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International markets and interstate cooperation: united states-Japanese efforts to conserve ocean life, 1950-1995

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International markets and interstate cooperation: united states-Japanese efforts to conserve ocean life, 1950-1995

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Content INFORMATION TO USERS This manuscript has been reproduced from the microfihn master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type o f computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back o f the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6” x 9” black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. UMI A Bell & Howell Information Company 300 North Zeeb Road, Ann Aibor MI 48106-1346 USA 313/761-4700 800/521-0600 INTERNATIONAL MARKETS AND INTERSTATE COOPERATION; U.S.-JAPANESE EFFORTS TO CONSERVE OCEAN LIFE, 1950 - 1995 By Virginia M. Walsh A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the i Requirements of the Degree DOCTOR OF PHILOSOPHY Political Economy and Public Policy May 1996 Copyright 1996 Virginia M. Walsh UMI Number: 9636761 UMI Microform 9636761 Copyright 1996, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zeeb Road Ann Arbor, MI 48103 UNIVERSITY OF SOUTHERN CALIFORNIA THE GRADUATE SCHOOL UNIVERSITY PARK LOS ANGELES, CALIFORNIA 90007 This dissertation, written by U '-Y - Y<\0__ V P S \ n under the direction of hârX. Dissertation Committee, and approved by all its members, has been presented to and accepted by The Graduate School, in partial fulfillment of re quirements for the degree of DOCTOR OF PHILOSOPHY Dean of Graduate Studies Date DISSERTATION COMMITTEE Chairperson Virginia Walsh Professor John Odell INTERNATIONAL MARKETS AND INTERSTATE COOPERATION: U.S.-Japanese Efforts to Conserve Ocean Life, 1950 - 1995 This dissertation analyzes cooperation between Japan and the U.S. in three international commissions, the International North Pacific Fisheries Commission (INPFC), the Inter-American Tropical Tuna Commission (lATTC) and the International Whaling Commission (IWC) from 1950 to the early 1990's. A comparison of these cases suggests that a set of economic factors influences interstate cooperation. Other things equal, (i) higher levels of industry concentration and/or vertical integration, (ii) increases in foreign direct investment (FDI), (iii) increases in market price (use and/or nonuse) of the resources and, (iv) where there are cultural differences in preferences, shifts to make them more similar would all tend to improve interstate cooperation. A game theory model is developed to illustrate the mechanisms by which economic factors influence international cooperation. The connection works in the following way. Firms undertake foreign direct investment only if it is likely to increase profits. In resource-based industries such as fisheries which have significant production value, foreign direct investment is frequently a way to guarantee access to supplies. Vertical integration and foreign direct investment may allow firms to appropriate a larger share of rent from resource use, ensure more stable contracts, provide implicit insurance and minimize transactions costs. (Sleuwaegen and Yamawaki I99I: 144). To be considered for acquisition, the potential subsidiary must be compatible with the parent, which suggests that it serves the same type of consumer market (hence, similar preferences across cultures). Assume a treaty regime restricts the access of one or more member state to a resource which is used as international common property. If the above-listed conditions are favorable for investment, firms can safeguard resource access and therefore reduce the pressure they put on their government negotiators at international commissions to change international rules or withdraw from the treaty. Hence levels of international cooperation would tend to be higher. If the conditions were unfavorable for investment, firms would increase pressure on their government negotiators to change international rules or withdraw from the treaty. Under these conditions firms would also have a greater incentive to cheat, and therefore the likelihood that sanctions would be used to enforce the treaty would be increased. To My Parents Acknowledgments This work would not have been possible without the careful guidance of my chair. Professor John Odell, and my dissertation committee. Professors Jeffrey Nugent and Robert Friedheim. All three were generous with their time and insightful in their comments. Many thanks are also extended to the U.S. Institute of Peace, Institute for the Study of World Politics, the Hancock Foundation at U.S.C., and the Center for International Studies at U.S.C., who provided critical funding. Many individuals contributed insights and information. Scientists at the Southwest Fisheries Science Center, particularly Drs. Robert Brownell, Mike Tillman and Steve Riley were especially helpful by providing access to the 1995 whaling negotiations as well as historical documentation. At the North Pacific Anadromous Fish Commission, Shigeto Hase and Wakako Morris provided statistical yearbooks for North Pacific Salmon. Scientists at the Inter-American Tropical Tuna Commission, particularly Drs. James Joseph, Bill Bayliff, Martin Hall, Richard Deriso, and Gary Sakagawa, offered important comments. In addition, the Fisheries Agency of Japan devoted days to providing interviews and information, especially Kenji Kagawa, Nobuyuki Yagi, Yoshiaki Ito, Katsuma Hanafusa, Jay Hastings, Hideo Inomata and Moronuki Hideki. In addition, Kazuo Shima of the Japan Fisheries Association and Kunio Yonezawa, adviser to Nippon Suisan Kaisha, Ltd., provided important contextual information. My sincerest thanks are extended to these and others who were generous with their time. Colleagues and friends at U.S.C. were also a continual source of encouragement and support, especially Martha Little and the weekend hiking group. Certainly not least, Farideh Motamedi and Francis Pereira provided assistance and advice throughout my graduate student days. Any shortcomings which remain in this work are my sole responsibility. m Contents 1. Introduction 1 2. Method 14 3. North Pacific Salmon and the Driftnet Fisheries 71 4. Tropical Tuna and Dolphins in the Eastern Pacific 111 5. Whaling 137 6. Theoretical Implications 164 1. Future Research 203 IV Introduction States use the world's oceans as an international commons, but they often fail to protect vital marine resources. The oceans cover seventy percent of the Earth's surface and perform functions essential to support human life. Oceans provide about half of the oxygen to and absorb half of the CO2 from the atmosphere.* The oceans provide an important source of food for humans. In sum, destruction of ocean life is one of the more serious threats to the environment. But even if states can agree on measures to protect marine life, the necessary behavioral changes will not necessarily follow. What factors can account for better (or worse) cooperation among states which have signed treaties to protect the marine environment and natural resources? This study addresses this question by focusing on the behaviors of the Japanese and American states, firms and nongovernmental organizations which have worked to exploit and protect fish and marine mammals in three international commissions from 1950 to the present. This study suggests that a set of economic factors have predictable effects on interstate cooperation. Other things equal, higher levels of industry concentration and/or vertical integration, increases in foreign direct investment (FDI)^, increases production value (use and nonuse) of the resources^ and, where there are cultural differences in preferences, shifts to make them more similar would all tend to improve interstate cooperation. In general, the influence of these economic factors on international cooperation would work as follows. Industries undertake foreign direct * Michel Pascal, French delegate to the IW C/47, M ay 1995 (personal comm unication). See also Greenpeace, "The Year of the Ocean," Greenpeace, Washington, D C. (unpublished), p. 1-3. ^and/or joint ventures or other forms o f transnational ownership o f capital ^per-unit values, such as price per pound o f salmon, tuna, or whale meat; per-ticket price for whale watching ^ investment only if it is likely to increase profits. In resource-based industries such as fisheries which have significant production value, foreign direct investment is frequently a way to guarantee access to supplies which have certain public goods qualities, such as jointness of supply and the ability to traverse international boundaries^ freely. Vertical integration and foreign direct investment may allow firms to appropriate a larger share of rent from resource use, ensure more stable contracts, provide implicit insurance and minimize transaction costs.^ To be considered for acquisition, the potential subsidiary must be compatible with the parent, which would suggest that it serves the same type of consumer market (hence, similar preferences across cultures). Assume international rules (e.g., treaty rules) are being changed to reduce or to block one state's access to a resource, as Japan's access was increasingly blocked in North Pacific salmon fishing and in whaling from 1950 to the early 1990's. If the above-referenced conditions are favorable for investment^, firms can safeguard resource access through FDI and therefore reduce the pressure these firms must put on their government negotiators to resist further international rule changes. If the above-listed economic conditions are not favorable, firms will continue to pressure their governments to resist rule changes. The effects of other factors, such as power and institutions, are explained in more detail in the following chapter.'^ The ideas expressed above were generated by a focused comparison of U.S.-Japanese cooperation in three international fishery commissions.^ A report migrate through and past the areas o f states' coastal jurisdiction, or 200-m ile zones ^Sleuwaegen, Leo and Yamawaki, Hideki, "Foreign Direct Investment and Intra-Firm Trade: Evidence from Japan," in Koekkoek and Mennes, eds.. International Trade and Global Development (London and New York: Routledge, 1991): 144. ^higher levels o f industry concentration and vertical integration (implying higher production value or at least high market share), similar preferences ^Chapter 2 explains other rival explanations and 6 articulates the hypothesized causal connections in more detail. ^see, for example, Alexander George, "Case Studies and Theory Development: The Method of by the U.S. International Trade Commission^ (ITC) provided a universe of cases from which the International North Pacific Fisheries Commission (INPFC), the Inter-American Tropical Tuna Commission, (lATTC), and the International Whaling Commission (IWC) were selected. To ensure that the treaties would be comparable, cases from the same issue-area were necessary. The ITC listed thirty-nine agreements concerning marine fishing and whaling, more than any other issue area. * 0 O f the agreements concerning fisheries and whales* *, only three had created management commissions in which the U.S. and Japan were active members. To ensure comparability, these three cases emerged as the best candidates for analysis. Other explanatory variables are also analyzed. Treaties were selected to include the U.S. and Japan, so that the international power structure would be very similar across cases. As explained in the next chapter, increases in Japan's relative power in the decades following World War II would make lower levels of cooperation more likely over time. This explanation is underdetermined, however, since the level of cooperation varied; the level of cooperation in the IWC decreased over time, but in the other two cases it did not. The institutional context was similar. In the INPFC, the lATTC, and the IWC, the U.S. and Japan were active, and arguably dominant, states. Both states are democratic and capitalist in orientation. Both are contracting parties to the Structured-Focused Comparison," in Theory Development; New Approaches to History, Theory, and Policy, Paul G. Lauren, ed., (New York: Free Press, 1979). ^International Trade Com m ission, International Agreem ents to Protect the Environm ent and Wildlife," Report to the Committee on Finance, (USITC Publication 2351, January 1991). * (^compared to agreements concerning other wildlife (twenty-seven); agreements concerning marine pollution (thirty-three); agreements concerning pollution o f air, land, and inland waters (fifteen); agreements with Canada and M exico on boundary waters (nine); agreements concerning archaeological, cultural, historical or natural heritage (twenty-five); agreements concerning nuclear pollution (fifteen) and other general agreements (eighteen). (International Trade C om m ission Publication 2351, January 1991, pp. G 3 - 0 13). * *The Indo-Pacific Fisheries Com m ission, created in 1961 under the auspices o f the U.N. Food and Agriculture Organization, was created for general scientific cooperation and exchange of information, but had no management role. General Agreement on Tariffs and Trade, both are members of the United Nations, and fishery regulation in both states shifted in response to the extension of coastal state jurisdiction to 200 miles from the coast, stemming from the Law of the Sea negotiations in the 1970's. Although the number of states in each commission varied, which in theory would affect cooperation, in practice the U.S. unilaterally assumed the burden of enforcement through a series of domestic laws including the 1976 Magnuson Act and a series of amendments to it in the 1980's. Hence the three commissions provide a set of cases in which U.S. maritime law authorized sanctions and/or embargoes against states which failed to comply with efforts to protect whales, regulate tuna, minimize incidental killing of dolphins, and curtail the use of pelagic driftnets. In theory, these groups can be viewed as privileged groups since one actor was willing to bear the burden of enforcement. These cases were also selected because the management commissions were functionally similar. The INPFC, lATTC, and IWC were created at roughly the same time, shortly after the end of World War II, and have extended for at least forty years. The INPFC, in some ways as a result of its own success, ended its operations in 1993,'2 while the lATTC and the IWC continue to meet. Each of the treaties included language requiring the commissions to maintain maximum sustainable yield (MSY) of the resource in the interests of the fishing or whaling industries. After the 1970's, each of the commissions assumed an environmental mandate as well. The INPFC became more active in regulating the harmful impacts that the fishing industry (particularly driftnets) had on other marine life, especially marine mammals. The lATTC created a program in 1976 to protect ’ 2after Japan closed down its pelagic driftnet operations there was no longer a need for the INPFC. Its successor organization, the North Pacific Anadromous Fish Commission, oversees management o f salmon and other species in the North Pacific from the former IN PFC offices in Vancouver, Canada. Russia is a member o f the NPAFC. 4 spinner, spotted, and common dolphins which were often trapped and killed as bycatch in purse-seine nets targeting yellowfm tuna. In the early 1970's the IWC began to consider proposals to ban commercial whaling in order to give some severely depleted stocks (especially blue, fin, humpback, sei, and sperm whales) an opportunity to recover. While the commissions differed in voting procedures, with the INPFC and the lATTC operating by consensus and the IWC requiring a three- fourths majority for amendments to the Schedule (and a simple majority for other actions) the rules nevertheless posed similarly high barriers to Japan's influence over rule changes. These similarities in the institutional context and among the commissions themselves imply that institutional differences cannot explain why levels of cooperation differed in the three regimes analyzed. Much of the data for this study were obtained from the international commissions. The staffs at the INPFC, lATTC, and IWC kindly agreed to be interviewed, as did Japanese and American fisheries experts in the Seattle area, the Japanese Fisheries Attaché Washington, representatives from Japanese and American fishing companies, as well as Japanese and American environmental non government organizations (NGO's). The INPFC staff on the campus of the University of British Columbia in Vancouver, Canada, provided statistical data dating back to the 1950's. Staff at the Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) in Tokyo also provided historical catch statistics to fuel this analysis. The Southwest Fisheries Science Center in La Jolla, California, provided important information about whaling. The cases provide contrasting observations of both the degree of U .S.- Japanese cooperation and the salient market conditions. The INPFC was created by The International Convention for the High Seas Fisheries of the North Pacific Ocean, signed in May 1952 and entered into force in June 1953. The commission was to manage commercially valuable species of fish in the North Pacific high seas. 5 While the U.S., Canada, and Japan were contracting parties, the INPFC was predominantly concerned with restricting Japanese attempts to fish for salmon on the high seas in ways which negatively impacted the U.S. salmon industry in Alaska and the Pacific Northwest. This analysis ranks the INPFC as full cooperation between the U.S. and Japan. In the North Pacific, market conditions can explain the relatively high level of U.S.-Japanese cooperation beginning in the 1970's. Harvesting patterns for salmon in the North Pacific were conflictual as Japanese pelagic fishing reduced the number of fish which returned to U.S. coastal waters. The bilateral dispute hinged on migratory salmon which spawned in North American rivers and then migrated freely in the high seas, where they were intercepted by Japanese-flag fishing vessels. Japanese firms used driftnets on the high seas. U.S. fishermen typically set nets at the mouths of rivers in Alaska and the Pacific Northwest, waiting for the mature, blood-red sockeye to seek out their natal streams to spawn and die.i^ When Japanese driftnet vessels took more salmon on the high seas, fewer were left to return to North America. Japanese pelagic driftnets also stripped the waters of marine mammals, sea birds, turtles, and other marine life incidentally trapped in the nets. The U.S. sought to eliminate this practice by pressing for rules to restrict the area in which Japanese flag vessels could operate. These rules imposed a burden of adjustment on Japanese fishing firms by reducing their harvest. The Japanese industry was concentrated and vertically integrated. The production value of the salmon industry was high relative to other industries in the Pacific Northwest in the U.S. Beginning in the 1970's Japanese firms increased foreign direct ’ ^Salmon are anadromous species, which are hatched in rivers and streams, then migrate to the high seas for two to four years (depending on the species) where they mature. A t the end o f their life cycle they return to their natal streams to spawn and die. Sockeye salmon turn a blood-red color as they enter the last phase o f the life cycle. 6 investment and joint ventures with U.S. canning and processing firms. Japanese firms ceded fishing operations to the U.S. (by agreeing to INPFC rules which restricted the areas accessible to Japanese vessels), but Japanese firms invested in U.S. firms and repatriated profits from canning and processing. Cooperation remained at a high level througout the period analyzed, 1950 - 1993. Ranked as an intermediate case, the lATTC was created by the Convention for the Establishment of an Inter-American Tropical Tuna Commission, signed in May 1949 and entered into force in March 1950. The U.S., Japan, and several Latin American states sent boats to the Eastern Pacific, the area under lATTC regulation. While Japanese firms were relatively concentrated and vertically integrated, they did not acquire U.S. operations or undertake joint ventures with U.S. firms. Per-unit values for the species were high, but the U.S. and Japanese domestic markets were different. Japanese consumers demanded mostly bigeye for sashimi, while U.S. consumers preferred canned yellowfin and albacore. American and Japanese consumers also had different preferences for dolphin protection, with Americans favoring more restrictions on incidental killing of dolphins by tuna boats. Because U.S. and Japanese firms' harvesting patterns in LATTC waters differed, the states and firms generally interacted without conflict. Limited policy coordination was required to gain Japan's assent to create the tuna- dolphin program in 1976. More bilateral conflict has occurred in the last twenty years of the IWC. Created by the International Convention for the Regulation of Whaling, the IWC formed a kind of whaling industry caitel in its early years, until the "Save the Whales" movement of the 1970's curbed its more destructive impacts. Since the early 1970's the IWC has been divided into two coalitions, one favoring whaling and one opposing it. The U.S. has often been a leader in the "like-minded" coalition opposed to whaling. Japan has led a smaller coalition favoring continued 7 commercial whaling under IWC regulation. Conflict has centered on the validity of whaling data and the question of whether the moratorium on commercial whaling should be lifted. Japan has been less likely to change its official positions and policies in response to U.S. pressure in this case. The IWC provides a direct contrast with the INPFC. The production value of whaling was tiny in the U.S., and was higher but still a relatively small part of the fishing industry in Japan. The Japanese industry, before 1976, was part of a concentrated and vertically integrated fishing industry. Because the U.S. had almost no whaling in the post-World War II period, there were no potential gains from foreign direct investment or joint ventures. In general, Americans had stronger preferences for living whales. Preference for consumptive use of whales was historically higher in Japan as there was a market for whale meat as well as whale oil. There was no conflict in harvesting patterns per se although the environmental movement in the U.S. (allied movements in the U.K., New Zealand and Australia) beginning in the 1970's sought to reduce, then to eliminate, commercial whaling. As IWC rules changed, beginning in the 1970's, to limit and then eliminate commercial whaling, levels of U.S.-Japanese cooperation disintegrated at the IWC. Foreign direct investment and joint ventures promised scant gains, Japanese preferences for consumptive use were opposed by U .S. preferences for nonuse, and therefore conflict emerged over the extent of (and the existence of) commercial whaling. The U.S. and Japan cooperated in the IWC from 1946 until the mid-1960's; thereafter, cooperation disintegrated as Japan resisted U.S. pressure to curtail, then eliminate, commercial whaling from the 1970's until the early 1990's. Conflict in the IWC is not necessarily a bad thing for the marine environment. As one analyst noted: "international cooperation is not necessarily benign from an ethical standpoint. Rich countries can devise joint actions to extract resources from poor ones, predatory governments can form aggressive alliances, and privileged industries can induce their governments to protect them against competition from more efficient producers abroad. The analysis of international cooperation should not be confused with its celebration." ^4 Successful cooperation does not necessarily imply a beneficial environmental impact, in part because in designing the treaties states may fall short of addressing important environmental problems. For example, although successful U.S.-Japanese cooperation in the INPFC coincided with higher overall populations of North Pacific salmon, it did not help the salmon runs in Puget Sound. Nor did it safeguard many populations of wild salmon in the Pacific Northwest which are increasingly threatened.A second risk is that transnational firms may influence states to set meaningless international standards. In the first two decades of the IWC, states successfully cooperated but set quotas that were environmentally destructive, too high to restrict the level of catches. Considering that certain economic factors tend to produce better cooperation, from an environmentalist's standpoint, one might be tempted to favor conflict over cooperation. U.S.-Japanese conflict in the IWC has coincided with a ten-year moratorium on commercial whaling and the creation of an Antarctic Sanctuary, as well as increases in many whale populationsT his analysis does not contend ’ '^Robert Keohaiie, "International Institutions: Tw o Approaches," International Studies Quarterly 32 (December 1988): 380. *^The problems with the salmon fishery in Puget Sound were reported in The N ew York Tim es, "U.S. Fishing Fleet Trawling Coastal Water W ithout Fish," 7 March 1994. The decline o f the runs are usually attributed to developm ent along the rivers, including dams which have been built in the rivers. According to the National Fisherman (1992), 218 stocks o f salmon and steelhead had gone extinct by 1990. (Greenpeace, "Greenpeace Fisheries Index" 1992) *^"Know Y our Whales: Their Names, Population Estim ates, and Status, Oceanus 32, 1 (Spring 1989): 12-13. 9 that transnational firms are environmentally benign, only that they tend to facilitate international cooperation, other things equal. One payoff from the focused comparison of cases is a more precise articulation of how market factors influence cooperation. As such, this study contributes to the literature on complex interdependence. Keohane and N ye's theory would suggest that increased trade and investment flows would make states more sensitive or vulnerable to manipulation, by sanctions for example, in certain issue-areas. This analysis shows how a range of économie factors, including industry structure (vertical integration/concentration), foreign direct investment and joint ventures, similarity in consumer preferences across cultures, and resource values are positively related to interstate environmental cooperation, other things equal. A preliminary formal model shows how the economic factors influence international bargaining in the commissions, and how rules shape the way the international markets operate. This study contributes to the international relations literature by extending existing analysis of complex interdependence in the oceans issue-area. Second, this study would qualify an important assumption in the international institutions literature. Many case studies and newspaper stories assume that international environmental standards entail costs which must be allocated among s t a t e s . T h i s assumption frames parties to a conflict as "domestic" or "foreign," a distinction that may be false in many cases. These conflicts do exist, but they may vary in predictable ways as certain market factors Peterson in Keohane, Haas and Levy (1993), p. 6-7 differentiates among four types of "national" firms; in the same volume, Haas writes: "(states)...sought to m inim ize the possible relative costs from environmental protection to their industries in highly com petitive markets," Bob Dole and Pat Buchanan have criticized the W orld Trade Organization for its ability to rule on U.S. standards, which, in a recent case, resulted in a victory for Petroleos de Venezuela. As the journalist framed the issue: "foreign companies argued that (the U.S. Clean A ir Act) required them to m eet higher standards than some American concerns, putting them at a disadvantage." {New York Times, January 18, 1996, p. D6). The distinction between "foreign" and "domestic" firms would be meaningful to the extent that foreign direct investment penetration (for example, by Petroleos de V enezuela in production facilities on U.S. soil) was low. 10 vary. A more useful line of inquiry may be whether and how market factors and firm structure influence interstate cooperation to develop meaningful international environmental standards. Third, this study applies theories designed to explain the role of FDI in reducing trade conflict to a new issue-area, environmental cooperation. Bhagwati (1991), following Brecher and Diaz-Alejandro (1987) argues that large firms may able to "leap" protective legislation by forming international investment ties. In addition, such investment may forestall protective legislation if the firm to be acquired has significant political influence. Hence Toyota's investment in G.M. was successful in influencing G.M. to lobby against protective legislation being considered by the U.S. Congress. In a similar way, international investment may allow a the parent state/firm to "leap" rule changes that result in an unfavorable division of gains, or impose a large burden of abatement activity. If the subsidiary firm is large enough, it may influence domestic politics there. This effect could be environmentally harmful (if "dirty" firms shop for investment ties in states with weak environmental standards). In the case of the North Pacific, the Japanese fishing firms "leaped" unfavorable INPFC rules and invested in U.S. firms which were less environmentally destructive. Hence conflict was reduced and Japan joined the U.S. and other states in banning driftnets on the high seas in the early 1990's. Fourth, the dissertation develops a preliminary model which may contribute to the emerging two-level games literature. The model is derived empirically, linking its main assumptions to observed data. By linking economic factors and firm-level incentives to international cooperation, the model indicates the conditions under which noncompliance is the likely result, and sanctions are more likely to be threatened or used. The preliminary model applies the logic of two-level games to the study of international environmental cooperation. 1 1 The dissertation presents its method first, then the case material. Chapter two explains the method of focused comparative case studies and considers the most significant alternate explanations. Chapters three, four, and five present the observations on selected economic factors and interstate cooperation between the U.S. and Japan the INPFC, the lATTC, and the IWC. The INPFC is a case of full cooperation, the lATTC is an intermediate case, and the IWC since the early 1970's has generated relatively more conflict. Chapter six presents a preliminary model, a two-level game, derived empirically, showing the impact of the economic factors on cooperation. Chapter seven connects the hypotheses generated in this work to ongoing research on contingent valuation, negotiation analysis, an empirical studies on compliance, presenting possible extensions and a summary of the main conclusions. The research presented here raises more questions than it can answer. For example, to what extent can better understanding of nonuse (or existence) values for international common property make the benefits of protection more salient, and lead to better cooperation for conservation? Non-government organizations (NGO's) typically play an important role in influencing public opinions and therefore preferences for nonuse. Dolphins and whales proved to be public relations successes, generated millions of dollars each year in contributions to environmental organizations dedicated to protecting them. Many people may value the existence of other commonly owned resources, and such knowledge has important practical implications for conservation. ' * Second, if markets, broadly speaking, affect cooperation, how do shifts in market conditions affect the ongoing negotiations in the international commissions? The economic factors considered ’ ^See, for example, the sym posia on contingent valuation. The Journal o f Economic Perspectives 8, 4 (Fall 1994): 3-45. '^ T h e im pact of economic factors on international negotiation is explored by John Odell, "Changing M arket Conditions and International Economic Negotiation," a paper prepared for the PIN Project international Institute for Applied Systems Analysis, January 1995. here may have an impact on the process of negotiation; specifically, the type of strategy chosen. Third, is better cooperation related to better compliance with treaty rules? In the IWC, concerns about compliance are now a major issue in the ongoing process of setting the commission's rules. In sum, this dissertation compares U.S.-Japanese cooperation in three fishery commissions in the decades following World W ar II and finds that economic factors influenced cooperation in predictable ways. Higher levels of firm concentration/vertical integration, foreign direct investment, similar consumer preferences, and higher resource values produced better cooperation in the INPFC. This result stands in contrast to the IWC, where by the late 1970's there was no concentration/vertical integration, or foreign direct investment, U.S.-Japanese preferences differed and the production value of the industry was relatively low.^o The lATTC provides an intermediate case. The next chapter defines cooperation and the other key variables, and presents the dissertations' method more explicitly. ^•^The industry production value o f whaling was low in Japan relative to other fishing operations (including salmon and tuna) but per-unit values for whale m eat had soared by the late 1990's, because o f demand which exceeded the extremely tight supply due to the moratorium on commercial whaling. In the U.S., by contrast, whale watching represented an industry based on American preferences for nonuse of whales. 1 3 Method This study is designed as a structured, focused comparison of case studies, following the method of Alexander George.^' Data collected from published histories, unpublished commission records, interviews, and transcripts of annual negotiations show that certain economic factors influenced U.S.-Japanese cooperation in the INPFC, lATTC, and IWC. Those factors include levels of foreign direct investment, firm concentration and vertical integration, the extent to which preferences were similar, and the market value (use and nonuse) of the species22. These factors were positively related to the level of U.S.-Japan cooperation in the commissions from roughly 1950 to the early 1990's, other things equal. Cases were selected in order to hold the most important alternative hypotheses, including power and institutions, roughly constant. This chapter provides operational definitions of the variables, and explains how the study was designed to control, insofar as possible, the most important alternative hypotheses. Dependent Variable: Interstate Cooperation The structured, focused case study method consists of selecting the same observations on the same variables across cases.^^ The dependent variable in this 2 'A lexander George, "Case Studies and Theory Development: The Method o f Structured, Focused Comparison," in Lauren, ed.. Diplomacy: New Approaches in Theory, History, and Policy, (New York: Free Press, 1979), 43 - 68. ^^D ata are reported on industry production value as well as per-unit values by species over tim e in the U.S. and Japan for use and, where available, for nonuse. 23w hen this study began, the dependent variable was to the degree of compliance and effectiveness o f the three environmental agreements. However, although there were specific reports of noncompliance in at least one case, insufficient data were available to make meaningful generalizations across time. Sufficient data were generated, however, to inform analysis of I 4 study is interstate cooperation. The use of the term follows that of Keohane (1984). "Cooperation requires that the actions of separate individuals or organizations - which are not in preexistent harmony - be brought into conformity with one another through a process of negotiation, which is often referred to as 'policy coordination.'... Cooperation occurs when actors adjust their behavior to the actual or anticipated preferences of others, through a process of policy coordination ... intergovernmental cooperation takes place when the policies actually followed by one government are regarded by its partners as facilitating realization o f their own objectives, as the result o f a process o f policy coordination.."'^'^ Operationally, this dissertation distinguishes between full cooperation, partial cooperation, conflict, partial conflict and indeterminate outcomes. Where cooperation occurred, for the most part it was Japan which changed its policy to facilitate realization of the U.S. objectives. Cooperation refers to state A 's changing its policy toward the position favored by state B (or vice versa). Such change might include voting with state B; cosponsoring a resolution or schedule amendment; or policy change by state A to restrain firms in state A resulting from pressure to do so by state B. Scientific cooperation refers to change in state A toward generating joint data and methods, joint analysis, and change toward agreement on data interpretation and results as a result of pressure to do so by state B. Partial cooperation refers to policy change in state A (observed implemented domestically and/or in its policy positions expressed in international negotiations) toward meeting state B's goals, with some "mixed" behavior. That is, state A exhibits cooperation behavior as described above, but also exhibits some limited conflict behavior as described below. interstate cooperation. 2'^Keohane, Robert, After Hegemony: Cooperation and D iscord in the World Political Economy, (Princeton, Princeton University Press, 1984), 51 - 52. Emphasis in original. ^ ^ Conflict behavior indicates that state A changes its policy away from the direction state B is pressuring it, or vice versa. For example, state A may take a reservation exempting it from treaty rules favored by state B; state A may find loopholes to "get around" rules favored by state B; state A may vote against, and/or make statements against, rules favored by state B; and state A may cheat on rules state B supports. Additionally, state A may not make domestic policy changes necessary (for example, set and/or enforce regulations constraining firm behavior) to implement rules made at the commissions. Scientific conflict refers to a policy change in state A whereby scientists insisting on separate generation of data; disagree on methods of analysis, and/or dispute results. Partial conflict would mean more change toward, with some change against, conflict behavior as described above. Indeterminate behavior is neither dominantly cooperative nor noncooperative (both behaviors are exhibited equally; or state A abstains from voting and makes no statements for or against the position advocated by state B). If there is not enough information to classify policy in a given time period, "no data" is reported. This definition does not assume mutual gains from cooperation. For example, unlike economic theories of international trade, cooperation as defined here does not necessarily imply that both states gain.^5 State A may pressure state B to accept an outcome that, in the absence of such pressure, state B would not ^^Economists use the "Edgeworth box diagram" to show how countries with different endowments may engage in exchanges o f goods that redistribute commodities and improve welfare in both countries. All feasible exchanges will make one country better off without making the other worse off. (See, for example, Caves, Frankel and Jones, World Trade and Payments: An Introduction, (Glenview, 111., Scott, Foresman, 1990), 25. The analysis o f cooperation used here does consider rule changes in which one state gains more relatively. The case chapters present two examples (the INPFC and the IWC) where rule changes ipso facto reduced the share of fish/marine mammals Japan could take. In the INPFC decreases over time in the area available to Japan increased the return of sockeye to U.S. coastal waters. The degree o f subsequent cooperation (the degree to which Japan changed its policy in response to U.S. pressure) depended on market factors including the level o f foreign direct investment, the degree of industry concentration and vertical integration, similarity o f preferences, market value of the resources, other things equal. 1 6 otherwise agree to. In cases analyzed, where cooperation occurred, it was typically Japan that changed its policies to realize U.S. objectives. Value (Use, Nonuse) Production or use value refers to the annual dollar value of the output of firms in the industry. Production value of the industry would range from high to low relative to the production value of other industries in the region. Industry value is ranked from high to low in terms of the number of people employed relative to other industries in the region. Ranked on this scale high end (top third) in terms of production value and/or employment would be "high value" or "big" industries; the second tier would be "medium value" or "midsized" industries; and the third tier would be "low" value or "small" industries. Per-unit value refers to the market price of the resource, typically reported as wholesale market value. Other firm characteristics analyzed are the degree of concentration and vertical integration. Concentrated or oligopolistic refers to an industry in which there is a small number of sellers of the product^^. Vertical integration refers to firm behavior in which a good or seivice that could, without major adaptation, be sold in the market, is transmitted within the firm. Vertical integration is the replacement of a market exchange by an internal (within the firm) transfer. In addition to acquiring upstream or downstream suppliers, firms may sign contracts with other firms to achieve similar results^^. Fishing firms which link fishing, canning and processing through ownership, joint venture, or other form of contract count as vertically integrated. Per-unit value is also used to compare the relative ^^N icholson, W alter, M icroeconomic Theory : Basic Principles and Extensions, Fourth ed., (Chicago: Dryden Press, 1989), 779. 2^Blair, Roger, and Kaserman, David, Law and Economics o f Vertical Integration, (New York: Academic Press, 1983), 11. See also Ronald Coase, "The N ature o f the Firm," Economica, 4 (Novem ber 1937), 386 - 485. value of species within each case. That is, price per pound can be measured by species to indicate relative value in a region. Environmental assets may have an additional dimension, an intrinsic value. Nonuse value refers to the value environmental assets have when they are left intact. Where available, willingness to pay surveys are the best measure of nonuse values. Nonuse value can be approximated^® by consumer spending on whale watching nonuse values. Although not an ideal measure, spending by environmental groups indicates that environmental assets have nonuse value^*. 2®the best available method for measuring nonuse value is the contingent valuation method. See Mitchell and Carson, Using Surveys to Value Public Goods: The Contingent Valuation M ethod, W ashington, D.C.; Resources for the Future, 1989. 2^The fact that Greenpeace spent a significant amount on its ocean ecology campaign, which has been active in the driftnet-ban, tuna-dolphin and anti-whaling issues does not directly reflect consum er preferences, but rather the strategic priorities o f the group. However, the fact that the majority o f Greenpeace's donations comes from individual donations does reflect a general preference for conservation across a range o f issues, including ocean issues. 1 8 SUMMARY TABLES (see also appendix to this chapter) North Pacific Salmon/Driftnet Case interstate cooperation full cooperation, 1953 - 1970. scientific cooperation indeterminate, 1950's and 1960's. full cooperation, 1970's. full cooperation, 1986 "donut hole" dispute. full cooperation, 1990's driftnet ban mixed cooperation, 1970's and 1980's. no data, 1990's. market factors: US Use value. The value of North Pacific salmon fishing was low relative to Japan's concentrated fishing industry and the overall U.S. economy. Compared to other industries in Alaska, the production value of sockeye salmon was high. Hence the industry had a relatively large impact on regional politics and in INPFC politics, which had a regional focus. Nonuse value for marine mammals; Donations to environmental NGO's indicate that there was some level of concern in the U.S. for adverse impacts of driftnets. U.S.: low level of concentration and vertical integration. Canning, processing and fishing operations were relatively small operations. No outward U.S. investment in the Japanese (or other industries) was identified. market factors: Japan Use value. Production of salmon was part of larger fishing operation. Value of Japanese industry was high relative to the U.S. industry. Fishing was low relative to other industries in Japan's economy, and its importance diminished relatively over the period analyzed (1945- 1995) as Japan industrialized. No data on nonuse value was found, and none is believed to exist. Japan: Concentrated, vertically integrated industry. Formed foreign direct investment and joint venture ties with the U.S. in the 1970's. 19 Eastern Pacific Tuna/Dolphin Case interstate cooperation harmony, 1966 - 1979. scientific cooperation indeterminate, 1950's and 1960's. partial cooperation, 1976 to present. Dolphin protection. no data, 1970's to present market factors: US Use value. The value of tuna fishing was low relative to Japan's concentrated fishing industry and the overall U.S. economy, but was high relative to other industries in Southern California. Hence the industry had a relatively large impact on regional politics and in lATTC politics, which had a regional focus. Production value of tuna was less than that of salmon in the U.S. for the period in which data are available, 1979 until present. Nonuse value for marine mammals: no data. Donations to Greenpeace indicate that there was some level of concern in the U.S. for adverse impacts of dolphin fishing. The tuna industry was relatively concentrated and vertically integrated. Three big tuna firms were integrated into larger food conglomerates. No outward U.S. investment in the Japanese (or other industries) was identified. In the late 1980's and early 1990's two of the U.S. companies were acquired by Thai and Indonesian firms. market factors: Japan Use value. Production of tuna was part of larger fishing operation. Value of Japanese industry was high relative to the U.S. industry. Fishing was low relative to other industries in Japan's economy, and its importance diminished relatively over the period analyzed (1945- 1995) as Japan industrialized. No data on nonuse value was found, and none is believed to exist. Concentrated, vertically integrated industry. No outward investment or joint ventures with U.S. were identified. 20 Whaling interstate cooperation cooperation, 1946 - nüd-1960's mid-1960's and 1970's. partial cooperation scientific cooperation no data, 1940's - 1960's no data, 1960's - 1970's conflict, 1980's. scientific conflict, 1980's. conflicts, early 1990's. scientific conflict, 1990's. market factors: US Use value. tiny industry until 1972; none thereafter. Nonuse value in U.S. can be approximated by revenues from the whale watching industry, $41 million in direct revenue in 1993. Low level of concentration and vertical integration. market factors: Japan Use value. Whaling was a relatively small segment of the larger fishing industry until 1976, when it was divested. After 1986/87 Japanese commercial whaling officially ended. Concentrated, vertically integrated industry until 1976, small, independent operation until 1986/87. No outward U.S. investment in the Japanese (or other industries) was identified. No investment ties to U.S. industry. Subsidiary operation was established in Chile in 1967 but quickly closed. Some of the most important ideas in the literature are that state power, institutions, the number of actors, and regulatory capture may influence interstate cooperation. The next section explains in more detail how these alternative hypotheses have been held roughly constant to focus this analysis on market factors. 21 Alternative Hypotheses: Neorealist Defining relative power in international relations usually entails some comparison of two states' relative military and economic strength. Waltz (1979) defined power in terms of states' relative capabilities. Power would be measured by assessing a state's relative position in the system. Both military resources and rates of economic growth would count as measures of capabilities, which in turn would provide a state with influence over international policy outcomes. However, as Baldwin (1993) argued, to define power requires specification of scope and domain. Baldwin wrote: "when neorealists and neoliberals debate the significance of relative gains in international politics, they sometimes neglect to specify precisely what kinds of gains they have in mind. Usually the answer is gains in capabilities. The answer, however, begs another question, "Capabilities to get whom to do what?"30 Krasner (1991) defined power as "the ability to determine who plays the game, or to define the rules, or to change the values in the payoff matrix."3i In international relations, unlike in purely competitive markets, an actor may be forced to accept an outcome that it would not have accepted voluntarily. Krasner argued that analysis based on relative power (determining which point on the Pareto Frontier actors reach) is most compelling. For telecommunications, relative power would be estimated by a state's control of technology, market size, regime membership, and territorial reach. The issue areas included the right to transmit radio and T.V. signals across state boundaries without the target's consent, the right to sense vs. the need to secure prior consent from the target, shares of access ^^Baldwin, in Neorealism and Neoliberalism: The Contemporary Debate^ (New York; Columbia University Press), 1993. 3 * Krasner, "Global Communications and National Power," in Baldwin, ed.. Neorealism and Neoliberalism: The Contemporary Debate (New York; Colum bia University Press), 1993. 22 to the electromagnetic spectrum, and the shift in telecommunications regimes away from national monopolies. More powerful actors dominated. Where negotiations occurred, more powerful actors determined who was allowed access to the bargaining table and had more influence over the rules created and took more of any divisible gains.32 This emphasis on power in regime formation follows earlier work by Krasner,33 Gilpin, and others who argued that the U.S. imposed a liberal trading regime on its partners after World War II. The U.S., being dominant both in military hardware and economic competitiveness, used its power to secure creation of the Bretton Woods institutions at a time when the liberal rules favored its own most competitive economy. As its hegemony has declined since the 1940's, so too has its commitment to the liberal regime. Gilpin argued that forty years after the end of World War II, the relative decline of the U.S. has made its producers sensitive to import competition from Japan and the NIC's, with the result that about a third of industrial production is covered by protectionist devices such as Voluntary Export Restraints, and that domestic pressures for adjustment assistance and structural direction of the economy through government support for education, research, and other programs has intensified.^^ Qualifying this treatment, Stein (1984) argued that the GATT and other postwar institutions resulted from a series of negotiations between a hegemon, the U.S., and its less powerful partners. In exchange for securing a multilateral system of freer trade to engender absolute gains for participants, the hegemon agreed to a web of bilateral bargains in which it risked losing relatively. Such 3^Krasner, "Global Communications and National Power: Life on the Pareto Frontier, World Politics 43 (Spring 1991), p. 364. Krasner, Stephen D., Structural Conflict: The Third Word A gainst Global Liberalism (Berkeley: University o f California Press, 1985). 3‘^Oilpin, Robert, The Political Economy o f International Relations, (Princeton, N.J.: Princeton University Press, 1987). 23 bargaining entails a dilemma for the dominant partner: In the economic arena, a state which cares only about absolute gains is more likely to lose ground relatively.35 Power in neorealist theory is a means to an end: security. Under certain conditions efforts by one state to increase its security through expanding military or other capabilities may be perceived by adversaries to be an act of aggression and so making the state less secure; hence, a "security dilem m a"^^ (Hertz 1959). Waltz (1979) argued that states seek power in order to increase security. As Keohane summarized: "States concerned with self preservation do not seek to maximize their power when they are not in danger...thus they moderate their efforts when their positions are secure. Conversely they intensify their efforts when danger arises..." (Keohane 1986:276). Defining security entails objective and subjective elements. According to Wolfers (1962), security refers to the absence of threats to acquired values such as national independence and territorial integrity and the absence of fears that such values will be attacked. The degree of security would vary with the ability of a nation to deter or defeat an attack. To be meaningful, Wolfers argued, a definition of security should specify what degree of security a nation shall aspire to obtain, and what means shall be used to obtain it in a given situation. Jervis (1976, 1988) stressed that in addition to objective measures of power and security, actors perceptions are an important determinant of behavior. Decision makers may not be ^^Stein, Arthur, "The Hegemon's Dilemma: Great Britain, the United States, and the International Economic O rder,"//i/er/ian'ona/ Organization 38, 2 (Spring 1984). 36"The 'security dilemma,' or 'power and security dilemma,' is a social constellation in which units o f power (such as states or nations in international relations) find themselves whenever they exist side by side without higher authority that might impose standards o f behavior upon them and thus protect them from attacking each other. In such a condition, a feeling o f insecurity, deriving from mutual suspicion and mutual fear, compels these units to compete for ever more pow er in order to find more security, an effort which proves self-defeating because complete security remains ultimately unattainable. I believe that this dilemm a...constitutes the basic cause o f what is commonly referred to as the "urge for power" and resulting 'power politics.' John Hertz, International Politics in the Atom ic Age, (New York: Colum bia University Press, 1959), 231 - 235. 24 aware that their defensive arms buildup may threaten other states; they may assume that their actions are compatible with the interests of others. These and other cognitive biases, Jervis argued, decrease transparency, posing a barrier to the formation and maintenance of regimes.^'^ One possible explanation of the patterns of U.S.-Japanese cooperation in the INPFC, lATTC, and IWC from 1950 - 1995 would stem from the foregoing literature emphasizing relative power and security. It would provide an alternative hypothesis to those put forth in this dissertation, that variation in U.S.-Japanese cooperation can be traced to variation in a set of market-related factors. The starting point would be a measurement of Japan's relative capabilities. Considering relative military and economic capabilities, Japan's position improved during the period. The ratio of Japanese military expenditures to U .S. military expenditures was .002 in 1951, and thereafter increased steadily to .16 in 1994 (see table, below).^* This increase was within the limit set by the 1960 U.S.-Japan Security Treaty, which held Japanese defense spending at or below 1% of Japan's GDP. Postwar recovery and subsequent export-led growth fueled increases in Japan's annual GDP that exceeded growth in the U.S. GDP each year until 1992 (see graphs, below) By both measures, Japanese capabilities increased from the early postwar period to the present. The following section considers U.S.-Japanese power looking at the three cases at any given moment; subsequently, the effect of increased Japanese capabilities over time on bilateral cooperation is analyzed. ^^Jervis, Robert, "Realism, Game Theory, and Cooperation", World Politics 40 (April 1988): 339. ^^T he M ilitary Balance, (W ashington,D.C. and London, International Institute o f Strategic Studies): various years and pages. "Annex Table 1, Real GDP % Change From Previous Period," OECD Economic O utlook 58, (D ecem ber 1995): A4. Figures from 1960 - 1979 from in OECD Economic O utlook 47, 2 5 Defense Expenditures $ Millions US Japan Ratio Japan: US 1951 33 .08 .0 0 2 1955 47 .164 .0 0 5 1960 43 .421 .0 0 9 1965 51 .848 .0 1 1970 76 1.6 .0 2 1975 88 4.6 .0 5 1980 N/A N/A N /A 1985 339 28 .0 8 1990 238 N/A N /A 1993 297 41 .1 4 1994 278 44 .1 6 Source: International Institute for Strategic Studies, The Military Balance, various years and pages. 26 74-79 80-82 83-87 Source: OECD Economic Outlook 47, OECD, Paris, June 1990. □ Japan Sources: OECD Economic Outlook 47, OECD, Paris, June 1990 and OECD Economic Outlook 58, December 1995. 27 Power Structure This section analyzes the effect of state power on U.S.-Japanese cooperation across cases, that is, considering the relative power position at any given moment. The nature of the U.S.- Japanese security relationship in the post- Cold War era has been fixed by a security guarantee. The treaty was signed in 1951'*° as a condition of ending World War II, but the core of the relationship is spelled out in the 1960 Treaty of Mutual Cooperation and Security.4' The United States committed itself to defending Japan in case of attack. Japan, in turn, agreed to consult with the U.S. about regional security problems, maintain limited defensive forces, and to come to the U.S. if the U.S. were attacked.42 The U .S.- Japan partnership "functioned like the 'Lone Ranger-Tonto' relationship."^^ The U.S. appears to have been a dominant partner, pressuring its junior partner in regimes which allocated gains asymmetrically. In the INPFC, lATTC, and IWC, the U.S. set the rules to its industry's (or its environmentalist community's) liking, while Japan largely complied. However, this explanation would predict a constant, high level of Japanese cooperation, while cooperation varied across cases at any point in time. The following section considers this relationship in more detail. Constant Power Structure, Variation Across Cases The 1960's marked an early phase in the U.S.-Japan security relationship. The security treaty was signed in 1960, institutionalizing the relative power relationship. Japan's defense spending in relative terms was low, limited to .96% ‘ ^^Burke, Ardrath, Japan: Profile o f a Postindustrial Power, (Boulder, Co.: W estview Press, 1981): 236. '^'B alassa, Bela and Noland, Marcus, Japan in the World Economy (W ashington, D.C.: Institute for International Economics, 1988): 158. '^^Balassa and Noland, p. 158. ‘ ^^Kishore M ahbubani, "Japan Adrift," Foreign Policy 88 (Fall 1992), 128. 2 8 of GDP in 1965, compared to 7% of GDP in the U.S.44 The security relationship would have affected all of the commissions in the same way; one would expect to see the U.S. pressing for its interests and Japan cooperating. Japan's behavior at the commissions varied. In the North Paeific, Alaskans expressed hostility toward perceived Japanese interceptions of North American salmon. Tagging data obtained later confirm that Japanese boats did take North American salmon, although the fish were most likely taken west of the Abstention line (175° West Longitude). That is, Japan was probably complying (keeping its boats within agreed-upon limits) but still intercepting North American salmon, which migrated west of the line. The Alaskans were hostile, arguing that the Japanese were not reasonable people; the Congress of American fishermen harshly criticized Japanese fishermen. The Japanese stressed the need for mutual problem-solving, and expressed a desire to cooperate closely with the U.S. to achieve and satisfy shared objectives and interests. Japan had changed its behavior in response to U.S. demands, although there was pressure to change treaty rules because the fish traversed the boundaries set by the Commission. Cooperation in the INPFC remained at a high level throughout the period considered. The lATTC, by contrast, represented a situation of harmony, where no cooperation was necessary to arrive at a mutually acceptable outcome.'^^ jn 1 9 6 6 the lATTC set a flrst-time-ever quota on yellowfin. Japan took most of its yellowfin from the Western Pacific at this time, and so there was little, if any, conflict with U.S. fishing for yellowfin in the Eastern Pacific. The situation did source: International Institute for Strategic Studies, The M ilitary Balance, various years and pages, faxed from The U.S. Committee o f the International Institute for Strategic Studies, W ashington, D.C. See also Keddell, Joseph P., The Politics o f D efense in Japan, (Armonk, N.Y.: M.E. Sharpe, 1993), 149. ^^The use o f the term harmony refers to state behavior which automatically facilitates the attainm ent o f others' goals. (Keohane, "International Institutions, Two Approaches," International Studies Quarterly (1988) 32: 379 - 96, p. 380, and Oye, "Explaining Cooperation U nder Anarchy," in Oye, ed.. Cooperation Under Anarchy (Princeton, N.J.: Princeton University Press, 1986): 7.) not require any policy change by Japan to bring it into conformity with new regime rules regulating yellowfin. No such harmony of interest was possible in whaling in the 1960's. Japan's behavior was, at best, partial cooperation. Japanese whaling reached its peak production in 1965, but Japan curbed its pelagic whaling in response to IWC quotas imposed in 1966 and thereafter. However, Japanese efforts to get around IWC rules in this period are well documented. Japan set up pirate whaling stations in Chile, from which 690 blue whales were killed between 1964 and 1968. Blue whales were granted full protection by the IWC in 1965.^6 1970's Japan's spending on defense forces continued to be tightly controlled in the 1970's. In November 1976, Japan instituted a policy officially limiting defense spending to one percent of GNP. For the rest of the decade, Japan's defense budget hovered between .8 % and .9% of GDP. The comparable figure in the U.S. was 7.8 percent in 1970, 5.9% in 1975, and 5.5% in 1980. Again, any changes in the security environment would be likely to affect the three commissions as a constant. The INPFC was renegotiated in 1978, as a result of rule changes at the U.N. Conference on the Law of the Sea and the U.S. Magnuson Fishery Conservation and Management Act of 1976. The Magnuson Act directed the U .S . to renegotiate treaties based on the new U.S. claim of extended jurisdiction (200 mile FEZ). Japan agreed to, and by all accounts abided by, the new rules that reduced its fishing area. This indicates cooperation, albeit at Japan's expense. ‘'^IW C , 17th Report 18 (1967); also Jam es E. Scarff, "The International M anagem ent o f W hales, Dolphins and Porpoises; An Interdisciplinary Assessment, Ecology Law Quarterly 6 (1977); and M ichael R. M 'Gonigle, "The 'Economizing' o f Ecology: W hy Big, R are W hales Still Die, " Ecology Law Quarterly 9 (1980): 119-237. One Japanese official described Japanese behavior in the seventies this way: "we knew we were going to lose, so we decided to lose s l o w ly . J a p a n restructured the market for salmon internationally and domestically. Japan increased FDI in the U.S., buying out the Alaskan salmon producers (processors and canners). Within Japan people at the bottom of the pyramid (fishermen in the villages) lost their jobs^S; the largest fishing companies stayed intact. In the lATTC, the U .S. pressed Japan to include dolphin management in the commission's jurisdiction. Japanese negotiators resisted, but agreed. Although Japan did not fish on dolphins, in contributing to the lATTC budget it did contribute to the dolphin program, indicating cooperation. In the IWC, Japan also cooperated by downsizing its whaling industry in compliance with increasingly tight IWC quotas. Yet at the same time, Japanese firms attempted to circumvent the quotas. Japan's behavior in the IWC was partially cooperative in the 1970's.‘ * ^ Japan's security relationship with the U.S. continued in the 1980's, despite increasing pressure for Japan to "share the burden" of defense with the U .S. Through 1985, Japan spent .99% of its GDP on defense, at a time when the comparable figure for the U.S. was spending 6 .8 %.^° Under pressure from the U.S., Japan abolished the ceiling on defense spending, and thereafter spent slightly ‘^^interview with Shigeto Hase, North Pacific Anadromous Fish Commission, Vancouver, Canada, spring 1994. ^^Fishing em ploym ent in Japan declined from 790,000 in 1952 to 342,000 in 1992. (Fisheries Agency o f Japan, unpublished document, 1994). '^^Figures are from Keddell (1993). Comparable figures from the International Institute for Strategic Studies in W ashington, D.C. w ere 6.5% of G DP in the U.S. and 1% o f GDP in Japan in 1985. Japan objected to U.S. and other "like-minded" states in their efforts to curtail commercial whaling. In 1971 and thereafter, until 1982, Japan opposed US proposals to ban commercial whaling. In 1973 the IW C agreed to phase out the killing o f fin whales in the Antarctic by 1976, to establish separate quotas for male and female sperm whales, and to reduce the quota on sei whales. Japan objected to each o f these measures. In 1977 a new sonar technique was used to calculate populations o f minke and sperm whales, and the quotas were cut by 36% (for minke whales) and 58% (for sperm whales). Japanese scientists opposed the cuts and disputed the new data, saying more time was needed for analysis. However, the available data indicates that despite its objections in the negotiations, in the 1970's Japan cooperated when outvoted in the IWC. ^^Balassa and Noland, p. 158 3 1 more than 1% of its GDP on defense^'. Again the main point is not that all security conditions were necessarily constant, but that security conditions in general would have affected bargaining in the three commissions in the same way at any given moment in time. Yet Japanese behavior with respect to U.S. pressure was quite different in the INPFC than in the IWC. In 1986 the U.S. and Japan agreed in a Memorandum of Understanding in the context of INPFC talks that Japan would withdraw its boats from the donut hole in exchange for permits to take groundfish within the U.S. FEZ. The Kokechick Fisherman's Association, mostly Alaskan fishermen, teamed with the Center for Environmental Education and sued to block issuance of the permits. The U.S. District Court in the District of Columbia found in favor of the fishermen and environmentalists, who argued that if the Japanese were allowed to take groundfish, they might incidentally take marine mammals for which there were no abundance estimates. This would violate the Marine Mammal Protection Act of 1972. Japan was denied the permits to fish in the U.S. zone, but Japan cooperated anyway, moving out of the "donut hole" area of the high seas. In the lATTC, Japan and the U.S. again had no conflict of interest. While the U.S. was attempting to extend protection for dolphins (guaranteed by the U .S. Marine Mammal Protection Act) internationally by placing embargoes tuna imported from states which had rates of dolphin kills substantially higher than the U.S. rate, Japan did not fish on dolphins and therefore was unaffected. The IWC, by contrast, became a forum for increased U.S.-Japanese conflict in the 1980's. In 1982, five resolutions were introduced in the IWC to ban commercial whaling. The U.S. had sponsored one, Japan opposed. The moratorium received the three-fourths majority of the IWC, but Japan filed an objection in 1982, which was withdrawn in 1987/88, whereupon Japan submitted a 5 '1 9 8 7 , 1.004%: 1988,1.013%;1989; 1.006%. 32 research proposal and has taken 300 whales per year under a loophole for "scientific research". Technically, Japan had complied with the moratorium. However, Japan continued to take whales under a research program the IWC Scientific Committee has criticized repeatedly. The scientific research program was not supported by the IWC, and many scientists have argued that Japan could do the same research with nonlethal methods. Environmentalists charge that Japan has reconstituted its commercial whaling in the guise of "scientific research." In response to Japan's whaling, the U.S. imposed economic sanctions on Japan in April 1988, cutting the Japanese fishing allocation in the U.S. zone in response to Japanese whaling. ^2 Japan did not cooperate with the U.S. demands in whaling for most of the 1980's. Japan was not only saying "no" to the U.S., but was also accusing its senior partner of racism.^3 1 9 9 0 's After the Cold War, the security alliance between the U.S. and Japan has become the subject of renewed discussion. There has been some suggestion that the terms of the agreement should be more clearly spelled out.^'* However, in terms of military capabilities, the hierarchy was unchanged. Japan has still spent approximately 1% (or slightly less) of its GDP annually on defense. The comparable figures for the U.S. were 5.3% in 1990, 4.7% in 1993, and 4.3% in 1 9 9 4 55 The research design holds this factor roughly constant. Variation in ^^The Commerce Secretary cited the following reasons for the sanctions; (1) the resolution adopted by the IW C calling for Japan to refrain from issuing the permits (for scientific whaling in the 1987/88 period) until the scientific uncertainties were resolved; (2) the December 1987 Scientific Committee meeting report which indicated that the revised research proposal did not succeed in resolving the Scientific Committee's uncertainties; and (3) Japan's issuance o f the pecial perm it to take whales for scientific research, and reports that Japan was taking whales under the scientific permit. ^^Interview with Kazuo Shima, Japanese Comm issioner to the IW C, October 1994. ^'^"America, Japan, and the Unmentionable," T/ie Economist, February 25, 1995, p. 33. ^^International Institute for Strategic Studies, The Military Balance, various years and pages, faxed from The U.S. Comm ittee o f the International Institute for Strategic Studies, W ashingto^ D.C. security-related issues would have affected the three marine treaties in a similar way. Within the three regimes, levels of cooperation have varied. In the North Pacific, in the 1990's environmentalists have worked to eliminate drifmet fishing, which has a high rate of incidental kill of marine mammals, sea birds, and other marine life. The U.S. and Japan agreed to cosponsor U.N. resolution 46/215 in 1990 which prohibited driftnets. This indicates a high level of cooperation, as Japan was required to remove its nets from the high seas, and to close down its high seas salmon fishing in the North Pacific. In the lATTC, Japanese and U .S. interests have once again been in a state of harmony. In the IWC, Japan continues to take whales for its scientific research program. In addition whale research, the creation of a sanctuary for whales in the Antarctic south of 40° Latitude has generated conflict between the U.S. and Japanese negotiators. The sanctuaiy was created by a majority in the IWC in 1994. Japan cast the only vote against, and Japan filed an objection to the sanctuaiy. In 1994/95, Japan took part of its research harvest from the sanctuary, and has announced that it will increase its annual harvest from 300 to 400 whales in the 1995/96 season. Japan is complying with the moratorium but continues to take whales in a program that, each year, the IWC Scientific Committee considers to be of questionable merit. Japanese officials have emphasized that Japan will not consider quitting the IWC because Japan does not want to be considered an "outlaw nation." At the same time, the Japanese position at the IWC supports the resumption of commercial whaling, in conflict with the U.S. position against commercial whaling. In the 1990's, Japan and the U.S. cooperated in the INPFC, but achieved a lower level of cooperation in the IWC. In short, alternative power-based explanations of U.S.-Japanese cooperation at any given point in time have been held roughly constant ^ ^ by case selection. The structure of the international system was a constant, while across the three cases, U.S. and Japanese behavior varied. The next section considers another possible effect of relative power on cooperation, the relative increase in Japanese capabilities from the early post-World War II period to the early 1990's. Japanese Behavior Over Time This section considers the effects of increases in Japanese capabilities over time. An additional alternative hypothesis derived from an analysis of relative power such as Krasner (1979, 1985, 1991) and Grieco (1990) would be that as Japan's relative capabilities increased, cooperation would be increasingly blocked. As the table below summarizes, cooperation in the three cases appears to be only weakly related to the relative increase in Japanese military capabilities from 1950 - 1995. There appears to be no connection between bilateral cooperation in the INPFC and LATTC and the increase in relative Japanese capabilities. In the IWC Japan's increase in capabilities appears to be inversely related to the strength of cooperation. It would seem, therefore, that explanations of U.S.-Japanese cooperation in these regimes based exclusively on increases in Japanese capabilities over time are underdetermined. This dissertation highlights other factors, especially market related factors such as international capital flows, patterns of harvest and consumption in the different fishing and whaling grounds, variation in resource values, were more closely related to variation in bilateral cooperation. 35 Japan: US military spending INPFC full lATTC IWC 1951 .002 cooperation full harmony cooperation 1955 .005 cooperation full harmony cooperation 1960 .009 cooperation full harmony cooperation partial 1965 .01 cooperation full harmony cooperation partial 1970 .02 cooperation full harmony cooperation partial 1975 .05 cooperation full harmony partial cooperation 1980 * cooperation full cooperation partial conflict 1985 .08 cooperation full cooperation partial conflict 1990 H - cooperation full cooperation partial conflict 1993 .14 cooperation INPFC cooperation partial conflict 1994 Data not available. .16 terminated cooperation conflict Another alternative hypothesis derived from the same literature would be that as Japan's relative capabilities increased, Japan would increasingly change the commission's rules to its advantage, taking a larger share of the gains. Relative gains could be measured by comparing each state's catches of fish and marine mammals, data which are available from the treaty secretariats and/or from the fisheries agencies of the states. As the case chapters detail, however, this did not occur. Where there was distributive bilateral conflict, in the INPFC and the IWC, the rules were set increasingly to Japan's disadvantage over time. Where the bargaining was predominantly bilateral, INPFC rule changes in 1978-79, 1988, and 1990-91 reduced the fishing areas open to the Japanese high seas driftnet fishery, and shares of salmon (particularly Bristol Bay sockeye) declined concomitantly. Where 3 6 bargaining was multilateral (albeit with the U.S. intermittently using threats of economic sanctions against Japan to influence Japanese policy), rule changes in the IWC beginning in 1966 tightening whaling quotas, setting a moratorium on commercial whaling (effective 1985/86) , and creating a sanctuary in the Antarctic (1994) also reduced the areas available to Japanese commercial and scientific whaling operations. Hence, relative increases in military and economic capabiUties appear unrelated to Japanese bargaining behavior in the INPFC and the IWC at least from the 1960's to the present. Another alternate hypothesis from this literature would follow from Stein (1984). It would consider the negotiations in the INPFC, lATTC and IWC in the light of hegemonic bargaining, roughly as follows. As the hegemon after World War 11, the U.S. established a set of regimes to conserve marine life at the expense of its own domestic production. These regimes, if effective, would create absolute gains for all users of the fisheries. To obtain the agreement of other fishing states, however, the U.S. would pay the price of relative losses in its domestic market. This reasoning is analogous to Stein's argument that the U.S., in creating the GATT, provided for absolute global gains from trade. At the same time, the U .S. made its markets vulnerable to penetration by Japan and other newly industrializing countries, particularly in the period after the 1970's when U.S. hegemony was declining. This logic would explain well only to the degree that Japanese fishing and whaling operations organized production for export and such production competed with U.S. firms for market share. These conditions were not met in salmon or whaling. Although there is evidence of an explicit U.S. government decision not to control Japanese imports of tropical tuna from Japan for security reasons, it is not clear that such a hegemonic bargain impacted the lATTC since U.S. and Japanese fishing areas for tropical tuna did not conflict. 37 In the North Pacific, the U.S. made Japanese abstention from areas in which U.S. stocks were known to migrate a precondition for signing a peace treaty. In 1951, Japanese Premier Shigeru Yoshida formally agreed that Japan would not fish for salmon or groundfish in the Northeast Pacific until a separate treaty was negotiated. The Japanese commitment was made through an exchange of letters with U.S. Special Envoy John Foster Dulles, who was beginning the work of negotiating a general peace t r e a t y . A s detailed in the case chapter, the U .S. believed that the Abstention Line, then set at 175° W. Longtitude, was sufficient to prevent Japan from taking American-origin salmon, particularly Bristol Bay sockeye. Subsequent rule changes in the 1970's, 1980's and early 1990's entailed further restrictions and an ultimate phaseout of the Japanese pelagic salmon fishery. These restraints progressively prevented Japanese flag vessels from taking American-origin salmon, and hence protected rather than sacrificed the U .S. industry to Japanese production. Bilateral tuna trade fit the pattern of a U.S.-Japan hegemonic bargain, but bargaining over tuna harvest and the tuna-dolphin program in lATTC waters did not. Japanese production of canned tuna for the U.S. market threatened the U .S. tuna producers in Southern California. The Eisenhower Administration (the White House, the Department of the Army, and the State Department) took the position that Japanese production of canned tuna for the U.S. market was to be encouraged as a policy of encouraging Japanese development and to deter Japan from building ties with China and the Soviet bloc.^^ Hence, a hegemonic bargain provided a relatively open market for U.S. imports of Japanese tuna (particularly the unprocessed product, which kept the U.S. canners in northern California active) to the detriment of the tuna harvesters in San Diego and San Pedro in the 1950's and ^^Scheiber, Harry, "Common Ocean Resources and Economic Interdependence: Japan, the U.S., and the Pacific Tuna Fisheries, 1945 - 1970". (unpublished photocopy, 1993). 57scheiber (1993), pp. 38 - 39. 3 8 early I960's.^® Japanese imports took a larger share of the U.S. market at this time, but the U.S. market was growing rapidly at the time. Furthermore, as detailed in the case chapter, Japanese flag vessels fished for yellowfin primarily in the Western and South Pacific. The U.S. flag vessels, based largely in San Diego and San Pedro, fished for yellowfin in the Eastern Pacific. Therefore, although the U.S. tuna fishing industry in Southern California and the canners further north competed with Japanese firms for U.S. market share, the U.S. and Japanese harvesting patterns for tropical tuna did not conflict for the most part. Tuna trade in the 1950's and early 1960's can be viewed as a hegemonic bargain, while U .S. and Japanese harvesting patterns for tuna did not. Hence, U.S. and Japanese behavior in the lATTC is distinct from the type of bargaining that Stein observed related to the creation of the GATT, and which appears to explain bilateral trade in canned tuna during the early post-World War n period. The IWC provides a third example of regime for conservation of marine life which, although created in the period of strong U.S. hegemony, did not entail sacrifice of U.S. production to Japanese import competition. Without doubt, immediately after World War II the U.S. was a dominant force both in controlling Japanese whaling and in creating the IWC. In 1946, the U.S. War Department authorized Japan to resume whaling under the condition that whale oil and whale meat be used for domestic consumption in Japan.^9 The U.S. played a major role in establishing the IWC, sponsoring and chairing the Washington Conference of 1946, and providing a first draft of the treaty to create the IWC.^° However, the U.S. was neither a major producer nor a major consumer of whale products. Japan did export significant amounts of whale products prior to 1976, particularly whale SSScheiber (1993) pp. 2 9 -3 7 . ^^Tonnessen, J.N. and Johnsen, A. O., The History o f M odern Whaling (Berkeley and Los Angeles: Uni verity of California Press, 1982): 529 - 530. ^^Tonessen and Johnsen (1982), 500. 39 oil, but these exports did not threaten the U.S. whaling industry, which had all but disappeared by that time. U.S. production of whale products was minimal in the 1950's and 1960's. Although the U.S. was a dominant force in creating the IWC, there was no explicit or implicit bargain whereby domestic production would be vulnerable to foreign competition. 40 Japanese Net Exports of Whale Products, in Tons 2 0 0 0 0 0 T 1 5 0 0 0 0 100000 5 0 0 0 0 -5 0 0 0 0 H-H-f in N . O) N 0 3 0 3 h- 0 3 0 0 0 3 C O CO 03 Net Exports of Whale Products from Japan, 1963 - 1985, in tons. Includes whale meat, fin oil, sperm oil, and other whale products. Source: Fisheries Agency of Japan. Photocopy obtained from National Marine Fisheries Service, La Jolla, California. To conclude, this section considered alternative hypotheses from the neorealist literature in international relations. Across cases, at any point in time, the relative power (meaning military and economic capabilities, translated into influence over policy outcomes) of the U.S. and Japan was constant, and would have influenced the INPFC, the lATTC, and the IWC in roughly the same way. In addition, relative security (meaning absence of the threat of attack as well as absence of threats to acquired values) would have also been constant at any point in time, and would have influenced the cases in the same way. Considering the relative increase in Japanese military and economic capabilities over time provided three additional power-related hypotheses. First, as Japan's relative power 41 increased, one would expect to see cooperation in the regimes weaken. While this may explain increased U.S.-Japanese conflict in the IWC after the 1970's, it does not explain the Japanese behavior in the INPFC, which was consistently cooperative even as the Japanese government agreed to progressively smaller fishing areas for its mothership salmon operations in the North Pacific. Hence as an explanatory factor power is underdetermined, since there is variation in Japanese negotiating behavior in the regimes as its power increased relatively. Second, as Japan's relative power increased, one would expect to see the Japanese government increase in its ability to set the regime rules to its own advantage. In two cases, the INPFC and the IWC, the reverse occurred. In the lATTC, there was little inherent distributive conflict. Third, as Japan's relative economic power increased, one would expect to see increasing penetration of the U.S. markets for fisheries and whale products, perhaps weakening U.S. support for the regimes it created as a hegemon immediately after World War H. However, in the INPFC and the IWC Japanese harvest was largely for its own domestic market, and in the North Pacific the U.S. used INPFC rules to protect its salmon fishing interests. In tropical tuna trade, there is evidence of a U.S. decision to trade off domestic market share in the interest of promoting a security partnership with Japan. However, harvesting patterns for tropical tuna had a stronger impact on bargaining in the lATTC, which regulated an area in which Japanese longline fishing for bigeye to serve its domestic sashimi market coexisted rather harmoniously with U.S. fishing for yellowfin. In short, power-based theories are held constant by case selection at any given moment, and as power varied over time, one observes at best a partial influence over negotiating outcomes in the IWC but no corresponding influence in the INPFC or lATTC. 42 Alternative Hypotheses from the Institutional Literature A second set of hypotheses can be drawn from the international relations literature on political economy, sometimes referred to as institutional theories.^ ' As a study of international regimes, this dissertation follows a path opened by Keohane and Nye (1989, 1993), Oran Young (1989) as well as James Sebenius (1985), John Odell (1993) and others who have used the tools of institutionalism and negotiation analysis to explain the behaviors of states and substate actors. This section considers the main alternative hypotheses from the institutional literature. The INPFC, lATTC and IWC were similar in significant ways. From an institutional perspective, the most important differences were in the voting rules and in the number of states which participated in each commission. The requirement that consensus be reached before action was taken in the INPFC and the lATTC provided Japan with no discernible advantage in changing commission rules as opposed to the requirement that Japan marshall a three-fourths majority in the IWC, which from the start had a majority of nonwhaling states (although conflict between whaling and nonwhaling states did not manifest itself until the early 1970's). The larger number of actors would, however, imply a greater tendency for each member to free ride. Enforcement provided by the U.S. implies that the regimes better fit the description of "privileged groups," with one state (the A subset o f institutionalists, referred to as constructivist, draws inspiration from both the postmodern philosophers (particularly Foucault and Derrida) as well as from linguistic theory. Agreement on the question o f whether states are the main actors in a context o f anarchy differentiates the neorealists and neoliberals from critical theorists, such as John Gerard Ruggie, Nicholas Onuf, Robert Kratochwil, R B I W alker and others who argue that sovereignty and the state system is a distinctly "modem" construction, having explanatory power only in a narrow slice o f space and time. Ruggie emphasizes forces which may be transforming the state system into som ething else, while O nuf and Kratochwil focus on a more basic form o f social organization, language and rules. W alker also dismisses the neorealist-neoliberal antinomy as a red herring, arguing that theories o f world politics should flow from closer study o f general social theories, including "other" voices such as environmentalists and feminists. U.S.) bearing the burden of enforcement. Hence, the institutional context, while not uniform, can be considered roughly constant. Institutional Context Regime Creation The INPFC, lATTC and IWC were created by U .S . initiatives in the immediate post-World War II era, an "extraordinary moment of U . S . d o m i n a n c e . "^2 this period the U .S . sought both to oversee the rebuilding of the Japanese fishing/whaling industry to solidify the nascent security partnership and to safeguard the interests of its own fishing industries on the west coast. The conflict inherent in these goals explains at least in part the particular institutional forms which emerged. Beginning with the occupation period, the U.S. acted to shield North Pacific salmon fisheries from feared Japanese competition. The first Japanese commitment to keep out of the area was made in an exchange of letters in February 1951 between Premier Shigeru Yoshida and U.S. Special Envoy John Foster Dulles, who had begun initial negotiations on a general peace t r e a t y The Japanese commitment to abstain from the North Pacific was the cornerstone of the 1953 treaty which created the INPFC.^'* The Americans feared that if the Japanese were allowed unrestricted access to the high seas they would intercept large amounts of migrating salmon bound for U.S. territorial waters. In contrast to the ^^Scheiber, "U.S. Pacific Fishery Studies, 1945 - 1970: Oceanography, G eopolitics, and M arine Fisheries Expansion," photocopy, from Lenz and Deacon, eds, Ocean Sciences, p. 417. ^^Scheiber, "Common Ocean Resources and Economic Interdependence: Japan, the United States, and the Pacific Tuna Fisheries, 1945 - 1970, (photocopy), August 1993, p. 21. 64A t the sam e time, Japan was also under pressure from the USSR which was interested in protecting sockeye from Kamchatka from Japanese interception. Harris, "Catches o f North American Sockeye Salmon by the Japanese High Seas Salmon Fisheries, 1972 - 84, in Sockeye salmon Population Biology and Future M anagem ent, H.D. Smith, L. M argolis, and C.C. W ood, eds. Departm ent o f Fisheries and Oceans, G overnment o f Canada, p. 462. The U SSR and Japan negotiated a treaty in 1956 to allay Russian fears o f Japanese competition. The Soviet-Japan Fisheries Commission, created by the treaty, set annual catch quotas, regulated times and areas of operation, gear, and other fishing activity, (p. 462). 44 well-regulated Japanese coastal fishery, the pelagic fishery '"has a well-established prewar reputation for not accepting international agreements to conserve marine resources, and for moving into fisheries off the coasts of other countries...in complete disregard of the conservation activities of those nations.'" The Japanese pelagic fishery was often portrayed as "'predatory'" and " ' r u t h l e s s . T h e purpose of the INPFC and its scientific committee was to verify that the stocks of salmon and groundfish were fully utilized, and to ensure that Japanese pelagic fishing for salmon did not harm the American fishing firms in the North Pacific. The U.S. chose this form of protection for salmon stocks in the 1950's as opposed to an explicit claim of jurisdiction over the high seas because the U.S. fishery in the Eastern Pacific could itself be vulnerable to exclusion from Latin American coastal waters by similar claims.^^ This regime protected U.S. salmon fishing interests in Bristol Bay and Puget sound from Japanese fishing competition. Also during this period the U.S. tuna industry expressed concern about competition from Japanese firms. With the support of the U.S. Navy and significant input from the U.S. tuna industry. Congress created the Pacific Ocean Fishery Investigation (POFI) in Hawaii, to study oceanographic, biological and technological aspects of the tuna operations in the Pacific. Internal communications made clear that the central objective of the institute was "to retard active exploitation by Japanese of the tuna fisheries of he eastern Pacific, at least until American fisheries begin to make economic use of these resources. Simultaneously, the U.S. forces occupying Japan were overseeing the ^^W ilbert Chapman, March 17, 1949, quoted in Scheiber (1993), p. 11. See also Edward Allen, International Law, War, and Fish," Tulane Law Review 18 (1943), "Japanese M enace Long Seen in Fisheries o f the Pacific," Pacific Fisherman, January 1942, pp. 18 - 19; and Stefan A. Reisenfeld, The Protection o f Coastal Fisheries Under International Law (1942). G^hence, despite the Truman Fisheries Proclamation o f 1945, declaring that the US would regard it as proper for nations o establish high seas conservation zones for ocean fisheries threatened with "destructive exploitation," a then striking departure o f the U.S. position respecting a 3 mile territorial limit, the U.S. did not make or recognize elaims to extended coastal state jurisdiction during this period. Scheiber, "U.S. Pacific Fishery Studies, 1945 - 1970," p. 418. ^^Scheiber, "U.S. Pacific Fishery Studies, 1945 - 1970," p. 418. ^ ^ redevelopment of the Japanese tuna fishing industry with the goal of enabling Japan to become self sufficient in food, as well as to develop its tuna export industry. The U.S. could finesse such a dilemma because its tuna fleet concentrated its effort in the Eastern Pacific, while Japanese boats fished further west. In anticipation of Latin American claims to extended coastal jurisdiction, the U .S. initiated talks to create the lATTC in 1950. Initially signed with Costa Rica, the treaty creating the lATTC was intended to engage Latin American states in joint scientific research with the U.S. in order to ensure that any decision to restrict fishing to protect stocks was arrived at cooperatively, and did not result in discrimination against U.S. boats.^^ As described in the case chapter, Japan's tuna industry did not fish for large amounts of yellowfin or albacore in the Eastern Pacific. The U.S. fleet dominated production from waters in the Eastern Pacific at this time. Hence the scientific and regulatory activities of the lATTC involved joint U.S. and Latin American interests. Japan, which acceded to the lATTC in 1970^9, had much more limited interests in the area, centered on catches of bigeye for its domestic market for sashimi. However intense the bilateral commercial rivalry for the U.S. canned tuna market in the 1950's and 1960's, U.S. and Japanese harvesting patterns in the Eastern Pacific were relatively nonconflictual. The U.S. was also the dominant force in creating the IWC. The U .S. convened the conference that created the IWC in Washington, D C. in November 1945. The first drafts for the IWC's organization were submitted by the U .S. At the time eight nations, Australia, Canada, and the U.S. (nonwhaling) and Japan, the Netherlands, Norway, the U.K., and the Soviet Union (whaling) were ^^Scheiber, "U.S. Pacific Fishery Studies, 1945 - 1970," p. 419. ^^Peterson and Bayliff, Inter-American Tropical Tuna Commission, Special Report No. 5, Organization, Functions, and Achievements o f the Inter-American Tropical Tuna Commission, 1985. Japanese longliners first fished in the eastern Pacific in 1954 (M iyabe and Bayliff, lATTC Bulletin Vol. 19, No. 1, 1987, p. 5 ., and Japanese longline harvests in the Eastern Pacific were monitored and reported periodically in lA TTC bulletins. See Nakano and Bayliff (Bulletin 20, No. 5, 1992; M iyabe and B ayliff (Bulletin 19, vol. 1, 1987); Shingu, Tomlinson and Peterson (Bulletin 16, No. 2, 1974); and Kume and Joseph, (Bulletin 13 No. 2, 1969). 46 the most active. The U.S. was in a unique position as a nonwhaling nation which dominated the creation of the regime, while Japan possessed an unusually lucrative domestic market for whale meat due to its consumption of both whale meat and whale oil.^o In short, the INPFC, lATTC and IWC were all created in the immediate aftermath of World War II largely by U.S. initiatives. The INPFC protected U .S. salmon fishing interests, while the lATTC was intended to safeguard U.S. access to fishing off of the coastlines of Mexico, Central America, and the Galapagos. Of the three, the IWC alone protected no U.S. commercial interest. The U.S. and Japan were the most active states in the INPFC, while in the lATTC the U.S. and Latin American states were most active. Production of canned tuna from all areas of the ocean was dominated by the U.S. and Japan, and served the U.S. market. The IWC was initially dominated by eight states, only five of which were active in pelagic whaling in the 1950's. The U.S. and Japan occupied unique positions, one as the hegemon most responsible for the regime's creation, and the other as the state with the most lucrative market for whale products. Relevant Institutions and Regimes The INPFC, lATTC, and IWC were similar organizations (or regimes) nested in a common set of institutions. Young, in an analysis of institutions for natural resources and the environment (including fisheries) emphasized that such institutions are social inventions, reflecting systems of rights and rules operating in international society. Young defined institutions as social practices coupled with clusters of rules. Rules link institutional roles (or social practices), forming a superstructure of institutions.^ ' The INPFC office in Vancouver, British ^^Tonessen and Johnsen (1982), 500 - 509. 7 'Y oung (1989), 32. Columbia, the lATTC headquarters in La Jolla, California, and the Whaling Convention Secretariat in Cambridge, England can be seen as organizations operating within the context of larger institutions. In the context of the North Pacific, the most significant institutions would be the market-based economies and the liberal democratic governments. The treaties operated within this superstructure. In addition, the U.N. Conference on the Law of the Sea (UNCLOS) and the General Agreement on Tariffs and Trade (GATT) defined more specific rules setting the context for the commissions' operations. By Young's definition, the institutions regulating the marine resources of the Pacific were very similar. The social practices guided by sets of rules were similar for the three cases. Regimes, as Keohane and Nye define them, are sets of governing arrangements that affect relations of interdependence.^ 2 Extending Waltz's framework, Keohane and Nye argue that regimes affect the structure and process of international relations. Framed by international stru c tu re ,"^ ^ states interact with each other in peaceful times through bargaining. Regimes affect the players' strategies and moves by setting networks of rules, norms and procedures that govern behavior and control its effects^By this definition, regimes in the North Pacific would include the INPFC, the LATTC and the Whaling Convention, but also the GATT (setting trade rules) and UNCLOS Keohane and Nye (1989), 273. ^^states arranged hierarchically according to capabilities, or power resources ^^Keohane and Nye, Power and Interdependence, 2d ed. (New York: Harper Collins, 1989): 19. third approach to institutions focuses explicitly on common property resources. Elinor Ostrom uses the term institutions to refer to "sets o f working rules that are used to determine who is eligible to make decisions in some arena, w hat actions are allowed or constrained, w hat aggregations will be used, what procedures must be followed, what information must or m ust not be provided, and what payoffs will be assigned to individuals based on their actions." ^^W orking rules are not only formal laws (treaty provisions or domestic law) but also include regulation and court decisions. Further, rules are nested in more general sets o f rules, like computer software relies on an operating system. Operational rules directly affect the day-to-day decisions o f the people using the resource (how much to take, how to divide the catch, monitoring, enforcement, and so forth.) Collective choice rules affect how the resource is managed (setting policy, management, and adjudication decisions.) At the most general level, constitutional choice 4 8 Sim ilarities As regimes INPFC, LATTC and IWC bear many similarities. The three commissions operated in a common institutional context. The GATT norm of most favored nation treatment (MFN) affected the patterns of trade, particularly of salmon and tropical tuna between the U.S. and Japan. The treaties were initially signed to protect commercial interests. The resources were drawn from an international commons, and were traded internationally as commodities. That is, states (particularly Japan in the 1950's and 1960's) did not only draw from the commons for their own domestic use, but also used fisheries as an export industry to contribute to economic development. The three commissions were therefore very much alike, being nested in larger institutions, particularly the GATT. The INPFC, lATTC, and the IWC were also functionally similar. The commissions were organized around the principle of sustainable use. Originally designed to calculate and maintain a "maximum sustainable yield," each commission created a scientific committee which included scientists from member states who cooperated in applied biological and oceanographic research. Except for the INPFC, which attempted to limit catches by pressuring Japan to abstain from fishing in certain areas, tlie commissions could and did set quotas (including zero quotas) on taking species considered to be overharvested. Within each state, treaty rules were implemented through the domestic fisheries agencies, which constrained the activities of the fishermen and whalers through established procedures. (For the most part, in Japan, this was the Fisheries Agency of Japan, in the U.S., the National Marine Fisheries Service, and in Canada, the Department of Fisheries and Oceans). The time frames of the commissions' operations were rules affect the comm ons by deciding who is eligible to make the rules. 49 roughly the same, from the late 1940's or early 1950's^^ until the 1990's. The commissions have met yearly to consider the measures needed to sustainably use and/or preserve the resources under their mandates. In the INPFC and the IWC, the U.S. and Japan were significant if not the dominant states. In the lATTC, Japan was an important but not a dominant actor, although Japan and the U .S. dominated production of canned tuna in the 1950's and 1960's. In these ways, the three commissions were very similar. D ifferences Clearly, the commissions were not identical. They organized scientific research on and regulated different migratory species. Reflecting migration patterns, the spatial domain of the commissions differed; the INPFC and the LATTC were regional, covering the North Pacific and the Eastern Pacific, respectively, while the IWC was global. The membership also differed. The INPFC had three member states; the lATTC's membership has varied??, but currently there are six member states; and the IWC's membership also varied, but currently thirty-six states are members. Another important distinction is voting rules. The Convention creating the INPFC required that any rule changes be made by unanimous agreement among the national sections of the U.S., Japan, and Canada. The treaty stated: "Each national section shall have one vote. All proposals, recommendations and other decisions of the Commission shall be made only by a unanimous vote of the three national sections. (Article II, Section 3)."?^ Similarly, the Convention creating the LATTC ?^T he INPFC was created in 1952; the lA TTC in 1950, and the IW C in 1946 (it m et for the first time in 1949). The INPFC was dissolved in 1993, while the other two com m issions have ongoing operations. ??Ecuador withdrew in A ugust 1968; M exico withdrew in November 1978; Canada withdrew in May 1984; and Costa Rica withdrew in 1979 and rejoined effective M ay 9,1989. (ITC p. 5-8) ?®International North Pacific Fisheries Comm ission, Handbook, p. 2. Obtained from the International North Pacific Fisheries Commission, Vancouver, Canada. 50 required that any action of the Commission be taken by unanimous vote The IWC, by contrast, operated by majority rule, except in the case of amendments to the Schedule (operating rules contained within the treaty). Schedule amendments were to be made by a three-fourths majority of voting members (Article IE, Section 2). Amendments were not necessarily binding, however, as any contracting party could register an objection to any amendment to the Schedule within ninety days of its adoption, releasing it from an obligation to comply with that mle*° (Article V Section 3). Hence it is possible that whaling outside of limits set by the IWC could nevertheless be within the bounds of treaty compliance if the whaling state filed an amendment to that rule within the appropriate time frame. In practice, the different voting rules had no discernible effect on U .S.- Japanese cooperation. In the INPFC, to change the rules in its favor Japan would have had to secure the consent of the U.S. and Canada (i.e., form a consensus). In the IWC, to amend the Schedule Japan would need a three-fourths majority in a commission with a membership that, from the start, consisted primarily of nonwhaling nations. Hence in practice both the consensus rule and the three- fourths majority rule presented serious obstacles to Japan's effort to safeguard its access to fish and whale on the high seas. Japan was no more or less successful in ^^Peterson and Bayliff, Inter-American Tropical Tuna Commission, Special Report No. 5, Organization, Functions, and Achievements o f the Inter-American Tropical Tuna Commission, 1985, p. 9. ®*^the section reads: "Each o f such amendments (to the Schedule) shall become effective with respect to the Contracting Governments ninety days following notiOcation o f the amendm ent by the Commission to each o f the Contracting Governments, except that (a) if any Government presents to the Commission objection to any amendment prior to the expiration o f this n in ety - day period, the amendment shall not become effective with respect to any o f the Governments for an additional ninety days; (b) thereupon, any other Contracting Government may present objection to the amendm ent at any tim e prior to the expiration o f the additional ninety-day period, or before the expiration o f thirty days from the date o f receipt o f the last objection received during such additional ninety-day period, whichever date shall be later; and (c) thereafter, the amendment shall become effective with respect to all Contracting Governments which have not presented objection but shall not become effective with respect to any Government which has so objected until such date as the objection is withdrawn..." from The Marine M am mal Commission Compendium o f Selected Treaties, International Agreements, and other Relevant Documents on Marine Resources, Wildlife, and the E nvironm ent, 3 vols. (W ashington, D.C., M arine M am mal Comm ission, 1993): 1402. ^ ^ changing rules to its advantage in the INPFC with its consensus rule than it was in the IWC with its three-fourths majority rule coupled with a membership of predominantly nonwhaling states. In both cases, over time the rules changed to Japan's disadvantage. In sum, the INPFC, lATTC and IWC had stong similarities, but were not identical. The commissions were nested in UNCLOS and the GATT. Treaty rules in each case, although they varied by species, were functionally similar in that they restricted access and/or allowable catch. Domestic political agencies and rules did not vary. The U.S. and Japan were important, if not dominant, members of the INPFC and IWC, although in the lATTC negotiations also included Latin American states as dominant actors. The commissions were also distinctive in their regulatory targets*', geographic range*^, and voting procedures. Number of Actors The regime memberships also differed. Many institutionalists refer to the ideas of Mancur Olson to explain why cooperation would be more difficult in situations involving larger numbers of actors. Olson hypothesized that cooperation would easier with smaller numbers, not only because problems of information and monitoring would be less acute**, but because the free rider effect would be less intense. That is, where groups organize to provide themselves with public goods, each actor has an incentive to free ride or pay less than its fair share because public * 'T h e biological differences among species would account for the differences in types o f rules set and in the length o f time needed for a species to recover from overuse. M arine mammals such as whales reproduce more slowly and hence recover more slowly from overuse than salmon, for example. Fish populations are subject to more random fluctuations in their population sizes. H owever there is no obvious connection between this biological difference and the variation in U.S.-Japanese cooperation over time. *^The differences in geographic range (the INPFC covered the North Pacific, the lA TTC the Eastern Pacific, while the W haling Convention was global) most likely accounts for the differences in the numbers of contracting parties to each treaty. Hence this factor is considered next under "number o f actors". ** "transaction costs" associated with gathering information and monitoring cheaters are lower with smaller numbers 52 goods are nonexclusive (nonpayers cannot be forced out or made to pay) and exhibit "nonrivalry in consumption," meaning more for one actor does not mean less for another.^'* Olson also argued, however, that there are some groups for which one member finds it advantageous to provide the public good to the extent that it will bear the cost of providing it. These are "privileged" groups.^^ The U.S. was the only state which unilaterally threatened sanctions to further cooperation with rules set by the INPFC, lATTC, IWC and other maritime treaties. Specifically, the Magnuson Fishery Conservation and Management Act of 1976 (16 USC Sec. 1801), the Felly Amendment to the Fishermen's Protective Act of 1967 (22 USC Sec. 1978), The Driftnet Impact Monitoring, Assessment and Control Act of 1987 (16 USC Sec. 1822) and its 1990 amendments (16 USC 1826), and The Dolphin Protection Consumer Information Act (16 USC Sec. 1385, Sec. 1385, Sec. 1371 (a) (2), Title 3 of 16 USC 1411), all provided mechanisms for the U.S. to officially certify states which violated (or "diminished the effectiveness of") fishery agreements and to impose limited sanctions. In 1988, the U.S. certified Japan for diminishing the effectiveness of the Whaling Convention, and terminated Japan's allocation of certain fishery products in the U.S. Exclusive Economic Zone. Although certification and fishery sanctions have been largely symbolic, they nevertheless have served as an important policy tool, as Japanese officials seek to ®'^Mancur Olson, The Logic o f Collective A ction (Cambridge, M ass.: Harvard U niversity Press, 1965): 35. Recent work on international institutions challenges this argument. Sebenius argued that adding parties may facilitate negotiations over the establishment or maintenance o f a collective goods. Jam es Sebenius, Negotiating the Law o f the Sea (Cambridge, M ass.: Harvard University Press 1984): 211. Young observed that the assumption that individuals have powerful incentives to free ride, and will tend to enjoy the benefits o f institutions while refusing to com ply with rules is "a severe distortion o f reality at the international level as well as the domestic level." Young (1989): 72. Kahler argued that "although certain costs do rise with increasing numbers, the neoliberal pessimism has been overdrawn."Kahler (1992); 3. 'privileged' group is a group such that each o f its members, or at least som e o f them, has an incentive to see that the collective good is provided, even if he has to bear the full burden o f providing it himself. In such a group there is a presumption that the collective good will be obtained, and it may be obtained without any group coordination whatever." Olson (1965): 49 5 3 avoid any official "smear" on Japan's re p u ta tio n .^ ® Hence it appears that the U .S. willingness to unilaterally provide enforcement offsets, at least in part, the organizational obstacle of the large number of states in the IWC. Narrowing the focus to U.S.-Japanese cooperation, Japan would be less likely to get away with free riding in a large-group setting like the IWC if the U.S. unilaterally provided monitoring and enforcement. In other words, this dissertation recognizes that other states besides the U.S. and Japan have been active in the IWC. Norway, Iceland (before its withdrawal in 1992), the Soviet Union (and now Russia), as well as Japan and other states have been interested in increased commercial whaling. The U.S. has been joined by the U.K., New Zealand, Australia, France and other states opposed to commercial whaling. If the public good in question is providing viable stocks of whales, the larger number of actors is less relevant to IWC dynamics than the fact that one state provided enforcement activity. Hence the U.S. did threaten Iceland, Russia as well as Japan with sanctions at various points in the I980's. Such threats were not confined to whaling, as dolphin protection and the driftnet moratorium were also backed by U.S. sanction and/or embargo threats which have been used. Hence the negotiating dynamic shifts from multilateral cooperation to a series of bilateral interactions, with the U.S. acting to change the behavior of the whaling states. ®®Interviews witli Japan's Ministry o f Agriculture, Forestry and Fisheries and U.S. National Marine Fishery Service, October 1994 and M ay 1995. 54 Prisoners' Dilemma Conceptually related to collective action problems is a variety of situations, particularly managing common property resources and international cooperation,®^ which have been characterized as Prisoners' Dilemmas and/or "tragedies of the commons"®®. Prisoners' Dilemma depicts a situation in which two individuals, following rational strategies, achieve an outcome which is collectively suboptimal.® ^ This model has often been used as a metaphor for these types of situations without careful consideration of how well it connects with empirical realities.90 In particular, as Ostrom notes, constraints that are assumed fixed for the purpose of analysis are sometimes taken on faith to be fixed in empirical settings. The Prisoner's Dilemma game is not a plausible guide to the cases considered in this dissertation, for several reasons. In Prisoners' Dilemma, the players cannot communicate. There is no organization (like an international commission) to serve as a forum for bargaining. There are only two strategies (cooperate or defect), unlike the bargaining in the commissions, in which there were many strategic options, which sometimes changed over time. Unlike the model's prisoners, the actors in the commissions included states, firms, and N G O 's. Prisoners' Dilemma does not fit well with the facts in these cases. Single-play Prisoners' Dilemma predicts players' following individually rational strategies to their mutual detriment. If one used the game as a metaphor for ®^Ostrom noted that, by 1975, 2,000 articles had been written about the Prisoners' Dilemma game. (Ostrom 1992: 5). ® ® Garrett Hardin, "The Tragedy o f the Commons," Science 162 (1968): 1243-8. ®^See p. 6, footnote 9, for a verbal description. Prisoners' D ilem ma is usually depicted as a 2x2 matrix game, as in Gibbons (1992), pp. 2-4. ^OQstrom (1990): 22-23; Snidal in Oye, ed., (1986): 29. ^ ^ U.S.-Japanese cooperation in the INPFC, lATTC, and IWC one would predict a uniformly low level of cooperation. In fact, the level of cooperation was better in the INPFC and the lATTC than in the IWC. While often used to explain why nations (or fishing companies) fail to cooperate in open access situations, the Prisoner's Dilemma^' does not explain the central puzzle of this dissertation, namely, why cooperation between the U.S. and Japan varied. In short, the INPFC, LATTC and IWC, as regimes designed in the immediate aftermath of World War II to regulate harvests of fish and marine mammals, were like siblings nested in a common institutional environment. The most important institutional differences centered on voting procedures and the number of active states in each. However, the INPFC consensus rule provided no discernible advantage to explain the higher level of cooperation by Japan as compared to the IWC with its requirement for a three-fourths majority to amend the Schedule. In each case, the voting rule posed a disadvantage for Japan in changing rules to its advantage. Indeed in both cases rules were changed to Japan's disadvantage. The larger number of actors in the IWC could explain the lower level of Japanese cooperation in the absence of U.S. enforcement. However, U.S. unilateral action beginning in 1976 to pressure Japan and other potential violators of fisheries regimes supports the assumption that the regimes were closer to Olson's idea of "privileged" groups. Hence the larger number of actors would not necessarily inhibit cooperation to protect whales. Alternative Hypothesis in the Environmental /Regulatory Literature The most common explanation of how firms influence international environmental negotiations is that states attempt to minimize costs to "their" firms, and impose them on "foreign" firms. Haas (1993) argued that European states ^ * Further analysis o f Prisoner's D ilem ma as applied to the cases is included in chapter 7. 5 6 setting pollution standards in the Baltic and North seas in the early 1970's tried to minimize the costs to their industries markets that were highly competitive. M .J. Peterson argued that four main patterns of fishing-industry government relations tend to emerge. First, privately owned fleets may pressure their governments to retain or expand their fishing opportunities. Japan, in particular, exemplified this pattern, although Britain, South Korea, Norway, Spain, Taiwan and the U.S. also behaved this way. Second, the government may fostered state-owned fleets, as did the USSR, Bulgaria, East Germany, Poland and Romania. Third, the government may encourage state-owned or private coastal fleets, as did many developing countries. The final pattern is coastal fleets pressuring their governments for protection against distant-water fleets, as occurred in Iceland, Canada, some European countries, and the US. Multinationals are missing from this typology. In the North Pacific after the 1970's the distinction "Japanese" and "American" firms was partially erased through EDI ties. After these relatively large, vertically integrated Japanese firms bought a significant share of canning and processing in the North Pacific, the usual patterns of international politics at the commission changed. The argument that states attempt to minimize costs to "their" firms misses this essential dynamic. A second explanation for why high commercial value may produce better cooperation is that the industries may have achieved regulatory capture (Bernstein 1955, Stigler 1971). Industries may demand regulation, among other reasons, for control of entry. In issue-areas where the public awareness is low, industries may achieve a high degree of control over the rules that are set, resulting in rules that favor business interests. INPFC commissioners were often selected from the business community, both in the U.S. and Japan. Congressional hearings in the 1950's and 1960's gave voice to fishermen claiming that the Japanese high seas fishing operations were hurting them. Likewise, until the early 1970's the lATTC 5 7 considered issues of importance to the fishing industries in the region. The early history of the IWC, as well as earlier international attempts to regulate whaling, provide a notorious example of industry setting quotas so high as to be virtually meaningless. International agreements to manage environmental resources are often designed like cartel arrangements, restricting supply in order to raise price. In the 1950's and early 1960's it would be reasonable to argue that the INPFC, lATTC, and IWC were tools of the fishing industry. However, with the increase in public awareness in the 1970's, environmental NGO's became active on conservation issues. Rule changes in the INPFC, lATTC and IWC all favored conservation of marine mammals and other marine life, restricting or eliminating driftnet fishing, dolphin fishing, and whaling. In short, a strong argument can be made for regulatory capture in these commissions before the environmental movement of the mid-to-late 1960's. The three cases were similar in this respect, so that the degree of regulatory capture cannot explain the variation in cooperation. A third idea in the environmental literature is that "leader" industries might be ahead of the curve in developing clean technologies and would be supportive of tighter regulation while laggard firms would resist. This appears to have been the case in the 1980's when DuPont shifted its position in favor of restricting CFC's after it had developed s u b s titu te s .^ ^ Barriers to market entry, such as a patent on new "clean" technology, could enable leader firms to expand market share while attempting to kill laggards by supporting burdensome regulation on old "dirty" technology. While there is no evidence for this happening in the North Pacific fisheries, "leader" firms are likely to behave in ways similar to the vertically integrated firms analyzed in this study. A patent on "clean" technology would ®2parson in Keohane, Haas and Levy, Institutions for the Earth, Cambridge, the M IT Press, 1993. 58 provide a barrier to entry, and the leader could increase profits from expanding multinationally. Therefore the firm would tend to favor tighter international regulation on the "dirty" technology to kill its rivals at home and abroad. This chapter defined the key terms which frame the analysis in the cases, which are presented next. Other ideas, well known in the literature, concerning state power, institutions, and the number of actors were reviewed. Power, while important, is underdetermined as an explanation. The institutional context and regime design were similar across cases. The larger number of actors in the IWC, which might otherwise block cooperation, was offset by unilateral enforcement activity by the U.S., particularly after 1976. Hence the most important alternative hypotheses do not go far enough in explaining the different outcomes. Using the focused, comparative case study method outlined above, the next three chapters present the descriptive material. 59 APPENDIX TO CHAPTER 2 SUMMARY OF MAIN OBSERVATIONS S um m ary: C ooperation IN P F C : Full cooperation Full cooperation, 1953 - 1970. Japanese Government regulations that caused the Japanese pelagic fishery to reduce catches of salmon in conformity to the Abstention Line were created by negotiations at the INPFC.^3 Further U .S. pressure on Japan at the Commission influenced the Japan to reduce catches of sockeye in particular, despite the commercial incentive to do otherwise. The Japanese government imposed such restrictions on the pelagic salmon fishers in this period.®'^ See tables, "Relative Shares of Sockeye Taken From the North Pacific, 1957 - 69." and "Relative Shares of Other Species (Chinook, Pink, Chum, and Coho) Taken from the North Pacific, 1957 - 69." Science: In d e te rm in a te . The INPFC's scientific committee was primarily concerned with tagging returns, i.e., differentiating North American from Asian salmon.^^ In the early years of the INPFC (1953 - 1978), the Abstention line was in the wrong place (given that the goal was to ensure Japanese boats took Asian salmon). The U.S. government studied productivity and escapement to determine whether the salmon were fully utilized. ^6 it is not clear that the U.S. and Japan changed their research plans over time in the direction of joint data collection or analysis. ^3lnterview , Hanafusa-san, M inistry o f Agriculture, Forestry and Fisheries, October 1994. ^'^Interviews, Hanafusa-san, Tokyo, October 1994; Dr. Low, National M arine Fisheries Service, Seattle, M arch 1994. ^^Interview, Dr. Linda Jones, March 1994. ^^Interview, Dr. Low, Seattle, March 1994. 6 0 Full C oo p eratio n , 1 9 7 0 's . Law of the Sea/ Extended Coastal State Jurisdiction. INPFC rule changes that entered into force February 1979 further reduced the area available to the Japanese pelagic fishery. The Japanese government imposed reduced area restrictions on its firms, reducing sockeye catches more than other species. Science: 1970's and 1980's. M ixed c o o p e ra tio n . The Magnuson Act (1976) changed the way the rules operated. Regional management councils determined the status of the stocks, setting catching potential and quotas. The councils' analysis was passed on to the INPFC. The Japanese were allowed to take the surplus salmon not already taken by the U.S. fishermen. While analysis was typically done separately, the U.S. scientists sometimes used Japanese data, because they had a longer history.^? According to U.S. and Japanese sources, the INPFC provided a forum for successful scientific research.^* F ull cooperation, 1986 "D onut H ole" d isp u te. The Japanese government required its pelagic fishing boats to comply with the 1986 Memorandum of Understanding with the United States and curtail fishing an area of the Bering Sea known as the "donut hole", between the U.S. and Soviet Exclusive Economic Zones. F ull coop eratio n , early 1990's D riftn et B a n . The Japanese government cosponsored 46/215 with the U.S. Japan voted in favor of eliminating driftnets on the high seas by Dec. 31, 1992. The Japanese government also required the Japanese pelagic fishing industry to shut down its high seas fishing operations. ^^Interview, Dr. Low, Seattle, March 1994. ^^Interview, Hanafusa-san, Tokyo, October 1994. 6 1 lA T T C : H arm ony in Fishing A reas; P a rtia l C o o p e ra tio n (T u n a/D o lp h in ) lA T T C Q uotas 1966 - 1979. The U.S. and Japan fished for yellowfin in different areas of the Pacific. Japanese flag vessels fished for tuna primarily in North Western Pacific and the Indian Ocean, while before 1981 the U.S. flag vessels fished for tuna primarily in the Eastern Pacific. Scientific C ooperation. Indeterm inate. Japanese sources say the Japanese position was neutral as they were not a major fishing nation in the lATTC area. American sources indicate that there was no conflict of interest between the U .S. and Japan; where joint research was undertaken, and research agendas dovetailed. 1976 to present. D olphin protection. P a rtia l C o o p eratio n . Japan argued that the lATTC was not a dolphin protection body, and resisted creation of a dolphin program. Their official view was that marine mammals should be available for consumption like any other species, with no special protection. However, the Japanese tuna fishery did not fish on dolphins in the Eastern Pacific (as did the U.S. and Latin American fleets). The Japanese may have believed that pressure from the environmentalists would threaten their longline fishery in the Eastern Pacific if they opposed the creation of a dolphin program. The program required Japanese support to create (the lATTC makes rules by consent and does not keep voting records). However, it required no subsequent Japanese government restraint on the tuna industry (since Japan the longline fishery did not injure dolphins). Science: no d ata. 62 IW C 1946 - m id 1960's. C ooperation. Japan, under occupation, had to coordinate its policy with the U.S. in order to relaunch its whaling industry. Japan and the U.S. cooperated (in a multilateral context) in a cartel-like arrangement. m id-1960's. P a rtia l C ooperation. Japanese government curbed its whaling industry in compliance with quotas first established in 1966. (See tables, "Production of Pelagic Whaling, Large Type Coastal Whaling and Small Type Coastal Whaling" [(11/95 draft p. 74; compared to "Annual Changes of Production of Whale Meat and the Products" 1990 - 1994, 11/95 draft p. 76).] At the same time, the Japanese evaded quotas by setting up pirate whaling operations in Chile, and by some reports, by continuing to import illegal shipments of whale meat. Science: no d ata conflict: 1980's. 1982, Japan voted against ban on commercial whaling, and filed a reservation to the moratorium. 1986/87, Japan began "scientific" whaling, over U.S. objections, certification, and sanctions. 1987 - present, research whaling continues despite U.S. objections, a t p resen t: various, ongoing conflicts. Japan opposes inclusion of small cetacean regulation, the U.S. supports. Japan continues to make statements against, and votes against, such a rule change, despite U.S. pressure. Japan requests, makes statements for, and votes for increases in its allowable take by its small type coastal whaling industry each year. The U .S. opposes. Japan voted against the creation of a sanctuary for whales in the Southern 6 3 Ocean in 1993, Japan took a reservation, and conducts research whaling in the sanctuary. The U.S pressured Japan to do the opposite. Science: Conflict. Japanese and American scientists disagree about methods and interpretation of data.®® The Japanese data and analysis has been conducted by the Institute for Cetacean Research, which conducts the research whaling operation. The U .S. scientists question the merit of the program and the necessity of conducting lethal research. Each year beginning in 1986/1987, the IWC Scientific Committee adopted resolutions condemning the Japanese research program, with little apparent effect. Summary: Use and Nonuse Values Use Value Japan. The same firms operate salmon and tuna fishing operations. High seas fishing for tuna was conducted in the North Western Pacific and the Indian Ocean. Production of tuna (all species) was about $1.5 billion in 1992. High seas fishing for salmon was mostly in the North Pacific. Production of salmon (fresh, frozen and salted) was about $702 million in 1992. The value of the Japanese industry was high relative to the U.S. industry (salmon and tuna were largely separate in the U.S.) but low relative to other firms in Japan (contributing about .5 percent annually to Japan's GDP). U .S. Salmon fishing is concentrated in the Pacific Northwest, in the states of Alaska, Washington, and Oregon. Salmon production was $500 million in the U.S. in 1992. ®®Interview, Dr. Linda Jones, Seattle, March 1994. 64 Tuna was harvested from the Eastern Pacific until the early 1980's, and the industry has been concentrated in Southern California. Tuna production was $90 million in the U.S. in 1992. The value of the fishing industry has been high in the regional economies but low as a part of the U.S. economy as a whole. Vertical Integration Interviews with Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) indicate that the fishing firms were vertically integrated. Nippon Suisan and Taiyo Gyogyo were the largest firms in salmon, tuna, and whale meat production. The Executive Director of the Fisheries Agency of Japan described the fishing industry there as consisting of "Giant companies, supported by small companies, supported by tiny ones. A pyramid. The big companies provide the motherships, and contract with small companies which provide the catcher boats. " * ° * No further data available. No data are available for vertical integration in the U.S. salmon industry, except to the extent that they were acquired by and integrated into Japanese firms. The U.S. tuna industry was apparently vertically integrated, as harvest, canning and processing were done by the same firms, which themselves were integrated into food conglomerates. The U.S. tuna industry was concentrated, dominated by three large firms, Castle and Cooke (Bumble Bee Seafoods), H.J. Heinz (Star Kist Foods), and Van Camp Seafood (Chicken of the Sea). Unicord (a Thai company) acquired Bumble Bee in 1991. P.T. Management Trust (an Indonesian company) acquired Van Camp in 1988. ’ ^^Interview, Hanafusa-san, Tokyo, October 1994. ’ * Interview, Hase-san, Vancouver, Canada, March 1994. 6 5 On the U.S. salmon industry, no data on concentration were obtained. The U .S. salmon industry was concentrated, as indicated above, with three firms (Bumble Bee, Star Kist, and Chicken of the Sea) dominating production and sales.'0% N onuse V alue Japan: No data on nonuse values of fish. Whale watching industry was ¥100 million in 1993. The nonuse value is low relative to other whale watching industries and relative to other industries in Japan (fishing included). U.S.; Greenpeace spent $11 million on its Ocean Ecology program in 1990, targeting among other causes the harmful environmental impacts of driftnet fishing in the North Pacific and fishing on dolphins in the Eastern Pacific. Whale watching was worth an estimated $41 million in direct revenue in the U.S. in 1 9 9 4 104 This figure is high relative to other whale watching industries (the U .S. has one of the biggest whale watching industries in the world) but is low relative to the value of other fisheries in the U.S., and relative to other industries). ' ^^Interviews with lA TTC staff. No historical annual reports were located. • Greenpeace USA, Inc, Return o f Organization Exempt From Income Tax (Federal Copy), 1990, p. 2. ’^'^Hoyt, Erich, The Worldwide Value and Extent o f Whale Watching 1 9 9 5 , IW C/47/W W 2, (Bath, U.K.: W hale and Dolphin Conservation Society, M ay 1995). 66 SUMMARY OF MAJOR RULE CHANGES AND U.S.- JAPANESE COOPERATION BY DECADE 1940’s and 1950's: Regimes Created * 1946: The International Convention for the Regulation of Whaling was signed. * 1950: The Convention for the Creation of an Inter-American Tropical Tuna Commission was signed. * 1953: The International Convention for the High Seas Fisheries of the North Pacific was signed. 1960's: Regulation of Depleted Species Begins * INPFC: No major changes. Cooperation was achieved, as Japan changed its policies to keep its vessels west of the Abstention Line. Conflict persisted because the treaty rules did not reflect the desired division of the Pacific, since salmon traversed the zones. * lATTC, 1966: Quotas were set on yellowfin in 1966; and lATTC management continued until 1979. U.S. and Japanese fishing patterns did not conflict, and there was no effort within the LATTC by the U.S. to restrict or change Ja p a n 's fishing patterns. * IWC, 1966: 1966 regulation of depleted species (blue, fin, sei) began. Cooperation was mixed. Japan directed its firms to curtail whaling, at the same time Japan also set up pirate whaling stations in Chile, from which 690 blue whales were killed between 1964 and 1968. Blue whales were granted full protection by the IWC in 1965. 1970's: Fisheries Issues Connect with Environmental Agenda; Coastal States Extend Jurisdiction to 200 Miles from the Coast * All Ocean Regimes: 1972 U.N. Conference on the Human Environment in Stockholm, Sweden. The conference marked the broadening of a cognitive shift 6 7 (particularly in western states) viewing ocean issues as "environmental" issues. Marine mammal protection (whales, dolphins and bycatch of other species in driftnets ) gained salience. The U.N. Conference on the Law of the Sea was negotiated; the U.S. extended jurisdiction to 200 miles with the 1976 Magnuson Fishery Conservation and Management Act. * INPFC, 1978: International Convention for the High Seas Fisheries of the North Pacific was renegotiated (as directed by the Magnuson Act in claiming the 200 mile zone), reducing the area of the North Pacific High Seas open to Japanese fishing vessels. Cooperation in the INPFC in the 1970's was good; Japan altered its policies to keep its fishing vessels within the limits set by the commission. * lATTC, 1976: In the lATTC, the tuna-dolphin program was created and there was increased concern about dolphin mortality, especially in U.S. The lATTC quota system regulating Yellowfin broke down in 1979; thereafter, the lATTC recommended rather than imposed quotas. Cooperation between the U.S. and Japan was good. Although Japan did not fish on dolphins, it reluctantly agreed to support the creation of the dolphin program in the LATTC. * IWC, 1972: At the U.N. Conference in Stockholm, a resolution was unanimously adopted calling for a 10-year moratorium on commercial whaling. The Secretary General of the U.N. Conference, Maurice Strong, flew to the IWC meeting to present the resolution personally. Thereafter, resolutions were introduced each year to place a moratorium on commercial whaling. Japan opposed the moratorium. However, Japan cooperated, and has been in compliance. In the 1970's Japanese fishing companies observed the IWC rules, and curtailed operations. Japanese fishing companies divested themselves of whaling operations, which were losing money, in 1976. 1980's: Pressure for Marine Mammal Protection Alters Regime 68 Rules * INPFC, 1986-88: The U.S. signed a Memorandum of Understanding with Japan in 1986; environmentalists and fishermen teamed up to deny permits to Japanese flag vessels to fish in the U.S. EEZ in 1988. Japan changed its policy, restricting its fishing vessels from the donut hole. U.S. courts prohibited the Commerce Department from issuing permits to the Japanese to take groundfish within the U.S. zone (the U.S. reneged on its quid-pro-quo). * lATTC: No major changes. Japan did not fish on dolphins in lATTC waters. * IWC, 1982: A moratorium on commercial whaling was approved by majority in IWC. The result has been, at best, partial cooperation. Japan complied with the moratorium but Japan has harvested approximately 300 whales per year since 1987/88. Japan has changed its policy, and takes fewer whales than it did in the 1960's. The whaling is not commercial in the way it was then (operated by private, for profit companies). But the scientific research is not supported by the IWC, and many scientists argue that Japan could do the same research with nonlethal methods. NGO's contend that Japan has reconstituted its commercial whaling in the guise of "scientific research." 1990's. Driftnet Ban Ends INPFC; Dolphin Protection Program Expanded in lATTC * U.N./INPFC, 1990: U.N. General Assembly adopted a resolution banning high seas driftnet fishing (to protect mammals and other marine life killed as bycatch). This was a death knell for the Japanese pelagic salmon industry. The INPFC was terminated 1993. Japan cooperated; it cosponsored U.N. Resolution 46/215, removed its nets from the high seas, and closed down its high seas salmon fishing in the North Pacific. * lATTC, 1992: The commission agreed to specific limits on incidental dolphin kill. Since Japanese boats didn't fish on dolphins, Japan was in compliance 6 9 without changing its behavior (state or firms), indicating harmony rather than cooperation. * IWC: No major regime changes. 70 North Pacific Salmon and the Driftnet Fisheries The International Convention for the High Seas Fisheries of the North Pacific O c e a n *05 created the International North Pacific Fisheries Commission, (INPFC) a forum for full cooperation between the U.S. and Japan from 1953 to 1993. Japanese negotiators agreed to a series of rule changes in the INPFC allocating a smaller fishing zone to Japanese firms. Anticipating large-scale restriction of pelagic fishing in the 1970's, Japanese firms, which were relatively concentrated and vertically integrated, acquired canning and processing operations in Alaska and the Pacific N o r th w e s t.P r e s s u r e from the U.S. was highest on the most commercially valuable species, sockeye. Japanese firms cut back catches of sockeye more relative to less commercially valuable species. These aquisitions reduced the Japanese firms' incentives to press the Japanese government to resist U.S. pressure in the INPFC. They removed an important obstacle to cooperation in the INFPC. In short, the economic factors were directly related to the strength of U.S.-Japanese cooperation. • 05 International Convention for the High Seas Fisheries o f the North Pacific Ocean (with Annex and Protocol), date signed; 5/9/52; entry into force: 6/12/53; citations: 4 U ST 380, TIAS 2786, UNTS 65; Protocol 4/25/78 (30 UST 1095, TIAS 9242); 4/9/86 (no citation); Memorandum of Understanding (US-Japan) relating to the Protocol o f 4/25/78, amending the Convention , as amended, signed 6/8/87, entered into force 6/8/87. INPFC ceased operations 2/21/93. ’ 06 As opposed to the tuna market, where American and Japanese consumers demanded different species (bigeye for sashimi in Japan, yellowfin and albacore for a canned product in the U.S.) preferences in the U.S. and Japan were similar, and targeted the same species in the North Pacific (particularly sockeye). This chapter summarizes cooperation by decade. The Japanese government required its pelagic fishery to reduce catches of salmon by restricting its fishing area to the area west of the Abstention Line, created in the early 1950's. In the 1970's, when INPFC rule changes further reduced the area available to Japan's pelagic fishery, the Japanese government enforced the new limits on its motherships. In the 1980's, the Japanese government again required its firms to limit their catches within the "donut hole" area of the Bering Sea. In the early 1990's, Japan again responded to U.S. pressure, cosponsoring U.N. Resolution 46/215, which ended Japan's pelagic salmon fishing. In each of these examples, there was inherent conflict which was resolved by the Japanese government agreeing to rules which were, judging by fishing area, restrictive to Japanese firms. Economic factors, namely, the higher concentration and vertical integration of Japanese firms, foreign direct investment and joint ventures targeting U.S. canning and processing operations, the relatively high market value of sockeye salmon, and similar consumer preferences tended to improve the prospects for international cooperation'07. This chapter provides descriptive information on the fishing industries and on U.S.-Japanese cooperation. The Japanese fishing industry had a higher overall production value than the U.S. firms, was more concentrated and vertically integrated. When INPFC rules restricted the area of the North Pacific available to Japanese pelagic motherships, the larger Japanese firms were able to form direct investment and joint venture ties with canning and processing operations in the U.S., and refocused on exporting to Japan. Canning and processing operations were more natural targets for acquistion because U.S. and Japanese consumers both favored consumption of tlie same species, particularly sockeye. • o* Smaller * *^^The processes by which this occurred are more precisely articulated in chapter 6, "theoretical im plications." ' ''^U .S. and Japanese consum er preferences differed in the next case, tropical tuna. ^ ^ Japanese firms, which had traditionally provided only catcher b o a t s 'w e n t out of business as more and more fish were captured on the U.S. side of the Pacific. The link between economic factors and U.S.-Japanese cooperation in the North Pacific also appears when the market data are broken out in more detail. Sockeye salmon was relatively more valuable than other species in the North Pacific, pink, chum, coho or Chinook. Each year at the annual INPFC meetings, the U.S. pressured Japan to take fewer salmon on the high seas, but fewer sockeye in particular. While no special rules were negotiated over sockeye, over time, Japan took progressively less of the more expensive species. This indicates that conflict over sockeye was resolved through cooperation on a species-by-species basis (as well as over areas of the ocean). Use and Nonuse Values in the U.S. and Japan Salmon in the North Pacific has considerable commercial value. In the U.S., particularly in Alaska and the Pacific Northwest, salmon fishing is a $500 million industry, contributing a large percentage to the regional economies' '". In Alaska, the seafood industry is the state's largest private employer, bigger than the oil, gas and tourism industries combined. Salmon accounts for approximately half of this value.* ' ' There are five commercially valuable species of salmon. Of the five, sockeye generates the most income for Alaskans. Because sockeye was important to the industries in Alaska (Bristol Bay) and the Pacific Northwest (Puget Sound), there was considerable effort to eliminate Japanese high seas fishing for sockeye. Catch statistics from 1957 on indicate stronger pressure ' "^T he high seas fishing fleets were made up o f motherships, usually provided by the largest fishing firms (Nippon Suisan and Taiyo Gyogyo) and catcher boats, typically owned by tiny fishing firms which contracted with the large firms. ' ' "N ational M arine Fisheries Service, Fisheries o f the United States, various years and pages. The value o f salmon landings was $582 million in 1992. ' ' ' Alaska Seafood Industry Study, M ay 1989; 5 ,7 2 . ^ ^ for Japan to reduce high seas fishing for sockeye, whereas Japan continually took larger catches of the lesser-valued species, particularly pink and chum. More scientific studies were also done on sockeye than on any other species. Although rules were not specifically designed to protect sockeye, Japanese motherships took progressively fewer over time in response to U.S. pressure. US Salm on In d u stry : V alue by Species S 500 0 0 0 T ■ " 400000-- ■ M 300000-- ■ 1980 □ 1985 - 2 0 0 0 0 0 -- (n ^ 1 0 0 0 0 0 - - 1990 1992 Value o f salmon landings in the U.S. in thousands o f dollars. From the National Marine Fisheries Service, Fisheries o f the United States, various years and pages. The Japanese market has been the largest market for fishery products in the world. From the end of World War II until the 1970's, Japan was the biggest harvester and processor of fish. Today, Japan is the largest processor and importer of fish products in the w o rld .'’2 The North Pacific was an important source of supply for Japan: until the 1970's Japan took 40% of its total catch in this area. "3 Japan is the most important customer for Alaskan salmon, buying 75% of all Alaska's exports. This is not surprising considering how expensive salmon is in Japan: Wholesale salmon prices are considerably higher in Japan than ' '2 jap an Fisheries Association, Fisheries o f Japan, 1991. 1 I3inP F C An/iua/ Reports, 1957-1972, various pages. 74 in the U.S. It is possible that this anomaly may be explained by the imperfectly competitive nature of the Japanese fishing industry, where relatively few sellers dominated the market. Salmon Prices in Dollars Per Pound Consumer Prices, Japan Cities Average (cities included: Tokyo, Yokohama, Nagoya, Kyoto); prices fo r fresh salmon, all species; Consumer prices in the U.S. are an average fo r the fiv e commercial species. Sources: Fisheries Agency o f Japan, unpublished data, various years; Fisheries o f the United States, U.S. Departm ent o f Commerce, National Marine Fisheries Service, various years and pages. Exchange rates from ¥ to $ were taken fro m the International Monetary Fund, International Financial Statistics, various years and pages. Conversion rate fro m kg. to pounds is 2.2046. Consumptive use is not the only significant value of the North Pacific fishery. In the U.S., marine mammals had considerable nonuse value, meaning that some Americans were willing to pay to protect them. It appears that this value was significant. Greenpeace'(one of several environmental groups involved in lobbying on ocean issues) spent more than $11 million in 1990 on its Ocean Ecology campaign, created "to preserve and protect marine ecosystems around the world. This includes diverse and healthy " ''in c lu d in g both Greenpeace USA (now called Greenpeace Fund, a 501 X (3) tax exempt organization and Greenpeace Action (now called Greenpeace, Inc.), the 501 C (4) organization working on grassroots causes. 75 populations of fish, marine mammals...This is done through such measures as ocean protection zones, driftnet bans and eliminating the practice of catching tuna by setting on d o l p h i n s ." ' * 5 Dolphins, whales and other marine mammals are excellent advertisements for the environmental movement, and Greenpeace's ability to raise funds to protect them is an indication that a significant segment of the American public was willing to pay to preserve them ."^ The driftnet ban was an important example of Japanese cooperation with the U.S. on an issue which centered on the protection of marine mammals and other bycatch, in which action by Greenpeace and other NGO's was an important factor. Market factors affected the negotiations at the INPFC in a significant way. The fishing industry in Japan was large relative to other fishing industries (particularly in the U.S.), and was concentrated and vertically integrated. This facilitated the Japanese industry's forming joint venture and FDI ties with the U.S. firms in Alaska and the Pacific Northwest. Because this eliminated the distributive gains problem for the large Japanese firms, conflict at the commissions was reduced. It is also possible that ownership ties improved the political climate between the U.S. and Japan, because a partially-Japanese-owed salmon industry in the Northwest would have significant local political clout. The salmon industry was particularly important to the regional economies of Alaska and the Pacific Northwest. These economic factors were significant because they affected the processes of cooperation between the U.S. and Japan which emerged in the INPFC. ' '^Greenpeace U .S.A ., Inc., Return o f Organization Exempt From Income Tax (Federal Copy), 1990, p. 2. ' ' ^Expenditures by NGO's on programs such as the driftnet ban and eliminating dolphin fishing do not measure the public's willingness to pay with precision. Rather, they indicate the NGO's strategic priorities as well as its judgm ent as to how much money m ust be comm itted to effect change in the targeted areas. For example, a segm ent of the public might have a high willingness to pay to protect a certain species, but the NGO might set its strategic priorities elsewhere, reflecting less than the actual willingness to pay. (Richard Carson, personal communication, April 1995). 7 6 Cooperation in the INPFC The behavior of the U.S. and Japan in the INPFC, both governments and firms, ranks as full cooperation. Three distinct periods emerged. The first stretched from the treaty's signing in 1953 to 1978, when the U.S. extended its claim of coastal jurisdiction to 200 miles from the shore, and demanded that the Abstention Line be moved west. The second extended from 1978 until 1986, when Japan signed a Memorandum of Understanding with the U.S. and subsequently phased out its high seas fishing operations from the "donut hole" area of the Bering Sea. The final phase, from 1989 to 1993, was marked by the U.S. and Japan's agreement (in a parallel forum, the U.N.) to abandon driftnet fishing because of its harmful impact on marine mammals, sea birds, and other marine life. Japan's behavior helped to bring about the "long term dream"' of fishermen and environmentalists in Alaska and the Pacific Northwest, namely, to phase out Japan's high seas fishing operations permanently. At the same time, the largest Japanese fishing companies integrated U.S. canning and processing operations into their businesses. The Japanese government had little choice but to agree to a treaty limiting its pelagic fishery when it was under U.S. occupation. The International Treaty for the High Seas Fisheiies of the North Pacific signed in 1952, creating the IN PFC ,' was a precondition for peace. Fishermen from Alaska were concerned that if Japanese motherships fished on the high seas, they would intercept salmon of Alaskan origin. After having surrendered unconditionally to the U.S. and its ' '^Interview with Katsuma Hanafusa, Deputy Director, International Affairs Division, Fisheries Agency o f Japan, Tokyo, October 1994. ' ' ®The U.S., Japan and Canada were contracting parties to the treaty. Salmon o f Canadian origin was generally not at risk o f interception by the Japanese. Therefore, the U.S. and Japan were dom inant in the bargaining that took place in the forum o f the INPFC. The cooperative behavior of the U.S. and Japan is the focus o f this analysis. 140E 150E 160E 170E ISO 170W 160W I SOW I SOW 120W 140W 64N 64N Russia Alaska 60N 60N Canada 56N 56N 52N 52N 44N 44,V 160E ISOE 170E 1 3 0 I70W 160W 150W I40W I SOW Map 1. Area open to Japanese motherships was restricted to west of 175° W est Longitude under INPFC rules from 1953 to 1978 (shaded area). 78 allies, Japan agreed to a treaty which limited the area its motherships could fish to an area west of 175° West Longitude (see map 1). At that time, the best available scientific data could not accurately account for migration patterns of the North Pacific salmon, and scientists believed that North American salmon did not migrate westward of this area. The U.S. goal was to keep Japanese motherships from intercepting salmon from North America, particularly sockeye from Bristol Bay, Alaska. The U.S. firms pressed their representatives for better protection for sockeye, and INPFC meetings reflected this pressure. Sockeye salmon, by far the most commercially important species to the fishermen of Alaska and the Pacific Northwest, was given better protection. From the earliest meetings of the Commission until the rule change in 1978, the U.S. delegates pressed Japan to reduce its catch of salmon on the high seas, in particular, Bristol Bay sockeye. Despite its insistence at the Commission meetings that the goal of the INPFC was to safeguard salmon yields, not to simply reduce Japanese catches, Japan cooperated with the U.S. pressure to a striking degree. Catch statistics from those years indicate that the Japanese fishermen took fewer sockeye relative to the other species. Nothing in the treaty rules indicated that Japan should abstain from taking more sockeye than the other species; however, U.S. pressure did single out Bristol Bay sockeye, the most commercially important species, for special attention. The Abstention Principle, 1956-1978. Sockeye were at high risk of interception by the Japanese motherships. Alaskan fishermen in particular were concerned about protecting the runs of sockeye which, in Alaska and the Pacific Northwest, provided a cornerstone for the local economies. North American sockeye spawn in rivers and streams in Alaska, Washington and Oregon and then migrate to sea, where they spend one to four 7 9 years of their lives maturing. Sockeye are found throughout the Pacific Ocean (see map 2), and North American and Asian stocks intermingle on a wide area roughly 160° East Longitude to 175° West (see map 3). In Alaska, Washington and Oregon, fishermen traditionally set nets at the mouths of rivers when the fish return to spawn at the end of their lives at sea. Also by tradition, the Japanese have preferred to catch salmon on the high seas."^ Therefore the Japanese had access to North American salmon over a wide area of the high seas, but the Americans caught only their own fish as the salmon migrated up their natal streams. The high seas have traditionally been considered an international c o m m o n s . *20 But by the 1950's, improvements in fishing technology threatened to exhaust the supply of fish available in the high seas. If Japanese flag vessels were able to catch North American sockeye in the high seas area of the North Pacific, the Alaskan salmon fishery would have smaller runs. The U.S. fishing industry claimed the Japanese high seas fishing operations were bankrupting them. Accordingly, the U.S. government put pressure on the Japanese government to stop taking North American-origin salmon. * * ® According to Kazio Shima, the Japanese prefer the taste o f salmon which are caught in the open ocean. Sockeye turn a blood-red color when they return to their natal streams to spawn, and according to Shima, this change signals a high level o f hormones, which ruin the taste of the fish. *20The concept has been associated with Hugo Grotius, who argued in Mare Liberum (1608) that the oceans should be open to all potential users , giving them equal access to ocean resources, except for a narrow area o f coastal state jurisdiction. No state could claim an area o f the ocean under the notion of private property. (Robert Friedheim , Negotiating the N ew Ocean R egim e, Columbia: University of South Carolina Press, 1993: 11.) 8 0 70°N 60°N SO°N 40°N 140°E 1S0°E 160°E 170°E 180° 170°W 160°W 1S0°W 140°W 130°W 120°W Map 2,. "Ovefall ocean distribution of sockeye salmon. Stippled areas show where sockeye were caught in 1956-83 INPFC salmon research operations; zeros show areas where INPFC sampling was conducted but sockeye were not caught; hatched areas show where sockeye are known or strongly suspected to occur..." (Groot and Margolis, p. 71). 8 I 140' 150' 160' 170' 170' 180' 160' 150' 140' 130' 120 ' 70' 70°N 65°N -J? ' 60°N 3 4 28 37 222 139 2 9 5 38 55°N 85 170 234 103 F-' 2 g--' 8 25 95 159 244 119 4 5 37 89 144 64 50' 37 20 70 28 45°N 40°N 35°N 140°E 150°E 160°E 170°E 180° 170°W 160°W 150°W 140°W 130°W 120°W Map 3. 'Known ocean distribution of Asian (shaded areas) and North American (open areas) sockeye salmon on the basis of tagging, parasitological analysis, and scale-pattem analysis..." (Groot and Margolis, p. 76). There was one problem for the U.S. in attaining its goal of ending Japanese mothership fishing for salmon in the high seas of the North Pacific: It flew in the face of the internationally accepted principle of the freedom of the high seas. At a more practical level it posed a contradiction for U.S. marine policy because the U.S. tuna industry was interested in safeguarding its right to fish for tropical tuna in international waters off the coast of Central and South American states. To get around this problem, the U.S. proposed that the Japanese government "voluntarily" restrict its firms' fishing on the high seas. This was the main objective of the U.S. in the INPFC. The Japanese negotiators, on the other hand, stressed the need for cooperative management of the resources based on scientific principles. The distinction was important, because the U.S. believed it had the right to prevent Japanese motherships from taking any North American-origin salmon on the high seas, while the Japanese continually argued that they should be allowed to fish unless it could be demonstrated scientifically that their fishing operations threatened fish populations. The U.S. representatives called for maintaining maximum productivity of the fishery resources of the high seas," recognizing that fisheries productivity "will decline unless exploitation is limited by adequate conservation measures," considering that this "may depend on international agreement and cooperation, and, finally, "realizing that attainment of effective conservation may in some instances depend upon agreement by some nations to waive the exercise of their rights to exploit particular high seas fishery resources... The U.S. was stressing the need for limits on Japanese high seas fishing. Japanese negotiators, on he other hand, proposed the following language: 83 Acting in the light of the fact that exploitation ...is open to all nations on an equal footing under both the principles of internationd law and international customs..." "Believing that the said fisheries resources, when they are exploited by free competition and free enterprise of all nations according to the above-mentioned principles and customs and for the sake of the world's food supply, will best serve the common interest of m a n k in d ...'21 The Japanese government argued that the salmon should be available on an open access basis, with restrictions imposed only if scientific evidence indicated they were necessary. The compromise which emerged from the negotiations became known as the "Abstention Principle" (Articles III, IV, V, Appendix A ) '22. Japan would agree to abstain from, or not to fish in, the area of the high seas west of 175° West Longitude, if the Commission determined that the stock met the following conditions: (a) Evidence based on scientific research indicates that more intensive exploitation of the stock will not provide a substantial increase in yield which can be sustained year after year; (b) the exploitation of the stock is limited or otherwise regulated through legal measures by each Party which is substantially engaged in its exploitation, for the purpose of maintaining or increasing its maximum sustained productivity; such limitations and regulations being in accordance with conservation programs based upon scientific research and; *21 Jackson and Royce, Ocean Forum, p. 31. 122jfv(ppQ regulations imposed other restrictions as well: Japan would not fish halibut in the area o ff the coasts o f Canada and the U.S., herring off the coasts o f Canada and the U .S. exclusive of the Bering Sea and o f the waters west o f the tip o f the Alaskan peninsula, or salmon off the coasts o f Canada and the U.S. exclusive of the Bering Sea. Both Canada and Japan agreed to abstain from fishing salmon in waters o f the Bering Sea east o f a fixed limit. [Jackson and Royce, p. 33.] However, this chapter focuses on Japanese-U.S. cooperation over the Abstention Line because it was the most significant and contentious issue of this period o f the INPFC's history. 84 (c) the stock is the subject of extensive scientific study designed to discover whether the stock is being fully utilized and the conditions necessary for maintaining its maximum sustained productivity. Nevertheless, the fishing industry in the U.S. sounded alarm bells, claiming the imminent demise of their operations. The U.S. Senate held hearings in Seattle, Washington in November 1957123. The first witness, Clinton E. Atkinson, [Chief of Pacific Salmon Investigations, U.S. Fish and Wildlife Service] testified that salmon, halibut and herring in the North Pacific were already fully exploited, and needed protection from Japanese. Atkinson concluded that "It is certainly true that the Japanese took a large quantity of North American salmon last year"'24 The Congressman from Alaska remarked that the Japanese were catching at least 50 percent of the North American fish. In reply, Atkinson pointed out that Americans were not catching a similar amount of Asian fish as the US did not have high seas salmon fishing, only exploratory boats. In conclusion. Senator Magnuson declared; The whole trouble here is that our fishermen are prohibited from fishing out in those areas and the Japanese are not. That makes a different picture. And I would say...when it was asked how many Asiatic salmon do our fishermen take, I would say the answer would be zero, by our own limitations. ' 25 The testimony by the fishermen's associations were blunter still. A representative from the Alaska Fisherman's Union stated: •23 Hearings before the Com m ittee on Interstate and Foreign Commerce, US Senate Eighty-fifth Congress, first session, on North Pacific Fisheries Problems and Related M atters and S. 1483 to amend the Act o f A ugust 27, 1954 (68 Stat 883) Relating to the Rights o f Vessels o f the US on the High Seas and in Territorial Waters o f Foreign Countries, and S. 2719, to provide for the payment o f bounties for the control of certain predators on salmon and halibut of the Pacific Coast and Alaska, W ednesday, N ovem ber 27, 1957, Seattle, Washington. •24 Senate hearing transcript (1954): 9-10. '25 Senate hearing transcript (1954): 12. 8 5 I have always said, and I still do, that the spirit and intent of this treaty was to maintain and conserve these Alaska salmon stock at maximum productive level. I think that the Japanese, if nothing else, have broken the spirit and intent of this treaty by constantly increasing their catch to a point where, as of now, if they continue there will be nothing left. I am not satisfied that we are dealing with reasonable people. *26 The language at the INPFC was far more diplomatic, yet transmitted the same message. At the Commission's meeting the following year, the U .S. representative Milton E. Brooding expressed his "utmost concern" for Bristol Bay sockeye. He urged the Japanese to restrict their fishing in areas where Asian and North American stocks were known to intermingle, or the fishery in Bristol Bay might be closed down entirely. Japanese Commissioner Kenjiro Nishimura pointed out that in the Japanese view, the goal of the convention was to ensure maximum sustained productivity of the stocks, not unilateral Japanese restraint. He pointed to the need for more scientific studies to demonstrate which conservation measures would be necessary. Clearly, the U.S. was pressuring the Japanese to withdraw their motherships from areas where they might catch Alaskan sockeye, even if these areas were west of the Abstention line. The Japanese did not agree to do so, but nevertheless their motherships took fewer sockeye than they did other species of salmon. This general debate continued each year throughout the 1960's. In June 1965, the Congress of American Fishermen (CAF), the voice of fishermen's unions, vessel owner associations, and fishery marketing cooperatives, issued a statement complaining about Japanese catches of Bristol Bay salmon and citing U.S. Coast Guard interceptions of Japanese salmon fishing vessels some 70 miles east of the Abstention line. The CAF, joined by the Seafarer's International Union, ’^^Senate hearing transcript (1954): 21 - 22. 8 6 called for a boycott of Japanese imports. In editorials and speeches, Alaskans' opinions echoed this hostility toward the Japanese. Remarkably, despite the industry's cries about imminent collapse, the sockeye runs in 1965 were so large that the Alaskans could not harvest all of the fish. The salmon run was a massive 54 million fish.*^? This abundance of sockeye was not lost on the Japanese Fisheries Association (JFA), the mouthpiece of the Japanese industry. The JFA shot back that the (assertion that the) Japanese salmon fishery is depleting the Bristol Bay salmon resources is totally contrary to fact...that the distortion of facts or emotional criticism would not serve to solve our mutual problems...We wish to express our hope to the fishing interests of the U.S. that we will cooperate closely together in the effort to achieve and satisfy such objectives and interests as we share. The Japanese Socialist Party went so far as to call for Japan to withdraw from the INPFC. > 28 Nevertheless, over the next five years the U.S. representatives to the INPFC continued to pressure Japan to stop any harvest of North American origin salmon on the high seas, particularly Bristol Bay sockeye. The Japanese continued to point to the need for international cooperative management. The compromise appeared to be continued scientific research to determine the origin of the stocks in the high seas, in order to determine a way to "best divide" them, if necessary, by moving the Abstention line. Using the INPFC as a negotiating forum, each year the U.S. pressured Japan to reduce its catches of sockeye on the high seas, particularly Bristol Bay sockeye. The Scientific Committee undertook cooperative studies to determine the >22Jackson and Royce, p. 112. INPFC records set the number at 56 million fish for Alaskan fishermen (including all species). INPFC Statistical Yearbook 1965, p. 12. > 28Jackson and Royce: 112-113. 87 origins of sockeye taken in the high seas, in order to minimize and ultimately eliminate Japanese catches of North American salmon. In reality, however, even if Japanese motherships confined their operations to the zone allowed by the INPFC, at least some interception of North American salmon was probably inevitable. North American and Asian salmon intermingled in a very wide area of the high seas (see map 3). U.S. pressure on Japan did restrain Japanese high seas fishing in this period. Even with the unusually high runs in 1965, Japan continued to abstain from fishing west of the line. Groups within Japan called for abrogation of the treaty when the INPFC continued to support Japanese abstention in 1965. Japanese fishermen argued that given the extraordinary size of the runs, sockeye could not possibly be "fully utilized," and the Abstention line was not justified by the treaty provisions. Yet the Japanese government and firms continued to cooperate with the treaty rules. Compared to the other commercial species of salmon, U.S. pressure was highest on the sockeye. Sockeye was the most important commercial species in Alaska and the Pacific Northwest, and its price relative to the other species was quite high. This variation in price among the species is reflected in the relative shares of the catch. The U.S. took a bigger share of sockeye than Japan, as shown below. 88 160000 - 140000 - - 120000 - - 100000 - - 80000 40000 20000 H Japan sockeye [U US sockeye 0 \ 0 \ 0 > 0 \ 0 \ G \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ Relative shares o f sockeye taken from the North Pacific (1957 - 69). IN PFC Statistical Yearbooks, various years and pages. At the same time (1957-1969), as shown below, the Japanese were still taking a larger share of the other, less commercially valuable, species than the U.S. was. 400000 350000 + 300000 250000 200000 150000 100000 50000 ^ S VO ON OV Ov OV VO C * * “ 0 0 Ov VO VO VO VO OV O v OV 0 > Relative shares o f other species (chinook, pink, chum, and coho) taken fro m the North Pacific. (INPFC Statistical Yearbooks, various years and pages). 89 It is not clear that science was cooperative in terms of shared data collection and the use of agreed-upon methods. The INPFC's scientific committee was primarily concerned with tagging returns, designed to differentiate North American from Asian salm on.’29 It is clear that the U.S. government funded studies of productivity and escapement, but there is no evidence showing conflict or agreement on data or methods. However, the question of whether salmon stocks were fully utilized was apparently not seriously contested, despite controversy in 1965 over the large size of the runs. One analyst said of the discussions at the time: "It's night and day they were fully utilized." '20 Many scientists and diplomats regard joint science as one of the proudest legacies of the INPFC. Still, for the purposes of this study, the result is indeterminate. Nevertheless, in interstate relations, the 1950's and 1960's can be seen as a period of full cooperation between the U.S. and Japan in the INPFC. The Japanese government issued regulations that reduced the area available to Japanese pelagic salmon fishing boats. Further U.S. pressure in the commissions persuaded the Japanese government to limit firms' catches of sockeye relative to lesser-valued species, despite their commercial incentive to do otherwise. U.N. Conference on the Human Environment, UNCLOS, and the Environmental Movement of the 1970's The following decade brought profound shifts in attitudes and policies, particularly in the U.S., that were ultimately reflected in the INPFC. The U .N . Conference on the Human Environment, held in Stockholm, Sweden in 1972 ’29interview, Dr. Linda Jones, Seattle, March 1994. ’ 29lnterview, Dr. Low, Seattle, M arch 1994. 90 marked a clear shift in the way many people thought about the environment. At the INPFC meeting that autumn, the U.S. Commissioner, James C. Cameron, remarked that "growing awareness of environmental degradation" and "examples of ineffective natural resources management" had aroused public concern to levels "unknown in the past."'^ ■ This shift in public attitudes gradually led to increased attention to the catches of nontarget species of marine life in fishing nets, such as sea lions, fur seals, porpoises, and sea birds. At the same meeting Commissioner Nishimura expressed "deep concern" about another movement: The jurisdictional claims of coastal states over anadromous fish like salmon, and ultimately over areas up to 200 miles from the coast. Two years later, a representative of the U.S. State Department issued this implicit warning to the Japanese: many of the old ways of dealing with common international concerns regarding living marine resources are almost certain to be superseded in the near future by new concepts and new regimes. The words 'conservation' and 'environmental quality' are going to take on new meanings, as we move from an era in which often little more than lip service was paid to them, into one in which they are likely to receive paramount attention. Over the next decade, "environmentalism" in the form of protest against incidental taking of nontarget species and extended coastal state jurisdiction fundamentally changed the INPFC rules and in the nature of cooperation which emerged among Japan, the U.S., and the fishing industries. Extended Jurisdiction and Marine Mammal Protection, 1978-1986 The U.S. joined most other coastal nations in declaring jurisdiction over an area up to 200 miles from its coast in the spring of 1976, with the passage of the ' 3 'IN P F C Annual Report (1972): 3. 132j]sjppc Annual Report (1974): 1-2. ^ ^ 140E 150E I60E 170E 180 I70W 160W 120W I SOW 140W 130W 64N Russia Alaska SON SON Canada 56N 56N 52N 52N 4SN 44N 40N 3ÔN -----------^ 36N Î30W 120W iSOE 160E 170E 180 now I SOW 150W I40W Map 4. Area open to Japanese motherships was moved to 175° East Longitude after the INPFC was amended in 1978. The "donut hole" north of 56° North Latitude, between the U.S. and U.S.S.R.'s 200-mile Exclusive Economic Zones, was still open to the Japanese in this period (1978-1986). 9 2 Magnuson Fishery Conservation and Management Act. The Magnuson Act claimed U.S. jurisdiction over salmon throughout their r a n g e ’ 3 3 , claimed an area 200 miles from the coast as an Exclusive Economic Zone (EEZ), and directed the relevant agencies to withdraw from any fishery treaty if it were not renegotiated to conform with this new claim. Subsequently, the U.S. and Japan agreed to move the Abstention line to 175° East L o n g it u d e ’ 34 (see map 4), reducing the area in which the Japanese motherships were allowed to fish. The new agreement, in the form of a Protocol, entered into force in February 1979.'35 As illustrated in the table below, the rule changes drove Japanese catches of salmon down to the lowest levels in the INPFC's history. Catches of sockeye were cut more than catches of the lesser-valued species. The graphs below facilitate comparison of U.S. and Japanese catches by species in the 1970's and 1980's. The Japanese translated its agreement to rule changes in the INPFC into regulations that constrained the Japanese fishing industry. That U.S. pressure on Japan in the commission to reduce sockeye catches relative to other species reflected the commercial value of sockeye to the industry in Alaska and the Pacific Northwest. The graphs show that lesser-valued species (pink, chum, coho and chinook) provided more of Japan's harvest when catches of sockeye were reduced. However, other factors, such as migration patterns, may also influence the quantities taken. For example, to explain why Japan substituted proportionately more pink and chum (and less chinook) to compensate for the reduced catches of sockeye. The link between commercial values and share of the catch, then, is that the U.S. pressured Japan in the ’ 33The M agnuson Act claimed fishery management authority to manage living resources "of the continental s h e lf throughout their range. The U.S. was claim ing jurisdiction over salmon throughout their range, not only within 200 miles from the coast. Jacobson and Conner (1985): 8. ’ 34except for the "donut hole" area north o f 56° North Latitude ’ 35jackson and Royce, Ocean Forum: 153. 93 commission to take fewer sockeye. Japan did, and took proportionately more of the other species, as illustrated below. DIVISION OF SOCKEYE, 1970’ S ( U a > o o < 0 90000 j 80000 -- 70000 -- 60000 -- 50000 -- 40000 -- 30000 -- 2 0 0 0 0 -1 10000 H Japan □ US 00 O ) 94 DIVISION OF SOCKEYE, 1980'S 0 ) >• ( U u o w 200000 -r 180000-- 160000-- 140000-- 1 2 0 0 0 0 - - 100000 -- 8 0 0 0 0 " 60000 -- 4 0 0 0 0 " 2 0 0 0 0 " M - 'l' ' I O t-CMCO'^10<ON-COO>0 oo o o c o o o o o c o c o o o o o o o o ) 0) 0 ) 0 ) 0 ) 0 ) 0 ) 0 ) 0 ) 0 ) 0 ) 0 ) Catches o f sockeye salmon in the North Pacific Ocean by the U.S. and Japan, 1970 to 1979 and 1980 to 1990, in m etric tons. Source: IN PFC statistical yearbooks, various years. 9 5 DIVISION OF PINK, 1970'S c Q . 100000 80000-- 60000 -- « 40000-- o 20000 o 1 — C M C O L O C O N 00 O) N N N O) o> O) O) O ) G) O ) C D G) C D DIVISION OF PINK, 1980'S 300000 j 250000 -- S' .E 200000-- 150000 + c 100000 o 50000 O C M C O in C O N 00 G) O 00 00 00 00 00 00 00 00 00 00 G > G) C D G) C D G) G) G) G) G) G) G) Catches o f pink salmon in the North Pacific Ocean by the U.S. and Japan, 1970 to 1979 and 1980 to 1990 in m etric tons. Source: IN PFC statistical yearbooks, various years. 9 6 DIVISION OF CHUM, 1970'S E 3 S . u » c o 1 2 0 0 0 0 t 1 00000 80000-- 60000 -- 40000 20000 O 1 - < M C O "«t [V . h» |v. O) O) O) O) O) If) (o N 0 0 cn M . M M N M 0 0 ) 0 ) 0 ) 0 ) DIVISION OF CHUM, 1980'S 300000 j ^ 250000-- I 200000 £ ^ 150000 c 100000 o 50000 ■ Japan □ U.S. O T - C M C O ' ^ i n < D N . O O O ) 0 c o c o c o o o c o c o c o c o o o c o o ) 0 )0 )0 )0 ) 0 )0 )0 ) 0 )0 ) 0 )0 ) Catches o f chum salmon in the North Pacific Ocean by the U.S. and Japan,, 1970 to 1979 and 1980 to 1990 in m etric tons. Source; INPFC statistical yearbooks, various years. 9 7 DIVISION OF COHO, 1970'S 20000 J 1 8000 -- 16000" o' 14000-- o 12000-- 1 0 0 0 0 - - 8000 -- o 6000-- 4000 2000 O i - c M c o ' t i n c D r ^ o o o ) 0)0)0)0)0)0)0)0)0)0) DIVISION OF COHO, I980'S 30000 T 25000 -- 20000 - - I Japan □ U.S. 1 5000 -- 1 0000 - - 5000• ■ o T- O J 00 00 00 0) 0) 0) lO C D 00 00 O) O) N 00 O) 00 00 00 0 ) 0 ) 0 ) O ) O ) Catches o f coho salmon in the North Pacific Ocean by the U.S. and Japan, Î970 to J979 and 1980 to 990 in m etric tons. Source: INPFC statistical yearbooks, various years. 9 8 DIVISION OF CHINOOK, 1970'S zg o o c 1 8000 -r 16000 .. 14000-- 12000-- 1 0 0 0 0 - - 8000 -■ 6000 -- 4000 -- 2000 -h 0 o T— C\J CO m (O 00 G) N N N N N O) O) o> G) G) G) G) G) G) G) DIVISION OF CHINOOK, 1980'S 25000 T 20000 - - ■ Japan □ U.S. 15000 -- 1 0000 -- 5000 ■ ■ 0 0 0 0 O) O) 0 0 O ) O) O ) Catches o f chinook salmon in the North Pacific Ocean by the U.S. and Japan, 1970 -1 9 7 9 and 1980 to 1990 in m etric tons. Source: IN PFC statistical yearbooks, various years. M igration patterns o f chinook probably account fo r the fa c t that the U.S. took a disproportionately large share. Chinook do not migrate over as wide an area as sockeye, pink, coho or chum. 99 Increased Japanese Foreign Direct Investment As their fishing operations were being steadily pushed from the high seas, the Japanese firms found a relatively effective way to cut their losses. In the 1970's, the larger Japanese fishing companies, Nippon Suisan'3^ and Taiyo Gyogyoi37^ substantially restructured their operations. Early in the 1970's, Japanese industrial managers foresaw their imminent loss of distant water fishing operations as more and more states began claiming 200 mile exclusive economic zones. ' 3 ^ The Japanese distant-water fleet was becoming a thing of the past. The largest Japanese companies had the option of restructuring their operations away from fishing and toward direct investment in foreign fishing operations. For the most part, this shift was toward higher value-added operations, processing and canning. During this period, by one estimate, Japanese ownership was more than 50% of the canning and processing operations in Alaska. • 39 Restructuring enabled the Japanese companies to stay in the business and profit from the reallocation of ocean resources by changes in international treaty rules. 136 Nippon (or Nihon) Suisan Co., Ltd., located at the Nippon Bldg., 2-6-2 Otemachi, chiyoda- ku, Tokyo 100. '3?T aiyo Gyogyo (also known as M aruha Co., Ltd.,) 1-1-2 Otemachi, chioda-ku, Tokyo 100. 138interview, Hase-san, Executive Director o f the INPFC, Vancouver, April 1994. ’39interviews with Japanese industry representatives. This percentage is also confirmed by the Alaska Seafood Industry Report, p. 41. Estimates o f Japanese ownership o f Alaskan canning and processing operations range from 50 to 100%. Direct Investment by Japanese Fishing Companies in the U.S., 1970 to 1979140 Japanese Investor US Subsidiary Operation 1970 1971 1972 1972 1973 1973 1973 1973 1974 1973 1974 1974 1974 1975 1976 1976 Marubeni Maru Sanshoukai Marubeni Marubeni Marubeni Marubeni Marumitsu Tsuda Suisan Nippon Suisan Kibun Nippon Suisan Houei Tsuashon Marubeni Sasatani Shouten Touto Suisan Togiak Fisheries, Inc. S.A. Packers, Inc North Pacific Processors Bering Sea Fisheries Alaska Pacific Seafoods Wards Cove Packing Co., Ltd. Marimitu Marine Corp. Pacific Marine Products Corp. Pan Marina Products Corp. Morpac, Inc. Kibun Corp. of America Universal Seafoods, Ltd. Hoei Trading America, Inc. Cordova Bay Fisheries, Inc. Homer Seafoods Maruhide Marine Products, Inc. canmng canning canning canning canning canning processing processing processing processing processing processing processing canning buyer processing •4HSource: Clint Atkinson, Fisheries Consultant, Seattle, M arch 1994. 1 0 1 1977 1979 1979 1979 Girakushii International Nichiro Nichiro Nichiro Oxnara Seafoods, Inc. Peninsula Salmon, Inc. Seven Seas Fishing Co. Peter Pan Seafoods, Inc. processor processing processing buyer Smaller Japanese companies did not have the option of going multinational, however. These firms, many of which are represented by the Japan Fisheries Association, continued to oppose imported fish products. Smaller Japanese firms were the true losers from the shift in INPFC rules, and job losses were very high in this sector. Employment in the fisheries sector fell steadily from a high in 1952 of 790,000 people to 342,000 in 1992.*4i The loss of high seas fishing operations, particularly in the North Pacific Ocean, was a principal reason. In addition to limiting the area of the Japanese mothership salmon fishery, the INPFC began to assume responsibility for reducing the incidental killing of nontarget species by fishermen. In 1978, the Commission created an Ad Hoc Committee on Marine Mammals, with a subcommittee devoted to research on the impact of fishing on marine mammals. Three years later, the U.S. and Japan signed a Memorandum of Understanding calling for research on incidental takes of Dali's porpoises. Specific provisions allowed incidental takes to be directly monitored, and directed that data be collected on mothership and catcher boats. The voice of U.S. environmentalists in the US was fell on sympathetic ears in Alaskan fishing circles, and became influential in the INPFC. ''^'F isheries Agency o f Japan, unpublished document, 1994. 1 0 2 Marine Mammals and the End of Japanese High Seas Salmon Fishing: 1986 - 1991 Environmentalists and the U.S. industry joined forces to oppose Japanese pelagic fishing. Since the U.S. salmon fishermen did not use driftnets on the high seas, elimination of driftnet fishing meant both elimination of foreign competition and an environmentally destructive practice. High seas fishing for salmon, in the U.S. view ,'42 was inefficient, took too many juvenile fish, caught fish from mixed Asian and North American stocks, and took too many nontarget species. The two groups proved to be a powerful political coalition in the Northwest. Under pressure from the U.S., the Japanese government apparently left the decision to its firms, which made an unfortunate choice. According to the Ministry of Agriculture, Forestry and Fisheries, the Japanese firms were allowed to choose whether they wanted to keep the salmon in the Bering Sea, or opt for groundfish in the U.S. EEZ. The firms chose groundfish.'43 Jn 1986, through a Memorandum of Understanding with the U.S., Japan agreed to phase out its operations in the Bering Sea west of 180° Longitude and 56° North Latitude (see map 5), known informally as the "donut hole" area. While Japan's agreement to phase out of this area was in writing, the quid pro quo, an issuance of permits to catch groundfish in the U.S. zone, was unwritten. Nevertheless, both U.S. and Japanese sources acknowledge that such an agreement was made by U.S. diplomats.'44 When the regional fisheries management council took action to issue the permits, it found a rather strong coalition of opposition. The Kokechick Fisherman's Association, comprised of Alaskan fishermen, and the Center for '4 2 u .S . Com m issioner Clem ent V. T illion, INPFC Annual Report 1985, p. 3. '43interview , Hanafusa-san, Tokyo, October 1994. '44interview , Jay Hastings, Fisheries A gency o f Japan, Seattle, March 1994. This was confirm ed by interviews with representatives o f U.S. fishing firms. 1 0 3 140W 130W 120W now 160W 150W 180 I70E 160E 140E 150E 64N 64N Russia Alaska 60N 60N Canada 56N 56N S2N 52N 48N 44N 44N 40N -----------^ 36N 130W 120W 36N 140W 180 now 160W I50W n oE 160E 150E 140E Map 5. Area open to Japanese motherships was further restricted after the U.S.-Japanese Memorandum of Understanding in 1986. The "donut hole" north of 56® North Latitude, between the U.S. and U.S.S.R.'s 200-mile Exclusive Economic Zones, was gradually closed to the Japanese in this period (1986-88). 0 4 Environmental Education, filed a lawsuit to block the issuance. Since Japanese driftnet fishing in the area would affect marine mammals, such fishing would conflict with the U.S. Marine Mammal Protection Act, which required that a management plan to protect the mammals be put in place before any fishing which might affect the animals could take place. That is, since the Japanese methods of catching groundfish might affect the marine mammals, the U.S. District Court in the District of Columbia found for the fishermen and the environmentalists. The Japanese fishing boats were denied the permits required to fish in the U.S. EEZ. The Japanese government expressed fury over this action. A Japanese representative bitterly noted that the action would deprive 10,000 Japanese fishermen of their livelihood, and save perhaps one marine mammal’^5. Commissioner Nishimura hinted that this action might anger Japan enough to withdraw from the INPFC. Due to the result of litigation in the U.S. over the permit on incidental take of marine mammals, ...(the INPFC)... is now faced with significant crisis...I...strongly hope that these countries should make a cooperative effort to overcome the current crisis and to maintain and develop the INPFC arrangement.*'*^ However, despite the bitter words and veiled threat, the U.S. persisted in its refusal to issue the permits to the Japanese fishing boats, and Japan held to its commitment to restrain its motherships from fishing in the donut hole area of the Bering Sea. This incident also ranks as full cooperation. Despite the conflict *'*^The Com m issioner noted that only one fur seal had been caught incidentally by the Japanese mothership salmon fishery from 1984 to 1988. (INPFC Annual Report 1988, p. 5). However, the im pact o f pelagic driftnet fishing was found to be damaging to certain populations o f marine mam mals, particularly to the Northern Right Whale Dolphin and certain species o f sea turtles, some o f which were endangered. The impact on other marine mammal species, sea birds, and other marine life were unknown. Burke, Freeberg and Miles, "The United Nations Resolutions on D riftnet Fishing: An Unsustainable Precedent for High Seas and Coastal Fisheries," (School of M arine Affairs, University o f W ashington, 1993, photocopy) p. 23. 146i n p f c Annual Report (1988): 6. 1 0 5 inherent in the situation, the Japanese government changed its policy, directing its firms to cease operations in the "donut hole" area of the Bering Sea after 1988. U.N. D riftn e t B an, 1989, 1991 Action in a parallel forum affected U.S. and Japanese cooperation in the INPFC. A strong push by environmentalists to ban driftnet fishing had led the U.N. to recommend fishing nations ban the use of driftnets altogether. In 1989, the U.N. passed Resolution 44/225, which recommended a moratorium on large scale pelagic driftnet fishing. The resolution suggested that the ban would be lifted if a scientific management program were put in place for the fishery resources and for the conservation of other marine life. It also recommended that action be taken to reduce driftnet fishing on the high seas, and to immediately end any further expansion of the practice.*'*'^ At the same time, the U.S. had completed an agreement with Japan*'^^ to phase out driftnets. The U.S. Congress had mandated the bilateral talks through the Driftnet Impact Monitoring, Assessment, and Control Act of 1987, which directed the Departments of Commerce and State to negotiate with countries using driftnets in areas where U.S. marine resources were affected. The Driftnet Act was backed by the threat of sanctions under the Felly Amendment to the Fisherman's Protective Act, which would ban fisheries imports from any nation certified by the Department of Commerce to be using driftnets. The U.S. - Japanese driftnet agreement contained provisions for observers aboard the boats and other provisions to ensure compliance. •'t^Burke et al., "The United Nations Resolutions on Driftnet Fishing: An Unsustainable Precedent for High Seas and Coastal Fisheries," (Seattle, Wa: University o f W ashington School of M arine Affairs, 1993): 21. agreements were also signed with Taiwan and the Republic o f Korea. Canada was also a signatory to the agreement with Japan. (M arine M ammal (Commission Report, 1992): 127. •“ ^^The agreements also required that satellite transmitters be placed on the driftnet fishing vessels for exact monitoring o f their location. (M arine Mammal Com m ission Report 1991, p. 120. In 1 0 6 Concern in the U.S. over the issue had been fueled by NGO's such as Greenpeace, which had waged a campaign to incite action. This activity was important because it added force to the coalition in the U.S. government supporting economic sanctions against countries using pelagic driftnets. In September 1990 Greenpeace issued the following announcement: Greenpeace lined the San Francisco waterfront today with a massive "wall of death" — a three-mile section of a high-seas driftnet confiscated from a Japanese fishing vessel...Children also were given the opportunity to attach notes to the net, asking the Japanese government to ban driftnetting. Greenpeace plans to return the net to the Japanese after taking it to Washington, D.C., to garner support for legislation banning the import of driftnet-caught fish to the United States...The three-mile section of net is only one-tenth the amount of net a single fishing boat deploys each night. During the summer months, over 20,000 miles of driftnet — enough to circle the Earth — is laid nightly in the North Pacific by Japanese, Taiwanese and Korean vessels fishing for tuna, squid, salmon and shark.’^o Environmental groups were one part of a powerful coalition of support in the U.S. for banning driftnet fishing. Joining them were the salmon fishermen in the Alaska and the Pacific Northwest. With the fishing industry and Greenpeace and other environmental groups strongly behind the U.N. resolution, political pressure in the U.S. intensified. Senator Ted Stevens (R-AK) obtained a commitment from Secretary of State Baker that the U.S. would do whatever was necessary to end driftnet fishing. ' ^ ' The issue thereafter assumed greater political weight. In the bilateral talks between the President Bush and the Japanese Prime Minister in the fall of 1990, 1993, after the agreement had been extended, the Department o f Defense agreed to use Navy surveillance capabilities to locate violators o f the agreement. The Navy agreed to consider using underwater acoustic detection to identify use o f driftnets in violation o f the agreement. (Marine M ammal Comm ission Report 1993): 136. *^®Greenpeace press release, September 1990. •5 lB u rk e e ta l.,(1 9 9 3 ): 15. 1 0 7 banning driftnet fishing was high on the a g e n d a . *52 Japan agreed to support the U.S. position at the U.N., and joined the U.S. in proposing the Resolution 46/215 b a n n in g d r i f tn e t f i s h i n g ' g y 1 9 9 1 ^ support for the ban in the U.N. was strong enough that the resolution passed unanimously. It stated that the best scientific data had failed to demonstrate that there were no adverse impacts from driftnet fishing, and called for a complete end of the practice by December 31, 1 9 9 2.'54 This period (1989 - 1992) also ranks as full cooperation. In 1992, Japan submitted a plan to the U.N. Secretariat detailing its intended phaseout. Despite some behind-the-scenes resistance, such as insisting that the U.N. resolution call for a delay rather than an immediate ban, the Japanese did cooperate with the international effort to end its driftnet fishing operations. In part, this may have been a response to pressure from the U.S. at the highest political levels, and the threat of legislation which would have imposed economic sanctions on Japan and other states which ignored the moratorium. ' 55 Despite inherent conflict, as the ban had a significant impact on Japan’s pelagic fishery for salmon, tuna, and squid, the government changed its policy to facilitate the U.S. goal of ending driftnet fishing. However, in a parallel case, the Whaling Convention, where the same President was also involved and where the U.S. actually imposed sanctions under the Magnuson Act, Japanese government's behavior was less cooperative. Market factors can explain much of the difference. In the North Pacific, the Japanese firms owned a majority share of the canning and processing industry. More fish for U.S. fishermen would also be a gain for the larger Japanese companies. I '52lnterview with Robert Brownell, Southw est Fisheries Science Center, La Jolla, Ca., May i 1995. i 153j^arine Mammal C om m ission Report (1993): 135. '54B urke et al. (1993): 25. The U.S. extended the bilateral agreement with Japan through 1993 despite the U.N. ban which banned the practice by the end o f 1.992. (M arine M ammal Commission Report 1993: 136). '55T he Driftnet Fisheries Enforcement Act, passed on Novem ber 2, 1992, would probibit imports of fish and fish products o f a nation which conducted large scale driftnet fishing on the high seas. It would also deny port privileges and impose import prohibitions on sports fishing e^u^m ent. Therefore, although the Japanese fishermen would be forbidden from using driftnets on the high seas, the largest Japanese fishing companies would not lose significantly from the ban at the U.N. This interpretation would explain why, under similar threats from the U.S. at roughly the same time, the Japanese behavior was cooperative in supporting the U.N. resolutions, but not cooperative in a parallel forum, the IWC. Overall, the INPFC ranks as a case of full cooperation. The last year of operation for the Japanese high seas salmon fishery was 1991. Without a Japanese fleet on the high seas, there was no further need for the INPFC. The Commission ceased its operations on February 21, 1993. Japanese cooperation with the U.S. in the dismantling of its high seas fishing operations was, in large measure, due to specific economic factors. The U.S. and Japan agreed in the INPFC to progressively reduce the area of the high seas available to Japanese mothership fishing boats. Limitations imposed in 1978, 1988, and finally Japan's endorsement of U.N. resolution 44/215, ending its high seas fishing the North Pacific, indicate full cooperation. The North Pacific had provided Japan with 40% of its catch of fish. The Japanese fishing industry was bigger, more concentrated, and more vertically integrated than the U.S. industry in Alaska and the Pacific Northwest. The steady reduction in the fishing area available to the Japanese catcher boats, combined with an additional shock when the U.S. suspended the gold standard in 1971, devaluating the dollar, made FDI from Japanese fishing firms to Alaskan canning and processing the most profitable option. Japanese FDI in Alaska and the Pacific Northwest also facilitated cooperation at the INPFC, since further gains to U.S. fishermen would be processed and canned in largely Japanese-owned plants, then exported to Japan. From a firm-level view, the U.S. operations were integrated into the Japanese firms at the point where rule changes at 1 0 9 the INPFC were changing in an unfavorable direction for Japanese catcher boats. In short, relatively concentrated, vertically integrated Japanese fishing firms invested in U.S. operations, which improved bilateral cooperation. Such investments in processing and canning were higher value added than the catcher boats' activities that were sacrificed. Foreign direct investment ties appeared to alleviate distributive issues at the INPFC. Japanese firms would have less opposition to U.S. gains, since U.S. firms were partly or wholly Japanese-owned. Focusing on variation within the INPFC reveals higher levels of cooperation associated with higher valued species. Each year beginning in the 1950's until the 1970's, the U.S. pressured the Japanese more intensively to cut back on its high seas catches of sockeye salmon, particularly Bristol Bay sockeye. Scientific cooperation, the most important and celebrated legacy of the INPFC, produced more studies of sockeye salmon than any other salmon species. The patterns of U.S.-Japanese interaction differed in the next case considered, the lATTC. Since Japan took most of its yellowfin from the Western Pacific and the U.S. fished mostly in the Eastern Pacific (before the restrictions on dolphin fishing imposed in the 1980's), the firms' fishing areas did not conflict. Limited policy coordination was required, however in the creation of the tuna- dolphin program in the 1970's. The lATTC is ranked as an intermediate case of U.S.-Japan cooperation. analyzing Japanese and U.S. patterns o f harvesting yellowfin (Japan stayed in the W estern Pacific, the U.S. in the Eastern Pacific) cooperation was therefore unneccessary to the realization o f mutual interests. In gam e language, the situation approximates "harmony." (K eohane,/t/rer Z/ege/iio/iy (1988): 49, 51-64. also Oye, "Cooperation U nder Anarchy," (1986): 6.) The creation o f the tuna-dolphin program required U.S. pressure to overcome Japanese resistence. 1 1 0 Tropical Tuna and Dolphins in the Eastern Pacific The U.S. signed the Convention for the Establishment of an Inter-American Tropical Tuna Commission (lATTC)'^'^ in 1949 with Costa Rica, and other states, including Japan, became involved later. Production of tropical tuna was a significant industry in Japan, and was part of a concentrated, vertically integrated fishing industry. The U.S. industry in Southern California was also a significant industry in the local economy, and was relatively concentrated and vertically integrated, being part of larger food conglomerates. No foreign direct investment or joint ventures between U.S. and Japanese firms were identified. Preferences differed in the Japanese market, in which consumers paid the highest prices for bigeye. In the lATTC, U.S.-Japan relations reflected the underlying absence of competition or conflict in the Eastern Pacific from 1966 - 1979. Japan and the U.S. achieved partial cooperation in dolphin protection from 1976 to the present. This chapter focuses on providing descriptive detail, leaving articulation of the ways in which markets influenced cooperation to Chapter 6, "Theoretical Implications." The Eastern Pacific provides a case in which the U.S. and Japan largely avoided conflict. In general this made explicit policy coordination between the U.S. and Japan unnecessary. The U.S. took most of its yellowfin from the ’^^signed: May 31, 1949; entered into force, March 3, 1950; citations: TIAS 2044, 1 U ST 230, 80 UNTS 3. The Convention was originally signed between the U .S. and Costa Rica. France, Japan, and Nicaragua were included shortly thereafter. Ecuador also signed, but withdrew in 1968; as did M exico, withdrawing in 1978, and Canada in 1988. C osta Rica withdrew in 1979 and resumed participation in 1989. Again, for the purposes o f this study, only the actions o f the U.S. and Japan are analyzed. ("International Agreements to Protect the Environm ent and Wildlife, Report to the Comm ittee on Finance, U.S. Senate, 332-287 Under Section 332 o f the Tariff Act o f 1930," USITC Publication 2351, January 1991, p. 5-7. ^ ^ ^ Eastern Pacific, as did Mexico and other states (see graph, in Appendix). Japan took most of its yellowfin from the North West Pacific and from the Indian Ocean, and concentrated fishing effort on bigeye tuna in the Eastern Pacific. When the LATTC created its tuna-dolphin program in 1976, the Japanese Government resisted, then yielded to U.S. pressure. However, the tuna-dolphin program required no subsequent restraint on the Japanese tuna industry, since Japan's longline fishery did not use "dolphin fishing" methods. Harvesting patterns for Yellowfin resulted in a state of "harmony" between the U.S. and Japan, which required no explicit cooperation. Japan did cooperate partially in creating the tuna- dolphin program, which Japan initially resisted and which required no change in firm behavior. The lATTC in Brief The LATTC was created by a treaty initially signed by the U.S. and Costa Rica in 1949 to conserve the fishery resources of the Eastern Pacific Ocean. The Eastern Pacific tuna fishing waters extend roughly from the coast of central California south to the central coast of Chile (roughly 40° North Latitude to 30° South Latitude) in the Eastern part of the Pacific (east of about 150° West Longitude). The tuna are highly migratory. Most of the states with fishing fleets in the area are members of the Commission; namely, France, Japan, Nicaragua, Panama, and the United S t a t e s . ' 58 This chapter focuses on cooperation between the U.S. and Japan. In short, the fishing patterns Japanese and American firms caused little bilateral conflict, and this case is ranked as "harmony" in terms of fishing area. Japan and the U.S. did cooperate partially in creating a dolphin protection program under lATTC auspices in the 1970's. •5 8 o n e important exception is M exico, which fishes for tuna in the eastern Pacific but currently is not a m em ber o f the lATTC. 112 The lATTC has had two primary aims: research and conservation. The lATTC's Scientific Committee was created to study the biology of tropical tunas, baitfish, and other kinds of marine life in the convention areas, as well as the impacts of fishing and oceanographic conditions on tuna populations. In the event of overfishing, the Commission was required to recommend appropriate conservation measures to allow the tuna populations to support maximum sustained c a tc h e s .I n 1976, the Commission added to its mandate the protection of dolphins from being killed needlessly or carelessly by purse seiners fishing for tuna swimming in association with dolphin schools. Since then, the lATTC has focused on research and regulation to maintain high levels of tuna production while minimizing the fishery's harmful impact on dolphins. For most of the lATTC's history, Japan and the U.S. were the world's most aggressive harvesters and consumers of tuna. The Japanese and American flag vessels avoided direct competition for yellowfin stocks in the years of their competition for U.S. market share by fishing in different areas of the ocean. Japan took most of its yellowfin in the Western Pacific, out of lATTC jurisdiction. Most of the Japanese effort in the Eastern Pacific targeted bigeye, which was not a big seller in the U.S. market. Perhaps because of the differences in fishing areas and in their domestic markets, the leading Japanese firms did not invest directly in the U.S. firms. A significant motive for FDI (unfavorable treaty rules allocating a smaller share of fishing areas) was absent. Nevertheless, both countries cooperated in the multilateral effort to prevent overfishing of yellowfin between 1966 and 1979. •59peterson and Bayliff, Organization, Functions, and Achievem ents o f the lA T T C , Special Report No. 5, La Jolla, California: Inter-American Tropical Tuna Comm ission (1985): 1. ’^^Balassa and Noland (1988) and Reid (1991) single out the need to overcome U.S. trade barriers as the dominant motive for Japanese foreign direct investm ent in manufacturing in the 1970's and 1980's. Reducing the high seas fishing areas open to Japanese vessels (after the Law o f the Sea and the U.S. M agnuson Act had a sim ilar effect in the lA TTC and IWC). In addition to cooperating to prevent overfishing, lATTC staff cooperated with scientists at Japan's National Research Institute of Far Seas Fisheries*^* in studying the biological impacts of the Japanese longline fishery in the Eastern Pacific. Bigeye in the Eastern Pacific were the main target of the Japanese longliners, but a significant amount of yellowfin was also taken. The research focused on the biological impacts of the longline fishery, and found that this fishery had a limited impact on the main target of the U.S. fishing boats, namely, yellowfin. Finally, Japan cooperated with the U.S. in adding the dolphin protection issue to the lATTC agenda. The Japanese resisted the extension of the lATTC mandate to include dolphin protection in the m id-I970's, arguing that the Commission should keep its exclusive focus on tuna. When the lATTC began to set stricter controls in the 1990's, Japan continued to resist, fearing that the efforts to protect dolphins would have a negative impact on the tuna fishery. Pressure from the U.S. was instrumental in bringing Japan to support dolphin protection in the Commission. In general, the U.S.-Japanese relationship in the Eastern Pacific tuna fishery was not as extensive or as cooperative as it was in the North Pacific salmon fishery. A higher level of cooperation was achieved over tuna and dolphins, however, than has been possible over whaling. Japan was the world's largest fishing nation until 1989'^^, and the Japanese and the U.S. were both major harvesters and consumers of tropical tuna. In Japan, landings of tropical tuna netted a significantly higher annual revenue than did salmon landings. In the U.S., the reverse was true: The value of commercial landings of salmon was significantly higher than tuna landings. The patterns of cooperation which developed in the INPFC and the lATTC were related in ’ ® ’ formerly the Far Seas Fisheries Research Laboratory ’ Annual Report on Japan's Fisheries, (Fiscal 1993): 26. 1 14 important ways to patterns of harvest and production which developed in the fisheries industries. Investment ties and joint production of salmon produced a higher level of cooperation in the INPFC; in the lATTC, asymmetrical patterns of harvesting, divergent domestic consumption patterns, and lack of lA lT C restrictions on the Japanese fleet removed any incentives for Japanese firms to undertake FDI (or vice versa), and the U.S. and Japanese tuna harvesting and processing companies stayed s e p a r a t e . > < 5 3 This case required less explicit policy coordination than was required in the INPFC and is ranked as an intermediate case of cooperation. The U.S. Tuna Industry (1950-1990's) The context of U.S.-Japanese interaction in the lATTC in the 1950's and I960's was a bilateral battle for a share of the U.S. market for canned tuna.’® '^ Operating out of San Pedro and San Diego, the tuna fleets were an important part of the Southern California economy. U.S. fishermen began taking tuna from the Eastern Pacific Ocean shortly after 1900. By the 1930's tuna packing had grown from a minor specialty into a major food industry, putting out between 2 and 3 million cases per year. By mid-century, tuna fishing had grown to be San Diego's th ird la rg e st b u sin e ss' The U.S. industry was dominated by three large companies. Initially family-owed enterprises, the tuna companies became part of U.S.-owned food '^ 3 Chapter 6, "Theoretical Implications" reviews the economic literature indicating the conditions under which firms tend to profit from FDI. In resource-based industries like fisheries, FDI is a way to maintain access to resource supplies, stabilize contracts, obtain im plicit insurance, and educe transactions costs. An international rule threatening a state's access to the resource may trigger FDI to "jump" the barrier in the same way threatened tariff protection may trigger FD I to maintain a firm's access to foreign markets. In concentrated and vertically integrated firms FDI may increase the benefits from economies o f scale, * However, the U.S. and Japanese fleets focused the majority of their fishing effort for yellowfin and skipjack in different areas of the ocean, and the rivalry generally did not extend to large-scale competition for the same stocks. 165^|^j]e it was an important fishery, the eastern Pacific tuna fleets had annual landings that were, historically, less commercially valuable than the salmon industry in the U .S. Scheiber (1992). Since the NMFS began keeping statistics on landings in 1979, the value o f the tuna indusUy has ranged between one-tenth and one-half o f the salmon industry in the U.S. conglomerates in the early 1960's. Columbia River Packers, a major canner of tuna and salmon, changed its name to Bumble Bee Seafoods, Inc. in 1961 and merged with Castle & Cooke, Inc. Bumble Bee remained a part of the larger food industry conglomerate until 1991, when it was acquired by a Thai company, Unicord. Star Kist Foods was an independent tuna canning company until 1965, when the H.J. Heinz Company acquired it. The third major U.S. tuna company was Van Camp Seafood, with its Chicken of the Sea label. Ralston Purina acquired Van Camp in 1963, and in 1988 sold it to an Indonesian company, P.T. Management Trust Compan y. Th e three largest U.S. tuna companies, then, were U.S.-owned until the late 1980's and early 1990's, and have never had investment ties with the Japanese fishing companies. Yellowfin was the main target of U.S. fishermen in the Eastern Pacific. Demand for yellowfin soared during World War 1 1 as canned fish was used both to supply the Allied army and to substitute for red meat and chicken in the domestic market. After the war, the U.S. tuna industry promoted 'light meat' tuna as a healthy (and cheaper) alternative to chicken. "Light meat" referred primarily to yellowfin and skipjack. Skipjack tended to be taken as an alternative to yellowfin. Generally abundant, skipjack stocks tended to be more variable than yellowfin and therefore less reliable. In the 1960's, when yellowfin were severely overfished, U.S. boats increasingly focused on skipjack. During the period of lATTC quotas for yellowfin (1966-1979), skipjack remained sufficiently abundant that harvests were unrestricted. Other tuna and tuna-like species were less commercially valuable to the U.S. Bigeye, which was very expensive in Japan, was not consumed in the U .S. •ôÔDirectory o f International Business History , Vol. II, pp. 491, 508, 562. 1 1 6 market. Often bigeye that were caught incidentally were simply included in the catch statistics for yellowfin, and were packed and sold as yellowfin. By the 1950's tuna fishing was one of the largest businesses in Southern California, but it quickly lost market share as the Japanese recovered from World War II. Japan relied on tuna fishing, and in particular, tuna exports to the U .S ., to earn hard currency to rebuild its productive base. Japanese competition proved to be fierce. In 1948, the U.S. supplied 92% of its domestic tuna market. Ten years later, this figure had fallen to 4 6% . The San Pedro tuna fleet was cut by half between 1953 and 1 9 5 8 . U.S. tuna producers appealed to Congress for tariff protection. To dramatize their plight, fishermen in Los Angeles and San Pedro canceled their annual "Fishermen's Fiestas" in 1958, promising to reestablish the celebration in 1959 if Congress would grant them tariff protection. The Eisenhower Administration opposed such a move, however, and meaningful tariffs were never put in place. Despite the industry's pleas for help, the U.S. fleet was quietly transforming itself into a dramatically more efficient operation. Purse seine nets were introduced, encircling fish schooling around dolphins or floating objects such as tree trunks. This method, combined with the introduction of nylon nets and power blocks, vastly increased the efficiency of the U.S. fleet. Between 1955 and 1965, large, modern purse-seiners replaced the older baitboats. By the early 1960's the U.S. fleet was larger, faster, and more efficient than ever. The "purse I ^^Congressional Record, July 1959, p. 12582. 168 Ip 1955, the President signed an Executive Order which would raise the tariff on water packed tuna from 12.5 to 25 percent whenever imports exceeded 20 percent o f the previous years' level. Eisenhower's move was mainly sym bolic, and although the tariff increase was never triggered, it signaled to the Japanese an upper limit on the growth o f the American market. Scheiber, 1993, p. 66. ^ ^^Congressional Record, April 1958. 1 1 7 seine revolution" enabled the U.S. fishermen to be even more efficient than their Japanese competitors.' ” ^0 Such efficiency proved unsustainable, however. In 1961, the lATTC reported that yellowfin stocks in the Eastern Pacific were being overfished. Catches in 1960 and 1961 were much higher than the Commission's estimated Maximum Sustainable Yield. The Commission recommended catch quotas beginning in 1962, but did not regulate catches until 1966. The goal was to reduce fishing effort to enable the yellowfin stocks to regenerate.'7 1 Although the lATTC lacked the authority to enforce quotas, the U .S. Congress threatened to embargo any nation whose boats did not comply. In October 1962, Congress passed legislation both to enable the U.S. Department of the Interior to implement the Commissions regulations with respect to U.S. boats, and to embargo tuna imports from any nation which violated lATTC r e c o m m e n d a t i o n s . ’’ ^2 Since the U.S. market was the largest consumer of tuna in the world in the 1960's, the embargo threat had sharp teeth. From the mid-1960's until the late 1970's, cooperation under the lATTC quotas was very successful. 170i a t t C Annual Report (1965): 6. •^ 'lA T T C Annual Report (1965): 7. '^^C ongressional Record, October 1962; Scheiber, "Common Ocean Resources and Economic Interdependence: Japan, the U .S., and the Pacific Tuna Fisheries, 1945 - 1970," University of W ashington, Seattle (photocopy), August 1993. 1 1 8 Value of Tuna Landings: U.S. 120000.00 j 100000.00 -- 80000.00 -- 60000.00 - - 40000.00 - - 20000.00 - - 0.00 H albacore O bigeye @ bluefin H skipjack B yellowfin Landings in dollars. Source; National Marine Fisheries Service, Fisheries o f the United States, various years and pages. Value of Tuna Landings: U.S. 70000.00 j 60000.00 - - 50000.00 - - 40000.00 - - 30000.00 - - 20000.00 - - 10000.00 -- 0.00 S S' z" C O 0 0 o > O n O n 0 ^ O n ON O n O n ON H albacore CH bigeye H blueRn B skipjack H I yellowfin Landings in dollars. Source: National Marine Fisheries Service, Fisheries o f the United States, various years and pages. The Japanese Tuna Industry (1950 - 1990's) Of the three species analyzed, tuna is by far the most important in the Japanese market. In addition, tuna fishing has been a much larger business for the 119 Japanese than for the Americans. In Japan, the total value of tuna landed (all species) in 1992 was approximately $1.5 billion, compared with $90 million in the U.S. Tuna production in Japan has also been a bigger business than salmon production. Considering all species (and combining fresh, frozen and salted salmon), the market in Japan was approximately $702 million, compared to $500 million in the U.S.’'^^ Traditionally, fish has been a more important part of the Japanese diet, and tuna a more important fish in commercial terms. The Japanese tuna fishing industry differed from the U.S. industry in other important ways as well. The largest fishing companies in Japan, Nippon Suisan and Taiyo Gyogyo, were diversified and operated over a wide area of the world's oceans harvesting many different forms of marine life. The U.S. companies, by contrast, that mainly focused harvesting and processing tuna in southern California were separate from those in Alaska, Washington and Oregon which harvested and processed salmon. The Japanese companies that invested heavily in U.S. salmon canneries and processing operations in the Pacific Northwest in the 1970's did not form similar ties with U.S. tuna companies. There were no barriers to Japanese yellowfin harvesting in the Western Pacific imposed by the lATTC. Separate fishing areas meant that Japanese vessels were not restricted by lATTC quotas (1966 - 1979), which applied only in the Eastern Pacific. Japan fished primarily in the Western Pacific and the Indian Ocean, and to a lesser extent in the central Atlantic. Japanese boats also caught yellowfin in lATTC waters, but the Eastern Pacific was not the main target for Japan's yellowfin harvests. Japan took about 15 to 20 percent of its total harvest of yellowfin in the Eastern Pacific. Most of this was taken by the longline fishery, and is believed to be incidental. Nevertheless, the longlines targeted enough yellowfin that the lATTC reported that • 73 Japanese industry data from the Fisheries Agency of Japan; U.S. data from the National Marine Fisheries Service, Fisheries o f the United States, various years and pages. 1 2 0 the Japanese longline boats did have some impact, albeit a small one, on the overall health of the yellowfin in the Eastern Pacific. As noted above, the U.S. tuna fleet fished for yellowfin almost exclusively in the Eastern Pacific before the 1980's. Japan was also an important harvester of skipjack, but took comparatively little from the Eastern Pacific. Most of Japan's catch of skipjack was taken from the Western Pacific, and some was taken from the central Atlantic. Less than 5% of Japan's total catch of skipjack came from lATTC waters. Japanese consumer tastes also differed from the Americans'. The Japanese preferred sashimi to canned tuna, and one of the most prized species in the Japanese market was bigeye. The highest quality bigeye were the larger fish caught by longline (rod and reel), as nets tended to take smaller fish and damaged their flesh in the process. Japanese boats began fishing for bigeye using longline gear in the mid-1950's. The fishery expanded steadily, targeting mostly bigeye but also taking some yellowfin and billfish each year for the next decade. In the 1970's, the Japanese began using "deep longline" gear, which was more targeted to large bigeye which tended to school in deeper, colder waters. Fewer yellowfin were taken in the 1970's and 1980's by the Japanese longline fishery, while Japan's bigeye catches more than doubled The Eastern Pacific was an important area for Japan, supplying between 40% and 50% of Japan's total (worldwide) bigeye harvest. In general, American consumers did not share the Japanese taste for sashimi, and the Japanese longline fleet had little direct competition for its bigeye harvest in the Eastern Pacific. The differences in the Japanese and American tuna markets is reflected in the prices paid domestically for each species. In Japan, bluefin and bigeye harvests generated the most revenue. Yellowfin, albacore and skipjack were less commercially valuable. In the 1950's and 1960's, Japan harvested yellowfin '74M iyabe and Bayliff (1987): 14. ^ ^ ^ throughout the world for export to the U.S. Domestically, however, the Japanese demanded a different type of product. 10000 T 8000 - - 6000 -- 4000 - - 2000 - - CO 00 ON H bluefin D b igeye ^ yeiiowfin H albacore 111 skipjack Source; Price data by species, in ¥ per kg. Source: Fisheries Agency o f Japan Value of Tuna Landings in ¥ per kg. (Japan) 3500 T 3000 -- 2500 -- 2000 1 500 1 000 ■ b lu efin O b igeye ^ y e llo w fin H aibacore 1 3 sk ip ja ck 1978 1979 1 980 1 981 Price by species in ¥ p er kg. Source: Fisheries Agency o f Japan The U.S. market differed from the Japanese in important ways. The Japanese industry was more vertically integrated and the same two large companies, Nippon Suisan and Taiyo Gyogyo conducted salmon, tuna and (until 1976) 122 whaling operations. The companies in the U.S. were a few family-owned enterprises operating tuna boats out of San Pedro and San Diego. A second difference was consumer tastes, with the Japanese taking mostly bigeye for sashimi, and the U.S. taking more yellowfin for the canned market. Finally, the Japanese fleet concentrated largely in the Western Pacific (especially in the northern area), while the U.S. fleet (until the early 1980's) focused operations in the Eastern Pacific. These differences probably made the U.S. market for tuna less attractive as investments (i.e., FDI and/or joint venture operations) than was the salmon industry in the north. Bilateral Relations in the 1950's: Competition for U.S. Market Share Americans consumed more canned tuna than anyone else in the world in the 1950's and 1960's, and the market was expanding rapidly. In 1947 tuna boats from the Eastern Pacific Ocean supplied more than 90 percent of the domestic market, about 285 million pounds. Ten years later, the domestic market had more than doubled, but the American tuna boats supplied only slightly more than half. Japan had become a ferocious competitor in the U.S. canned tuna market. US Tuna Consumption (000 s o f cases) 20000 15000 10000 123 In 1959, Congressmen Kutchell of California went to the floor of the House and called for bilateral talks with Japan on the "perennial tuna import problem." The Congressman called for an "amicable and effective" bilateral agreement to stem Japanese imports.'^5 That year, the U.S. and Japan agreed to voluntary Japanese export quotas. The U.S. industry continued to complain, arguing that the quotas were set so high as to be more like production goals than meaningful export restraint. (Scheiber, 1992). Kutchell labeled Japan "the most aggressive and dangerous rival of American fishermen." Cooperation and Competition for Bigeye and Yellowfin Despite the harsh rhetoric in Congress, the Japanese and the U.S. actually had rather harmonious patterns of fishing in the Eastern Pacific. The Eastern Pacific was Japan's richest fishing area for bigeye. The lATTC published reports on the Japanese longline fishery every few years, concluding that it had only a small impact on yellowfin stocks. Because bigeye and yellowfin generally did not school in the same areas, the Japanese longline fishery did not compete head-to- head with U.S. purse seiners. Asymmetrical interests allowed the two fleets to operate separ ately and without conflict over bigeye stocks. The U.S. preferred to take yellowfin and skipjack from lATTC waters using surface gear such as bait boats, jigboats and later purse seiners. More than 90% of the total U.S. harvest was taken from lATTC waters through the 1970's. Therefore, although the U.S. industry lost a large share of its market for canned tuna (mostly yellowfin and skipjack) to Japan in the 1940's and 1950's, the fleets generally did not compete in the same fishing areas. Had the U.S. actually ’^^Congressional Record, July 1959, p. 12582. '^^C ongressional Record, March 1960, p. 4159. 1 24 embargoed Japanese tuna (as it threatened to do to any country which ignored lATTC quotas) it would have shut out mostly tuna from the Western Pacific, rather than the eastern. U.S. and Japanese competition for harvesting yellowfin in the Eastern Pacific was not nearly as ferocious as the rivalry for market share in the 1950's. While the focus of the U.S. and Japanese efforts on yellowfin were largely different, there were areas of overlap and competition. In 1966, Japan's yellowfin harvest dropped 12,000 short tons from about 20,000 in the previous year. The yellowfin were taken by the longline fishery, which generally caught larger fish than the U.S. fleet, which used surface gear. According to Dr. James Joseph, Director of the lATTC, this drop in harvest probably did not signal a decision to reduce harvests in response to the Commission's quotas, which came into effect that year. Rather, the falloff in catch reflected the scarcity of fish due to the efficient harvests by purse seiners, many of them U.S.-owned. Therefore, the drop in the Japanese longliners' yellowfin harvest in 1966 was probably due to decreased availability due to the larger catch taken by the U.S. surface fishery, which targeted younger fish.'^^ There was some, albeit limited, competition between the U.S. and Japanese tuna fleets in lATTC waters in the 1960's. Over the next decade the U.S. industry's demands for protection subsided as the U.S. fleet's efficiency outstripped Japan's. The yellowfin populations in the Eastern Pacific were seriously overfished in the late 1950's and 1960's. It also became evident that incidental killing of dolphins in the Eastern Pacific was a serious problem. By the 1970's, the lATTC began to shift its focus from providing research to enhance the fishing fleets' effectiveness to promoting conservation of the tuna and dolphin resources. '^^Interview with Jam es Joseph, March 21, 1995. 1 2 5 As the focus shifted to conserving yellowfin in the Eastern Pacific, the U .S. turned down the diplomatic heat on Japan. Conflicts were erupting with Latin American states which claimed jurisdiction over tuna stocks in waters adjacent to their coasts, and seized U.S. vessels fishing in their coastal zones. U.S. interests with respect to the fishery were being framed in a larger arena than U.S.-Japanese commercial rivalry. Scientific Research While the U.S. and Japan were commercial rivals in tuna production, their behavior was much more cooperative in the lATTC's scientific research. As was the pattern in the INPFC, the lATTC developed an excellent reputation for research into Pacific Ocean marine life and oceanography. The purpose of the research was "to maintain 'the populations of yellowfin and skipjack tuna and other kinds of fish taken by the tuna fishing vessels in the Eastern Pacific Ocean..at a level which will permit maximum sustained catches yeai" after year."*'^® The role of the scientific staff was to advise the Commission which actions would be necessary to ensure the continued viability of the tuna populations. As the underlying purpose was to maintain commercially viable tuna stocks, the Commission's work focused on the more commercially valuable species. Although well respected, scientific cooperation is indeterminate, since it is not clear that data and methods converged over time. From 1954 until 1976, when the dolphin issue became a major concern of the lATTC, yellowfin and skipjack were the subject of more scientific research than any other species. The lATTC Bulletins were filled with studies of yellowfin (more than 40 articles) and skipjack (more than 20 articles) and baitfish, particularly •78peterson and Bayliff, "A Review o f the Japanese Longline Fishery for Tunas and Billfishes in the Eastern Pacific Ocean, 1971 - 1980," lA TT C Bulletin 19, 1 (1987): 11. 1 2 6 anchoveta. Many general studies were also produced, treating El Nino, ocean currents, and other oceanographic topics. The scientific staff devoted relatively little effort to the species which were less commercially valuable in the U .S ., namely albacore and bluefin. Scientists from the U.S. and Japan also copublished reports on the Japanese fishery for bigeye in the Eastern Pacific. Beginning in 1965, scientists from the Japanese National Research Institute of Far Seas F ish e rie s c o o p e ra te d with scientists from the lATTC to analyze the longline fishery in the Eastern Pacific and its biological aspects. • Scientific cooperation, considered to be one of the Commission's outstanding accomplishments, tended to favor the more commercially valuable species and to slight those considered to be less valuable. Cooperation Over the Tuna-Dolphin Issue The issue of incidental killing of dolphins, which the lATTC began to consider in 1976, provides another locus of U.S.-Japanese cooperation. As discussed previously, Japanese fishing in the Eastern Pacific Ocean was focused on bigeye tuna, caught with longlines. Dolphins were killed incidentally by the purse seiners, which in the 1950's and 1960's were mostly U.S. flag vessels. Japan did not contribute to the problem of incidental killing of dolphins in the Eastern Pacific tuna fishery. Nevertheless, as a member of the lATTC, when the Commission's focus turned to protecting dolphins the Japanese reluctantly went along. The conflict between the tuna industry and environmentalists and others fighting to protect dolphins had its roots in the transformation to purse seining in the late 1950's. Fishermen found that if they used synthetic nets and a hydraulic- '^^form erly the Far Seas Fisheries Research Laboratory in Shimizu, Japan • SOsuda and Schaefer, 1965a and 1965b; Kume and Schaefer, 1966; Kume and Joseph, 1966, 1969a and 1969b; Joseph et al., 1974; Shingu et al., 1974, M iyabe and Bayliff, 1987, Nakano and Bayliff, 1992). 127 powered lifting mechanism called a power block, they could lift vastly larger quantities of fish than was possible using traditional methods. Since in the Eastern Pacific Ocean, the larger yellowfin tuna swim along with some species of dolphins, fishermen were able to encircle entire herds of dolphins along with yellowfin schools. Dolphin fishing had begun. Conflict over dolphin fishing surfaced a decade later. A scientist from the U.S. National Marine Fisheries Service (NMFS) recorded that the method of dolphin fishing killed a large number of mammals incidentally. Public attention had already begun to focus on the need to protect marine mammals, including whales and fur seals. Several of the largest environmental organizations, including the National Audobon Society, the Sierra Club, the Wilderness Society, the Izaak Walton League, the World Wildlife Fund and others joined the fight against dolphin fishing, testifying before Congress in September 1971 for the need for legislation. This pressure, plus a growing awareness that the U.S. fleet was most responsible for dolphin mortality, was instrumental in passing the Marine Mammal Protection Act in 1972 (MMPA).*^' The MMPA required the U.S. Secretary of Commerce to regulate the incidental killing of marine mammals associated with fishing operations. In October 1974, the Secretary of Commerce issued a general permit to the US fleet to allow continued dolphin fishing, subject to limits on the incidental kill. Environmental organizations sued, charging that the Commerce Department was violating the MMPA. The permit remained in force despite these challenges. At the U.S. behest, in 1976 the lATTC became involved in the effort to reduce incidental dolphin killing by purse seiners. Japan's operations in lATTC waters were targeted to bigeye tuna using longlines, a method which generally did not injure dolphins. Nevertheless the Japanese argued that the lATTC was not a Jam es Joseph, "The Tuna-Dolphin Controversy in the Eastern Pacific Ocean: Biological, Economic and Political Impacts, Ocean Development and International Law , 25, no. 1, (January - M arch 1994), p. 3. 128 dolphin protection body, and resisted the creation of a dolphin program. It is significant in this instance that the same Japanese companies sent fleets to fish for salmon in the North Pacific, to fish for bigeye tuna in lATTC waters, and throughout the world's oceans to hunt for whales. Their official view was that marine mammals should be available for consumption like any other species, and should not be given special attention. Therefore Japan's support for the dolphin program's creation was r e lu c ta n t . A separate incident in the late 1970's also highlights the tone of the dolphin issue in U.S.-Japan relations at that time. Americans were aghast to learn that Japan had instituted a program to benefit its own coastal fishermen which provided a bounty of $12 per dolphin killed in Japanese fishing waters. Dolphin, which competed with the industry for fish, were dragged from the sea, clubbed, and knifed. One thousand dolphins were killed in the first year of the program. Americans found it hard to comprehend why the Japanese would want to rid their coastal waters of dolphins (which competed with fishermen for food) or how the Japanese could consider dolphin meat edible. Several members of Congress condemned Japan's policy toward dolphins, introducing resolutions in 1978 to condemn the Japanese practice. Despite different views about the need for dolphin protection, the U.S. was able to secure Japanese support for the LATTC program. The Japanese were hesitant to accept the tuna-dolphin program. In a parallel forum, the International Whaling Commission, beginning in 1976 Japan opposed U.S. efforts to include management of small cetaceans in the Commissions mandate. It is likely that Japan had more harmonious relations with the U.S. in the tuna commission, since it fished for bigeye in the Western Pacific (an area not under lATTC jurisdiction) and cooperated with U.S. scientists on aspects of tuna research that dovetailed with ’ ^^Interview, Dr. Jam es Joseph, lATTC, La Jolla, Ca., M arch 1995. 1 2 9 their ow n.'83 Another reason was that Japan's longline fisheries for bigeye did not fish "on dolphins" as the U.S. purse seine fishery for yellowfin did. In addition, the Japanese government argued that pressure from environmentalists in the U.S. would threaten their fishing operations in the Eastern Pacific if they refused to agree to the tuna-dolphin program. The Japanese government agreed to the creation of the tuna-dolphin program, which had little if any practical impact on Japanese tuna fishing in the area. The Commission attempted to finesse the dilemma inherent in developing the tuna industry while limiting the dolphin kill. The tuna-dolphin program, added to the lATTC in 1976, had the following goals: (1) to maintain a high level of tuna production; (2) to maintain dolphin stocks at or above levels that assure their survival in perpetuity; and (3) to make every reasonable effort to avoid the senseless killing of dolphins.* The tuna-dolphin program, combined with efforts by the U.S. Congress to enforce quotas on the U.S. fleet, proved to be very successful. From 1976 until the early 1980's, dolphin mortality in the fishery declined to one-third of the 1972- 76 level. *^5 Nevertheless, in the next decade, the issue grew more volatile and complex. Transformation of the Eastern Pacific Tuna Fishery in the 1980's In the 1980's, the U.S. Congress made a series of changes in the Marine Mammal Protection Act which transformed the fishery in the Eastern Pacific in rather unintended ways. Congress pursued the conflicting goals of reducing '^^Interview with Dr. Rick Deriso, lA TTC, La Jolla, Ca., April 1995. •84joseph, Jam es, "The Tuna-Dolphin Controversy in the Eastern Pacific Ocean: Biological, Economic and Political Impacts," Ocean D evelopm ent and International Law 25, 1 (January - March 1994): 5. •85Joseph (1994): 3. 130 dolphin mortality by the U.S. fleet while, at the same time, safeguarding the competitiveness of the U.S. tuna industry. In 1981, the law was amended to allow continued dolphin fishing, but required that the best available technology be used to limit the overall dolphin mortality in the fisheiy to 20,500 per year for the U .S. fleet, which numbered 81 v e s s e l s .T h r e e years later the Marine Mammal Protection Act was amended again, extending the 1981 limits but adding that, for foreign vessels fishing for dolphins "in excess of U.S. standards," import restrictions would be applied against the flag under which the vessels operated. In 1988 Congress passed a stricter set of amendments, sanctioning foreign vessels which did not comply with U.S. standards to limit dolphin killing.Although a GATT dispute-settlement panel found in 1991 that these amendments violated its rules against restrictions on trade, Mexico, which had requested the panel, did not seek a vote from the GATT council. The Marine Mammal Protection Act amendments passed in the 1980's were significant as they transformed the Eastern Pacific fishery and the world markets for tuna. Tuna-Dolphin in the 1990's: Aggressive American Enforcement (and Japanese Indifference) Both the fishery and the world market for tuna had shifted in the 1980's. The U.S. fleet, which had dominated the fishery for most of the century, left the area. In 1980, there were 101 U.S.-flag purse seiners in the Eastern Pacific; by 1986, only 39 remained, and by m id-1993, all but 8 U.S. vessels had left. During •^^Joseph (1994): 4. * ®^The 1988 amendments to the M M PA required that fishing nations would have to satisfy a two- part test to qualify as exporters o f Yellowfin to the U.S. First, they m ust provide documentary proof that they had a regulatory program comparable to the U.S. program in place. Second, the average rate o f incidental mortality in the fishery would have to be comparable to that o f the U .S. fleet, and by 1990 could not exceed 1.25 times the U.S. rate. Any nation failing to m eet these requirements would be subject to a primary embargo; within 90 days o f the im position o f the ban an embargo would be imposed on yellowfin and yellowfin products from any third country which continued to im port yellowfin from the embargoed nation. M ore than 20 nations have been embargoed since August 1990. As o f Septem ber 1993, 4 countries were still under primary embargo, M exico, Panama, Venezuela and Colom bia, and four third-country embargoes were in place (James Joseph, 1994: 7). that period, vessels from other states, especially from Latin America, increased substantially, from 63 in 1980 to 70 in 1976 and 89 in 1993. Latin American nations lost the U.S. market, which had been the largest in the world. These countries, particularly Mexico and Venezuela, developed their own internal markets for tuna. By the end of 1992 the U.S. market accounted for only 10% of the world consumption of tuna.'^s The embargoes, then, excluded the U.S. fleet'^ 9 from the Eastern Pacific and encouraged Latin American nations to fish in lATTC waters to supply their own growing domestic markets. While aggressive U.S. unilateral action was an important factor shaping the development of the Eastern Pacific fishery, multilateral cooperation in the LATTC forum was evolving more quietly. In the late 1980's, the number of observers covering the fleets in the Commission's jurisdiction increased, and the program to transfer technology was expanded. Dolphin mortality caused by the yellowfin fleet fell by 60% between 1986 and 1990.'®° In 1992, the lATTC provided a forum in which ten nations agreed to progressively reduce dolphin mortality in the fishery to levels approaching zero by setting annual limits. They also agreed to develop more ecologically sound methods of capturing large yellowfin not in association with dolphins, with the twin goals of eliminating dolphin mortality and ensuring maximum sustained catches of yellowfin. While the U.S. unilateral actions were a powerful force for change in the fishery, multilateral cooperation was providing a less controversial, more politically stable alternative. More specifically, the 1992 agreement would limit the mortality to less than 5,000 dolphins by 1999. The limit would be divided among vessels that intended to fish on dolphins. These vessels could apply for individual dolphin mortality ^Joseph (1994): 15. '®®In the early 1980's the U.S. fleet left the eastern Pacific when an El Nino event made fish harder to catch in the area; when the El Nino subsided, not all o f the fleet returned. '®°Joseph (1994): 7. 132 limits. If a vessel kept incidental dolphin kills lower than its limit, it continue to fish on dolphins throughout the year. Alternatively, if it exceeded its limit, it would be forced to stop fishing on dolphins. This arrangement provided an incentive for each fishing vessel to minimize dolphin kills, rather than to compete with each other to take the most yellowfin (and dolphins) given an overall quota for the fishery's incidental kill. Finally, the agreement calls for a Scientific Advisory Board of technical experts to assist the LATTC in matters regarding research to modify current purse seine technology aimed at reducing dolphin mortality and seeking alternative means of capturing yellowfin. Japan, still an important fishing nation in LATTC waters, had not been a key player in the tuna-dolphin issue. In a wider context, the issue of marine mammals had been a sore spot in U.S. and Japanese relations, and the same Japanese fishing companies were involved in the Eastern Pacific. These fishing companies did not have strong ties to the tuna industry in the U.S. Nor were Japanese tuna exports to the U.S. anything of significance; Japan was now a major importer of fisheries products, and the U.S. market was no longer the world's largest tuna consumer. The Japanese companies derived most of the profits in the Eastern Pacific from taking bigeye with deep longliners, destined for the profitable market for sashimi in Japan. Dolphin mortality was simply not an important issue for Japan. Nevertheless, the extension of the lATTC program to control dolphin fishing did require Japanese cooperation. It is significant that, at the same time, the International Whaling Commission was considering the Revised Management Procedure (RMP). If accepted, the RMP could result in resumed commercial harvest of minke whales’^*. The Japanese argued that marine mammals should *®*The IW C received its Scientific Comm ittee's recommendations on the RM P in 1992; however, it has not yet been put into place (formally included into the IW C schedule and made operational). The IW C listed several issues o f concern, including monitoring and enforcement, and other potential impacts on whale populations (collectively known as the Revised Management Scheme, or RM S) which must be satisfied before the moratorium is lifted. 133 not be given special treatment, and should be harvested like other resources. This was very different from the predominant view in the U.S., that marine mammals were intelligent creatures which should be given special protection. The Japanese resisted the effort to focus an lATTC agenda on protecting dolphins. To conclude, harvesting patterns in the Eastern Pacific required less explicit policy coordination between the U.S. and Japan. U.S. and Japanese flag vessels fished in different areas of the Pacific, there was little conflict over shares (which dominated negotiations in the INPFC and IWC). lATTC quotas did not restrict the Japanese tuna fleet in the way the INPFC Abstention Line or the IWC quotas did. The restrictions, which formed a dominant motive for FDI in the North Pacific salmon industry, did not elicit the same market restructuring in the lATTC. To the firms, the market incentives approximated a situation of harmony. On the dolphin issue partial cooperation was achieved. The nature of the cooperation was strongly influenced by the commercial nature of the fishery. Japan was reluctant to agree to add a tuna-dolphin program to the LATTC, but dropped its opposition in the face of U.S. pressure. Again, this decision required little if any limitations on Japanese vessels in the area. Scientific cooperation cannot be verified due to data limitations. The LATTC represents a case where little explicit cooperation between the U.S. and Japan was necessary. The same Japanese firms which fished for salmon in the North Pacific also operated the Japanese tuna fishery. The firms were higher in production value than their U.S. counterparts, and were concentrated and vertically integrated. However, the firms were not faced with unfavorable rule changes in the Eastern Pacific as they were in the North Pacific. Therefore, there was no need for the firms to use FDI, joint ventures, or other methods of restructuring to circumvent rule changes. In addition, U.S. tuna fishing differed in important ways from the Japanese industry, making it unlikely that the big 1 3 4 Japanese firms minimize transactions costs or realize other gains by acquiring them. Finally, the one example of explicit U.S.-Japanese cooperation in the lATTC, namely, the creation of the tuna-dolphin program, entailed few if any restraints on Japanese fishing. The lATTC is an intermediate case, illustrating how market conditions created a context of "harmony" and created an environment were U.S. - Japanese cooperation, albeit limited, could be achieved. 135 APPENDIX TUNA FISHING IN SELECTED AREAS lATTC Regulatory Area 140000 j ^ 1 2 0 0 0 0 -- ( / } o 100000 + 8 0 0 0 0 f C ^ 60000 4 = 40000 + 0 ) ^ 20000 + 0 Korea Mexico c o' ^i nco N CD cno i-C M co' ^m coN oo a> h - N M N M N N O O O O O O O O O O O O C O O O O O 00 O ) O ) O ) O ) O ) O ) O ) O ) O ) O ) O ) O ) O ) 0 R O ) O ) O) g o >- Japanese Yellowfin Harvest By Area 50000 T 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 ■ E. Indian O. □ W. Indian 0. NW Pacific ■ lATTC Area 136 5 Whaling The International Convention for the Regulation of W h a l i n g '^2 ^ a s signed in December 1946, creating the IWC. While the annual negotiations are multilateral, and currently engage thirty-six states, this analysis focuses on bilateral cooperation between the U.S. and J a p a n . The markets considered in this chapter provide a contrast to those that produced a high level of U.S.-Japanese cooperation in the INPFC in the same time frame. In the U.S., whaling was a tiny industry from 1950 until 1972, when it was shut down completely. Nonuse or existence value was more significant in the U.S., producing $41 million in direct revenue in 1993, whereas Japanese preferences were more strongly oriented toward consumptive use. The Japanese whaling business was a relatively smaller part of a concentrated and vertically integrated fishing industry until 1976. After 1986/87 Japanese commercial whaling ended in accordance with the IWC moratorium. There were no foreign direct investment or joint venture ties. U.S.-Japanese cooperation remained at a high level from the creation of the IWC until the mid- 1960's; thereafter, cooperation was at best partial until the 1980's and 1990's, when the U.S. and Japan were largely in conflict in the IWC. This chapter provides descriptive material on the markets and interstate cooperation. '^2gigned: D ecember 2, 1946; entered into force: Novem ber 1948; citations: 62 ST AT 1716, TIAS 1849, 4 Bevans 248, 161 UNTS 72; Protocol Amending 1946 Convention (TIAS 4228). (USITC Publication 2351, January 1991, p. 5-25). ' ^^The bilateral focus certainly suppresses important multilateral tactics, such as coalition- building ("like-minded" vs. whaling states). A multilateral study o f IW C negotiation is beyond the scope o f this study. However, the main hypotheses developed in this text are amendable to extension to a multilateral context, which is one possible avenue for future research. 137 Because whaling and attempts at international regulation precede the creation of the IWC by about two decades, this chapter reviews the earlier agreements first. It then briefly traces the evolution of whaling and whale watching in the two countries. A final section summarizes cooperation between the U.S. and Japan at the IWC. Comparing across industries, whaling in the U.S. and in Japan has been a relatively small enterprise. In the U.S., the tiny industry ended when the U .S. Marine Mammal Protection Act'^^ of 1972 prohibited killing of whales in the U .S. and restricted imports of whale meat. When quotas at the IWC began to seriously limit the Japanese factory ships' catches, there was no way to recoup losses through restructuring. The same firms were able to acquire U.S. salmon canning and processing operations into the firms to offset losses from INPFC rule changes. By the time Japanese whaling was curbed, the U.S. whaling operations had long since shut down. There was relatively more conflict between the two states in this IWC. It is especially important in this case to note that cooperation is not always a good thing. ' ^5 Cooperation in the management of a single species, particularly for commercial use, is not necessarily ecologically sound. Successful international cooperation among the world's largest whaling companies in the 1930's proved to be an organized ravaging of the world's populations of blue and fin whales, from which the populations have never recovered. The "Whaling Olympics" was triggered by regulation based on the "Blue Whale Unit (BWU),‘96" a system which * ^'^and the U.S. Endangered Species Act '^^K eohane (1988):380 writes: "international cooperation is not necessarily benign from an ethical standpoint. Rich countries can devise joint actions to extract resources from poor ones, predatory governments can form aggressive alliances, and privileged industries can induce their governments to protect them against competition from more efficient producers abroad. The analysis o f international cooperation should not be confused with its celebration." • 9 6 0 n e Blue W hale U nit was equal to one blue whale, two fin whales, two and one-half humpback whales or six sei whales. 138 has become notorious for its efficiency in destroying whale populations. While not explicitly focused on U.S.-Japanese cooperation, the following section is included as it illustrates the results of international cooperation motivated by consumptive use of whales. International Cooperation in the 1930's Modem commercial whaling and attempts at international cooperation to restrain it predate the IWC by at least twenty years. In September 1931, after nearly four years of negotiations at the League of Nations, the Geneva Convention was adopted by the major whaling nations to rein in some of the more destructive whaling practices. The treaty was to extend protection to the depleted stocks of right whales, as well as to lactating mothers, calves, and sexually immature whales. ' The agreement did not set limits on either the whaling season or on the number of whales taken. Since Britain, one of the major whaling nations at the time, delayed ratification for more than three years, cooperation under the Geneva Convention was tenuous from the outset. More in tune with Britain's economic philosophy at the time was to "let the market decide." Although whaling had nearly destroyed the right whale populations by the 1930s, in Britain especially many people believed that private companies would be the most qualified to regulate whaling. Unilever, then one of the world's largest whaling companies, spearheaded an effort to put limits on the whaling season and on the number killed. The goal was to raise the price of whale oil by limiting supply. With a glut of whale oil on the market, Unilever believed the whaling companies could gain by forming a cartel to limit the supply of oil. In '^^R egulations also specified that whale carcasses be fully used, that the whaler’ s bonus be fixed according to the size, species and oil yield o f the whale, not the number caught; that governments be required to license whalers; and that statistics be subm itted to the Com m ittee for Whale Statistics, located in Norway. Britain delayed ratifying the Geneva Convention until October 1934, undermining the agreement's effectiveness (Tonnessen and Johnsen, p. 399-400|. 3 9 1932 - 1937, whale catches were limited to two-thirds of the 1930-31 level. With industry leading the regulation, reducing overharvesting of whale stocks was incidental to the main objective of cooperation, namely, maximizing profits. This private agreement among the major whaling companies was signed in June 1932. It was the first ever to establish catch quotas. The agreement set limits in BWU's. Regulating whale catches in terms of BWU's created an incentive for whalers to kill the largest whales, or those producing the most oil in proportion to their size. This system of regulation is significant not only because it put in place a pattern of consumption of whales which continued until the mid-1960's, but also because it became the method by which quotas were set under the Whaling Convention until 1972. The period in which this system of industry regulation of whaling was used (1930's - 1960's) has become known as the "Whaling Olympics." 1 99 The 1932 agreement, although intended to limit kills, was in effect an cooperative effort to target blue whales. Whalers found the BWU system to be in their short-term interest, and killed 422 blue whale cows for every 100 bulls in 1932-33.200 From 1933 to 1940, blue and fin whales were still harvested at a much higher rate than the smaller species. The elimination of the largest whales was systematic. The estimated size of the original stock of blue whales in the Antarctic was roughly 150,000. According to the IWC, this population size would have sustained an approximate harvest of only 6,000 per year.^oi Jn the 1931/32 season, the annual harvest of blue whales approached 30,000; throughout the decade of the 1930's, reported annual kills of ’98xonnessen and Johnsen, The History o f M odem W haling, Berkeley and Los Angeles: University o f California Press, 1982, p. 406. '9 9 iw C , 10th Report, 5-6, 24 (1959). More recently, see Ray Gambell, cited in Friedheim (1994): 7. 209xonnessen and Johnsen (1982): 403. 201 IW C, 14th Report 40 ( 1964). Cited in Scarff ( 1977). 140 blue whales were between 15,000 and 2 0 ,0 0 0 .2 0 2 Under these conditions, the population rapidly dropped to about 40,000.203 By the late 1930's, with blue whale populations nearly annihilated, whalers turned their attention to the next most profitable species, the fin whales. Whale Kill by Species Under the BWU System £ n .c 5 <0 JO E 3 z 30000-,- 2 5 0 0 0 - 2 0 0 0 0 - 1 5 0 0 0 - 1 0 0 0 0 - 5 0 0 0 0 % C M C O '^ in C O t^ C O O T O T - C V l cococ<3coco<r)c<3cO't'<a-'i- 0) 0) 0) 0) 0) 0) 0) 0) 0) 010 ) ■ blue O fin M humpback SB sei HI sperm Source: McHugh, "The Whale Problem, " pp. 306-307. A third attempt at international cooperation, led by Britain and Norway, was a complete fiasco. In 1937, in an effort to bring in the whaling countries which had resisted earlier agreements (Japan, the United States, Germany, and others), an international conference convened in London. Once again, the primary goal was to restrict catches in order to protect whales stocks; this failed, however, and 11,519 more baleen whales and 683,815 more barrels of oil were produced in the next season. The attempt to restrict the number of catcher boats also failed, and the number of whale catchers per floating factory increased. The number of blue 202M cHugh (1964): 306-307. 2()3iw C, 14th Report 40 (1964); Scarff (1977): 364; Tonnessen and Johnson (1982): 614. 1 4 1 whales killed in this period so greatly exceeded the maximum sustainable level that the populations have never recovered.^o^ In short, international cooperation among whaling nations before World War n furthered the interests of the industry. Whaling was not yet a bilateral issue between the U.S. and Japan. At this time, Japan was just beginning to develop its pelagic whaling industry, which proved ferociously competitive and grew quickly. By contrast, American whaling had a far lower return on investment than other emerging industries, and had surrendered its world dominance to Britain and Norway by the end of the nineteenth century. Not until 1950's did a new commercial use, whale watching, develop in the U.S. The following sections detail the development of the whaling and whale watching industries in the U .S. and Japan. The dissimilarity of the commercial enterprises has generated political support in each country for management goals that have proved to be largely incompatible. Cooperation between the U.S. and Japan at the IWC has been difficult to achieve and partial at best. The Whaling Industry in Japan The Japanese began whaling on the high seas in the 1930's. After three seasons, Japanese pelagic whaling in the Antarctic had risen to 11.6 percent of the world total.205 Compared to the British and the Norwegians, the Japanese had a significant competitive advantage. Japanese factory ships paid wage rates which were approximately half of those paid to the Norwegian and British whaling crews. Japan also had a domestic market for whale meat, which in some seasons was more lucrative than the market for whale oil.206 Japan resisted joining a private industry quota agreement in 1932, issuing a statement alleging that Britain and Norway ^^'^Tonnessen and Johnsen (1982): 448-453. ^^^Tonnessen and Johnsen (1982): 420. ^^^Tonnessen and Johnsen (1982): 566. 142 wanted to stop Japanese whaling in order to secure their own dominant positions.207 After World War II, the U.S. hosted a conference in Washington, D.C., where the major whaling nations signed the Whaling Convention in 1946; almost simultaneously, the U.S. War Department authorized General Mac Arthur to relaunch the Japanese whaling operations which had virtually stopped between 1942 and 1947. In its proposal to the U.S. to renew whaling in May 1946, Japan cited "a desperate attempt to rescue the country from a serious shortage of food."208 The Japanese whaling industry developed three distinct types of commercial operations. The pelagic, or factory ship, whaling operations were conducted in the Antarctic and in the North Pacific. In the Antarctic, the dominant whaling companies were part of the Taiyo Gyogyo, Nippon Suisan, and Kyokuyo Gyogyo groups. In the North Japanese Pelagic and Large-Type Coastal Whaling (1932 - 41) 2 0 0 - r 1 5 0 -- 1 0 0 - - 5 0 • • Q Coastal I Pelagic Source: Fisheries Agency o f Japan ^^^Tonnessen and Johnsen (1982): 421. ^^^Tonnessen and Johnsen (1982): 423. 143 Pacific, the operations were conducted by the Taiyo Nihon Hogei, Nissui Nitto Hogei, and Kyokuyo Hokuyo Hogei groups. Large type coastal whaling, also known as landbased whaling, was conducted by the Taiyo, Missui, Nitto, Nihon and Sanyo companies. About ten small companies focused on small type coastal whaling, also landbased, but limited to small whaling boats of less than fifty tons. Three major companies dominated Japanese whaling: Taiyo Gyogyo, Nippon Suisan, and Kyo Kuyo. 209 As illustrated below, the coastal whaling operations were small and relatively constant source of meat and oil. The Japanese high seas whaling operations, by contrast, grew explosively in the 1950's, particularly in the Antarctic. Whaling served two important functions for Japan's postwar economy. First, whale meat was consumed domestically, providing an inexpensive substitute for beef and chicken. Japanese whale meat production increased from roughly 25,000 in 1950 to 100,000 tons in 1959; Norway, Iceland, Spain, and other countries shipped in an additional 20,000 to 25,000 tons. One-third of Japanese meat consumption in 1960 was from whales.2>o Second, Japan exported fin oil and sperm oil, which combined with the exports of other fisheries products, earned much-needed foreign exchange for the Japanese economy. As a rapidly developing industrial economy, Japan used its whaling industry, which was organized as an integral part of its high seas fishing operation, to fuel its economic growth. Industry Dovrnsizing and Pirate Whaling 209Hirasawa, "The W haling Industry in Japan's Economy," in The Whaling Issue in U.S.-Japan /îe/ar/ons, eds. Schmidhauser and Totten, (Boulder, Colorado: W estview Press, 1978): 88. 2 1 (^Fisheries Agency o f Japan, "Products o f Japanese W haling" (photocopy). Obtained from National M arine Fisheries Service, La Jolla, Ca. 144 But the fuel had run dry by the mid 1960's, as the IWC began to reign in its quotas. From a its record level of production in 1965, the IWC rules curbed Japanese pelagic whaling significantly. The Japanese whaling industry was being shut down. By the mid-1970's, Japanese high seas whaling produced only about 30 percent of its 1965 l e v e l ' Between 1971 and 1975, whale meat sales by Nippon Suisan fell 60 percent. Taiyo Gyogyo's sales of whale meat fell by about 20 percent during this period, while Kyokuyo's fell by about 35 percent.212 In the span of ten years, whaling ceased to be a commercially viable operation for the major Japanese fishing companies. However, at the same time, the Japanese were setting up pirate whaling operations in South America to serve their domestic market for whale meat. Greenpeace reports, as well as IWC records from 1967 [IWC, 17th Report 18 (1967)] report that Japan had set up whaling stations in Chile, from which 690 blue whales were killed between 1964 and 1968. Blue whales were granted full protection by the IWC in 1965. Scarff (1977) also notes that Chile and Peru killed about 450 blue whales in 1966. 2 • ' Fisheries Agency o f Japan, "Production o f Pelagic W haling, LTCW & STCW ." (photocopy). 2l2H irasaw a (1978), pp. 90 - 92. 145 Production of Japanese Whaling Operations (1946 - 65) 400 T 350 -- 300 -■ 250 -- (0 c o o o o 200 - - 150 -- 100 - - 50 -- CO 00 o OJ Tf Tf lo in O) O) O) O) O) O C M ^ CO CO C D 0) 0) 0) # ST Coastal n LT Coastal I Pelagic Source; Fisheries Agency o f Japan, "Production o f Pelagic Whaling, LTC W & STC W , photocopy obtained from S. IV . Fisheries Science Center, La Jolla, California. In 1976, the three companies formed a joint whaling company, Nippon Kyodo Hogei Kaisa, Ltd., (Japan Joint Whaling Company) thereby separating the revenue- losing whaling operations from their other fishing e n te r p r is e s .^ ^'^H irasaw a (1978), p. 88; M arine Mammal Commission Annual Report (1979): 148. 1 4 6 The whaling industry continued in Japan in this reduced state for about ten years. The combined production of the pelagic, large type and small type coastal whaling operations in the late 1970's and early 1980's was about 15 percent of its level a decade earlier. Nevertheless, the Japanese were highly resistant to shutting down this remaining part of their operations. In 1988, after intense pressure from the U.S. in bilateral negotiations, as well as a largely symbolic cancellation of the Japanese fishing allocation in the U.S. EEZ for sea snails and Pacific whiting^''*, Japan ended its pelagic and large type whaling operations. In principle, Japanese commercial whaling has ended in compliance with the IWC moratorium. Since 1988, Japanese whaling has been limited to approximately 330 whales taken each year under a scientific permit issued by the Japanese government. Lethal taking of whales for scientific purposes is permitted in the IWC Article 8; however, the Scientific Committee of the IWC has urged the Japanese to discontinue the scientific program until uncertainties in the research program have been resolved. The Japanese scientists disagree with the conclusion of the Scientific Committee, however, and have proposed an increase in the scientific research kill for the 1995-96 season. sanctions were the strongest possible under the M agnuson Fishery Conservation and M anagement Act, which requires the Secretary o f Commerce to certify to the President countries which "diminish the effectiveness" of fishery agreements. Japanese Whaling (1990 - 94) 2 0 0 0 - r 1 5 0 0 " (0 5 1000 " 5 0 0 " □ STCW Research Take Source: Fisheries Agency o f Japan, "Annual Changes o f Production o f Whale M eat and the Products, " (photocopy) Shortly after their commercial whaling ended, a new, nonconsumptive use for whales began to appeal to many Japanese people. The first whale watching boat left Tokyo in April 1988, destined for the Ogasawara Islands, 1,000 kms. south of Tokyo. Forty seven tourists under the guidance of the Japanese cartoonist Kyusoku Iwamoto embarked on a four-day expedition to watch humpback whales, accompanied by TV and newspaper reporters. From there the practice spread; often it was subsidized by government funds for revitalization of small communities. Fishing villages which had suffered economic dislo catio n ^sin ce the I970's welcomed this new source of revenue.2i6 Whale watching had expanded to seven areas by 1993, bringing in an estimated ¥100 million in direct revenue. 217 The whale watching business has been growing much faster in Japan than in other areas, such as the eastern U.S., where it has been a mature industry for at 2 ’^According to the Japanese Fisheries Agency, em ployment in the fisheries sector fell from 790,000 in 1952 to 342,000 in 1992. ^l^H oyt, Whales and Dolphins: Alive and Being Watched Japanese-Style (Bath, U .K., W hale and Dolphin Conservation Society, 1993): 3. 2*^ IW C report on Japanese W hale W atching, IW C/46/W W 1, 1993. 148 least a decade. The boats used tend to be small sized fishing boats, and occasionally ferry boats and cruise ships. The main target species are humpback and Bryde’s whales near the coast, as well as sperm, pilot and minke whales. Dali's porpoise. Pacific white-sided and bottlenose dolphins are also popular.^is Despite the industry's potential to generate revenue, the Japanese have opposed the inclusion of whale watching in the IWC's mandate^'^. The U.S. Industry Although the U.S. has recently used its voice in the IWC to restrain Japanese whaling, a century and a half earlier it was American whalers that plied the world's oceans to produce whale oil and baleen for their emerging industrial economy. The heyday of American whaling was the early nineteenth century, when 80 percent of the world's catch was taken by American ships. The widespread substitution of petroleum for whale oil after 1859, combined with the destruction of most of the whaling fleet in the Civil War, caused the collapse of the American whaling industry.220 By the early twentieth century, little remained. Aboriginal whaling continued in Alaska^^i. The Eskimos used their traditional methods to kill bowhead and occasionally gray whales. Three commercial stations remained on the Pacific coast, plus a few land-based operations. In Richmond, California, the Del Monte Fishing Company operated a whaling station at Point San Pablo. The Golden Gate Fishing Company opened a whaling station in the same area in 1958. 2'8iWC/46AVW1. ^l^A pparently the reason is that they believe IW C members who oppose consum ptive use of whales may attem pt to substitute nonconsum ptive use for the IW C's mandate o f "conservation and rational use o f whale resources and the orderly development o f the w haling industry." (IWC/46/WW1). 220M cHugh, "The Role and History o f the International W haling Com m ission," in The Whale Problem, ed. W illiam E. Schevill (Cambridge: Harvard University Press, 1974): 321. 22 • at St. Lawrence Island (Savoonga and Gambell), W ales, Little Diomede, Kivalina, Point Hope, W ainwright, Barrow, Nuiqsut, and Kaktovik. 149 Bioproducts, Inc., of Warrenton, Oregon, obtained a license for whaling in 1961, but operated only one vessel, killing 4 whales in 1961 and 1 in 1962. The U.S. catch was small, as was the demand for whale products. The U.S. stations targeted baleen whales (blue, fin, sei, and humpback) as well as a smaller number of toothed whales (sperm and giant bottlenose).222 Commercial uses varied. Most whale meat was sold for pet food, much of it to Kal Kan.223 Some of the meat from sperm whales was used on fur farms for mink feed.224 Whale oil was used in poultry feed and in paint, while sperm oil had certain specialized industrial uses. Whale stocks became increasingly depleted by the early 1960's, increasing production costs at the same time the price of whale oil was falling225. By 1962, commercial whaling in the U.S. was a tiny operation, with production less than 1 percent of Japan's.226 Ten years later, with the passage of the Marine Mammal Protection Act22?^ it closed down altogether. 222Rice, "Pacific Coast W haling and W hale Research," Paper Presented at the Twenty-Eighth North American Wildlife Conference, (1960): 327-328. 223interview with Robert Brownell, S.W. Fisheries Science Center, La Jolla, Ca., A pril 1995. 224Rice, Dale W., "Pacific Coast W haling and W hale Research," paper presented at the Twenty- Eighth North American Wildlife Conference (I960): 323. Photocopy obtained from S.W . Fisheries Science Center, La Jolla, Ca. 225xonnessen and Johnsen (1982): 575. 226in 1962 the Japanese produced 228,200 tons o f whale meat, compared to U.S. production of 1,952 tons. Japanese whalers produced 37,700 tons o f sperm oil compared to the U.S. whalers' 241 tons. The total value o f Japanese production o f whale products in 1962 was ¥26.8 trillion or about $74 m illion; in the U.S. production was about $700,000. (Fisheries Agency o f Japan; Rice, 1960, p. 330; 1962 exchange rate was ¥358 per dollar, from IM F, International Financial Statistics). 227 and the Endangered Species Act 1 5 0 Production of U.S. Whaling Industry (1956 62) 2 5 0 0 - t - 2 0 0 0 " 1 5 0 0 " 1 0 0 0 " ■ meat □ meal m oil m sperm oil Production in metric tons. From Rice (1960), p. 330. Commercial Value of U.S. Whaling (1956 1962) (0 T3 C (S ( / > 3 O 1 0 0 0 - r 800 sperm oil 6 0 0 " 4 0 0 " LJ meal 2 0 0 " Nonconsumptive use of whales in the U.S. is far more profitable than whaling has been this century. Beginning in the 1955, the commercial value of whale watching developed into a significant industry, particularly in New England and along the west coast. In the east, whale watching began in Provincetown, Massachusetts, in 1975, and spread to other communities along Massachusetts 151 B ay .228 Whalewatching concentrates on Stellwagen Bank, about 12 miles southeast of Gloucester extending to 6 miles north of Cape Cod, 21 miles in length. Jeffrey's Ledge, 5 miles northeast of Cape Ann, extending to Southern Maine, provides a second prime location. Tourists watch humpback, fin and minke whales, as well as white-sided dolphins and an occasional northern right whale. While some scientists are concerned about possible negative impacts of human activities on whales, many others combine research activities such as photo identification with recreational whale watching tours.229 In the northeast, whale watching generated an estimated $22.5 million in direct revenue in 1993, and $60 million in indirect income (hotel, transportation, food, clothing and souvenirs). Smaller whale watching industries have grown up around the country. Whale watching is also popular in the Pacific Northwest, where coastal gray whales are seen in the spring, minke and killer whales, harbor porpoise and occasionally humpback whales in the summer. Alaska also has a small industry, with boats observing humpback, killer, minke, gray and white whales, as well as harbor and Dali's porpoise. Finally, California also maintains a small whale watching industry, which began in 1955 with observation of the gray whale migration, and extending to the humpback whale, sperm and pilot whales, and dolphins.23° The whale watching industry in the U.S. generated an estimated $41 million in direct income in 1994, and is believed to be a mature industry.23 • 228 Hoyt, Whale Watching and the Comm unity; The Way Fonvard, Bath, U .K., W hale and D olphin Conservation Society (1994): 3. 229geach and Weinrich (85). 230NM FS, p. 13. 231 Indirect Revenues in 1994 were estimated to be $214 million. Hoyt, The Worldwide Value and Extent o f Whale Watching 1995, Bath, U.K.: W hale and D olphin Conservation Society, May 1995. (IW C/47/W W 2). Data on whale watching was first submitted to the 45th Annual Meeting in Kyoto, Japan, in 1993 (IW C45/21). ^ ^ ^ Cooperation Between the U.S. and Japan In the early years, states cooperated in allocating quotas that did little to restrict the industry. The 1960's and 1970's rank as partial cooperation at best. Again, while the reduction in IWC quotas was not a bilateral decision, the U .S. supported increased protection while Japan opposed it. Bilateral talks did occur with a multilateral context. Japan cooperated with the quotas by reducing its takes of the largest whales (as indicated in the graphs above), but there were significant incidences of cheating, as in the late 1960's when Japan imported significant amounts of whale meat from its Chilean subsidiary. The Environmental Investigative Network, an NGO that tracks illegal trade in protected species, reported in 1994 that such illegal capture and trade in whale meat continued throughout the next two decades up to the present.23 2 Japan did change its policy in response to pressure from the U.S. and other anti-whaling states, but there is sufficient evidence of cheating to qualify as "partial" cooperation. U.S./Japanese Conflicts Over Whaling, 1972 - 95 In the 1970's, environmentalism became a major political movement in the U.S. Several environmental groups led an embargo on Japanese products in 1974. Resolutions were introduced in Congress supporting the embargo and greater protection for whales. Two new laws, the Pelly Amendment to the Fisherman's Protective Act (1967) and the Magnuson Fishery Conservation and Management Act (1976) gave the U.S. negotiators the ability to impose trade sanctions on whaling countries which "diminished the effectiveness" of the IWC. In Japan, by contrast, whaling continued to be considered part of the fishing industry. The largest fishing companies in Japan, Nippon Suisan Kaisha, Ltd. and 232Envlronmental Investigative Network, "Japanese Trade in W hale Meat" (video), 1994. Copy obtained from S.W . Fisheries Science Center, La Jolla, California. 1 5 3 Taiyo Gyogyo operated the pelagic whaling operations in the Antarctic and the North Pacific until 1976. The Fisheries Agency of Japan was responsible for regulating pelagic whaling until operations ceased in 1988. The current Japanese Commissioner to the IWC, recently retired from the Fisheries Agency of Japan, simultaneously holds a position as the Vice President of the Japan Fisheries Association, the leading industry group. Many Japanese people consider whales to be one of many sources of food to be harvested from the world's oceans. Since the early 1960's, an awareness that many stocks of whales were severely overexploited had spread from the whalers and the IWC's cetologists to a broader segment of the public. By the 1970's, a strong environmental movement had developed in the U.S. and many European countries, which was reflected at the IWC and the U.N. Conference on the Human Environment held in Stockholm, Sweden in 1972. At Stockholm, a resolution was unanimously adopted calling for a 10-year moratorium on commercial whaling. After the conclusion of the Stockholm Conference, Maurice Strong, the Secretary Generap33, flew to the IWC meeting and presented the resolution personally.334 An American delegate reported that the Japanese "'were visibly upset by the pro-conservation climate of the (1972) meeting. Throughout the meeting the Soviet and Japanese representatives reiterated the threat that unless talk of moratorium or significant quota reductions ceased...the IWC might be wrecked."335 This marked the beginning of a cleavage within the IWC and its Scientific Committee, and in particular between U.S. and Japanese negotiators and scientists, over the scope and quality of protection to be extended to the whale stocks. 333of the U.N. Conference on the Human Environment 234 IW C 24th Report 23-24 (1974); Scarff (1977): 367; Hirasawa (1978): 82; M 'G onigle (1980): 141 ; Tonnessen and Johnsen (1982): 674. 235scarff (1977): 368. 154 U.S. set a collision course against Japan in the IWC when it began to aggressively pursue an agenda 1971 to end commercial whaling. Thereafter, the U.S. submitted proposals to the IWC calling for a moratorium, and each year Japan and other whaling nations o p p o s e d .2 3 6 i n 1973, the IWC agreed to phase out the killing of fin whales in the Antarctic by 1976, to establish separate quotas for male and female sperm whales, and to reduce the quota on sei whales. Japan objected to each of these m e a s u r e s .^ ^ 7 At the 1977 meeting, after a new sonar technique was used to calculate populations of minke and sperm whales, the quotas were cut by 36 percent and 58 percent, respectively. Japanese and U.S. scientists disagreed over the new data, with the Japanese demanding more time for analysis, while the U.S. refused, insisting that any new analysis would produce the same r e c o m m e n d a tio n .2 3 8 Conflict became persistent feature of the bilateral relationship in the IWC and its Scientific Committee. Political Conflict and Divisions over Scientific Research Whaling By the early 1980's a majority in the IWC opposed commercial whaling, with Japan and a small number of whaling nations in the minority. At the IW C's 1982 meeting, five resolutions were introduced to ban commercial whaling, and as usual, the U.S. had sponsored one and the Japanese vehemently opposed. This time, the IWC achieved the necessary three-fourths majority, and the moratorium passed, to become effective in 1985 for pelagic whaling and 1986 for coastal whaling. Japan filed an objection to the moratorium^39^ and proposed to continue whaling under the IWC loophole for scientific whaling. Conflict ensued. 236xonnessen and Johnsen (1982): 674; M arine M ammal Com m ission Annual Reports to Congress, various years and pages. ^^^M 'G onigle, "The 'Economizing' of Ecology; W hy Big, Rare W hales Still D ie, " Ecology Law Quarterly 9, (1980): 143. 238M'Gonigle (1980): 153. 23®The governments o f Japan, Norway, Peru, and the U SSR filed objections to the moratorium within the Convention's tim e frame. For all other contracting governm ents the m w atorium At issue was the extent to which Japanese research whaling had scientific merit. At the annual meeting in June 1987, Japan submitted a research proposal to take 825 minke whales and 25 sperm whales in the Antarctic. The Scientific Committee reviewed the proposal, finding "uncertainties" which required further analysis. The IWC adopted a resolution calling on Japan to refrain from issuing a special permit for whaling until the Scientific Committee had resolved these uncertainties. On June 26, in protest of the IWC's "constant vote against Japan," Commissioner Tatsuo Saito announced his resignation^'’^. The Japanese scientists did not share the Scientific Committee's skepticism about the value of the research. The Japanese argued that they could resume whaling under a special permit for scientific research and still be in compliance with IWC rules. In response to the Scientific Committee's criticism, the Japanese scientists submitted a revised research proposal to the IWC. Before the Scientific Committee had reviewed the new plan, Japan commenced its whaling operation in December 1987. The Japanese factory ship Nisshin Maru III took 273 minke whales from the Antarctic region in 1987-88.2'” Scientists from Japan's Institute for Cetacean Research gathered data on the age and other characteristics of the whales, then the whalers flensed the carcasses and distributed the meat^'’^ to restaurants and schools. Whale meat had become an expensive delicacy in J a p a n .2 '’3 became effective on February 3, 1983. Peru withdrew its objection by m id-1983. Japan withdrew its objection to comm ercial pelagic whaling effective May 1987, commercial coastal whaling for minke and Bryde's whales starting O ctober 1987 and April 1988 for coastal sperm whaling. Japan submitted a research proposal at the June 1987 IW C meeting for minke and sperm whales in the Antarctic, and has continued to take approximately 300 minke whales per year under this loophole. 2'” ’r/(e New York Times, Saturday June 27, 1987. 2'” IW C Annual Report 39 (1989): 235; M arine M ammal Com m ission, Annual Report to Congress (1988): 101. 2'’2According to Joji M orishita, Fisheries Attache at the Japanese Embassy in W ashington, D C., the government-sponsored research program does not profit from the whaling operation. Mr. Morishita stated that the revenues expended on the research whaling operation exceed the income from the sale o f whale meat, and that the Japanese government loses money each year on the whaling operation. He emphasized that the operation was not comm ercial in nature. 2'’3 A dish o f sliced minke whale, between 1/4 and 1/3 lb., would sell for $20 to $30 in Tokyo at a 15 6 The Japanese action was widely criticized in the U.S. in other nonwhaling countries. Environmental groups alleged that Japan was using the scientific loophole to keep its whaling industry operating until the moratorium was lifted.244 The New York Times expressed many Americans' disapproval of Japan's research whaling: "Japan's whaling fleet, reconfigured as a "research expedition," steams toward the Antarctic. In defiance of the International Whaling Commission, Japan plans to kill 300 minkes in the name of science. The meat would be sold, as usual, for profit. The U.S., traditionally the conscience of the treaty that protects whales, can have only one reaction to this brazenness: s a n c tio n s ." ^ 4 5 In February 1988, the Secretary of Commerce wrote to the President, certifying that the Japanese were conducting whaling operations in the Antarctic which "diminished the effectiveness" of the IWC. The Commerce Secretary cited the following as the basis for his decision: (1) the resolution adopted by the IWC calling for Japan to refrain from issuing permits until the scientific uncertainties were resolved; (2) the December 1987 Scientific Committee meeting report which indicated that the revised Japanese research proposal did not succeed in resolving the Committee's uncertainties; and (3) Japan's issuance of the special permit to take whales for scientific research, and reports that Japan was taking whales under the scientific permit. ^46 Under U.S. law, it was up to the President to decide whether and how to respond to the Commerce Secretary's recommendation. medium priced restaurant. ( Japanese Embassy estimate, M ay 1993). This is matches an estimate by the Southw est Fisheries Science Center in La Jolla, California, which estim ates that whale m eat sells for $90 per pound in Tokyo ( January 1995). 244p)r_ Arne Schlotz, IW C representative for the World Wide Fund For Nature, cited in The Christian Science Monitor, (June 10, 1988): 12. 245T/,e yvetv York Times editorial, (January 3, 1988): E 14 (L). ^46M arine Mammal Commission, Annual Report to Congress (1988): 102. In this case, the U.S. chose to act. In April 1988, the President directed the Secretary of State to withhold the Japanese fishery allocation in the U.S. EEZ. That year, the Japanese had requested 3,000 metric tons of sea snails and 5,000 metric tons of Pacific whiting.^^v Environmentalists criticized the Administration, claiming that the sanctions were a mere slap on the wrist for Japan, and that the President should have also cut off Japanese exports of fisheries products to the U.S. Nevertheless, the action had the effect of official, if merely symbolic, U .S. condemnation of Japan's research whaling. In subsequent years, the Japanese continued to take whales under the exception for scientific research. The Scientific Committee continued to express uncertainty about the scientific value of the research take, and the IWC continued to adopt resolutions asking Japan to reconsider issuing the scientific permits. Since 1988, the U.S. has not imposed sanctions on Japan for its scientific whaling, but U.S. scientists have continued to take issue with the Japanese research program. By the early 1990's, the U.S. and Japanese delegations to the IWC were still at loggerheads. At issue was the extent to which best available scientific data would support a lifting of the m o r a to r iu m .2 4 8 Japan and the other whaling nations argued that certain populations of minke whales were sufficiently abundant to support limited commercial harvests. At the 1992 meeting, the Scientific Committee submitted its Revised Management Procedure (RMP) to the IWC, providing estimates for what it believed were sustainable harvests of Antarctic minke whales. The number of minke whales in the Antarctic, believed to be approximately 750,000, was not subject to serious dispute. The political climate sanctions were the strongest possible under the Packwood M agnuson Amendment to M agnuson Fishery Conservation and Management Act. No action was taken under the Felly Amendment. M arine M ammal Commission, Annual Report to Congress (1988): 103. ^'^^The schedule amendment creating the moratorium included the following language: 10 (e): "This provision will be kept under review, based on the best scientific advice, and by 1990 at the latest the Comm ission will undertake a comprehensive assessment o f the effects o f this decision on whale stocks and consider modification o f this provision and the establishm ent o f other catch lim its." 158 at the IWC was not conducive to a resumption of commercial whaling, and the moratorium remained in place. Arguments against lifting the moratorium were not directed at the Scientific Committee's algorithm or its population estimates. Rather, the U.S. representatives maintained that monitoring and enforcement procedures were not sufficient to ensure that renewed commercial whaling could be conducted at ecologically sustainable levels^^o At the 1994 meeting, the IWC accepted the RMP for setting catch limits. However, the Commission was not able to agree on a system for monitoring and enforcing compliance with the catch limits. The IWC produced a list of issues, known as the Revised Management Scheme (RMS), still to be resolved before commercial whaling could resume. The RMS included minimum standards for data, guidelines for conducting population surveys, inspection and observation, some insurance that catches were within RMP limits, and formal incorporation of these issues into the IWC regulations. In theory, if the IWC could arrive at some resolution of these issues, the U.S. and Japan would both be able to endorse the concept of sustainable use based on scientific principles. ^‘ ^®Many environmental groups, such as the W hale and Dolphin Conservation Society, argued that since nonconsumptive use o f whales (i.e., whale watching) had the potential to generate more revenue than consum ptive use, the IW C should consider nonuse values in their overall whale management program. Other arguments against resuming commercial whaling centered around other human activities which may affect whale populations, such as pollution and depletion o f the stratospheric ozone layer. In short, many groups argued that the management principle upon which IW C management had relied in the past. M aximum Sustainable Yield, was outdated and if reinstated would result in the sort o f overexploitation seen in earlier decades. (Marine Mammal Comm ission, Annual Report to Congress (1991): 118.) Other Areas of Conflict Small Cetaceans The issue of whether to include the management of dolphins and porpoises in the IWC's activities has been contentious since the late 1970's. Many human activities, including direct harvesting of small cetaceans for food and incidental capture by fishing boats, have threatened many dolphin populations. The U.S. has argued that the IWC has the authority to limit dolphin catches. Japan has strongly opposed the extension of IWC management to small c e ta c e a n s .2 5 0 Small-Type Coastal Whaling Beginning in 1986, Japan has argued that whaling by its small coastal communities should be considered comparable to aboriginal subsistence whaling, which the IWC permits. Alaska Eskimos have been allowed a quota of bowhead whales, an aboriginals in Greenland have been allowed to take fin and minke w hales.25 • Japan's request has been viewed with jaded eyes by many American observers. In February 1988 the L A . Times published this somewhat sarcastic account: "'I don't think I'm much different from an Eskimo," says the 59-year old whaler, who operates two 63- foot chase boats from the port of Wada on Chiba Peninsula near Tokyo. 'Our standard of living may not be the same, but our cultures and philosophies are very similar.' Emulating Eskimos may seem like a desperate subterfuge, but Shoji's interest in anthropology show the extent to which the Japanese whaling industry is hunkering down to s u r v iv e ." 2 5 2 ^^^M arine Mammal Commission, Annual Report to Congress (1994): 142. 'M arine M am mal Commission, Annual Report to Congress (1994): 138. ^^^"Japan Tries New Tactics to Keep W haling Industry," The Los A ngeles Times, February 22, 1988. 160 Japan has suggested that its position is similar to the U.S. position on aboriginal whaling. In negotiations with the U.S. delegation, the Japanese Commissioner to the IWC has proposed that the U.S. support Japan's request for small type coastal whaling because Japan has not opposed the U.S. request on behalf of the Alaskans to kill bowheads.253 The U.S. has refused to accommodate the Japanese request, arguing that small type coastal whaling is commercial in nature, not restricted to harvest for aboriginal subsistence. Southern Ocean Sanctuary At the IWC's 1992 meeting, France proposed that the Commission designate all waters south of 40° Latitude as a sanctuary where commercial whaling would be prohibited. The sanctuary proposal was high on the agenda at the 1993 meeting in Kyoto, Japan, and achieved the necessary three-fourths vote of the Committee at the 1994 meeting in Puerto Vallarta, Mexico. Japan was the only country to vote against it. In August 1994, Japan filed a formal objection to the Antarctic Sanctuary, and despite pressure from the U.S. to withdraw its objection, Japan continued its opposition. The Japanese Commissioner argued that the Antarctic Sanctuary lacks scientific justification because all species of whales are protected, despite varying levels of abundance in their populations. The U.S. supported the sanctuary proposal because of its general opposition to commercial whaling, and its conviction that monitoring whaling in the Southern Ocean would be extremely difficult. Cultural Clash 253unclassified Telegram s, Department o f Com m erce, M ay 13, 1994, obtained from S.W . Fisheries Science Center, La Jolla, California, and Department o f State, June 20, 1994. 161 Whaling has occasionally produced diplomatic firestorms. The Japanese Commissioner to the IWC has argued that the Japanese fish-eating culture is under attack by the western meat-eating culture, and that the environmentalist movement is motivated at least in part by racism directed at Japan.254 At the IWC's 1992 meeting in Kyoto, Japan, a group of environmentalists confronted the Japanese delegation, dumping buckets of red paint on them to symbolize the blood of slaughtered whales. Although a small environmentalist movement in Japan opposes whaling255^ the views of the fishing industry and the Japanese government are very closely aligned, and any antiwhaling sentiments which may be held by Japanese representatives to the IWC^^ô have been muted. Japan has continued to resist restrictions; the U.S., with organized environmental organizations and without a domestic whaling industry, has opposed whaling. There appears to be little or no range of agreement. Since the Stockholm Conference, the IWC has become increasingly opposed to commercial whaling. The U.S. has consistently blocked Japan's efforts to continue whaling. Japan, on the other hand, has opposed restrictions on its whaling industry. Without the commercial ties that linked the fishing industries in the North Pacific, and generally complementary fishing patterns in the Eastern Pacific, Japan has had nothing to gain from cooperating with the U.S. in the IWC. The profound differences stem, in large measure, from the different consumer preferences (based on different ethical attitudes) toward whales. Conflict between the U.S. and Japan has affected both the Commission itself, as well as its Scientific Committee. The IWC provides a contrast to the INPFC and the lATTC. The ^^'^Interview with Kazuo Shima, Tokyo, O ctober 1994. ^^^The W orld W ildlife Fund and Greenpeace have small Japanese memberships. ^^^these may be divided roughly into two groups; political representatives from the Fisheries Agency o f Japan who reflect the views o f the whaling industry, and scientists participating in the IW C Scientific Com m ittee. According to one American scientist, if the Japanese scientists disagree with 162 relatively low value of the industry, the lack of commercial ties, and the radically different consumer preferences may account for the low level of cooperation in this forum. When the IWC is set in the context of other ocean treaties in which the U .S. and Japan negotiated, it is clear that cooperation was only partially achieved at best. There was no significant market value for whale meat in the U.S., where consumer preferences were biased toward watching living whales. Low levels of concentration and vertical integration (in Japan after 1976), little or no production value in the U.S., different consumer preferences, and the absence of foreign direct investment can explain the relatively low level of U.S.-Japanese cooperation in the IWC. The next chapter explains the connections between the economic factors and interstate cooperation with more precision. 163 Theoretical Implications This chapter reviews the relevant theoretical literature and constructs a simple game model to articulate the connections between changes in economic factors and interstate cooperation. The first section reviews the work of Gordon, Demsetz, Nugent and Sanchez, and others who linked resource conservation with property rights. The second section reviews a relevant section of the literature on foreign direct investments^?. The third section differentiates between use and nonuse values for marine life, and suggests that environmental non-government organizations (NGO's) may help trigger shifts in preferences favoring nonconsumptive use. The last section introduces a preliminary formal model to analyze the impact of market conditions on international cooperation, particularly variation in preexisting situations of conflict or competition over shares, resource values, preferences (for use or nonuse), and the extent of vertical integration and foreign direct investment. The model could be further developed using comparative static analysis to show how shifts in these market factors influence cooperation. 1. The Property Rights Framework States use high seas fisheries as international common property, with regime rules setting the terms of access. H. Scott Gordon (1954) explained that 25? namely, that part treating Japanese foreign direct investm ent in the U.S. as a preem ptive or reactive response to export restraint negotiations (VRA's) 164 common property would persist even in societies with well-developed markets in cases where the costs of privatization exceed its benefits. Gordon argued that where fish migrate over such a large area that they cannot be considered husbandable by one society, the cost of excluding trespassers would exceed the gain from fishing. Therefore, the cost of enforcing private property rights would exceed the benefit in these cases.258 Gordon wrote: the only fisherman who becomes rich is one who makes a lucky catch or one who participates in a fishery that is put under a form of social control that turns the open resource into property rights.259 Demsetz (1967) argued that systems of private property rights tend to be developed in order to internalize costs and benefits associated with resource use. If a landowner has title to the benefits from land use (i.e., benefits are internalized) then he/she will have an incentive to protect the resource from overuse. That is, privatization can prevent overuse by internalizing externalities. Like Gordon, Demsetz argued that the emergence of distinct forms of property ownership (communal, private, and state) depends on the net benefits to the potential owner. As the value of a resource increases, a system of property rights would emerge. Benefits from private ownership must be compared with the costs of negotiating and policing cooperative arrangements such as contracts.^^o Hence the choice among alternative arrangements for assigning property rights would depend on several factors, including the resource value, the costs of negotiating and policing the area, and so forth. Scott Gordon, "The Economic Theory o f a Common-Property Resource: The Fishery," Journal o f Political Economy (1954). 259cordon (1954): 132. 260Demsetz (1967): 357. 165 Johnson and Libecap (1982) explicitly considered the role of politics in perpetuating market failure in fishing. They argued that political constraints limit the ability of governments to address persistent patterns of overfishing and overcapitalization. Specifically, in the U.S., federal and state governments have emphasized the rights of all citizens to have access to fisheries, blocking the assignment of private territorial rights to an area large enough to cover migratory species. Therefore, even if a single firm would be the most efficient manager of a fishery with in the U.S. 200-mile zone, fishery regulations would prohibit such an acquisition by a single owner. The foregoing analyses (Gordon, Demsetz, Johnson and Libecap) presuppose that if private property rights are created, they lead to the most efficient use of resources. By contrast, Nugent and Sanchez (1989) found that where land quality is low and the weather is variable, communal (tribal) ownership of land is more efficient than private ownership and long distance herding activity (transhumance) would be preferable to ranching in enclosed, privately owned spaces. Similarly, Elinor Ostrom (1990) found that institutions for common ownership of resources have been successful across time in Japan, Switzerland, and other areas. Management of international common property has been relatively less well developed in the literature. Gordon Munro ( 1987) considered international regimes for tropical tuna. Munro proposed that international cooperation be managed by one state, namely, the state setting the highest value on the resource. The state would then have the responsibility to compensate the other states which are excluded from the former commons. In theory, this system would allow the state with the lowest production cost to harvest the resource, reimbursing nonparticipants for agreeing to be excluded. This would produce efficient management of international common property resources. 166 This section reviewed the theoretical literature on property rights to highlight the factors contributing to the high seas' use as international common property regulated by regimes. Following Gordon and Demsetz, the high seas would be owned in common because the high cost of monitoring and excluding trespassers would exceed the benefits derived from exclusive use of the resources. Given barriers to unified ownership of high seas fisheries and the not insignificant commercial value of the fisheries, following Nugent and Sanchez, Ostrom, and Eggertsson, there would be a gain from international cooperation if effective institutions were created to set rules of access to the resources. One barrier to the creation and operation of such institutions is interstate conflict. This chapter extends the existing literature by creating a preliminaiy model to show how state behavior in institutions for international common property is influenced by firm concentration and/or vertical integration, foreign direct investment, or other economic factors. The next section reviews a subset of the voluminous literature on foreign direct investment, treating Japanese investment in the U.S. in the 1980's and early 1990's. 2. Foreign Direct Investment This dissertation argues that certain economic factors, including FDI, influence international cooperation in predictable ways. Economic literature has understood FDI to be a substitute for trade flows since Mundell (1957); and, beginning with Krugman (1979), has acknowledged that economies of scale create gains from trade among industrialized countries. By 1980 multinationals accounted for 80 to 90 percent of global trade (not including centrally planned economies) with two-fifths of international trade transactions being intra-firm 167 transfers.26i Intrafirm txade had risen to 37 percent of all U.S. imports of goods and services by 1993, compared to 32 percent in 1 9 8 2 .2 6 2 In addition, resource based industries tend to acquire subsidiaries to guarantee access to resource supplies. As Blair and Kaserman (1983) argued, FDI enables these firms to extract a larger share of the rent from using the resource, to ensure the stability of contracts, to obtain implicit insurance and to minimize transactions c o s ts .2 6 3 FDI in resource industries considered together (petroleum, mining, and agriculture, forestry and fisheries) was higher than that in manufacturing in 1992. Total Assets of U.S. Businesses Acquired by Established by Foreign Direct Investors, 1992 (in $ millions) All Industries $35,652 Petroleum 1040 Manufacturing 3201 Wholesale Trade 1712 Retail Trade 1003 Banking 7450 Finance 3725 Insurance 2839 Services 2242 261ciairm onte and Cavenaugh 1982, p. 3; U nited Nations Centre on Transnational Corporations 1988, in Sleuwaegen and Yamawakl in Koekkoek and Mennes, eds. International Trade and Global D evelopm ent, 143. 262w hichard, Obie and Lowe, Jeffrey, "An Ownership-Based Disaggregation o f the U.S. Current A ccount, 1982 - 1993, Survey o f Current Business, v. 75 no. 10, U.S. D epartm ent o f Commerce, Bureau o f Economic Analysis, p. 53. 263 Sleuwaegen, Leo and Yamawaki, Hideki, "Foreign Direct Investment and Intra-Firm Trade: Evidence from Japan," in Koekkoek and Mennes, eds.. International Trade and Global Development, (London and New York: Routledge, 1991): 144. 16 8 Agriculture, forestry 65 and fishing Mining 2244 Source: Nader, M.F., "U.S. Business Enterprises Acquired or Established by Foreign Direct Investors in 1993," in Survey o f Current Business, October 1995, V . 75, no. 10, U.S. Department of Commerce, Bureau of Economic Analysis, p. 25, table 4-10.264 Nevertheless, the literature on Japanese FDI in the U.S. focuses almost exclusively on manufacturing industries. (Markusen 1991, Sleuwaegen and Yamawaki 1991, Balassa and Noland, 1990, Morris et. al., 1990, Jones 1984, Dicken, 1980). Dicken (1980) argued, FDI may be motivated not only by the need to safeguard access to a market threatened by protectionist barriers ("market- oriented" FDI) but also by the need to safeguard access to raw materials ("supply- oriented" FDI).265 Japanese FDI in the canning and processing operations in Alaska and the Pacific Northwest in the 1970's were of this second type, since Japan by this time was a major importer of fisheries products. Additional motivations for FDI may stem from public goods qualities of the firms' assets. Markusen (1991) argues that multinationals are facilitators, a sort of intermediary between big firms and market incentives abroad. With subsidiaries, firms would be able to take better advantage of other market conditions, such as differences in comparative advantage. Scale economies, Markusen maintains, would tend to lead to geographical centralization of production. Specific types of industries would gain from multinational reach; specifically, those with knowledge-based, firm-specific assets. Such assets can be transmitted across 264 The units in this table refer to the U.S. dollar value, in millions, o f the businesses in the U.S. acquired or established by foreign direct investors. As such, they represent stocks as opposed to flows o f capital. 265Reid, Neil, "Japanese Foreign Direct Investment in the United States," in M orris, ed., Japan and the Global Economy (Routledge, London and New York, 1991): 68. 169 borders at low cost and tend to have a "public goods" quality (jointness of supply) that can be supplied to additional production facilities at low cost. For example, transferring proprietary software from parent to subsidiary does not result in a loss of productivity for the parent. In short, Markusen argues FDI facilitates the realization of gains in knowledge-based industries. It is worth noting that both of the features Markusen attributes to knowledge-based assets (traversing borders freely or at low cost, jointness of supply) are qualities of many international (global and regional) environmental assets as well. While Markusen discusses the gains to a firm from transmitting these assets to foreign subsidiaries (a transfer in which intellectual property rights are protected), knowledge-based firms often bear heavy costs from diffusion of their products (software, videos, music) to unaffiliated but competing foreign firms. The pervasive problems in protecting intellectual property rights are in many ways similar to the difficulties in safeguarding environmental assets. Like international flows of information, the marine resources considered in this dissertation were jointly supplied to states using the high seas, and they passed freely through zones claimed by coastal states for exclusive management. Inferences drawn from these cases may have significance for international cooperation in other areas, such as international agreements to protect knowledge- based assets. For example, interstate cooperation to form rules to protect intellectual property would be improved by higher levels of foreign direct investment, other things equal. Foreign direct investment may also be motivated by a need to leap unfavorable trade barriers (Krugman 1979, Balassa and Noland 1990). Bhagwati (1991) also adds that FDI may be used to forestall unfavorable changes in treaty rules, necessitating a sufficiently concentrated industry in the host country as well. Using the example of Toyota's investment in G.M. in the mid-1980's, Bhagwati 1 7 0 argued that the threat of protection in the U.S. would be sufficient to prompt Toy Ota's investment in G.M., a firm with sufficient clout to influence the U .S. government away from protection. As Tsebelis (1990) argued, tariff jumping FDI assumes firms invest given a foreign government decision to protect its market (implying a Nash solution); tariff threat defusing FDI implies a firm's intent to influence the other player's next move (a Stackelberg solution). Hence another motive for foreign direct investment in the North Pacific salmon fishing industry might have been for Japanese firms to leap unfavorable INPFC rules by acquiring American subsidiaries. This section reviewed a subset of the large literature on foreign direct investment to summarize the conditions under which firms tend to form subsidiaries. In general, gains from foreign direct investment often stem from increased benefits from economies of scale. In addition, in resource-based industries, FDI allows firms to extract larger rents, ensure stable contracts, implicit insurance, and minimize transactions costs. Information technology firms may experience gains from FDI due to the nature of their product, which has public- goods-like qualities (jointness of supply, traverses borders at low cost). Finally, FDI may enable firms to leap unfavorable international rules, such as trade barriers. The conditions under which firms gain from FDI is significant, as these conditions have important implications for international cooperation. Such a review is based on a consideration of the use value of natural resources. The following section reviews measurement of nonuse value, derived from recent work in environmental economics. 3. Environmental Conservation and Nonuse Value In the 1950's and 1960's the value of natural resources was based on use value. By the m id-1960's different ideas began to emerge in the U.S., in which 171 natural environments were increasingly seen not only as inputs into production but also as assets with intrinsic value. Over time, American consumer preferences shifted away from products such as whale meat and oil^G G and tuna caught "on dolphins" which were believed to have harmful environmental impacts. While the traditional way to view fisheries is as a "natural resource," with the advent of the environmental movement came an understanding that many natural things have intrinsic value. In some cases, such as whaling or "dolphin safe" tuna, the nonuse value of marine life such as whales and dolphins may provide an incentive for people to protect them. In general, a shift in preferences toward nonuse or conservation would produce more donations for environmental N G O 's, more spending on "green" products, whale watching, or ecotourism, or a higher willingness to pay for other conservation programs, other things equal. If a normative shift occurs in more than one state simultaneously, this would tend to improve interstate cooperation. NGO's and other organizations which facilitate the transmission of ideas and shift in preferences would further this process. The question of shifting preferences approaches new theoretical terrain currently under exploration. Keohane (1988) divides the study of international institutions into two main groups. First, the rationalistic approach, based on a "substantive" concept of reality, seeks to build a cumulative knowledge base by designing research programs involving empirical testing of hypotheses. Constructivism (Keohane groups constructivists with post structuralists, labeling them "reflective") emphasizes the role human interpretations of events located within a specific context to influence behavior. 2G6by the mid-1960's, the m arket in the U.S. for whale products was limited to use o f w hale meat in dog food and the use o f whale oil for specialized industrial uses. As reviewed in the case chapter, petroleum replaced whale oil for most uses in the U.S. by the early 20th century. Hence the "Save the W hales" movem ent in the U.S. in the 1960's and 1970's shifted preferences away from these limited uses o f whale products. 172 This study remains in the rationalist tradition yet acknowledges that explaining shifts in preferences is critical to explaining change toward environmental awareness. Preference formation is something to be explained (for example, is it "culture" that tempts many Japanese to eat whale meat despite the abundance of other food sources?) In the context of this study, the commercial value of the species drove the creation of rules designed to protect the resources. The fisheries treaties set rules allocating access to the resource in order to preserve stocks for trading in international markets. Understanding how preferences shifted toward nonuse values in the 1970's is critical to explaining how the treaties signed to create a sustainable resource supplies changed into vehicles for more general environmental protection. After the Stockholm Conference in 1972, the fisheries treaties were transformed into vehicles for protecting marine mammals and other species adversely affected by fishing. This understanding of value emerged in the U .S. beginning in the 1970's when environmental groups began using the courts to challenge established practices favoring industrial use. Environmental economists began to add "existence value" of resources to the more traditional understandings of "use value," and these interpretations were upheld in the courts. In all three of the cases considered here, the transformation of the meaning of environmental value reinforced the treaties' new focus on environmental conservation linked to fisheries management. The limitation of the areas available to the Japanese pelagic driftnet fishery (ending in the closing of such areas by the early 1990's)267 was accelerated by a widespread perception that high seas salmon fishing operations in the North international ban on driftnet fishing resulted in the termination o f the INPFC; in a sense, the treaty created in the early I950's to limit Japan’ s pelagic fishing was so successful it became obsolete. The treay was replaced by a new cooperative arrangement, the North Pacific Anadromous Fish Commission (N P A F C ), also based in Vancouver, Canada, in 1993. The NPAFC includes Japan, Russia, Canada and the U.S. 173 Pacific, because they relied on driftnets, were highly damaging to the marine environment. The interests of the Alaskan salmon industry to keep Japanese^^s ships from fishing in the North Pacific meshed with the interest of Greenpeace and other environmental groups in stopping the "curtains of death"269 that wasted marine mammals and sea birds as well as the targeted fish. The shift to an environmental mandate resulted from a combination of the Alaskan salmon industry's interest in the use value of salmon and the environmentalists' interest in the existence value of nontarget species. The strong support of the U.S.270 and Canada, combined with fishing nations of the South Pacific provided a winning coalition in the U.N., banning high seas driftnet fishing with U.N. General Assembly Resolutions 44/225 (1989) and 46/215 (1991). In a similar way, the lATTC became increasingly concerned with marine mammal protection, beginning in the 1970's. In the U.S., the Marine Mammal Protection Act (1972) directed U.S. commercial fishermen to reduce the incidental killing of marine mammals, and would ban imports of fish or fisheries products from states whose fishermen killed marine mammals in excess of U .S. standards.271 Amendments in 1988 set stricter limits on tuna fishing to prevent incidental kills, and required tuna exporters to the U.S. to provide proof that they had a program to limit incidental catches, and that the level of incidental take was comparable to the U.S. level. In 1991 and 1992, the U.S. singled out Mexico and several other nations^^^ for trade embargoes under this law. 268and joint Japan-Taiwan ventures, as well as other new entrants to the area, such as Korea ^^^Burke, Freeberg and Miles (1993): 2. ^^^A fter a tepid reaction to the driftnet issue at its introduction to the U.N. General Assembly in the fall o f 1989, the Bush Administration shifted to a strongly supportive position, based on a personal com m itm ent by the Secretary o f State, Jam es Baker, to the Republican Senator from Alaska, Ted Stevens, and later to the Congress. In this respect, the interest o f the salmon industry in the northwest was a critical factor in producing the U.S. support o f the ban on high seas driftnets. (Interview. Robert Brownell, S.W. Fisheries Science Center, La Jolla, Ca.). 2 7 '1 6 U .S .C . s . 1371 (a) (2). Venezuela, Vanuatu, Costa Rica, France, Italy, Japan and Panama J 7 4 Mexico decided to take the issue to the GATT, claiming the trade embargoes were discriminatory and protective. In September 1991, a GATT panel decided in Mexico's favor.273 Mexican President Salinas de Gortari did not pursue a vote from the GATT Council, however, and announced a 10-point program to reduce the incidental killing by Mexican fishermen, including expanded observer coverage on Mexican vessels, funds for research in to methods to reduce incidental killing, and harsh penalties for violations against Mexican laws protecting d o lp h in s .2 7 4 Set in the context of U.S.-Mexican negotiations of the North American Free Trade Agreement, Mexico chose not to further confront the U.S. on this issue. The effect of the Marine Mammal Protection Act amendments'^ ^ was to explicitly link the use value of tuna with the existence value of dolphins. In the U.S., people's awareness that commercial tuna fishing operations incidentally injured or killed dolphins spurred action to protect them. One environmental group. Earth Island Institute, raised public awareness by videotaping fishing operations aboard a Panamanian-flag vessel, the Maria Luisa. This tape had been shown on all the major T.V. networks, as well as in the House Merchant Marine and Fisheries Committee by September 1988. Tuna companies responded to this concern by labeling their tuna "dolphin safe" (i.e. it was caught with methods that did not injure dolphins, certified by the LATTC or the U.S. Department of Commerce). Such a product would appeal to consumers who wanted to consume tuna, but did not want to support an industry that incidentally killed dolphins. The Whaling Convention is third case of how preferences shifted toward nonuse. A rapid growth in the whale watching industry in the last decade. 273jam es Joseph, "Tuna-Dolphin Controversy in the Pacific," Ocean Developm ent and International Law, 25, 1 (Jan. - March 1994):9. 274 Joseph (1994): 10. 273as well as the Dolphin Protection Consumer Information Act (part o f the Fishery Conservation Amendments o f 1990, PL 101-627, S. 901, 104 Stat. 4436, 4465-4467, codified as amended at 16 u s e S. 1385 (Supp. IV 1992). Joseph (1994): 27. ^ ^ ^ coinciding with the worldwide ban on commercial whaling, indicates that the existence value of whales has become more important while their use value has declined. At its annual meeting in 1993, the IWC requested its contracting parties to report on the economic and scientific significance of whale watching operations in their states. The total revenue from all countries was estimated at $319 million in 1991/92.276 In 1994, total revenue worldwide had grown to $504.3 million.277 Japan reported that the total value of whale watching had grown rapidly from its inception in 1988, generating ¥100 million (approximately $1 million) in 1993. In the Ogasawara Islands, the number of people whale watching grew from 500 in 1989 to 4,600 in 1993. Similarly, in Ogata-Cho, the business grew from 3,656 in 1991 to 10,007 in 1993. Other Japanese fishing villages had similar success in the growth of their whale watching businesses.278 Hoyt (1995) reported that Japan's whale watching industry grew from 10,992 whale watchers in 1991 (direct revenues of about $371,000) to 55,192 people in 1994 (direct revenues of $3,384,000).279 The U.S. has had the largest whale watching industry. The National Oceanic and Atmospheric Administration reported a direct income of $22.5 million and indirect income (derived from sales of hotel rooms, transportation, food, clothing and souvenirs associated with whale watching) of $60 million in New England alone in 1 9 9 3 .2 8 0 Hoyt (1995) reported that the U.S. industry was earned $37 million in direct revenue in 1991, and $41 million in direct revenue in 1994.281 As the use of whales has become commercially less valuable, their existence value has risen as people (particularly in the U.S., the U.K., and 2 7 6 iw c document 45/21, submitted by the U.K. in May 1993, the figure was revised to $319 million. (Hoyt, 1995: 6). 277%WC document 47/W W 2, Hoyt (1995): 6. 278 "Report of Investigation on Whalewatching in Japan," Government o f Japan, IWC/46/WW (1994): 2, 4. 279H oyt(1995): 30. 280"An Assessment o f W hale W atching in the United States," for the IW C, submitted by the National Oceanic and Atmospheric Administration, (January 1994): 13, 14. 281 Hoyt (1995): 8. 176 increasingly in Japan) have become interested in preserving what they perceive to be rare, intelligent creatures. In the model which follows, activities by NGO's which affect preferences may function in a way comparable to FDI by firms. That is, if NGO's in one state set up offices in another, their activities may influence ideas in the targeted states, thereby shifting preferences. If this occurs, demand for nonuse of environmental resources would increase, and, depending on the its magnitude, the shift could influence international negotiations. A shift in preferences could be reflected by increased demand for whale watching, dolphin safe tuna, or other non consumptive uses. Shifts in preferences toward nonuse value is not explicitly modeled, but is suggested as a path for future research. 4. Preliminary Formal Model The next section provides a preliminary formal model of the dissertation's main arguments. There are three potential theoretical contributions. First, the main assumptions regarding payoffs and strategies have been derived empirically, making the analysis more grounded in experience than many game models. Second, the processes by which economic factors and firm behavior influences rule formation (from the bottom up) and by which regulators attempt to exert authority over firms and organizations within their jurisdictions (top down) are articulated formally. This analysis is significant in that it points to factors which tend to improve implementation and compliance with international regime rules. For example, it highlights the ways in which pressures to cheat and the need to resort to sanctions vary in predicable ways. Third, if further developed, the model could use comparative static analysis to show how changing market conditions may influence cooperation. Game analysis has a rather long history in analysis of industrial organization 1 7 7 and political science. Cournot (1838) used game analysis to explain the behavior of firms under conditions of imperfect competition. Following Nash (1952), many theorists of international cooperation have chosen game theory as their preferred method to explain problems of international security as well as international political economy (Schelling, Jervis, Axelrod, Keohane, Oye, Snidal, Lipson, Coynebeare, and others). The Prisoner's Dilemma has been particularly influential as an illustration of how individually rational strategies can produce collectively suboptimal results. Rosendorff and Milner (forthcoming in Economics and Politics) constructed a two-level game to analyze domestic political influence on international trade negotiation in a context of incomplete information. Their focus was on the effects domestic level actors on international cooperation. They considered international trade negotiations in which each of two states must obtain ratification from their respective domestic legislatures before an agreement enters into force. In general, international negotiators would be more likely to reach agreement if ratification were not required. In the context of imperfect information, however, domestic interest groups may provide information which influences a recalcitrant domestic legislature to support an agreement that would otherwise be rejected. If the executive and legislature are of different political parties, in general, international agreement is less likely. If agreement is reached under divided government, the terms of agreement would tend to reflect the stronger position of the domestic-level actors. Rosendorff and Milner highlight the conditions under which domestic-level pressures tend to tend to dominate in trade negotiations. The following model also uses a two-level format to analyze international cooperation but is distinct from existing models in two ways. First, it analyzes cooperation after international treaties have been signed and entered into force. In 1 7 8 general, the conditions under which such cooperation is more likely has important implications for implementation and compliance with international regimes. For example, it points to the conditions under which cheating and the resort to sanctions will be necessary. Second, this model focuses on economic factors and the influence of firm behavior on international cooperation. The emphasis is on the conditions under which foreign direct investment is more likely and how these factors influence state behavior. As such it abstracts from other aspects of domestic-level action, such as the influence of domestic interest groups or N G O 's, which has been the focus of other analyses. Preliminary Model of U.S.-Japanese Cooperation The model analyzes the conditions under which economic incentives to firms influence interstate cooperation. The framework assumes that states agree to rules internationally which are intended to regulate firms' access to a commonly owned resource. Firms lobby negotiators in each state, but in these cases there is no direct ratification procedure.^*- Firms' payoffs would be affected by restrictions set by treaty rules, by the potential gains (if any) from acquiring foreign subsidiaries, and from cheating. If the international rules are restrictive (i.e., the payoff to firms from complying is lower than the payoff from cheating) then firms will lobby their governments to loosen the rules and, if they are unsuccessful, will be tempted to cheat. However, if conditions are favorable for FDI, firms can increase their payoffs without changing the rules or cheating. The game is such that two states divide N (the number of fish/marine mammals to be taken) by setting the area of the ocean available to each state. 2*2\vhen treaties are signed, such as between the U.S. and Japan, domestic legislatures must ratify them before they are entered into force. In these negotiations, "ratification" must be construed broadly as domesic actors expressing approval or disapproval for the comm issions’ actions. Hence a commission which is unpopular domestically may find that appointees lose their jobs after subsequent elections. However, this model is designed to analyze a different result, i.e., the conditions under which firms will have an incentive to press for looser rules and/or cheat. 1 7 9 season openings, and/or the amount and type of gear that may be used. The result of bargaining at level 1 is the selection of |J,j, the Japanese share of N, and the U.S. share. N = total fish/marine mammals |U = Japanese share of N; |li-j= 0 (no territory); |U = 1 (whole ocean) )L li-J = US share of N; |Ii-J = 0 (no territory); |Il-J = 1 (whole ocean) |IJ, i-J = Japanese/US share of N when FDI links Japanese with US firms; |X J = 0 (no territory); |U = 1 (whole ocean) Level 1 (International/Commission Rules). State payoffs are, following Putnam (1988, 1993), a range of acceptable bargaining outcomes^^s. Players can accept the division given in the rules (Si) or cheat/withdraw from the commission (So). The payoff to Si is defined as U i, the payoff to So is defined as Uo. State 2 Si So Si (Ui,Ui) (Ui, Uo) State 1 So (Uo, Ui) (Uo, Uo) 283pmnam , Robert, "Diplomacy and Domestic Politics: The Logic o f Two-Level Games," in Evans, Jacobson and Putnam, eds., Double-Edged Diplomacy: International Bargaining and D omestic Politics, p. 439, and International Organization 42, 3 (Sum mer 1988). 1 8 0 If the game were identical to Prisoners' Dilemma, one would assume generally that Uo>Ui, and that the preference ordering would be (Uo, U i) > (U i, U i) > (Uo, Uo) > (Ui, Uo) for each player . The dominant outcome is players 1 and 2 playing strategies (So, So) and the collective outcome would be the suboptimal (Uo, Uo). In single-play games, in the absence of effective methods of monitoring and/or sanctioning to improve compliance, one would expect to see mutual defection. However, this is not observed in any of the commissions analyzed. The next section will demonstrate how different economic factors create payoffs (on the firm level) and different ranges of acceptable outcomes (on the state level), changing the incentive structures and either facilitating or blocking cooperation. Specifically, a third option is available (under certain market conditions) allowing firms to restructure the market through FDI or joint ventures. This option, called Si*, has a payoff U i*. Depending on the market conditions, payoffs and dominant strategies differ. Specifically: If U 1 * > U 1 then restructure (INPFC) ; Ui > Uo and Ui > Ui* then no conflict (lATTC); U o U i > Ui* then conflict and/or increase in activities to change the rules and/or distributive bargaining in the commission (IWC). 181 (International Level, After Restructuring) State 2 S i So S i (U i.U i) (U i,U o) State 1 (Ui*, Ui*) So (Uo, Ui) (Uo, Uo) Under what conditions will restructuring (Si*) be the preferred alternative? In general, U i * > U i where conditions are favorable for market integration (FDI, joint ventures). This condition was met in the salmon industry in the Pacific Northwest. If market conditions are not favorable for market integration, U i> U l*. This was generally true in the eastern Pacific for tuna and in whaling. However, if the stock is at a low level, or if there are alternative sources of supply, then U l> Uo. This was generally true in the Pacific, since there were stocks of yellowfin in the west which could be substituted for yellowfin taken in the east. Finally, if the resource stock is at a high level (for example, as a result of successful control of entry by the management commission) then Uo > Ul. This was true for certain stocks of whales by the late 1980's. To explain these connections between market conditions and international cooperation, it is first necessary to analyze the domestic political situation within each state. 182 Level 2 (firm level): Strategies for the players are: Si, accept the payoff given by the treaty rules; or Si*, the same plus gain or loss from international investment Firms do not have the option of withdrawing from the treaty (So); they are regulated by the government which decides whether to enforce treaty rules domestically. However they will press for changes in treaty rules if the payoff Uo is high enough. Ui* is a joint action. 183 FIRM LEVEL Firm 2 S i So S i (U l, U l) (U l, Uo) Firm 1 (Ui*, Ui*) So (Uo, Ul) (Uo, Uo) The payoff Ui for Si is fixed by treaty rules (area of the ocean/average number of fish taken in that area per season). The payoff U l* for Si* is set by maximizing the profits taken by the joint venture or Japanese/US Jointly owned firm. Ul* is equal to the profit of the industry in first state plus the payoff from FDI. Profits to each Japanese fishing firm would depend on the profits to each of its catcher boats, less costs, plus the benefits from FDI. Benefits to each Japanese catching boat would depend not only on the area treaty rules made available to it, (|U ), but the revenues from that area, represented by r (|iJ ), times the fraction going to each boat (ni). Costs to each Japanese boat are represented by c (ni). With similar notation, the fraction of the benefits or costs accruing to each U .S . boat is represented by nz and the number of boats in the US fleet is bz. The profit to the Japanese firm, represented by Ui*, equals the benefit per boat [(ni) r (|Jj )] less [c (ni)] times the number of boats in each states' fleet [bi] plus the payoff from FDI, [the percent of FDI times the profit of the industry in that state, equal to 1 8 4 the benefit per boat, nz r (|Ii-J) less the cost per boat c (nz) times the number of boats in each states' fleet, bz ]. Ui* = bi [ni r (|U )-c (ni)] + %FDI * bz [nz r (|li-j)-c (nz)] The firm would compare this to the payoff from U i; unless there is no FDI or the payoff from FDI is zero or negative then Ui* > Ui. In general, Ul* > Ui unless FDI is blocked by protective legislation or unfavorable market conditions. U i * is a better choice because it combines the payoffs of players 1 and 2. Ui* > Uo in most cases over time because of the commons problem, whereby each state overfishes in the absence of regulation, making the take worse under open access than under regulation. If Ul * > Ul (fixed by the treaty rules) then the market will be restructured. If U 1 * < U 1 then the treaty rules will be observed unless Uo > U i; in this case there will be conflict and/or an increase in activity to change the rule and/or distributive bargaining in the commission. The hypotheses generated by the cases are as stated above: Ul * > U 1 then restructure (INPFC); U i > Uo and Ui > Ui* then no conflict (lATTC); Uo>U i > Ul* then conflict and/or increase in activities to change the rules and/or distributive bargaining in the commission (IWC). Links Between Levels Putnam (1988, 1993) and Rosendorff and Milner (forthcoming) interpret the links between levels as being the set of agreements on the international level that will be approved domestically in the context of domestic ratification of international decisions. Ratification may be construed broadly, so that even if the agreement 1 8 5 itself need not be ratified it must obtain tacit approval domestically if the politicians responsible for it wish to remain in office. However, this model points to another important implication of international cooperation in the regimes. Where conditions rules are restrictive, and where FDI is potentially less profitable than cheating (Uo > Ui > Ui*), one might also tend to see lower levels of compliance and a greater likelihood of sanctions threats. The process would work roughly as follows. In Japan, the negotiators are typically scientists and/or former industry representatives working for the Ministry of Agriculture, Forestry and Fisheries. The Ministry both regulates the industry and takes its concerns to the international negotiating table. Hence it is probable that should the industry react unfavorably to international rules, that their complaints would be made known to officials subject to reelection who have authority over reappointing the MAFF officials. Similarly in the U.S., scientists (typically from the National Marine Fisheries Service, itself a division of the Commerce Department) and representatives from other agencies (sometimes the State Department) solicit the views of the fishing industry as well as NGO's (e.g., environmental organizations) when formulating negotiating positions. This model assumes that there is domestic influence although not a formal up-or-down vote by a legislature on the rules negotiated at the commission. Hence if treaty rules are restrictive, firms will lobby negotiators in their states and may obtain rule changes. However, if they are not successful in obtaining rule changes, there will be an incentive for the firms to cheat, or for the state to with draw from the commission. Level 1 Game (Treaty Rules/ Commission Level) If FDI is possible, after restructuring occurs on level 2, the alternatives on level 1 may be more conducive to cooperative outcomes than in the commons game 186 or in Prisoners' Dilemma. On Level 1 the previous options are all still available, Si (accept rules) corresponding with a range of bargaining outcomes Ui and So corresponding with Uo. A third option, a joint Japanese/U.S. player on level 2 would lobby for (Si*, Si*) on the treaty level, with acceptable bargaining outcomes U i* for each state. Again, If the states' preferences over the range of outcomes Is Ui*> Ui>Uo the best strategy would be for the states to cooperate, given the blnatlonal structure of thé domestic Interest groups which are lobbying them. This game has been generalized from the cases which follow. To show how the general form has been derived from the cases, descriptive material on each case Is presented next, showing how the model captures the dynamics of each case. The International Convention for the High Seas Fisheries of the North Pacific (INPFC) [Phase I, 1953- 1978] In 1946, Japan was occupied by the Supreme Command of the Allied Powers, led by General Douglas MacArthur. As a precondition to ending the occupation, Japan agreed to sign The International Convention for the High Seas Fisheries of the North Pacific, which, when It took force In 1953, restricted the area of the high seas In which Japanese vessels could fish. In order to be consistent with International law, which guaranteed "freedom of the seas," the Convention provided for an "Abstention Line" to be drawn at 175° West Longitude. Japan agreed to keep Its fishing boats west of this line as long as the fishery (Including salmon and groundfish) was being fully utilized. The treaty also created the INPFC to collect data on fish populations, catch, migration patterns, and many other topics related to fishery management, as well as to serve as a forum for debate. The treaty changed access to the salmon fisheries from an open system to one based on exclusive use based on national origin. The "Abstention Line" essentially divided the Pacific Into two zones. 187 Japanese boats were allowed access to the eastern half, closest to Japanese waters. North American fishermen, who set nets at the mouths of rivers, believed this would safeguard North American stocks from capture by Japanese boats on the high seas. This allowed U.S. and Canadian management authorities to control the escapement of salmon in their jurisdictions, and the Japanese to take whatever measures necessary to safeguard Asian-origin salmon. The Abstention Line was a device designed to "nationalize" the stocks of salmon according to their place of origin. According to INPFC documents, the U.S. and Japan in fact landed roughly equivalent shares of salmon in this period, although at this stage little was known about the migration patterns of salmon on the high seas. Therefore, although the shares taken were roughly equal, the Alaskans in particular continued to claim that Japan was intercepting their salmon, and they continued to press for restrictions on Japanese high seas fishing.284 To amend the Convention would have required unanimous agreement, however, so the Abstention Line remained at 175° West Longitude for more than twenty years. In the early years, Japan and the U.S. shared approximately 80% of the catch (Canada took the rest, approximately 20%.) Japan took mostly Asian-origin salmon west of the Abstention Line, and the U.S. took North American-origin salmon, mostly from Bristol Bay and Puget Sound. was later shown that as much as 30% o f the salmon Japan captured on the high seas was of North American origin. Harris, Colin, "Recent Changes in the Pattern o f Catch o f North American Salmonids by the Japanese High Seas Salmon Fisheries,"in Salm on Production, Management, and Allocation: Biological, Economic and Policy Issues, ed. W. M cNeil, (Corvallis: Oregon State University Press 1986): 54. 18 8 Japanese Investment the U.S. Salmon Industry, 1970's Beginning in the early 1970's, beginning with Latin American fishing nations, countries began to claim exclusive jurisdiction over areas up to 200 miles from the shore, referred to as Exclusive Economic Zones (EEZ's). Historically, claims to exclusive coastal state jurisdiction stretched from 3 to 12 miles. The U.S. extended its claim to 200 miles by passing the Fishery Conservation and Management Act of 1976, which included a provision for the renegotiation of international treaties to accommodate this claim. Rule changes under the Convention took effect in 1979285 Although the U.S. never became a contracting party to the Law of the Sea, the U.S. goal was to push the Abstention Line further west, toward Japan. According to both U.S. and Japanese sources, by the early 1970's Japan anticipated that the U.S. would also claim exclusive jurisdiction to 200 miles. One Japanese source summarized the Japanese strategy at this point as "we knew we were going to lose, so we decided to lose s l o w l y . "286 During the 1970's the major Japanese fishing companies began investing heavily in fishing businesses in the U.S. and elsewhere^^?. In addition to direct investment, the Japanese companies 285xhe rule changes entered into force in February 1979 and (i) made adjustments to the conduct and area of operation o f the Japanese salmon fishery operations; namely, moving the Abstention line westward, to 175° degrees East Longitude; (ii) requested that the contracting parties work towards the establishment o f an international organization with broader membership dealing with species o f the Convention area other than Anadromous species; and (iii) deleted provisions to the Annex to the Convention that had provided protection for halibut and herring stocks fully exploited by Canada and the U.S. [INPFC working document, obtained from N PAFC in Vancouver, April 1994; M arine M am m al Commission Compendium o f Selected Treaties, International Agreem ents and Other Relevant Documents on M arine Resources, Wildlife and the Environm ent ( 1993): 1203. 286jj,terview with Shigeto Hase, INPFC, Vancouver, Canada, M arch 1994. 2 8 7 tw o factors motivated Japanese foreign direct investment in the U.S. in the I970's which had not existed previously. First, the extension o f U.S. jurisdiction to 200 m iles from the coast formed a barrier to the Japanese fishing industry (similar to Voluntary Export Restraint Agreements and other U.S. barriers to Japanese imports) which FDI enabled Japan to "jump." Second, in August 1971 the exchange value o f the dollar slid from ¥360 per dollar to ¥300 per dollar. Investment in U.S. production facilities enabled Japan to circum vent the effect o f the dollar's devaluation, (see Neil Reid, Japanese Investment in the U.S. M anufacturing Sector, in M orris, ed., Japan and the Global Economy: Issues and Trends for the 1990's, Routledge, New York, 1991., p. 63; also Balassa and Noland, Japan in the World Economy, p. 121.) formed joint ventures with U.S. (and other non-Japanese) firms. In this period Japanese companies acquired between 50 and 100% of the canning and processing operations in AIaska.288 in this case, an exogenous shift in the treaty rules forced the Japanese firms either to restructure, or face large losses to their salmon fishing operations. Japanese direct investment and joint ventures in the U.S. transformed the game, with the Japanese firms now influencing political pressures on both sides of the bargaining table. Empirical evidence for the payoffs is available in INPFC statistical yearbooks. When the Convention was renegotiated in 1978, the share of the catch assigned to Japan, according to INPFC statistics, dropped from more than 40% to roughly 10%. However, since Japanese companies had a large percentage of the ownership of the U.S. companies, its payoff was greater than the share of fish landed by its boats. Because it had changed the structure of the game, a rules that appear to be overwhelmingly beneficial to the U.S. actually benefited Japanese companies as well. From 1979 to 1988, Japanese boats were taking a smaller share (roughly 10%) of the fish in the North Pacific. However, there was increasing evidence that as much as one-third of the catch was of Alaskan origin.289 Alaskan fishermen once again became concerned about diminished salmon runs. The U.S. initiated bilateral talks with Japan, concluding an informal agreement in which Japan would curtail its fishing in the "donut hole" area of the Bering Sea (see map 4) in exchange for permits to take a larger share of groundfish in the U.S. EEZ. While the 288interviews with Japanese industry representatives. This percentage is also confirmed by the A laska Seafood Industry Report (1988), p. 41. According to Harris (1987), the o f the maturing fish caught by the Japanese mothership fishery between 1972 and 1976, 36% (mean) was o f Alaskan origin; o f immature fish, 40% (mean) was of Alaskan origin. From 1978-84, the mean values were 28 and 32 percent Alaskan origin, respectively. (Harris, Colin, "Recent Changes in the Pattern o f Catch o f North American Salm onids by the Japanese High Seas Salmon Fisheries," 1988, from table p. 54. agreement was informal, it is acknowledged by both U.S. and Japanese sources290. While the U.S. agency in charge of issuing the permits (the NMFS) did not oppose the agreement, Alaskan fishermen joined forces with environmental groups to file suit to prevent the issuance of permits. At stake was an interpretation of amendments to the Magnuson Act designed to protect marine mammals. A U .S. District Court judge decided in favor of the fisherman/environmentalist coalition, ruling that, because there was not management plan to protect marine mammals in the region, the NMFS could not issue permits to the Japanese boats. Although the Japanese had withdrawn from the "donut hole" area with the expectation that the permits would be issued, they continued to honor the agreement even after the U .S. had violated its commitment (even if the defection was involuntary, i.e., generated by domestic lobbying, not planned by the NMFS). Why would the Japanese accept such a situation, considering its economic power was much greater in 1988 than it was in 1946, when it was essentially forced to sign the Convention? Why did it continue to abide by an informal agreement, ostensibly contrary to its interests, even when the U.S. abrogated its end of the bargain? If the Japanese payoff is joined with the U.S. payoff (through market integration), it becomes clear that cooperative behavior by the Japanese is rational. Whether one interprets this, as one representative of Japan's fishing industry did, as evidence of a "special relationship" between the two countries, or as an economist might, as "interdependent utility functions," the paradox is nevertheless resolved. As will be shown below, during the same time frame (1980 to 1988), Japan's behavior with respect to the Whaling Convention provides a contrasting case. With no corresponding industry in the U.S., Japan was not able to restructure the game as it did in the INPFC. After the 1970's, when the 2®®Interviews with Hanafusa (October 1994), Hastings (M arch 1994); and Low (AprH ^994). U.S. and other states tried to end commercial whaling, there was relatively more conflict in the IWC. Final Phase of the INPFC, 1989-1993. North American fishermen were joined by environmental groups in their opposition to high seas salmon fishing. By the late 1980's, environmental groups voiced concern about nontarget species being trapped and killed in driftnets, including those used by the Japanese salmon fishing fisheries. The Japanese high seas salmon fishery was only one of many fisheries worldwide employing driftnets, which killed a wide variety of dolphins, porpoises, sea turtles, penguins, sea birds and other nontarget marine life.291 In December 1989, the U.N. General Assembly passed Resolution 44/225, calling for restrictions on large-scale driftnet fishing. Japan Joined the U .S ., Canada and other nations in endorsing the resolution, which called for cooperation in the collection and sharing of data for assessing the impact of large scale driftnet fishing on the marine environment. The resolution also called for an end to further expansion of driftnet fishing, cessation by July 1991 of all driftnet fishing in the South Pacific, and a moratorium on all large-scale driftnet fishing by June 30, 1992, unless management procedures could be put in place to minimize incidental b y c a tc h .2 9 2 i n June 1991, representatives from Japan, Korea, the U.S., Canada, Taiwan, Australia, the U.N., and the INPFC met in Sidney, British Columbia, to discuss possible conservation and management measures to minimize the bycatch of driftnet fisheries. In December 1991, Japan, Canada and the U.S. agreed to * FAO data cited in Burke, Freeberg, and M iles, "The UN Resolutions on Driftnet Fishing: An Unsustainable Precedent for High Seas and Coastal Fisheries," School o f M arine Affairs, University o f W ashington (August 1993): 4. 292"international North Pacific Fisheries Com m ission," photocopied history o f the INPFC distributed by the North Pacific Anadromous Fisheries Com m ission, Vancouver, Canada (1993): 10 . 192 support a global moratorium on high seas driftnet fishing by the end of December 1992 [General Assembly Resolution 46/215]. The game explains how Japanese cooperation was rational. Japan's FDI in U.S. firms is a significant explanatory factor. The payoff from investment made cooperation the preferred option even when the area available to its motherships in the North Pacific was eliminated. But by buying foreign operations, the Japanese firm can continue to derive revenue from the fishery while shutting down pelagic driftnet operations. With the moratorium on driftnet fishing, Japan's high seas salmon fishing ended. The INPFC met for the last time in 1991, and was officially terminated in February 1993. The INPFC headquarters in Vancouver, B.C., was transferred to its successor organization, the North Pacific Anadromous Fish Commission (NPAFC), which involves a wider membership (Japan, Canada, the U.S. and Russia) in managing salmon in the North Pacific.293 Japan's cooperation in supporting the U.N. resolutions ending high seas driftnet fishing underscores the change in incentives under the INPFC. That is, since its payoff was no longer dependent on the salmon caught by its high seas salmon fishery, Japan supported the two U.N. resolutions [44/225 and 46/215] which called for a moratorium on driftnet fishing. As will be shown, this cooperative behavior was not possible under in the Pacific tuna fishery or under the Whaling Convention. Japanese negotiators shifted their policy in the direction of U.S. pressure to a greater extent in the INPFC talks than in the IWC. This variation is due in part to the fact that the Japanese whaling industry has no counterpart in the U.S. or in other nonwhaling countries. Hence the option to restructure incentives through FDI and joint ventures was not available. "International North Pacific Fisheries Commission," (199): 16. 193 Cooperation was less successful in the lATTC and IWC management than it had been in the INPFC. INPFC GAME: LEVEL 2 (firm level): Strategies for the players are: SI, accept the payoff given by the treaty rules; or SI*, the same with capital flows The payoff Ui for Si is fixed by treaty rules (area of tire ocean/average number of fish taken in that area per season). The payoff U i* for S i* is set by maximizing the profits taken by the joint venture or Japanese/U.S. jointly owned firm. The payoff Ui* is equal to the profit of the industry in Japan [equal to the benefit per boat, ni r (|4j ) less the cost per boat c (ni)] times the number of boats in Japan's fleet, bi, plus the payoff from FDI, the % ownership of the foreign industry times the profit of the industry in that state [equal to the benefit per American boat, nz r (|Lli-J) less the cost per boat c (nz)] times the number of boats in the U.S. fleet, bz. Ui* = bi [ni r (|J.j)-c (ni)] + %FDI * bz [nz r (|J,i-j)-c (nz)] For the Japanese fishing firms operating in the North Pacific, after the early 1970's, Ui* > Ui. Since Ui* > Ul (fixed by the treaty rules) then the market was restructured. Since the strategy U l* is considered to be a joint strategy, the firm is considered to be binational, therefore the payoff U l* goes to both players.294 as such the model includes no "loss" for the acquired U.S. firms since they are considered to be part of Japanese operations and hence a joint entity. 194 INPFC GAME: LEVEL 1 (Treaty Rules/ Commission Level) On Level 1 the strategies are: S i (accept treaty rules) with a payoff of U i and So (cheat/withdraw) with a payoff Uo. A third option, a joint Japanese/U.S. player on level 2 would lobby for (Si*, Si*) on the treaty level, with a payoff Ua for each state. Again, since Ui*> Ui>Uo the best strategy would be for the states to cooperate, given the binational structure of the domestic interest groups which are lobbying them. The game is next applied to the lATTC, showing how where market conditions were less favorable for market integration (FDI, joint ventures) there was less direct cooperation. Rather, the availability of substitute sources of yellowfin took Japanese firms out of direct conflict with the interests of the U .S. firms. In other words, Japan did not need to coordinate policy with the U .S ., since the patterns of fishing (Japan in the Western Pacific, the U.S. in the Eastern Pacific) did not create significant conflict. Case 2. Inter-American Tropical Tuna Convention Open Access Before 1966 The Inter-American Tropical Tuna Convention, signed by the U.S. and Costa Rica in May 1949^^5 soon involved all of the major tuna fishing nations of the south Eastern Pacific Ocean. By far, the dominant fishing nations in the area in the 1950's and 1960's were the U.S., which consumed large amounts of canned tuna, and Japan, with a large domestic market for sashimi^^ô The major commercial species of tuna are highly migratory, precluding effective management by one country. Until the mid-1960's, tuna was considered to be abundant, and the Eastern Pacific tuna fishery was available on an open access basis. At present, lATTC contracting parties are the U.S. Japan, Nicaragua, Panama, and France. 29^Harry Scheiber, "Common Ocean Resources and Economic Interdependence: Japan, the U .S ., and the Pacific Tuna Fisheries, 1945-1970. (unpublished draft, 1993). 1 9 5 lATTC, 1966 - 1978 By 1966, the lATTC determined that yellowfin tuna being overfished. Subsequently, a quota on yellowfin was established, and each fishing nation was required to limit its fishermen's take to a share of the overall quota. For simplification, the behavior of the U.S. and Japan are considered. In the late 1960's, with the imposition of quotas backed by the threat of U.S. trade sanctions against potential violators, Japan continued to fish for yellowfin in other areas, especially the Western Pacific. This case is considered a qualified success in terms of cooperation. The lATTC was able to manage yellowfin stocks under quota, but Japan had the option of fishing for yellowfin in other areas, an option not available in the North Pacific salmon fishery under INPFC management. This intermediate case also supports the conclusion that the cooperative behavior in the INPFC can be attributed to interlocking U.S and Japanese ownership of the industry. lATTC GAME: LEVEL 2 Level 2 (firm level): Strategies for the players are: Si, accept the payoff given by the treaty rules; or Si*, restructure the market. The payoff Ul for Si is fixed by treaty rules (area of the ocean/average number of fish taken in that area per season). The potential for the Japanese fishing industry to profit from the acquisition of American firms was low. Therefore U i * < U i , and the treaty rules would have been observed. lATTC GAME: LEVEL 1 On Level 1 the strategy options were Si (accept commission rules) with 1 9 6 payoff U 1 and So (cheat/defect) with payoff Uo. FDI promised little gain. Ui>Uo because Japan took most of its yellowfin from the Western Pacific (rather than the lATTC waters in the Eastern Pacific) and the rules regulating yellowfin from 1966 - 1979 were not restrictive to the Japanese firms. Japan took bigeye, an unregulated species, from the area under jurisdiction by the lATTC. Therefore the dominant strategy for Japan was to accept the Commission rules. The lATTC provides a contrast with the IWC. Market conditions in the IWC were unfavorable for market integration, and there has been no "substitute" sources for Japanese whalers. Cooperation was less successful in the IWC than in the INPFC. CASE 3. Whaling Convention Signed in 1946, the Whaling Convention originally operated as a sort of producers' cartel, to support the price of whale oil by restricting the number of whales member countries could take. In practice, however, quotas were set at such a high level that whaling was essentially unrestricted. This era is often referred to as a "Whaling Olympics" a kind of international competition to hunt the most whales.297 Fortunately for the whales, however, with the development of fossil fuels, demand for whale oil diminished. The whaling industry in the U.S. was virtually nil after the Civil War, when most of the fleet was destroyed. Tiny whaling stations continued to operate, mostly in California. The Japanese, however, had traditionally used whale meat for food, and whaling continued to be profitable there. Opposition to the practice grew as people became aware of the label was first used by Dr. Ray Gambell, Secretary o f the IW C. (Frledheim, 1994, p. 7.) W hale quotas were set in Blue W hale Units (one blue whale unit was equivalent to one blue whale, two fin whales, two and a half humpback whales, or six sei whales). Q uotas were set so high that whalers typically did not m eet them. By the 1960's, concern was rising over the diminished stocks, but the BW U was officially used until 1972. 197 extent to which whaling had diminished, perhaps irreversibly, most species of whales.298 With the growth of the environmental movement in the U.S., particularly after the Stockholm Conference on the Human Environment in 1972, the U.S. (and other nations) pressed for an end to commercial whaling. In the early 1980's, the Whaling Convention voted to ban all commercial whaling. The ban took effect in the 1985-86 season. In contrast to the first case, there was no opportunity for Japan to change the structure of this game, and the option of switching to another area was not available, since the Whaling Convention was global in scope. Japan opposed the ban on whaling, complying after the U.S. threatened (and, in 1988, imposed) economic sanctions. The game has been d e a d l o c k e d . 2 9 9 The U .S. pressures the Japanese to end whaling but Japan continues to derive benefits from whaling and other nonconsumptive use. IWC GAME: LEVEL 2 Level 2 (firm level): Strategies for the players are: Si, accept the payoff given by the treaty rules; or Si*, restructure the market or 298population estim ates, showing original population and latest population o f several species: (severely depleted: blue whale, from 228,000 to 14,000; fin whale, from 548,000 to 120,000; sei whale, from 256,000 to 54,000; bowhead whale, from 30,000 to 8,000; North Atlantic R ight W hale, from (unknown) to 1,000; Southern Hemisphere Right W hales, from 100,000 to 3,000; H umpback W hale, from 115,000 to 10,000.) Gray W hales have recovered from 20,000 to 21,000; Sperm W hales are considered to be at or above optim um sustainable population, (from 2,400,000 to 1,195,000. M inke whales are not endangered (populations have increased from 140,000 to 941,240). In "Know Your Whales: Their Names, Population Estim ates, and Status," Oceanus, 32, no. 1 (Spring 1989), pp. 12-13. 299xhis is consistent with Oye's advice, "When you observe conflict, think D eadlock - the absence o f mutual interest - before puzzling over why a mutual interest was not realized." Oye, "Explaining Cooperation Under Anarchy: Hypotheses and Strategies," in Cooperation Utitder Anarchy (Princeton, N.J., Princeton University Press, 1986): 7. So, cheat The payoff U i for S i is the quota set by treaty rules. S i * (the same, with FDI) was not possible, since there is no U.S. whaling industry there is no possibility for international investment. For most species of whales, U i > Uo because of the commons problem, whereby each state overfishes in the absence of regulation, making the take worse under open access than under regulation. This has been true for the most depleted species of whales. However, for some abundant species of whales (especially minke whales), Uo > Ui > Ui*; in this case there would be conflict and/or an increase in activity to change the rule and/or distributive bargaining in the commission. IWC GAME: LEVEL 1 Game (Treaty Rules/ Commission Level) On Level 1 the options are Si (accept given rules) corresponding with a range of acceptable outcomes Ui and So (change the rules) with a range of acceptable outcomes Uo. A third option, a joint Japanese/U.S. player on level 2 would lobby for (Si*, Si*) on the treaty level, was not available. Again, if Uo> Ui>Ui* (as is the case for minke whales) the best strategy would be for the states to press for changes in the rules, look for loopholes, or cheat. This captures the dynamic of cooperation and conflict in the IWC. 199 C onclusions This comparison of the INPFC, lATTC, and IWC shows the conditions under which international cooperation is likely to emerge. In the North Pacific salmon fishery, when faced with successive large reductions in its fishing zone, conditions were favorable for FDI and a higher level of cooperation resulted. Interlocking ownership of the fishing industry (particularly FDI and joint ventures), which developed during the 1970's, explains how rule changes limiting the areas of operation of Japan's salmon fishery became acceptable to Japan. Japan endorsed the U.N. resolutions in 1989 and 1991 which shut down its high seas salmon fishing. In the Eastern Pacific tuna fishery, Japan had the option to exit when its catch was made subject to quota limits, backed by U.S. sanctions. Japan pursued this option, making this a "neutral" example of neither cooperative nor noncooperative behavior. Finally, the Whaling Convention provides a case in which Japan had neither the option of an alternative fishing area (the U .S. opposition to whaling was global) nor acquiring U.S. subsidiaries. Japan's behavior in this case was noncooperative, as it opposed (and continues to oppose) the ban on commercial whaling. In the end, as a result of U.S. sanctions, Japan ended its commercial whaling operations. However, Japan continues to take about 300 whales per year under a loophole in the IWC's rules allowing for lethal taking of whales for scientific purposes. Japan's behavior varied in the three cases (cooperative, neutral, noncooperative). This variation supports the argument that where Japan had the option of restructuring the game, cooperative behavior became the dominant strategy. The ways in which variations in market conditions (industry concentration, vertical integration, the profitability of FDI, in particular) may also be observed in nonenvironmental cases as well, such as Voluntary Restraint Arrangements for steel and automobiles. In addition, analysis the conditions under which cooperation emerges in international regimes has important implications for 200 implementation and compliance, for example, in demonstrating the conditions under which economic sanctions are more likely. The analysis in this chapter was a normal-form game representation of the material presented in chapters 2, 3, and 4. In addition to being more concise, the game representation facilitated an analysis of the players' strategy options using a simple shorthand. One drawback of using such a representation, however, is that it also concealed important information. One of the differences between the U .S. and Japanese markets for salmon, tuna, and whales is different preferences. The game models assumed preferences differed, and that this created market conditions that were more attractive for FDI in the salmon industry than the other two. Any influence that NGO's may have had on ideas (particularly targeted at changing Japanese preferences for consumptive use of marine mammals) was not explicitly treated in this analysis. However, the model provides a way of conceptualizing the way in which international communication of ideas may influence preference formation, patterns of demand and finally international cooperation.^oo a second set of hidden questions surrounds the bargaining which took place in the commissions. How did the market-related factors (especially production value of the industries, preferences, and shifts in these variables over time) impact this bargaining? Was there any connection between the market factors and the choices of bargaining strategy? Analysis along these lines would reveal more about the processes of reaching agreement than is possible in the game representation. Third, in all three commissions scientific committees worked, with different degrees of SOOpor example, a shift in preferences for nonuse o f whales would be reflected by an increase in whale watching in Japan. Growth in the value o f this industry would change the direction of Japanese firm influence on international negotiators in the IWC. If there were a significant lobby in Japan for whale watching this presumably would weaken the Japanese state's official opposition to restrictions on commercial whaling and would increase U.S.-Japan cooperation. NGO influence on consumer preferences could be represented by S 1 *, sim ilar to the way FDI was represented in the model presented above. The payoff U 1 * would be include the payoff from whale watching industries as well. If whaling and whale watching existed simultaneously, U l* could be expressed as the sum o f both activities, assuming the payoff from regulated whaling could coexist with a payoff from whale watching. success, to produce a commonly accepted base of information to inform the negotiations. Did scientific learning affect cooperation? Finally, the games did not treat noncompliance as a serious option, assuming that one side would discover violations and use sanctions or other pressures to enforce the treaty. More empirical research should be done in this area, either to support or to qualify this assumption. 202 7 Future Research Comparing U.S.-Japanese cooperation in the INPFC, lATTC, and IWC produced a set of economic factors which explain the different outcomes. The cases were selected to hold other important factors, including power and instutituions, constant to the extent possible. If there was no inherent conflict in harvesting patterns, harmony was observed. Given inherent conflict, as existed in the INPFC and IWC, the most relevant economic factors improving the prospects for cooperation were greater concentration and vertical integration in the target industries, higher levels of foreign direct investment, higher production value, and more similar consumer preferences across cultures. All of these factors tended to improve interstate cooperation, other things equal. This chapter connects these hypotheses with three avenues for future research: (1) to uncover the nature and extent of differences in preference formation in the U.S. and Japan on the values of environmental resources, specifically whales and other marine mammals; (2) to generate more policy-specific information about how the market-related factors impact international negotiation; and (3) to focus on issues of compliance with international treaties. The first section of this chapter reviews the current literature on environmental valuation, and calls for more research on preference formation. The second section proposes further research on the processes of international negotiation based on this dissertation's main findings. The third section provides a brief review of compliance in the INPFC, lATTC and IWC and suggests more 203 study is needed to uncover the factors which tend to produce better compliance. Preference Formation Preferences, traditionally modeled by economists as exogenous factors, are themselves increasingly taken as variables to be explained. Human attitudes toward nature have varied widely from one era to another, and from one culture to another. In the west, prior to the Romantic Movement in Europe and the Transcendental Movement in the United States in the nineteenth century. Western cultures have typically connected "wilderness" or nature with being lost, unruly, disordered or confused.30> People thought natural resources had no value apart from human labor, capture or harvest. Perceived scarcity has given rise to a different view. Since the 1970's, the court system in the U.S. has upheld claims^that natural resources have both use and nonuse value, and economists generally agree with this interpretation. Nonuse value is typically associated with nonconsumptive recreational use (such as enjoyment of scenic wilderness areas, or whale watching) which is measurable, but linked to an intrinsic value that some people associate with the resource. Different perceptions of nature create variation in the intrinsic value people attach to it. At least some of these differences are cultural. Stephen Kellert (1992), through survey research, found that Americans tend to have a stronger ethical and ecological perspective on nature than do Japanese people. Japanese were relatively less concerned about ethical treatment of the environment and nature, and about the need to conserve ecological systems. Japanese people tended to place greater value on satisfactions derived from control and mastery over nature, as well as 301 Nash, p. 1. 302such litigation is most often related to violations o f the Clean Water Act o f 1977, the Comprehensive Environmental Response, Compensation and Liability Act o f 1980, the Superfttnd Amendments and Reauthorization A ct o f 1986, and the Oil Pollution Act o f 1990. (Hausman, 1993: 4). 204 control of nature in situations with esthetic or emotional appeal. Interviews revealed that, in general terms, Japanese culture tended to place the greatest emphasis on the experience and enjoyment of nature in very controlled, confined and idealized circumstances. Considering generational differences, Kellert found that in both the U .S. and Japan, younger adults had greater knowledge and affection toward nature. Older people had more exploitative and hostile attitudes towards nature. However, both young and old Japanese respondents had a less moralistic and ethical concern for wildlife than did Americans. This latter difference held across different age and educational groups. Surveys measuring attitudes towards marine mammal protection among Americans and Japanese have found rather sharp differences. In one survey, when asked about paying higher prices for tuna fish to reduce the killing of porpoises in fishermen's nets, 70% of Americans expressed support, while only 38% of the Japanese public did.303 While a relatively small number (11 to 15%) of Japanese people reported having purchased ivory, tortoise shell, furs, or other wildlife products, a much larger group (46%) reported purchasing whale meat during a five- year period.304 Differences in American and Japanese views with regard to whaling were reported by Freeman and Kellert (1992), with 48% of American respondents "opposed to hunting of whales under any circumstances," compared to 24% in Japan. Similarly, 64% of Japanese respondents agreed "there is nothing wrong with whaling if it is properly regulated," while only 27% of Americans agreed.305 However, Erich Hoyt (1995) found that since 1988, when the practice 303Kellert (1992); 303. However, responses to questions about willingness to pay higher energy costs to protect a range o f endangered bird, mammal, herpetological, fish and butterfly species indicated a similar willingness to pay among Japanese and American respondents. 304K ellert(1992): 304. 305]viilton M.R. Freeman and Stephen R. Kellert, "Public Attitudes to Whales: Results o f a Six- Country Survey," August 1992. (photocopy). 2 0 5 started in Japan, the number of Japanese people participating in whale watching tours has grown dramatically. In 1991 10,992 people went whale watching off the coast of Japan; by 1994, the number had grown to 55,192.3°^ While surveys have found rather sharp differences Japanese and American preferences, the higher knowledge of and affection for nature expressed by younger Japanese people and the increase in the number of whale watchers since 1988 may indicate a growing shift in preferences toward environmental conservation. Given variation in cultural preferences, the monetary values people assign to environments differ. Environmental economists define the total economic value of an environmental resource as benefits derived from its use, preservation, and/or existence. Use value refers to the value derived from use. For example, an angler or a commercial fisherman uses the environment and derives benefit from it. Option value captures the potential benefits of the environment, or an expression of a person's willingness to pay to preserve the resource so that it may be used at a future date. Finally, the intrinsic value of natural environments is value people attribute to the resource itself: value "in" the resource which people express through a preference for non-use. Intrinsic value is also known as existence value. Total economic value of environmental resources, then, is the sum of use value, option value and existence value.^o^ Environmental resources differ from man-made capital in three significant ways. Natural resources exhibit irreversibility, meaning if the asset is not preserved it is likely to be eliminated with little or no chance of regeneration. The values are typically uncertain in the sense that if the asset is eliminated, future choices are foregone, creating a sort of opportunity cost in the future. Environmental resources may also exhibit uniqueness values, meaning that scenic 306H oyt(1995). 3 97 Pearce and Turner, Economics o f Natural Resources and the E nvironm ent (New York: Harvester Wheatsheaf, 1990): 131. 206 views or endangered species, for example, may have intrinsic value because of their distinctiveness.308 Contingent Valuation Method While there appears to be consensus about the concept of environmental values (i.e. use and nonuse values), the techniques for measuring nonuse value have generated some controversy. The contingent valuation method (GYM) is the most commonly used measure, and has been included in the regulations issued by the Department of the Interior for valuing damages under the Clean Water Act of 1977, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, and the Oil Pollution Act of 1990. Contingent valuation uses responses to surveys to estimate the what public goods are worth. Especially when used in combination with other methods, such as the travel cost method (which measures the value of recreational sites with reference to the distances people will travel to them), contingent valuation is considered to be the best method of measuring nonmarket values. CVM uses surveys to indicate revealed or stated preferences^o^ . Of the methods being developed to measure nonuse value, CVM is the most controversial due to its pivotal role in assigning damages in pollution cases. The criticism has centered on the methods for measuring nonuse value, rather than attacking the concept itself. Hausman (1993), in a study funded by Exxon, argued that contingent valuation methods do not accurately measure preferences because they rely on surveys rather than observed behavior. In the same study, Nobel 3()^Pearce and Turner (1990): 131. 309See, for example, M itchell and Carson, Using Surveys to Value Public Goods: The Contingent Valuation M ethod, Resources for the Future (1989). h \so , A .Bibliography, o f .. Contingent Valuation Studies and Papers, by Richard Carson, Jennifer W right, Nancy Carson, Anna Alberini, and Nicholas Flores, Natural Resource Damage Assessment, Inc., San Diego, California, January 1995. 207 laureate Kenneth Arrow also expressed reservations about the CVM. The most serious problem, known as "embedding," is that willingness to pay responses often indicate that people would pay the same amount for some small damage as for a more extensive damage including the smaller one. For example, survey responses may show the same willingness to pay to preserve 2,000 as 20,000 birds. To reduce the embedding effect. Arrow suggests revising the survey technique to ask the question directly in the usual way, then to ask the same question in alternative way (i.e., reverse the order of the damages). Arrow observed that the core criticism of contingent valuation surrounds the survey methods, not the concept of nonuse value. Measurement uncertainty is not uncommon in damage assessments, such as those used in patent infringement or antitrust cases. If the measurement errors in CVM surveys are comparable to errors in other measurement techniques used in current litigation and legislation. Arrow concluded, the outlook for future use of such surveys is optimistic.^io One potentially significant use of CVM surveys may be to link differences in preference formation to international cooperation. This dissertation generated the hypothesis that where the U.S. and Japan have similar preferences, cooperation tends to be better. Where preferences differ (particularly toward the consumption of marine mammals such as whales) cooperation tends to be worse. More research on preference formation (specifically, CVM studies to measure Japanese and American attitudes to marine mammals and whales) could provide important information on cultural factors influencing international cooperation. The basic Japanese position is that eating whale meat is a cultural preference in Japan, one typically not shared by Americans. However, if a study using the CVM to measure consumer preferences in Japan showed that many Japanese value the Arrow in Contingent Valuation: A Critical Assessment, Hausman, ed., (1993): 483. 208 existence of whales and dolphins in the ocean,3*> this could indicate changing preferences in that country. This dissertation argues that similar preferences are one important factor facilitating cooperation in the cases studied. Negotiation-Analytic Framework As discussed above, production value of a resource could be measured using a combination of industry production (for fishing and whale watching) and CVM-type surveys (for existence values). The impact of FDI and joint ventures on the structure of the negotiations, and the impact of preference formation on cooperation, would be best developed using the negotiation-analytic technique. This approach has been applied in different ways by James Sebenius (1980, 1984), Howard Raiffa (1982), and Robert Friedheim (1993) in analyzing the Law of the Sea negotiations.^ ' 2 Sebenius argued that the negotiation-analytic approach to international cooperation is superior to the leading approaches in international relations theory, namely, neorealism and neoliberalism. First, in the simple matrix games (such as Prisoners' Dilemma), cooperation is depicted as a binary choice (cooperate or defect), which directs attention away from the key issues of distribution (how to divide the pie) and integrative potential (how to expand the pie) which are both part of the negotiating process. Second, the games suppress the important role uncertainty (imperfect information) and learning play in the negotiation process. This is particularly significant as actors may be uncertain as to the payoff values. Third, the approaches assume that relative gains seeking behavior (related to power) and Joint gains seeking behavior are analytically 311 Recent work by the W hale and Dolphin Conservation Society in Bath, U.K., suggests that this might soon be the case. The whale watching industry has grown rapidly in Japan since 1988 (when the industry began) to 19,992 people in 1991 and to 55,192 people in 1994. (Hoyt, Erich, 1995). ^ ’2jam es K. Sebenius,"Anatomy o f Agreement," Doctoral Dissertation, Harvard, 1980; and Negotiating the Law o f the Sea, Harvard University Press, 1984; Howard Raiffa, The A rt and Science o f Negotiation, Harvard University Press, 1982: 275-299; also Friedheim (199:^ 1994). 209 separable. The negotiation-analytic framework considers them to be two aspects of negotiation that are intertwined, and not analytically separable. Therefore, to study the process by which actors reach (or fail to reach) agreement, the negotiation-analytic framework has distinct advantages.^ 13 Further advantages of this framework are provided by John Odell (forthcoming). By relying on the international structure (bipolar/multipolar) as the main explanatory factors, the leading models of international relations are underdetermined. That is, many outcomes are consistent with a given power structure, pointing to the need for further theoretical development. Second, like many economic models, the leading approaches in international relations do not explain how preferences are formed. Third, in the matrix games, tlie binary notation (states cooperate or defect) conceals important information about the strategies states (and other actors) may employ in seeking negotiated outcomes. Negotiation analysis facilitates examination of the processes by which the game itself may be changed and the impact changes in preferences may have on the process of seeking cooperation. These are significant for this study, which focused on structural factors which may influence the emergence of cooperation. The best- known factors, namely, power, institutions, and the number of actors, were held relatively constant. An additional explanatory factor, a set of market-related hypotheses, emerged as possible explanations of the variance in U.S.-Japanese cooperation. More research is needed to determine whether the market factors which promoted cooperative outcomes the INPFC also promoted more value- creating negotiating behavior. Likewise, to the extent these market factors blocked cooperation, they may also have produced more value-claiming negotiating behavior. 3 ’^"Challenging Conventional Explanations o f International Cooperation: Negotiation Analysis and the Case o f Epistemic Communities," International Organization 46, 1 (W inter Another advantage of the negotiation-analytic technique is that it allows for a clearer analysis of conflict and cooperation as they occur simultaneously. In general, this dissertation argued that a higher level of cooperation was achieved in the INPFC than under the IWC. However, within the IWC, Japan cooperated with quotas by tightening regulations on its whaling industry, downsizing it. At the same time, beginning with pirate whaling operations in the 1960's and continuing through the scientific whaling in the 1980's, Japan has found loopholes in convention rules enabling its policies to conflict with U.S. pressures. Cooperation and conflict existed simultaneously. Negotiation analysis models the processes of conflict and cooperation as intertwined rather than poles on a continuum. A third important element which is not well developed by other approaches to international cooperation (neorealist, institutional, and game theory) is the role of learning. Raiffa argued that negotiation analysis provides a framework for understanding situations where actors are not completely sure what there alternatives are, what the adversaries think, or what payoff calculations may be for the participants. Idiosyncratic issues may also be considered important to one player, but completely extraneous to another. These situations, common in actual negotiation, are not addressed by game theory models which assume that actors are "superrational," that the rules of the game are well understood, and that each player knows his own payoff and the payoffs for the other players, given alternative s tra te g ie s .3 '4 During the process of negotiation, each party's learning about all of these partially known factors may be an important determinant of the terms of agreement that may be reached. Learning was facilitated, to a greater or lesser extent, by the scientific committees of the three commissions analyzed in this dissertation. The INPFC, the 314Raiffa, (1982),p. 3. ^ ^ ^ lATTC and the IWC each had scientific committees which were designed to promote joint research efforts to generate solutions to the problems of managing fisheries and whale stocks. In the INPFC, the Scientific Committee conducted ongoing research on the migration patterns of salmon in the North Pacific. In the 1950's, very little was known about the life histories of salmon once they reached the ocean.315 Over time, through Joint U.S.-Japanese-Canadian tagging, parasitological, and other studies, the general migration patterns of North American and Asian salmon became better known, and a clearer picture of the areas on the high seas in which the races intermingled emerged. International cooperation in the INPFC's Scientific Committee generated information which both sides could accept as unbiased, and this learning over time facilitated cooperation. The lATTC's Scientific Committee also generated data in the mid-1960's which was used as the basis for setting quotas to conserve stocks of yellowfin. The IWC's Scientific Committee has also provided a forum for international cooperative research. However, a relationship between the recommendations of the Committee and cooperation in the Commission has heen harder to establish in this case. To what extent did learning, facilitated with different degrees of success by the scientific committees of the three commissions, influence the process of achieving cooperation? The negotiation-analytic technique offers the best-developed framework within which to analyze learning under varying degrees of conflict. An additional advantage of the approach is its ability to incorporate the process of "changing the game." As opposed to many games which consider parties, interests, and payoffs to be fixed, negotiation analysis provides a framework in which these factors can vary. According to Lax and Sebenius, in the negotiation-analytic framework, "The game is that which the parties act as if it 3*5H arris(1988): 44. 212 is."316 The game model developed in this dissertation demonstrated how, through the decision to create FDI links with American firms, Japanese firms were able to change the structure of the game over a few iterations. To more nearly approximate the fluidity of actors, interests, issues, payoffs and other game "structures" in actual negotiations, however, a negotiation-analytic framework may provide a better method. Compliance A third avenue for future research involves compliance with regime rules. This study has focused on market-related factors affecting cooperation; these factors may be important in producing an acceptable level of compliance, as well. As Chayes and Chayes noted, compliance has evolved from pursuing enforcement (based on a model of domestic legal enforcement) to emphasizing dispute-settlement mechanisms and an ongoing process of negotiation.^ > 7 In the past, more emphasis was put on actions states would take to implement treaty rules. Changing states' domestic laws to conform to conform with regime rules was believed to be the best way to secure compliance. As Roger Fisher argued, effective implementation tends to vary "depending on (a state's) domestic institutions and upon the degree to which that government is restrained by legal limits."^*® This emphasis on international law is reflected in Albert Koers' review of compliance with IWC rules, published in 1970.^ ' ^ Recent experience 3 *^Lax and Sebenius, The M anager as N egotiator (New York: Free Press, 1986): 216. ^ ’^chayes, Abram and Chayes, Antonia, "Adjustment and Compliance Processes in International Regulatory Regimes," in Preserving the Global Environment: The Challenge o f Shared Leadership, New York: W.W. Norton and Company, 1991, p. 202. ^Fisher, Roger, Improving Compliance with International Law, Charlottesville, University Press o f Virginia, 1981, pp. 141, 146. ^'^ A lb ert W. Koers, "The Enforcement of Fisheries Agreements on the High Seas: A Comparative Analyis o f International State Practice," Law o f the Sea Institute, University of Rhode Island, Occasional Paper No. 6 (June 1970). 213 in the IWC suggests that this legalistic approach was rather naive, and that compliance is becoming more salient in the commission's ongoing negotiations. In addition to the legal literature, recent work on institutions has argued that institutions themselves can help by affecting the political process, an important step toward improving environmental quality.^zo Ron Mitchell considered a set of rule changes under the 1954 Convention for the Prevention of Pollution of the Sea by Oil and concludes that the regime was, in some instances, effective in changing states' b eh av io rs.3 2 i In general, however, our knowledge about compliance remains rather limited. One reason may be that information on compliance has not been gathered systematically or consistently for any of the commissions. In general, the secretariats are too small and underfunded to undertake comprehensive assessments of compliance. Questions about noncompliance are also politically sensitive. Member states are expected to police themselves and report to the secretariats, and they often do. Nevertheless, an accumulation of independent assessments has provided some indication that compliance, as well as reporting, has not always been adequate. It appears that the INPFC and lATTC have been more successful in terms of compliance than the IWC has been. In general, compliance with INPFC rules was considered to be at a relatively high level. The INPFC rules brought about in sharp reductions in Japanese catches by Japan of North American-origin sockeye salmon, indicating a high overall level of compliance. Legal experts have noted that the U.S. did not comply with the 1986 agreement by which the U.S. agreed (but not in writing) to issue permits to fish in the US EEZ in exchange for Japan's agreement not to fish in 320Keohane, Haas and Levy, eds, Institutions fo r the Earth: Sources o f Effective Environmental Protection (Cambridge, M ass., : M IT Press, 1993). 321 Get 10 Cite for Mitchell 214 the Bering Sea "donut hole" area between US and Russian EEZ's.322 Japan complied with its commitment to phase out of the donut hole but a US court decision prevented the quid pro quo, the issuance if permits to Japanese boats to fish in the US EEZ. While there were scattered reports of specific incidents of noncompliance (i.e. boats fishing out of designated areas, and/or taking salmon "incidentally" in nets ostensibly targeted for squid), no data was gathered systematically. In general, however, the overall level of compliance with INPFC rules was considered to be at a high level. The lATTC also has had a good record of achieving compliance with its rules. The Commission set quotas on stocks of yellowfin with good results from 1966 to 1978. The lATTC’ s tuna-dolphin program has had a relatively high level of compliance and effectiveness, primarily due to a system of placing observers aboard purse seiners. While the Commission agreed to create the observer program in 1976, due to funding and other problems, it took ten years before there was sufficient observer coverage (about one-third of the fleet) to ensure adequate precision in their estimates of dolphin m o r ta li t y .^ 2 3 Since the 1986, incidental mortality of dolphins in the tuna fishery has dropped from 133,000 to 53,000 animals, or by 60%.224 The observer program in the tuna-dolphin program has made the lATTC one example of high international compliance with regime rules. Although the least successful in terms of compliance, the IWC was nevertheless the first of the international fisheries commissions to confront noncompliance systematically. The first requirement put on contracting parties was to report on infractions by their own nationals, in a standard form published in ^^2interview with Jay Hastings, Seattle, W ashington, March 1994. 223joseph, (1994). The U.S. Marine Mammal Protection Act Amendments o f 1988 would require 100% observer coverage on vessels with a carrying capacity greater than 400 short tons. The Amendments would sanction imports o f tuna from countries with lower standards than the U.S. Mexico appealed to a GATT dispute settlement panel to challenge these rules, and in September 1991 the GATT ruled in favor o f Mexico. 324joseph, (1994): 7. 215 the Second Report of the Commission in 1950-51. In general, the IWC requested states to supply information on their inspection procedures, on any whale ships operating in prohibited areas, and the number of whales taken in violation of IWC rules. At roughly the same time, the IWC also asked member states to supply information about domestic implementation, particularly legislation dealing with domestic enforcement. A Technical Committee was given the responsibility to review the reports submitted by member governments, which in turn created a Subcommittee on Infractions. Each year, the Technical Committee reports its results to the entire membership gathered in a plenary s e s s i o n . 3 2 5 The system was designed to allow member governments to police themselves, and provide information to the IWC. Many IWC delegates believe that this system has been a failure. One of the earliest reported series of infractions involved the "Olympic Challenger," a factory vessel which operated under the Panamanian flag until 1956. Japan and Norway accused the "Olympic Challenger" of having repeatedly violated IWC rules, although Panama had not reported any infractions to the IWC in the seven-year period under q u e s t i o n . 3 2 6 It is generally acknowledged that the Soviet Union took blue, right, and humpback whales at much higher levels than were reported to the IWC in the 1960's and 1970's, although this information was not reported to the IWC until 1994.327 Some attempts at illegal smuggling of whale meat have also been documented. The Fisheries Agency of Japan reported eight attempts to smuggle whale meat into Japan between 1987 and 1994, all of which were blocked 3 25Joseph, (1994): 27-29. 326joseph, (1994): 29 327Y ablokov, A lexey V., "Validity o f W haling Data," Nature, 367 (6459), 1994, in Brownell, "Japanese and Soviet Exploitation o f Pygm y B lue Whales," Southw est Fisheries Science Center, La Jolla, California, IBI Report No. 5, 1995. O ne o f the four Soviet factory ships in the early 1960's and 1970’ s reported taking no right w hales, 156 blue whales, and 152 humpback whales; Yablokov reported in 1994 that 717 right whales, 1,433 blue whales and 7,207 humpback whales were actually taken, (p. 27). 216 by the Japanese g o v e r n m e n t .3 2 8 TRAFFIC East Asia and the Whale and Dolphin Conservation Society have reported incidents involving whale meat smuggling, much of it believed to be destined for the Japanese m a r k e t .3 2 9 In the past, noncompliance has been a problem for the IWC. The issue gained salience after the IWC's 1992 meeting. That year the IWC accepted procedures recommended by its Scientific Committee for resuming the commercial harvest of whales, which has been banned since 1985/86. The procedures are referred to as the "Revised Management Procedure," or RMP. The Commission has not yet implemented the RMP. In 1992 the IWC asked the Scientific Committee to clarify certain aspects of the RMP and to recommend guidelines for conducting and analyzing the results of whale stock assessment surveys. The following year, the IWC adopted a list of additional issues still to be resolved before the moratorium on commercial whaling would be listed. Known as the "Revised Management Scheme," or RMS, the issues still to be resolved include (1) what minimum standards for basic data would be necessary for the IWC to calculate catch limits; (2) how to monitor states to verify that the RMP works as expected, and any catch limits authorized by the IWC do not have unforeseen effects; and (3) how to put a system of observation and inspection into place to ensure that authorized catch levels are not exceeded. Compliance had become a major agenda item at the IWC.330 To conclude, this chapter connected the main thesis of this dissertation with three avenues for future research. This dissertation argued that FDI ties produced 328Fisheries Agency, Government o f Japan, "Known Smuggling Attem pts o f W hale Meat," May 1995, IW C D ocum ent IW C/47/Inf. 5. 329sim ba Chan, Akiko Ishihara, Lu Dau Jye, Marcus Phipps and Judy M ills, "Observations on the W hale Meat Trade in East Asia, TRA FFIC East Asia, M ay 1995; Steven Galster, "Tracking the Pirates: New DNA Results and Undercover Research Expose the Illegal W halemeat Trade," A Report by the Endangered Species Project's Investigative Network with Earthtrust Sponsored by the W hale and Dolphin Conservation Society. May 1995. 330M arine Mammal Commission, Annual Report (1993): 130. 217 better cooperation between the U.S. and Japan. To the extent that differences in preferences may be barriers to FDI (and therefore cooperation), this chapter suggests that measuring preferences in the U.S. and Japan may provide important information about how to improve cooperation. Specifically, if the study finds a shift in preferences toward nonconsumptive use in Japan (a shift that may be indicated by the fast-growing whale watching industry in that country), this could indicate a higher level of U.S.-Japanese cooperation. This would contribute an important cultural factor to our understanding of U.S.-Japanese cooperation. Such cultural factors may also be at work in other bilateral negotiations, such as present and past negotiations over automobiles, steel, semiconductors, and so forth. A second avenue for future research would be a more focused investigation into how market-related factors highlighted in this study affect the process of negotiation. Odell (1995) has designed a study to investigate how changes in market factors influence states' choices of bargaining strategies. A similar study might be designed to investigate the relationships between production value, preferences, FDI, and negotiating strategies. 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Asset Metadata

Creator Walsh, Virginia Maria (author)

Core Title International markets and interstate cooperation: united states-Japanese efforts to conserve ocean life, 1950-1995

Contributor Digitized by ProQuest (provenance)

Degree Doctor of Philosophy

Degree Program Political Economy

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Agriculture, Fisheries and Aquaculture,Economics, Commerce-Business,environmental sciences,OAI-PMH Harvest,Political Science, public administration

Language English

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c17-104496

Unique identifier UC11355061

Identifier 9636761.pdf (filename),usctheses-c17-104496 (legacy record id)

Legacy Identifier 9636761.pdf

Dmrecord 104496

Document Type Dissertation

Rights Walsh, Virginia Maria

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA