Subsidies to the fishing sector have long been criticized for fueling over-fishing, and a reduction in subsidies is currently on the agenda in the negotiations within the World Trade Organization (WTO). This article analyzes the role of subsidies and other management measures for Spain, one of the largest fishing nations within the EU.
A static bio-economic model is used to analyze the effect of simultaneous elimination of subsidies and introduction of an economically efficient management system for the Northwest Spanish fleet. It is concluded that improvements in management would bring substantial rents to the industry, up to €164million, irrespective of subsidy level, but also a reduction in fishing effort of almost 60%. Under a management scheme that maximizes economic rents, elimination of subsidies in the fishery would increase social welfare, induced by a decrease in the equilibrium fishing effort level. However, the impact of subsidies under this scheme is limited.