Greening China’s Fish and Fish Products Market Supply Chains The International Institute for Sustainable Development (IISD) Greening China’s Fish contributes to sustainable development by advancing policy and Fish Products Market recommendations on international trade and investment, economic policy, climate change and energy, and management of natural Supply Chains and social capital, as well as the enabling role of communication technologies in these areas. We report on international negotiations and disseminate knowledge gained through Contributors collaborative projects, resulting in more rigorous research, capacity Arthur Hanson building in developing countries, better networks spanning the North and the South, and better global connections among He Cui researchers, practitioners, citizens and policy-makers. Linlin Zou IISD’s vision is better living for all—sustainably; its mission is Shelley Clarke to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and Geoffrey Muldoon has 501(c)(3) status in the United States. IISD receives core Jason Potts operating support from the Government of Canada, provided Huihui Zhang through the Canadian International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada, and from the Province of Manitoba. The July 2011 Institute receives project funding from numerous governments inside and outside Canada, United Nations agencies, foundations and the private sector. Contents Introduction...... 2 Sustainability Analysis of China Tilapia Products Supply Chain...... 6 China Aquatic Products Processing and Marketing Alliance Cod Market Supply Chain Analysis...... 14 (CAPPMA) is a non-profit organization. It consists of seafood Live Reef Food Fish Trade (lrfft) Case Study...... 20 producers, processors, traders, distributors, suppliers, and institutions for fisheries research and education, as well as Conclusions...... 29 relevant social entities that provide various services for seafood processing and marketing. Its objectives are dedicated to Recommendations...... 32 improve the self-discipline mechanism among members in List of figures and tables their business operation, to standardize and maintain order in the seafood market, to protect the members’ legal rights, Figure 1: Three Market Supply Chains...... 4 to coordinate relationships among domestic enterprises and Table 1: Tilapia Production and Trends...... 7 international parties, to upgrade technology and management in Figure 2: The Tilapia Supply Chain in China...... 8 China’s seafood industry，to enhance the awareness of credibility needs within the industry and to improve seafood quality Table 2: Cod Production and Trends...... 15 security, to promote the prosperity and stability of markets, and Figure 3: Chinese Importation and to ensure sustainable fisheries development. Further information Processing of Cod...... 16 is available at www.cappma.org Table 3: Leopard Coral Trout: Production and Trends...... 21 Figure 4: Supply Chain Component Linkages for Aquacultured and Wild-Caught Live Reef Food Fish from Source Countries to Hong Kong and Mainland China...... 24

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ISBN: 978-1-894784-46-7 This publication can be viewed online at www.iisd.org/publications/pub.aspx?id=1474 1

Acknowledgements

This report summarizes the main findings and recommendations of the Chinese Global Fish and Fish Products Supply Chain Sustainability Analysis Project. IISD would like to thank the Chinese Ministry of Commerce (MOFCOM), the U.K. Department for International Development (DFID) and the Swiss State Secretariat for Economic Affairs (SECO) for their financial and in-kind support, without which this project would not have been possible. More specifically, we would like to acknowledge the personal commitment and input of Weijing Yin from MOFCOM, Su Zhang and Lin Cui from DFID and Hans-Peter Egler from SECO. Finally, but definitely not least, we would like to thank the team of expert contributors and advisors to the project for their pointed, sometimes challenging, but always compelling, input, questions and overall guidance. The contents of this report represent the views of the contributors. Greening China’s Fish and Fish Products Market Supply Chains

Greening China’s Fish and Fish Products Market Supply Chains1 Summary Report

INTRODUCTION

Over the past two decades, China’s involvement with are not well understood, either within world fisheries and trade in aquatic products has China or outside of the country2. Some increased dramatically, making it the world’s largest of the raw materials supplying China’s producer, consumer and exporter of seafood. China massive processing industry are from will play an increasingly important role in securing aquaculture in China or elsewhere, the long term sustainability of the sector. Its role in some are catches from Chinese vessels market supply chains is especially important. There operating within China’s territorial seas is worldwide interest in greening of these supply and Exclusive Economic Zone (EEZ) or in chains, taking into account sustainability impacts other parts of the world, and some by on species, stocks and ecosystems within China fleets of other nations which then send and elsewhere in the supply chains. International the products to China for processing and certification processes such as those of the Marine then export to markets such as Japan, Stewardship Council (MSC) and various seafood the EU and the U.S. or many other consumptions guides are examples of how this countries. international interest is shifting production, Seafood often moves great distances processing, trade and consumption patterns globally. from point of capture or production 2 China is linked into the complex oceanic before reaching final consumers. During exploitation and management systems in ways that that journey its origin, identity and

1 This is a summary of the full IISD and CAPPMA report Greening China’s Fish and Fish Products Market Supply Chains (2011, 149 pps.) available at http://www.iisd.org/publications/pub.aspx?id=1474

2 The work of Shelley Clarke in studies undertaken via TRAFFIC provides the most coherent picture of Chinese fish trade linkages, along with statistical data bases published by FAO and the Chinese Fisheries Statistics Yearbook. certainly the circumstances of production China has a large stake in attempting to make and processing may be lost or altered. fisheries and aquaculture sustainable, and has Without good traceability it becomes taken a number of steps to address the activities difficult to assess whether the fish or of its own fisheries and processors, but there other aquatic product was obtained and will be pressures for more action in relation to processed in a way that was sustainable. market supply chains. Already there is a strong The criteria of sustainability also need to effort on the part of Chinese producers to ensure be reasonably defined, but generally will health and food safety in aquatic products bound take into consideration social, economic for international trade, for example through and environmental factors. implementation of Hazard and Critical Control Trade in aquatic products is undergoing Points (HACCP) principles. In the years ahead, considerable scrutiny since it is a key sustainability of market supply chains will become avenue for enhancing global efforts on an important part of the mix—both internationally sustainable development. A number and domestically. of issues have been raised in the past The International Institute for Sustainable decade. These include problems such Development (IISD) and the Chinese Ministry of as the import into China of Patagonian Commerce (MOFCOM) have cooperated on analysis toothfish for processing and export to of sustainability of China’s market supply chains 3 markets in North America and Europe. in several major sectors . In 2009, work was 3 Much of the overfishing around the world initiated on market supply chains related to China’s for sharks and rays is for markets in Asia, fisheries and aquaculture, in cooperation with the with China being a prominent consumer. China Aquatic Products Processing and Marketing Chinese exports of aquacultured Association (CAPPMA). Funding was provided by products are subject to considerable British Department for International Development international scrutiny due to reports of (DFID), with supplemental funding from the Swiss contaminants including heavy metals, State Secretariat for Economic Affairs (SECO). antibiotics and other medicines and In addition to providing an overview of some bacteria. The potential exists for non- key general concerns related to environmentally tariff trade barriers being imposed in the sustainable market supply chains and some of form of excessive health and sanitation the important species in Chinese freshwater and requirements. saltwater fisheries, the project examined three fish

3 The “Sustainable Development: China and Global Markets” Project, initiated by IISD and MOFCOM in 2006, with financial support from the Swiss State Secretariat for Economic Affairs (SECO), examined the ecological impacts and shared responsibilities of China and its trading partners in several commodity supply chains. The overall goal of this on-going project is to integrate sustainable development concerns into trade/economic policies of the Chinese government as well as countries supplying raw materials to China and countries consuming Chinese products internationally. The market supply chains include forest, cotton, e-waste and copper. As well, IISD in cooperation with Development Research Center of the State Council (DRC) published a major report in November 2010 on Elements of a Sustainable Trade Strategy for China. Further information on these studies is available at http://www.iisd.org/publications/pub.aspx?pno=1361 Greening China’s Fish and Fish Products Market Supply Chains

supply chains in some detail. The methodology is based on an approach worked out by IISD in previous market supply chain analyses, and draws upon the knowledge and expertise available in CAPPMA and from several international experts knowledgeable about Chinese fish trade and sustainability concerns. Extensive use was made of existing studies of China’s fish trade. This summary report is based on the full report of the study which is available on IISD’s website in both Chinese and English versions. The recommendations to the Government of China contained in this summary report are based on the full report, and have been submitted to MOFCOM for consideration in shaping future policies. Additional recommendations to the seafood industry in China are being carried forward by CAPPMA.

Figure 1: Three Market Supply Chains

Domestic Aquaculture Fish International Domestic Capture Fish International Supply Chain Supply Chain

Pre-Cultivation

Fish Feed and Fish Feed and Other Inputs Other Inputs 4 Cultivation Catch

Fish Farm Production Fish Farm Production Fresh Water Marine Capture Fresh Water Marine Capture Capture Capture Processing and Transportation

Primary Processing Primary Processing Primary Processing Primary Processing

Secondary Processing Secondary Processing Secondary Processing Secondary Processing

Distribution

Tier 1- Tier 3 Wholesaler Tier 1- Tier 3 Wholesaler Tier 1- Tier 3 Wholesaler Tier 1- Tier 3 Wholesaler

Retailers/Restuarant Retailers/Restuarant Retailers/Restuarant Retailers/Restuarant Consumption

Consumption Consumption Consumption Consumption

Tilapia Cod Reef Three types of market supply chains have been international organizations interested examined, as noted in the diagram. The red in working with China on sustainable line is a within China aquaculture-based system fisheries and aquaculture. 3. Overview designed to supply both domestic consumption of species for market supply chain and a major export product. The example used analysis. Notes on nine specific fisheries is the economically-outstanding rise of tilapia and aquaculture supply chains of high aquaculture and trade. China now leads the world interest. 4. Sustainability case study of in production and trade of this fish. The other two tilapia supply chain. 5. Sustainability market supply chains are based on capture fisheries case study of China’s cod supply chain. 6. and involve movement of fish into China either Sustainability case study of live reef food for processing and re-export (green line), or for fish (LRFF) supply chain. 7. Conclusions domestic consumption (blue line). The example of and recommendations. the processing and re-export is frozen cod. This This Summary Report covers material is one of many white-fleshed species caught in drawn mainly from Chapters 1, 4, 5, 6 waters in various parts of the world, sent to China, and 7. Sources of quotations and more often via ports such as Rotterdam processed to detailed information on the topics here 5 finished or semi-finished in Chinese plants, and can be found in the main report. then distributed abroad either as a final product or to be finished into final products at seafood The study was completed in March 2011 plants in other countries. The third market supply at a time of unprecedented interest chain is the live reef food fish trade (LRFFT) mainly in environment and development of grouper species from the Coral Reef Triangle in within China, and the start of the 12th Southeast Asia to Hong Kong and Mainland China. Five Year Plan (2011-2015). This is a This trade is mainly for consumption in Chinese transformative time when China is placing restaurants as a luxury food item. The grouper great emphasis on expanding its domestic fishery also includes a growing component of consumption and is starting to expand aquacultured fish from Taiwan and Mainland China. its foreign direct investment as well as seeking to build new, sustainable avenues The seven-chapter main report from which this for bolstering trade. There is a growing summary is drawn covers the following topics, realization that China will need to to not all of which could be covered here: 1. expand international cooperation, and to Background and Purpose. 2. Trade, Sustainability pay greater attention to ways in which and Engagement covering China’s role in world China can shift its economic growth into fisheries and aquaculture trade, international and less ecologically damaging activities. At Chinese aquatic resources, the significance of the same time it is also recognized that this sector in WTO agreements and action; and job creation, food security and scientific various sustainability criteria for fisheries and development continue to be very aquaculture that may be used in the framework for important goals. analysis; plus results of other relevant studies by Greening China’s Fish and Fish Products Market Supply Chains

SUSTAINABILITY ANALYSIS OF CHINA TILAPIA PRODUCTS SUPPLY CHAIN Tilapia, a tropical freshwater fish from Africa, is now “unsustainable because of issues related one of the most widely-farmed fish types—in more to harmful environmental effects, includ- than 80 countries. Tilapia ranks third in the inter- ing chemical use, waste spilling into national trade of farmed aquatic products, behind waterways, risks of disease and escapes salmon and shrimp. Total production reached 3.5 and weak regulation of aquaculture in million tonnes (Mt) in 2008, out of which 2.8 Mt many producing areas.” Through the were farmed products. Tilapia has become popular Aquaculture Stewardship Council, WWF globally among consumers for its tasty meat, free of has recently released a tilapia steward- intramuscular bones, so that the international de- ship standard for certification. Tilapia mand from North America, Europe, Africa, Mid-East, in Indonesia and Honduras are currently Oceania and many other countries and regions has being certified, but so far not many Chi- been continuously increasing. Tilapia will probably nese tilapia aquaculture businesses have become one of the major sources of animal protein started such a process. in the future, given the expanding demand being China is the world’s biggest tilapia experienced in the global seafood market. China has exporter. The U.S. and Mexico were the become the world’s leading producer and exporter traditional markets, with the U.S. taking of tilapia. A profile of the species, China’s remark- 70 per cent in 2005. The Russian mar- able success in culturing tilapia, and some of the ket share began to expand after 2005, perceived sustainability issues are summarized in becoming the third largest tilapia market 6 Table 1. for China. But Russia stopped importing While international commentary about tilapia for several months during the 2008–2009 sustainability has been relatively positive, sourcing financial crisis. Meanwhile, the EU market from Asia, including China, has been discouraged was growing steadily to become the in a number of seafood watch guides issued by fourth largest export market; it is ex- various NGOs. WWF has generally rated the fish as pected to be the fastest growing market Table 1: Tilapia Production and Trends

Tilapia (Oreochromis niloticus)

Global Production Tilapia (all species) is the second most important group of farmed fish after carp, and the most widely cultured of any farmed fish. (Approximately 650,000 t per year of tilapia are also produced from capture fisheries but none of it from Chinese fisheries). Aquaculture production has grown rapidly since the early 1980s and now totals over 2.1 Mt per year based primar- ily on one species, Nile tilapia (Oreochromis niloticus). Since tilapia can accept feed with a higher percentage of plant proteins (or other agriculture by-products, e.g. manure) and are relatively resistant to poor water quality and disease, they can be cultured intensively and economically. Yield for a skinless fillet is 33 per cent.

China’s Role China’s production in 2008 (1.11 Mt) far surpassed the other top producing countries of Egypt, Indonesia, Thailand, and the Philippines, each of which cultured no more than 300,000 t. 7 China reports exporting only about 200,000 t in 2007 with a substantial proportion of produc- tion consumed in China.. China reported mostly processed exports in the categories of “prepared and preserved” and “frozen fillets” with 64 per cent to the U.S. and 31 per cent to Mexico. U.S. demand is at- tributed to China’s low production costs. The trade figures, however, are shifting with Europe becoming more significant.

Current and Future Trends Global production has grown at an exponential rate of approximately 14 per cent per year. The development of sex reversal techniques for female tilapia in the 1970s allowed for the introduction of male monoculture populations which grow twice as fast and produce uniformly- sized individuals for market. Current estimates suggest that tilapia culture produces more fish protein than it consumes but an ongoing trend toward higher quality products would be expected to lead to a greater use of fish meal and fish oil as feed for tilapia, thus reducing efficiency.

Key Drivers Premium production for higher grade export markets may increase quality standards but decrease efficiency. Dependence on the U.S. market belies a sensitivity to U.S. demand and hence market perception. Some seafood sustainability guides advocate avoidance of Chinese- produced tilapia due to issues relating to operational waste management, antibiotic and pesticide residues, and treatment with carbon monoxide which can mask spoilage. There have been some recent efforts within China to certify tilapia production to various national and international organic, or other “green” standards. Greening China’s Fish and Fish Products Market Supply Chains

in the future. In 2008 some 70 countries received tilapia cultured in China. Mostly the exported product is whole or filleted frozen fish. It is a remarkable success story for farmers and proces- sors, drawing revenue and jobs into the countryside. The diagram describes, in a simplified way, the market supply chain within China. From the environmental point of view the most critical aspects are within China, although there are some concerns about the impacts elsewhere, including fish food sourced from imported fish meal. And there is a good possibility that future growth may have to be mainly through ponds located outside of China due to the scarcity of suitable land and water supply within China. An important point is that preferences within China dictate that domestically consumed fish are often moved around the country as fresh fish, where some 70 per cent of the weight or volume transported is water, and only about 30 per cent fish.

Figure 2: The Tilapia Supply Chain in China

Fry

Feed Irrigation Farming 8

Wastewater and Harvest Releasing sediment Sediment filtrate

Transport

Wastewater and Fishmeal Additive to food sediment and fish Processing

Product Byproduct Reprocessing High value-added

Storage, Freezing, Transport

Sale Based on the extensive information gathered during reduce carbon emissions in the tila- this study, and including recent studies done under pia industry such as rational stocking EU sponsorship on tilapia sustainability in southern density, proper feeding methods, China, CAPPMA has identified the following short healthy and ecological farming mod- and medium term priorities to ensure sustainable els, good operating specifications development: for transportation, refrigeration and • To improve the current domestic standards and processing. to remove inappropriate criteria while adding • To set up a Tilapia Industry Devel- new standards. opment Fund with the support of 9 • To align the domestic criteria with interna- international organizations, such as tional criteria. banks and foundations, to export or transfer technologies to other devel- • To establish a traceability system from pond to oping countries to help solve food dining table. shortage problems. • To research and develop vaccines for disease • To establish a unified supply chain prevention. platform which gives consideration • To implement an integrated tilapia technol- to all benefits from both develop- ogy export through international cooperation ing and developed countries, both projects. The Chinese tilapia industry plays a producers and consumers, and set up leading role in technology for breeding, aqua- standards in various stages of tilapia culture and processing: These advanced, inte- producing, processing, transporta- grated technologies can be exported to other tion and other sectors. It will help developing countries in order to support them to promote the integration of the in development of the aquaculture industry. global tilapia industry. Over the longer term (i.e., the coming decade) IISD’s perspective, based in part on CAPPMA proposes that Chinese producers, assisted its own observations of the Chinese by government and others, take the following ac- situation, and also on efforts by vari- tions, with a focus on globally significant improve- ous groups working internationally to ments: make aquaculture more sustainable, is that there is a tremendous opportunity • To set up a global tilapia information sharing for China’s tilapia industry to become a system that includes all information and crite- global model for sustainable aquaculture. ria for farming, processing, marketing, trading It will be necessary to address challeng- and the latest progress. ing issues at all stages in the market • To develop a low carbon emissions industrial supply chain. The model should be global business model and explore the proper way to in focus since the markets are widespread, Greening China’s Fish and Fish Products Market Supply Chains

and because the species is so important in terms of China, has the potential to be sustain- its potential elsewhere in Asia, Latin America, and, ably conducted. It could eventually be of course, Africa. an important contributor to China’s new The clearest effort to define the sustainable devel- green economy. opment of tilapia has come from the international Other observers, for example, have docu- efforts of the tilapia roundtable dialogue process mented sites in south China where tilapia established by WWF, including a recently released cultivation appears to be undertaken with sustainability standard and certification process. The adequate environmental safeguards. The dialogue produced a set of eight principles that are EU–China Trade Project examined sustain- listed below: able aquaculture potential at a number 1. Obey the law and comply with all internation- of sites in both Hainan and Guangdong al, national and local regulations Provinces in the autumn of 2008. The EU study team reported the following find- 2. Site and/or expand farms to conserve natural ings based on visits to leading companies habitat and local biodiversity operating in southern China: 3. Conserve water resources The management of environmental 4. Conserve fish species diversity and wild popu- sustainability was impressively demon- lations strated at the site visits: all facili- 10 ties well situated without any visible 5. Use resources efficiently signs of unfavourable environmental 6. Manage disease and pests in an environmen- impacts on the surrounding areas; tally responsible manner water resources were well used with farms and hatcheries minimizing on- 7. Ensure food safety and environmental health site water exchange and most waste 8. Be socially responsible water receiving basic treatment before Extensive effort has been put into developing rel- discharge for use as irrigation water evant laws and regulations within China to address or back into the surrounding water; these health, safety and environmental management all sites demonstrated good manage- matters. It is also clear that there has been a con- ment, which lead to a low incidence certed effort, especial on the socio-economic side, of disease and the regulations on the to provide considerable rural employment through use of aquaculture medicines was well the tilapia market supply chain. Thus it may be communicated and understood; all reasonable to consider that tilapia aquaculture, even hatcheries used farmed broodstock on the massive scale currently being carried out in with strict quarantine procedures on Sustainable Maritime Industries Ltd., with tilapia all imported broodstock. All farms and aquaculture operations in Hainan. The company hatcheries exclusively used formu- takes certification seriously as noted below: lated, pelleted feed, which the feed The Company holds HACCP and GMP certification factories produced from good quality from the U.S. FDA and the EU Code Assignment raw materials and without using any of Quality, permitting its products to be sold in waste products, medicinal or hormone these international markets. It has also achieved additives or binding agents. the ISO 9001 quality management system stan- The EU–China team concluded that “with dards certification and the ISO 22000 certifica- the current trend in the EU’s major retail tion for quality in food safety. The Aquaculture and food companies towards implement- Certification Council, Inc. certified that HQS ing purchasing programs for the supply of tilapia farming and processing standards met environmentally sustainable aquaculture Best Aquaculture Practices and Moody Interna- products, the need to adopt an inter- tional Certification Ltd. The Company’s certified national environmental sustainability co-op farming and processing are in conformity scheme will significantly improve China’s with the new Global G.A.P., the Global Partner- supply opportunities.” That is indeed a ship for Good Agriculture Practice, standards for worthwhile observation and one that is Tilapia. The Chinese government gave organic timely, given that as a result of the WWF- certification to the Company’s tilapia processing, 11 initiated Tilapia Aquaculture Dialogue production, labeling, marketing and management there now is not only a set of standards system. formulated around the eight principles The HQ company experience is at the high end of noted above, but also robust indictors what may be required of major aquaculture com- that can be used for certification. It is panies operating in China in the future, certainly anticipated that the certification process over the 10 year time frame of further development will operate via a new body, the Aqua- laid out by CAPPMA. But what of the many smaller culture Stewardship Council. However, it companies and individual farmers that have con- is not clear at this stage whether most tributed to the growth of this industry? And what large Chinese enterprises will partici- of at least some of the larger businesses that are pate, at least in these early days of such probably operating somewhere well below the high certification. sustainability performance level by comparison to Clearly, however, there is interest, es- the ideals of existing regulations and certification? pecially on the part of companies with Or companies that are selling into markets that are direct ties to the U.S. and perhaps also less demanding on sustainability concerns than the from other countries with considerable U.S. or the EU countries? experience and pressures for certifica- These three questions reflect the concerns of how to tion and traceability. An example is HQ bring an entire sector first of all into the dialogue on sustainable development, and then into full compliance and, when appropriate, certification of their efforts. At least for some of the international Greening China’s Fish and Fish Products Market Supply Chains

markets this has already been done by Chinese tors such as extreme weather like the enterprises with respect to HACCP (Hazard Analysis severe storm that impacted south China and Critical Control Points) which is a self-analysis tilapia operations in 2008. Hopefully necessary for exporting seafood products into the the AIP effort will be helpful to linking U.S. If the obligation is there (whether by regula- smallholders into the broader picture tion or market imperatives), or if there is a suf- of sustainable aquaculture. Many more ficient market opportunity opened up by embracing such efforts will be required, given the tilapia certification then it will almost certainly number of farms and processors in local happen within China. But it may take considerable areas of south China. This will require the time. involvement of local governments and the The U.S.-based Sustainable Fisheries Partnership, relevant national agencies including the which has a sustainable tilapia program in China Ministry of Environmental Protection, the under its Aquaculture Improvement Partnership (AIP Ministry of Agriculture and others. is “an alliance of buyers, suppliers and producers”), For the larger operations, especially sees a great need for capacity building, including those involved with export operations, mechanisms to improve the livelihoods of small- the role of CAPPMA to promote sustain- scale producers. The objectives of the partnership able aquaculture should be helpful, but a are to: more concerted and visible effort on the • Convene producers to reduce potential risks part of individual companies is needed, associated with tilapia farms in the natural especially vertically integrated opera- 12 environment and to prevent their introduction tions that include several components in pristine water bodies. of the market supply chain. The major companies should consider taking an • Improve tilapia aquaculture management and active role on introducing the new tilapia compliance with eco-label standards. certification standard within China. This • Create an environment where different stake- could be useful in ensuring “branding” of holders (producers, processors, exporters, etc.) Chinese tilapia aquaculture as sustainable can discuss and work together towards the in the seafood markets of the world. And sustainability of tilapia. it could help to align the industry with the government’s goals of seeking green • Assist buyers in developing procurement poli- economic growth. WWF-China could be a cies. helpful partner. • Improve small farmer capacity to achieve sus- Also important is creating awareness on tainable farming. the part of Chinese consumers of the desirability of purchasing eco-certified This initiative is being undertaken first in Hainan, aquaculture products. Tilapia is not by with work already underway. A number of lessons any means among the most favoured fish learned are useful to consider. These include: impor- within China, and there is a desire on tance of involving key stakeholders; collaborating the part of industry to stimulate demand, with local institutions; taking into account regional especially for frozen fillets. If tilapia is or other characteristics; recognizing the value of perceived as a product that is cultivated demonstration farms; and taking into account fac- in an environmentally sustainable fashion it might help to stimulate domestic sales. This consumer awareness-raising should be left reputation as a country seeking sustain- mainly in the hands of the aquaculture industry, if able development. Thus China should be possible, but it will require leadership, by compa- prepared to draw upon its best environ- nies and by associations such as CAPPMA. mental management experience and best aquaculture practices in tilapia ventures The third question, pertaining to Chinese aquacul- undertaken in other countries. Such an ture products being sold in poorer countries, and approach will require guidance from very likely also pertaining to the conditions for government, understanding and diligent investment in tilapia aquaculture ventures in Africa, 13 review on the part of the financial sector Latin America, and other parts of Asia, should be in China providing loans, lines of credit, addressed through national-level policies. Obviously and development assistance for foreign it would not be in China’s interests to sell really investment. low-grade food products to anyone. However, it may be difficult to differentiate between products Overall, China’s tilapia aquaculture is now that have a large environmental impact and those one of the highest profile fishery activi- that have been produced sustainably unless there ties in the world today. It has achieved a is adequate traceability and other safeguards as- level of economic success that now must sociated with certification or other reliable market be safeguarded by creating a sustain- mechanisms. In the case of tilapia products it would able development approach that reaches be ideal if there could be a simple standard set both smallholders and large operators. that would provide for basic product quality and The regulatory framework within China to some recognition of basic environmental conditions address this challenge is quite extensive, being met in the production and processing stages. and the means to provide assurance via This approach would not be as comprehensive on international standards and indicators is sustainability matters as the WWF standard. also at hand. Thus considerable progress towards sustainable tilapia aquaculture That China will need to look abroad for siting some should be possible over the coming period of its future aquaculture growth is almost a given. of the 12th Five Year Plan (2011-2015). There are not enough suitable land and water Without such progress it is likely that resources to accommodate the likely future growth some markets will weaken, especially in of freshwater aquaculture. Growth of tilapia farm- North America and Europe where sustain- ing will be affected unless there are opportunities ability questions about Chinese tilapia to invest in pond development elsewhere in the products are likely to be raised, as they tropical world. Such expansion should be done in have been in the past. an ecologically-sound way if China is to build a Greening China’s Fish and Fish Products Market Supply Chains

COD MARKET SUPPLY CHAIN ANALYSIS

Cod (Gadus morhua in the Atlantic, and Gadus there also are some raw materials shipped macrocephalus in the Pacific) has long been one to China that are likely taken from IUU of the most heavily utilized whitefish in western fisheries. There are many problems of seafood markets. Cod’s long-standing top rank in traceability and practical difficulties for the EU’s whitefish supply was usurped by [Alaska] downstream final processors in countries pollock (Theragra chalcogramma) only in 2008 when abroad being able to make accurate 906,000 t of pollock and 849,000 t of cod were im- statements about the sustainability of ported. Nevertheless, cod remains the highest value supply for the semi-processed prod- whitefish species by a substantial margin (generally ucts coming from China. It is clear that double the price of pollock). China is the largest improvements are needed and these will supplier of frozen wild-caught whitefish fillets to require international cooperation within the EU market contributing 36 per cent of the total the seafood industry, and by government. supply. However, due to recent, strong growth in the Chinese laws and regulations relevant to market for Pangasius (a species of farmed catfish), the supply chain for cod include customs Vietnam surpassed China as the leading supplier regulations applied by the China Customs of whitefish to the EU in 2008. Although these Administration. These regulations specify statistics indicate that cod, pollock and Pangasius the requirements for import documenta- are all important species to China’s fish process- tion and clearance, i.e., the certificate of ing trade, the depleted status of several cod stocks origin, and regulations and procedures for suggest that this species is of greatest concern from auditing product yields for the purposes 14 an ecological perspective. China’s supply of cod for of duty assessment. China classifies all processing derives from stocks in four major fishing processed fish products as being “prod- grounds (northeast Pacific, northwest Pacific, north- ucts of China” if the value added during east Atlantic and northwest Atlantic). The status processing increases by ≥40 per cent or of these stocks range from severely overfished to the four-digit tariff code heading chang- resilient. A highly summarized profile of the global es, e.g., from 0303 for frozen fish to cod situation and China’s role is shown in Table 2. 0304 for frozen fillets. While this policy Based on the IISD Global Market Supply Chain analy- has attracted some criticism on the basis sis, a diagram has been prepared for China’s import, that it could serve to conceal the true processing and re-export of cod. It is a complex set origin of IUU-derived fish products, it is of supply chains, in fact, with points where there has been advocated by many countries as are already some Marine Stewardship Council certi- appropriate. The extent to which China’s fied fish being delivered and processed in China. But fish processing industry would benefit Table 2: Cod Production and Trends

Cod (Gadus morhua and Gadus macrocephalus)

Global Production Two species of cod comprise the majority of global production: Atlantic cod (Gadus morhua) and Pacific cod (Gadus macrocephalus). Both species are temperate, pelagic whitefish caught primarily by midwater trawl. Currently catches of Atlantic cod are roughly 775,000 t per year with the major fisheries conducted by Norway, Russia and Iceland. Pacific cod catches cur- rently total approximately 332,000 t primarily by U.S. fleets with considerably smaller catches by Russia and Japan. Yield ratios for fillets are slightly less than 50 per cent. A portion of the U.S. Pacific cod fishery (116,000 t) and a small segment of the Norwegian Atlantic cod fishery (5,000 t), both of which are longline fisheries, are certified under the Marine Stewardship Council (MSC) Ecolabel.

China’s Role 15 China processes 110,000 t of cod products for the European Community and U.S. markets. This amount equates to approximately 15–20 per cent of the global catch. Although cod are primarily imported to China for processing and re-export, a small amount of product likely remains in China for consumption. Although cod is undoubtedly a major processing trade spe- cies, the reliability of China’s trade statistics for cod may be compromised by mixing of cod and pollock under the same commodity code. There is a small cod fishery in China’s Yellow Sea (21,000 t per year). These fish are consumed domestically.

Current and Future Trends Atlantic cod catches peaked in the late 1960s at nearly 4 Mt but have collapsed to roughly 20 per cent of that level. Pacific cod catches have declined slightly from levels of over 400,000 t in the late 1980 and early 1990s. Pacific cod is considered to be resilient to fishing pressure. Small quantities of Atlantic cod (≤14 t) have been farmed in recent years but several major producers are struggling or have closed down.

Key Drivers NGOs’ consumer campaigns may have dampened demand for cod by highlighting problems with IUU fishing and stock declines. A few Atlantic cod fisheries appear to be rebuilding and have applied for MSC assessment. IUU fishing for cod in the Barents Sea has been successfully com- batted by NEAFC port State controls. Limited incidents of circumvention of these port State controls by landing in China have been reported. Greening China’s Fish and Fish Products Market Supply Chains

Figure 3: Chinese Importation and Processing of Cod

Caught by fishing Primary Processing Secondary vessel (travel or Landing Processing longline) onboard vessel P r Potential Change in Ownership o Transhipment c e Containerization or other Import Clearance s catch and transport (to China) Transport for Export s i Finishing/wholesale Import Clearance Emport Clearance n (to receiving country) (to China) Fillets g

Mince Tertiary Processing Wholesaler Restaurant

catch and transport Retailer Consumer Processing Finishing/wholesale Wholesaler, Retailer, Retail 16 Restaurant or Consumer in another country Retail

from, or be disadvantaged by, a change in World Trade Organization (WTO) rules of origin which might force China to modify this current practice remains to be assessed. Regarding sanitary issues, the China Administration of Quality Supervision Inspection and Quar- antine (CIQ) and its regional China Inspection and Quarantine Bureaus are responsible for sani- tary checks of imported materials for processing and outgoing finished products (exports). CIQ is also responsible for day-to-day auditing of processing facilities. CIQ’s traceability systems and tools are developing rapidly and already represent a solid foundation for documenting the origin of processed fish materials back to the original imported shipment. However, their primary focus is food safety, and a recent decision to create a new system in response to the EU’s IUU fishing regulation to be managed by the China Bureau of Fisheries. The responsibility for maintaining documentation of the origin of China’s fish raw materials back to the Chinese fishing vessel, as required under the EU IUU fishing regulation and under catch documentation schemes, has been assigned to the China Bureau of Fisheries (BOF). The BOF is responsible for validating the catch and trade documents accompanying imports of these species to China. BOF is also the lead agency for ensuring that catch certificates are provided with all fish shipments imported to China for processing, and for ensuring that these certificates remain linked to the product up until the point at which they are exported from China. It appears that BOF, through its non-governmental coordinating body CAPPMA, is in the process of implement- ing a tracking system similar to that currently There are a number of important conclusions from employed by the China Customs Administration for the case study, starting with traceability needs. tracking product yields. Since the system was fully China’s role is a mid-chain one, since in most implemented on January 1, 2010, it reduced the cases it is neither harvesting the fish nor con- IUU fishing products going into China for re-export suming it. The key sustainability issue for China processing effectively. therefore seems to be the extent to which China’s handling of the fish allows full traceability be- There are no multilateral treaties specifically tween the fishery and the consumer. Establishing relevant to the trade of cod into China for process- such traceability allows for market preferences for ing. Management of cod stocks is the responsibil- sustainable products to be transmitted through the ity of RFMOs such as the North Atlantic Fisheries supply chain to encourage sustainable harvesting Organization (NAFO) in the northwest Atlantic; the practices. The lack of such traceability breaks the International Council for the Exploration of the Sea linkage between markets and fisheries, and negates (ICES) and Northeast Atlantic Fisheries Commission the value of any sustainability policies put in place (NEAFC) in the northeast Atlantic; or of national “downstream” from the point of extraction/catch. authorities (e.g. in the North Pacific where the gov- ernments of Russia, the U.S., and other countries At the moment there are two separate traceability manage cod stocks in their respective EEZs). There systems operating in China: the sanitary system are two voluntary initiatives by industry to combat managed by CIQ and the new EU catch certificate IUU fishing for cod in the Barents Sea and in the scheme managed by Bureau of Fisheries (BOF) del- 17 Baltic Sea. Much work remains before the major- egated to CAPPMA. These systems do not appear to ity of the world’s cod stocks could be certified as be closely linked. The sanitary system is covered in sustainable. detail in a 2009 TRAFFIC report. The new EU catch certificate scheme is well understood from the The Marine Stewardship Coun- perspective of the EU requirements, but, because cil’s (MSC) sustainability certi- it has only been in operation for a relatively short fication program requires strict period, the procedures used by China to comply chain of custody standards to with the EU requirements may require adjustment. be upheld, and there have been This will require thinking that goes beyond merely some incidents of facilities in satisfying the requirements of the EU catch certifi- China having their certificates cate scheme. withdrawn due to non-com- pliance. However, in principle, There are many sustainability issues which are since CIQ’s traceability system not necessarily covered by this scheme since it is requires the same basic prin- aimed only at establishing legal provenance based ciples as the MSC, there should be no fundamental on confirming that the fishing vessel was properly problem for Chinese processors in complying with licensed. In addition, there are many imported fish the MSC’s eco-label chain-of-custody requirements. raw materials which are not subject to the EU catch Some China-based fish processing operations are certificate scheme. By focusing only on the EC accredited to the British Retail Consortium’s (BRC) requirements, China leaves itself open to a range of food safety standard. While this is an important accusations of “laundering” illegal or unsustainable step toward ensuring quality, this standard does fish, as was the international criticism several years relate directly to sustainability issues. ago concerning Patagonian toothfish processed in China from fish taken in Antarctic waters. Greening China’s Fish and Fish Products Market Supply Chains

Beyond the EU catch certificate scheme, China needs to have been MSC certified since late 2010. consider traceability requirements arising from Regional Chinese reprocessors could accelerate the Fisheries Management Organizations (RFMOs) catch docu- demand for certification by setting goals mentation schemes (tuna and toothfish), potentially CITES for increases in amount of MSC certified listed species (e.g., concerning the on-going debate about fish, and also by expanding the range of the status of Atlantic bluefin) and schemes developed by processed fish types. countries other than the EU, especially with regard to the Improvements are quite urgently needed U.S. China should also consider how to maintain trace- in the fish statistical data system. At ability for certified sustainable fish which do not fall under the moment, many problems exist in the any of the above regulatory systems. In all cases, the key Chinese data gathering system, includ- point is to link documentation attached to the shipment ing misidentification of species, problems at import to documentation attached to the shipment at with accuracy concerning the amount export. While the provision and use of the information is of fish recorded (and the actual origin) not China’s responsibility, this linkage clearly is. However, and other aspects related to traceability. at present, the responsibility is split (or perhaps even These are not problems that China can duplicated) between different government agencies and solve on its own, but because the per- it appears that some important information is being lost centage of the world’s fish catch moving because of the lack of a coherent system to hold it. through China is so high, it is a strategi- Options for China to respond to current and future pres- cally important country in terms of ad- sures for traceability of fish supply beyond documentation dressing these issues. It is important to of legal provenance (e.g., exact species identification, do so for a number of reasons. First, it is more precise location of catch data, and fishery informa- essential in order to control IUU. Second, tion such as gear type, etc.,) need to be explored. Recom- it is the fundamental way to address 18 mendations should be made in a more fine-grained way, for traceability and, ultimately, contribute to example, related to fisheries from particular regions, par- sustainable fisheries management. Third, ticular fleets, and with greater identification of species. It better statistics will lead to greater will be necessary to improve statistical data gathering, and confidence and credibility with partners to work closely with the seafood processing industry and in the market supply chains, especially as retailers who increasingly are concerned about traceability. they face increasing scrutiny on issues of As the CEO of one major North American fish processor sustainable, responsible fisheries. mentioned during the latest global seafood conference The improvements within China need to held in Vancouver in February 2011, the coming five years be done in a perhaps more coordinated will be a shift away from past practices and will place em- fashion among different agencies, and phasis on the practices of the entire market supply chain. in a way that not only meets immediate Chinese processor participation in sustainability certifica- needs and demands from outside coun- tion needs to be increased. One of the areas for attention tries and bodies such as the EU, but also is increasing the percentage of MSC certified reprocessed in a way that genuinely builds a capac- fish handled by Chinese seafood companies. This is ity within China to extract the maximum particularly a concern for sources from countries such as value out of its information base. This Russia. It is good that Barents Sea cod and haddock be- should be considered part of the trend ing caught by Russian ships for the Ocean Trawlers Group towards scientific development in China. Statistical data gathering in interna- those of international trade, creating even greater scale than now tional fisheries and in the movement of exists. The advantage of doing so would not only relate to the raw product, semi-finished, and fully- financial bottom line, but could help to expand certification and processed product requires a lot more co- other sustainability best practices to the domestic marketplace. operation among the international bodies Another important matter is working conditions, pay scales and responsible for such monitoring, and the other socially-significant matters pertaining to large fish process- actors directly involved in the supply ing operations. These have not been receiving the same level of chains. With modern data management external scrutiny as some other sectors such as the electronic tools, it should be possible to be much assembly plants and some other export-oriented industries. This more precise about these transfers and could change at any time, but even without external drivers, the process should be much more open workers will be demanding more in the years ahead—not only in and transparent. China should consider a income, but also improvements in health and safety, and ameni- more proactive role because it is involved ties important for quality of life including those in the immediate at such a large scale, and also because environment of the work place. Making progress on such issues is it is now developing skills and personnel necessary for the reprocessing industry to thrive. probably beyond the level of many other countries. The question is, why bother? Fortunately China has learned to turn what others might consider The answer is the same as for any other waste into revenue streams as products. Inedible fish parts are natural resource commodity. Knowledge rather fully utilized, including skin, bones, oil, etc. This is a way of sources and accurate trading informa- to meet rising demand for fish meal, and for higher value products 19 tion can translate into security of supply such as cosmetics, nutraceuticals, and chemical ingredients. It is and competitive advantage in export a means to reduce pollution in the vicinity of fish plants. product marketing. But there is still room for improvements, including building pollu- The social and economic benefits of tion prevention rather than pollution control strategies, reduction fish processing for re-export need to be in water use, better energy efficiency and consideration of how optimized. The remarkable transformation to implement low carbon practices. In line with priorities of the of the world’s fish processing brought 12th Five Year Plan, fish processing plant operators should con- about by the efficient and inexpensive sider how their operations could meet environmental objectives Chinese seafood processing industry has that will help to meet targets for reduction of harmful nitrogen also brought employment to a substantial compounds, greenhouse gases, and other pollutants. number of Chinese workers, even though It is encouraging that Chinese large-scale fish processing, as ex- the actual numbers are difficult to ac- emplified by cod reprocessing has reached a stage where genuine curately determine. It is likely that the environment and sustainable development progress is possible. story is far from over. Indeed, it would It is a different industry today compared to a decade ago, and it unfortunate for the industry if it should is fortunate that despite much of the dismal international news remain at the current level of sophistica- about the state of ocean fisheries, there is evidence of the new tion and approach. models such as certification and traceability beginning to take There should be considerable potential hold, and of modern facilities in tune with the need of demanding to move into arrangements where more markets such as some in the EU. This decade offers the opportu- complete processing takes place in China, nity to make a transition where processing of fish in China will with a broader range of value-added expand and support the global effort for sustainable fisheries. projects. This is in line with national priorities. It might also be possible to integrate the domestic market needs with Greening China’s Fish and Fish Products Market Supply Chains

LIVE REEF FOOD FISH TRADE (LRFFT) CASE STUDY

The LRFFT supply chain study is quite different in the concern emanates from the issue of nature from those described in the previous two destructive fishing practices such as the chapters, involving the import of “live” coral reef use of cyanide to capture fish, which fish species, especially grouper (family Serranidae) cause collateral damage upon reefs and and snapper (family Lutjanidae), drawn from the other non-target species. However it is Indo-west Pacific and certain parts of the Indian the more common issue of overfishing, Ocean, but principally from the Coral Triangle (CT) and particularly the capture and retention countries adjacent to the South China Sea. One of juvenile or undersize fish, that poses of the most important species is the leopard coral the greatest threat to the sustainability trout, which is extensively distributed and heavily of this trade. fished. In some ways it is a proxy for many other The value added within the market supply species in the analysis. A summary of information chain in Hong Kong and Mainland China about this species is provided in Table 3. is at the retail level, since the consump- While LRFF are widely consumed in East Asian tion of these fish is extremely popular countries, they are most well known as a high value at higher-priced seafood restaurants, food for consumption in the restaurant trade, where especially in Southern China and Hong demand has historically been concentrated in Hong Kong. The fish are consumed at wedding Kong and southern China. Most LRFF enter Mainland banquets and on festive occasions such China as re-exports from Hong Kong, but there is a as the Spring Festival. During periods of growing trade directly from the producing coun- high demand, the wholesale price may 20 tries to Mainland China. Moreover, the distribution rise to over 1400 RMB (about US$200) of these fish within China is expanding northward per kilogram. rapidly and there are now burgeoning markets for Historically, most LRFF have come from LRFF in Shanghai and Beijing as well as a number wild-capture, but with rapid improve- of second-tier cities such as Chengdu. In addition, ments in breeding and farming technol- there is now a substantial aquaculture trade for ogy there is an increasing volume of some species, including fish cultured in Taiwan and grouper and snapper species coming to exported to Mainland China. The Live Reef Food markets from full-cycle aquaculture (FCA) Fish Trade (LRFFT), while a comparatively small fish- production. While many of these culture ery in terms of volume, is a highly valuable fishery operations are based in the CT countries, estimated to have a retail value of up to a billion mainly Indonesia and Malaysia, Mainland dollars annually, according to WWF. China has started to culture reef fish There has been considerable concern expressed (especially groupers), with an estimated about the sustainability of this trade. Much of Table 3: Leopard Coral Trout: Production and Trends Leopard Coral Trout (Plectropomus leopardus)

Global Production This species (known by the common names coral trout, leopard coral trout, and leopard coral grouper) is found in reef habitats throughout southeast Asia and northern Australia. The only catch reported to FAO of leopard coral trout was 6000 t by Indonesia in 2000. However, as many of these fish are likely to be caught by small-scale, artisanal fishers in developing coun- tries, reported catches are likely to be underestimates. The supply chains are characterized as long, complex, and with high transport costs controlled by dealers in Hong Kong.

China’s Role Commodity codes for Mainland China do not distinguish this species. However, it is estimated that about 60 per cent of the international trade in live reef fish transits Hong Kong, with about 50 per cent of this destined for Mainland China. The annual quantity and value of the 21 trade through Hong Kong is estimated at 13,000-14,000 t and US$400 million. Leopard coral trout comprised about half of the live fish reef traded during a Hong Kong survey in 1999- 2003 with a wholesale price of US$36 per kg (mid-to-high range among live reef fish).

Current and Future Trends Leopard coral trout imports to Hong Kong increased steadily from 2000-2007 to over 3000 t per year primarily from Australia and the Philippines. Live reef fish fisheries in southeast Asia are considered to far exceed sustainable levels. With the exception of Australia, most fisheries lack appropriate control structures suggesting that sustainability is unlikely to be achievable in the short term.

Key Drivers The International Union for Conservation of Nature (IUCN) Red List notes concerns for P. leopardus associated with declining catch rates and targeting of juveniles for “grow-out” operations, thus reducing spawning populations, as reasons for listing this species as “near threatened.” Other concerns include destructive fishing techniques, vulnerable life history characteristics, and potentially increasing demand by Chinese consumers. There have been some experiments with this species involving use of coded wire tags to facilitate traceability. Greening China’s Fish and Fish Products Market Supply Chains

50 per cent or more of domestic demand being under CITES. At present, the grouper met from cultured fish. fisheries appear to be highly damaging to Efforts to reform and transform this trade have coral reef ecosystems, so that short-term been underway for a number of years through income gains by fishers, traders and oth- various international bodies such as the World ers may lead to longer-term decline and Wildlife Fund (WWF), The Nature Conservancy loss of livelihood. (TNC), Conservation International (CI) and na- tional non-government organizations; enabling agencies such as the Asian Development Bank, Structure of the Worldfish, Australian Centre for International Grouper Supply Chain Agricultural Research (ACIAR) and the Secre- To understand grouper supply chains, tariat of the Pacific (SPC). production must be examined from both Despite ongoing efforts to reduce resource wild-capture and aquaculture sources. and environmental impacts, success has been Wild-caught grouper tend to be mainly limited and the LRFFT continues to pose harvested by non-Chinese national major challenges to future sustainable use of fishermen, but may be transhipped in 22 this marine resource. There remains a need whole or in part by Chinese vessels. For for a whole chain-of-custody approach that cultured groupers, China is the world’s would support responsible fisheries capture largest producer of “low-value” grouper and aquaculture through trade mechanisms species, almost all of which would be for and market-based initiatives. Various meet- domestic consumption but some aquacul- ings, most recently an Asia-Pacific Economic tured grouper species sold in China are Cooperation (APEC) sponsored gathering held imported. in Bali in March 2011, have attempted to find The grouper supply chain for wild-caught solutions involving producers, traders and species and for non-mainland China the LRFFT demand side. Several years ago a cultured product consumed in mainland voluntary sustainability certification concept China can be considered in two distinct was proposed, but uptake to date has been nil. stages. The first stage, which is well There are concerns that some species such as documented, is from the fishing grounds the humphead wrasse will become very scarce in source countries to the point of arrival to the point of being listed as endangered in Hong Kong, which itself is a major consumer of LRFF. The next stage of the supply chain from the point of entry into Fish too small for market are kept in floating cages Hong Kong, via air or sea shipment, into and “grown-out” until they reach marketable size restaurants in Hong Kong or for re-export (500–600 grams) while “good” size fish are trans- into and distribution throughout main- ferred to hubs for export to demand markets, either land China is less well understood. The by sea or air, with the mode of transport dictated diagram provides a schematic overview by the opportunity to access air transport and the of the various market supply chains. In value of the fish. Based on available data, more the diagram, Coordinator describes the than 70 per cent of all LRFF imported into Hong first collector of LRFF from the fisher Kong are transported by air, although this is higher and who usually operates at or near the in some countries (e.g. Australia, Philippines) where fishing grounds, particularly when remote nearly all LRFF exports are delivered by air. Propor- from major transit hubs, while Collec- tions also differ by species, with more than 95 tor describes the second buyer who is per cent of leopard coral grouper transshipped to responsible for transhipping fish to the Hong Kong by air as compared with around 50–60 point of export, and Exporter refers to per cent for lower value species such as Green and the agent responsible for transporting Tiger grouper. The reliability of these estimates is LRF to consumer markets. questionable, due largely to there being no require- ment for Hong Kong registered live transport vessels 23 Because many fishing grounds for LRFF to declare their imports. Despite the AFCD having a are remote and distant from major voluntary declaration system in place, it is regarded markets, and supply chains are complex, that estimates of LRFF imports into Hong Kong via custody of the fish will pass through fishing vessels capture only 30 per cent to 40 per many different agents before reaching cent of all sea shipments. their final destination, mainly restau- rants. The market chain can be shorter Those LRFF remaining in Hong Kong are recondi- in some countries than in others. The tioned for further short periods before being passed supply chain originates with fishers who onto wholesalers and retailers (e.g., restaurants) for catch fish using preferably hook-and-line purchase and consumption by a consumer at home but also other means including poisoning or display in tanks before being purchased by the with cyanide and use of explosives. They consumer. Those LRFF being re-exported to mainland sell their catch to coordinators and col- China may be transshipped by air, by road or by sea, lectors who consolidate catches near the although sea transport is widely seen as the most fishing grounds in holding pens (ranging widespread means of transportation. from floating sea cages to land-based tanks). Greening China’s Fish and Fish Products Market Supply Chains

Re-Export of LRFF to FiGure 4: Supply chain component linkages for Mainland China aquacultured and wild-caught live reef food fish from source countries to Hong Kong and mainland China The only known records of re-exports of LRFF to mainland China are retained WILD HARVEST by the Hong Kong Agriculture, Fishery and Conservation Department (AFCD). FISHER COORDINATOR Market size fish (Fish caught by Hook & However these are considered to be (Local Collector – catches Line, Traps, DFP) unreliable estimates. Compounding the consolidated in sea cages) unreliability of these data is the route by which most LRFF are thought to enter Juvenile (sub-market mainland China. For those LRFF imported COLLECTOR size fish) (Consolidates and into Hong Kong, most are re-exported to tranships to air export mainland China using widely acknowl- hubs) edged informal or unofficial trading Broodstock 24 routes—transported by sea across the Capture “Grow-out” of juveniles in sea cages border to Yantian and then by road to EXPORTER (Exports by Shenzhen before distribution throughout Sea or Air) China (historically mainly to Guangzhou but increasingly to Beijing and Shang- hai). Furthermore, there is an unknown quantity of LRFF shipped from source AQUACULTURE countries which are transferred at sea, just before entering Hong Kong waters, Transhipment to vessels bound for mainland China. HATCHERY mainly by Sea (Full-cycle According to the AFCD, official re-ex- mariculture) ports of LRFF to mainland China account for only 4 per cent of all re-exports, with the main destination ports being Macao and Chinese Taipei. However, market FRY/FINGERLING FARM GROW-OUT interviews conducted by WWF Hong NURSERY (Land-based grow-out) (Land-based Pond or Kong in Shenzhen suggest a somewhat Sea Cage) different breakdown. Based on recorded imports into Hong Kong of roughly 3,600 t of leopard coral grouper in 2009, ap- Catching, Production, Transport – Source Country proximately 20 per cent of these can be accounted for from an By Air IMPORTER By Sea estimate of trading volumes given (Imported into Hong WHOLESALER/ Kong DISTRIBUTOR by a small sample of traders in Shenzhen; suggesting that the es- timate of 50–60 per cent of Hong IMPORTER By Sea Kong imports being re-exported to (Imported into Hong RETAILER mainland China may be reasonable. By Sea Kong Trade agreements between Hong Tran-shipment Kong and mainland PRC have TRANSFER AT SEA By Sea meant lower tariffs on LRFF enter- (Not imported into CONSUMER Hong Kong ing mainland China through Hong By Air 25 Kong than on those entering China IMPORTER Illegal Re-export into directly. While China has now Legal Re-export into (Directly into China) Mainland China joined the World Trade Organiza- Mainland China tion (WTO) and is entering into bilateral and multilateral Free Trade Agreements (FTAs), which will significantly reduce tariffs, By Air By Road By Sea WHOLESALER these have yet to take effect, making Hong Kong still the most IMPORTER IMPORTER attractive option for trade with (Imported into Mainland (Imported into Mainland China) – Shenzen mainland China. Despite this, and China Guangzhou) RETAILER with LRFF entering mainland China By Air continuing to attract a tariff of 12 per cent, there remains a strong incentive to avoid this charge. At DISTRIBUTOR CONSUMER (Distributed to Northern present, there is limited capac- and Central China) ity to record and monitor such imports or trade between Hong Kong, China and mainland PRC, Catching, Production, Transport – Source Country Transport and Marketing, Hong Kong Transport and Marketing, China Greening China’s Fish and Fish Products Market Supply Chains

and given the relative insignificance of the LRFFT • High consumption of fish protein compared with other traded seafood commodities by aquacultured LRFF and other (e.g., cod, pollock, tilapia, and shrimp), more needs issues regarding sustainability of to be done by Chinese authorities to eliminate these farmed groupers within China, while loopholes. At present, the traceability of product demand continues to rise in many within China is difficult, especially in the rigor- parts of China. ous fashion required for any type of sustainability Coupled with these sustainable develop- certification. ment concerns is a set of difficult man- The live reef food fish supply chain presents major agement, administrative and institutional challenges for shifting from the current practices to matters for urgent attention. The three more sustainable approaches. The key unsustainable most important are: elements that need to be addressed are the following: • Significant gaps in statistical data • Overexploitation of a number of species, often and scientific information needed with fishing practices that have collateral to fully understand the dynamics of ecological damage to coral reefs and to non- reef fish stocks under various pres- targeted species. sures and to accurately determine the magnitude of trade flows into • Extensive IUU (Illegal, Unregulated and Unre- the main markets, especially into ported) fisheries throughout much of the vast China. These problems need to be 26 Coral Triangle area. tackled by producer countries and • High demand and expanding trade of threat- the importing countries, especially ened species such as the humphead wrasse Hong Kong and China. Regional and without adequate regulatory safeguards re- global fisheries and environmen- quired under CITES. tal organizations, especially FAO, regional trade agreements such as • Substantial mortality as a consequence of some those between ASEAN and China, transportation methods between capture and China and Taiwan, and global trade the final marketplace. bodies such as the secretariat of • Capture of juvenile fish before they have a CITES could be helpful in setting chance to reproduce, and the grow-out of these out protocols for data gathering, fish by feeding them other fish to fatten them and acceptable practices. The issues to market size. associated with IUU are critically important. • Inability to implement sustain- for both. There are major opportunities if a able development initiatives at the long-term sustainable aquaculture vision can most strategically important points be developed. This vision will include consid- along the market supply chain and erable science and technology investment, to secure cooperation from all the consideration of aquaculture expansion within important players, including produc- China and also in some of the Coral Triangle ers, traders, wholesale and retail countries, improved traceability of products, operators. Entrenched approaches by and mechanisms to ensure harvest of young the important players at all levels fish and other resource management associ- (production, trade and consumption) ated with reef fish aquaculture is kept within reward continuation of unsustain- sustainable limits. able practices for wild reef fish In the coming years the international dialogue exploitation. Generally the players about sustainable live reef food fish trade is likely fail to engage on these issues in the to become much more intense. Certainly it will broader context of either sustain- involve major international organizations, both able fisheries or sustainable trading intergovernmental and non-governmental, the Coral arrangements. Awareness on the part Triangle countries, and, of course, the governments of consumers in China and Hong of reef fish consuming countries in Southeast and Kong appears to be limited, so that East Asia. Much of the focus will be on the links in pressures for sustainable seafood the supply chain, especially those between primary choices are markedly less than in 27 producers and entry into Hong Kong and China. western Europe or North America, These elements of the trading system do not appear for example. to be well-prepared for a transition. This is where the proposed LRFF Thus the steps required for the move towards sus- certification system that so far has tainability of reef fisheries and aquaculture should not gained much support on the start with awareness-raising and action in the part of producers and traders could marketplaces where demand is greatest: Hong Kong be extremely valuable. It would and mainland China’s coastal large cities and ports. provide a basis initially for dialogue The governments of Hong Kong and mainland China among the important members could move quickly to improve the statistical data of the market supply chain, and systems to help close trading loopholes in ports eventually could serve as the basis of entry such as the limited reporting from ship for agreement on what constitutes landings. It is also possible to develop traceability a sustainable approach. It is likely and chain of custody systems for some of the most that the impetus for a shift will threatened species such as the humphead wrasse, have to come from non-governmen- as quantities are fairly limited, and mostly move by tal organizations, but it is necessary air. This will require cooperation from airlines so for both industry and government to that they do not move shipments without adequate participate. documentation of species, and eventually, of cer- • The optimal arrangements between tification so that IUU products are eliminated. The the rapidly expanding aquaculture good aspects of the Hong Kong statistical report- of reef species, including their ing system could be quickly adopted in mainland food sources, and the existing reef China, and improved communications between the fisheries need to be worked out in two systems could reduce discrepancies of data that a fashion that is more sustainable currently exist. Greening China’s Fish and Fish Products Market Supply Chains

Already some chefs in international hotels such not happened for reef fish trade. Certainly as the Marriott in Hong Kong are working towards a robust LRFF trade certification arrange- assurances that their fish supplies are drawn from ment worked out by stakeholders would sustainable sources. This effort needs to be encour- provide a good basis, even if it operates aged via trade associations such as the Chamber of on a voluntary basis. The number of trad- Commerce in Hong Kong. But the effort will have to ers and wholesalers is quite limited, even be extended on a much broader scale, and especially though there are thousands of individual needs the cooperation and involvement of major sea- producers. The existing effort on trade food restaurant chains in mainland China. certification is stalled and needs to be Additional outreach to the Chinese public is needed. restarted. It was based on the model The objective should be to make consumers under- that has proven useful in other settings, stand the relationship of catching and consuming including the Marine Stewardship Council, LRFF with protecting coral reef, fish resources and the Marine Aquarium Council, and others biodiversity. Ultimately, the purpose should be to such as the Roundtable on Sustainable reduce growth in the consumption of wild captured Palm Oil certification. LRFF. Reinforcing the publicity of LRFF resources It would be strategically valuable to protection can be done through print and broadcast initiate a roundtable process, endorsed media. by the Government of China and by na- 28 A globally-shared scientific and economic informa- tional governments of the Coral Triangle tion platform of LRFF knowledge is urgently required. countries in order to develop certification It should contain up-to-date information on catch- for living reef food fish trade (LRFFT). ing, farming, supply chains and all other aspects of Simultaneously, it is possible to consider this sector. As the largest consuming nation of reef possible action in trade forums such as fish, China should be both an important contributor the Committee of Parties for CITES, and to and user of this knowledge. It would be useful for in regional trade discussions. So far there a future meeting of key scientists, NGOs and oth- has not been full agreement within CITES ers concerned about these fisheries to take place in to accelerate the pace of action for pro- mainland China. tecting humphead wrasse, as requested by Indonesia. This deserves further atten- The trade agreements China has put in place bilater- tion from both consuming and producing ally and multilaterally (e.g., ASEAN-China) are open- countries. ing freer trade on many items, including fisheries. It is important to bring in concrete measures for sus- The opportunity to develop a sustainable, tainable resource use and traceability for both food healthy farming mode of LRFF should safety and ecological sustainability either within the not be lost. By rationalizing the farming agreements or in parallel with them. So far this has density, improving feeding mechanisms so they are less dependent on harvest of small fish, and standardizing transport opera- millions of livelihoods have been main- tions that minimize losses, reef aquaculture can tained or added in the last two decades progress to a more sustainable basis. It is impor- of expansion into aquaculture and fish tant to strengthen research efforts such as seeking processing and reprocessing for export. further breakthroughs of artificial propagation and China has been able to add value to its for developing vaccines to prevent fish diseases. fish products, with high utilization rates Perhaps it would be possible to develop a domestic of caught fish (“there is no such thing as certification system that would emphasize higher trash fish in China”), and by extracting quality of aquaculture products, and thereby reduce novel products such as ingredients for the price differential between farmed and wild fish. cosmetics and medicines from aquacul- If so, this might take some pressure off wild stocks. tured species. The fundamental question Certainly a good approach to protect LRFF resources is whether the exponential growth can is to have high-standard aquaculture models of continue. China is already experiencing LRFF. Encouraging Chinese investment in overseas limits as to what it might expect to har- reef fish aquaculture in the Coral Triangle countries vest from the sea, lakes and rivers, and is likely to be worthwhile in the future. from the flooded lands and other areas The steps outlined above all need to be initiated where aquaculture takes place. over the coming three to five years, but action The answer to this question lies not should be started as soon as possible since con- only in ecological limits, including land, 29 sumption growth is likely to continue over the com- clean water and ocean space that is ing decade, even if wild supplies are unsustainable. environmentally suitable and available It will be a difficult undertaking because the supply for aquaculture, but also in the issues of wild fish is so dispersed. But the market supply associated with the market supply chain, chains are quite limited in terms of the number of including trade and investment practices, actual traders, ports of entry and final destinations and pressures arising from those seeking of products. It is thus possible to transform this environmentally sound practices in re- system into one that is far more sustainable than at source use, or seeking limits for a variety present. of other reasons. We could not explore all of the important factors likely to affect sustainability of China’s aquatic resource CONCLUSIONS systems and market demands such as, for example, the growing demand for fish China’s fishery and aquaculture sector leads the meal and bait-sized fish for aquaculture, world. Whatever the directions of China’s future or a workable path towards reduction in expansion of production, import and export, and shark fin consumption in order to halt the domestic consumption, it will affect the potential alarming decline in global shark popula- of global aquatic resources to become sustainable in tions. However, clearly there are lessons their use and regeneration. The great range of prod- to be taken from the analysis of the three ucts, the success with aquaculture (which now ex- market supply chains. ceeds fisheries in scale) and the ability to create a great variety of market supply chains in an adaptive In the main report we identified 17 fashion are positive signals of a dynamic develop- sustainability criteria that might be ment capacity in China’s aquatic resource exploita- used to provide some guidance as to tion. The economic result has been important, since whether activities in the living aquatic Greening China’s Fish and Fish Products Market Supply Chains

resource sector were following a sustainable path. species (e.g., the coral reef groupers It is doubtful that any country could claim success examined in this study) by turning to in fully meeting these criteria at the present time. the Convention on Trade in Endangered The health of the oceans is believed to be under Species (CITES) for support. And regional growing threat, and there are no real boundaries to fisheries management organizations have this threat. Nor are there boundaries to the transfer had difficulty limiting unsustainable lev- of aquatic resource products. No matter how remote els of fishing for bluefin tuna and other the fisheries, there may be a good chance that luxury food items from the sea. its products will end up in China on the way to a These examples are cited to give a sense final consumer destination. This movement can be of how widespread and serious the prob- an impediment to sustainability, especially when, lems of sustainable market supply chains as so often happens, the catch is from an illegal, have become, and of how solutions are unregulated or unreported source. In aquaculture needed that involve the most significant there may be greater hope for accurate traceability, components in the supply chain if there but the rapid growth of this sector strains ability to is to be real progress. It is for this reason manage many of the issues of intensive cultivation. that China is now perceived to be the Furthermore, international development of appropri- most important link in the chain. Not ate standards and certification is still at a relatively only is the country so involved, but it early stage, and where they are available, as now is 30 has the means and, very likely, the will to the case of tilapia, uptake by producers and traders create positive changes. has not been great. The Government of China has clearly The formal international trade rules affecting aquatic stated its aspirations to accelerate action resources, while providing quite good safeguards that will support an improved environ- for health and safety, especially for export products ment and development relationship in sent to some rich parts of the world such as the EU, order to achieve an environmentally U.S. and Japan, are still lacking when it comes to friendly society. It wishes to tackle ocean addressing environmental and ecological sustainabil- environmental issues, to make fisheries ity. The issue of fisheries subsidies, which are highly sustainable, and to protect biodiversity. damaging in terms of overfishing, is still unresolved The Government is well aware of the at the level of the WTO. There has been limited pollution problems in lakes, rivers, and ability to resolve matters such as overexploitation coastal areas, including the implica- of threatened or endangered high economic value tions for aquaculture. It is also aware of the issues associated with destruction accurate documentation of species and other neces- of wetlands and other natural aquatic sary information for traceability to be possible for habitats by land reclamation. Thus there many of the most significant types of supply chains, will be ongoing pressure to reduce pollu- including the two oceanic supply chain studies tion from fish ponds and fish plants and examined (cod and live reef food fisheries). to protect important ecological habitat. China needs time now for ecological stewardship These measures should help to restore to catch up after the frenetic economic growth of and safeguard aquatic habitats, which the past two decades. Not only is this essential for are often among the most threatened creating better sustainability in its aquatic resource ecosystems. As well, there appears to be supply chains, but also for building better communi- an extensive body of laws and regula- cation on sustainability issues with consumers and tions that, if well applied, could support within the aquatic products sector. Fish and other sustainable development for fisheries and forms of aquatic products form a basic, relatively aquaculture. low cost component for food security in China, but When it comes down to how well the en- also increasingly are part of the luxury trade in vironmental protection system is working food—high end products for which demand rises for securing the environmental security with scarcity and cost. In between, domestically and of aquatic resources, the picture is not in the market places of the world where Chinese- very clear. Certainly there are excellent processed aquatic production ends up, are many op- 31 models of aquaculture, with integrated portunities for increasing value-added, sustainably environmental management capacity; and certified products. also seafood processing facilities capable In the effort required to make the transition to of handling certification demands of sustainable fisheries and aquaculture two important many types, especially in the reprocess- points should never be overlooked: (1) the effort ing sector. Yet these are not the norm. can be staged over a period of time that allows for Monitoring for compliance with the many learning and pilot efforts, starting with simpler or aquaculture regulations certainly more urgent needs; and (2) the effort should be occurs, but the need is great, and capac- profitable if accompanied by good communications ity likely quite limited at the level of concerning benefits to consumers (health, safety small farms. There is limited transpar- and quality) and to the environment. ency in the statistical system for fish processing, and significant problems with Greening China’s Fish and Fish Products Market Supply Chains

RECOMMENDATIONS The primary audiences for the recommendations from this study are policy-makers in the Govern- ment of China concerned about sustainability aspects of trade and investment, especially on topics related to fisheries and aquaculture, plus those directly involved in the industry, whether as produc- ers, processors, traders, financiers or industrial associations. In addition, the various stakeholders in China and internationally such as non-governmental organizations, and international bodies and research organizations may find the recommendations helpful in guiding their interests and work. The recommendations are oriented towards policy needs, and in the interests of keeping a focus on a select group of high priority, practical and implementable suggestions, their number has been kept reasonably small.

1. The Government of China should set in place a robust long-term sustainable fisheries and aquaculture trade policy governing both domestic aquatic production for export, and imported seafood intended for domestic consumption or for reprocessing for export. China’s success in expanding its fish and aquaculture production and processing carries with it new levels of responsibility for ensuring sustainability of products whether for domestic or export markets. This includes consideration of internationally-defined objectives such as reduction in illegal, unregulated and unreported (IUU) sources of aquatic products; addressing pollution from processing facilities, aquaculture and other sources; and harm to marine and aquatic ecosystems and species as a consequence of harvesting or other activities. 32 Sustainable trade policy should address these and other problems at critical points in the market supply chain using a combination of regulatory and market-based approaches. These approaches may include improved enforcement of national and international conservation and environmental measures, economic instruments to limit participation and catches, and compulsory or voluntary certification systems such as those now in use for cod and other spe- cies through the Marine Stewardship Council and the proposed standard for tilapia cultivation. The sustainability trade policy should also take into account stepped-up action for conserving threatened or endangered species via the Convention on International Trade in Endangered Species (CITES), including some shark species and coral reef fish intended for live reef trade. Greater attention needs to be paid to sustainability concerns for trade in fishmeal, fish oil and other products in feed for aquaculture. These concerns include overfishing of small pelagic fish species, excessive amounts of bycatch taken in order to meet demands for aquaculture feed, and harvest of juvenile fish as fish food for high value aquacultured fish such as groupers. It is important to note that further promotion of efficient omnivorous feeders such as tilapia into world markets is a means of reducing pressure on fish protein sources could be part of a Chinese sustainable fisheries and aquaculture trade policy. An aquatic trade policy for China should address five significant elements: (1) Promotion and stronger support for sustainable fisheries and aquaculture initiatives within international trade agreements such as the WTO, via regional fisheries agreements from wherever China catches or sources aquatic products, and through the FAO initiatives for responsible fisheries and aquaculture. (2) Improvement of quality and sharing of information regarding the presence and impacts of unsustainable practices and policies within market supply chains. (3) Formulation of a strategy for branding China as a source of safe, healthy and environmen- tally responsibly aquatic products. For this branding effort to be successful, policy (e.g., for incentives) will be needed to stimulate aquatic products industries into greater participation in strategy implementation of the strategy. (4) Link aquatic product sustainability trade objectives with 12th Five Year Plan objectives for environmental improvement, for example, with those for improving freshwater and marine habitat protection, for sustainable aquaculture and for fisheries conservation, and for fish processing pollution reduction. More generally, this link should be made for low carbon economy, energy intensity reduction and greenhouse gas reduction as well. (5) Improve sustainability guidelines and, as necessary, regulations that cover Chinese trade 33 and investment abroad for fisheries and for aquaculture. 2. Work collaboratively to set in place enabling policies for fisheries and aquaculture sus- tainability certification covering a range of aquatic products starting with products enter- ing export markets and eventually covering domestic consumption as well. The move towards sustainably harvested, produced and processed aquatic products is gaining world-wide momentum, and China will benefit from being proactive. To do so will require con- sideration of accreditation arrangements that are compatible with Chinese interests and needs but also meet international standards. Some Chinese fish processors are already taking Marine Stewardship Council-certified products for export-oriented reprocessing, but in general the level of participation needs to be accelerated and additional species such as tilapia added. The enabling policies could include a clear statement by the Government of China concerning the need for and desirability of Chinese aquatic products industries to participate in reputable certification schemes; establishment of incentives for early acceptors of certification; an accred- itation and auditing policy to ensure that certification systems used within China are credible; and promotion of certification as part of the branding of Chinese export products as sustainable. While sustainability certification initially could be oriented mainly towards products exported from China, eventually certification should also be considered for key products consumed do- mestically. It would be desirable to establish seafood certification pilot projects, for example in some coastal cities, or for certain types of fisheries such as the live reef food fish trade (e.g., groupers sold for the restaurant trade). It should be emphasized that good certification demands accurate identification of the product and its origin, good traceability, and sustainability criteria that can be monitored. These points are covered in the next recommendation. Greening China’s Fish and Fish Products Market Supply Chains

3. Develop a national sustainable fisheries and aquaculture traceability system for seafood and other aquatic products imported, produced or processed in China. Good traceability and chain of custody arrangements are essential for credible market-based sustainability certification. The market-oriented systems now in place have been developed through roundtable mechanisms that bring together the stakeholders, industry representa- tives, governmental bodies and scientists. The elements of the specific certification systems are detailed and auditable at the level of individual stocks as well as market supply chains. In the Chinese situation where the potential number of sustainable certification systems eventu- ally could become quite large, the following become very important: to build more complete data systems with better information on individual species and stocks; better information on catches of Chinese distant water fleets; closer cooperation with international bodies to ensure accuracy and compatibility of data; and efforts to close loopholes through which aquatic prod- ucts enter the country with inadequate identification. Thus, as part of developing the national traceability system, consideration should be given to a thorough overhaul of the national statistical data gathering for fisheries and aquaculture in order to provide more accurate information and to make it more relevant to trade and sustain- ability considerations. Another important part of traceability is constructing good channels for information flow and communication regarding topics such as IUU-sourced materials, accurate naming of products being imported or exported, and verification of chain of custody. These appear to be matters 34 of pressing concern for some supply chains, including some white-fleshed commodity fisher- ies, and for some of the boat-shipped live food fish supply chains, for example. It is a reason for the strong interest expressed by groups outside of China for greater engagement with China on fish and aquaculture market supply chains. Traceability is, of course, an essential part of quality assurance systems for health and safety considerations of aquatic products. It will be useful to link policies for environmental and sus- tainability traceability with these other considerations in order to avoid unnecessary duplica- tion of effort, and to reduce costs.

4. Create a sustainable aquaculture policy at the national level with considerable capacity development for regulating and managing future growth. Such a policy would help to safeguard the reputation and quality of products exported from China as well as Chinese aquaculture investments elsewhere in the world. The great success of aquaculture in terms of its current rapid growth in quantity and range of products also raises expectations concerning its future role in rural development, food secu- rity, and the national economy. China now has more experience with aquaculture than prob- ably any other country in the world. Sharing that experience with others for example in other parts of Asia and Africa is likely and will require policies that optimize benefits for both China and other countries hosting Chinese investments in aquaculture abroad. Domestically, there is a need to consider how much consolidation is needed to optimize production systems for efficiency and use of inputs, to improve environment, and to maximize social benefits locally. This is an important topic for trade products such as tilapia, since limits will otherwise be reached on the ability to increase exports of this commodity trade. The trade and investment implications of a sustainable aquaculture policy are quite considerable. They include matters such as the possible roles of genetically modified organisms (GMO) in Chinese aquacul- ture; science and technology advances required for reliable sources of young animals, disease control with minimal use of medications, food conversion, improving water quality, control of invasive species; and maintaining markets and the competitiveness of Chinese products. Capacity development is essential and in line with policies for scientific development and for a science- based economy.

5. Set in place policies for containment of growth, substitution of existing products, and other means to avoid further ecological and conservation damage arising from luxury imported fish products from species believed to be in decline in areas outside of China. Extremely high value imported seafood such as shark fin, some live reef fish used on festive occasions or in very high priced restaurant meals, some tuna species, and rare crustaceans are examples of products that are threatened—but where demand is still rising in the Chinese marketplace. Such products will be- come even more valuable as they decline in abundance, and therefore require special attention in trade policies. If trade continues to grow in such circumstances, it likely will be at the expense of China’s 35 sustainable development reputation. To change the situation will require policies and actions for awareness-raising that may take years to be fully effective. This is a task that cannot be done by government alone but requires participation by individuals well known within China to take a personal stand on such products and who are prepared to campaign with peers as well as the general public. The Government of China is in a position to address the subject of unsustainable luxury seafood con- sumption in a variety of policy ways. One is to work closely with producer countries to reduce or elimi- nate IUU fishing of threatened species (an example is the humphead wrasse). Another is to shift effort away from fish and shellfish stocks that are in decline and substitute species that are more abundant or develop aquaculture of the threatened species. While this happens at present for some scarce types of seafood, it is not totally successful, and other methods are needed as well. Generally the situation will be aided by policies that promote stronger international cooperation and improvements to transparency, monitoring and reporting.

6. Ensure that trade and competitive advantages associated with sustainable development of marine and freshwater Chinese products are identified and realized through effective working relation- ships of government and industry.

China’s overall approach of seeking a low carbon economy, promoting resource efficiency, and gener- ally building a stronger environment and economy relationship provides a macro-policy framework that should provide future competitive advantage of value to sustainable aquatic resource development and trade. The concrete ways, however, should be carefully assessed and reinforced for each major product. This will require on-going research and development that is best done through joint efforts involving individual enterprises, industry associations and government bodies including MOFCOM, the Ministry of Agriculture, and perhaps others.

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