CEEAplA Working Paper Series 2011
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Browsing CEEAplA Working Paper Series 2011 by Subject "CGE Modelling"
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- Estimating the impacts of eliminating fisheries subsidies on the small island economy of the AzoresPublication . Fortuna, Mário; Carvalho, Natacha; Rege, SameerSubsidies that reduce the costs incurred by fishers and increase profits for the industry can insulate fishers from economic signals, countering the economic incentive to stop fishing when it is unprofitable. Subsidies can thus be a major impediment to achieving economically productive fisheries, exacerbating overexploitation and delaying the necessary industry adjustments, particularly in the absence of effective management systems. Although some fisheries are profitable without government support, several studies have shown that many European fishing fleets are either running losses or returning low profits. In most cases operating costs are higher than gross revenue, resulting in a negative net contribution of fisheries to the economy, the deficit of which is largely funded by subsidies. Thus the cost of fishing to the public budget exceeds the total value of the catches. Recently, fishery subsidies have received much attention with a mounting literature on the urgent need to reduce capacity-enhancing subsidies and begin focusing on developing a profitable and sustainable industry that can adapt to changing economic and environmental conditions. Simple economic models showing how subsidies affect profits and therefore provide incentives for increased fishing effort have accompanied a number of overviews of subsidies published by leading intergovernmental and research institutions. A number of case studies have also illustrated the critical link between fleet capacity and subsidies and that some categories of subsidies are more distorting than others. However, most of the studies have been limited to estimating the value of these subsidies, and usually at the multinational or global level. None so far, to our knowledge, has estimated the economy-wide impact of reducing or eliminating fishing subsidies even though there is a growing consensus that subsidies should gradually be terminated. Moreover, the Fisheries Secretariat believes that capacity enhancing and fuel subsidies should be stopped immediately. Nonetheless, the new financial instrument of the CFP, the European Fisheries Fund (EFF 2007-2013), although an improvement on its previous homologous (FIFG 2000-2006), contains some ambiguous elements, which could open up for further increase of fishing capacity. A long-term approach is needed that encompasses more fundamental changes than using for example more efficient engines that initially reduce fuel consumption but in the long-run worsen the situation by contributing to increasing fishing effort on already overexploited stocks. On account of the global fisheries crises, highly subsidised fisheries and the anticipated reforms of the CFP, this study aims at estimating the impact of eliminating cost-reducing and capacity-enhancing fisheries subsidies on the Azorean economy. In particular, this study sets out to measure the impact of such a shock on various macro and micro variables pertaining to the regional economy using a dynamic CGE model based on a SAM for the Azores.