China joining WTO fisheries pact a victory for multilateralism and sustainability

Handing over an ‘instrument of acceptance’ normally would not merit note, but China accepting the WTO’s agreement on fisheries subsidies is a watershed moment
Having China, the world’s largest subsidiser of fisheries and biggest exporter of aquatic products, on board will help curb subsidies that drive overfishing and damage sustainability

David Dodwell

Published: 3:30am, 17 Jul 2023

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Late last month, on the margins of the World Economic Forum’s Meeting of the New Champions in Tianjin, China’s Commerce Minister Wang Wentao beamed alongside the World Trade Organization’s Director General Ngozi Okonjo-Iweala as he exchanged China’s “instrument of acceptance” of the WTO Agreement on Fisheries Subsidies.

In most circumstances, such a moment would pass unnoticed. But for China, by far the world’s largest subsidiser of fisheries, and the WTO, this was a watershed moment. The agreement to rein in fisheries subsidies has been haggled over for years.

While formal agreement was reached at the WTO Ministerial Conference in June last year, only 13 countries have completed the acceptance process. It will take two-thirds of WTO members ratifying the agreement before it comes into force. Officials are hoping to reach that target by February next year when WTO ministers next meet in Abu Dhabi.

The agreement is significant not just because it has taken such patient work over many years but because of its rarity. It marks only the second multilateral agreement reached within the WTO since its creation in 1995.

At a time when multilateralism is embattled, this is something to celebrate. Let’s not kid ourselves that multilateralism is back and healthy again, but a multilateral deal in any form provides modest comfort to anyone concerned about the global spread of protectionism in recent years.

Premier Li Qiang meets World Trade Organization Director General Ngozi Okonjo-Iweala at the annual Meeting of the New Champions in Tianjin on June 26. Photo: Xinhua

The agreement to address fisheries subsidies – which are estimated to amount to around US$35 billion a year globally and contribute significantly to overfishing, threatening the sustainability of fisheries worldwide – has further significance. It is the WTO’s first environmentally focused agreement and will greatly improve transparency around illegal, unreported and unregulated fishing activity in international waters.

More importantly, the agreement could provide a template to tackle the thorny issues of subsidies in general and industrial policies favouring “national champions”. Such issues sit at the heart of much of today’s international trade conflict.

An obvious next target for the WTO must surely be to deal with fossil fuel subsidies, which have also been on the WTO’s agenda for years and have exploded in significance since the global energy crisis triggered by Russia’s invasion of Ukraine. The International Energy Agency estimates that fossil fuel subsidies doubled to more than US$1 trillion between 2021 and 2022 – this is almost 30 times the size of fisheries subsidies – with an additional US$500 billion spent supporting consumers’ energy bills.

The environmental price paid for these subsidies is huge as they play a significant role in generating greenhouse gas emissions worldwide and have slowed the transition to renewable energy.

While progress on tackling fossil fuel subsidies might remain elusive for some time, hopes are now high that rapid progress can be made on reducing fisheries subsidies. Of particular concern are the fuel subsidies, tax exemptions and fisheries management support arrangements that encourage overinvestment, overfishing and illegal fishing activity.

How China’s vast and aggressive fishing fleet is kept afloat

WTO’s Okonjo-Iweala noted when she met Wang in Tianjin: “As the world leader in marine fish catch, China’s support for the implementation of this agreement is critical to multilateral efforts to safeguard oceans, food security and livelihoods.” China is the world’s largest producer, processor and exporter of aquatic life, whether from the ocean, inland fisheries or aquaculture.

The UN’s Food and Agriculture Organization (FAO) said that out of the 4.1 million fishing vessels worldwide in 2020, China was home to the largest fleet by far at 564,000, even though that number had nearly halved from more than 1 million vessels in 2013. FAO figures show that in 2020 China accounted for 11.8 million tonnes of wild-caught marine fish – about 15 per cent of the world’s total – while it accounted for 70.48 million tonnes of aquaculture-raised seafood, about 57 per cent of global production.

According to a recent study by a team from the University of British Columbia in Canada, China accounted for about 21 per cent (US$7.2 billion) of global fisheries subsidies in 2018, as much as the European Union and the United States combined. It accounted for an even larger share of the subsidies that encourage overfishing.

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While it would be easy to blame China and its fishing activities, the government is trying to both move away from harmful subsidies and ensure the sustainability of its seafood supplies. Subsidies surged in 2006 to soften the impact of soaring global oil prices on fishing communities and were revised in 2016 with the aim of cutting subsidies and reducing pressure on sustainable fish supplies.

According to a study of China’s post-2016 reforms by a team from the University of California Davis, there has been significant progress but mixed results. The number of large trawling vessels in Zhejiang province has fallen by 22 per cent, with average annual fuel subsidies down by 20 per cent. The result is a smaller, newer and more efficient fleet which has not necessarily led to the reduced fish catches needed to improve sustainability.

The study concludes that the elimination of subsidies will not reduce overfishing unless it helps fishermen transition into non-fishing occupations, saying “the relationship between subsidies and sustainable fisheries is nuanced rather than simple”.

The WTO’s fisheries negotiators would probably agree. While celebrating progress on cutting subsidies, their focus is on reducing overcapacity and overfishing. Let’s hope it does not take long before the WTO can celebrate further progress.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades.