Macroeconomic impact of an international fishery regulation on a small island country

Abstract

Abstract This paper examines the macroeconomic impact of a tuna fishing regulation on a small island economy that relies heavily on tourism and fishing for foreign exchange earnings. While there is scientific consensus to limit the use of drifting fish aggregating devices (dFADs) worldwide, there is no agreement on their optimal number at sea. Resolution 23/02, adopted by the Indian Ocean Tuna Commission (IOTC) in February 2023, proposes a 72-day moratorium on dFADs, but this resolution faces opposition from many contracting parties, particularly developing countries. To understand the reasons for this opposition, a recursive multi-sector dynamic general equilibrium model is developed for the Republic of Seychelles, a small tuna-dependent country. The model assesses the short- and medium-term macroeconomic impacts of a seasonal dFAD closure in the Indian Ocean tuna fishery. The analysis suggests that a 12% decline in canned tuna exports would result in a -8.8% deviation from the trend in real Gross Domestic Product after seven years. Such an impact would have wide-ranging effects on the domestic economy, affecting all components of aggregate demand. Consequently, the economy would become more dependent on tourism, which has shown its vulnerability during the recent pandemic crisis. The study highlights the importance of considering social and economic aspects in sustainable fisheries management and provides insights into the potential consequences of dFAD regulations for small island economies. JEL codes: Q22, D68, E65