EXECUTIVE SUMMARY
The Chatham Islands lie some 800 kilometres off the east coast of mainland New Zealand. Fishing and farming are the lifeblood of the 800 or so inhabitants, with the fishing industry having experienced some spectacular booms and busts. Seals, whales, cod, and, most notoriously of all, rock lobster, are all fisheries that have boomed and then crashed as the resource was fished out.
A new and lucrative fishery on the Chathams now centres on the shellfish known as paua or New Zealand abalone. The fishery was developed in the early 1970s, and since then has been subject to numerous regulatory attempts to beat the boom and bust cycle. In 1987 paua divers were presented with Individual Transferable Quotas (ITQs) that allow the taking of a specified tonnage of paua each year. The ITQ is, in effect, a property right in the Chatham Islands' paua harvest. The experience of ITQs in the Chatham Islands' paua fishery thus provides an interesting property rights case study.
The case study is presented in seven sections. The first section makes clear that over-fishing is a consequence not of free enterprise but of fisheries being owned in common by all. The common view that over-fishing is caused by fishermen chasing short term profits is a mistaken one. This mistaken view leads to the conclusion that fisheries, and indeed all resources, should be regulated. However, government regulation is not the answer. As the second section makes plain, the great multitude of regulations that government introduced to conserve paua failed to ensure sound resource management.
The third section of the study describes the introduction of the ITQ system. The ITQ system is a great advance over previous regulations but it is far from ideal. In particular, it does not provide property in the paua stock but only in the paua crop. The fourth section explains problems arising because the property rights are so attenuated. The fifth section describes the political contest that has arisen over paua and which has shifted ashore the wasteful competition that the ITQ system stopped at sea. The sixth section describes the conversion of paua divers through the ITQ system from paua plunderers to paua farmers. The seventh and final section concludes the case study by explaining how the problems that the Chatham Islands' paua fishery confronts can be overcome by allowing a better definition of property rights.
EVERY-ONE'S PROPERTY IS NO-ONE'S CARE
The blame for over-fishing is usually placed at the door of unregulated free enterprise. Fishermen are seen chasing short term profits, without regard to longer term consequences, with over-fishing the inevitable result. The conclusion follows that fishing must be regulated. However, over-fishing is not a consequence of fishermen chasing the dollar. It is instead a consequence of fisheries not being in private ownership. The problem is the lack of the very institution that lies at the heart of the free enterprise system.
The European tradition is for the sea to be owned by everyone, and the fish in the sea to be owned by no one.
Roman law laid down that the sea is communis omnium naturali jure, or by nature, common to all mankind, and not susceptible of possession in the same manner as land (Swarztrauber, 1972: 10).
Traditionally the sea has been open to all, with those taking fish, taking ownership of them.
The fish of the sea ... belong by an absolute title to him who first succeeds in obtaining possession of them (Fitzgerald, 1966: 433-434).
The reason why sea-fisheries historically were left open to all and not reduced to private ownership was that they appeared limitless.
The moral reason why ownership is not suitable to the sea is drawn from the consideration that its use is inexhaustible and therefore sufficient for the general service of all, so that it is idle to wish to assign parts of it to individuals (Pufendorf, 1688: 561).
Unfortunately, fisheries have now proved all too exhaustible, and the result of having them open to all is that they are over-fished (Gordon, 1954). The essence of the problem is captured in phrases such as, "Everyone's property is no one's property"; "Get it while the getting's good"; "Why should I save it, if my neighbours will just use it up?" The phrases evoke an image of greed, plunder and careless use, the root cause of which is open entry. When entry is open, resources are overused, used too quickly, and the ability of natural systems to replenish themselves is destroyed.
The reason why is not hard to fathom. Imagine yourself a paua diver. No one owns the paua beds you fish; you simply own the paua that you take. Imagine further that the fishing pressure is such that the paua beds are in danger of being fished out. Your future income from paua diving is thus at risk.
To sustain the fishery you might be willing to limit your catch and forgo some of this year's income to preserve next year's. However, although you can restrict your catch, you cannot ensure that the other divers do likewise. They can keep on fishing, and, indeed, they can take the very paua that you leave behind. The other divers can profit at your expense and reduce your efforts at conservation to futile self-sacrifice. There is nothing you can do to conserve the resource. Instead of leaving paua behind you may as well fish as hard as you can while you can. The same goes for each and every diver. The logic of open entry drives you and the other divers to fish the paua out.
Now consider your behaviour if through some quirk of biology paua lived ashore on your own land, or alternatively, if through some legal oddity paua beds were privately owned and you owned a slice. You would not fish out your own paua; to do so would simply be to strip your own private asset. Instead of fishing your paua out, you would husband them. If you owned a paua bed, every incentive would exist for you to maintain the paua; to do otherwise would be to jeopardise your future livelihood.
The essential feature of private ownership is exclusive use (Cheung, 1970). If you own the paua bed, you have an exclusive right to the paua. You can prevent other divers from taking your paua and thereby control the harvest and manage the resource. If entry is open to all, your right to take paua is non-exclusive. The right of exclusive use is also what makes the paua bed your asset. Anyone who wants to take your paua has to buy or otherwise negotiate the right to do so. The resource thus attracts a price, and it is your private asset. To maintain the value of your asset, you must not over-fish. Private ownership thus gives you the authority to manage the resource while making you responsible for your management.
RESOURCE CONSERVATION THROUGH
GOVERNMENT REGULATION
The fisheries experience in New Zealand has certainly not been one of private property and free enterprise. The experience instead has been one of common property and state regulation. Common ownership has been maintained and fishing regulated in an attempt to counter over-fishing.
The paua fishery was for a long time open to all and unregulated. The first regulation applying to the taking of paua came as part of general fishery regulations. The Fisheries Amendment Act of 1945 to the Fisheries Act of 1908 required fishermen fishing commercially to be licensed. The move was in part a conservation measure. The Sea-fisheries Licensing Authority in considering any application for a licence was required to have regard to "the desirability in the public interest of conserving sea fisheries." Thus, since 1945 anyone taking paua for sale has been required to have a licence.
However, back in the 1940s there was little commercial interest in paua. The resource was conserved simply because demand was low. As O.M. Moore (1982: 33), a senior fisheries officer with the Ministry of Agriculture and Fisheries, recalls:
Before the late 1960s the taking of paua, both by amateurs and commercial fishermen, caused few problems. Stocks were generally high, especially in the less accessible areas of Southland (including Stewart Island), Marlborough, and Wairarapa, and they were virtually untouched in the Chatham Islands. The amateur take was low, as paua was then considered an acquired taste, except among the Maori people, for whom it is a traditional food. Commercial exploitation was confined to a few small-time operators, as the only export market available at that time was Australia. There raw, black paua meat was further processed and bleached. The raw New Zealand product fetched only low prices, and, as a result, attracted few commercial operators.
The pressure came on the paua resource in the late 1960s. In 1968 an entrepreneur discovered how to bleach the black paua meat and thereby penetrate overseas markets. Moore (1982: 33) recalls the resulting price hike:
In 1968 the situation changed suddenly when the Palmerston North based company of Prepared Foods Ltd. discovered a satisfactory bleaching process for New Zealand paua and was able to market and export the fully processed and canned product under the name of New Zealand abalone. The price for raw paua increased by about 50%.
The race for paua had begun.
Many persons saw the opportunity of making big money and entered the fishery (Moore, 1982: 33).
The Wellington area took the initial brunt. As catches started to decline divers moved further afield to Wairarapa, Marlborough, the west coast of the South Island, and eventually the Chatham Islands. In 1972 over 400 diving permits were issued. Paua stocks in many areas were seriously depleted.
In an attempt to conserve the fishery the government set size limits and gear restrictions. A size limit of 5 inches (125 mm) was introduced in 1971, and the use of underwater breathing gear banned. Areas of the coast were also closed to commercial divers. Catch quotas for amateurs were also introduced and progressively tightened. The amount one person was allowed to take in a day was restricted to a four gallon measure in 1959; reduced to two gallons in 1968; and to 10 paua in 1972. In heavily fished areas daily and weekly catch quotas were introduced for commercial divers (Report of the Fishing Industry Committee, 1972: 35). However, the difficulty of policing the quotas rendered the restrictions useless and the entire paua fishery was closed for four months in 1972.
The fishery was opened once more to year-round fishing the following year. In that year a quota on the export of paua meat was introduced as a conservation measure.
The export quota for meat was divided proportionately among established export companies only. The amount of quota depended on the quality and quantity of the company's product and the time it had spent on marketing paua (Report of the Paua Shell Review Committee, 1988: 11).
Five companies received quota. The product also was regulated.
Exports were restricted to bleached, canned meat as the raw, black product was unacceptable to some overseas buyers for religious and cultural reasons (Report of the Paua Shell Re view Committee, 1988: 11).
Overseas buyers interested in paua other than bleached and in a can could not be supplied. Between 1973 and 1984 the export quota for all New Zealand was held at 71,400 dozen cans of processed product, or about 928 tonnes (whole landed weight) of paua (Murray and Akroyd, 1984). No quota applied to domestic sales.
A hotch-potch of regulations was thus applied to the taking of paua. Regulations applied to who could fish (commercial divers had to have a licence), how you could fish (underwater breathing gear was banned), what fish you could take (paua had to be above legal size), how many fish you could take (catch quotas were in force), and where you could fish (areas of the coast were closed to commercial divers). Regulations also applied to who could export paua, how you could export it, and how much you could export.
The regulations restricted the taking of paua but in so doing they restricted the potential of the fishery. Licence requirements locked out new entrants, gear restrictions kept the cost of taking paua high, and export quotas discouraged product development and price competition. The regulations were themselves a cause of considerable waste.
What is more, the regulations never got to the heart of the problem. The fishermen were left fishing a common stock and total catch was never directly constrained. The outlook for the paua fishery remained one of ever-increasing effort for ever-fewer fish. Any rent generated was always to be dissipated by divers competing amongst themselves for a share of the resource. The hotch-potch of regulations did not and could not provide the necessary incentives to ensure sound resource management.
ESTABLISHING PROPERTY IN PAUA
The hotch-potch of paua regulations was swept away when the Individual Transferable Quota (ITQ) system was extended from the inshore fisheries to paua. Within the ITQ system the total catch is constrained by setting a Total Allowable Catch (TAC) that limits the amount of fish that may be taken in a year. To prevent fishermen wastefully "racing" against each other to get as large a share of the TAC as they can, the TAC is divided up into individual catch quotas. The individual catch quotas serve to allocate the TAC amongst individual fishermen and fishing firms before the fishing season gets underway.
In New Zealand the quota were allocated in perpetuity, the intention being to give fishermen long term security. In order not to lock quota holders into the fishery, and to lock non-quota holders out, the quota were made tradeable. Trade in quota allows fishermen and fishing firms to enter and exit the fishery freely. The ITQ system thus attempts to control the total catch while leaving fishermen and fishing firms free to catch their quota as they best see fit.
The difficult step in establishing the ITQ system is the initial allocation of quota. In the paua fishery ITQs were allocated on the basis of catch histories. Divers who were licensed, and who worked the fishery, received quota. Beginning in 1982 there had been a moratorium on the granting of licences to take shellfish, including paua. In 1985 Individual Quota (IQ) (not tradeable) set at 90% of a licence holder's catch in either 1982 or 1983 were allocated. Initially 227 tonnes went to 35 divers in the Chathams. A further allocation of 27 tonnes was made by a Ministry of Agriculture and Fisheries committee for licence holders who did not have a catch history for 1982 or 1983, or for whom those years were not a reasonable reflection of their catch history. As a result, a new total of 254 tonnes was established.
In June 1985 a Paua Quota Review Committee was established to report on objections received from paua divers. The Committee recommended further increases in IQ totalling 29 tonnes and, in addition, the Ministry of Agriculture and Fisheries itself allocated a further 49 tonnes to take the total to 332 tonnes.
Legislative backing for the ITQ system was enacted as an amendment to the Fisheries Act of 1983 in 1986, with full implementation of the ITQ system for paua scheduled for the 1st October 1987. Another 35 tonnes were allocated in the move from IQs to ITQs to give a new total of 367 tonnes. All quota holders then took a 28.6% quota cut to meet the preset TAC of 262 tonnes. Taxpayers funded this later cut to the tune of $5,400 for each tonne divers gave up, with taxpayers contributing $1.4 million nationwide to buy back 260 tonnes of paua quota.
The allocation of ITQs was further complicated when Maori interests obtained a High Court injunction preventing the establishment of ITQs for Maoris fishing paua, and other species. Maori representatives contested the authority of the government to allocate individual property rights in fisheries when ownership of the resource had not been established. The High Court ordered ITQ to be issued subject to the condition that the quota terminate if at any stage Maori tribes proved in court that the fish belonged to them, or if the Crown acknowledged that Maori tribes had control of the fishery. All but eight tonnes of the original ITQ issued for paua in the Chathams are subject to the High Court order.
The initial allocation of ITQs in the Chatham Islands' paua fishery provided 37 divers with a total of 261 tonnes of quota (yes, one tonne was lost in the system!). However, as part of the implementation procedure for the ITQ system, the Fisheries Amendment Act 1986 established a Quota Appeal Authority (QAA) to which any person could appeal. As of February 1990 the QAA had allocated a further 21 tonnes of paua quota to the Chatham Islands giving eight divers additional quota and two divers an initial allocation. The TAC for Chatham Islands' paua has thereby been increased to 282 tonnes.
Following the introduction of the ITQ system the earlier paua regulations were rationalised. The only restrictions that remain are the size limits and the ban on the use of underwater breathing gear. The market for paua is now competitive and product development is free of the regulations previously intended to protect the resource. The freeing up of the market has had a considerable effect. In 1984 divers were getting only $1 a kilogram green-weight; by December 1989 they were getting $15.
These high paua prices spilled back into higher quota prices when in December, 1987 permission was given for trade in paua quota. This trade has been heavy. After all, existing licence holders had effectively been locked into the fishery since 1982 and new divers locked out. One hundred and eighty tonnes of Chatham Islands' paua quota changed hands between February 1988 and March 1990. Ten divers sold out entirely, and 17 new divers entered the fishery. Paua quota now sell for around $40,000 a tonne, and are very valuable assets.
I.T.Q.s AS ATTENUATED PROPERTY RIGHTS
Although the ITQ system is a vast improvement over earlier regulations, it is far from ideal. Two problems, in particular, stand out in the paua fishery. The first is that the TAC must sometimes be reduced to protect paua stocks, or, perhaps increased to take advantage of stock improvements. Adjusting the TAC is both difficult and contentious. It is difficult because the government officials making the adjustments do not know the resource as well as the divers doing the harvesting, and it is contentious because the costs fall upon the quota holders and not the government officials doing the adjusting.
The original plan had been for government to adjust TACs by buying and selling quota by tender (Ministry of Agriculture and Fisheries, 1984: 11). In the event the Fisheries Amendment Act of 1986 that set up the ITQ system provided for the proportionate reduction of all ITQ, with the Government compensating quota holders for the "fair market value of the individual transferable quota."
The mechanism for TAC adjustment was changed yet again with the Fisheries Amendment Act of 1990 that enables proportionate cuts without government compensation. These changes have shifted the costs of TAC reductions from government to quota holders. They have also considerably undermined quota which are now effectively specified not as a fixed tonnage but as a percentage of an adjustable TAC.
The second problem with the ITQ system is that the rights in question are rights to a part of the harvest from the resource as opposed to the resource itself. The individual quota holder is left without a property interest in the fishery. The incentive therefore exists for individual quota holders to take in excess of their quota and for non-quota holders to poach paua. Under current arrangements the only way to counter "quota busting" and poaching is to monitor paua divers and enforce quota regulations.
The government monitors each diver's catch by having them fill out on landing their catch a Catch Effort Landing Log which must then be available on demand to any fisheries officer or examiner. Divers must also complete and regularly submit to government a Quota Management Report detailing by area the quantity of fish caught for each species for which quota is owned or leased.
Also, fish processors have to submit regularly to government a Licensed Fish Receivers Return (LFRR). The LFRR shows the quota holder's name, the fisherman's identification number, species, and greenweights for all fish received. It allows the cross-checking of fishermen's logs and reports. The bureaucratic detail needed to monitor each diver's catch makes the ITQ system expensive to run.
Enforcement has also proved a problem. Enforcement officers estimate that six hundred tonnes of paua are taken illegally in New Zealand waters each year. The Total Allowable Catch for all of New Zealand is only 1114 tonnes and illegal fishing is seriously undermining the ITQ system.
The problem of enforcing quota is particularly acute in the Chathams.
In the Chathams the surveillance is currently provided through one resident officer who has the task of enforcement for the seas around the many Islands of the Chathams group (Taylor Baines and Associates, and Lincoln International, 1989: 116).
The resident officer is provided with a 4-wheel drive vehicle and a pair of binoculars, yet he must police not just paua but the entire Chatham Island's fishery.
FISHING POLITICAL WATERS
Illegal fishing is not the only threat the fishery confronts. The high returns and high quota prices have caught the attention of envious eyes and various groups without quota are lobbying government for a slice of the pie. Indeed, government is one of the groups after a slice. In establishing the ITQ system for managing fisheries around New Zealand, the government set the precedent for extracting the rent the fishery earns. This was done by establishing a nominal rental or tax on quota. "Government policy has been to gradually increase resource rentals until the value of annual traded quota approaches zero" (Clark & Duncan 1986: 118). The stated purpose of increasing the tax on quota is to encourage new fishermen, discourage speculation, and return the rent the fishery earns to the people of New Zealand (Clark, Major & Mollet 1988: 334). The tax at present is only $131.54 a tonne on paua quota, and it would have to be increased substantially if quota prices were to be driven from $40,000 a tonne to zero.
Chatham Islanders without fish quota are also after a slice of the paua pie. A recent study of the Chatham Islands economy recorded a number of submissions that argued "that due to the location of the Islands, any economic rent derived from the fishing resources within 'the Islands' 200 mile EEZ (Exclusive Economic Zone), should be returned to the Islands" (Taylor Baines and Associates and Lincoln International, 1989: 121). The idea again is to tax away the value of the quota but in this instance to direct the revenue to a political body on the Chathams. The submissions noted that the revenue could be used for local administration funding, fishing resource management, and Island-based investment.
Another common submission was for the Island to either own or at least hold control over the fishing resource, so that the allocation of the resource quotas could be directed by the Islanders only to residents (Taylor Baines and Associates and Lincoln International, 1989: 121).
The idea is for quota rather than fishery revenues to be taken and then reallocated to locals. A related proposal is to require quota holders to live in the Chathams.
Yet another aspect of those submissions was the proposal to apply residential clauses in order to get people to invest on the Island and to have the fish landed on the Island to create increased economic activity (Taylor Baines and Associates and Lincoln International, 1989: 121).
In addition, three indigenous groups are using the Treaty of Waitangi to claim the paua resource. The Treaty of Waitangi, signed in 1840 by representatives of Queen Victoria and Maori tribes, established British governance over New Zealand but also affirmed the rights of the tangata whenua (original people) to their lands, forests, and fisheries. The Treaty of Waitangi Act of 1975 established a Waitangi Tribunal to investigate Maori claims against the Crown, while the Treaty of Waitangi Amendment Act of 1985 has enabled the Tribunal to examine claims dating back to the signing of the Treaty.
The first indigenous claim arises from the arrival of the Taranaki Maoris in the Chathams in 1835 and their subsequent conquest and subjugation of the original inhabitants of the Chathams, the Moriori. The claim attests that this conquest puts the Chatham Islands within Taranaki tribal boundaries. The Taranaki Maoris claim exclusive title to possession, use and control of the fishery. Where such rights cannot now be restored the claim is for sufficient compensation for loss of mana and of such rights. The Taranaki claims are made on behalf of the beneficiaries of the Taranaki Maori Trust Board and associated corporations and trusts.
The second indigenous claim is from the Moriori, and is not so straightforward. The Moriori, spurred to action by the Taranaki claim, assert that as the indigenous tribe of Rekohu (Chathams), they have standing as tangata whenua before the Waitangi Tribunal and are therefore justified in presenting a case for the return of the fishery resource to the Chathams. The original intent behind this proposal was that the formal structure under which the Chathams' fisheries would be owned and managed would be along the lines of an Iwi (tribal) Authority. But a later proposal was that an independent body be incorporated to govern the management and control of the fisheries, with representatives of Maori, European and Moriori participating in management. Supporting the claim of the Moriori to rights as indigenous people is the Moriori Tchakat Henu Association of Rekohu. The Association has amongst its objects the promotion of the wise management, conservation and administration of natural resources in Rekohu, and it consists of members committed to the objects of the Society. These members are either resident members (whose principal place of residence is Rekohu), non-resident members (able to take up voting rights if their principal place of residence is Rekohu for more than three months in anyone year), or special members (under 18 years of age or yet to complete the residency requirement).
The third indigenous claim is from Te Rununga O Wharekauri Rekohu, the Chatham Islands' Maori, who assert that they represent the tangata whenua of the Chatham Islands by descent and who accordingly claim exclusive title to possession, use and control of their fisheries.
In response to the many claims upon the resource a recent government-sponsored Review of the Chatham Islands Economy argued for:
... both Government officials and fishers to compromise their extreme positions and overcome their resistance to sharing power and responsibility (Taylor Baines and Associates and Lincoln International, 1989: 118).
The consultants proposed the setting up of a Chatham Island Fishing Authority to represent the various interests.
The representation on the Fishing Authority would come from the following groups: the fishers through their respective speciality groups; the processors; the service sector, including MAF fish, Fishing Industry Board (FIB), private consultants etc; the CICC (Chatham Islands County Council) chief executive officer, the CDC (Community Development Corporation) chief executive; and the Iwi Authority (Taylor Baines and Associates, and Lincoln International, 1989: 119).
The Authority's task would be to manage the fishery with the rent from the fishery being split between central government and the Authority. The proposal is to get the many interests represented in management and to manage the resource and direct investment politically.
Notwithstanding the ITQ system, the paua fishery remains up for grabs. Both central and local government are after a slice, as are local Chatham Islanders, and the three indigenous groups. There are now more people than ever fishing for paua. The fishing effort is not now going into trying to take paua ahead of another but rather to out-lobby other groups after the resource. The wasteful competition that the ITQ system stopped at sea has simply been shifted ashore. In the process neighbour is being set against neighbour. One group's gain will be another group's loss.
FROM HUNTER TO FARMER
The various attempts to re-slice the pie politically are not only proving wasteful and divisive, but are also undermining the ITQ system and scaring off the very investment that could make the pie even larger. The investment made back into the resource follows from a feature of the ITQ system that is often overlooked. Quota holders are, in effect, a club with the exclusive right to take paua commercially. Club members hold a valuable property right in the paua harvest in the form of their ITQ. It is in the club's interest to maintain and, if possible, enhance paua stocks, in order to maintain and improve the income stream generated from the fishery and hence quota prices. Accordingly, the Chatham Islands' paua divers have formed the Chatham Islands' Shellfish Reseeding Association which has amongst its objectives, "to foster and promote the enhancement of the fishery stock in the Chatham Islands," and "to foster and promote scientific research into shellfish programmes in the Chatham Islands."
In an attempt to enhance the fishery the Association has contracted the Ministry of Agriculture and Fisheries to conduct a trial paua seeding programme in the Chathams for the year ending 1st October 1990. The contract involves rearing 100,000 paua to a size of about 7 mm, seeding and monitoring these juvenile paua, and reporting on the success or otherwise of the trial. The trial is funded through a 1% levy upon Association members' paua sales for the year. Thirty-four out of the 46 quota holders on the Chathams have joined the Association and these 34 hold 84% of the Chathams' TAC. If the trial proves successful, the paua divers are set to seed the paua fishery around the Chathams on a large scale.
The exclusive right to harvest the resource as secured by the ITQ system has thus converted Chatham Islands' paua divers from resource plunderers to custodians of the resource. Unfortunately, the insecurity generated by present ITQ management and the many competing political claims are undermining investment and conservation. Roger Beattie, the secretary of the Reseeding Association points out the problem. "Paua divers are not going to invest in conserving the fishery unless their rights to harvest where they have sown are secure. Farmers would not put fertiliser on their land unless they were sure they could reap the benefit. Paua divers are no different to farmers. They will only invest back into the resource if their property rights are secure."
CLOSING THE COMMONS
The problems confronting the Chathams' paua fishery are plain enough. The rent captured through the ITQ system is in danger of being dissipated in a political contest over the resource. At the same time, the investment that could enhance the resource to everyone's advantage is being scared off. Although paua divers are investing in the paua fishery, they are investing less than they otherwise would be. On top of these difficulties, the TAC and hence quota are able to be adjusted by government officials who have no financial interest in the fishery, and the ITQ system is being further undermined by the bureaucratic detail needed to monitor each quota holder's catch and by the government's inability to enforce quota regulations.
The claims to the resource from non-quota holding Chatham Islanders are counterproductive. They have as their stated aim the promotion of local investment. However, the way to promote investment in the Chathams is to secure the quota. Moreover, the various claims all involve replacing private investment with political investment. Political investors do not risk their own capital and are motivated to seek out the most politically attractive investments, not the most profitable. The substitution of political investment for private investment will harm rather than benefit the Chathams' economy.
The claims lodged with the Waitangi Tribunal are not going to go away, but it would certainly help to secure the ITQ system if the government acknowledged that these claims are against the Crown and not existing quota holders. The government should state categorically that if claims to the Waitangi Tribunal are recognised, government will not ride roughshod over existing quota holders' rights. That is to say, the government will neither take quota from existing quota holders nor increase the TAC to allow more quota to be handed out. If government does agree to give quota to claimants, existing quota holders should be bought out at the market price. This would serve to secure quota and perhaps minimise resentment by dispersing the costs of reallocation.
Resource taxes are also a threat. Quota cannot be secure so long as government plans to expropriate the rent by driving quota prices to zero. The quota can be made secure by government indicating that it has no intention of raising the quota tax and the best way of doing this is to abolish the tax completely. The quota tax serves no good purpose, being a very small source of revenue, and any move to increase it would only serve to undermine the incentive the ITQ system provides for quota holders to conserve and enhance the fishery.
Another contentious issue is the adjusting of the TAC. It would be much better if the TAC were set by quota holders each year instead of government. Quota holders have the detailed information of the fishery that government lacks, and with quota giving them a stake in the fishery, they have every incentive to adjust the TAC if the fishery is being either over-fished or under-fished. The decision would then rest with those who bear the cost. In taking responsibility for setting the TAC, quota holders would no doubt seek out and employ fishery scientists who could assist them in making the decision. Fishery scientists would then work advising quota holders who have a direct financial stake in the fishery.
The setting of the TAC by quota holders would require some form of voting procedure, and it would be preferable if voting rights reflected the extent of the quota holder's stake in the fishery. That is to say, voting rights would be set according to the amount of quota held. If each quota holder had but one vote the influence of each person's vote would be disproportionate to the costs and benefits incurred by that vote.
Monitoring and enforcement also need not be entirely a government responsibility. Indeed, there is considerable scope for self-policing. There are currently 46 quota holders out on the Chathams spending considerable time lifting their quota and they should be encouraged to police the resource themselves. Although it can profit individuals to go over their quota and steal paua, it costs them if other quota holders (and non-quota holders) do likewise. If everyone exceeds their quota the fishery will be over-fished, paua divers' incomes will fall, and the price of quota will like wise fall. If quota busting and poaching become common-place, paua divers will find themselves back to the situation of the hunter plundering an unowned resource. Each quota holder will realise that over-fishing is the road to ruin, but that there is nothing he can do about it, and that he may as well be in while he can. It is in the interests of the quota holders as a group to see that the quota are enforced. As in the case of setting the TAC, monitoring and enforcement should increasingly be the responsibility of quota holders. If they don't take responsibility, it is hard to see who will.
Monitoring and enforcement is difficult because it is almost impossible for one diver to know if another is within his quota. One consequence of quota holders taking increased responsibility might be that they agree to carve up the coast to lower monitoring and enforcement costs. This would involve each quota holder agreeing to take his quota from a specified area. Anyone taking paua from outside their area would be taking them illegally. Of course, the productivity of the resource in his area would have to be in proportion to quota held. If a quota holder has five tonnes, he should be given an area equivalent to his five tonne holding. The carve up could presumably proceed privately and voluntarily.
The incentive to carve up the coast follows from quota holders taking increased responsibility for monitoring and enforcement. However, the advantage of such a carve up does not end with reduced monitoring and enforcement costs. Specifying rights to an area of coast would allow quota holders to decide as individuals, or as groups, their commitment to investing in enhancing the resource in their area. It would also allow those who want to invest greater sums in enhancement to do so, and to reap the reward. The increased reward would come from their being able to more easily fill their quota, and, perhaps in the not too distant future, to increase the harvest from their area. At present, investment in enhancement is tied to what the most unwilling member of the Association is prepared to commit.
Indeed, if the coast were carved up the ITQ system for paua would become redundant and the paua beds would be effectively managed by private owners. The owners would have authority to prevent over-fishing in their area, and, so long as they remained free to sell the rights to their paua, they would have every incentive to conserve their resource rather than plunder it. A TAC would not be needed. Private owners would simply decide their own level of harvest in their own area, just as farmers decide the stocking rates on their own land. Monitoring and enforcement also would not prove such a problem. No government monitoring of the harvest would be necessary, and enforcement of exclusive rights to the paua in a given area would prove no more difficult than the enforcement of exclusive rights to stock on land.
CONCLUSION
The Chatham Islands' paua fishery illustrates the importance of establishing property rights in resources to ensure sound resource management. The attempt to regulate fishing in the absence of property rights was a failure. The introduction of the ITQ system not only served to constrain the total catch directly, but also provided the incentives necessary to convert paua divers from resource plunderers to resource custodians. The fishery also illustrates the dangers of the property rights approach. The potential gains in establishing property rights can easily be dissipated in the political arena as interests lobby for a slice of the pie (Anderson & Hill, 1983). There is no easy answer to the problem. But clear, sharp and rigidly applied rules to guide a quick and final allocation are certainly important. One mistake made with paua ITQ was to stretch the rules to the limit and to continue allocating quota to divers after the initial allocation. Another mistake made was to encourage the many claimants to lobby for the resource and to re-establish the common property problem within the political arena.
The Chatham Islands' paua fishery also illustrates that the ITQ system should not be viewed as an end point of reform. As Anthony Scott (1988: 289) has explained:
An ITQ harvesting regime, requiring continued regulation, is best seen as only a brief stage in the development of management. Its evolution can be expected to continue until each owner has a share in the management decisions regarding the catch, and, further still, until he has an owner's share in management of the biomass and its environment.
The incentives and opportunities the ITQ system provides can thus be built upon by allowing quota holders to club together for the purpose of fisheries management. As a club, quota holders can control their fishery and can capture the benefits of conservation and investment. In establishing an exclusive right to the fishery, albeit a collective one, the problem of over-fishing has been solved.
The evolution of the ITQ system is well underway in the Chathams' paua fishery with quota holders seeding the fishery themselves. The prospects for a profitable and sustainable fishery appear bright. The danger is that present policy is directing the energies of the Chatham Islanders away from conservation and investment and into unproductive competition over the resource.
REFERENCES
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