Hopping mad

Foreign fishermen gaining access to British fishing quotas seems unjust to the fishing communities in the west of England. But it makes some of their members rich and is economically efficient
February 20, 1997

The spanish love fish. Their annual consumption is 37 kilos for each man, woman and child. By contrast, the average Briton eats less than half that amount-much of it in the form of fish fingers. It is hardly surprising therefore that Spain is a major net importer of fish-about 80 per cent of the fish caught by the Cornish and landed at Newlyn is promptly trucked to the wholesale market in Madrid.

Yet contrary to popular belief, the price of fish at the Merca Madrid is no higher than at Billingsgate: it is Spain's high demand rather than high prices that provides the incentive for quota hopping.

Quota hopping, the practice that gives Spanish and other foreign fishermen access to fish quotas allocated to Britain by the EU, encapsulates many of today's most urgent national debates-equity versus efficiency, shareholder versus stakeholder-as well as perennial European disputes over qualified majority voting, and the consequences of not being present at the creation of new EU policies.

In 1970 the six members of the then EEC adopted a Common Fisheries Policy (CFP). At that time Britain was not a member and had no say in the rule-making. The conservation element of the CFP works as follows. Each year scientists estimate the tonnage of threatened fish species (known as pressure stocks) that can be safely caught within the EU's 200 mile limit. Member states then review these figures-almost always adjusting them upwards. (The most recent meeting of fishery ministers in Brussels in December followed exactly this pattern.) Each country is then allocated a proportion using a formula based on catches during the period 1973-78. This raises another set of controversies as to whether this historical split is fair. The British fishing industry maintains that while we were honest all other countries declared grossly inflated catches for this critical period and thus continue to be given unfairly large allocations.

Switch now from the big picture to the local scene. At ports around Britain's coast there are 19 fish producers' organisations (FPOs) responsible for administering almost all the annual quotas. This is done in great detail: for example in November, a boat that was a member of the Cornish FPO was allowed to catch 0.5 tonnes of haddock in Area VII (which stretches from Sussex to Northern Ireland), 0.25 tonnes of sole in sub-Area VIIe, and so forth.

If you want to fish you need two things: a boat and a licence. If your boat is less than ten metres long these are all you need. You are not subject to quotas and can fish for anything just about anywhere, but in practice with such a small boat you would not stray far from shore. Owners of larger boats who want to catch pressure stocks-as they almost certainly will-must have a third thing: a track record. Generally your track record will equal the previous years' quotas, but could be less if you have not fished actively or if your boat has had problems.

No more licences are being issued; indeed under the EU's boat scrapping scheme, the number of licences is slowly declining. A licence with a track record attached has therefore become a valuable commodity-sometimes more valuable than the boat itself. Although the conservation element of the CFP was formalised in 1983, it was not until about 1990 that it really began to bite. This shows up in prices: in the late 1980s a licence with a good track record for a 35 metre trawler might have cost ?50,000; today it could fetch ?200,000.

Who are the buyers and who are the sellers? Enter the quota hopper. The Dutch have been quota hopping for years but have had the sense to keep a low profile; and by restricting their activities to the North Sea have avoided exacerbating unemployment in some sensitive areas of Britain.

The other big quota hoppers, the Spanish, have been less skilful (or perhaps less lucky) and are thus the target of most opprobrium. Spain's big fishing problem started in 1977 when the EEC (which included by that time Britain but not Spain) extended members' territorial waters from 12 to 200 miles. This move drastically reduced Spanish access to many of their traditional fishing grounds, and compelled their fishing industry to think carefully about the longterm future, a chore from which British and other EEC fishermen were largely excused.

Any business in one country can form a subsidiary in another. Oil companies do it all the time: Shell's subsidiary in Spain has successfully found and produced oil off the coast near Valencia for many years. The Spanish insight was to realise that this could apply to fishing as much as to any other business.

Starting in 1977, but increas-ingly after Spain joined the EEC in 1986, Spanish companies set up subsidiaries in Britain, bought licences and track records when they were still cheap and started fishing for British quotas. Actu-ally, this had little to do with EEC membership-a landlocked Bolivian could have done the same, indeed still can.

Spanish attempts to do the same in France were met with Gallic guile: "Yes, of course you can, but..." and the "buts" included a requirement that for "safety reasons" all the crew must speak French. Ten years later, a British minister is now proposing that we adopt a similar wheeze.

The Spaniards prefer Britain's southwestern fishing grounds because they are particularly well endowed with species such as hake that are much sought after by the Spanish diner. It is widely believed, and may even be true, that 40 per cent of the hake catch in our Area VII is caught by Spanish owned British flag vessels. Many of these so-called "flag vessels" are based at Milford Haven and are members of the Wales West Coast FPO. They would have preferred Plymouth as their base, but they were cold-shouldered there; the Welsh, on the other hand, provided a warm welcome plus grants to help them. As a result, Milford Haven today enjoys a boost to its local economy of at least ?2m a year.

We must not lose a sense of proportion about quota hopping. Britain has 2,900 fishing vessels over ten metres in length. Of these only about 140 are quota hopping "flag vessels," roughly two thirds of which are Spanish and the rest mainly Dutch and French-with one Belgian. Although locally important, quota hopping is a small issue.

Who are the winners and losers? Clearly the big winner is the British owner (often the skipper) who sells his boat, licence and track record. His reason for selling is usually retirement or a wish to trade down to a smaller boat. Where capital gains tax is payable on the sale, the Inland Revenue also wins.

The buyer must also be a winner, otherwise he would not buy. After an initial burst of activity in the 1980s, when the cost of entry was low, the Spaniards are now less frequent buyers. The majority of buyers of licences and track records are the big Scottish fishing companies. The idea that Cornish trawlermen are outbid by rich foreigners is a myth; the Cornish are sellers not buyers.

Why are Cornish fishermen not buyers? Although you might think that buying an extra track record would increase the amount of fish your boat is allowed to catch, that is not necessarily so. The Cornish FPO-like many others-operates a pooling system. Thus if a member of the CFPO bought an additional track record it would benefit the entire membership. Once spread among the other 169 boats the benefit to the buyer would be minute. In Cornwall selling not buying is rational behaviour. There are very few individual newcomers to vessel ownership buying licences and joining the CFPO. It may be possible to get a mortgage for a boat, but financing the purchase of the licence and track record can often be more difficult because of the economic uncertainty surrounding the future of quotas. This is less of a problem for the big Scottish fishing companies-because a corporation has more economic power and flexibility than an individual.

The big losers are the crews. When the owner sells, the crew goes on the dole-and this is true in Cornwall whether the buyer is a Spaniard or a Scot. The shore-based businesses also suffer, because the new owner of the track record is unlikely to make great use of local ports for repairs, chandling and so forth. It is estimated that in the fishing industry there are five shore-based jobs for each seagoing one, so the effect can be locally devastating. A classic case of the clash between the interests of shareholder and stakeholders.

There is no doubt that the sale of licences to those who value them most is economically efficient as well as generating income for the sellers; but to the people who are pushed on to the dole it just does not seem fair. "Those quotas were meant for us!" is the refrain. And that is the problem. In the CFP two fine principles conflict: on the one hand, free access for EU citizens to pursue business anywhere in the EU; on the other hand, the belief that quotas allocated to a country are intended for that country alone.

Can anything be done about this? Not much. The CFP is subject to qualified majority voting, and Britain will be outvoted if we try to make major changes when the CFP is reviewed in 2002-the case of a passionately supported single issue being trumped by the rules required to make a multinational organisation function.

Even if we could, should we do anything? This is trickier because there are plenty of British winners as well as losers. My view is this: yes, quota hopping is (or at least, has been) a serious local issue for the losers; but no, it is not important enough to jeopardise the vital principle of equal access for our businesses throughout the EU, or to put the nation at risk of yet more humiliation at the hands of the other 14.