Interview
Bozeman, Montana
May 6, 2005

PERC's Don Leal Interviews Steve Thornton,
an Expert on ITQs* in New Zealand

Steve Thornton has a master's degree in natural resource management from the University of Canterbury in New Zealand. He was employed by the Ministry of Fisheries as manager of commercial fisheries policy in the late 1980s, at a time when New Zealand's Quota Management System (QMS), which encompasses individual transferable quotas in fisheries (ITQs)*, was undergoing some important changes. For the last five years he has worked for PA Consulting Group and is currently head of PA's New Zealand office in Wellington. As a consultant, he continues to work closely with the Ministry of Fisheries helping develop the next stages of the evolution of fisheries management in New Zealand.

Don Leal:  Why have you devoted so much of your professional career to commercial fisheries?

Steve Thornton:  From an economics and resource management point of view, fisheries management is absolutely fascinating. It's fascinating because fisheries management is such a problem in many parts of the world, and the theory about how to fix the problems is so interesting. I particularly enjoy the challenge of refining the already very good [management] system that we have in New Zealand in order to make it work even better. It is such a rich area to explore, and from the
Steve Thornton

perspective of someone who is interested in property rights, I think it is one of the most exciting areas to work in.

Don:  You got involved in New Zealand's fisheries management right after initial implementation of the QMS for 26 commercial species. Could you discuss some of the important developments following the implementation?

Steve:  The initial implementation of the QMS was an important learning experience for all involved, and some important early refinements were made as a result. For example, early on there was some experimentation with limited term quota. However, it soon became apparent that this was not a good solution because the real source of value in a rights-based approach is the permanence of those rights. This is what gives fishermen a long-term stake in the health of the fishery. Eventually, these rights were made permanent in New Zealand.

Another important early event was the settlement with Maori [New Zealand's indigenous people] over the allocation of ITQs. The Government settled Maori claims to fishing resources by allocating them a proportion of each fishery's TAC (Total Allowable Catch). This was exactly the right thing to do. It not only addressed the Maori claims to the fisheries, but did it in a way that was consistent with the on-going operation of the property rights —ITQs.

Don:  What other developments do you consider significant?

Steve:  One other early change was the change from absolute weights for quota to percentage shares. The importance of this change was that it shifted the risk of managing the resource from the government to the fishermen themselves. Fishermen now had a stronger incentive to make sure that the management of the fish stock was of the highest quality.

Another important change was the requirement that the fishermen pay for the services that the government was providing in the areas of stock assessment, research, and harvest management. With this change, fishermen became interested in the cost-effectiveness of these services. As a result, in some fisheries, they started to think like owners of the fishery - about the long-term benefits of investing in good management practices and research. The Tasman scallops is a good illustration. The fishermen/quota-holders came together voluntarily and invested in enhancing the scallop stock.

Don:  Was there some common characteristic about the fisheries that took this route?

Steve:  There were most likely a variety of factors at work - ranging from things as random and unpredictable as the personalities of the people involved, to the underlying economic benefit from enhancing the fishery.

Again, take the Tasman scallops for example. There was some innovative leadership, there was real potential for increasing their productivity and capturing the benefits, and the transaction costs were low because of the relatively small number of owners involved. In fisheries where there are a large number of quota-holders, getting collective action can become more difficult.

Don:  Why did the government go along with this? Typically governments try to protect their turf of managing fisheries.

Steve:  That's a particularly interesting area - the political economy of the development of the QMS. To understand why things evolved in the way that they did, you really have to place the events of the late 1980s within the wider political and economic context of what was happening in New Zealand at the time. When the QMS was introduced the country was in bad shape economically with a recent history of considerable government intervention and control of the economy. The development of the QMS and the associated devolution of some of the fisheries management functions was part of a wider wave of reforms designed to get more market and less government involvement in the economy.

Don:  Is the devolutionary process still intact?

Steve:  We're probably at something of a cross roads at the moment. In my view there is still a great deal to be done in designing and refining the institutional arrangements that will facilitate more and more of the resource management functions being devolved to stakeholder organizations, thereby increasing their sense of ownership in the fisheries, and ultimately better resource management outcomes. However, progress is somewhat intermittent at present.

Don:  What do you see on the special interest side as some of the things that need to be resolved in fisheries management?

Steve:  Certainly the interface between the commercial and non-commercial fisheries is not as good as it could be. While the QMS is an excellent mechanism for allocating rights among commercial fishermen, the means for allocating and transferring rights between the commercial, recreational and indigenous customary sectors is poor in comparison. Ideally you want a mechanism that responds to changing use values in a responsive and timely manner Let's say the snapper fishery became more important economically as a recreational fishery; we would want to see more of the rights to the fishery going to the recreational uses. Extending ITQs to the recreational sector is one way of doing that.

Don:  Are there any recreational interests in New Zealand right now that may be supportive of a kind of property rights system for recreational fishermen?

Steve:  I'm not aware of support for the rights system for recreational fishers. In fact, there's quite a lot of opposition to it on the part of recreational fishers. The reason for the opposition has a lot to do with the traditional right of New Zealanders to go fishing in the sea without needing a permit, notwithstanding that there are bag limits and so forth in place. The idea of having to have a tradable property right to do so is something of anathema to many recreational fishers.

Don:  What are the environmentalists' views towards the QMS?

Steve:  I think a lot of the environmentalists would recognize the role that the QMS can play in terms of ensuring the sustainability of the resource. However, in practice, the environmentalists tend to be suspicious of the government and its setting of TACs. They suspect that the government is unduly influenced by the commercial sector and as a consequence sets the TACs too high. In practice, they also tend to focus a lot on the impacts of fishing on resources that fall outside the QMS system such as the inadvertent taking of sea lions, other marine mammals, and sea birds.

Don:  What are the fishermen as quota-holders doing in those three areas?

Steve:  There are certainly some moves on the part of fishermen to change their fishing techniques and practices to try and mitigate the environmental effects. However, I think some of the ways that the environmental affects have been managed in New Zealand are poor to the extent that they undermine the incentives created by the QMS. An example is the taking of sea lions in one of the southern squid fisheries. Once a certain number of sea lions have been caught, the fishery is closed irrespective of whether or not squid quotas have been filled. This creates a race for fish, and risks the dissipation of the economic benefits created by the property rights regime.

Don:  Is there currently any kind of conflict between those wanting marine reserves and the ITQ-holders?

Steve:  That's another very interesting area of interface between the QMS and the wider policy environment. There's a move within New Zealand to set aside quite a large area of the marine environment as marine reserves. It is frequently claimed that whereas New Zealand has a large proportion of its land area set aside as terrestrial reserves-around one-third of the land mass - there are very few marine protected areas. The Government has been talking about setting aside 10 percent of the ocean within New Zealand's Exclusive Economic Zone as marine reserves. This has the potential to remove a significant proportion of the catch currently available to the quota-holders. It raises important policy questions such as the case for compensation, the sanctity of the Government's settlement with Maori and the practical means by which the location of those marine reserves are to be determined. All of these issues are still being worked through

Don:  Thank you for talking with me. You have given me a good overview of fisheries management and the issues in New Zealand.

*ITQs are the same as IFQs, Individuval Fishing Quotas.