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Implications of differences in technical efficiency of fishing boats for capacity measurement and reduction
Marine Policy 24 (2000) 301}307
Implications of di!erences in technical e$ciency of "shing boats for capacity measurement and reduction Sean Pascoe *, Louisa Coglan Centre for the Economics and Management of Aquatic Resources, University of Portsmouth, Locksway Road, Southsea PO4 8JF, UK Department of Economics, University of Portsmouth, Locksway Road, Southsea PO4 8JF, UK Received 14 January 2000; accepted 11 February 2000
Abstract Capacity measurement and reduction is a major international issue to emerge in the new millennium. However, there has been limited assessment of the success of capacity reduction schemes (CRS). In this paper, the success of a CRS is assessed for a European "shery characterised by di!erences in e$ciency levels of individual boats. In such a "shery, given it is assumed that the least e$cient producers are the "rst to exit through a CRS, the reduction in harvesting capacity is less than the nominal reduction in physical #eet capacity. Further, there is potential for harvesting capacity to increase if remaining vessels improve their e$ciency. 2000 Elsevier Science Ltd. All rights reserved. Keywords: Decommissioning; Multi-Annual Guidance Programme; Technical e$ciency; Capacity reduction
1. Introduction It is generally recognised that there is a disjuncture between the level of physical inputs employed in "sheries and that required to harvest the stock on a sustainable and e$cient basis. Hence, in the pursuit of e!ective "sheries management policies the measurement and reduction of "shing capacity is emerging as the "rst major issue confronting "sheries managers in the new millennium. In 1998, a technical working group (the La Jolla working group) was convened by the Food and Agricultural Organisation of the United Nations (FAO) to consider the management of "shing capacity [1]. Following this, FAO produced an International Plan of Action for the Management of Fishing Capacity in 1999 [2], which calls for all member states to achieve e$cient, equitable and transparent management of "shing capacity by 2005 (preferably 2003). In addition, the International Plan of Action requires member states to provide estimates of the capacity of their "shing #eets by 2001. An international conference was subsequently held in Mexico in Decem-
* Corresponding author. Tel.: #44-3292-844242; fax: #44-3292844037. E-mail address: [email protected] (S. Pascoe).
ber 1999 to discuss uni"ed methods for the measurement of "shing capacity. The La Jolla working group de"ned "shing capacity in terms of the potential output of a #eet [1]. This de"nition was largely adopted by the Mexico conference, with the recognition that managers could only manage capacity through #eet adjustment, so an equivalent physical measure of capacity was also required. Many nations have already developed measures of capacity based on the physical attributes of the #eet, and have implemented capacity reduction policies based on these capacity measures, such as gross tonnage (GT) or engine power. In the EU, capacity reduction is a key component of the Common Fisheries Policy (CFP). The mechanism by which this is to be achieved is the Multi-Annual Guidance Programme (MAGP). Under this programme, which forms part of the structural policy of the CFP, target capacity reductions (in terms of both GT and engine power) are set for di!erent #eet segments of each Member State. In the UK, the #eet reduction targets of the last MAGP were largely planned to be achieved through a decommissioning programme. The programme aimed to buy back vessel capacity units (VCUs) from individual "shers. These units, based on a combination of the physical features of the boats, were assumed to be linearly related to the harvesting ability of each vessel (i.e. the La
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Jolla working group's de"nition of capacity). As a result, the reduction in units was assumed to be directly proportional to the reduction in harvesting capacity. However, if VCUs are not linearly related to harvesting capacity, then the level of true capacity reduction would depend on which units left the "shery. There is a danger that the programme may have removed the most ine$cient boats from the "shery. Consequently, the reduction in harvesting capacity may not have been as great as suggested by the reduction in the #eet's physical capacity. Further, the remaining #eet may have the potential to increase harvesting capacity through exploiting increases in technical e$ciency, thus thwarting the original policy objective. Hence, the reduction in harvesting capacity arising from such a decommissioning programme will not only depend on the number of VCUs extracted, but also the e$ciency of their use while active in the "shery. In this paper, the results of a study of the technical e$ciency of a UK #eet segment are used to estimate the e!ectiveness of the UK capacity reduction programme. This follows a brief description of the MAGP and the UK decommissioning programs.
2. The Multi-Annual Guidance Programme (MAGP) Fisheries management in the waters of the EU is governed by the CFP. The CFP derives from the Common Agricultural Policy (CAP), which includes "sheries under Article 38 of the Treaty Establishing the European Community (the Treaty of Rome). The objectives of the CFP (and CAP), as de"ned by Article 39 of the Treaty of Rome, are to: (i) increase production by promoting technical progress; (ii) ensure a fair standard of living for the agricultural community, in particular by increasing the incomes of persons engaged in the industry; (iii) stabilise markets; (iv) ensure availability of supplies; and (v) ensure that supplies reach consumers at reasonable prices. To achieve these objectives, the CFP has four key areas: a common market organisation, a common structural policy, a resource conservation and management system and an external policy concerned with agreements with countries outside the European Union [8]. Of key interest for this study, however, is the common structural policy.
EU "sheries policies have been extensively examined, so only a brief description will be provided here (see, for example [3}7]).
The common structural policy is largely concerned with modernisation of the "shing #eet. To this end, the policy has two main elements. The "rst is a subsidy programme designed to encourage the introduction of new "shing vessels into the "shery. The second is a capacity reduction programme to encourage older vessels out of the industry, and to bring the #eet size in line with the available resource. Since 1983, subsidies have been provided for the removal of boats from the "shery. Target #eet sizes were estimated for each year under the MAGP. Provision of EU subsidies for boat construction and modernisation were contingent upon the Member State achieving its MAGP targets. The "rst (MAGP I) and second (MAGP II) rounds (1983}1986 and 1987}1991, respectively) focused on the balancing of boat capacity. Targets were set for both engine power and aggregate vessel tonnage of each Member State's #eet. The objective of MAGP I was to o!set the e!ects of #eet modernisation by encouraging removal of older boats so that total capacity remained at or slightly lower than the 1983 level [9]. The target of MAGP II was to reduce overall #eet tonnage by 3 per cent and engine power by 2 per cent compared with the 1986 level. The third round of the MAGP (MAGP III) ran from 1992 to 1996. Unlike the previous programmes, MAGP III explicitly recognised that a number of "sheries were overcapitalised and that #eet reductions were necessary. The programme was also amended to consider not just reductions in tonnage and engine power, but also `efforta, which was de"ned as the product of the capacity measures times the number of days "shed. E!ort targets as well as capacity targets were set for each Member State. MAGP III speci"ed reductions in capacity and e!ort by #eet segment rather than for the #eet as a whole. In particular, MAGP III speci"ed capacity reductions of 20 per cent and 15 per cent, respectively, in the demersal and beam trawl sectors over the period 1992}1996 [9,10]. This decision was further modi"ed in 1993, such that the "shing e!ort of those #eets using bottom trawls to "sh for demersal species was to be reduced by 20 per cent between 1994 and 1996. At least 55 per cent of this decrease was to be achieved through capacity reductions identi"ed in the MAGP, although the remainder could be achieved through e!ort controls (such as days at sea or tie-up restrictions). Tonnage refers to the total Gross Registered Tons (GRT) of the boats. GRT is a measure of boat capacity representing the volume of space under the deck (excluding the engine room) and within covered areas above the deck (e.g. wheelhouse). The term `tona originated from the word `tuna which was a barrel used for shipping cargo. Hence, GRT refers to the number of tuns that could be carried rather than the weight of the ship. The measure has more recently been replaced by Gross Tonnage (GT). European Council Decision of 20 December 1993 (94/15/EC).
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3. The UK decommission programme The UK #eet has been recognised as overcapitalised since the 1970s [11]. Early studies concluded that the 1979 catch could have been taken with one-third fewer vessels, while the 1981 quota could have been taken with 29 per cent fewer boats and 30 per cent less "shing time [11,12]. In response to the capacity targets set under MAGP I, a decommissioning programme was implemented over the period 1984}1986. During this period, 225 boats were removed from the #eet at a cost of C15 m (half of which was spent to remove 15 large freezer trawlers) and the programme was considered grossly expensive for what it achieved [11,13]. Hence, a further decommissioning programme was not implemented during MAGP II. The #eet capacity increased in 1987 and 1988, o!setting any gains achieved (little though they may have been) by the decommissioning programme in MAGP I. As a result, the UK failed to meet its targets in the "rst two MAGPs (Fig. 1). Despite the MAGP targets, the UK Government did little to implement capacity reduction apart from the decommissioning programme in 1984}1986 [15]. However, subsidies for #eet modernisation were contingent upon the MAGP targets being achieved. Faced with increasing pressure to meet the MAGP targets and the advent of further reductions being required in MAGP III, the UK government introduced the unitisation scheme [11]. Since 1990, boat capacity in the UK has been de"ned in terms of VCUs, given by the formula
(1)
where ¸ is the overall length in metres, B is the breadth in metres, and kW is the engine power of the boat in kilowatts [11,13,16]. Between 70 and 80 per cent of the di!erences in catching capacity of the boats was thought to be explained by di!erences in engine power and boat size, with these e!ects being captured in the above de"nition of VCUs [17]. Hence, it was expected that controlling VCUs would be an e!ective means of controlling catch. In response to the targets set under MAGP III, a second decommissioning scheme was announced in 1992 to cover the period 1993}1996. To be eligible for decommissioning under the scheme, a boat had to be over 10 m in length and at least 10 years old, be seaworthy and have "shed for a minimum number of days in the preceding two years [16,18]. Further, unlike previous MAGPs, MAGP III speci"ed targets for di!erent #eet categories. Boats were excluded from the decommissioning programme if their #eet segment had reached (or was close to) the MAGP target. Fishers interested in decommissioning their vessels made an o!er to the Ministry of Agriculture, Fisheries and Food (MAFF) indicating how much (in terms of
Fig. 1. UK MAGP target and actual tonnage and engine power (source: [9,14]).
C/VCU) they required to exit the "shery. A decommissioning budget was announced each year, and o!ers were accepted from the lowest bidders until the budget was exhausted. The decommissioning programme removed 578 boats representing 87,500 VCUs and 17,600 tonnes GRT at a cost of C36.4 m (Table 1). The decommissioned boat was either scrapped or donated to a museum or school. A number of the "shers purchased new boats following the decommissioning of their old boat. Twenty-eight per cent of all "shers purchased boats in the under 10 m category following decommissioning of their old boat. In the south west of England, this "gure was as high as 67 per cent [16]. Although the decommissioning programme contributed to the removal of "shing capacity, the UK were still unable to meet their MAGP targets for all #eet segments (Table 2) and failed to meet the overall capacity targets for each year (Fig. 1). While the total capacity for some
While the EU regulations permitted decommissioned boats to be redeployed in non-commercial "shing marine activities (e.g. charter boat, tourism), this option was not permitted in the UK.
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Table 1 Results of the second decommissioning programme, 1993}1996 (and additional programme in 1997) Year
GRT
Boats (No.)
VCUs (&000)
Cost (Cm)
1993 1994 1995 1996 Total for MAGP III 1997 Total
4800 5200 4206 3380 17586 4406 21992
135 162 139 142 578 108 686
22.9 24.8 21.4 18.5 87.5 21.9 109.4
7.8 8.8 9.6 10.2 36.4 14.3 50.7
Estimated based on average VCUs per GRT in previous years (source: [16,18,19]).
Table 2 Actual UK physical capacity as percentage of target physical capacity, 1996
Beam trawl Demersal trawl and seiners Pelagic trawl Shell"sh "xed Shell"sh mobile Netters, liners and other static gear Nephrops trawl Distant water Others '10 m Mixed (non-trawl) (10 m Total
GRT (%)
kW (%)
114 111 116 143 105 119 78 72 90 89 106
130 113 98 161 114 92 86 85 58 98 102
Source: [14].
segments in 1996 was substantially lower than the target level (for example, the distance water #eet and the nephrops trawl #eet), 6 of the 10 segments were at least 10 per cent over the target level in one (or both) of the capacity measures. In the `shell"sh "xeda category (e.g. potting boats), the GRT was 43 per cent above the target level and the engine power was 61 per cent above the target level in 1996. In total, the GRT and kW targets were exceeded by 6 and 2 per cent, respectively, in 1996. The UK was one of only two countries not to meet its MAGP III targets in 1996, the other being The Netherlands [14]. The decommissioning programme was extended by MAFF into 1997 in order to achieve the targets of the MAGP III, prior to the start of MAGP IV in 1998. To encourage "shers to sell their units to the programme, owners were allowed to sell their `track recordsa separately if they decommissioned their boat. The `track recorda is an informal quota allocation that is transferable between boat owners (see [8,13] for further details). Under previous decommissioning rounds, however, the
track record (which is attached to the boat licence) was surrendered as part of the scheme. The resultant e!ect was that the 1997 decommissioning round was relatively successful in achieving its targets removing an additional 108 boats representing 4406 GRT (Table 1).
4. Technical e7ciency of the UK demersal trawl 6eet Despite the relative success of the 1997 round, the e!ect of decommissioning on the level of harvesting capacity in the UK or European "sheries has not been assessed. Assuming that the least e$cient operators would be the "rst to exit the "shery, then wide variations in e$ciency in the #eet may have meant that a less than proportional decrease in harvesting capacity was achieved. The level of e$ciency of a particular unit can be characterised by the relationship between observed production and some ideal or potential production [20]. The potential level of production is de"ned by the production frontier. Each "rm's actual production point lies on (if perfectly e$cient) or below the frontier (Fig. 2). The technical e$ciency of a "rm is a measure of its output as a proportion of the corresponding potential output as de"ned by a "rm using the same level of inputs but laying on the frontier. That is, from Fig. 2, technical e$ciency is given by q/q* for a "rm at point A [21]. Hence, a perfectly e$cient "rm would have a technical e$ciency of one, while "rms that are not perfectly e$cient would have a technical e$ciency score of between zero and one. The statistical or econometric estimation of technical e$ciency has been developed and applied extensively to a range of industries. For example, the technical e$ciency of individual "rms has been estimated for manufacturing [22,23] and steel production [21], as well as a range of agricultural activities, e.g. dairy farms [24}26] and crop farms [27,28]. Comprehensive reviews of the techniques have been undertaken by [20,29]. In "sheries relatively few studies of technical e$ciency have been conducted [30}32].
Fig. 2. The production frontier and technical e$ciency (source: [21]).
S. Pascoe, L. Coglan / Marine Policy 24 (2000) 301}307 Table 3 Distribution of technical e$ciency in the demersal trawl "shery Technical e$ciency
Per cent
Cumulative
(0.50 0.50}0.55 0.55}0.60 0.60}0.65 0.65}0.70 0.70}0.75 0.75}0.80 0.80}0.85 0.85}0.90 0.90}0.95 0.95}1.00
0.0 7.9 3.2 9.5 11.1 6.3 4.8 12.7 14.3 9.5 20.6
0.0 7.9 11.1 20.6 31.7 38.1 42.9 55.6 69.8 79.4 100.0
The study of most importance to this paper is that of Coglan, Pascoe and Harris [32] who examined the technical e$ciency of the UK beam and otter trawlers operating in the English Channel. The distribution of technical e$ciency scores (TE scores) are presented in Table 3. From this table it can be seen that there is a considerable range of e$ciency in the "shery. A small proportion of the sample (about 8 boats) were operating with e$ciency levels of around 50 per cent. That is, the value of their catch was only 50 per cent of the potential value given the level of inputs employed (e.g. boat size, engine power, hours "shed). Conversely, about 21 per cent of the boats were operating at levels of e$ciency between 95 and 100 per cent. Overall, 70 per cent of the boats in the sample were below 90 per cent e$cient, while 38 per cent were below 75 per cent e$cient. The least e$cient boat was 51 per cent as e$cient as the best boat.
305
Di!erences in e$ciency can be explained by comparison of the e$ciency measures with the characteristics of the boat. However, these measures only re#ect di!erence in inputs not explicitly included in the regression model. Hence, factors such as boat size, engine power, amount of time "shed, area "shed and seasonal factors have already been taken into consideration in the analysis. Di!erences in e$ciency therefore rely on factors other than these. These could include factors such as boat age, degree of specialisation, crew size and skipper skill. Coglan, Pascoe and Harris [32] examined the contribution of these factors to di!erences in e$ciency, and found that these factors only account for 14 per cent of the variation. While other authors have suggested that `lucka may explain variation in performance between boats that can not be explained by physical characteristics of the boat, this element was removed as part of stochastic analysis [33]. As a result it is reasonable to assume that the bulk of the variation is due to di!erences in skipper skill.
5. Discussion In the case of the e!ectiveness of the UK decommissioning scheme in reducing harvesting capacity, it is the level of ine$ciency rather than the source of ine$ciency that is important. From the results of the above analysis, about 80 per cent of the beam and otter trawl #eet are less than 90 per cent e$cient. About 8 per cent of the #eet are about 50 per cent e$cient. Given this distribution, the relationship between the actual number of VCUs and e!ective VCUs can be derived (Fig. 3). E!ective VCUs are derived from the product of a boat's VCUs and its respective e$ciency, and is more representative of the harvesting capacity of the #eet. From this "gure it can be
Fig. 3. Actual units versus e!ective units.
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seen that e!ective capacity diverges from actual capacity. Under the tendering process of the decommissioning scheme, the "sher willing to leave the "shery at the lowest payment per unit is likely to be the least pro"table. Fishers that are highly pro"table will be expected to require high payments to leave the "shery than less pro"table "shers. Assuming that the least technical e$cient boats are also the least pro"table then these boats are likely to leave the "shery "rst. As a result the reduction in e!ective capacity will not be as great as the reduction in nominal capacity. For example, removing a boat with a TE score of 0.5 would imply that only half as many e!ective VCUs were being removed. While targeting boats with a high level of technical e$ciency may result in a greater reduction in harvesting capacity, this would result in a #eet with an overall lower level of e$ciency. This is counter to the objectives of the CFP which, as noted previously, include the objective of increasing the e$ciency of the industry. Further, presumable the most e$cient boats are also the most pro"table, so achieving the nominal targets of the MAGP would be more costly. From a "sheries bureaucrat's perspective, achieving the nominal target at lowest cost maybe of greater concern that achieving a real reduction in capacity. Given this, the e!ectiveness of the decommissioning scheme in terms of capacity reduction will not be as great as it would be if all boats were of equal e$ciency. Further, as most of the boats are operating at less than their full potential level of e$ciency, harvesting capacity in the "shery could still increase even though the number of units has decreased. Given that the main source of ine$ciency may be skipper skill, technological development that can replace skill could result in a signi"cant increase in e$ciency and hence harvesting capacity. An example of this that has already occurred in the "shery is the introduction of improved sonar equipment. This has increased the ability of skippers to "nd "sh and has narrowed the e$ciency di!erential between skippers. This highlights some of the problems with multi-objectives of "sheries management. As noted previously, one of the key objective of the CFP is to increase production by promoting technical progress. By removing the leaste$cient boats the decommissioning scheme will result in an average increase in e$ciency. Hence, the programme could be seen as successful in achieving this objective. However, there are clear trade-o!s between improving e$ciency in the short run and achieving a long run economically e$cient #eet, which would require a substantial reduction in the level of harvesting capacity. The results also highlight the inappropriateness of using physical capacity units for both the measurement of "shing capacity and the basis of capacity reduction programmes. While the latter is to some extent essential
Based on discussion with beam trawl skippers in the "shery.
from a pragmatic management perspective, managers need to take into account di!erences in e$ciency of the boats when implementing decommissioning programmes.
6. Conclusions Di!erences in e$ciency between boats has implications for capacity reduction programmes based on the physical characteristics of the vessels. Although the analysis above is speci"c to UK beam and otter trawlers, it is likely that similar variations in e$ciency are present in other European #eets. Hence, while EU capacity reduction targets may be being met in the various Member States, the true level of capacity reduction is likely to be less than it appears. In addition, the potential for harvesting capacity to increase through increased e$ciency may result in the capacity reduction policies based on physical features being e!ective in the short term only, if at all.
Acknowledgements The study was partly funded as part of the EU funded project `Bioeconomic modelling of the "sheries of the English Channela (FAIR CT-96-1993).
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[24] Battese E, Coelli TJ. Prediction of "rm level technical ine$ciencies with a generalised frontier production function and panel data. Journal of Econometrics 1988;38:387}99. [25] Hallam D, Machado F. E$ciency analysis with panel data: a study of Portuguese dairy farms. European Review of Agricultural Economics 1996;23(1):79}93. [26] Jaforullah M, Devlin NJ. Technical e$ciency in the New Zealand dairy industry: a frontier production function approach. New Zealand Economic Papers 1996;30(1):1}17. [27] Ne! DL, Garcia P, Nelson CH. Technical e$ciency: a comparison of production frontier methods. Journal of Agricultural Economics 1993;44(3):479}89. [28] Heshmati A, Kumbhakar SC. Estimation of technical e$ciency in Swedish crop farms: a pseudo panel data approach. Journal of Agricultural Economics 1997;48(1):22}37. [29] Schmidt P. Frontier production functions. Econometric Review 1986;4(2):329}34. [30] Kirkley JE, Squires D, Strand IE. Assessing technical e$ciency in commercial "sheries: the Mid-Atlantic Sea Scallop Fishery. American Journal of Agricultural Economics 1995;77(3): 686}97. [31] Sharma KR, Leung P. Technical e$ciency of the longline "shery in Hawaii: an application of a stochastic production frontier. Marine Resource Economics 1999;13:259}74. [32] Coglan L, Pascoe S, Harris RID. Measuring e$ciency in demersal trawlers using a frontier production function approach. In: Salz P, editors. Proceedings of the Tenth Annual Conference of the European Association of Fisheries Economists, The Hague, Netherlands, 1}4 April 1998. Agricultural Economics Research Institute (LEI): The Netherlands, 1999. p. 236}57. [33] Hilborn R, Ledbetter M. Determinants of catching power in the British Columbia salmon purse seine #eet. Canadian Journal of Fisheries and Aquatic Science 1985;42:51}6.
Implications of di!erences in technical e$ciency of "shing boats for capacity measurement and reduction Sean Pascoe *, Louisa Coglan Centre for the Economics and Management of Aquatic Resources, University of Portsmouth, Locksway Road, Southsea PO4 8JF, UK Department of Economics, University of Portsmouth, Locksway Road, Southsea PO4 8JF, UK Received 14 January 2000; accepted 11 February 2000
Abstract Capacity measurement and reduction is a major international issue to emerge in the new millennium. However, there has been limited assessment of the success of capacity reduction schemes (CRS). In this paper, the success of a CRS is assessed for a European "shery characterised by di!erences in e$ciency levels of individual boats. In such a "shery, given it is assumed that the least e$cient producers are the "rst to exit through a CRS, the reduction in harvesting capacity is less than the nominal reduction in physical #eet capacity. Further, there is potential for harvesting capacity to increase if remaining vessels improve their e$ciency. 2000 Elsevier Science Ltd. All rights reserved. Keywords: Decommissioning; Multi-Annual Guidance Programme; Technical e$ciency; Capacity reduction
1. Introduction It is generally recognised that there is a disjuncture between the level of physical inputs employed in "sheries and that required to harvest the stock on a sustainable and e$cient basis. Hence, in the pursuit of e!ective "sheries management policies the measurement and reduction of "shing capacity is emerging as the "rst major issue confronting "sheries managers in the new millennium. In 1998, a technical working group (the La Jolla working group) was convened by the Food and Agricultural Organisation of the United Nations (FAO) to consider the management of "shing capacity [1]. Following this, FAO produced an International Plan of Action for the Management of Fishing Capacity in 1999 [2], which calls for all member states to achieve e$cient, equitable and transparent management of "shing capacity by 2005 (preferably 2003). In addition, the International Plan of Action requires member states to provide estimates of the capacity of their "shing #eets by 2001. An international conference was subsequently held in Mexico in Decem-
* Corresponding author. Tel.: #44-3292-844242; fax: #44-3292844037. E-mail address: [email protected] (S. Pascoe).
ber 1999 to discuss uni"ed methods for the measurement of "shing capacity. The La Jolla working group de"ned "shing capacity in terms of the potential output of a #eet [1]. This de"nition was largely adopted by the Mexico conference, with the recognition that managers could only manage capacity through #eet adjustment, so an equivalent physical measure of capacity was also required. Many nations have already developed measures of capacity based on the physical attributes of the #eet, and have implemented capacity reduction policies based on these capacity measures, such as gross tonnage (GT) or engine power. In the EU, capacity reduction is a key component of the Common Fisheries Policy (CFP). The mechanism by which this is to be achieved is the Multi-Annual Guidance Programme (MAGP). Under this programme, which forms part of the structural policy of the CFP, target capacity reductions (in terms of both GT and engine power) are set for di!erent #eet segments of each Member State. In the UK, the #eet reduction targets of the last MAGP were largely planned to be achieved through a decommissioning programme. The programme aimed to buy back vessel capacity units (VCUs) from individual "shers. These units, based on a combination of the physical features of the boats, were assumed to be linearly related to the harvesting ability of each vessel (i.e. the La
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Jolla working group's de"nition of capacity). As a result, the reduction in units was assumed to be directly proportional to the reduction in harvesting capacity. However, if VCUs are not linearly related to harvesting capacity, then the level of true capacity reduction would depend on which units left the "shery. There is a danger that the programme may have removed the most ine$cient boats from the "shery. Consequently, the reduction in harvesting capacity may not have been as great as suggested by the reduction in the #eet's physical capacity. Further, the remaining #eet may have the potential to increase harvesting capacity through exploiting increases in technical e$ciency, thus thwarting the original policy objective. Hence, the reduction in harvesting capacity arising from such a decommissioning programme will not only depend on the number of VCUs extracted, but also the e$ciency of their use while active in the "shery. In this paper, the results of a study of the technical e$ciency of a UK #eet segment are used to estimate the e!ectiveness of the UK capacity reduction programme. This follows a brief description of the MAGP and the UK decommissioning programs.
2. The Multi-Annual Guidance Programme (MAGP) Fisheries management in the waters of the EU is governed by the CFP. The CFP derives from the Common Agricultural Policy (CAP), which includes "sheries under Article 38 of the Treaty Establishing the European Community (the Treaty of Rome). The objectives of the CFP (and CAP), as de"ned by Article 39 of the Treaty of Rome, are to: (i) increase production by promoting technical progress; (ii) ensure a fair standard of living for the agricultural community, in particular by increasing the incomes of persons engaged in the industry; (iii) stabilise markets; (iv) ensure availability of supplies; and (v) ensure that supplies reach consumers at reasonable prices. To achieve these objectives, the CFP has four key areas: a common market organisation, a common structural policy, a resource conservation and management system and an external policy concerned with agreements with countries outside the European Union [8]. Of key interest for this study, however, is the common structural policy.
EU "sheries policies have been extensively examined, so only a brief description will be provided here (see, for example [3}7]).
The common structural policy is largely concerned with modernisation of the "shing #eet. To this end, the policy has two main elements. The "rst is a subsidy programme designed to encourage the introduction of new "shing vessels into the "shery. The second is a capacity reduction programme to encourage older vessels out of the industry, and to bring the #eet size in line with the available resource. Since 1983, subsidies have been provided for the removal of boats from the "shery. Target #eet sizes were estimated for each year under the MAGP. Provision of EU subsidies for boat construction and modernisation were contingent upon the Member State achieving its MAGP targets. The "rst (MAGP I) and second (MAGP II) rounds (1983}1986 and 1987}1991, respectively) focused on the balancing of boat capacity. Targets were set for both engine power and aggregate vessel tonnage of each Member State's #eet. The objective of MAGP I was to o!set the e!ects of #eet modernisation by encouraging removal of older boats so that total capacity remained at or slightly lower than the 1983 level [9]. The target of MAGP II was to reduce overall #eet tonnage by 3 per cent and engine power by 2 per cent compared with the 1986 level. The third round of the MAGP (MAGP III) ran from 1992 to 1996. Unlike the previous programmes, MAGP III explicitly recognised that a number of "sheries were overcapitalised and that #eet reductions were necessary. The programme was also amended to consider not just reductions in tonnage and engine power, but also `efforta, which was de"ned as the product of the capacity measures times the number of days "shed. E!ort targets as well as capacity targets were set for each Member State. MAGP III speci"ed reductions in capacity and e!ort by #eet segment rather than for the #eet as a whole. In particular, MAGP III speci"ed capacity reductions of 20 per cent and 15 per cent, respectively, in the demersal and beam trawl sectors over the period 1992}1996 [9,10]. This decision was further modi"ed in 1993, such that the "shing e!ort of those #eets using bottom trawls to "sh for demersal species was to be reduced by 20 per cent between 1994 and 1996. At least 55 per cent of this decrease was to be achieved through capacity reductions identi"ed in the MAGP, although the remainder could be achieved through e!ort controls (such as days at sea or tie-up restrictions). Tonnage refers to the total Gross Registered Tons (GRT) of the boats. GRT is a measure of boat capacity representing the volume of space under the deck (excluding the engine room) and within covered areas above the deck (e.g. wheelhouse). The term `tona originated from the word `tuna which was a barrel used for shipping cargo. Hence, GRT refers to the number of tuns that could be carried rather than the weight of the ship. The measure has more recently been replaced by Gross Tonnage (GT). European Council Decision of 20 December 1993 (94/15/EC).
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3. The UK decommission programme The UK #eet has been recognised as overcapitalised since the 1970s [11]. Early studies concluded that the 1979 catch could have been taken with one-third fewer vessels, while the 1981 quota could have been taken with 29 per cent fewer boats and 30 per cent less "shing time [11,12]. In response to the capacity targets set under MAGP I, a decommissioning programme was implemented over the period 1984}1986. During this period, 225 boats were removed from the #eet at a cost of C15 m (half of which was spent to remove 15 large freezer trawlers) and the programme was considered grossly expensive for what it achieved [11,13]. Hence, a further decommissioning programme was not implemented during MAGP II. The #eet capacity increased in 1987 and 1988, o!setting any gains achieved (little though they may have been) by the decommissioning programme in MAGP I. As a result, the UK failed to meet its targets in the "rst two MAGPs (Fig. 1). Despite the MAGP targets, the UK Government did little to implement capacity reduction apart from the decommissioning programme in 1984}1986 [15]. However, subsidies for #eet modernisation were contingent upon the MAGP targets being achieved. Faced with increasing pressure to meet the MAGP targets and the advent of further reductions being required in MAGP III, the UK government introduced the unitisation scheme [11]. Since 1990, boat capacity in the UK has been de"ned in terms of VCUs, given by the formula
(1)
where ¸ is the overall length in metres, B is the breadth in metres, and kW is the engine power of the boat in kilowatts [11,13,16]. Between 70 and 80 per cent of the di!erences in catching capacity of the boats was thought to be explained by di!erences in engine power and boat size, with these e!ects being captured in the above de"nition of VCUs [17]. Hence, it was expected that controlling VCUs would be an e!ective means of controlling catch. In response to the targets set under MAGP III, a second decommissioning scheme was announced in 1992 to cover the period 1993}1996. To be eligible for decommissioning under the scheme, a boat had to be over 10 m in length and at least 10 years old, be seaworthy and have "shed for a minimum number of days in the preceding two years [16,18]. Further, unlike previous MAGPs, MAGP III speci"ed targets for di!erent #eet categories. Boats were excluded from the decommissioning programme if their #eet segment had reached (or was close to) the MAGP target. Fishers interested in decommissioning their vessels made an o!er to the Ministry of Agriculture, Fisheries and Food (MAFF) indicating how much (in terms of
Fig. 1. UK MAGP target and actual tonnage and engine power (source: [9,14]).
C/VCU) they required to exit the "shery. A decommissioning budget was announced each year, and o!ers were accepted from the lowest bidders until the budget was exhausted. The decommissioning programme removed 578 boats representing 87,500 VCUs and 17,600 tonnes GRT at a cost of C36.4 m (Table 1). The decommissioned boat was either scrapped or donated to a museum or school. A number of the "shers purchased new boats following the decommissioning of their old boat. Twenty-eight per cent of all "shers purchased boats in the under 10 m category following decommissioning of their old boat. In the south west of England, this "gure was as high as 67 per cent [16]. Although the decommissioning programme contributed to the removal of "shing capacity, the UK were still unable to meet their MAGP targets for all #eet segments (Table 2) and failed to meet the overall capacity targets for each year (Fig. 1). While the total capacity for some
While the EU regulations permitted decommissioned boats to be redeployed in non-commercial "shing marine activities (e.g. charter boat, tourism), this option was not permitted in the UK.
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Table 1 Results of the second decommissioning programme, 1993}1996 (and additional programme in 1997) Year
GRT
Boats (No.)
VCUs (&000)
Cost (Cm)
1993 1994 1995 1996 Total for MAGP III 1997 Total
4800 5200 4206 3380 17586 4406 21992
135 162 139 142 578 108 686
22.9 24.8 21.4 18.5 87.5 21.9 109.4
7.8 8.8 9.6 10.2 36.4 14.3 50.7
Estimated based on average VCUs per GRT in previous years (source: [16,18,19]).
Table 2 Actual UK physical capacity as percentage of target physical capacity, 1996
Beam trawl Demersal trawl and seiners Pelagic trawl Shell"sh "xed Shell"sh mobile Netters, liners and other static gear Nephrops trawl Distant water Others '10 m Mixed (non-trawl) (10 m Total
GRT (%)
kW (%)
114 111 116 143 105 119 78 72 90 89 106
130 113 98 161 114 92 86 85 58 98 102
Source: [14].
segments in 1996 was substantially lower than the target level (for example, the distance water #eet and the nephrops trawl #eet), 6 of the 10 segments were at least 10 per cent over the target level in one (or both) of the capacity measures. In the `shell"sh "xeda category (e.g. potting boats), the GRT was 43 per cent above the target level and the engine power was 61 per cent above the target level in 1996. In total, the GRT and kW targets were exceeded by 6 and 2 per cent, respectively, in 1996. The UK was one of only two countries not to meet its MAGP III targets in 1996, the other being The Netherlands [14]. The decommissioning programme was extended by MAFF into 1997 in order to achieve the targets of the MAGP III, prior to the start of MAGP IV in 1998. To encourage "shers to sell their units to the programme, owners were allowed to sell their `track recordsa separately if they decommissioned their boat. The `track recorda is an informal quota allocation that is transferable between boat owners (see [8,13] for further details). Under previous decommissioning rounds, however, the
track record (which is attached to the boat licence) was surrendered as part of the scheme. The resultant e!ect was that the 1997 decommissioning round was relatively successful in achieving its targets removing an additional 108 boats representing 4406 GRT (Table 1).
4. Technical e7ciency of the UK demersal trawl 6eet Despite the relative success of the 1997 round, the e!ect of decommissioning on the level of harvesting capacity in the UK or European "sheries has not been assessed. Assuming that the least e$cient operators would be the "rst to exit the "shery, then wide variations in e$ciency in the #eet may have meant that a less than proportional decrease in harvesting capacity was achieved. The level of e$ciency of a particular unit can be characterised by the relationship between observed production and some ideal or potential production [20]. The potential level of production is de"ned by the production frontier. Each "rm's actual production point lies on (if perfectly e$cient) or below the frontier (Fig. 2). The technical e$ciency of a "rm is a measure of its output as a proportion of the corresponding potential output as de"ned by a "rm using the same level of inputs but laying on the frontier. That is, from Fig. 2, technical e$ciency is given by q/q* for a "rm at point A [21]. Hence, a perfectly e$cient "rm would have a technical e$ciency of one, while "rms that are not perfectly e$cient would have a technical e$ciency score of between zero and one. The statistical or econometric estimation of technical e$ciency has been developed and applied extensively to a range of industries. For example, the technical e$ciency of individual "rms has been estimated for manufacturing [22,23] and steel production [21], as well as a range of agricultural activities, e.g. dairy farms [24}26] and crop farms [27,28]. Comprehensive reviews of the techniques have been undertaken by [20,29]. In "sheries relatively few studies of technical e$ciency have been conducted [30}32].
Fig. 2. The production frontier and technical e$ciency (source: [21]).
S. Pascoe, L. Coglan / Marine Policy 24 (2000) 301}307 Table 3 Distribution of technical e$ciency in the demersal trawl "shery Technical e$ciency
Per cent
Cumulative
(0.50 0.50}0.55 0.55}0.60 0.60}0.65 0.65}0.70 0.70}0.75 0.75}0.80 0.80}0.85 0.85}0.90 0.90}0.95 0.95}1.00
0.0 7.9 3.2 9.5 11.1 6.3 4.8 12.7 14.3 9.5 20.6
0.0 7.9 11.1 20.6 31.7 38.1 42.9 55.6 69.8 79.4 100.0
The study of most importance to this paper is that of Coglan, Pascoe and Harris [32] who examined the technical e$ciency of the UK beam and otter trawlers operating in the English Channel. The distribution of technical e$ciency scores (TE scores) are presented in Table 3. From this table it can be seen that there is a considerable range of e$ciency in the "shery. A small proportion of the sample (about 8 boats) were operating with e$ciency levels of around 50 per cent. That is, the value of their catch was only 50 per cent of the potential value given the level of inputs employed (e.g. boat size, engine power, hours "shed). Conversely, about 21 per cent of the boats were operating at levels of e$ciency between 95 and 100 per cent. Overall, 70 per cent of the boats in the sample were below 90 per cent e$cient, while 38 per cent were below 75 per cent e$cient. The least e$cient boat was 51 per cent as e$cient as the best boat.
305
Di!erences in e$ciency can be explained by comparison of the e$ciency measures with the characteristics of the boat. However, these measures only re#ect di!erence in inputs not explicitly included in the regression model. Hence, factors such as boat size, engine power, amount of time "shed, area "shed and seasonal factors have already been taken into consideration in the analysis. Di!erences in e$ciency therefore rely on factors other than these. These could include factors such as boat age, degree of specialisation, crew size and skipper skill. Coglan, Pascoe and Harris [32] examined the contribution of these factors to di!erences in e$ciency, and found that these factors only account for 14 per cent of the variation. While other authors have suggested that `lucka may explain variation in performance between boats that can not be explained by physical characteristics of the boat, this element was removed as part of stochastic analysis [33]. As a result it is reasonable to assume that the bulk of the variation is due to di!erences in skipper skill.
5. Discussion In the case of the e!ectiveness of the UK decommissioning scheme in reducing harvesting capacity, it is the level of ine$ciency rather than the source of ine$ciency that is important. From the results of the above analysis, about 80 per cent of the beam and otter trawl #eet are less than 90 per cent e$cient. About 8 per cent of the #eet are about 50 per cent e$cient. Given this distribution, the relationship between the actual number of VCUs and e!ective VCUs can be derived (Fig. 3). E!ective VCUs are derived from the product of a boat's VCUs and its respective e$ciency, and is more representative of the harvesting capacity of the #eet. From this "gure it can be
Fig. 3. Actual units versus e!ective units.
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seen that e!ective capacity diverges from actual capacity. Under the tendering process of the decommissioning scheme, the "sher willing to leave the "shery at the lowest payment per unit is likely to be the least pro"table. Fishers that are highly pro"table will be expected to require high payments to leave the "shery than less pro"table "shers. Assuming that the least technical e$cient boats are also the least pro"table then these boats are likely to leave the "shery "rst. As a result the reduction in e!ective capacity will not be as great as the reduction in nominal capacity. For example, removing a boat with a TE score of 0.5 would imply that only half as many e!ective VCUs were being removed. While targeting boats with a high level of technical e$ciency may result in a greater reduction in harvesting capacity, this would result in a #eet with an overall lower level of e$ciency. This is counter to the objectives of the CFP which, as noted previously, include the objective of increasing the e$ciency of the industry. Further, presumable the most e$cient boats are also the most pro"table, so achieving the nominal targets of the MAGP would be more costly. From a "sheries bureaucrat's perspective, achieving the nominal target at lowest cost maybe of greater concern that achieving a real reduction in capacity. Given this, the e!ectiveness of the decommissioning scheme in terms of capacity reduction will not be as great as it would be if all boats were of equal e$ciency. Further, as most of the boats are operating at less than their full potential level of e$ciency, harvesting capacity in the "shery could still increase even though the number of units has decreased. Given that the main source of ine$ciency may be skipper skill, technological development that can replace skill could result in a signi"cant increase in e$ciency and hence harvesting capacity. An example of this that has already occurred in the "shery is the introduction of improved sonar equipment. This has increased the ability of skippers to "nd "sh and has narrowed the e$ciency di!erential between skippers. This highlights some of the problems with multi-objectives of "sheries management. As noted previously, one of the key objective of the CFP is to increase production by promoting technical progress. By removing the leaste$cient boats the decommissioning scheme will result in an average increase in e$ciency. Hence, the programme could be seen as successful in achieving this objective. However, there are clear trade-o!s between improving e$ciency in the short run and achieving a long run economically e$cient #eet, which would require a substantial reduction in the level of harvesting capacity. The results also highlight the inappropriateness of using physical capacity units for both the measurement of "shing capacity and the basis of capacity reduction programmes. While the latter is to some extent essential
Based on discussion with beam trawl skippers in the "shery.
from a pragmatic management perspective, managers need to take into account di!erences in e$ciency of the boats when implementing decommissioning programmes.
6. Conclusions Di!erences in e$ciency between boats has implications for capacity reduction programmes based on the physical characteristics of the vessels. Although the analysis above is speci"c to UK beam and otter trawlers, it is likely that similar variations in e$ciency are present in other European #eets. Hence, while EU capacity reduction targets may be being met in the various Member States, the true level of capacity reduction is likely to be less than it appears. In addition, the potential for harvesting capacity to increase through increased e$ciency may result in the capacity reduction policies based on physical features being e!ective in the short term only, if at all.
Acknowledgements The study was partly funded as part of the EU funded project `Bioeconomic modelling of the "sheries of the English Channela (FAIR CT-96-1993).
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