156 



Fishery Bulletin 90(1). 1992 



it is a conservation problem or not, bycatch constitutes 

 a management problem. It also constitutes a problem 

 for members of the fishing industry when they try to 

 adjust their portfolios of quota holdings to match their 

 landings. In theory, this can be done by buying and sell- 

 ing quota, assuming that the overall TACs match the 

 relative catch rates experienced by the fishing industry 

 in aggregate; but this may not be so. 



Annala et al. (1991) reviewed the bycatch situation 

 in detail. In the 1987-88 fishing year, the quota was 

 overcaught for 33 (out of 169) management units, by 

 up to 74%. Nine management units were overcaught 

 by more than 20%. The frequency and magnitude of 

 overcatching increased from 1986-87 to 1987-88. 



Hjghgradjng 



Highgrading is the discarding or dumping of a lower 

 valued size or species of fish, in favor of keeping more 

 valuable fish. Although highgrading is illegal under the 

 New Zealand ITQ system, it is known to occur (Annala 

 et al. 1991). For example, it probably occurs in the 

 snapper fishery where there is a premium paid for high 

 quality fish for the Japanese "iki jime" (killed by spik- 

 ing the brain) market, and in the oreo dory fishery 

 where three species (spiky, and black and smooth oreo 

 dory) with significantly different values are managed 

 by a combined TAG. The amount of highgrading in 

 New Zealand fisheries has not been quantified. 



Clark and Duncan (1986) felt that highgrading would 

 be " . . .a short term, transitional problem and should 

 disappear once the fishery recovers and product value 

 differential within the same stock diminish. . . " There 

 is little evidence that the fishery has recovered. Nor 

 should recovery of the fishery eliminate the incentive 

 for highgrading, unless the ITQ system is administered 

 such that TACs do not limit catch. If so, then other ad- 

 vantages of ITQ management would be undetermined. 

 Nor are the authors aware of reasons why ITQ manage- 

 ment should reduce value differences between species 

 or levels of quality. 



Enforcement 



ITQ management is potentially difficult to enforce. 

 New Zealand has some advantages over the United 

 States when it comes to enforcement. First, the popula- 

 tion is small, and therefore there is less scope for the 

 development of a domestic black market, although 

 black markets may be significant for some inshore 

 species consumed domestically. Second, the country is 

 remote, so that it is difficult to smuggle fish elsewhere. 

 Third, most fish are exported, which involves record- 



keeping that helps to check the accuracy of quota 

 reports. Finally, fisheries enforcement is carried out 

 entirely by a single, coordinated agency. 



New Zealand placed a high priority on establishing 

 enforcement capability when it implemented ITQs. It 

 reoriented enforcement from at-sea operations to 

 shoreside investigations. The emphasis moved from 

 conservation officers to accountants and investigators 

 and "electronic surveillance" (computerized data re- 

 cording). The industry is required to maintain and 

 submit several different types of records that are 

 necessary for monitoring catch and product flow. 

 Penalties for quota violations are heavy. They may in- 

 volve forfeiture of catch, vessel, and quota holdings, 

 in addition to fines of up to $10,000 NZ. A second of- 

 fense within seven years may result in prohibition from 

 participation in any aspect of the fishing industry for 

 up to three years. In addition, the fisheries enforcement 

 agency passes information on to the tax department, 

 which may then be used in income tax prosecutions. 

 It is difficult to assess how well this enforcement 

 approach is working. 



Resource rentals 



The New Zealand fishing industry is concerned about 

 the basis of setting resource rentals, although it does 

 not seem to dispute them in principle. The government 

 planned to gradually increase resource rentals^- until 

 the fair market value of quota was reduced to approx- 

 imately zero. In theory, government is extracting all 

 of the resource rent from the fisheries at the point in 

 time that there is no longer incentive to enter the 

 fisheries. The industry argued that not all of the re- 

 source rent should be extracted, since investment in 

 fishing is inherently risky. 



It is arguable whether the market value of quota 

 reflects resource rent in the fisheries. The price paid 

 for quota should reflect the buyer's estimate of its net 

 present value. However, the buyer's estimate may be 

 incorrect (i.e., a bad investment). Even if the price paid 

 for quota is correct, it may not reflect rent in a par- 

 ticular year. In practice, the price paid for quota has 

 been extremely variable (e.g., from $13 per ton to 

 $16,500 per ton for snapper; Bevin et al. 1989) for a 

 variety of reasons (e.g., imperfect knowledge, inclusion 

 of other assets in the price of quota, different discount 

 rates, noncompetitive price setting). This makes it dif- 

 ficult to use the sales price of quota as a criterion for 

 setting resource rentals. 



'-The law limits increases in resource rental rates to 20% per year. 



