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STATUS QUO BIAS AND CONSERVATION POLICY REFORM: THE CASE OF THE COMMON FISHERIES

POLICY REFORM OF 2002

Matthew Oakes BergerThursday 26 August 2010

Master's thesis forMSc European Political Economy

The London School of Economics and Political ScienceThe European Institute

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Table of Contents

1. Introduction……………………………………………………………………………………………………….3

1.1 Puzzle and hypothesis……………………………………………………………...……………………………41.2 Methodology………………………………………………………………………….……………………………4

2. Theoretical background……………………………………………………………..………………………….6

2.1 Status quo bias in policy reform……………………………………………………….……………………..62.2 Status quo bias in EU negotiations………………………………………………………...

………………….72.3 Some general fisheries policy background…………………………………………………….

……………8

3. Status quo biases in EU fisheries policy…………………………………………………………...……...12

3.1 Legal and historical background of the CFP…………………………………………………….………...12

3.2 A model of CFP decision-making…………………………………………………………………………….143.3 Establishing its

ineffectiveness……………………………………………………………………………….163.4 Explaining the persistence of this

ineffectiveness……………………………………………………..….17

4. Case study: The 2002reform………………………………………………………………………………...….20

4.1 Partially overcoming a status quobias………………………………………………………………………20

4.1.1 Overcoming: the cases of funds and policy introduction………………………………...……………20

4.1.2 But only partially: the cases of TACs………………………………………………………………...…….22

4.2 Explaining thebreakthrough………………………………………………………………………………..…24

4.2.1 Rule Changes………………………………………………………………………………………………..….24

4.2.2 ExternalChanges……………………………………………………………………………………………...26

4.2.3 Iteratedgames…………………………………………………………………………………………….....…27

4.3 A qualitative comparative analysis of previousreforms…………………………………………..…..…28

4.4 Case study conclusions…………………………………………………………………………………...……31

5. Discussion……………………………………………………………………………………………………..……32

5.1 Effects of the LisbonTreaty……………………………………………………………………………………32

5.2 Effects of future accessions…………………………………………………………………………..……….32

5.3 The 2012 reforms…………………………………………………………………………………………...……33

5.5 Conclusion………………………………………………………………………………………………..……....34

Works cited…………………………………………………………………………………………………….……..35

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1. Introduction

The E.U's Common Fisheries Policy is a fascinating puzzle of a policy

problem where domestic politics, theories of integration, history, environmental

regulation and game theory all come together in a perfect storm that has

resulted in one of the most vilified of community policies. But the CFP means

well. Originally, it was needed to prevent conflict over a resource whose

finiteness was becoming more and more apparent. Since then, it has become a

tool to ensure the sustainability of both fish stocks and the fishing industry that

depends on them.

Its success at conserving either of these entities has been negligible.

When looked at in the broader context of international fisheries policies

generally, the difficulty of the policy's task is clear: The FAO says that 80 percent

of the world's fish stocks for which data is available are fully or overexploited

(FAO 2009: 34). The European Commission estimates that 88 percent of EU

stocks are overfished (Commission 2009b: 7). Clearly, the CFP is not doing well

even by the low standards of transnational fisheries regimes.

The scheduled reforms of the policy have done little to change this. In fact,

reforms have repeatedly reiterated the existing and suboptimal policy outcomes

of the CFP, policy outcomes that have satisfied virtually none of the

stakeholders. This paper contends that this is due to the nasty and pernicious

status quo policy bias that adheres in the CFP. But this leads immediately to

another question: How can this status quo bias be overcome?

In fact, it was partially overcome in 2002, as several of the most harmful

aspects of the policy – particularly in terms of the objective of conserving the fish

stocks on which the industry depends – were done away with or significantly

modified and several new priorities introduced. The reform was far from

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comprehensive and it has become clear in the years since it was agreed that a

significant and detrimental status quo bias still remains in many areas, but the

reforms that did take place indicate that the CFP and other often-criticized but

rarely reformed policies – such as the Common Agricultural Policy – are not

doomed to forever reiterating a suboptimal policy status quo.

1.1 Puzzle and hypothesis

The puzzle ultimately addressed in this paper, then, is how, despite a

terrible track record, have status quo biases been at least partially overcome in

the case of CFP and under what conditions can significant reforms to the CFP and

other conservation-related policies occur?

My proposed answer to this question, which will be presented and

evaluated in this paper, is that there is a deep status quo bias in CFP decision-

making that has had quantifiable effects on policy outcomes and that still exists

today, but that changes in changes in voting rules, changes in the external

policymaking environment, and an iterated game that eventually leads to an

awareness of the suboptimal outcomes resulting from acting based on short-

term interests have led to reforms being taken on some – though only some –

aspects of the policy and it is conceivable that such conditions could lead to

further reform.

This question has been discussed in the literature before, but what I add to

the discussion is the case study of the 2002 reforms and, significantly, the

contention that they at least somewhat went against the accepted narrative that

significant CFP reform is impossible.

To make this case the paper will be structured thus: First it will place itself

and its arguments in the theoretical context of other analyses that have been

done on status quo biases affecting policy reforms in the EU. In section 3 it will

look at the legal and political landscape of the CFP in order to assess the extent

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allowing for the 2002 reform are in fact necessary conditions, though necessarily

sufficient conditions, for CFP reform generally.

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2. Theoretical background

2.1 Status quo bias in policy reform

A preference for a status quo that is both economically inefficient and

surprisingly difficult to dislodge has long been identified as a partial cause of

suboptimal policies. It is a fairly intuitive idea – decisions will disproportionately

favor the status quo when the status quo is an option or tend to at least

approximate that status quo option as closely as possible, even when other, new

options would clearly be the better choices. Samuelson and Zeckhauser (1988)

found that this bias occurs in individual decision making, to the point that the

bias is "substantial in important real decisions" (p. 7). Later, Fernandez and

Rodrik (1991) applied the idea in answering the question of why governments

often fail to adopt policies that would be economically efficiency-enhancing. They

found that a status quo bias emerged from an inability to pinpoint who would

gain and lose from possible reforms – and thus an inability to see that a majority

of players would gain.

A variety of phenomena can contribute to a status quo bias, including risk

aversion and the endowment effect. Risk aversion does not do much to explain

the lack of CFP reform so it will not be discussed in this paper, but the

endowment effect plays a very important role in CFP decision making,

particularly when it comes to deciding how much a certain fish a certain country

can catch and how much structural funds will be allotted to a country's fishing

industry. The concept of the endowment effect was first developed by Thaler

(1980). It says that actors will generally be less reluctant to lose something they

already have than to gain something they do not. In the case of the Common

Fisheries Policy, many member states have over time come to look at the fishing

quotas and structural funds allotted them as endowments, thus making them

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less inclined to accept reductions in these numbers despite the long-term

benefits that would result.

Though status quo biases are widespread, it is the phenomena which

causes these biases that makes them interesting and observable. The EU has

provided particularly fertile ground for researching and explaining how status

quo biases originate and persist.

2.2 Status quo bias in EU negotiations

Negotiations are at the heart of the EU's operations, and these

negotiations take place in the context of a number of factors, all of which are

repeatedly influencing each other and thus continually shaping the complex and

interconnected setting in which the negotiations take place. These negotiations

are constrained not only by Commission preferences and member state

preferences (as represented on the Councils of Ministers) but by the institutional

setting created by previous configurations of preferences, by previous

negotiations and by their resulting policies. Following the definitions given by

new institutionalists like Hall and Taylor (1996) this institutional setting includes

the formal decision-making rules and more informal procedures that constrain

the negotiation game.

The actions of member states and, especially, of the Commission are, of

course, constrained by the preferences of (other) member states, as well.

Scharpf (1997) put forward the concept of an "actor-centered institutionalism"

where actors' interests are in many ways shaped by the institutions in which

they are acting. Thus both interests and institutions "matter" – and they matter

very much in the maintenance of status quo policies. This is in no small part due

to the path dependency (Pierson 1996) that permeates much of EU

policymaking. When negotiating a policy outcome, both the present policy

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configuration, past configurations and the effect the outcomes will have on

future configurations cast a "shadow" of influence over the negotiations (Friis

and Murphy 1999: 215). No negotiation begins with a blank slate on which the

intrinsically optimal policy can be agreed. The path dependency means that, for

better or worse, new policies arise out of old policies and the optimal policy

outcome is really just the optimal policy outcome within the particular

institutional and historical context in which the policymaking is taking place. The

large status quo bias arising from a policy-setting system so dependent on the

past is clear.

Tsebelis (1990) refers to negotiations taking place in this complex

environment as a nested game, and Payne (2000) has pointed out the nested-

game characteristics of CFP negotiations, as will be discussed in the following

section.

This paper thus fits into the EU negotiation literature by further defining

the conditions that lead to a status quo bias in these negotiations, the extent of

that bias and the conditions that may allow for reforms to occur. To do this it will

analyze a specific area of EU policy negotiations, the CFP, in which this anti-

reform bias is especially strong, and analyze it using mainly game-theory

terminology with an emphasis on the institutions constraining actors' choices.

A major study similar to this one has already been done on the EU's

Common Agricultural Policy (Pokrivcak et al. 2006), where conditions allowing a

status quo bias in EU policymaking were laid out. Taking into account the

somewhat shared legal background of the CFP and CAP – as well as the unique

problems the CFP presents – many of the ideas from that paper will be applied

to the CFP in this one. In their paper, Pokrivcak et al. set up a model of CAP

decision making and then use it to demonstrate under what conditions CAP

reform occurs as well as the influence of the Commission on that reform. They

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find that changes in the Council voting rules , particularly changes lowering the

threshold for the number of votes needed for passage, and changes exogenous

to CAP negotiations, such as international treaties and EU enlargement, are the

main conditions under which major reforms occur. In answering the question

what is the extent of a status quo bias in the CFP and (how) can it be overcome,

this paper tries to determine whether the same factors Pokrivcak et al. identified

as leading to CAP reform also hold true for CFP reform and, if so, to what extent?

This paper also differs from that previous work through the much greater

reliance on empirical evidence that is utilized here.

This paper, then, adds to the debate on CFP reform and, by extension

reform in the context of EU negotiations, by focusing on the empirical data

related to one case, by examining whether what has been said about the lack of

reform of the CFP still holds true today following the 2002 reform, and by arguing

that a status quo bias was partially overcome by those 2002 reforms.

2.3 Some general fisheries policy background

Before going further, a brief comment on fisheries policy generally and the

concepts that govern the field is necessary in order for the suboptimality of the

status quo CFP to be understood. A "fishery" is generally defined as a group of

vessels targeting a stock in a certain area with a certain type of gear. A "stock" is

the subpopulation of a species targeted by a fishery.

There are several recognized levels at which a stock may be fished. The

CFP generally aims to set levels at the maximum sustainable yield, BMSY, where B0

is the biomass untouched by any fishing activity. Fish stocks, like any population,

grow as a function of their present population, so that a large population this

year means an even larger one next year – but only to a point. With unchecked

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growth that population will reach a total so high that it hits its carrying capacity

and no longer has enough food or habitat to support for everyone; causing a

population to then reduce through natural causes. MSY occurs at the precipice,

where the rate of population growth is as large as it will get, as shown here

(Kahlilian et al. 2010: 1178):

Figure 2.1: Showing population growth as a function of total population size

Though the effectiveness of using MSY as a target for fishing exploitation levels

has been questioned since the late 1970s, it is still widely used today.

Other factors also need to be taken into consideration, including the sizeand age of the fish that are caught. This is usually regulated by setting a

minimum size for the mesh of fishing nets, thus allowing fish that are too small

(and thus likely too young to have spawned) to escape. These regulations also

sometimes work to allow non-target species (i.e. species caught as bycatch in

the process of catching a different species) to escape. These technical measures

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are also set by the CFP and their effectiveness varies across species and

fisheries.

The EU relies on a system of total allowable catch (TAC) for each fish

stock, set annually for most stocks, that is then divided up between the member

states before those states again divide it up between their fishers. Other

management measures, like individual transreable quotas (ITQs) exist and are in

use elsewhere. Unlike ITQs, though, TACs allow for the existence of a prisoners'

dilemma between fishers over whether to overexploit a stock for short-term gain

at the expense of the long-term survival of the fishery and the fishers who

depend on it, as illustrated in this table:

Figure 2.2: Prisoners' dilemma between individual fishers, with a Nashequilibrium at [Exploit, Exploit], from Payne (2000: 18)

TACs are particularly problematic when it comes to mixed-species fisheries, for

instance, since the quota for one species may run out before those of the species

around it, but it is difficult to catch one species without taking others as well. The

prospects for and history of introducing new management policies under the CFP

are discussed later.

This section was meant to show where in the debates on status quo bias

and the EU as a negotiation-based polity this paper's arguments will fit in, as well

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as to give some necessary background on how fisheries policy works generally

so that the case study of this paper will make sense.

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3. Status quo biases in EU fisheries policy

Before discussing how the CFP has been doomed to the maintenance of

suboptimal status quo policies, it is necessary to lay out the rules of the CFP

policy-setting game; that is, why it exists, how it is structured and how it works.

3.1 Legal and historical background of the CFP

The Treaty of Rome addressed the issues of fisheries only obliquely in

1957 – in Article 38, in the context of agriculture.1 It was not until over a decade

later that European governments began to see that a more comprehensive – and

separate – policy for fisheries would be needed. In part, this initial oversight can

be explained by the relative smallness of the issue to the original six member

states and that, in those days before coastal waters were divided into exclusive

economic zones, those countries' fleets caught most of their fish in distant

waters (Conceição-Heldt 2004: 22; Holden 1996: 17). The fact that fisheries

became a more important issue later on as countries like the U.K, Denmark and,

especially, Spain and Portugal acceded is the first indication of the influence

external changes have on shaking up the status quo of European fisheries policy.

Segments of that policy first began in 1970 with the establishment of a

common market for fish products, the first structural policy elements by which

funds were allocated for the modernization of vessels, and the decision that

fisherman from any member state were to have equal access to the waters of all

others. This equal access principle would have major repercussions for the future

of European fisheries policy. Then, in 1976, Iceland claimed the waters 200 miles

off its coast as its exclusive fishing territory. The EU soon followed suit, and the

management measures that this exclusive economic zone required eventually

led to the creation of the CFP in 1983.

1 Art. 38 (1) of TEC

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By then, the CFP had been given four areas in which to work: structural

policy2, the organization of a common market3, the ability to negotiate

agreements with third countries, and resource conservation and management4.

This fourth area was established in 1983 and, since it limits both the amount of

fish member states are allowed to catch and the number of boats that are

allowed to pursue those fish, has become the most controversial – for industry

and conservationists alike. This paper will deal only with the first and fourth of

these CFP pillars since they are the most easily quantifiable as well as the most

controversial and visible aspects of the policy.

Under the first pillar, the CFP sets aside structural funds for the fishing sector

and says, loosely, how they can be used, though member states typically have

the final say on the funds' ultimate destination. The fourth has several areas in

which decisions must be made: setting the total allowable catch (TAC) for each

species, dividing those TACs into particular quotas for each member state,

placing restrictions on the amount of effort (usually a measure of engine

strength or boat capacity) fishers can use to pursue those fish, regulating the

type of gears that can be used to catch them, and restricting certain areas to

certain fishing activities.

It should be noted that there is therefore both a production (creation) and

distribution (sharing) of value that takes place in the negotiations over TACs,

where the final TAC (the amount of a fish that is legally available) is the level of

production while the quotas are how that production will be distributed, as

illustrated below (Scharpf 1997: 120). This distribution relies on the principle of

relative stability , which was originally based on historic catches during the

reference period 1973-78, with some preference given to areas deemed

traditionally dependent on fishing activities. Since then it has continued to

2

Council Regulation 2908/833 Council Regulation 3796/814 Council Regulations 2057/82, 170/83 and 171/83

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allocate quotas according to a fixed key based on historic catches so that each

state gets the same proportion of a species' TAC each year. Thus, in order for a

state's catch to be increased the whole TAC must typically be increased (Payne

2000: 315). This is illustrated below; the anti-reform bias in such a system should

be clear and will be discussed in more depth later in this section.

Figure 3.1: The total production level is TACx (the TAC of a given fish

population for a given year) while the distribution level for country a (thequota of TACx allotted to country a) is Fa. Due the principal of relative stability,country a can only increase their quota by increasing every other country's

quota as well (i.e. increasing the TAC). Thus a movement from Fa to Fa'necessitates a movement from TACx to TACx'. (Loosely adapted from Scharpf

1997: 122)

Per Scharpf (1997), without acceptable distribution agreed to, countries

that feel squeezed by the status quo distribution levels, like the U.K., will argue

for less production (lower TACs) while countries who perceive themselves as

benefiting from the status quo distribution, like Spain, will always want higher

TACs (p. 121). "In other words," concludes Scharpf, "negotiated solutions will

reproduce the existing distribution of advantages and disadvantages" (p. 123).

This has been one factor leading to the loss of legitimacy of the CFP in the eyes

of many fishers, especially, in this case, those of Ireland and the U.K. (Symes and

Crean 1995; Payne 2000: 313).

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3.2 A model of CFP decision-making

TACs are the outcome of an annual dance of scientific advice,

recommendations and negotiations that has been aptly referred to as the "TAC

machine" (WWF 2007: 10; Schwach et al. 2007). This "machine" begins with data

collected by the International Council for the Exploration of the Sea (ICES). That

data is then prepared by the European Commission's Scientific, Technical and

Economic Committee for Fisheries (STEFC) for the use of the Commission and

other policymakers. Consultations are then held with stakeholders, the relevant

Commission agencies and the European Parliament before the Commission

issues a final proposal. That proposal then heads to the Council of agriculture

and fisheries ministers, where the final negotiations take place and the

Commission recommendations are adjusted as the ministers see fit. This process

is repeated every year, in December, in order to set the following year's TACs, as

well as its effort reductions. Structural fund decisions follow a similar path.

The Parliament has had only a consultative role to play, though it does have

indirect influence over the CFP through its powers over the budget (Markus

2009:21; Schweiger 2009: 83). It now has a broader role to play under the Lisbon

Treaty, though not in the setting of fishing opportunities like TACs. The

implications of the Lisbon Treaty are discussed in the last section of this paper.

As for interests, member states are driven primarily by short-term political

gain – or, according to Markus (2009), "ruthless promotion of their national

economic interests" – which for the most part usually amounts to advocating for

high rates of exploitation of fish stocks and levels of structural funds and, thus,

hopefully a better chance of getting re-elected (p.20). The Commission's

interests, on the other hand, are usually seen as furthering community

17



integration and maintaining its powers as mediator between the member states

(Payne 2000: 309).

Following the actual setting of CFP policies, it is left for these rules to be

implemented and enforced. For most CFP measures, this role is left to the

member states, thus creating a prisoners' dilemma – to enforce or not – with

significant negative impacts of the efficacy of the policy measures. Of course,

the prospects for enforcing policies also influence the form that policy decisions

eventually take, meaning these aspects are implicit factors in the setting of

policies in the first place (Scharpf 1997: 118). The Commission has taken on a

greater policing role in recent years, as discussed in section 4.

3.3 Establishing its ineffectiveness

The policies resulting from this decision-making process have for the most

part failed to achieve the CFP's main objectives. In terms of conserving fish

stocks, the Commission has said that 88 percent of EU stocks are being fished at

rates that exceed their maximum sustainable yield. "This means that these fish

populations could increase and generate more economic output if they were left

for only a few years under less fishing pressure," it wrote in a 2009 green paper,

concluding that "European fisheries are eroding their own ecological and

economic basis" (Commission 2009b: 7).

Despite the accusations of some national fishers' organizations, this steep

decline is not due to the CFP; studies have shown it began long before, with the

onset of industrial fishing earlier last century (Thurstan et al. 2010). Still, the CFP

has so far been unable to stem this trend, and while conservation measures

appear to have been strengthened in 2002 and since, as will be discussed in the

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section 4, the CFP has a long history of failing to protect the long-term viability of

European fisheries.

In the case of TACs, the Commission generally takes the Council's objections

into account when drawing up its proposal so that the Commission-proposed TAC

levels are already higher than those recommended by the scientific advice and

those proposals are almost uniformly further increased by the Council (COM

2007:5; Karagiannakos 1996). The TACs agreed by the Council in the mid-1980s,

for instance, were on 20 percent higher than the recommendations of ICES.

They topped out at 40 percent higher near the turn of the century and averaged

32 percent higher in the pre-2003 years, according to the WWF (2007:11).

The ways in which the CFP fails to achieve its objectives, then, are not hard to

see: TACs set too high, a continued vast overcapacity of fishing capabilities

(vessels and other equipment relative to the amount of fish available to be

caught), a lack of credibility among fishers due to the inability of the CFP to

account for things like discarded bycatch of above-quota fish, and a lack of

enforcement by member states and even by the Commission (these are

discussed most comprehensively in Kahlilian et al. 2010).

3.4 Explaining the persistence of this ineffectiveness

But the EU has been unable to reform these aspects of the CFP. Why?

The first answer is interests: member states' short-term interests

dominate Council decision making to the detriment of the long-term, sustainable

management that is needed to ensure both the survival of fish populations and

of the fishing industry.

But interests are only half the answer. An institutional configuration in

which these short-term interests are allowed to dominate is certainly partly to

blame, but instead the institutions allow for the maintenance of an ineffective

CFP status quo. One way in which this can be seen is by applying Tsebelis'

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(1990) concept of the nested game to CFP reforms. This was done most

thoroughly by Payne (2000). Payne sets up CFP policymaking as a tug-of-war

between the member states (represented by the Council), which want no further

loss of sovereignty, and the Commission, which wants greater competence at the

EU level. He explains that the CFP's failures are due to the policy's existence

within "a 'nested' institutional setting that allows wider questions of institutional

competence to dominate conservation interests" (p.304). That is, member

states are more concerned with what CFP policy outcomes mean for other EU

policies than the CFP itself. As an example, the principal of equal access has

come under fire since it might perpetuate a tragedy of the commons problem

where one could easily be avoided by further privatizing the commons of the

seas into the hands of coastal states. Yet, since eroding this equal access

principle could be potentially seen as also eroding the non-discrimination policies

of the EU as a whole, it survives. Even if enough member states supported

overturning it, it would never be in the potential win-set of policy outcomes since

the Commission would never propose an option such as this that would go

against its own pro-integration interests (Payne 2000, 314). The same holds true

for the other aspects of the CFP, like relative stability – the status quo is

maintained because reforming it would have too great of a spillover effect on the

rest of the EU institutional arena.

Payne's observations, however are pre-2002 and he neglects to say why

the CFP is uniquely so affected by the nested game problem, as well as why

nested games would be more of a factor than the dominance of short-term

political interests or other explanations.

Conceição-Heldt (2004) argues that it is because the CFP negotiations

(games) are repeated over time that they take on a nested-game quality. "When

iterating the game shifts the focus from strategies within the game to strategies

20



between linked games," he writes (p. 51; emphasis in original). He says this

emphasizes the fact that regulations are characterized by an advancement of

integration simultaneous with a conflict over distribution. These iterations also

emphasize the fact that, as was discussed in section 2 of this paper, EU

negotiations take place in the context of past, present and future decisions and

this creates a path dependency that makes EU decision making inherently biased

against innovative reforms. No negotiation can start with a fully clean slate, and

this is especially true of CFP negotiations where TACs are set every year and

every year's TACs literally set the parameters for the next year's. This can be

most directly seen in the rule that TACs should generally not be moved in either

direction by more than 20 percent (previously, 15 percent) from the previous

year's levels.

This paper sees the status quo bias, therefore, as the result of a number of

phenomena – not just a nested game. I would add firstly the influence of voting

rules and of the general decision-making process, as Pokrivcak et al. (2006)

discusses and which I use in section 4 to partly explain the partial CFP reforms

achieved in 2002.

Moreover, there is an endowment effect that has skewed the possible win

set in favor of the status quo by influencing member states' interests. The

principal of relative stability has given member states the impression that they

have a right to a certain number of fish and this has made them less willing to

accept reductions in that number, despite the long-term benefits that would

result. The relative stability that encourages this endowment effect, as illustrated

in figures 3.1 and 3.2, is thus inherently status quo-biased (Markus 2009: 77).

Despite all this, though, in 2002 the status quo maintenance was partly –

though only partly – upset, as will be demonstrated in section 4.

21



In this section, then, we established the extent of a status quo bias in CFP

decision making and the factors arrayed against significant reform of the CFP,

including, inter alia, the lack of movement and lack of heeding scientific advice

in the setting of TACs and public aid, the lack of innovative policies or removal of

damaging policies, an endowment effect, and the ways in which all these factors

interact. Taken together these factors might be seen as forming a critical case

of status quo bias, where the status quo bias goes so deep as to make the CFP a

prime example of the phenomenon; that is, if the CFP can even partially

overcome a status quo bias, most any other policy area should be able to do the

same. Demonstrating the fulfillment of these critical case criteria more than

qualitatively is beyond the scope of this paper, but we will try to demonstrate at

least the first part of this proposition – that the CFP can overcome its deep status

quo bias – in the next section.

22



4. Case study: The 2002 reform

This section will try to answer the question of to what extent were

significant reforms of the CFP taken as part of the 2002 reforms and what were

the factors either allowing or preventing those reforms. It will then use a

qualitative comparative analysis to determine whether those factors correlate

with other reforms of the CFP. Put more simply, it will try to prove that something

(overcoming the status quo bias established in the previous section) happened

and why it happened when it did.

4.1 Partially overcoming a status quo bias

4.1.1 Overcoming: the cases of funds and policy introduction

Like the previous reforms, in 1983 and 1992, the 2002 reform provides the

legal basis for subsequent decision making under the CFP; it is the CFP. The 2002

reform is widely seen as the first fundamental revision of the CFP since its

creation in 1983, but the degree of reform varies between aspects of the policy.

Possibly the most significant area of reform was in the allotment and

distribution of public funds. These subsidies, in fact, are generally regarded as

the main issue addressed in the 2002 reform (Markus 2009: 198; Schweiger

2009: 92). Markus (2009) goes as far as to say that "substantive changes were

introduced by all [structural] regulations adopted in the course of the reform" (p.

198). An entry-exit scheme5

that generally required entry of new capacity to be

replaced with withdrawal of capacity replaced the previous Multi-Annual

Guidance Programme, which was widely recognized as having failed to achieve

its objective of reductions in fishing fleet size. And aid for constructing new

vessels would stop after 2004.6 Other changes allocating increased funds for the

retraining fishers and increasing the scrapping of vessels were also adopted.

5 Arts. 11-14 of Council Regulation 2371/20026 Regulation Council 2369/2002

23



The effects of these measures have been far from ideal, but they have had

some effect, as demonstrated in these graphs:

Figure 4.1: Levels of public funding for activities that increase (top row) and

decrease (bottom row) fishing capacity, based on data provided by the

Commission to the website Fishsubsidy.org, run by the U.K. nonprofit EU

Transparency and the Danish investigative journalism partnership Kaas and

Mulvad (Fishsubsidy.org 2010)

The activities in the top two graphs have the potential to increase capacity

and thus harm the viability of fish stocks and profitability of the fishing industry

long-term. As the graphs show, both of these activities saw increases leading up

to the 2002 reform but a steady decrease since that time. The activities in the

bottom two graphs would potentially lead to reductions in fleets and, thus, in

capacity. They both show an – albeit slight – increase since the 2002 reform.

These measures resulted in an overall capacity reduction of the EU fleet by

approximately 197,000 gross tonnage and 720,000 kilowatts between 2003 and

2007, a net reduction of approximately 11 percent in tonnage, despite the

accession of 10 countries in 2004 (COM 2008: 6).

24



There has also been increased reliance on other conservation measures,

like effort reductions7 and "a progressive implementation of an eco-system-

based approach to fisheries management"8. In terms of conservation measures,

the multi-annual plans9 that were adopted symbolized a shift from short-term

measures to long-term management plans, thus overturning the dominance of

short-term interests that had characterized decisions previously. Multi-annual

plans would institute pre-set rules for deciding catch and conservation levels so

that the annual horse-trading of TAC-setting negotiations in the Council would be

avoided. Many, including Beddington et al. (2007), see rules like these as

necessary for sustainable fishery management. In 2003, the EU saw the first

long-term plans begin, for northern hake and some cod, including those in the

North Sea (Commision 2009a: 15). Setting up these management plans has been

an ongoing process since 2002, with mixed results (WWF 2007: 21- 32), but the

fact that the initiative to set these up was taken in the first place is enough to

demonstrate that the status quo system of annual TACs can be upset if the right

conditions exist and that new, more effective conservation policies can be

introduced.

All this partially upends Payne's (2000) contention that the political

advantages of TACs mean that "the Community is unlikely to increase its

reliance on other conservation instruments" (p. 316). In fact, the Commission

had hoped for an even greater movement away from the "TAC machine" system

to one based more on multi-annual plans, the catch limits for which would

eventually be set solely by the Commission (Schweiger 2009: 95). But this

proposal, which would have ceded more power to the Commission, largely failed,

which is where Payne and others are still correct.

7

Art. 4 (2) (f) of Council Regulation 2371/20028 Art. 2 (1) of Council Regulation 2371/20029 Art. 5 of Council Regulation 2371/2002

25



4.1.2 But only partially: the cases of TACs

The status quo policy configuration therefore still obtains in many aspects

of the post-2002 CFP and particularly in the conservation aspects. The fact that

after the reforms TACs are still set a level too high to be able to maintain

sustainable levels of fishing, for instance, has been shown in numerous studies

(COM 2007; WWF 2007; Kahlilian 2010) and in this table:

200

3

200

4

200

5

200

6

200

7

Average percentage higher

than the advised catch

42% 48% 57% 47% 43%

Figure 4.2: Showing that TACs since 2002 still deviate significantly, onaverage, from the scientifically advised catch (COM 2009b)

The policies of equal access and relative stability, so detrimental to effective

conservation of the resources, were also left unchanged.10

But the Commission seems to have made reforming the subsidy aspect,

not the TAC aspect, of the CFP its focus in 2002. As Schweiger (2009) notes, it is

quite possible the Commission's strategy was to use the 2002 reforms as "the

first step in a complete overhaul of the CFP" in which a reduction in overcapacity

was seen as both more achievable and more beneficial for bringing fishing to

sustainable levels than was a revision of the quota system (p. 97).

Thus, we could say that the status quo bias that has marked CFP reforms

was overcome-able in some policy areas, like structural funding and the

introduction of some conservation measures, but not yet in others, such the TAC

system and the principles of relative stability and equal access that underlie it.

Indeed, it has been argued that a system based on TACs, and especially due to

10 Art. 17-19 and 20 (1) of Reg. 2371/02

26



its interconnectedness with the principal of relative stability, is inherently biased

toward the status quo policy configurations (Markus 2009: 77).

Even in terms of structural policies, though, the 2002 reform has had

mixed results. The Commission has said that "while EU fishing capacity overall is

declining, the reduction is coming too slowly (on average, an annual reduction of

2-3% over the last 15 years) for it to have any substantial impact on fishing

pressure and thus alleviate the poor state of many EU fish stocks, in particular

demersal [living on or near the ocean bottom] stocks" (Commission 2009a: 19).

This, it says, is largely because "technological creep" runs at a parallel rate of

about 2 to 4 percent annually, "thus effectively cancelling out any nominal

reduction" (p. 19). Others have noted the indirect subsidies, such as tax

exemptions for fuel, that have also helped maintain this "vicious circle" of

overcapacity and overfishing (Kahlilian et al. 2010: 1180).

But at least some progress has been made, which is a feat in itself when

up against an intractable bias of the interests and institutions toward the status

quo. The hurdle of overcoming at least the initial bias against reform of policies

on structural funds has been crossed, and maybe, to invert the nested game

logic, that will lead to a snowballing of new reforms in 2012 and after.

Many – many – papers have examined why the reforms have come up

short of their goals, but this one is focusing on what they did achieve: marginal

shifts in the policy that are impressive in their own right given the deep-seated

status quo bias that exists in the CFP. There are three primary factors we can see

as allowing those shifts to occur.

4.2 Explaining the breakthrough

4.2.1 Rule Changes

27



As Pokrivcak et al. (2000) have demonstrated in the case of the Common

Agricultural Policy, changes in decision-making rules, and particularly a shift from

unanimity to a qualified majority or majority being required for passage, can be

instrumental in decreasing a status quo bias. The case of the 2002 CFP reform

shows that rule changes have the same effect for the CFP, and are even

instrumental in allowing it to overcome that bias. The case of reforms to the

structural funds areas illustrates this.

The shift from unanimity to qualified majority voting on the Council had

continued during the 1990s, and, as Schweiger (2009) notes, the agreements to

phase out public aid11 discussed above marked the first time that a major CFP

revision had been adopted with a qualified majority, rather than unanimously

(p.94). This allowed the disagreement of some countries that wanted more

stringent reductions in fleet capacity (Sweden and Germany) to not doom the

compromise agreed by the other countries. This also, it should be noted, allowed

countries like Sweden and Germany, as well as the U.K. and the Netherlands, to

try harder for the more stringent measures (and larger reforms) without fear that

this tactic would mean a stalemate that ends up preserving the status quo.

Relying on Pokrivcak et al.'s models and Schweiger's description of the

member states' policy preferences, then, the shift from non-agreement (and thus

status quo) to agreement on reform can be demonstrated in this graph:

11 Council Regulation 2369/2002

28



Figure 4.3: Rough mapping of the interplay between member state preferencesand voting rules, based on Pokrivcak et al.'s spatial depictions of the effect of

voting rules on CAP reform (pp. 572-7).

In this graph, the possibility of a policy outcome is plotted according to the

preferences of member states, as represented on the X axis, and the voting rule

needed to approve that outcome, as represented on the Y axis. In order for a

policy to pass it must fall outside the gray triangle, so that at a simple majority

any reform would be approved, while at unanimity none would. The fact that the

approved policy (represented by a vertical line) here is so far to the right on the

X axis indicates the significance of the reform, since those countries to the right

are in favor of significant reform (i.e. a movement away from a structural policy

dominated by subsidies for vessel modernization and construction).

This is only a rough model, of course, as member states preferences would

not be this uniform. The ranking of member state preferences here is based on

indications of those preferences as given in Schweiger (2009: 93-4). The exact

accuracy of this ranking is not as relevant as the fact certain countries, the self-

described "Amis de la Pêche" (Spain through Finland on this graph) are on one

side and certain other countries (the Netherlands through Germany) are on the

other side as well as the fact that Sweden and Germany voted against the

29



package (and thus are outside the agreed policy), while the U.K. and the

Netherlands were persuaded to consent.

4.2.2 External Changes

As Pokrivcak et al. (2000) also showed, external changes between decision

periods may affect actors' preferences and the outcomes of the decisions. Prior

to the 2002 reforms, there were several major changes to the policymaking

environment exogenous of the actual policymaking process.

First was the accession of Austria, Sweden and Finland in 1995. But since

Austria is landlocked, Finland has only a small and local fishing fleet, and Sweden

already had a third-country country agreement12 to fish in EC waters, this event

did not rock the CFP boat too much.

In 2002, however, the EU committed to the Johannesburg Declaration

which resulted from the World Summit on Sustainable Declaration. Under this

agreement, it agreed to "maintain or restore stocks to levels that can produce

the maximum sustainable yield with the aim of achieving these goals for

depleted stocks on an urgent basis and where possible not later than 2015" (U.N.

2002: para. 31(A)). The Rio Declaration had included a similar goal in 1992, but

without the deadline Johannesburg established. Prior to this international commitment a European-wide commitment was

made in 2000 as part of the Lisbon Agenda: to make the EU “the most dynamic

and competitive knowledge-based economy in the world capable of sustainable

economic growth with more and better jobs and greater social cohesion, and

respect for the environment" (Council 2000). The environmental aspect of this

strategy would have likely factored into member states preferences as they

decided how best to reform the CFP – as well as the CAP, which also underwent a

significant reform in 2002. Thus several exogenous shifts in the policymaking12 Agreement on fisheries between the Community and Sweden, OJ 1980 L226/2

30



environment had placed sustainability high on the EU agenda just as CFP

negotiations were occurring.

Pokrivcak et al. point out that policy preferences should not necessarily

change if nothing changes them. These external changes could be one factor in

shifting those preferences. Even if these external changes were not enough to

bring a shift from the status quo policy, when combined with voting-rule changes

they certainly influenced the policymaking environment and caused member

states to consider how they would look internationally. The greater awareness of

conservation partly brought on by these events might be best represented by an

iterated game model.

4.2.3 Iterated games

The fact that a prisoners' dilemma exists in instances of overfishing is

evident. As in any tragedy of the commons, if player A does not use up the

resource, she runs the risk that player B will. Thus, in fishing, if, say, the Spain

does not overexploit a given fish stock, it runs the risk that the U.K. will. But if

this game is repeated over frequent interactions between Spain and the U.K. and

both continue to choose "defect" (overexploit), eventually they both lose

because no fish remain for either of them. More significantly, though, long before

that eventuality occurs both players will see steep drop-offs in the profitability –

and thus employment figures, etc. – of those overexploiting components of their

respective fishing industries, assuming they are not being kept afloat by

distorting subsidies.

Over some number of iterations of this PD game, then, the long-term

consequences of the players' defection choices will become apparent. It is

plausible that the moment at which this occurred for many EU fisheries was

between the 1992 and 2002 CFP reforms. Scientific and information advances

31



would have reached the point that information on the state of both stocks and

fishers was widely available while fishing technology would have continued to

make overexploitation an even easier choice. This realization of the costs of a

reciprocal defection strategy would have likely led to a shift in member state

preferences toward more sustainable levels of exploitation of fish stocks, as

indicated by their positions at the Council – what Hegland and Raakjaer (2008:

152), cited in Markus (2009:240), call a "crisis driven change" in the Council

decision making in favor of conservation ("cooperate”). Thus we see the

emergence of a reciprocal cooperation strategy, à la Axelrod (1984). As

Schweiger (2009) points out, even the typically Euro-skeptic U.K. was okay with

ceding some sovereignty to Brussels in order to achieve a stronger conservation

regime in 2002, seeing as it has likely been hurt the worst by the repeated

"defection" choices of countries like Spain which have a large presence in waters

traditionally fished by British fleets (p. 98). The U.K. was joined by several other

countries in choosing "cooperate" (conserve) during the 2002 negotiations, thus

creating what Axelrod calls a "cluster of nice strategies" (p. 68). Axelrod sees

such clusters as leading to cooperation, and the success of these clusters can be

so great that it makes up for the exploitation still being done by the defectors.

Based on the evidence from the 2002 reform process, it appears that an

awareness of the dire economic and ecological state of EU fisheries led some

players to start to choose to "cooperate". And, per Axelrod's logic, once one

player chooses to cooperate, the optimal strategy is for every player to copy that

"cooperate" in a tit-for-tat strategy that will ultimately achieve the optimal

outcome for everyone involved. Whether that optimal outcome will be achieved

remains to be seen, but the CFP at least got a little closer to it in 2002 and the

years since.

32



4.3 A qualitative comparative analysis of previous reforms

In order to determine whether these conditions – voting-rule changes,

external changes and iterated games – are crucial for CFP reform generally, it is

necessary to compare the 2002 reforms with previous CFP reforms. Minor

reforms of the policy occur all the time and it would not be feasible to include

them all in analysis. Instead, we will focus on the scheduled, comprehensive

reforms that take place every ten years, starting with the formation of the CFP

out of the existing Community fisheries policies in 1983.

In the truth table below, we can see the relative correlation of different

conditions with the eventual policy outcomes of each reform. Since Boolean 0

and 1 rankings would not work with conditions as amorphous as these, the table

is based on Ragin's (2000) concept of fuzzy-set qualitative comparative analysis.

Rather than using the traditional 0.1 to 0.9 relative rankings, though, I have used

a 1 to 4 scale where 1 indicates a "minor" presence and 4 indicates a

"significant" presence. This is simply because, again, of the difficulty involved in

identifying the presence of these conditions to the degree that such a ranking

would require. All this has made the table even more fuzzy, to be sure, but it has

avoided the arguably even worse methodological trap of saying with certainty

something one cannot actually know with certainty.

33



Figure 4.4: Truth table showing the extent of three conditions and theircorrelation with the extent of CFP reforms

An explanation of the rankings given is in order. Leading up to the 1983

reform, voting rules were not much changed from the way they had been when

earlier fisheries decisions were taken by the Community. Plenty of external

changes had occurred over the past decade, though, including the accessions of

Ireland, Denmark and the United Kingdom and the aborted accession of Norway.

The continued evolution of the U.N. Convention on the Law of the Sea as well as

the expansion of exclusive economic zones in the 1970s also fit into the category

and have major effects on EU fisheries policy. Conservation awareness as it

relates to the CFP is generally regarded as being low during this time as the

policy was mainly meant to shore up the fishing industry (i.e. "promotion" of the

industry, not "management" of it) (Markus 2009: 234; Holden 1996: 21). This

was reflected in the reforms taken, namely plenty of funding for expanding

capacity and very few conservation measures13, though since at least

13 Council Regulation 170/83

34



conservation measures were agreed to for the very first time a ranking of 2 is

given (Markus 2009: 234).

As for conditions leading up to the 1992 reforms, there were again few

changes in the voting procedures, major external changes – especially the

accession of Spain and Portugal in 1986 – and a growing conservation

awareness, though only within a segment of the population and certainly not

amongst most fishers. These correlate with a similar policy outcome as in 1983:

greater improvement and expansion of conservation measures but also

substantial increases in the amount of aid going to vessel construction and

modernization, particularly for the Iberian fleets14 (Markus 2009: 237; Churchill

and Owen 2010: 11-4).

As detailed in this section, the 2002 reforms featured significant new

voting procedures; some, though limited, external changes; and a seemingly

significant amount of conservation awareness resulting in a greater willingness

to "cooperate" rather than "defect" in the iterated prisoners' dilemma of fishing

in common waters. These resulted in another marginal – though only marginal –

improvement in conservation measures and a fairly substantial reform of the

structural aid measures.

Adding up the results of this fuzzy-set QCA would seem to indicate that

voting-rule changes hold the most potential for overcoming a status quo bias and

instituting significant reforms, while external changes, when the sole significant

factor, hold the least. The fact that voting rules changes are so powerful in

overcoming the status quo indicates that the status quo bias may originate

mainly from institutions. Changes in the voting rules change those institutions

and thus open a more direct path to reform.

4.4 Case study conclusions14 Council Regulation 3760/92

35



This section described how the status quo bias that was established in the

preceding section was partially overcome in the 2002 reforms, identified the

conditions that led to that bias being overcome and detailed the extent of the

status quo bias that still exists today. It found a perfect storm of events both

external and, in the case of voting rules, very much internal to the policymaking

process prior to the 2002 reforms and that these led to both a convergence of

interests and the institutional environment in which those interests could be

somewhat fulfilled.

To explain this overcoming of a status quo bias, we tried to find whether

Pokrivcak et al.'s (2000) conclusions applied to the CFP, and found they do, but

that Axelrod's (1984) model of overcoming a prisoner's dilemma likely also

played a role in modifying the interests of a sufficient numbers of players.

Maybe most significantly the policies that were introduced in 2002

increased the competence of the Commission, thus overcoming the nested

game-based aspects of the status quo bias that Payne (2000) observed and

creating a new institutional environment in which reform is now actually more

possible – and likely to become even more possible in the future.

36



5. Discussion

This section will conclude the paper by analyzing the results of these conclusions

for the CFP today and the EU generally.

5.1 Effects of the Lisbon Treaty

When the scope and details of the next CFP reform are agreed, in 2012, it

will be in accordance with the decision-making rules laid out in the Lisbon Treaty.

These rules feature some substantial changes to the current process. Most

notably, the treaty requires co-decision, under which the European Parliament

will have an expanded say in many CFP matters, though not in the case of

"measures on fixing prices, levies, aid and quantitative limitations and on the

fixing and allocation of fishing opportunities,"15 which will still be set by the

Council following a proposal by the Commission.

The effect these expanded Parliamentary powers will have is not yet clear.

Lequesne (2004: 40) and Steel (1998: 40) have pointed out how the EP has

historically been primarily a mouthpiece for their countries and the fishing

industry, which, Markus (2009) says, makes it a "weak promoter of sustainability

under the CFP" (p. 22). But Lequesne also notes that the EP has hosted expert

debates on specialized, scientific topics, and that the populist rhetoric about the

historical plight of the fisherman that characterizes debates in national

parliaments "produces no effect in a transnational assembly that has no

reference to a common history". Moreover, environmental NGOs do and will

continue to lobby MEPs, as well (Lequesne 2004: 41).

5.2 Effects of future accessions

Since 2002, the EU has almost doubled in size, but none of those new

member states presented much to upset the current configuration and operation15 Art. 43 (3) of the Treaty of Lisbon

37



of the CFP, mainly because they either had small fishing fleets, fleets that stayed

in their own coastal waters or previous access agreements with the EU (Churchill

and Owen 2010: 21-2). In addition to the prospect of a Turkish accession, which

would both significantly increase the EU's total marine catch and expand the

union's presence in the Black Sea, an Icelandic accession presents the most

potential for rocking the current CFP status quo.

As its accession negotiations began this summer, fisheries issues seemed

to be looming over the whole process, much as they have during Norway's three

aborted accession tries. The island country has said that since fishing makes up

nearly half its economy it has no intention of signing up for the CFP, which would

open its exclusive economic zone to other EU fishing fleets and to the CFP's

largely ineffective management schemes (BBC 2010). But some EU member

states have accused it of overstepping the international regulations that manage

which and how much of certain fish it can catch (Recalde 2010). Of course,

Iceland's practice of whaling – albeit only for subsistence – is banned in the EU

and will also figure into the talks.

5.3 The 2012 reforms

The time since the 2002 reforms – and even in the past couple years – has

therefore been eventful one with plenty of potential implications for the future of

the CFP. In terms of decision-making rule changes, the Lisbon Treaty will have

some effect, though what exactly is not yet clear. And, in terms of external

changes, the much larger EU will mean a much different layout for the

negotiating game. On the iteration of the common-resource prisoner's dilemma

game, conservation awareness has only continued to grow, as has awareness of

the CFP's failures in its conservation and fisher-support goals.

38



Moreover, a number of further reforms have been taken since 2002, which

is perhaps an indication of the full extent of the 2002 reform. That is, the 2002

reform, perhaps not only somewhat shifted the CFP status quo policy

configuration but, more significantly, accelerated a spillover process that has

shifted – and is continuing to shift – the institutional framework in which CFP

decisions are made. It would be reasonable to expect these shifts to bring further

reforms of the policy going forward.

5.5 Conclusion

In this paper, the reasons for the widely-acknowledged failure of the EU's

Common Fisheries Policy to maintain the fish stocks – and thus the long-term

viability of its fishing industry – were assessed. It was found that a status quo

bias in which unsustainable levels for quotas and structural funds are reiterated

in reforms is the main cause. The paper also found, however, that this bias was

overcome – if slightly – in the 2002 reform. It found several conditions that

allowed for this unexpected reform, including changes external to the

policymaking environment, such as EU accessions or international treaties;

changes to the rules of CFP decision-making; and overcoming of a prisoners'

dilemma game.

The weight of the paper's conclusions should not be overstated, though,

as a more extensive analysis of the conditions allowing for CFP reform can and

should be done. But this paper brought several new findings into the discussion,

which I will leave to others to expand upon or refute.

This paper's findings on how changes in the factors leading to a status quo

bias – including a prisoners' dilemma, dominance of short-term interests, strict

voting rules, etc. – led to an overcoming of that harmful bias should also be

relevant to similar fields with similar policy tools, including subsidies and

39



restrictions on the use of finite resources – such as the Common Agricultural

Policy or environmental regulations.

In the face of a perfect storm of interests and institutions lining up against

reform, it is impressive that even small reforms to the CFP have occurred, and

this paper tried to present plausible explanations for why they did when they did

and why they may again in the CFP or other EU policy realms.

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