Limitation of the right to fish to certain individuals or groups - limited entry - involves, in any international fishery, two successive problems of allocation - between countries and within countries.
It should be noted here, that if any country wishes to introduce a scheme of entry limitation among its own fleet, this is only practicable - unless it is the sole, or predominant country fishing on the stock - if there is a system of allocation between countries. The converse is, however, not true. If shares of the total (in catch or effort) are allocated to countries, this in no way necessitates that any individual country operates a limited entry system on a national scale. One of the attractions of a system of allocating national quotas is that it does allow countries a wide flexibility in national regulations, provided that they ensure that the national share is not exceeded, e.g. a nation may set its own single quotas regulation for its national fishery. This flexibility is obviously important in allowing a variety of countries with very different social, political and economic conditions (e.g. Spain, Germany, Canada and USSR in the Northwest Atlantic cod fisheries) to pursue their varying national objectives.
The problem of allocating a limited amount of fishing (whether in terms of a number of licences for vessels, or catch quotas), is best approached in terms of deciding the use to be made of the potential economic benefits. Two obvious beneficiaries can be identified - the national treasury, and those presently engaged in fishing.
The first of these would benefit if licences were temporary - for one or a limited number of years - and issued at a high fee. This licence fee should be so high that the less efficient fishermen cannot afford to pay it, and the number of applicants for licences (the more efficient fishermen) are just equal to the number of available licences. In practice social and other factors, other than simple economics, may be taken into consideration when issuing licences. Thus the licence fees might be somewhat reduced, so that the number of applicants would likely be greater than the number of available licences. The choice between these applicants would then be on a basis of these other factors. If allocation were done purely on economic criteria, and licence fees were as high as possible - which might be achieved by an auction system for licences - the total licence fees should be about equal to the difference between the value of the catch and the minimum cost of harvesting it (here and elsewhere in this paper costs are understood to include a reasonable return on investment on vessels, etc., as well as running costs, wages, depreciation, etc.).
The second alternative, of benefit accruing to existing fishermen, could be achieved if licences were permanent but transferable. As the fish stocks build up under regulation the right to fish acquires value, which should be reflected in the increasing capital value of a licence. In the long run the total capital value of all licences should be such that the interest from it, if put into alternative investment, would be equal to the difference between the value of the catch and the cost of harvest.
In both, problems arise in relation to the measure used of fishing mortality, and in the transition period from a heavily exploited unregulated fishery to one in which the fish stocks have been built up by the management. These problems are less when licences are limited in duration and have a high cost, so that allocation is decided by the ability to pay the fee. There is then no real difference between the long-term and transition period, except that the possible fees will be smaller during the transition period - and probably negligible in the first year - while the stocks are being rebuilt. Also in the transition the net amounts going to the national treasury may be smaller because part or all may be used to give temporary compensation to those fishermen failing to get licences or to resettle them in alternative employment.
Provided mortality is measured in terns of catch, the choice between different sizes or types of vessels is straightforward - the fishermen operating the most efficient vessels (those that can land fish at the least cost), will be best able to afford a licence. If licences are in terms of vessels, then there will be problems of determining the appropriate fee to operate a 150 ton trawler, if the licence to operate a 100 ton purse-seine vessel costs, say, $10,000.
The justification of using the vessel rather than catch as a basis for licencing, is that the vessel is the natural basic operating unit. The practical advantages of vessel licences, rather than a licence to catch a certain quantity, are particularly marked when the fishing industry is composed of a large number of separate units - especially skipper-owners - rather than a few big concerns. A large concern operating a number of ships can adjust the number to its catch quota, making adjustments if necessary towards the end of the season; most of the active ships can then work at full capacity throughout the year. A man operating one ship has less flexibility - there is a certain quantity of fish he can catch (or a certain fishing mortality he can cause) if the ship fishes at full capacity - a bigger catch quota cannot tie used, and a smaller quota means that the ship is working at less than full efficiency - unless good alternative employment is available. This aspect is not confined to small operations; one of the problems facing the Norwegians in Antarctic whaling as the quota was reduced, was that in some seasons their share, based on a fixed percentage of the total, was too large to be harvested by a single expedition (factory ship plus associated catchers, supply ship, etc.), and too small to support two expeditions.
If the number of licences is controlled, or more strictly, if the number of those applying for a licence is limited, by charging a large licence fee, the relative magnitude of the fees paid by vessels of different types or size has to be carefully decided. On purely economic grounds these should be adjusted to give no artificial advantage to any group, and should allow the most efficient fishing unit to be developed. However, few, if any, fisheries are managed on purely economic (or purely biological) grounds. Social or other considerations can easily be taken into account in setting licence fees. For example, a concern of many governments is to encourage the development of more efficient fishing units, while giving protection, during their working life, to groups of existing fishermen with small (and basically inefficient) vessels. The two somewhat conflicting objectives might be achieved by charging properly balanced fees to any new ships, but artificially low fees to existing small vessels. This artificial difference could be abolished progressively over a shorter or longer period in accordance with general social objectives.
If licences are issued for a limited period, the duration of this period can be important to the development of new techniques. If it is too short, then the uncertainty about future operations may inhibit new developments, especially those requiring big investments; too long, and the fishing may stagnate without the effective pressure of those outside the fishery, with new ideas wishing to use them. A reasonable period might be around 5-10 years, i.e. perhaps a half to a quarter of the normal working life of a fishing vessel. Presumably this would be managed by one-fifth, or one-tenth of all licences being renewed each year, rather than all being renewed every 5-10 years. The tine of determining licence - holders also needs some consideration. It should be done sufficiently in advance of the period concerned to enable new entrants or others to adjust their construction of vessels and other investment actions in accordance with their holdings of licences.
The basis for issuing licences has been considered so far only in terms of the economics of the particular fishery directly concerned. Consideration should, however, be widened to cover the effects on other fisheries. A limitation, or the need for limitation implies that there is surplus capacity, in money, or ships, etc., that can be used elsewhere - not necessarily in fishing. If one alternative is to exploit another stock of fish that is underexploited, the choice of licence-holders may be made so as to encourage the diversion of the surplus to that stock. This may be done quite explicitly, e.g. a condition of granting a licence to a company may be that it undertakes at least some trial fishing on the new area.
Less direct ways can also be used. For example, if a range of sizes of ships are fishing an inshore ground, which is over-exploited, while more distant grounds are neglected, it may be desirable at first to restrict licences for the near grounds to the smaller vessels (assuming that they can only fish near port), thus forcing the larger vessels to seek new grounds. In the short run, this would increase the economic effectiveness of the fleet as a whole, even if the larger vessels were the most suitable for the nearer grounds, since, if they were allowed onto the nearer grounds, there would be no productive activity open to the smaller vessels. In the long run, however, it would be necessary to reduce the small-ship fleet to that giving the optimum level of fishing mortality, and then gradually to allow the larger ships back into the fishery as replacements for the smaller ships.
If the replacement is merely a matter of changing the ships the process can be moderately quick; no more, at a maximum, than the economic life of a vessel. Often though, large and small vessels belong to quite different groups of fishermen; the change would involve major changes in habits, perhaps of whole communities, and can be very lengthy.
If licences are held for an unlimited period, and are transferable, then the measures of fishing mortality in which they are expressed have to be carefully chosen. A licence to, say, operate one trawler would certainly offer no restraint on the mortality caused unless there was at least a limit on the size, and, as described above, even this is likely to become ineffective, either by deliberate actions, such as fitting an exceptionally powerful engine, or by normal technological advances. Similarly, a licence to catch any specified quantity would lead to over- (or under-) exploitation, if there was a reduction (or increase) in the stock.
The above discussions outline some of the problems involved in controlling the fishing mortality caused by a national fleet by limitation of entry. While not exhaustive these discussions do suggest that limited entry, by itself, offers a more satisfactory solution to the problem of rational management than a single quota system.
It may be that a combination may be more successful; a single quota system achieves the correct fishing mortality, but gives much less promise of preventing the build-up of excessive fishing capacity. Conversely, limited entry prevents excess capacity, but may not ensure the correct mortality. Under a combined approach the primary control of fishing mortality would be the catch quota, but a licencing system would be used to limit the capacity of the fleet. Since the initial purpose of the licence would be to prevent new entries, rather than cut down the existing fleet, the great difficulties inherent in refusing licences to existing fishermen need not arise. The ultimate objective could be to maintain the fishing capacity a little greater than that necessary to take the quota in a full year, so that, under average conditions, the season would end after around 11 months. The same methods to ensure continuing operational efficiency - transfer of licences, or a high fee - as used in controlling mortality entirely by limiting entry, would be necessary.
While this procedure makes regulation more complex, with two separate processes - setting licence fees to control the fishing capacity, and setting a catch quota to control fishing mortality, this may not be too inconvenient. It also serves to emphasize the two rather separate objectives of regulation - biological, achieved by the catch quota, and economic, by the licence fee.