5
Considerations for a National Policy on Individual Fishing Quotas

This chapter addresses the specific issues raised by Congress in the Sustainable Fisheries Act of 1996 (Sec. 108[f]). These important issues are considered within the context of first principles, which are used to guide the analysis of the specific questions about individual fishing quota (IFQ) design and implementation posed by Congress and serve as the basis for the committee's recommendations. This chapter presents a variety of viewpoints, from which the committee has drawn the findings and recommendations discussed in the following chapter. From this analysis, a national policy on IFQs may be derived.

First Principles of Fisheries Management as a Policy Framework

A brief look at IFQ programs that have been implemented around the world reveals that these programs were designed for a spectrum of purposes because nations do not all share the same policy goals for their fishery resources. In New Zealand, for example, the move to institute IFQs on a broad scale was motivated by the desire of the national government to foster rapid development of a domestic fishing industry that could extract maximum benefits from the national resource. In Iceland, an IFQ program was set up to serve a variety of goals: biologic, economic, social, and administrative.

What principles are at work in the United States that can help answer whether the IFQ is an appropriate policy instrument in the U.S. economic setting and help shape the direction of U.S. IFQ programs? A set of foundational principles for U.S. fisheries management is embodied in the Magnuson-Stevens Act; therefore, all discussions of future management logically begins with this act, supplemented



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--> 5 Considerations for a National Policy on Individual Fishing Quotas This chapter addresses the specific issues raised by Congress in the Sustainable Fisheries Act of 1996 (Sec. 108[f]). These important issues are considered within the context of first principles, which are used to guide the analysis of the specific questions about individual fishing quota (IFQ) design and implementation posed by Congress and serve as the basis for the committee's recommendations. This chapter presents a variety of viewpoints, from which the committee has drawn the findings and recommendations discussed in the following chapter. From this analysis, a national policy on IFQs may be derived. First Principles of Fisheries Management as a Policy Framework A brief look at IFQ programs that have been implemented around the world reveals that these programs were designed for a spectrum of purposes because nations do not all share the same policy goals for their fishery resources. In New Zealand, for example, the move to institute IFQs on a broad scale was motivated by the desire of the national government to foster rapid development of a domestic fishing industry that could extract maximum benefits from the national resource. In Iceland, an IFQ program was set up to serve a variety of goals: biologic, economic, social, and administrative. What principles are at work in the United States that can help answer whether the IFQ is an appropriate policy instrument in the U.S. economic setting and help shape the direction of U.S. IFQ programs? A set of foundational principles for U.S. fisheries management is embodied in the Magnuson-Stevens Act; therefore, all discussions of future management logically begins with this act, supplemented

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--> by relevant international principles and agreements. The act's dominant purposes provide the reference points by which most, if not all, of the issues concerning IFQs—if, when, where, and how they should be used—can be answered. Since the act will undoubtedly be amended repeatedly in the future, however, recommendations about management should not be limited to its present content. Over the course of the Magnuson-Stevens Act's history, its dominant purpose and policy goals have changed. The history of these changes is recounted briefly in Chapter 1. Also, the legal responsibilities of the United States as a coastal nation with respect to the biological resources within its exclusive economic zone (EEZ) have been clarified recently through the articulation of international norms and management criteria (Rieser, 1997a). The dominant purposes of U.S. fisheries law and policy may be gleaned from these obligations and from the far-reaching changes to the Magnuson-Stevens Act brought about by the 1996 amendments. The salient features of the 1996 amendments are the following: The express duty to end overfishing and to rebuild overfished stocks (Secs. 303[a][10], 304[e]); A new ecological imperative, with its emphasis on protecting essential fish habitat and reducing bycatch (Secs. 301[a][7], 305[b]); The mandate to consider fishing communities (Secs. 301[a][8], 303[a][9]); A concern with the fair and equitable allocation and distribution of fishing quotas (Secs. 303[d][5][C]); and The cautious approach to market mechanisms evidenced by the moratorium on development and implementation of new IFQ programs (Sec. 303[d]). In these provisions, the act supports the notion that fish stocks are public resources to be conserved for future generations and for their ecological importance, and managed carefully for the benefit of local communities and the diverse array of citizens who derive benefit from them. From these features, the first principles of U.S. fisheries law appear to be as follows: Conservation and sustainability of biological resources have a high priority. Management programs must take careful account of the social context of fisheries, especially the role of communities and the importance of fishing as both a tradition and a profession. When harvests take place, they should maximize the net benefits (benefits minus cost) that society receives from their use. Management programs must consider equity, fairness, and the distribution of the benefits derived from marine resources. Other principles stem from the public trust nature of fishery resources. For example, the public trust doctrine prohibits the permanent alienation of use rights

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--> to fisheries; access must be balanced with conservation and the public should be compensated for any private, exclusive use of public trust resources. Applying the Framework to Questions About Individual Fishing Quotas With these principles in mind, it is possible now to turn to those questions that Congress posed as forming the basis for a national policy on the use of IFQs. This chapter presents the background information relating to specific issues referred to the committee by Congress and for which recommendations are presented in the following chapter. Criteria for Determining Appropriate Fisheries for Application of Individual Fishing Quotas Congress asked the National Academy of Sciences (NAS) to identify, if possible, "threshold criteria for determining whether a fishery may be considered for IFQ management, including criteria related to the geographic range, population dynamics and condition of a fish stock, the socioeconomic characteristics of a fishery (including participants' involvement in multiple fisheries in the region), and participation by commercial, charter, and recreational fishing sectors in the fishery" (Sec. 108[f][1][G]). This query implies the question of whether IFQ programs should be limited to fisheries in which overcapitalization exists or should be made available for application to all fisheries. Two approaches to the development of threshold criteria are possible. The first is to be proactive and say that all fisheries are potential IFQ fisheries if there is some reasonable expectation that a total allowable catch (TAC) could be specified upon which IFQs could be based (perhaps eliminating fisheries with no TAC, such as some shrimp and crab fisheries1). The "threshold criteria" would then evolve more into conditions governing the rational development of IFQ programs (e.g., adequate data, clear objectives, full participation). The second (reactive) approach, is that only fisheries that meet certain, presumably more restrictive, criteria are appropriate for IFQs. For example, these criteria could include the following: 1   In some fisheries, for example Pacific salmon and some species of shrimp and crab, annual harvests are sustained almost entirely by animals from single year classes and there is substantial variability from year to year in year-class strength that cannot be predicted reliably on the basis of stock size. Because future recruitment is largely unaffected by current harvests, these stocks are not usually managed using TACs. However, fisheries with no TAC could still be amenable to a market-based system with transferable units of effort, rather than catch.

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-->  A TAC can be specified, upon which IFQs could be based.  An excess of capital, participation, or effort with respect to the available TAC is present or likely to develop.  Administrative or enforcement difficulties are present that could be remedied by an IFQ program.  The fishery is in, or appears to be headed into, a "derby" situation.  Bycatch either is insignificant or can be managed.  Managers and stakeholders agree that market mechanisms should be relied on to allocate use privileges.  The goals of improving economic efficiency and reducing the number of firms, vessels, and people in the fishery have higher priority than other goals. The committee favors the first approach, that all fisheries that can be managed using a TAC are potential candidates for IFQs. Process and Criteria for the Initial Allocation and Qualifications for Holding Individual Fishing Quotas Deciding who should receive quota and how much quota they should receive is a difficult, highly political process as participants in a fishery attempt to ensure their continued participation. The controversy about initial allocations results from at least three factors: (1) the "windfall profit" to initial recipients, (2) the choice of criteria for allocation, and (3) the amount of quota received. Windfall profit—The initial value of quota shares depends on rational expectations about potential future profits; quota shares increase in value to the extent that an IFQ program improves the profitability of the industry. If the fishery is overexploited or if there is great pessimism about future prospects for the fishery at the time of program implementation, quota share value could be zero. Any value provides the initial recipients with capital they may be able to leverage for additional purchases of quota shares. The recipients of initial allocations of quota shares reap a windfall profit when they sell their shares, which is not available to subsequent holders of the quota shares who must purchase them. The committee knows of no cases in which initial recipients of IFQs have been charged for their quotas. An auction-based allocation could be expected to capture any expected windfall gain. Criteria used to determine quota allocations—Dozens of different criteria can be used, each one more or less appropriate and fair, depending on the goals of the IFQ program. The choice of criteria differentially affects fishermen. For example, if the harvest of the past two years is heavily weighted, newer entrants to the fishery benefit, but if the average harvest of the past ten years if used, long-term fishermen, or those who fished in the early part of the time period and then left the fishery, benefit. The particular years used to determine histori-

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--> cal participation and eligibility for IFQs can have profound social and distributional effects, advantaging some groups and disadvantaging others. Actual amount of quota received by each fisherman—IFQ programs may reduce the TAC initially, and in an attempt to include a broad class of stakeholders, quota is typically distributed to more individuals than are currently active participants in the fishery and recipients are allowed to use their best catch years as a basis for the initial allocation. This makes the total quota share pool greater than the actual harvest in the target years. Due to these factors, some fishermen who once were able to harvest sufficient fish to remain viable may receive too little quota to continue. Other fishermen may receive no quota at all because their participation did not coincide with the qualifying years. Still others may receive quota even though they are no longer active in the fishery. The allocation process includes the procedures or mechanisms used to allocate IFQs, such as a program that distributes IFQs, an auction, or a lottery. Allocation criteria are those conditions or characteristics that individuals must meet in order to participate in the process used to allocate IFQs and to be eligible to purchase quota shares subsequently. There are numerous ways of allocating quota because there are many different combinations of procedures and criteria. Evaluating Categories of Allocation Processes The process of initial allocation is probably the most contentious issue in IFQ management. There are basically four different ways to allocate scarce resources: The open-access approach; A rule of equal opportunity—through a lottery, a first-come-first-served principle, or a same-for-everyone allocation (Edney, 1981; Fiske, 1991); The political approach (Edney, 1981) or priority ranking (Fiske, 1991), similar to the triage approach in allocating scarce medical care; and The market device—the scarce resource is distributed to those who are willing to pay the most for it. All four categories of mechanisms have been used in fisheries to allocate valued things, whether licenses, quota, or prime fishing spots. Each type of mechanism should be evaluated in terms of its ability to provide economic returns to the public and its compatibility with the distribution of IFQs and other limited access permits. Competitive or Market Mechanisms. This mode is politically attractive because once it is chosen, subsequent choices are decentralized and seem politically neutral (Edney, 1981). Responsibility for negative outcomes resides in an imper-

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--> sonal force, the market, as well as in the actions of individual actors in the market. This mode involves bargaining and negotiated contracts (Fiske, 1991). A common competitive mechanism for making an initial allocation of a good is the auction. Auctions match buyers and sellers of a good and can be structured in a wide variety of ways. A standard auction involves a seller receiving a number of bids from several buyers. A double auction involves the public posting of bids and offers from multiple buyers and sellers, similar to a securities market. In a first-price auction, which the U.S. Forest Service uses to sell timber, the person making the highest sealed bid purchases the timber for a price equal to his or her bid. Auctions promote the economically efficient use of resources by allocating goods to their highest-valued uses. To realize the full value of the good, the person who "won" the auction must deploy his or her resources in the most profitable manner possible. For instance, a fisherman who was the highest bidder for a quantity of quota must organize his harvesting activities in the least-cost, or most efficient, manner possible, in order to recover the cost of the quota and earn a profit. Although auctions may promote the efficient use of resources, they also raise a number of fairness issues. Only those individuals with adequate finances can participate, potentially excluding many people who have historically had access to fishery resources. Furthermore, depending on who is allowed to participate, an auction need not recognize the importance of fishing as both a tradition and profession. It may be possible, however, to address both of these fairness issues while still gaining the efficiency of an auction. People can be given the financial ability to participate in auctions through public loans or other financing mechanisms. Also, eligibility criteria for participating in an auction can be established that allow only those who have historically participated in a fishery to purchase quota in the fishery. Furthermore, auctions can be used as a mechanism by which to decrease windfall profits to initial recipients, allowing the public to be compensated for the private use of a public resource (see discussion of economic returns to the public later in this chapter). Auctions may also promote resource conservation and biological sustainability in at least two ways. First, by requiring individuals to invest in fisheries by earning or purchasing quota, individuals may be more likely to care for the resource so as to protect their investment. This effect will occur only if the quota is auctioned off only once or at least for a long term. Second, some of the revenue collected by the government through an auction can be invested in the resource to support and enhance its productivity and to mitigate problems caused by human use. Finally, auctions need not be used only to allocate initial quota shares. If IFQs are transferable, periodic auctions can be used to establish prices for quota, even if they are not used to raise revenue (Box 5.1). Auctions have not been used to allocate quota or to establish quota prices in any IFQ fishery in the United States.

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--> BOX 5.1 The Zero-Revenue Auction Although auctions have many desirable allocation characteristics, their use has been limited by the reluctance of resource users to pay for the resources they use. One mechanism that has successfully circumvented this barrier is the zero-revenue auction. It is currently used in the Clean Air Act's Acid Rain Program to control sulfur emissions. After an initial allocation of IFQ shares based on historic catch or some other criterion, under a zero-revenue auction the government would take back some proportion of the allocation each year (approximately 3% in the sulfur allowance program) for sale in an auction. Quota holders are allowed to buy back the quota they put up to bid, but they will succeed only if they are the highest bidder. Revenue is returned to the holders of the auctioned quota shares. In principle, the auction could involve either quota shares (e.g., 0.5% of TAC) or annual quota (e.g., pounds of fish in 1999). Significantly, all components of auction transactions (e.g., price, identification of buyers, quantities transacted) are public information. Privately arranged transfers could also take place any time among eligible participants as long as the control authority was notified and the transfer was approved. A zero-revenue auction could improve an IFQ program in several ways. First. it provides excellent information about prices, which is helpful not only to fishermen in planning their investments, but also to bankers as they seek to value this uncommon form of collateral. Public information about prices also serves to facilitate private trades outside the auction. Second, the zero-revenue auction guarantees the steady flow of IFQs in the market, ensuring that potential entrants are not precluded from fishing. Random or Equal Opportunity Mechanisms. A good example of such mechanisms is provided by the people of Bikini, in the Marshall Islands, when they were removed to Rongerik after the U.S. hydrogen bomb tests. Food resources proved to be inadequate on Rongerik. Under their chief, the people pooled their harvests, and the chief divided the pool into equal shares per person. A common random mechanism that may be used for the initial allocation of quota is the lottery. Lotteries may be structured in a variety of ways, but their essential feature is randomness. A person is randomly selected from a pool of participants to receive a good. Lotteries may be particularly useful when the demand for a good is greater than the supply and it is not desirable to allocate the scarce good on the basis of price. Lotteries, unlike auctions, do not allocate quota to their highest-valued uses. Rather, lotteries promote equality (but not necessarily fairness) by treating all participants alike. Each participant is equally likely to receive valued goods. Lotteries may be an appropriate mechanism for allocating IFQs to new entrants. If there are more entrants than quota available, and if removing price barriers to entry is an important consideration, lotteries can be a fair allocation mechanism.

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--> Although randomly allocating quota among a pool of eligible participants may at first appear to be unusual, random mechanisms can be used to achieve a variety of ecological and social goals in an equitable manner. For instance, in order to maintain the viability and health of fish stocks, the time and place of harvest may be important. A means of limiting the concentration of fishing effort to particular places and instead spreading it across a fish stock is to denominate quota as a proportion of a TAC and by area of harvest, as is done in the Alaskan halibut fishery. If some areas of harvest are less desirable than others, area quotas may be allocated by lottery, ensuring that fishermen equitably share both the desirable and less desirable areas. Lotteries could be combined with other allocation rules. For example, considerable concern was expressed that the initial allocation rules for Alaskan halibut and sablefish IFQs were so liberal in recognizing past participation that ensuing quota shares were often too small to fish profitably. An alternative approach would have been to use the eligibility criteria to qualify individuals to participate in the lottery and then randomly award "fishable" quota shares to a subset of those deemed eligible. Lotteries may be used to promote equality and to address different social and ecological issues, but lotteries do not promote economic efficiency. Other mechanisms, such as transferability of quota, would have to be combined with lotteries to promote efficiency. Lotteries have been used to award limited licenses in developing fisheries in Canada, such as the Newfoundland snow crab fishery. Such cases show the capacity for an initially fair allocation to result in later perceptions of inequity, unless the licenses are transferable or subject to periodic redistribution through additional lotteries or auctions (McCay, 1999). Procedural or Priority-Ranking Mechanisms. Procedural mechanisms typically involve the development of a set of well-defined allocation criteria and subsequent allocation of valued goods based on these criteria. For instance, priority systems that allocate organs for transplant, or that allocate scarce public resources such as housing, are most familiar (Young, 1994). Allocation of fishing opportunities by the regional councils through various management systems provide other examples of procedural allocation mechanisms. A decision is made to allocate access to resources based on a social criterion. In the Polynesian community of Tikopia (Firth, 1959), people were ranked against one another on the basis of birth order among siblings and within ancestral sibling sets. When a devastating typhoon hit Tikopia, this system of ranking was used to allocate responsibility to take inventory of resources, determine the critical number who could be supported with those resources, and determine that those ranking below this number would go into permanent exile in their canoes. Given that a group of people is devising a set of criteria that will be used to allocate valued goods, fairness issues, in terms of appropriate representation and participation in the group, are immediately obvious. The interests and values of the individuals participating will strongly influence the set of criteria adopted.

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--> Neglecting particular interests or overrepresenting other interests may weaken the decisionmaking authority of the group, as the neglected individuals oppose the group's decisions or the legitimacy of the group's decisions is questioned if it is dominated by particular interests. These fairness concerns may be addressed in a number of different ways. The initial design and structure of the group can require representation of all interests directly affected by the decisions of the group. In addition, oversight mechanisms can be adopted that allow for the review of group decisions and perhaps for overturning decisions that appear to be egregiously unfair or exploitative. Another issue that often arises is the ability of the group to make decisions in a timely manner in the presence of conflict among its members. This issue may become particularly acute if the decisions that members are asked to make directly affect them and how they achieve their livelihoods, as is the case with some members of the regional fishery management councils. In settings in which members of a group are negotiating solutions to shared problems among themselves and the preferred form of decisionmaking is consensus, win-lose situations are particularly difficult. This is especially likely to arise in designing quota systems. Allocating quota among different gear types, or among different participants such as vessel owners, skippers, and crew members, sets up win-lose situations. Quota allocated to one gear type is not available to another, quota allocated to skippers is not available to vessel owners, and so on. Conflict can become intense, and reaching a decision may be very difficult (Hanna, 1995). Oftentimes, decisions, if they occur, are based on exhaustion and not on reasoned debate. These decisionmaking issues may be addressed in a number of different ways. For example, fisheries may be disaggregated into more homogeneous subunits that are allowed to develop their own initial allocation formulas (and other program specifications), as in the case of the Pacific Whiting Conservation Cooperative (see Box 4.4). This would mean, for example, allocating portions of the TAC to relatively homogeneous areas, fishing sectors, or communities. This, of course, raises the question of who would allocate portions of the TAC. Another mechanism, used by Congress and state legislatures when faced with particularly difficult and contentious win-lose decisions, is the independent commission. A commission makes recommendations to the decisionmaking body, which then either rejects or accepts the commission's recommendations. This mechanism was used by Congress to close military bases and by the Arizona State legislature to make an initial allocation of groundwater rights. Relying on an independent, external commission to devise alternative allocation schemes removes much of the conflict from within the decisionmaking body and among its members, while still allowing it to make the final decision. Actual systems of allocation are usually mixtures of the various modes, or movements from one to another, as is very clear for IFQs. How could other modes of allocation apply to an IFQ program? The rule of equal opportunity would suggest giving the initial allocation of a TAC in equal shares to eligible

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--> parties. The problem is that with scarce and declining resources, the shares may be insufficient, leading to pressures to buy and sell them, which may result in sharp inequality of access over time unless other resources are available. The third mode of allocation, priority ranking, is found in decisions to restrict initial allocation of IFQs to certain classes of people (e.g., vessel owners; those who fished during a certain period of time and/or caught a certain amount of fish), as well as in rules of transfer and accumulation that favor some groups over others. Reliance on this allocation mechanism has led to the concern that those who are well connected to the council process may be unduly advantaged. After the initial allocation (which may be made on other grounds), the market is intended to provide the incentives and signals to direct economically appropriate individual behavior. Allocating quota shares on the basis of catch history and allowing individuals to buy and sell quota shares make it possible for more viable firms to compensate less viable firms before the latter leave the industry. To date, federal IFQ programs have been limited in the allocation mechanisms used. Only the council process, a procedural mechanism, has been used. The council process is the central and necessary mechanism because, at the very least, it defines eligibility criteria, but it need not be the only allocation mechanism used. It can be combined with either auctions or lotteries to allocate and reallocate quota. Indeed, a combination of all three mechanisms might best allow IFQ programs to meet the various goals that the Congress (through the Magnuson-Stevens Act) and councils deem important to fisheries management. In relation to IFQ programs, each of the allocation mechanisms—competitive, random, and procedural—can meet, to a greater or lesser extent, each of the first principles of fisheries management, discussed at the beginning of this chapter, depending on the design of the IFQ program and the allocation criteria used. These mechanisms, however, do not specify who will receive how much and why. Criteria have to be established to determine the eligibility of individuals to participate in one of the allocation mechanisms. Furthermore, criteria will be needed to determine how much of the valued goods should be allocated to each eligible recipient. These criteria depend, in part, on the goals of the IFQ program and, in part, on the first principles. All federal IFQ programs have used two criteria for allocating quota: (1) historic participation in the fishery (catch history) and (2) vessel ownership. These criteria not only address the importance of fishing as a tradition and a profession, but also recognize the magnitude of investments already made in the fishery. For the other principles to be addressed, IFQ programs and the initial allocation of quota must take into account additional criteria. For instance, objectives related to the conservation and sustainability of biological resources could be reflected in a number of different criteria:

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-->  Individuals who have a history of low bycatch (if this can be documented) could be eligible to purchase additional quota in an auction, allocated more chances in a lottery, or granted additional quota through a procedural allocation process.  Individuals may be required to use relatively selective gear in order to participate in any one of the allocation mechanisms.  Individuals need not intend to harvest their quota in order to be eligible to receive it (e.g., conservation groups could be eligible to purchase quota). Such conservation-oriented criteria would have to avoid penalizing individuals unfairly, based on their use of legal gear and methods. Objectives related to equity and the social distribution of the benefits derived from marine resources can be met by expanding the criteria for individuals who are eligible to participate in initial allocation mechanisms, rather than only vessel owners (see discussion of allocation to specific participants in the following section). Thus far, federal IFQ programs have been relatively limited both in the allocation mechanisms and in the criteria used to allocate quota initially. New quota programs should consider a more varied mixture of criteria and allocation mechanisms. Framework for Devising An Allocation System Given the many diverse fisheries that exist in the United States, it would be impossible to devise a single allocation system appropriate for all settings. Rather, the following questions should be considered when devising an allocation system (see Young, 1994, pp. 164-167).  What are the eligibility criteria? Who is entitled to receive a share? These are most appropriately determined by the diverse set of stakeholders involved in the fishery. Furthermore, they must be related to the first principles and national standards of the Magnuson-Stevens Act. Eligibility criteria may be divided into several general categories, for example, residency, mode of production (which includes gear and fishing practices), time period of involvement in the fishery, and investment in the fishery (which includes catch levels; ownership of vessels, gear, or processing; employment in the fishery or a fishing-related industry).  What counts in the distribution? Two people can be eligible to receive a right or bear a responsibility, yet differ in the amount of the right or responsibility they deserve. What is the basis for distribution? What are the relevant principles for making the distribution among all eligible participants? Such principles include (1) proportionality, (2) need, (3) ability, and (4) other factors.

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--> favor sunset provisions, it provides suggestions in the next chapter for how a limited duration IFQ program might be developed. Impact on Fishing Communities and Other Fisheries In social science literature, a community is often considered to be a relatively small, usually residential, spatially bounded unit, whose members deal with one another on a daily basis. For example, it has been defined as "the maximal group of persons who normally reside together in face-to-face association" (Murdock et al., 1945, p. 79). This type of definition has problems, in that such spatially bounded entities vary a great deal in the extent to which the people residing in them exhibit what is often referred to as a "sense of community." On the other hand, people who do not reside in the same locality, but who regularly work together in the same place or are fellow members of the same religious congregation, may have a strong sense of community. What makes for a community is not necessarily proximity but awareness of shared interests and concerns (Dyer and McGoodwin, 1994). Those who live and work together in close daily association are likely to share a number of interests. The greater the number of interests they share and the more intensely they feel about them, the greater is their sense of community likely to be. Small, relatively isolated, residential units that depend for their livelihood on a single industry are likely to have a strong sense of community in regard to this industry as a focus of intensely felt, common interest. Such communities of interest can be found in urban neighborhoods, and also in occupational enclaves within large urban settings and in farming and fishing communities. The effect of change on a community is larger or smaller in proportion to how the common interests that give rise to a sense of community are affected. Culture, Community, and Individual Fishing Quotas Many fisheries are based in coastal communities that receive significant economic inputs from the fishing industry. Coastal communities in turn, with assistance from state and federal governments, often provide the shoreside infrastructure (harbor jetties and docking facilities) that support the fisheries. In addition, they may supply important services to fishermen, such as food, fuel, and maintenance facilities. Many coastal communities are made up of multiple generations of families engaged in fishing. For others, there is significant movement of individuals into and out of the fishery over time so that even though there is a relatively constant presence of fishermen in the community, different people and families are represented over time. Coastal communities sometimes offer only limited alternative employment opportunities for displaced fishermen and fishing industry workers. The social, economic, and cultural characteristics of U.S. fisheries are as

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--> diverse as the characteristics of the fish stocks and fish habitats. Some are small-scale, artisanal fisheries conducted in estuarine areas or close to shore in small vessels with low levels of technology. Others are large-scale, industrialized fisheries conducted coastif not worldwide in large, highly capitalized vessels with sophisticated technology (McGoodwin, 1990). Some fisheries are traditionally conducted by members of communities with specific national or ethnic characteristics, whereas others are composed of large proportions of fishermen relatively new to the occupation and with no common social, economic, or cultural background. Some fisheries are primarily recreational (Spanish mackerel, striped bass); others are primarily commercial. Subsistence and ceremonial fishing are components of many U.S. fisheries.7 Significant regional and geographical variation can be observed in the social, cultural, and economic characteristics of fisheries. In Alaska, the Western Pacific region, Caribbean Sea, and many rural areas of the contiguous United States, fishing communities are small and relatively isolated, with few occupational alternatives and high levels of community cohesion. On the other end of the spectrum, participants in other fisheries are embedded within large metropolitan areas or may be composed of a significant number of fishermen with higher levels of education or training who have gravitated to fishing as a life-style choice or have relatively marketable skills in other occupations. All of these differences will have implications for the degree to which various policy objectives may be achieved with particular management options. Communities can serve as important participants in fisheries management in situations in which institutional arrangements are developed by resource users and others to manage the resources (McCay and Acheson, 1987; Ostrom, 1990; Rieser, 1997b). The public debate about access rights in fisheries management has focused primarily on exclusive individual harvest privileges such as IFQs, neglecting alternative harvest access regimes, including those that build upon human communities and involve contractual “co-management" relationships between fishing communities (whether communities of place or of interest) and government (Rieser, 1997b). The concepts of "human ecology" (Pálsson, 1991) and "embeddedness" (Granovetter, 1985; McCay and Jentoft, 1998) emphasize unavoidable interactions among culture, ecosystems, and the economy, and the methodological flaws of the theories representing economics and public choice as merely the summation of individual actions. In the context of questions about 7   The role of processors and fish buyers and the extent of harvester dependence on them may vary among communities. Sometimes processors provide jetties, docking facilities, and other infrastructure for fisheries, which are one dimension of the dependence of fishermen on processors. Processors may also lend fishermen money to buy quota shares or even buy quota shares on behalf of fishermen who promise to deliver their catch to the sponsoring processor, although some U.S. IFQ programs prohibit nonfishermen from purchasing quota shares.

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--> proper governance or management of "the commons," these authors argue for more attention to the search for alternatives and complements to (1) top-down "command-and-control" approaches and (2) private property, market-based approaches (e.g., IFQs) to environmental problems. In particular, they support current efforts to (1) improve the degree and nature of public participation in natural resource management; (2) develop and build on systems of community-based resource management; and (3) experiment with public-private partnerships in resource management, or co-management (Felt et al., 1997). IFQs and other fishery management tools have profound effects on human communities and can be designed, through participatory processes, to meet the needs and concerns of these communities (McCay et al., 1998). That is, they can be designed to reinforce community structures and to formalize common property regimes. The tendency for IFQs programs is to create a new community of interest, the holders of IFQs, whose interests and goals can diverge sharply from the rest of the community (McCay et al., 1998). Consequently, attempts to link IFQs with larger community values and interests must take great care to design IFQ programs that will in fact reinforce desired community structures and formalize common property regimes. In many cases, common-pool resources have been rationally managed for centuries (Hanna, 1990). The likelihood of an effective agreement on resource use will depend on the resource in question, the chances of effective monitoring and enforcement, the ability to exclude outsiders, and the sense of community among resource users. IFQs are most likely to be successful when they reinforce communities by creating legal protection for informal mechanisms of common property management. This will be true only if the legal protections build on, rather than break apart, community capacities for common property management. Community-Based Governance The implicit assumption deriving from the influential arguments of Gordon, Hardin, Christy, and Anderson, is that fishermen will not take into account the effects of their own actions on each other and on the fish stocks they target. Even if they do attempt to consider these impacts, including expending ever greater effort to maintain harvest levels in the presence of declining populations or increasing competition for fish, they continue to face incentives to renege on any voluntary arrangements to limit harvesting effort, leading to the collapse of such arrangements. Consequently, under these assumptions one of two approaches must be taken: (1) a government agency must be given sufficient authority to impose and enforce rules and regulations that would induce fishermen to change their actions and limit the adverse impact of their uses of fisheries, or (2) fishermen must be given well-defined individual privileges to a portion of the harvestable fish stock. Individual harvest privileges presumably focus fishermen's attention on effectively

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--> harvesting their own share of the quota. If fishermen are granted secure interests in a proportion of a TAC, they may attempt to harvest it as efficiently as possible, thereby reducing the undesirable effects on other fishermen and on the fish stock experienced under an open-access situation. However, these two approaches to addressing the inefficient harvesting of fish ignore the hundreds of examples of fishing communities that organized themselves and have effectively managed their access to and use of fish stocks on which they were heavily dependent (e.g., NRC, 1986; McCay and Acheson, 1987; Berkes, 1989; Martin, 1989; Bromley, 1992). These community-based governing arrangements are not historic anomalies. Rather, they represent a viable alternative to central government and market-based approaches to addressing biologic, economic, and social problems related to fishing. Communities of fishing people that have developed long-standing, successful (legal and extralegal) arrangements for governing their use of fish stocks and fishing grounds share several general characteristics:  They are capable of effectively excluding outsiders from their fishing grounds. Effective exclusion may be based on physical, economic, or cultural isolation, legal authority, or other mechanisms.  They have existed for long periods of time. Most likely, their families have fished in the areas for decades, and they want their children and grandchildren to have the opportunity to fish there in the future.  They have extensive experience with their fishing grounds and the stocks they fish. They possess good information concerning the structure and functioning of their fishing grounds and variations over time.  They share norms of trust and reciprocity.  Community forums, whether the local bar or a social club, provide opportunities for community members to discuss and resolve shared problems.  Community members have access to trusted conflict resolution mechanisms that allow them to settle their differences relatively peacefully (Ostrom, 1990; Schlager and Ostrom, 1992; Schlager, 1994).  The communities are relatively small and largely homogeneous.  The harvested stocks are largely independent of stocks outside the community's sphere of influence (largely nonmigratory), or the community is able to coordinate its actions with those of other communities. The governing arrangements that guide and constrain communities' uses of fishing grounds also share several general characteristics:  The rules are carefully matched to the situation or problem. The problems are those that community members have some control over and that can be resolved or reduced by changing actions and strategies.  The rules are easily monitored, typically while fishermen are on the water

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--> harvesting fish. It is oftentimes in the self-interest of individual fishermen to monitor the rules; otherwise, they may be prevented from fishing.  Rules are typically enforced first by threats and modest social sanctions. Only after repeated rule breaking are stronger sanctions imposed.  The rules reflect communities' notions of fairness, particularly in the distribution of costs and benefits.  Communities' norms and values interact with the rules governing access and use of fisheries, with each supporting the other. Rules governing fisheries resolve problems and reduce conflict in ways that support and help maintain the community of fishermen. Conversely, the community of fishermen in designing, implementing, and enforcing the rules supports their maintenance (Schlager, 1990, 1994). Depending on how the rules related to initial allocation and transferability are set up, IFQs could increase or decrease the security of a community's stake in a fishery. Community-based governing structures possess several advantages over central government management8 and market-based management. First, community-based governing structures are based on local norms, values, and information and are matched to the situation. Government officials rarely, if ever, have access to the type of information that would allow them to design appropriate governance structures, unless they sponsor research that provides the necessary information. Second, community-based governing structures maintain the community and its norms of fairness. The interests of central government and the values of market-based approaches do not routinely give a high priority to the value of maintaining a community as such, nor are they likely to reflect a community's interests and values (Goodenough, 1963), although regulated market-based systems such as IFQs can be designed to do so (see Box 4.5). Third, monitoring and enforcement may be less troublesome and costly with a community-based system. Individuals who devise rules by which they will be governed are more likely to follow them and monitor others for compliance (Ostrom, 1990; Tang, 1992; Schlager, 1994). It is reasonable to conclude that IFQ programs are more likely to be successful if representatives of the relevant fishing communities have been active participants in devising the program and/or if such communities are themselves recipients of IFQ shares and are left to devise their own procedures for allocating these shares and monitoring their use. Community-based governance is not necessarily incompatible with central government or market-based designs for managing fisheries. In cooperation with them, community-based management can deal with issues it cannot easily manage alone. Cooperation with central governments may make it possible to deal 8   The regional council system is an approach to co-management and is decentralized in many of its components. It generally is not, however, community-based management.

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--> effectively with larger, regional issues that extend beyond any single community in ways that meet the concerns of government (including the public trust), economic efficiency, and the maintenance of community. Certain cases of fisheries management, such as those involving transnational migratory fishing fleets, highly migratory or anadromous fishery resources, or fisheries with a broad range of geographically dispersed constituencies pose particular challenges to the development of efficient, effective, equitable systems of management that allow some degree of responsibility or authority on the part of fishery constituents while conforming to overall public trust principles. The development of fishery policy and management with the maximum involvement of all constituents and sensitivity to both cultural traditions and broader public trust principles is clearly an appropriate goal. The impact of IFQs on fishing communities is likely to be more or less stressful depending on how fishing and fishing-related activities are organized, the isolation of communities, and their ability to switch among fish species as stocks and exvessel values fluctuate. The members of some fishing communities derive significant income from work in processing plants located in their communities. The extent to which the impact of IFQ programs on processor-dependent communities can be mitigated is a matter to be determined for each fishery and each community and merits serious discussion when IFQ programs are contemplated. Less isolated fishing communities, such as those found in New Bedford and Gloucester, Massachusetts, pose somewhat different problems. These and other communities like them in the northeastern United States have been intensively engaged in commercial fishing for at least several generations. Fishing is built into the established way of life and social values, and is a main contributor to people's sense of worth as respectable citizens. These communities have resisted the imposition of TACs and any kind of fishery management program that would effectively reduce overcapitalization by significantly limiting the number of people and vessels engaged in fishing. In doing so, they have contributed to developing crises in their fisheries that earlier, prudent management programs may have mitigated. Some fishing communities may suffer a tension between the demands of fishing and other aspects of life. In New Zealand (Levine and Levine, 1987), IFQs shifted the competition among fishermen in the community from competition for fishing the ocean to competition in the marketplace for quota shares. At the same time, in other respects, the community's members valued maintaining a sense of community in spite of the divisiveness of fishing. The way management programs are set up can serve either to exacerbate the tension between competition and community or to reduce it. The Canadian Pacific coast fisheries managed on the basis of individual vessel quotas (IVQs) have proposed significant measures to encourage community development and proper treatment of crew (Box 5.8).

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--> BOX 5.8 Groundfish Development Authority in Canada In the Canadian West Coast groundfish trawl fishery, the Pacific Region of the Department of Fisheries and Oceans has established procedures whereby 20% of the annual groundfish trawl TAC is set aside and managed by the Groundfish Development Authority, which is made up of representatives from coastal communities and fishermen's unions. The Groundfish Development Authority (GDA) is composed of seven voting members. The GDA was established in 1997 as the result of agreement between the Department of Fisheries and Oceans and various fishing industry and coastal community participants. The GDA reviews joint proposals from processors and shareholders who must commit IVQ shares to match the quota shares granted by the Authority. The purpose of the GDA is "to ensure fair crew treatment, to aid in regional development, to promote the attainment of stable market and employment conditions and to encourage sustainable fishing practices" (GDA, 1998). The proposals are rated on the basis of things such as processing and catch history, and fair treatment of crew members, and with respect to development objectives such as stabilization of employment, sustainable fishing practices, and training opportunities for new entrants. The 20% of the groundfish trawl TAC controlled by the GDA is authorized to be used in two separate programs: (1) 10% of the total TAC can be allocated to a Groundfish Development Quota to aid in regional development in coastal communities, and (2) 10% of the total TAC can be allocated to a Code of Conduct Quota for the purposes of protecting the interests of crew members under the new IVQ management plan. The GDA receives proposals for both Groundfish Development Quotas and Code of Conduct Quotas. Based on the criteria established for the programs and the ranking given the proposal by the Minister of Fisheries, an area- and species-specific quota will be allocated to those submitting proposals. Groundfish Development Quota proposals can be submitted by properly licensed vessel owners and processors. The GDA will evaluate how well the proposal meets qualifying criteria. These criteria include contributing to market stabilization, maintaining existing processing capability, stabilizing employment in the groundfish industry, contributing to economic development in coastal communities, providing economic benefits, increasing the value of groundfish production, providing training opportunities, and maintaining sustainable fishing practices. The proposals are ranked by the GDA, and quota is allocated for the Groundfish Development Quotas. Code of Conduct Quotas are allocated to vessel owners unless there have been valid complaints received from crew members of a vessel indicating that they have been asked to contribute to the cost of the vessel's original IVQ allocation; if they are coerced into contributing to the leasing of additional IVQ or any other costs not traditionally associated with the operation of the vessel; or if there are indications that crew safety is being compromised. If the complaints are verified, the GDA can recommend that the Minister of Fisheries withhold the Code of Conduct Quota from the vessel owner.

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--> Participants in Decisionmaking Processes Who should participate in decisionmaking processes engenders considerable debate. A consensus is emerging among scholars and practitioners that those most directly affected by natural resource management should participate directly in devising management rules and regulations (Ostrom, 1990; Hanna, 1995, 1997). Users possess critical time and place information about natural resource stocks and about community norms and values. Furthermore, resource users bear the benefits and burdens of management regulations. In many cases, adopting new rules profoundly changes their lives. Although it may be accepted that resource users should actively engage in defining, implementing, monitoring, and enforcing any management system, there is less agreement as to who should be considered a resource user and the level of participation that should be allowed. Many people who do not directly harvest a resource nevertheless have made substantial investments in it. For instance, the families of harvesters, businesses that provide supplies and equipment to harvesters, processors of the harvested product, and the communities in which harvesters live, all have direct ties to the resource. Whether, and to what extent, such people and organizations should participate in designing management systems is subject to debate. Each group has different ties to the resource, a different set of interests, and perhaps, a different mixture of values. Likewise, there are nonconsumptive users of fish who may be interested in preserving fish, their predators, or the existing ecosystem structure. Defining the participation boundaries too narrowly increases the likelihood that important individuals and interests will not be represented, affects the quality of decisions, and makes these decisions vulnerable to external intervention. Excluded interests may take advantage of appeals processes or other avenues to nullify decisions (Hanna, 1994, 1995). On the other hand, defining participation boundaries too broadly increases the likelihood that conflicts among represented interests will increase, making decisions more difficult to achieve and/or compromising their quality (Ostrom et al., 1994). Individuals without a direct stake in the natural resource, who have the authority to participate in decisionmaking, may introduce values and issues that are tangential to natural resource management. Although scholars and practitioners understand the problems of defining the set of participants too narrowly or too broadly, there are no widely accepted procedures for determining who should participate in decisionmaking. One factor that has been important for fishery management in Iceland is the political capacity of various components of fishing industries to respond. This raises the issue of the organization of various dimensions of fisheries and their political influence. In some areas, sportfishermen and environmentalists have considerable influence; in some, processors are well organized and influential; and in some, vessel owners are organized.

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--> Decisionmaking Structure Not only do the participants involved affect the quality of decisionmaking, so does the structure of decisionmaking. There are several issues involved in the structure of decisionmaking: (1) the role of resource users, (2) the types of problems resource users are asked to address, (3) the transparency of decisionmaking processes, (4) the deliberative aspects of decisionmaking processes, and (5) the information that is part of the decisionmaking process. In decisionmaking processes, the role of natural resource users varies considerably. At one end of the participation spectrum, users may be asked to comment on management plans devised by managers. Under this scenario, managers are entrusted with the authority to define natural resource problems, devise regulations to address these problems, devise implementation structures for administering and monitoring the regulations, and solicit resource users' comments at various points in the development and implementation of the plans. At the other end of the participation spectrum, resource users define natural resource problems, devise regulations to address these problems, and devise implementation structures for administering and monitoring the regulations. In this scenario, managers act to support and facilitate users' decisionmaking activities. How well a natural resource management system performs is determined in part by how well it is accepted by users of the resource. A management system is most likely to be well received if it addresses the problems experienced by resource users in ways that they perceive as legitimate and fair. This implies that resource users' participation in decisionmaking must extend beyond commenting (Pinkerton, 1989; Ostrom, 1990; Hanna, 1995). Natural resource user participation may be structured in a variety of ways. Many U.S. federal agencies are experimenting with various procedures. For instance, the U.S. Environmental Protection Agency supports the creation of community advisory groups in relation to Superfund sites and national estuaries. Likewise, cattle ranchers and others participate in resource advisory committees sponsored by the Bureau of Land Management. Also, of course, fishermen and others participate in regional fishery management councils. Creating procedures that integrate resource users' participation in decisionmaking, however, does not ensure that they will choose to participate or will participate in meaningful ways. Participation requires a substantial commitment of resources. If resource users believe that their participation will be of no consequence in devising regulations or if they believe that their decisions may be easily overturned by managers, resource users are unlikely to invest in participation. Norms, values, and expectations shape the outlooks and actions of individuals as they make use of fisheries. By ensuring the active participation of resource users in designing and implementing fishery management systems, users' norms, values, and expectations are more likely to be taken into account. Since management regimes are simply collections of rules, and rules guide and shape people's

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--> behavior only to the extent to which they are followed, management approaches must, to a large extent, be consonant with a community's norms if they are to be meaningful. Norms and values concerning fairness, reciprocity, and work effort, among others, constrain and guide the types of rules and regulations most appropriate for a community. A community's sense of fairness concerning who should have access to a resource, how the resource should be used, and how rights of use should be transferred to others or passed to future generations must be accounted for in designing management systems if these systems are to be followed and not fought. Furthermore, crafting management systems to better fit the characteristics of the fishery and the groups of people who use the resource may reduce the costs of implementing, monitoring, and enforcing a system, as well as enhance the probability that desired outcomes will be achieved. Management systems that closely match the physical and cultural environments in which they operate should reduce monitoring and enforcement costs because rule-following behavior is likely to be enhanced. People are more likely to commit to a set of rules if they believe these rules are fair, if they believe that other members of the community are committed to following the rules, and if noncompliance is observable and subject to meaningful sanctions. Well-designed management systems to which resource users are committed will also elicit significant levels of mutual monitoring and enforcement. Process for Design and Adoption of Individual Fishing Quota Programs Are regional councils the best forum for making the decision to adopt an IFQ program for a particular fishery? Testimony to the committee reflected the concern that at any given time, a council may include neither adequate voting representation of all of sectors that would be affected by the design choices in an IFQ program nor the broader public interest. The council appointment process is a political one, carried out by the governors of states in the council region and the Secretary of Commerce, and politics can skew the voting membership in favor of a more powerful sector of the commercial or recreational fishery. To some extent, however, the participatory nature of the council process can moderate unequal voting representation on a specific council. The Secretary of Commerce is limited by the Magnuson-Stevens Act and by political realities in the degree to which he or she can correct for unbalanced representation and decisions in the design of IFQ programs. Currently, the Secretary may not approve or implement any fishery management plan, plan amendment, or regulation that creates a new IFQ program before October 1, 2000 (Sec. 104[d][l][A]). The Gulf of Mexico Fishery Management Council is further restricted from submitting and approving an IFQ program for the commercial red snapper fishery unless the preparation and submission of the IFQ program to the Secretary are approved in two separate referendums (Sec. 407[c]).

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--> Even if the moratorium on the approval and implementation of IFQ programs were lifted, there are other procedures that the Secretary of Commerce must follow in order to approve any proposed IFQ program. The Secretary may disapprove or partially approve a council-developed IFQ program for inconsistency with the national standards (Sec. 304[a]), other provisions of the Magnuson-Stevens Act, or other applicable law, but the Secretary cannot rewrite a proposed IFQ program to change, for example, the criteria for the initial allocation (Sec. 304[a][1]). The Secretary may not adopt a provision establishing an IFQ program unless such a system is first approved by a majority of the voting members of the council (Sec. 304[c][3]). The act gives the Secretary the power to reject an IFQ program when he or she deems the initial allocation to be skewed in favor of sectors that have more weight on the councils, under National Standard 4, which requires any allocation of fishing privileges to be fair and equitable to all fishermen, to be reasonably calculated to promote conservation, and to give no particular individual, corporation, or other entity an excessive share (Sec. 301[a][4]). Both the design and the implementation of IFQ programs can be delegated to other units. Examples of such co-managed or delegated authority regimes are found in the Canadian mobile gear groundfishery of Nova Scotia (see Appendix G; McCay et al., 1995, 1998) and the IFQ fishery of The Netherlands.