ITQS as Collateral Rightly Understood: Preserving Commerce and Conserving Fisheries

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INTRODUCTION number of vessels comprising the United States' fishing fleets has, in many fisheries, grown to such great numbers that their fishing capacity far exceeds fishery productivity. This excess capacity perpetuates a cycle of overinvestment and overfishing, contributing to dangerous depletion of fish stocks. In unsuccessful efforts to conserve threatened fish stocks, the United States has reduced fishing seasons and allowable harvest limits.(1) reduction of fishing seasons has itself contributed to overinvestment in fishing fleets. As fishing seasons were shortened, purchasing equipment capable of meeting limits in the shortest possible time became the business strategy of choice. A proposed alternative to these unsuccessful fishery management practices is the implementation of transferable fishing schemes, which may provide incentives to conserve fish stocks and simultaneously reduce the excessive numbers of active vessels within U.S. fisheries. Individual Transferable Quotas (ITQs), are tradable fishing rights created by the National Marine Fisheries Service (NMFS) and local fishery management councils in an attempt to alleviate the problem of overfishing, and achieve sustainable management in the United States.(2) Under ITQ management schemes, each qualifying fisher receives an individual quota, which is a specific percentage of the annual harvest limit--or total allowable catch (TAC)(3)--for a specific fishery. A fisher may use his percentage allocation to harvest fish himself, or he may transfer his allocation to someone else by lease or sale. The primary feature of ITQs is the assignment of . . . property rights to harvest common property resources such as fish and shellfish . . . Usually, ITQs are fully transferable (buy, sell, lease) to allow operators to optimize their business.(4) Critics of market-based environmental solutions point out the difficulty of applying economic models to environmental questions because [h]umans cannot . . . impose limited notions of order on a living world that, by its very nature, will not be pinned down.(5) Regardless of the validity of this criticism, the reality is that current policies value market mechanisms as superior to other alternatives.(6) implementation of transferable fishing schemes worldwide is evidence of this trend.(7) Transferable systems have been implemented in various fisheries around the world with distinct consequences for the economic structure and the conservation of fisheries. For example, in the Icelandic cod fishery, the implementation of such a management system has resulted in the concentration of fishing among a few large market participants.(8) In fact: This state of affairs has lead many to describe the system in feudal terms, with the quota kings or lords of the sea controlling most of the and profiting from renting it to tenant companies, who actually do much of the fishing. After paying the rental price, the tenant companies are left with only 60% of the value of the catch, while still bearing the normal expenses of fishing.(9) Currently, there are three ITQ management systems in the United States. These regulate the Atlantic Surf Clam and Ocean Quahog fisheries,(10) the Wreckfish fishery,(11) and the Alaskan Halibut and Sablefish fisheries.(12) While the character of each of these three fisheries is unique, the theory behind their ITQ management is the same: to provide for more efficient and sustainable management of the fish stock by limiting access through tradable fishing rights--ITQs--which are a percentage share of total allowable catch.(13) In theory, transferability of the will encourage needed fleet downsizing by giving marginal actors an asset they can sell to exit the market. Due to the nature of the initial allocation,(14) researchers point out that small actors, lacking the financial backing to acquire extra permanent quota-shares, must sell out. …