions from fishing titans such as China, Japan and the U.S. And they have closed a vast swath of the high seas to big states’ fleets.

Those are impressive achievements for a group that includes such minnows as Palau, Nauru, Tuvalu and Micronesia. But the concessions are only a prologue to the PNA’s wider campaign to make tuna a sustainable, controlled commodity—if the group can stick together past this year.

All told, PNA waters contain 60% of the western and central Pacific’s tuna stocks—one of the world’s last healthy tuna fisheries—and about 30% of the global supply. That amounts to an annual catch worth $2.2 billion.

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For decades, the PNA mostly consulted on environmental policy. But a few years ago its member states banded together to renegotiate the annual fees that other countries pay to fish in PNA waters.

In the past, the big tuna-fishing countries won this access for a pittance. But by negotiating together, the PNA is reversing the trend.

This year the PNA forced the U.S. to triple the access fees it pays out to the region to $63 million from $21 million in 2011. The U.S. has also agreed, along with the major Asian fishing nations, to a scheme that caps the number of permitted fishing days in PNA waters for skipjack tuna (the smaller kind that’s usually canned).

Most impressively, in 2010 the PNA blocked the big countries from fishing skipjack in adjacent international waters. If vessels want to catch the tuna in the PNA’s rich waters, they must agree to host an independent monitor onboard and stay out of designated high seas pockets that extend for 1.7 million square miles.

These ships must also abide by tougher environmental rules. The PNA says it aims to be most sustainable tuna fishery in the world, partly because it’s the right thing to do, but also because in the long run overfishing would be terrible for PNA states’ livelihoods. For instance, Kiribati relied on fishing access fees for an average of 45% of its government revenues over the last decade, according to the International Monetary Fund.

The cartel’s efforts have lately been aided by favorable political winds. China, seeking to woo Pacific states and boost its naval influence, has been unusually acquiescent to the PNA’s demands.

“China has been one of our big brothers,” said Nannete Malsol, a Palauan who this month completed a yearlong term as PNA chair. “All I can say is there is strategy in there.”

And if other foreign fleets don’t want to get on board? Tough.

“This is our price,” said Mrs. Malsol. “You’re going to have to follow our rules, and if you don’t agree, I’m sorry, go fish some other place.” The big fleets—except for the European Union’s—are willing to comply.

I met up with Mrs. Malsol during the PNA’s annual meeting, held earlier this month in Palau. The group agreed to increase the minimum daily access fee to $6,000 from $5,000, with the promise of more hikes to come. The PNA also moved to extend its restrictions on skipjack fishing to cover fishing for sashimi-grade tuna such as bigeye and bluefin.

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“It’s [about] taking ownership of the resource from where it’s being caught all the way to where it’s being sold,” said Mrs. Malsol of the cartel’s plans. In the future, this might involve requiring fleets to bring their catch to PNA ports for canning. The group recently launched its own tuna brand.

The question is, can the PNA pull off its grand vision? Security is one impediment for cash-strapped island states. Palau, for instance, has just one boat patrolling for rogue fishermen in its waters.

Another unknown is what consumers will do if fishing companies pass along the costs associated with restricted access and higher fees. In countries like Japan, top-grade tuna is already on its way to becoming the next caviar. But will shoppers world-wide switch away from skipjack if it gets pricier? Or will they pay a small premium for sustainable canned tuna?

The biggest challenge for the PNA, though, is just sticking together. When a cartel artificially restricts supply of a good, there’s a temptation for individual states to break off and sell more. With 1.37 million square miles of ocean holdings, Kiribati has been vulnerable to overtures from the EU to sign a separate, less-stringent access pact.

At the other end of the spectrum, Papua New Guinea is trying to build up its domestic fleet. It could someday ban foreign vessels as a means of protectionism.

And then there’s Palau, whose new president, Tommy Remengesau, is an environmentalist. Despite hosting the PNA annual meeting just a few weeks ago, he announced last Monday that he was submitting a bill to ban all commercial fishing in the country’s waters.

The bill might not win support, and the PNA has averted defections before through vigorous diplomacy. But Mr. Remengesau sounds like he’s sick of playing the long game, waiting for tuna to become lucrative for Pacific islands at some future date.

The president’s official announcement reads like a travel brochure as he explains why he’s willing to forgo the several million dollars a year Palau makes from access fees. Instead Mr. Remengesau “hopes some of that revenue will be recovered simply through the increase in tourism that results from the incredible marine biodiversity that will be protected by our sea sanctuary.”

Mr. Walter is a Princeton in Asia fellow at The Wall Street Journal Asia‘s editorial page.

 

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