In the second half of the 20th century, the U.S. fishing industry was plagued by too many boats chasing too few fish. Overfishing was rampant, profits for fishermen were low and the federal government fueled the flames by subsidizing the construction of new fishing vessels with taxpayer dollars.
By the mid-1990s, we had learned our lessons the hard way. We began to implement policies to curtail overfishing, allow stocks of fish to recover, eliminate subsidies and increase profitability. To address the legacy that our own policies had created, we spent $140 million between 1995 and 2001 to buy out fishermen by retiring fishing vessels, gear, permits.
Now the Trump administration wants to forget all of those hard lessons learned and begin subsidizing new fishing vessel construction again in a rule proposed last November that could be finalized any day. This seemingly small rule change represents a major policy reversal that looks more like Soviet-style central planning than regulatory rule-making in a market economy.
Under current law, subsidies for constructing new commercial fishing vessels are illegal. The proposed rule change would allow use of taxpayer dollars to offer low-interest, fixed-term loans for new commercial fishing boat construction. As I explain further in a new peer-reviewed study in "Science," this rule change contradicts decades of fisheries science, economics and fisheries management practice. It also threatens to increase overfishing and is unfair to taxpayers and other industries.
When fisheries are overfished, the industry cannot supply as much healthy seafood to consumers. For fishermen, this translates into lower revenues and higher costs to catch fish that are harder to find.
I study environmental economics, and I’ve noticed that environmental regulation is often like an elaborate game of Whack-a-Mole. You succeed in regulating in one place only to have the same problem crop up elsewhere. Fisheries are no different. In the early 2000s, regulators would close the red snapper season in the Gulf of Mexico each year to curtail overfishing. Some fishermen responded by fishing more for groupers, which were also overfished. When New England fisheries adopted a policy in 2010 to deal with too many vessels chasing too few cod, many fishermen migrated south to fish for squid in the Mid-Atlantic.
Fishermen faced fewer restrictions there, but folks already fishing in the Mid-Atlantic were forced to compete with more vessels to grab a slice of the same size pie. Playing Whack-a-Mole is hard enough for regulators right now. What you really don’t want to do is caffeinate those moles with subsidies.
Fisheries subsidies are unfair to the public, too. In most natural resource industries, such as oil and gas and timber, companies pay royalties to the federal government to extract resources. Fish are a natural resource, too. But the fishing industry is allowed to fish the seas without compensating the public. On top of that, the public already pays for specialized fisheries management in the form of sophisticated biological modeling, costly data collection and world-class enforcement by the U.S. Coast Guard, which also keeps foreign fishing fleets from accessing U.S. fishery resources. That management directly benefits the fishing industry.
The proposed subsidized vessel loans are also unfair to the next generation of fishermen. Today’s fishermen will be able to use their fishing quota as collateral to qualify for vessel loans. New entrants will not have that same collateral and will be unable to compete for subsidized loans. This will deter new entry into fishing and solidify the positions of those already in the industry.
The proposed plan to subsidize commercial fishing boats is a turn away from a market economy and toward central planning. The stated rationale for the loan program is that the private banking industry offers interest rates that are too high and amortization schedules that are too short. Any industry would like to have more favorable loan terms, just as any homeowner would like a lower mortgage interest rate, of course.
But commercial fishing is risky, and interest rates should reflect that fact. The proposed rule offers no evidence that private banks are failing to offer competitive rates. For an administration that rails against socialism, it’s bizarre that it would place more faith in big government to price vessel loans than in the private banking industry. The National Marine Fisheries Service should reject this shortsighted rule change. If it doesn’t, Congress should refuse to appropriate funds to support these wasteful and unfair fisheries subsidies.
Martin D. Smith is the George M. Woodwell distinguished professor of environmental economics in the Nicholas School of the Environment and the department of economics at Duke University. He is the president-elect of the International Institute of Fisheries Economics and Trade and is former editor-in-chief of the journal "Marine Resource Economics."