Ecological Economics 36 (2001) 205 – 221
COMMENTARY
The role of economics in global management of whales:
re-forming or re-founding IWC?
Massimiliano Mazzanti *
Department of Economics,Uni6ersity Rome III,Via Ostiense139,00154Rome,Italy
Received 19 January 2000; received in revised form 17 July 2000; accepted 21 July 2000
Abstract
The global management of whale species, identified as an economic mixed good, is addressed by means of economic theory of bargaining and institution making. I will analyse (i) why it is important to take into account explicitly both (consumptive) use and non-use values within international conventions on global mixed goods; (ii) the role and nature of institutions dealing with global issues; (iii) the role of bargaining between conflicting interests as a focal feature of the institution-making process; and, (iv) the role of economic thinking in international conventions. Co-operative and non co-operative solutions are discussed, and instruments aimed at achieving co-operative bargaining, analysed. The study has both positive and normative implications, with insights on social welfare enhancing institutional reforms. Although the study is broad yet special focus is given to the International Whaling Commission (IWC). This paper concludes that we should make economic theory operational within the realm of global institutions. On the basis of the bargaining model, the conclusion is that IWC should necessarily be re-founded or at least re-formed, changing the convention from ‘whaling’ to a ‘whale’. It is suggested that the possibility of introducing compensatory side payments into the bargaining arena in order to increase social welfare and enforceability with respect to a ‘ban’ scenario be investigated. Ethical implications of monetary compensations are considered in parallel with economic efficiency. The limits and potentialities of economics and economic instruments are also tested globally with respect to the whale and other environmental issues. © 2001 Elsevier Science B.V. All rights reserved.
Keywords:Whales; Shared resources; International agreements; Mixed good; Global bargaining; IWC
JEL classification:Q22; Environmental and natural resource economics
www.elsevier.com/locate/ecolecon
And about him the sea beasts came up from their deep places and played in his path, and acknowledged their master, and the sea stood apart before him, rejoicing
(Homer, Iliad 36 – 38, XIII).
* Corresponding author.
E-mail address:[email protected] (M. Mazzanti).
1. Introduction
The essay is motivated and looks at two consid-erations based on the International Whaling Commission’s (IWC) recent efforts. The first is the failure of past and current management con-cerning whales as a global common resource. This failure also needs to be conceived within an eco-nomic framework — by developing a positive scrutiny of agreement failure aimed at assessing failure determinants. The second is the need for a normative analysis of international agreements, which is deemed necessary given the deadlock characterising global whale management since the ban (on hunting) was voted by IWC in 1982.1The
deadlock, which has occurred since the ban was voted, is affecting the IWC annual meetings and actual management. IWC has hardly been search-ing for a feasible and party-shared new agree-ment. But differences in opinion amongst IWC members on how to manage commercial whaling, what techniques should be used and who should pay have not helped declining whale populations. The majority of IWC members refute whaling for scientific and ethical reasons (Appendix A); their influential majority has voted both the 1982 ban and the creation of a whale sanctuary in the Indian Ocean in the early 1990s. On the other hand, whaling countries have been urging strongly for a resumption of whaling on purely scientific terms (Monnesland et al., 1990; Amundsen et al., 1995; High North Alliance), and they have disre-garded the ban, either by exploiting existing loop-holes (Japan) or by refusing to subscribe to IWC majority decision (Norway, Iceland). The dead-lock, that is the failure in creating a successful and enforceable treaty, is due to inadequate attention to the total economic value of whales and to its integration within institutional mechanisms and agreement rules structured on economic incentives.
The current equilibrium achieved within IWC is
unstable and not self-enforcing.2 Furthermore,
other marine mammals under IWC management could be included in a larger convention, giving further relevance to IWC reform (Samples and Hollyer, 1990; Samples et al., 1986; Seligman et al., 1994).
This adds relevance to some suggestions for
re-forming or re-foundingIWC, where the
empha-sis is placed on turning a whaling con6ention into
a whale con6ention. The self-enforcing nature of
2The last IWC meeting in 1999 confirmed the unenforce-ability of the current International Environmental Agreements (IEA) equilibrium, and the invariance of positions assumed by countries. The 52ndannual Meeting of the International Whal-ing Commission will be held in Australia in July, 2000. Among the issues of interest, the meeting will deal with whale killing methods and associated welfare issues; aboriginal subsistence whaling; socio-economic implications and small type whaling; whale watching, sanctuaries; and co-operation with other or-ganisations. These are ‘new’ issues, which have been ‘inter-nalised’ within IWC annual meetings. Among the other, ‘co-operation with other organizations’ is of great relevance and will deal with inconsistency and incompability between different IEAs. Currently, we observe a ‘paradigm shift,’ which has arisen during the 1990s with the inclusion of the above mentioned issues onto the agenda. It is not clear how the current bargaining on such values may lead to stable solutions by implementation of rules accepted widely. The current pro-cess seems far from achieving effective global management, from establishing a framework for dealing with marine mam-mals’ management. The position expressed by the UK fisheries ministry is clear, the country opposes a return to commercial whaling, both because even limited whaling can encourage illegal whalers, with a possibility that protected species would be hunted, and because whale meat is a luxury food, which does not find sufficient justifications. More sharply, the Prime Minister of New Zealand said she supported Greenpeace efforts to stop ‘scientific’ Japanese whaling. The implicit confl-ict between values is not manageable unless IWC is re-formed to take into account explicitly the whale socio-economic val-ues. It is noteworthy that a special session is also devoted to discuss ‘the Future of IWC’. It will be interesting to analyse on what basis IWC and its stakeholders are managing the transi-tion to a New Commission. The latest news is the IWC secretary proposing that commercial whaling should be al-lowed again for some species. The international community has reacted as usual, opposing parties stating that many countries reject adamantly the proposals they are reaping benefits from whale watching. After last season in the Antarc-tica, Japan has received formal diplomatic protests from sev-eral countries. The conflicts on values and economic benefits becomes steadily more explicit.
M.Mazzanti/Ecological Economics36 (2001) 205 – 221 207
agreements concerningmixed and6alue-conflicting goods is certainly an issue worthy of complemen-tary institutional and economic analysis.
The analysis will focus on the following points, (i) to define to what extent consumptive use and non-use values should be accounted for when dealing with International Environmental Agree-ments (IEA) concerning whales and global mixed goods; (ii) the role and nature of institutions dealing with global issues; (iii) the role of bargain-ing between conflictbargain-ing interests as a focal feature of institution-making process. The key points mentioned above will define what role economics can play with respect to whales and, more gener-ally, to marine mammals (Eagle, 1996). The study has both positive and normative implications, and it is explorative in nature. It is also aimed at generating some controversy and further discussion.
To develop a comprehensive and policy-ori-ented economic analysis, point (i) is necessary but not sufficient. Bulte and Van Kooten (1999) claim, ‘The assumed objective of the IWC, which regulated whaling primarily through the device of moral suasion, is to maximise the sum of use and non use benefits’. This assertion is valid3 but not
sufficient for policy purposes, as IWC does not possess coercive power over its members. It is necessary to analyse how conflicting values are bargained over, and consequently, by what means conflicts might be reduced (Schelling, 1960; Raiffa, 1982). The management of natural re-sources, which have both consumptive and non-consumptive values, must be based on total value maximisation and bargaining. To be clear about what is intended by 6alue, I will refer to a stan-dard Hicksian measure of welfare.
Bargaining outcomes are addressed comparing the (equilibrium) agreement in force, with a self-enforcing equilibrium, which also aims at max-imising — as far as it is possible — the total value of whales. The focus is both on economic
efficiency and on self-enforcing features of bar-gaining solutions. The efficiency criterion requires that bio-ecological attributes should be considered along with monetary and non-monetary costs and benefits of preservation4 (Eggert, 1998). This also
requires that economic and ethical considerations are to be included jointly and explicitly within the bargaining arena.
Kaldor – Hicks criteria are suggested in order to value bargaining welfare implications (Freeman, 1986; Kuronuma and Tisdell, 1993). This is con-sistent with both corner solutions (one party man-aging the resource) and interior bargained solutions (consumptive exploitation and non-use values exercised together). I will recognise the need for implementing realcompensations, in or-der to achieve self-enforcement.
The weakness, instability and economic ineffi-ciency of the current IEA are underlined explic-itly. It is also highlighted how economic efficiency
could be enhanced if monetary transfers between
conflicting parties were allowed. Ethical implica-tions of monetary compensaimplica-tions are considered together with economic efficiency and policy-ef-fectiveness considerations (Stahler, 1995), in order to discuss limits of economic efficiency arguments when ethics represent a major factor. As new rules are to be developed within a re-formed conven-tion, I investigate the possibility of introducing compensatory side payments into the bargaining arena, in order to increase economic efficiency with respect to a ‘ban’ scenario, sustained at present by side-trade threats.
What I believe is necessary is to make opera-tional economic theory within the realm of global institutions. The main conclusion is that IWC should necessarily be formed or, better, re-founded, developing from a ‘whaling’ to a ‘whale’ convention. If the setting up of a new institution proves to be too difficult a task, room for reform exists even within the current IWC. For example, article V of International Convention for the Reg-ulation of Whaling (ICRW) states, ‘‘The amend-ments must be only such as are necessary to carry
3It is valid, in a narrow sense, as the ‘functional value’ of the species should be taken into account as well. For a debate over the limits of conventional economics in addressing func-tional value, see Vatn and Bromley (1994). We assume nar-rowly that non-use value encompasses functional value.
out the objectives and purposes of the Conven-tion and to provide for the conservaConven-tion, devel-opment and optimum utilisation of the whale resource be based on scientific findings, and take into consideration the interests of the consumer
regarding products and the whaling industry’’ (Birnie, 1989, emphasis added). A re-definition of the notion of consumers/users within IWC is a necessary pre-condition for the future estab-lishment of a new convention (Vogel, 1995).
This article suggests that the history of the IWC, the first environmental organisation to be global in scope, points to the weaknesses in con-temporary environmental treaty regimes. Like the whaling convention, many environmental treaties are not well enforced and monitored (Barbier et al., 1990; Blackhurst and Subrama-nian, 1992; Barrett, 1998).
2. The ‘whale’ global issue
Whaling is an ancient industry. Whaling has been evolving and changing, mostly during the last century. The problem was once one of open access leading to over fishing, exacerbated by the intrinsic slow growth of many species.5
This, in addition to decreasing costs of harvest and high price for whale-made products, determined a standard case of exploitation (Walsh, 1999), leading possibly to extinction (Small, 1971; Clark, 1973, 1989; Clark and Lamberson, 1982). Whaling provided the extreme case of over-ex-ploitation of a marine living resource. When IWC was set up in 1946 as a consequence of the ICRW, it was organised to enable whaling countries to conserve the great whales and the associated industry. The only economic interest in whales was concerned with oil and meat. Things could have been worse without the IWC, although it could not prevent whaling countries
from depleting stocks of most species toward extinction.
The year 1972 might be regarded as a turning point. Following decades of declining stocks, many species were endangered toward extinc-tion. In that year, at the United Nations Con-ference on the Human Environment in Stockholm, and in the Marine Mammal Act in the US, Baleen and toothed whales were, for the first time, dealt explicitly with as the species worth conserving because of non-consumptive values. It was the beginning of an institutional deadlock, whales being explicitly valued not only for harvesting benefits, but still managed by a ‘whaling’ convention. An ongoing struggle between whalers, who were interested in the rents associated with ‘fishery’ harvest, and the conservationist/animal welfare lobby began, which saw an end in 1982 with the total ban (moratorium) on whaling. The ban, which took effect from the 1986 and 1985/1986 whaling sea-son, was indicative of the strong support for the ‘non consumptive use’ of whales and (air breathing) marine mammals in general. There developed a powerful anti-whaling majority within IWC (Barstow, 1986). The free access of non-whaling countries into IWC has to be con-sidered the most important point at the root of the current deadlock within the institution. These states joined with the predominant aim of stopping whaling altogether. The convention
be-came polarised into the whalers, who wanted (in
principle) to conserve the stock but exploit the resource, and non-whalers who believe killing is wrong either because of the danger of extinction or regardless how many whales there are in a stock.
The fact that at that time not all species of whale were endangered shows how formally the vote was only aimed at ensuring sustainable stocks, but it was determined implicitly by ani-mal welfare preferences. Nonetheless, on eco-nomic grounds, the moratorium is inefficient, at least with some stocks, unless significant non-market values exist (Horan and Shortle, 1999). Economics’ role is also to measure and make explicit within the bargaining arena such values.
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Table 1
Total economic value of whales and marine mammals
Total economic value
Use value Non-use value
Non
Consumptive use Indirect use values Optional and quasi option Existence value value
consumptive use
Whale watching; Ecological functions Future uses; new Mere conservation; Harvesting
(‘functional values’)
research value information on ecological ‘symbolic’ value and animal welfare motivations values
Whales present two important features as an economic good. On the one hand, whales are characterised by having attached both private consumptive values and non-consumptive values (privately appropriable or non-use public values); they are mixed good, or impure public good. Whaling is an example of consumptive value, whale watching of non-consumptive use value, existence value attached to conservation, that is species non-use value.
At the very least, the values of all agents who declare a stake in a decision should, in principle, be taken into account in the making that final decision. Stakeholder participation in environ-mental decisions is accepted widely (Lockwood, 1999a). Seligman et al. (1994) point out, ‘‘How can decision makers arrive at allocative decision making procedures and outcomes that are seen to be just or legitimate by all stakeholders? Pre-sumably, one approach is to ensure that society’s values and ethical considerations are reflected both in the decision-making process and outcome. The interest is in the institutional processes by which including values into management and de-cision making procedures’’.
Secondly, whales are shared oceanic resources. This makes it necessary to analyse how interna-tional institutions have dealt with whales, what international laws apply to whales, and how those laws are interpreted and implemented. A theory of (socio-economic) bargaining arises as a neces-sary framework for global management.
Both the mixed good and the shared nature of whales have arisen over the past 30 years, dramat-ically changing the nature of whale management,
which had always been characterised by open access exploitation motivated by private con-sumptive values.
I argue that the problem is that the IWC, which
is aimed at managing whales sustainably, has not
fully e6ol6ed, failing to keep up with the complex and conflictual set of values attached intrinsically
to marine mammals. The cultural, symbolic back-ground has changed. Institutions have not.
3. Whale as a mixed good
Whales, as a natural resource, can be depicted economically by a complex set of values/benefits. Table 1 depicts total value components. In addi-tion to direct consumptive value, marine mam-mals can ‘produce’ direct non-consumptive values, and a set of non-consumptive non-use values, ranging from option, pure existence, be-quest value (Kuronuma and Tisdell, 1993). I here add ‘Functional values’, which are crucial in de-termining the biological systemic value of whales. As they are hardly valued by ‘consumers’, the role played by IWC is strengthened in assuring full consideration. I define functional values as the set of non-monetary benefits a species indirectly pro-vides to human beings, by means of sustaining the biological equilibrium of the natural environment where they live. They are essentially non-anthro-pomorphic in nature (Vatn and Bromley, 1994; Ariansen, 1998). Being mixed good, whales repre-sent different values to different people. In this sense, whales are mixed good with jointprovision
4. Whales as a shared good
The mixed good nature of whales has devel-oped in parallel with the recognition of marine resources as shared ‘natural assets’. The shared nature of whales stems from the migratory nature of such marine mammals, whales usually migrate to warmer tropical waters in winter where calves are born (Table 2). No country can ‘manage’ effectively any species of whale through full con-trol of Exclusive Economic Zones (EEZ), so that property rights definition is far from being a sufficient instrument leading to a stable solution to the whale ‘war’ (Edwards, 1994; Hanna and Munasinghe, 1995). Whales can, today, be defined as a mix of open access and common property resources (within EEZ).
It will be shown below how the Law of the Sea has devoted special attention to whales, given their intrinsic nature of global shared resource (global heritage of mankind) and mixed good. Nonetheless, since articles of that treaty are neces-sarily non-definitive in determining the instru-ments of co-operation, a high degree of subjectivity (and conflicts between different inter-pretations) obviously remains (Birnie, 1989).
While the ‘mixed good’ characteristics have re-cently been considered and studied both on em-pirical and theoretical grounds (Conrad, 1989; Kuronuma and Tisdell, 1993, 1994; Loomis and Larson, 1994; Bulte et al., 1998), the need to bring together the mixed and the shared nature has never been recognised. I claim that to achieve a structured and comprehensive scientific frame-work aimed at influencing future negotiations on whales, both features must be considered together within the economic and political arena.
Classifying marine mammals by their mixed good and shared resource nature produces a framework for the socio-economic management of marine resources (Ferrara and Missios, 1998). Two possible cases for analysis are envisaged.
1. (Global and local) mixed goods (i.e. stock of seals; Wilen, 1969; McKelvey, 1987).
2. Global mixed good and shared resource (i.e. whales, sea turtles, dolphins).
Point (b) is the one relevant to the present analysis on whales.
4.1. IWC and other con6entions
The management of whales by IWC is influ-enced by and connected to other international conventions, and to national policies and acts concerning marine mammals and endangered marine species. Reciprocal connections among global conventions are important as far as the reciprocal consistency of policies and decisions is concerned. For example, the effects and consis-tency of trade tools as deterrents are to be as-sessed (Schulz, 1997). Further, trade instruments will be compared with the instruments based on compensatory payments, assessing relative effec-tiveness in terms of social welfare and sustainabil-ity of agreements.
The most relevant International Conventions and National Acts concerned with whales are the following.
1. 1972 UN convention on the Human Environ-ment in Stockholm calls for a 10-year morato-rium on commercial whaling.6
2. 1973 Convention on International trade in en-dangered species (CITES). This convention is relevant since endangered species can be listed either in appendix 1 or appendix 2 in order to prevent exploitation by illegal trade. CITES has provided a useful framework for prevent-ing any whale meat or products from beprevent-ing traded between parties. Following the 1982 ban, a proposal by Seychelles was approved in 1983 to list all whales under appendix 1. Nonetheless, the issue became one of compati-bility between objectives and action of two different but overlapping — as far as whales are concerned — conventions, IWC and CITES. Norway has attempted to de-list minke whales — from appendix II to I — never succeeding so far. A need for a reconcil-iation and co-ordination between IWC and CITES arises.
3. 1982 UN Convention on the Law of the Sea (UNICLOS). This gigantic treaty — 320 arti-cles — has been called a constitution for the
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Table 2
Whale stock size and migration patternsa
Species Total estimated stock size Estimated Migrations Trend
pristine population
20 000/25 000 175 000 MexicoB--\arctic seas Positive recovery
Gray
54 000 Within arctic seas
Bowhead 6000/9000 Negative
Rarest of all
300 Within North Atlantic seas
Right (northern)
South America/AfricaB--\Antarctica Rare+some recovery signs
25 000/30 000 Right
(southern)
95% of initial stock wiped out; some 120 000 All around the world, high latitudes to
10 000 Humpback
recent recovery tropics
World-wide, mostly cooler waters.
320 000 Not endangered
Mostly abundant, some unit stocks Minke
(smallest about 60 000, total about 300 000 Some migratory, some resident great whale)
Heavily depleted (from 250 000 to
Sei 40 000/60 000 110 000 World-wide in temperate waters, tropics
and southern hemisphere 60 000)
120 000 Some resident some migratory between Depleted but not highly endangered
Fin 410 000
warm and cool southern waters 10 000
Blue 190 000 Patchy world-wide distribution, some Some stocks may never recover, some
resident, some migratory between low (i.e. Mexico) have shown positive signs and high latitudes
Not strictly endangered Patchy world-wide distribution, from
130 000
Sperm 98 000
tropics to arctic
oceans, and it should be ranked as one of the most important pieces of international law. It provides a massive extension of coastal state jurisdiction over adjacent ocean space, giving the message that high-seas resources should be managed internationally. This means that defi-nition of property rights should occur by co-operation sustained by IWC members, which is exactly the issue I am attempting to throw some light on. Article 56 introduced an exclu-sive economic zone of 200 miles, which was adopted to assign property rights on manage-ment of living and non-living natural re-sources. Since 1982, many countries have enforced it and many developing countries are sympathetic because it strengthens their bar-gaining power. Nonetheless, full ratification has not been achieved. This means that the framework for ocean exploitation is still hotly contested. Furthermore, the issue becomes more complicated when highly migratory spe-cies, as cetaceans, are examined (De Klemm, 1989). Such marine resources fall in theshared
stocks — highly migratory category7
, and they are left to international treaty organisations. IWC is currently the one playing the predomi-nant role in the case of whales (Birnie, 1989). Article 65 deals with it by stating that states must cooperate in conserving marine mam-mals. Cetaceans represent an exception since all countries, not only the range states, should participate in agreements. The issue is, nonetheless, unsettled, as range states may claim application of the consistency principle by which the management of resources should be consistent with the one chosen by coastal states.
4. World Trade Organisation (WTO). WTO rules and articles are worth considering because uni-lateral trade policies (i.e. US trade policies)
aimed at enforcing, by means of threats, spe-cific IEA, must be consistent with WTO arti-cles (given the involved states are WTO members). This could be the case of commer-cial threats menaced by US to Norway and Iceland, in case of a resumption of whaling. The extent to which such threats are credible under international law is affecting the whale bargaining game. Article XI(1) of WTO pro-hibits members from imposing restrictions on imports and exports. Moreover, no exceptions exist as far as conservation of natural re-sources is concerned. Articles XX(b) and (g) allows governments to impose trade measures that are necessary to protect human, animal or plant life or health, and to take measures relating conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production and consumption. It seems that the only cases where such threats are plausible and consistent might be (a) where another interna-tional treaty permits the use of trade measures to protect species (i.e. CITES); in this case we could argue a priority over WTO; (b) when trade measures are established by the conven-tion concerned with the resource under analy-sis; (c) when the resource is under the jurisdiction of the damaged agent. It follows that the IWC agenda should contemplate trade sanctions in order to avoid WTO incon-sistency. It is not WTO the institution that should address global issues concerning spe-cies; the matter is one of providing responsible institutions with agreed rules and effective in-struments specifically aimed at managing global resources.
5. 1972 US Marine Mammal Protection Act. The basic scheme is unchanged although it has gone through several amendments. The central feature is a moratorium on all taking of all marine mammals and a ban on imports. 6. 1976 Magnuson Fishery Conservation and
Management Act. The act applies within the US EEZ zone. The relevant fact for whales is the Packwood amendment to the act in 1979, which provides for an automatic 50% reduc-tion in fishing allocareduc-tions within EEZ for
M.Mazzanti/Ecological Economics36 (2001) 205 – 221 213
those countries undermining conservation pro-grammes managed by international conven-tion.8
Nonetheless, the Packwood amendment may have lost some relevance.
7. 1976 Fishery Conservation and Management Act and Pelly amendment of 1979. The amendment provides that the US President may restrict import into the USA of fish prod-ucts from a country that undermines conserva-tion programmes under international conventions.9
Other national acts are, 1978 New Zealand Marine Mammal Protection Act, by which New Zealand asserts jurisdiction by their nationals on the high sea; Australian Whale Protection Act, 1980 (Birnie, 1989; De Klemm, 1989).
A first conclusion can be that whales, being both a mixed good and a shared resource, make it necessary that many international institutions deal with those marine mammals. Co-operation and
consistency of actions and rules are to be sought
among global conventions and national acts, so the degree of complexity is emphasised further. These facts raise even further the necessity of re-forming or re-founding IWC. Re-founding would be a process aimed at managing whales and reducing ambiguities, inconsistency and confl-icts within IWC and among IWC and other conventions.10
As far as IWC is concerned, the big challenge is the reform of the international institution(s) deal-ing with and managdeal-ing whales, by attractdeal-ing the membership of all whaling and anti-whaling coun-tries (recall unanimity is needed within IWC for structural reforms of the convention, as a revision of the treaty was not included as an option within ICWR (Birnie, 1989)). A great bargaining effort is needed to achieve such an agreement, as conflict-ing values over the use of common shared re-source are to be drawn together and reduced.
As stressed by Swanson (1991), the main prob-lems in reaching an agreement on a global oceanic resource arefree riding(easy riding)and non-com
-pliance. Free riding (easy riding) is caused by
opportunistic behaviour (incentive to cheat when the other co-operates); non-compliance follows from country heterogeneity, which characterises international issues and is associated often with uneven distribution of agreement costs. Diversity and asymmetries are not only of an economic, but also of a cultural nature.
As far as whales are concerned, interested parties have conflicting interests and values on the use of the resource. Non-compliance follows as a result. A strong bargaining effort is needed. The role of side payments and trade threats in
achiev-ing and enforcinga potential global optimum will
be explored below.
8The President may direct the Secretary of the Treasury to prohibit the bringing or the importation into the US of any products from the offending countries for any duration and to the extent that such prohibitions are sanctioned by WTO.
9Under the Pelly amendment, the US can restrict fish imports totally. In the case of Norway, this amounts in 1997 to a value of 900 million NOK loss, 4% of total Norwegian exports. Recall that Norwegian whaling business was about 1 million NOK over the period 1993 – 1996. Instead a restriction of Japanese fishing within US EEZ amounted to ten times the Japanese whaling business. Boycott actions are another way of menacing. Conrad and Bjorndal (1993) estimate at about 10 million NOK per year economic damage. Even this threat is likely to fade away over time, so is non-credible.
10The main inconsistency arises between IWC and WTO. Trade threats, which have been menaced so far as a deterrent to whaling, represent a myopic tool, insofar as they do not provide stability of agreements and self-enforcement. Further-more, they are deemed to be WTO-inconsistent. More
Table 3
Species and unit stocks under a ‘decentralised’ approach — how whales could be classified in order to pursue a decentralised approach to bargaininga
North Pacific
Southern hemisphere North Atlantic
Protected Right
Protected
Bowhead Not present Protected
Protected
Not present Not present
Gray
Humpback Protected
Protected Blue
Fin Protected Protected/sustained
Protected Protected/sustained
Sei
Initial Bryde’s
Initial/sustained
Initial Sustained
Minke
Sustained
Sperm protected/initial Protected
aAdapted from Kuronuma and Tisdell (1993).
5. Bargaining and side payments
As far as the specific of bargaining is con-cerned, it is worth noting two points:
1. The costliness of bargaining between interested parties may be not very high if proper institu-tions and rules are set up. Ambiguity of objec-tives and lack of commonly shared rules increase costliness of bargaining. This could allow a ‘Coasian’ bargaining between parties (Harsany, 1989; Merrifield, 1993), aimed at achieving the most valuable use of the re-source. The success of such a deal depends mostly on the institutional capacity to reduce transaction costs. IWC should play this role. The valuation and consequential bargaining process should deal, for whales, with each species and unit stocks separately (see Table 3). Similarly, sustainability of harvest refers to unit stocks, not to the species as a whole. 2. The current ban under enforcement has led to
anex post bargaining process(without
redistri-butions), and some countries (Norway, Japan, Iceland, Russia and South Korea) are not accepting it because the costs for them are higher than the benefit. What I want to ex-plore and suggest is an ex ante bargaining process with redistributions. If the first frame-work has been demonstrated to be inefficient, an ex ante bargaining possesses the potential to perform better.
There are two causes by which a ban, even if it could be proved optimal in the short run, is not optimal and self-enforceable in the long run. First, enforcement is effective if and only if cir-cumvention costs are higher than incentives to catch; secondly, a ban may change the manage-ment system from a property right based to open access (Schulz, 1997). Circumvention costs have been increased by means of threatened trade sanc-tions. Nonetheless, inconsistency of trade mea-sures weakens their credibility as deterrents. With non-credible threats, agreements are not sustain-able as Nash bargaining solutions (Raiffa, 1982; Binmore, 1992; Binmore et al., 1986). It follows that trade sanctions do not make the deal self-enforcing.
The suggestion is that an ex ante bargaining process with redistributions is a better theoretical framework for policy making. The costliness of the ex ante approach, definition of individual shares, total global/regional quotas and monitor-ing, may be reduced by using recurrent short term ‘contracts’ between parties (Williamson, 1985). By means of short-term agreements (i.e. 6 – 8 years) reciprocity could be increased and opportunistic behaviour discouraged. Flexibility is also assured to adapt contracts to emerging situations.
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been demonstrated to potentially improve the so-cial welfare from bargaining (Munro, 1979; Hamalainen et al., 1984; Carraro and Siniscalco, 1997). I claim that a new whale convention might explore and include such a possibility.
Munro (1979, 1986, 1996) demonstrates that, by allowing side payments in a shared and joint management fishery, difficulties are reduced with respect to the benchmark without compensation. As he considers two agents with different discount rates, optimal payments policy calls for the low-discount-rate country to buy out the other coun-try at the beginning of the game. Both will be better off and the choice is determined by prefer-ences. The ‘whale issue’ is more complicated, as whales are mammals with attached mixed conflict-ing values on use. Discount rates are not the only difference leading to conflicts in management. I argue that, in the presence of substantially differ-ent discount rates, the low country preferences should be given more weight in the present and eventually dominate the more distant future. If discount rates are assumed to be equal, compen-sations should be paid according to relative gains and losses, framing the bargaining on Kaldor – Hicks criterion of welfare. The mixed good-shared resource paradigm can provide a useful general framework for bargaining analysis and institution making.
Summing up, joint owners value whale stocks differently. The optimal outcome is the one ap-pealing to common sense, that is assigning the rights of exploitation and use, to ‘consume’ more of the stock, to the agents that value the resource relatively more, eventually compensating other stakeholders by means of transfers of utility.
Having introduced the rationale for setting aside payments into the bargaining arena, it is worth acknowledging some problematic points.
Who has property rights on whales? That is,
should a victim pay principle (VPP) or a pol-luter pay principle (PPP) be adopted? Although economic efficiency is not affected by this choice, welfare distribution is. Do the whalers have rights to exploit the resource? Does the global community have the rights to ‘con-serve’? The Law of the Sea gives clear but still ambiguous guidelines, assessing that countries
should cooperate in order to achieve sustain-able use of migrating resources. Migrating whales should be managed co-operatively, and stricter guidelines should apply to marine mammals and to the endangered marine spe-cies (Birnie, 1989; Kaitala and Munro, 1993).
The property right structure is relevant both
for structuring acceptable surveys aimed at eliciting non-use values, and for setting up bargaining rules at the institutional level. Ma¨ler (1992) suggests that, forpolicy purposes, the victim pays principle should receive more attention as it may prove to be more effective in achieving desired outcomes by means of side compensatory payments (Rettig, 1994).
Free riding behaviour among non-users may
lead to sub-optimal side payments and so to private sub-optimal provision of the whale stock as a public good. Expressed values may turn out to be lower than actual benefits.
Strategic behaviour by agents receiving
com-pensations is to be carefully studied. Incentives to cheat may exist before and after the receipt of bargained compensation.
Side payments could be questioned on ethical
grounds. It is highly probable that ‘pro whale’ organisations representing non-use values would never accept to ‘pay’ money for saving whales, tending to express lexicographic prefer-ences over marine mammals. While there is general acceptance of the polluter pay princi-ple, the idea of anti-pollution groups paying polluters not to pollute (Ma¨ler, 1992) would probably be unacceptable to most stakeholders.
accept monetary compensations for a loss.11 The
issue further needs empirical investigation (Loomis and Larson, 1994; Loomis and White, 1996). Nonetheless, the willingness to contribute financially to the non-consumptive management of the resource might be important for the long-term sustainability of the agreement.
I am aware that the point is provocative. The possibility that compensatory measures might be an incentive and support self-enforcing agree-ments is nevertheless highlighted.12
I am also aware that implementation of side payments (compensations to losers) together with a Kaldor – Hicks (KH)13
criterion can be justified only on economic-ethical grounds (Freeman, 1986), the KH decision rule being the more ‘ethi-cal’ solution within neo-classic measures of social welfare change. Nonetheless, extending the do-main of economics to more holistic and ethical-rooted approaches, an atomistic framework could be sharply inconsistent with broader definitions of socio-economic welfare (Norgaard, 1989).
6. Conclusions
The essay attempts to develop a new
frame-work for addressing the management of whales (and marine mammals/resources) framed also on economic grounds. It extends the existing litera-ture (Kuronuma and Tisdell, 1993; Bulte and Van Kooten, 1999; Bulte et al., 1998) by provid-ing conceptual insights on institution makprovid-ing and bargaining. Although the topic may not be novel, it does deserve further study, mostly focusing on sustainability and enforcement of environmental agreements (Barrett, 1992, 1994; Folmer and Musu, 1992) concerned with species that are both an economic mixed good and shared re-source. What I have tried to stress is the neces-sity to bring together (i) the management based on total value of the species; (ii) the bargaining on shared and mixed resources; and (iii) IEA and institution policy making in a common frame-work, and investigating the possibility of setting up a ‘new’ whale convention on such a frame-work.
The current IWC effort aimed at enforcing a stable IEA on whales has not been successful so far. Following some years of stability of the deal after the ban, the situation is now one of sharp polarisation and non-compliance. Anti-whaling countries — possessing a clear majority within IWC — continue to vote a total ban on whaling, while whaling countries have resumed small-scale whaling and have threatened (starting to set up a parallel convention named North Alliance) to leave IWC. The majority clearly lacks the retalia-tory power and the institutional mechanisms to enforce the deal in a long-run perspective. Creating a new whaling convention formed by whaling nations alone would not lead surely to optimal management. Consumers demanding non-use stock-based values should be the agents more concerned with enforceability and su-stainability of whale agreements, preventing whaling countries from establishing their conven-tion.
During the 1997 IWC meeting, Ireland intro-duced a proposal for discussion, which was in-tended to break the deadlock. That package could represent an example of a deal, in which compensatory payments may be recognised and included explicitly (Japan is accused of using
11We note that the acceptance of a VPP is far from being achieved. Anti-whaling countries have been refusing to pay for monitoring and other activities, claiming whalers should pay. 12A similar argument is presented by Barbier et al. (1990) as far as management of elephants is concerned. Some similarities exist between the international management of whales and elephants. And the effectiveness of a ban is disputed for both species on economic grounds. Given the differences between species — elephants are land resources with a different set of opportunity costs — the rationale for claiming economic arguments is, nonetheless, the same; bans are not self-enforc-ing institutions, at least not in the long run. For a critical debate on the issue, see Schulz (1997).
M.Mazzanti/Ecological Economics36 (2001) 205 – 221 217
overseas aid to ‘buy’ pro-whaling votes).14 The
proposal, after heard, discussion continues year by year, whalers do not want to lose power within the convention. What if a (menaced) division, sooner or later, occurs?
An agreement on what values IWC should manage and bargain has not been reached. Coun-tries supporting non-consumptive uses have been exploiting a ‘whaling’ framework (the current IWC) to pursue their goals. The equilibrium, I stress, is inefficient clearly in economic terms, unstable and not self-enforcing. A new institution should be set up, from a ‘whaling’ one to a ‘whale’ one. But will it be possible to begin to attract the unanimity required to revise the ICRW? It appears that the flexibility of ICRW schedule has been used to the advantage of whales. But I claim that time is ready for a new step forward, for a re-founded and self-enforcing new convention. Both conservationists and whalers seem to reject any revision; this is ineffi-cient for whale management, and for whales.
I can sum up results and suggestions for further research by underlying the following.
If side payments can lead potentially to first
best outcomes, second best economic solutions are to be explored as well. To date, economic arguments have been absent from the IWC arena. Indirect non-use (Davis and Tisdell, 1999) and non-use values (Barstow, 1986) should explicitly be recognised as elements of the resource total value on which bargaining should be centred.
Compared with side payments, policies based
on trade — basically trade threats — show inconsistency with international conventions, then leading to temporarily sustainable agree-ment. Moreover, a mainstream conclusion in environmental policy is to neglect trade policy as a first best policy to manage IEA (Black-hurst and Subramanian, 1992). Side payments have been advocated often as a possible tool
leading to efficient solutions (Munro, 1979; Ma¨ler, 1992).
Side payments require the acceptance of a
‘vic-tim pays principle’ (Ma¨ler, 1992). I argue that a victim pays principle is to be preferred as far as sustainability of agreements is concerned. This for two reasons: first, non-consumptive values have to be captured and made visible to the international community, and a visible pay-ment could better achieve the result. Secondly, retaliatory power seems to be in favour of whaling countries.
Monetary payments could be used both to
compensate whalers and to fund research, con-servation activities and monitoring. Monitor-ing is a crucial part of the ex ante approach to IEA (along with assessment of optimal total quota and individual share distribution).
An ex ante approach could present drawbacks
that are not to be underestimated. Reaching an agreement may be very costly, if the aim is to define an optimal stock level (stock harvest vector taking account of total value) and opti-mal side payments, then monitoring the deal. If bargaining, and associated benefit transfers, were too costly (significant bargaining and en-forcement costs may lead to inapplicability of the deal), a second best solution is represented by an auction, finalised at giving the right of managing the entire stockto the agent valuing the resource the most, for a determined period of time. Marginal benefit equalisation is substi-tuted by a corner solution, but some kind of economic (not only biological and/or political) approach would be introduced. An auction could be the optimal policy solution whenever agents have different discount rates, so that who values the resource the most should man-age it (obviously being the higher bidder) (Munro, 1979). Different discount rates, with non-users discounting the future the less, possi-bly represent the whale bargaining situation. Three scenarios, given below, are likely to occur in the future.
1. IWC members will be able to bargain on different conflicting values within a re-formed
whaling convention, by means of new instru-ments and rules.
2. Bargaining will occur within a re-founded Global Whale Convention, explicitly struc-tured on total components of value.
3. Two different and conflicting institutions, ‘whaling’- and ‘whale’-oriented, respectively, will be generated.
Economic values and instruments, together with cultural and political factors (Andresen, 1989), might play a role for the establishment of a new international regime to manage whales as global resource.
7. Further reading
Allen (1973), Barrett (1990, 1995), Bjorndal and Conrad (1998), Carraro and Siniscalco (1995), Chandler and Tulkens (1992), Conrad (1995), Conrad and Clark (1987), Ecchia and Mariotti (1997), Freeman (1993, 1991), Gulland (1988), Hagemann (1985), Hall (1988), Hanley et al. (1997), Hannesson (1987), Hoyt (1995a,b), IWC (1993), Lockwood (1998, 1996), Luce and Raiffa (1967), McGoodwin (1990), Myerson (1991, 1997), Nash (1950, 1953), Rubinstein (1982), Siebert (1995), Spence (1973), Stephen (1987), Tulkens (1997), Tullock (1950), Witt (1986), Swanson et al. (1997).
Acknowledgments
I am greatly indebted to Prof. Timothy Swan-son, Prof. David W. Pearce and Dr. Joe Swierzbinski for research assistance and invalu-able support during the first stages of my work at CSERGE and UCL in London. The IWC staff in Cambridge was very supportive and helpful throughout the research; I am also clearly in-debted to them. The paper has benefitted from comments and suggestions by Prof. Scott Barrett, Anthony Brunello and James McGregor. I also thank Prof. Paolo Pini for having provided sup-port. I am grateful to four anonymous referees for most constructive comments on an earlier version of the paper. Responsibility for its contents is mine alone. The work is intensely dedicated to
Sandra.
Appendix A. IWC membership
1998 IWC members are — Antigua and Bar-buda, Argentina, Australia, Austria, Brazil, Chile, China, Costa Rica, Denmark, Dominica, Finland, France, Germany, Grenada, India, Ireland, Italy, Japan, Kenya, Korea, Mexico, Monaco, Nether-lands, New Zealand, Norway, Oman, Peru, Rus-sia, Saint Lucia, Saint Vincent and Grenadines, Senegal, Solomon Islands, South Africa, Spain, Sweden, Switzerland, UK, USA, and Venezuela.
The 40 members represent six whaling support-ing nations, namely, Japan, Norway, Saint Lucia, Saint Vincent, Korea, Russia (Iceland is outside IWC). Within the 34 ‘anti whaling’ group, we face heterogeneous, moderate countries (i.e. UK) and non-moderate countries (Australia), interested both in direct and indirect non-consumptive ues, and countries interested only in indirect val-ues (Germany, Sweden, Switzerland and Austria). Membership is quite stable with new entries and exits. In 1982, when the ban was voted, there were 40 countries. Twenty-three voted for the ban, 7 against (Brazil, Korea, Norway, Iceland, Peru, Japan and USSR), 5 abstained. Brazil now seems on the anti-whaling side, while some new entrants have joined the whalers (i.e. St. Vincent). A comparison to the vote on the Indian Ocean sanctuary in 1994 is interesting — 23 votes in favour, 1 against, and 6 political abstentions by whaling countries. The polarisation seems to be stable within IWC, 6 – 7 pro whaling versus about 30 anti-whaling countries (taking account of absents).
This should clearly show why and how IWC should be re-formed. Given the non-efficient out-come of majority voting, a bargaining scheme must be set up to explicitly take into account of all cetacean values.
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