Course:ECON371/UBCO2009WT1/GROUP2/Article4

Group 2

Article 4: From Deep Pacific, Ugly and Tasty, With a Catch

Summary

As society becomes increasingly concerned with sustainability, industry has attempted to find products to offer which are of less concern to the general populous. One such case is the hoki fishery in New Zealand. A deepwater fish (that is more than unattractive), the hoki has a relatively short lifetime with a quick pace of reproduction - generally thought to be the 'keys to a sustainable fishery'. The hoki is often the alternative used when a product is sold simply as 'fish' - McDonald's used 7 million kilograms per year for there Filet'O'Fish.

Large scale fishing of the hoki began in NZ in 1996 with a very large (275000 ton) quota. In 2001 the fishery was given certification by the Marine Stewardship Council (the very same as in Article 3) letting consumers know the fish was 'sustainable and well managed'. Despite the certification, New Zealand has steadily reduced the yearly quota from 275 000 tons in 2001 to 100 000 in 2008. This cutback in quota was the result of some signs the fishery was suffering: large drops in hoki spawns, ecosystem damage, falling catches (without increased effort), and accidental death of ecosystem top predators. Despite these signs and the plea of the World Wildlife Fund, the fish received recertification as recently as 2007.

New Zealand's Ministry of Fisheries claims that their cutbacks in quota have halted the damage done to the hoki ecosystem and that the fish is springing back. While populations appear to have stopped declining, many organizations are still concerned about side effects of this fishery - namely the accidental killing of other large oceanlife.

What happened in 2001

With the certification as 'sustainable and well managed' by the Marine Stewardship Council in 2001, demand for the hoki increased, as restaurants (largely chain restaurants) saw that they could mark their fish products as environmentally friendly - a large pull for many consumers in this last decade. However, New Zealand held firm with their catch quota, actually decreasing it over the following years instead of increasing to hold the price firm.

Ecosystem damage and balance of trade

Most of people have eaten fish like red snapper, monkfish and tuna at some point in their lives, but until recently it would have been other kinds of fish like hoki. Now the hoki fishery cannot remain in healthy condition. Demand for fish and its related production continues to grow, however. The response to this demand has been to ramp up the North Pacific fisheries of similar new found species to the New Zealand. Now nearly most fish stick, fast-food or breaded fish is starting with hoki. Despite this, fisheries are trying to make these fish both economical and sustainable.

However, will the nature of fish allow New Zealand export to increase their supply to meet demand? The answer is highly unlikely as there is only so much fish in New Zealand waters at a certain time. Price Elasticity of Supply would be relatively inelastic in the short-run. Besides that, New Zealand would not over-fish as it might threaten their deeper waters source of revenue. This will not only hinder the production of that will probably improve Balance of trade, but excessive demand for fish relative to a slow-growing supply will push prices of fish up. Terms of Trade will improve but it can be argued whether Balance of trade will change or not due to the uncertainty to traders caused by fluctuating prices of fish and ecosystem damage. People must make a living, supply your customers with the finest quality fish, and respect the balance at the same time. By sustainable harvest, "to keep in existence; to maintain".

Reoccurring diminishing population

It seams to be an accurate realization that as soon as this "blue seal" reaches a species of fish, the population is already being fished and produced on a global scale to massive market demands. Haki as said in article three is suffering such a fate, now brought on to the Hoki fish, this seems to act only as a efficient justification in the ability of large chains and fisheries to provide longevity to an already constant menu choice. This is a dangerous catalyst in over fishing certain species because not only is the populous rigorously fished to begin with, it allows companies to ignore warnings by most local and world surveying activist groups, and increase supply to an according demand market brought in light of such media publication. Not only this, but new major and minor chain restaurants, grocery stores, and individual consumers will be intrigued and cohereced into producing a menu with such listing fish as Hoki. All of these fish seem to be suffering the same fate, endangered population and thus detrimental effects on the ecosystem. Orange Roughey was concidered to be in a similar position in previous years, and now look at the populous of this species. It is clear that Hoki is acting as a substitute in the category of universal global mass production of numerous varieties of serving fish, and will sooner than later suffer the same fate if proper action is not taken. As stated in the article some differences occur between Hoki and Orange Roughy, for example a higher spawn rate, and shorter life expectancy. And this is a contribution to the ability to increase sustainability , but it is still none the less being sustained. New Zealand has already cut limit catches from 250 000 tons to 100 000 tons, but has not yet declared any underlying issues as to why. This is a clear realization of depletion in populous, but without a public warning, demand is not likely to decrease as rampantly. Because this fish is produced on such a massive global scale, in various forms (most of which are pre-made and packaged without a species of fish labeled), it is already difficult enough for the consumer to become aware of depletion, especially without public notification.

Hoki as a Green Good & the Effects of Misleading Labeling

It seems one if the most interesting things that comes up in this article is related to the article analyzed last week. In our analysis of that article, the fish stocks were being certified by the Marine Stewardship Council and it was posed that possibly this promotion as a Green Good, if not accurate, could affect demand and therefor stocks of fish. As a Green Good, people are choosing Hoki over other fish, reducing demand for fish not harvested sustainably. It is almost convenient that this week we encounter a perfect example of what we had been fearing. It can be theorized that the "sustainably harvested" label on Hoki led to a lower perceived external cost for this product, leading the market to reach an equilibrium that was not actually the socially efficient one. The misleading certification from the Marine Stewardship council lead to the Private + External cost curve being too low, when in reality, this Total Social Cost was higher. This low curve caused a false equilibrium further to the right (at higher quantities) than it should have been at, leading to damage to the stocks and future harvests (non-sustainable practices). It could also be guessed that part of this problem was due to abuse of this open access resource, if the New Zealand Fishing industry WAS being sustainable and outside ships from other countries were harvesting fish illegally...

Prof's Comments

Yes, another case where misleading labeling may be leading to excessive fishing. However, the fact that the quota has been reduced means that this may be a well managed fishery with some initial learning, or in fact dynamically optimal harvesting of a part of the stock - which is for the Natural Resource Economics course. There does seem to be a cascade going on, from one species to the next. When one species is overexploited, the marginal cost of catching fish, the supply curve, shifts back. Given a constant or even outward shifting demand, this results in a higher price. As a result, species that were formerly uneconomic become economic to exploit. Improved technology also reduces the cost of catching fish, increasing the number of species that can be harvested and brought to market. Together, we get a cascade down the food chain.