As pressure from WTO mounts, China faces decision on fishing subsidies

Negotiations amongst World Trade Organization member nations over the elimination of fisheries subsidies have intensified, according to a WTO announcement made at the tail end of 2018. WTO member states face a mandate of achieving an agreement by the end of 2019, in time to announce the agreement at the 2020 Ministerial Conference in Kazakhstan. 

One of the linchpins of any deal will be China, the world’s biggest fishing country by volume. Thus far, China has shown a willingness to negotiate, even making concessions to limit the country’s international fishing fleet to its 2016 level and to reduce fuel subsidies for its trawlers by 40 percent on 2015 levels. 

But China’s cut to trawler subsidies only applies only to those vessels engaged in fishing within China’s own waters – not abroad. And broadly, China’s general alignment with the agreement stands in stark contrast to its continued efforts to build giant processing and distribution hubs for its distant-water catches. 

Chinese Vice Minister for Agriculture Qu Dong Yu, who was in Argentina for the last WTO Ministerial Conference in 2017, appears to be straddling both sides of the issue. While he negotiated the concessions on fishery subsidies (though a larger agreement was not reached due to objections from India and China over the scale and timing of subsidy cuts), he also appears to support China’s distant-water fishing efforts. While he was in Argentina, he showed support for the industry by touring vessels owned by Shanghai Fisheries Group, Dalian Hua Feng and the well-known fishing and seafood distribution conglomerate Zhejiang Da Yang Shi Jia (Ocean Family). The vessels included red shrimp catch-processors and squid liners. 

Qu also visited vessels from Fuzhou, which is one of several Chinese cities trying to build a massive processing hub for processing and distributing catch from China’s distant-water fleet. The city aims to be one of up to five such hubs China aims to build under its 13th Five-Year Plan, according to the city’s deputy mayor, Yan Ke Shi, who met with city fishery chiefs to review a report commissioned from Ocean University in Shanghai on the project.

Yan met in December 2018 with Lin Xi Neng, head of China’s Ocean and Fisheries Bureau, to push for the building of the base in the Lianjiang County suburb of the city. Fuzhou is home to 13 fishery firms with 432 vessels fishing in international waters, according to Yan. 

“The city’s fishing firms were the first to venture into this business,” Yan said. “We are the birthplace of China’s distant-water fishing industry.”

Leaning on the prestige of the Ocean University in Shanghai appears to be a new ploy in seeking to land federal support for the project. Much of China’s expertise in global fisheries management comes from the university, which last month co-hosted a seminar with the FAO on the subject of traceability and sustainability in the seafood value-chain. The seminar brought to light the fact that distant-water catches constituted only 6.28 percent of overall seawater-based seafood production in 2017, rising 4.97 percent in volume terms year-on-year. 

That statistic correlates with a recent scholarly article in the China Journal of Sciences. The article, coauthored by Deng Shangui from the Zheijiang Ocean University and Li Laihao, deputy head of the Fishery Research Institute at the Academy of Fisheries, found that China’s seafood processing sector is beset by overcapacity – with capacity in many factories as low as 30 percent – and requires a major increase in value-add activity in freshwater seafood, which currently comprises only 18 percent of the market.  The article puts the number of processing enterprises at 9,694 in 2016 – a figure that has stayed largely static over a decade.  But given that capacity utilization is as low as 30 percent, it may well be that many of these firms are effectively zombie enterprises kept going by local governments wary of job losses or write-offs of bad debt. 

Nonetheless, local governments continue to push to build giant industrial parks with processing plants and boat yards catering to what’s perceived to be an industry with national government support. Local governments in China are known for seizing on fads or industries in favor with central government and for building giant projects (that often turn out to be white elephants) in the name of economic growth. Therefore, it’s not surprising to see similar efforts for fishery bases from officials in Zhoushan, Qingdao, and Tianjin.

The goals being espoused by different arms of China’s government seem mutually exclusive. While regional governments hurry to build giant new processing centers – for what is described by promoters like the Fuzhou government as a “bountiful” global supply of international catches – China’s national government claims it wants to guarantee the sustainability of global fishing stocks. And the FAO, which China supports, has found that 90 percent of the world’s fishery stocks are either fully exploited or overexploited.  

It will become clear over the next year, as the WTO negotiations continue on elimination of fishery subsidies, whether China is serious about reform or whether it will continue to pay lip service to international mandates while internally embracing a policy of expanded fishing effort abroad.