The Marginal Value of Parks

Environmental valuation studies should be clearer as to whether the value they estimate is marginal value or something else. 

The idea of a marginal quantity is one of the most-used in the economist’s toolkit.  In the theory of the firm, profit is maximised when marginal revenue equals marginal cost.  In macroeconomics, the effect of a change in disposable income depends on the marginal propensity to consume.  In the literature on valuation of non-market environmental goods, however, this tool seems not to be used as often as it should.  Travel cost studies estimating the value of recreational sites often fail to consider whether what they have estimated is the marginal or some other value of the site, and this can lead to inappropriate policy recommendations.

The sense of marginal value with which I am concerned here is that which considers a whole recreational site as one unit.  Admittedly that could raise a difficulty in respect of open countryside with no clear subdivisions, but for urban parks surrounded by developed land and for designated national or country parks with well-defined boundaries it is usually clear enough.  So I am not concerned with the difference in value between a park as it is and the same park with one less square metre of land.  The margin I mean is that between the status quo in respect of all the parks in a region and a situation with one less park.  One might argue that incremental would be a more correct term, but I consider that marginal has connotations that are relevant here, such as the idea of diminishing marginal utility.

A couple of examples will illustrate why it matters whether or not the value estimated by a study is marginal value. Suppose there is a proposal to convert a recreational site for housing development, which we want to evaluate by cost-benefit analysis.  This involves, for both costs and benefits, comparing the situations with and without the project (1).  The recreational value that should be used in the analysis is therefore a marginal value, the value that would be lost if the site were no longer available for recreational visits.  If there are other recreational sites in the vicinity, then people who would have visited that particular site might visit other sites instead.  If so, then the numbers of visits to the particular site and the costs incurred by its visitors will not give a good guide to the value that would be lost.  It should of course be borne in mind, here and throughout this post, that recreational value is only one component of the total economic value of undeveloped land – others include the values of water and air purification, biodiversity and carbon sequestration -, and decisions on land use conversions should have regard to all such components.

Sometimes, however, marginal value is not the value we need.  Suppose we want to include the value of a recreational site in the national accounts, as part of an estimate of the aggregate value of the country’s environmental assets or natural capital.  In that case the marginal value is not appropriate. Suppose two sites A and B are not far apart.  If we value site A on a marginal basis, excluding the value attributable to visitors who would have visited site B if site A had not been available, and if we apply the same approach, vice versa, when valuing site B, then we will not capture the full combined value of the two sites.  In simple terms, the value attributable to visitors with no strong preference between the sites will be missed.

How then should we estimate the marginal recreational value of a park?  And where marginal value is not what we want, what other value concepts are available and how should they be estimated?  A key consideration here is that parks are not a homogeneous good: they differ in location, size and other characteristics.  This has several implications.  We should not expect a smooth curvilinear relation between the number of parks in a region and their combined value.  Obtaining the marginal value of a park is certainly not a matter of estimating such a curve and then applying differential calculus.  Each park will have its own marginal value.  Furthermore, the average value of a park, obtained by dividing the total value of the parks in a region by the number of parks, is unlikely to be a useful statistic. 

To address the above questions, I shall consider the example below of a stylised small town with two parks.

The grey zone C2 is the commercial and shopping centre, with no residents.  The two green zones B2 and E1 are parks with free entry, also without residents.  The remaining seven zones are residential, each with the same number of residents: what the number is does not matter as all my calculations were per resident. 

In the interests of simplicity I make the following assumptions:

  1. All residents are alike in their behaviour in respect of park visits.  Their visit rates depend only on the travel costs of their visits to parks.
  2. Residents perceive the two parks as different but equally attractive, except in so far as visits require different travel costs.
  3. Distances are measured as straight lines between the centres of zones, the unit of distance being the side of one square zone.
  4. The travel cost (TC) of a resident’s visit to a park is measured in monetary units such that it equals the park’s distance from the resident’s zone.
  5. There are no complications arising from congestion or multi-purpose trips.

I pass over the important practical question, a key focus of attention in many published studies, of how the formulae modelling visit rates (trip-generating functions) might be estimated from observational data.  My focus here is on the determination of site values from the trip-generating functions, and I therefore start from plausible assumptions about those functions.  By plausible I mean that the functional forms are credible; the coefficient values are chosen so that all residents will make some visits to each park, but their visit rates will vary considerably depending on their zone of residence.

It is convenient to define the functions in two stages.  The first stage consists of formulae stating what the visit rate to a park would be if, hypothetically, the other park were not available (to indicate the hypothetical nature of these visit rates I write VR’).  These formulae are:

VR'(B2)=18-3TC(B2)

VR'(E1)=18-3TC(E1)

The formulae for actual visit rates, given the availability of both parks, are then expressed in terms of these hypothetical visit rates:

VR(B2)=VR'(B2)-\Bigg(\dfrac{VR'(E1)}{VR'(B2)+VR'(E1)}\times\dfrac{\min{(VR'(B2),VR'(E1)}}{2}\Bigg)

The formula for VR(E1) is as above but with B2 and E1 interchanged throughout.  These formulae may appear complicated, but are chosen for various desirable properties (further details are in the download at the end of this post).  Note that a simple linear functional form as below will not work:


VR(B2)=a-bTC(B2)+cTC(E1)

While it correctly indicates that a higher travel cost to park E1 will be associated with a higher visit rate to park B2, it has the very implausible implication that the relation between VR(B2) and TC(E1) is linear.  The higher TC(E1) is, the smaller we would expect the effect on VR(B2) of a unit increase  in TC(E1) to be.

To calculate values, starting from these trip-generating functions, I applied the standard method of deriving points on the demand curves by considering various price additions to the travel cost, then taking the area under the demand curve (the consumer surplus) to be the value (2).  Applying this method to the actual trip-generating functions, I obtained values per resident of 21.66 for park B2 and 16.06 for park E1, implying a total value of 37.72.  An appropriate description for these values would be “contribution of visits to the park to the total value of the two parks”.  This (generalised to all the parks in a country) is the value concept that would be relevant for inclusion in the national accounts as above.

The lower value for park E1 – the more distant park for more than half of the residents – is unsurprising, notwithstanding the equal attractiveness of the two parks.  There is much evidence that the recreational value of sites is lower when they are further from centres of population, other things being equal (3).

I also applied the method to the hypothetical trip-generating functions, obtaining values per resident (in each case in the absence of the other park) of 28.26 for park B2 and 22.26 for park E1.  This enabled the marginal values to be obtained as follows (calculations may not exactly agree due to rounding:

Marginal value of park B2

=  (Total value of two parks) less (Value of park E1 in absence of park B2) 

=  37.72 – 22.26  =  15.45

Marginal value of park E1

=  (Total value of two parks) less (Value of park B2 in absence of park E1) 

=  37.72 – 28.26  =  9.45

The table below summarises these results.

Total value is shown only for the “contribution” row: totals of the other rows would not be meaningful.

Once one has both the actual and the hypothetical trip-generating functions, the calculations of these distinct values do not present any special difficulty.  Why then do published travel cost valuation studies often fail to consider whether the values they obtain are marginal values or contributions to total value?

One possible reason is that researchers may not be entirely impartial.  They may be seeking results that would support a case for preservation of a site, and recognise that a marginal value, which could be low, would not be helpful.  Certainly, I have seen quite a few such studies that use their results in recommending preservation, perhaps with the help of government funding.  I cannot however recall a single study concluding that a site was not worth preserving.

Another reason is that many studies, perhaps because of resource limitations, focus on a single site.  They may, with the aim of avoiding omitted variable bias, estimate a trip-generating function that includes travel costs to alternative sites as independent variables.  But even then, it is impossible to obtain the marginal value of a site from a trip-generating function for that site only.  As we have seen above, that requires such functions for other sites too.

Suppose however that a researcher is both impartial and well-supplied with resources.  Suppose that they collect data on visit rates and travel costs for a number of sites in a region.  They could then estimate the actual trip-generating function for each site and hence calculate each site’s contribution to total value.  To obtain the marginal value of a site, however, they would still have to estimate the hypothetical trip-generating functions describing the unobservable visit rates to other sites that would prevail if that site were unavailable.  That seems, at best, statistically challenging. 

It is understandable, therefore, that many studies lead to value estimates for a site that are a reasonable approximation to “contribution to total value”, but do not estimate, even approximately, the marginal value.  What is less defensible is when such values are used to justify policy recommendations, for example whether a site should be preserved or converted to an alternative land use, that really require the marginal value.  One such example is a paper by Bharali & Mazumder (2012) which estimates the recreational value of Kaziranga National Park, Assam, India (4).  Starting from sample data on visit rates, travel costs and other relevant variables, the authors obtain an estimate of consumer surplus which, they state, “signifies the value of the benefits that the visitors derived from visiting the park” (5).  But they do not consider whether those benefits are gross, or net of the benefits that visitors would have obtained at alternative sites if the park had not been present.  Since the paper does not consider alternative sites at all, we can take it that these benefits are gross and that the value it estimates is not marginal value.  Nevertheless, the author’s conclude that the government should allocate large funds to preserve the site (6).  That conclusion would be much better supported if it had been shown that the marginal value of the site were significant.

The calculations underlying the above results may be downloaded here: Marginal Park Value Calculation (MS Excel 2010 format).

Notes and References

  1. See for example quote from Watkins T at  https://www.smartsheet.com/expert-guide-cost-benefit-analysis  (select Compare Aggregate Costs and Benefits)
  2. See for example Perman R, Ma Y, McGilvray J & Common M (3rd ed’n 2003) Natural Resource and Environmental Economics  Pearson Addison Wesley  pp 413-4
  3. See for example Bateman I et al (2013) Bringing Ecosystem Services into Economic Decision-Making: Land Use in the United Kingdom  Science Vol 341 Issue 6141 pp 45-50 (section headed National-Scale Implications)   http://science.sciencemag.org/content/341/6141/45
  4. Bharali A & Mazumder R (2012)  Application of Travel Cost Method to Assess the Pricing Policy of Public Parks: the Case of Kaziranga National Park  Journal of Regional Development and Planning Vol 1(1) pp 41-50  http://www.jrdp.in/archive/1_1_4.pdf
  5. Bharali & Mazumder, as 4 above, p 47.  An unusual feature of this paper (an error?) is that, having estimated the consumer surplus, it then adds on the actual travel costs to arrive at what it describes as total recreational value.
  6. Bharali & Mazumder, as 4 above, p 48
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An Unnecessary Book on Environmental Economics?

In the internet age, a collection of fine articles may not make a worthwhile book.

Edward Elgar Publishing have recently published a seventh edition of Economics of the Environment: Selected Readings (1), a collection of 34 articles on a wide range of topics in environmental and natural resource economics, edited by Robert Stavins.  According to the publisher, it “serves as a valuable supplement to environmental economics textbooks and as a stand-alone reference book of key, up-to-date readings from the field”. 

A virtue of the book is that, while the articles are all republished from academic journals, most of them are towards the more readable and less mathematical end of the spectrum of academic writing on economics.  I will comment briefly on a few.

Article 2 – Coase’s The Problem of Social Cost (1960) – is a seminal work in which he challenges the view that the appropriate policy response to a negative externality is either a Pigovian tax or regulation. Instead, he lays emphasis on a comparison of the overall economic effects of alternative social arrangements defining the respective rights of the parties, and on the transaction costs which arise if a party attempts to negotiate agreement with another party to infringe their rights in return for payment.  His numerous detailed examples illustrate the range of circumstances to which his arguments apply – but many readers will probably prefer to skip some sections in order to focus on the main points.

Articles 5 to 7 by, respectively, Carson, Kling et al and Hausman (2012), set out alternative positions on the contentious issue of the role of the contingent valuation method for valuing non-market environmental goods.  They focus especially on the conditions under which contingent valuation studies may be subject to hypothetical bias, where individuals overstate their willingness to pay for an environmental good.  I discussed these articles in this post.

Article 12 by Schmalensee & Stavins (2017) is a useful and fairly concise analysis of the performance of and lessons from seven cap and trade (marketable permit) systems intended to reduce emissions at a lower cost than would a command-and-control approach.  It considers six US systems differing in type of emission addressed and regional scope – notably the national Sulphur Dioxide Allowance Trading Program that began in 1995 –, as well as the EU Emissions Trading System, a multi-country system focused on CO2 emissions which started in 2005.  Among the lessons identified are a) not to require prior approval by a central authority of trades in emissions allowances; b) to establish rules and obtain accurate data well before the start of the first compliance period; c) to limit price volatility by price collars and by permitting allowances to be carried forward to the following period (allowance banking).

Article 16 by Covert, Greenstone & Knittel (2016) asks whether natural supply and demand forces (that is, without policy intervention) can be expected to significantly reduce fossil fuel consumption and so help to mitigate climate change.  They consider two kinds of such forces: increases in the costs of extracting fossil fuels; and technological advances improving the energy efficiency of existing technologies and developing new carbon-free technologies.  Their conclusion that fossil fuels will remain the primary energy source without policy intervention may not be a surprise, but it is useful to have the evidence for this set out in detail.

Article 24 by Tol (2018) considers the overall economic effects of future climate change, drawing on the conclusions of many previous studies of general and specific effects of climate change, and also considers recent estimates of the social cost of carbon (which should inform the welfare-maximising rate of a carbon tax).  As might be expected, he concludes that the overall effects of climate change in the long run are negative.  On the crucial issue of quantifying the negative effect, he suggests that the welfare effect of a century of climate change is unlikely to exceed that of losing a decade of economic growth.  But this conclusion is importantly qualified by recognition both that the effect on poor tropical countries is likely to be especially large and that the range of uncertainty is very wide.

Article 30 by Shogren & Taylor (2008) assesses the relevance of behavioural economics to environmental and natural resource economics, referring to much previous literature on this topic.  One of various arguments considered is that markets tend to encourage rational behaviour, in aggregate if not at the level of individual participants, and that the insights of behavioural economics are therefore especially relevant to behaviour in respect of non-market environmental goods. The conclusions reached are in my view balanced: neither dismissing the behavioural approach, nor over-stating the extent to which it requires modification of conventional analysis and policy recommendation based on an assumption of consistently rational behaviour. 

Although the book certainly contains some fine and mostly recent articles, I find it difficult to see who would want to buy it at a (current online) price of £130.50 (hardback) or £35.96 (paperback).  The world of publishing has changed since the first edition (1972).  Those affiliated to an academic institution will probably have free access to most if not all the articles via institutional arrangements with the original journals.  Moreover, nine articles are from the Journal of Economic Perspectives, an open access journal.  Another four (articles 3, 12, 24 & 27) I found to be freely accessible on the websites of the Review of Environmental Economics and Policy and the American Economic Review, subscription journals which however make the full text of selected articles freely available.  The Coase article is available within the open-access part of JSTOR.  So even without an institutional affiliation, it is possible to obtain free (and legal) access to at least 14 of the articles. 

Notes & References

  1. R N Stavins (ed) (2019)  Economics of the Environment: Selected Readings, 7th edition,  Edward Elgar Publishing   https://www.e-elgar.com/shop/economics-of-the-environment
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Some Thoughts on this Blog

When I started this blog in 2012, I considered – having looked at many other blogs – that posts should be short and frequent, and my early posts were all well below 1,000 words.  But it gradually became apparent that for many topics I could not present the sort of sustained argument I wanted to make within that limit. I do aspire to persuade, and not just address readers who already agree with what I say.  Hence my posts became longer and less frequent.   Many are in the region of 2,000 to 3,000 words, and the longest – a review of Dieter Helm’s Natural Capital: Valuing the Planet – extends to some 8,000 words.

Through WordPress I can access statistics giving some idea of which of my 54 posts have received most views.  The statistics are not as helpful as they could be, with a high proportion of views classified under the catch-all category of “Home page / Archives”.  Based on the classification of the remainder, some posts have been viewed far more times than others.  The ten most-viewed posts are as below, in descending order of views (counted from the date of posting to the end of 2018).

  1. The Economics of a Carbon Tax (20/2/2013)
  2. Of Fish, Fishers and Consumers (23/6/2013)
  3. Explaining Environmental Policy Failure (1/12/2017)
  4. Pollution Control and Output (30/12/2016)
  5. A Valuation Case Study: The Great Barrier Reef (15/7/2017)
  6. Green Space: An Important Use of Urban Land (28/7/2013)
  7. Net National Product and Sustainability (17/5/2017)
  8. In Defence of the Linear Demand Function (21/6/2016)
  9. Reducing Pollution with a Combined Tax and Subsidy (6/9/2012)
  10. Lessons from the Industrial Revolution (7/3/2013)

Of the less-viewed posts, the following are some with which I am especially pleased:

While some posts relate to matters that were in the news at a particular time, all are intended to address or illustrate more general issues in the field of environmental and natural resource economics and related disciplines.  I’m not trying to build up an encyclopaedia – which would be absurdly ambitious -, but I hope that some may find my posts, including some of the older ones, a useful resource.  With that hope comes a responsibility to try to improve older posts where possible, which may include explaining points more clearly, improving layout and – yes – on occasion correcting errors.  In that spirit I have recently made substantial amendments to Net National Product and Sustainability and minor changes to several other posts.

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Fish Imports, Tariffs and Conservation

A recent paper proposes that, post-Brexit, the UK should lower tariffs on imported fish to benefit consumers.  That may be a good idea, but the effect on fish stocks in the regions of origin should also be considered.

The Institute of Economic Affairs has published Plan A+: Creating a prosperous post-Brexit U.K. by Singham and Tylecote (1).  The paper is wide-ranging, but of particular interest from an environmental perspective is a short section on fish and fisheries (2).  It includes a proposal that tariffs on certain imported fish should be lowered once Brexit allows the UK to do so (3).  That set me thinking. Generally I favour free trade so that countries can gain from specialising in industries in which they have a comparative advantage, but sometimes short-term gains from trade must be weighed against long-term costs. When the traded good has been harvested from a renewable natural resource such as fish, there clearly is a possible long-term cost in that the quantity of fish imported could contribute to over-exploitation and depletion of the resource.

A little background.   Currently, fish imported into the UK from outside the EU are subject to the EU’s common customs tariff.  Imports of Pacific bluefin tuna, for example, carry a tariff of 22% (4).  Once the UK leaves the EU, and subject to the terms of any Brexit agreement, it will be free to set a lower tariff, or none at all.  Arguments regarding import tariffs typically focus on the protection they offer to domestic producers and the costs they impose on domestic consumers.  The UK fishing industry contributes £1.4 billion annually to the UK economy and employs some 24,000 people (5).  But tuna in recent years has been rare in UK waters (6).  Commercial fishing of tuna by UK fishers is virtually non-existent, and the same goes for some other fish types.

Singham and Tylecote’s proposal to lower tariffs on imported fish relates specifically to those types of fish that are consumed but rarely caught in the UK.  Reduced tariffs, they state, would benefit consumers but have little effect on the UK fishing industry.

Let’s examine these claims.  For any fish type, UK demand is only a small proportion of world demand.  Whether or not the UK levies a tariff therefore has only a small effect on the world price (7).  If a tariff is levied, then it raises the price to UK consumers by most of the amount of the tariff.  Conversely, starting from the UK’s current position, lowering the tariff will reduce prices by most of the amount of the tariff reduction.  That’s a clear benefit to UK consumers.

The claim that there would be little effect on the UK fishing industry is more problematic.  Singham and Tylecote’s point is that the fish types mainly caught by UK fishers – cod, haddock, mackerel, etc – are not those on which they advocate a lowering of tariffs.   But the relevance of this depends on consumer behaviour  in respect of fish purchases, which can usefully be described in terms of the cross-elasticity of demand, a measure of how a change in the price of one good affects demand for another.

Suppose cod and tuna can be taken as representative respectively of UK-caught and imported fish.  If the cross-elasticity of demand between cod and tuna were close to zero – that is, a change in the price of one would have very little effect on demand for the other – then Singham and Tylecote’s argument would be valid.  But it would fail if there were a large positive cross-elasticity of demand, implying that consumers regard cod and tuna as good substitutes. The reality is probably somewhere in between, a situation sometimes described by saying that the goods are weak substitutes. Cod is a white fish while tuna is an oily fish, an important distinction for consumers in terms of both taste and nutrition.  So far, then, Singham and Tylecote’s claim that there would be little effect on the UK fishing industry seems to have a degree of validity.

However, about one third by value of the UK catch consists of oily fish such as mackerel (8). The cross-elasticity of demand between tuna and mackerel seems likely to be fairly high.  If so it would further weaken Singham and Tylecote’s claim.

It might also have been suggested that the interests of millions of fish consumers should take precedence over those of the relatively small number of people employed in the UK fishing industry, but that is not an argument used by Singham and Tylecote.

The above analysis is entirely within a comparative static framework, which is fine so far as it goes.  When considering the economics of a natural resource at risk of depletion, however, it can never give the full picture.  It has no regard to the importance of conservation of fish stocks so as to ensure continuing catches for the benefit of future consumers. This prompts me to pose the following question:

If country A imports fish caught by country B within B’s waters (eg its Exclusive Economic Zone (EEZ)), should A’s policy on fish imports have regard to the conservation of B’s fish stocks?

Admittedly the scenario posited by the question is only one of several possibilities: imported fish might be caught (under agreed arrangements) in a third country’s EEZ, or in international waters.  It does I believe present the issue I want to consider in its simplest form.  Here are some arguments that might be adduced.

The sovereignty argument: No
Management of the fish stocks within B’s waters is entirely a matter for B.  Whether it chooses to conserve or to over-exploit is its own decision.  It is no business of A’s to interfere, and to do so could infringe B’s rights under the UN Convention on the Law of the Sea (9).

The laissez-faire argument: No
The fact that there is, and will probably continue to be, a market for exports of fish caught in B’s waters provides B with an incentive to conserve its fish stocks.  Although A has an interest in continuing to have the opportunity to import fish from B, there is no need for it to take any particular steps to that end.

The second-best argument: Yes
B may not be managing its fish stock in a sustainable manner, as evidenced by declining fish populations in its waters.  By limiting its fish imports from B, A can help to limit demand for B’s fish.  Other things being equal, reduced demand will reduce the quantity of fish that B’s fishers can profitably catch in its waters and so contribute to conservation of its fish stock for the benefit of future consumers, including those in country A.

The public choice argument: Yes
B’s government may understand the long-term benefits of conservation, but find it politically impracticable to override a fishing industry lobby defending its short-term interests.  A’s government, however, may find it relatively easy to limit its fish imports, imposing a small cost on each of a very large number of consumers.

All these arguments could have a degree of validity, subject to the detailed circumstances. But the applicability of the sovereignty argument is I suggest very limited indeed.  The UN Convention on Law of the Sea does indeed assign sovereign rights to a coastal country within its 200 nautical mile EEZ.  Those rights, however, are not the equivalent of the sovereignty a country exercises over its land territory: they do not amount to the right to do almost anything it likes. Article 56 specifies that, within its EEZ, a country has:

“sovereign rights  for the purpose of exploring and exploiting, conserving and managing the natural resources, whether living or non-living, of the waters …” (9)

Article 61 explictly forbids over-exploitation of living resources:

“The coastal state, taking into account the best scientific evidence available to it, shall ensure through proper conservation and management measures that the maintenance of the living resources in the exclusive economic zone is not endangered by over-exploitation.” (10)

If B – like most countries (11) – has ratified the Convention, then for A in its policy on fish imports to have regard to the conservation of B’s fish stocks could hardly be described as interference.  It would be helping B to fulfil its treaty obligations.  Even if B were not a party to the treaty, no one would suggest that for A to adopt a trade policy such as an import tariff would in itself amount to interference or an infringement of sovereignty. Any such claim would have to refer to the intentions underlying A’s policy.  There is a subtle difference between a country adopting a trade policy to advance its own interests, without particular regard to its effects on another country, and adopting perhaps the same policy with the intention of affecting another country in a specific way.  Trade sanctions would be an extreme case of the latter.  A policy intended to help conserve another country’s fish stocks would be, at worst, a very mild form of interference.

The laissez-faire argument would be a good one in circumstances in which B is effectively managing its fish stock in a sustainable manner, with regard to its long-term commercial interests.  However,  there are many fisheries for which this is not the case.  The FAO estimated that in 2013 31% of the world’s marine fish stocks were fished at a biologically unsustainable rate (12).

Where, for whatever reason, B is not managing its fish stock sustainably, the second-best argument becomes relevant.  For country A through its trade policy to try to contribute to conserving B’s fish stock is an inferior approach to effective management by B itself, but it may be better than nothing, especially if A’s policy can be coordinated with that of other importing countries.  A coordinated tariff could ensure a significant lowering of the world price of the fish, resulting in a worthwhile reduction in the quantity demanded and so make a material contribution to conservation of B’s fish stock.  It could also avoid the objection that a tariff adopted by one country alone would impose a cost on its consumers but do little towards conservation and therefore little to safeguard continuing imports of the fish for its consumers in future.

Where the reason B is not managing its fish stock sustainably relates to the lobbying power of its fish industry, the second-best argument may be complemented by the public choice argument.  What is envisaged here is far from the situation in which a powerful producer lobby achieving gains for itself at the expense of many dispersed consumers.  In the right circumstances, perhaps via coordination with other importing countries as above, the cost to consumers would be in return for a benefit to future consumers via conservation of B’s fish stock and continuing imports.

In conclusion, my main concern about Singham and Tylecote’s proposal to lower tariffs on certain imported fish is that it is presented without any consideration of the possible effects on fish stocks in the marine regions of origin.  Whether detailed information on the state of those fish stocks and the way in which they are managed would strengthen or weaken the case for their proposal is beyond the scope of this post.  But it would be unwise – an application of the precautionary principle – to lower tariffs without a careful examination of what the full effects might be.

Addendum 27 November 2018: WTO Rules and Fish Conservation

Would the imposition of a tariff with the aim of conserving fish stocks in another country’s waters be consistent with WTO rules?  Such a policy would carry a risk of non-compliance with GATT Article I (13), which requires that any advantage granted to one country must be granted to all others.  The logic of setting a tariff with a conservation aim would suggest that, if country B’s fish stocks are more depleted than country C’s, then a higher tariff should be levied on fish imports from country B.  But that is just what Article I prohibits.  The most that could be done, consistently with Article I, would be to set a uniform tariff having regard to the average conservation status of fish stocks in all relevant fish-exporting countries.

However, WTO rules do permit certain exceptions to Article I.  The most relevant appears to be Article XX(g) which permits measures:

“relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption” (14)

Fish as a natural resource are normally described as “renewable” rather than “exhaustible”, but in the US-Shrimp case it was held that in certain circumstances a living species could be considered exhaustible (15).  The clause about domestic restrictions requires “even-handedness” (16) in promoting conservation domestically as well as abroad.  Where a type of fish is both imported and caught in a country’s own waters, this requirement could perhaps be met by combining a tariff on imports with a tax on domestic production.

Paragraph (g) is subject to the overriding condition in the preamble of Article XX that such measures:

“are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail …”.

To demonstrate that this condition is satisfied would seem to require, as a minimum, very good scientific evidence regarding the conservation status of fish stocks in different countries, together with a clear link between the scientific findings and the tariff rates both across countries and between fish species.

Notes and references

  1. Singham S & Tylecote R (2018) Plan A+: Creating a prosperous post-Brexit U.K. , IEA Discussion Paper 95 https://iea.org.uk/publications/plan-a-creating-a-prosperous-post-brexit-uk/
  2. Singham & Tylecote, as 1 above, pp 64-67.
  3. Singham & Tylecote, as 1 above, p 66.
  4. European Commission Market Access Database http://madb.europa.eu/madb/euTariffs.htm?productCode=03023599&country=US
  5. Ares E, Rhodes C & Ward M (2017) The UK Fishing Industry House of Commons Library Debate Pack 2017/256
  6. Although it is beginning to become slightly more common. See https://phys.org/news/2018-04-experts-team-bluefin-tuna-uk.html
  7. Suranovic, S M International Trade Theory and Policy Trade 90-5 http://internationalecon.com/Trade/Tch90/T90-5.php
  8. UK National Statistics (2017) UK sea fisheries annual statistics report 2016 https://www.gov.uk/government/statistics/uk-sea-fisheries-annual-statistics-report-2016 See Chapter 3 Table 3.2.
  9. UN United Nations Convention on the Law of the Sea http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf  p 40
  10. UN, as above, p 46
  11. Wikipedia UN Convention on the Law of the Sea – Parties https://en.wikipedia.org/wiki/United_Nations_Convention_on_the_Law_of_the_Sea#Parties
  12. FAO (Food and Agriculture Organisation of the United Nations) The State of World Fisheries and Aquaculture 2016  http://www.fao.org/3/a-i5555e.pdf  p 38.
  13. GATT Article I https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm#articleI.  Note that the original GATT 1947 agreement has been incorporated into subsequent GATT / WTO agreements.
  14. GATT Article XX https://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#articleXX
  15. WTO Trade Report 2010 E.Natural resources, international cooperation and trade regulation p 168 https://www.wto.org/english/res_e/booksp_e/anrep_e/wtr10-2e_e.pdf
  16. WTO Trade Report, as above, p 168
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