IMPACT OF PNA MEASURES ON GLOBAL TUNA MARKET:MANAGING PRODUCTION OR CREATING SCARCITY, OPPORTUNITIES FOR STRATEGIC PARTNERSHIPS

Speech by Dr Transform Aqorau, PNA Director, Delivered by Ms Nannette Masol, Chair, Parties to the Nauru Agreement, to INFOFISH Bangkok 2012

30 years spans a generation, and in that time PNA has been at the forefront of shaping international fisheries. PNA leads with conservation and management, including VDS as a effort control.

However, more recently, since the PNA free school skipjack fishery was granted MSC certification last year, that PNA has really come into prominence.

PNA shares the goals and aspirations of everyone in this room. We are resource owners; many of you in this room are resource takers. But we share a common goal. We want to see the tuna fishery sustainable, and profitable.

When the fishery is profitable, it is good for you, and it is also good for us. It is a win-win for both of us.

But PNA have been advocating for some time now that we do not simply want to be bystanders. We also want to participate in the fishery.

The global community has been talking about the special aspirations of Small Island Developing States for some time. Processes such as the negotiations of Economic Partnership Agreements (EPA’s), and the Pacific Agreement on Closer Economic Relations (PACER) are all endeavours directed at integrating the economies of Small Island developing States of the Pacific with Europe and Australia and New Zealand.

What better way to integrate the economies of Small Island Developing States with developed countries, than by sourcing all your tuna supplies, both fresh and canned, from Small Island Developing States in whose EEZs the tuna is taken? This would create onshore jobs, ensure adequate cash flows into households and help meet the Millennium Development Goals (MDGs).  It would create stable economies, and foster greater political stability and would need less aid from developed country taxpayers.

The problem is, developed countries, and most of the industries represented here, do not see it that way. They think that the tuna caught in our EEZs is theirs. They do not think that we, as resource owners, have a right to our tuna.

Even in instances where their Governments have agreed to assist this integration with Papua New Guinea and Fiji through the Interim Economic Partnership Agreement (IEPA), we continue to hear misleading statements about how this is going to spawn IUU fishing, and island nations  face other non tariff trade barriers which are not cost effective to address in order to export to EU.

A lot of this criticism is self-centred and economically based. You have mineral resources in your countries, we have tuna resources in our EEZs. Yet, unlike you, we do not seem to be at liberty to use these renewable resources in our own best interest.

For 30 years we have constantly faced this battle. The dichotomy is epitomised in the WCPFC, where the difference between coastal States and fishing States is almost black and white.  Yet the World talks about fairness, and sustainable development.

There is nothing fair about this game. Industry wants to get its profits at any cost. Their flag States only pay lip service to the ideals of development.  In the WCPFC, we see flag States raising objections after objections to proposals from coastal States. The converse is also true.

But there is a fundamental political and economic difference.

Small Island Developing States cannot move if the tuna in this region is exhausted. The rich developed countries, continue to build fishing capacity and can simply sail to the next ocean if an area is depleted.

There is scope for a new partnership.

PNA closed the high seas pockets to boats wanting to fish our EEZs. At next month’s Rio +20 Conference, there is a real opportunity for the international community to make radical changes and declare all  the high seas as global commons. They should be closed to fishing, and preserved as global commons; perhaps, reserved as Marine Protected Areas (MPAs).

All fish should be sourced from the EEZs, with developing coastal states supplying markets in developed countries. This should be the ultimate goal for global fisheries development and management.

When effort is zone-based it can be sustainably managed. Herein also lies the ultimate sustainability goal of the PNA.

The PNA have instituted a number of measures over the past 30 years. These are known as the Implementing Arrangements. These subsidiary arrangements are binding measures under international law.

The one that most people are aware of, are the 3^rd Implementing Arrangement (3IA).

The 3IA instituted the

• 3 Months FAD closure,
• high seas pocket closure to vessels that are licensed to fish in the EEZs of the PNA,
• 100% Observer Coverage on all purse seine vessels that fish in the PNA EEZs, and
• 100% catch retention of all tuna.

In addition, PNA have instituted measures

• prohibiting setting on whale sharks,
• imposing a minimum mesh size for purse seine nets, and
• prohibited fishing by licensed purse seiners in the high seas areas between 170⁰ E and 150⁰W and 10⁰N and 20⁰S. 

What are the impacts of PNA measures on global tuna markets? As argued at the Pacific Tuna Forum in Palau last September, PNA measures per se do not have a great impact on global tuna markets.

This is not to underestimate the importance of the PNA skipjack fisheries. 

We know what the proportion of the catch in PNA waters relative to the total catch in the WCPO is about 70% of the total. And skipjack catch in PNA waters is about 50% of global skipjack catches.

Hence, the leverage that PNA has to manage and effect conservation for skipjack cannot be underestimated at least in WCPO.

With the MSC certification process there were questions from DWFN interests over the leverage PNA has in our ocean. Scientific modeling now confirms not just does PNA take 70% of WCPO catch, but PNA management measures can indeed influence the WCPO stock overall.

Today we  are enforcing our ongoing governance of stocks with current work on introducing reference points [RP] and harvest control rules [HCR] for the perpetual sustainability of our resource.

PNA may be insignificant land masses and small populous, but clearly has influenced conservation in our region.

The VDS has been the most significant transformative agent in this fishery in recent years. 

The application of rights based instrument has entrenched the rights of the PNA, strengthened their bargaining role in access negotiations, and created a seller’s market.  The VDS is both a excellent sustainability tool but also an economic instrument.  It supports sustainability of the western and central Pacific skipjack purse seine fishery by setting a limit on Total Allowable Effort (TAE) expressed as Vessel Days.

The VDS has transformed the fishery by changing the trajectory of the relationship between  resource owners, and resource buyers. The clarity in the rights, provides greater security in investment, both for PNA and industry.  It also affords an opportunity to be innovative about the way in which these rights can be used. As you all know, investments in the fishery is conditional upon access to the tuna resources. This is a necessary pre-condition. 

Access to days over a longer-term gives investors greater security of investment. This is the reason why, in my presentation at the Pacific Tuna Forum, I called on investors to “Shape up or Ship Out”. I meant that in a positive sense.

Those that are investing in PNA will be securing long-term access to the resources. Others may need go home and fish.

Investors do not have to be only in onshore processing, joint venture fleets, and jobs on fishing vessels. They can be across a subregion, through pooling, and cross border investments and equity in processing plants linked to secured days.

The power of ideas in business and realising these challenges in an innovative way is represented in this room.  I call on you to draw upon the reserves of your entrepreneurial skills to work alongside PNA countries.

There are challenges however. As businesses you are inevitably concerned about the fishery. We continue to be challenged about what we do in this fishery.

Some would argue that we should manage production through flag based capacity limits again, putting the control in foreign hands to manage as we can’t, or is it should not ??.  Managing production levels by capacity limits or catch quotas for boat owners without a competitive market will tend to leave the extra profits with the boat owners offshore, not PNA investors.  For sure such strategy will not see investments in PNA, but secures raw materials to offshore sectors.

We were there before. While these arguments are good and well, the PNA is just one of the areas supplying tuna to the international market, and we continue to manage by limiting effort competitively.

It is for these reasons that I argued that on their own, PNA measures do not necessarily have an impact on the global tuna market, but we are seeing development and participation for PNA.

Two years ago, skipjack prices of US$1,200/mt was considered a good price. Even at US$800/mt, vessels were making profits and building boats.

But today demand for tuna continues to grow with prices at an all time high of US$2,200/mt.

It is not quite clear whether these prices are a result of production changes where our catches have been relatively stable over the past 3 years at around 1.2 million m/t. It is doubtful that this is the case.

The effect on prices on production changes depends on the elasticity which, for our region, has been previously estimated as at 0.5, that is, 1 % decrease in production causes a 0.5% increase in price.

Perhaps reality is with catches stable and increased competition from global over capacity, and growing demand for tuna protein it is inevitable tuna prices grow, yet Skipjack is clearly still cheap compared to other meat proteins.

But as we are seeing in the market, there are also other factors at play which is impacting on tuna prices not just local supply and demand. Two years ago, skipjack prices of US$1,200/mt was considered a good price. Even at US$800/mt, vessels were making profits and building boats.

But today demand for tuna continues to grow with prices at an all time high of US$2,200/mt.

It is not quite clear whether these prices are a result of production changes where our catches have been relatively stable over the past 3 years at around 1.2 million m/t. It is doubtful that this is the case.

The effect on prices on production changes depends on the elasticity which, for our region, has been previously estimated as at 0.5, that is, 1 % decrease in production causes a 0.5% increase in price.

Perhaps reality is with catches stable and increased competition from global over capacity, and growing demand for tuna protein it is inevitable tuna prices grow, yet Skipjack is clearly still cheap compared to other meat proteins

The decisions taken recently by the PNA on the VDS have implications locally, regionally and globally.  All fishing in the PNA EEZs including USMLT will now come under the TAE and VDS.  The application of non-fishing days will be harmonized closing some loopholes.The further development of the PNA Fisheries Information Management System (FIMS) further strengthen management efforts.

But it is also a platform for improving the management of the regional purse seine fishery and skipjack fishing throughout the WCPO.  These efforts will continue to increase the value of PNA’s resources and access to them.

Increase in the value of vessel days both in terms of access fees and in terms the leverage PNA has to promote domestic development. Already PNA can see the increase in the value from access agreements.  The application of the PNA US$5,000 minimum benchmark price for a day has roughly doubled fees, and some days have already been traded at prices up to US$8,000.   But note catch value also doubled.

The increased value in the fishery is also reflected in potentially greater returns from the Treaty with the US. 

The decisions taken at the recent PNA Annual Meetings provides the basis to work to conclude a highly valuable outcome with the US.

Progress with the MSC certification and Pacifical should add an additional premium to the value of the fisheries, and see PNA participation  in the islands and in the market place.

These steps remind us, that as global tuna supplies tighten, and global tuna demand strengthens, it adds further potential growth in the value of our fisheries, and affords Industry the opportunity to work with PNA.

It is time for you to re-think your partnerships, move away from seeing Small Island Developing States as an unnecessary appendage, but as true business partners through the rights now inherent under the VDS.

This is the opportunity that some in this room have already taken up as our partners.

So my final message is, you either “get on board, or you will miss the trip”.