VZCZCXRO6118
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHKN #0090/01 1630631
ZNR UUUUU ZZH
R 110631Z JUN 08
FM AMEMBASSY KOLONIA
TO RUEHC/SECSTATE WASHDC 2055
INFO RHHMUNA/USPACOM HONOLULU HI
RHMFIUU/USPACOM REP GUAM ISLAND GU
RUEHMJ/AMEMBASSY MAJURO 0353
RUEHKR/AMEMBASSY KOROR 0269
RUEHSV/AMEMBASSY SUVA 0035
RUCNMEM/EU MEMBER STATES
RUEHKN/AMEMBASSY KOLONIA 2401

UNCLAS SECTION 01 OF 02 KOLONIA 000090 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP/ANP AND OES - WILLIAM GIBBONS-FLY 
SUVA FOR REO JOE MURPHY 
 
E.O. 12958: N/A 
TAGS: EFIS ECON EAID SENV FM
SUBJECT: MICRONESIA DISSATISFIED WITH EU FISHING AGREEMENT 
 
KOLONIA 00000090  001.2 OF 002 
 
 
¶1.  Summary:  The Federated States of Micronesia (FSM) 
reportedly is intentionally delaying issuance of fishing 
licenses to European Union (EU) flagged vessels in reaction to 
the EU's late access fee payments and because it wants to 
renegotiate the 2003 FSM-EU Economic Partnership Agreement 
(EPA).  End summary. 
 
DELAY TACTICS 
 
¶2.  The FSM government reportedly feels the terms of the 2003 
EU-FSM Economic Partnership Agreement does not provide it 
appropriate financial compensation for its fish stock, the FSMs 
most valuable natural resource.  Fishing licensing fees are 
important to the GFSM, accounting for nearly 25 percent of its 
revenues from non-aid sources.  According to Gainmore Zanamwe, a 
trade policy analyst to the FSM Department of Resources and 
Development, the GFSM asked the EU to pay higher access fees, 
but EU negotiators are not willing to revisit the terms of the 
agreement.   Zanamwe stated that the EU insists that the 
agreement already provides generous compensation compared to the 
FSM's agreements with China.  Adding to the friction, Zanamwe 
noted, is the fact that the EU is slow in paying its yearly 
dues.  Confirming the late payments, Peter Konings, an EU 
consultant to the FSM Department of Resources and Development, 
disclosed that the FSM is retaliating against the EU by holding 
up individual EU ship licenses.  In fact, he said, three Spanish 
purse seiners departed Micronesia without licenses after being 
frustrated by repeated delays. 
 
AGREEMENT TERMS 
 
¶3.  The EU-FSM EPA provides EU fishing fleets with access to one 
of the last great tuna stocks on earth.  The EU's agreement with 
the FSM was its third in the western central Pacific, the others 
being with Kiribati and the Solomons.  Expiring in 2012, the 
EU-FSM EPA allows the EU to operate six purse seine vessels and 
12 longliners simultaneously in the waters of Micronesia for a 
period of three years, with an option to request additional 
vessel licenses in the future.  The agreement fixed compensation 
at EUR 559,000 (approx. USD 875,785) per year, to increase by 
EUR 65,000 (approx. USD 102,000) per additional vessel.  EU 
vessels are permitted to catch a total of 8,600 tons per year; 
if catches exceed 8,600 tons, the EU must pay an additional EUR 
65 (approx. USD 102) per ton. 
 
SIZE DOESN'T MATTER 
 
¶4.  The agreement fails to specify the maximum seiner size 
allowed for EU vessels.  Vessels licensed under the agreement 
are flagged in France, the United Kingdom, Portugal and Spain, 
and include three of the largest and most modern tuna seiners in 
the world.  These giant Spanish vessels, known as "super super" 
seiners, have the capacity to freeze 200 tons of tuna a day and 
to hold up to 2,200 tons at a time.  On an annual basis, just 
one of these vessels can nearly match the combined catch for the 
entire FSM tuna fishing fleet. 
 
SUSTAINABILITY 
 
¶5.  Noting that the EU-FSM EPA is almost identical in both 
compensation and fishing allotments to many of the EU agreements 
with West African nations, Zanamwe said he fears the FSM could 
face a decline in fish stocks similar to that already 
experienced along the coast of West Africa.  In an effort to 
promote sustainability, the EU-FSM EPA allocates 18 percent of 
the proceeds the FSM receives toward the National Oceanic 
Resource Management Authority (NORMA), the FSM national agency 
entrusted to guard and manage marine resources in the FSM's 
Exclusive Economic Zone (EEZ).  The balance of the proceeds from 
access fees go into the FSM's general treasury. 
 
FSM LIMITATIONS 
 
¶6.  A number of constraints limit the FSM's ability to realize 
returns from fishing commensurate with the value of the 
commodity.  These constraints include institutional weaknesses 
in oversight and enforcement, the grossly unequal economic and 
political power of the negotiating parties, undercutting 
competition by other Pacific Island countries, and insufficient 
data collection and surveillance capabilities.  Also, because 
the fish is transported offshore for all processing, the FSM 
receives no revenue from value-added services. 
 
EU SUBSIDIES 
 
KOLONIA 00000090  002.2 OF 002 
 
 
 
¶7.  EU fleet owners pay only 35 percent of the FSM's access fee; 
the rest is paid by the EU.  Fleet owners also receive from the 
EU money for vessel construction and transfer, tax breaks on 
fuel costs, and funding for onshore facilities.  These subsidies 
often enable EU fishing fleets to out-compete domestic 
fishermen.  Although the EU is loathe to renegotiate its EPA 
with the FSM, it is allowed under the "non-discrimination" terms 
of the EPA to negotiate more favorable terms should the FSM 
decide to enter into a more favorable agreement with a competing 
distant water fishing nation. 
 
BY-CATCH 
 
¶8.  The EU-FSM EPA makes no reference to the capture of 
vulnerable marine species by EU fishing vessels despite the fact 
that long-lining and purse seining are associated with the 
by-catch of sharks, sea turtles, marine mammals and seabirds. 
High by-catch levels also have serious implications for the 
sustainability of fish stocks because they contain high levels 
of juvenile at-risk by-catch species.  Yet, the EU-FSM EPA gives 
EU boats blanket exemptions within the FSM EEZ from by-catch 
regulations to which the FSM's own fishermen must adhere or face 
possible fines.  Indeed, most EU fishing agreements with 
developing countries do not specify by-catch limits,  even 
though domestically the EU has attempted to minimize the 
destructive environmental effects of commercial fishing by 
setting out strictly defined criteria governing fishing gear, 
by-catch limits, and regulations obliging fishermen to use 
by-catch reduction devices. 
 
COMMENT 
 
¶9.  The EU holds or is currently negotiating separate EPAs with 
77 countries.  It appears uninterested in a collective agreement 
with blocs of countries.  Without collective bargaining power in 
concert with other Pacific Island countries, the FSM is quite 
unlikely to succeed in negotiating a fishing agreement with the 
EU containing the three key elements it needs, which are EU 
involvement in locally-based fish processing plants, stronger 
regulations on the harvesting and exportation to EU markets of 
fish caught in FSM waters, and additional export duties on fish 
either processed or shipped raw from FSM waters.  Its tuna 
stocks are the FSM's greatest natural resource, but until the 
improbable day it makes common cause with its neighbors, 
Micronesia will continue selling its patrimony for a fraction of 
its true value.   End comment. 
PRUETT