Fishing and the Chatham Islands

AFFIDAVIT in the High Court of New Zealand BETWEEN Te Iwi Moriori Trust Board (First Plaintiff) Moriori Tchakat Henu Association of Rekohu Incorporated (Second Plaintiff) and The Treaty of Waitangi Fisheries Commission (Defendant) (September 1993)

Keywords: Business & Finance; Environment & Resources; Maori; Statistics;

I, Brian Henry Easton, economist and social statistician of Wellington do swear

1. Following the obtaining of degrees in mathematics and economics I have practised for over 25 years in universities in New Zealand and overseas, in research institutions, and latterly as a private researcher and consultant. A copy of my short C. V. is attached. I have taught, researched, and written in many areas related to this case, including the economics of development.

2. I have been asked by the plaintiffs to assess the significance of the fishing industry to the Chatham Islands (Rekohu).

3. My basic conclusion is that the future of the Chatham Islands is vitally dependent upon its fishing industry, more so than any other region. I also indicate how a population based rule is especially against the interests of a region as dependent upon fishing as these islands.

Data Sources

4. This affidavit uses two main sources.
(i) Review of the Chatham Islands Economy (a.k.a. The Taylor-Baines report) was prepared in September 1989 by Taylor Baines And Associates and Lincoln International for the Department of Internal affairs on behalf of the Ministerial Committee of the Chatham Islands.
(ii) Regional Summary is a publication of Statistics New Zealand (Department of Statistics) based on the 1991 Population Census, which identifies the Chatham Islands County separately. The tabulations are not detailed, and the reported population of 759 on Census Night (5 March 1991) included 156 people who described themselves as not normally resident in the area. This proportion (20.6 percent) is unusually high. In comparison the average nationally was 7.0 percent. In addition Chatham Islanders temporarily away from the island that night, are not included in the data. Because the population of the Chathams are small, these temporary shifts In population are relatively large, and the figures have to be used with care.

5. More generally, the data from each (or indeed any) report is subject to error and interpretation difficulties. My assessment allows for these, and reports only those conclusions which are robust to potential data difficulties.

Economic Activity in the Chatham Islands

6. Economists usually measure economic activity in a nation by Gross Domestic Product (GDP), which measures the net output of all the (market) activities in the territory (whether they be the activity of residents or of those who normally reside out the area), measured at market prices. A similar concept applies for a region.

7. There are no official regional estimates of GDP for the Chatham Islands. However the Taylor-Baines report provides two estimates of the local GDP for the 1988 year.

8. Table 3.1 (page 25) is headed “Chatham Islands economic production 1988. Value Added Basis (NZ$m)”.Its data is

Sector Value Added
Agriculture $5.1m
Fishing $21.1m
Service (Pvte/Govt) $0.7m
Wholesale/Retail $0.7m
Other $3.0m
Total $31.1m

9. The figures are valued in dollars of the day. It is well known that for many products a dollar buys less in the Chatham Islands than on the Mainland, mainly because of the additional costs of transport. A tabulation in the Taylor-Baines report compares the price of 18 groceries in the Chathams and Christchurch (p.D2). The price excess range between 24 and 227 percent, with a median of 67.2 percent. At the time of the report electricity sold for 42.6 c/kWH compared to Mainland rates of 5 to 15 c/kWH (p.81), petrol sold for $1.18 to $1.22 c/l compared to Mainland rates of 86 to 94 c/l (p.87). These price excesses are no doubt some of the more extreme, which is why they are being addressed in the report. Other locally produced prices may be closer to those of the average for the nation. Nevertheless comparisons between values in the Chathams and the rest of New Zealand, should allow for the overall higher level of prices in the Islands.

10. Not all the income from the production goes to the Islanders. In particular nonresidents (e.g. non-resident fishermen) and profits and other payments owing to investors outside the Islands are included in the figure.

11. The item fishing is footnoted “includes all forms of fishing by residents, but only output of non-residents through island-based fish processing/packing facilities.” Thus it excludes the economic activity of catching fish in the territorial waters of the Islands, but the catch of which is not processed locally. This omission means that the Chatham Island’s true GDP is greater than that recorded in the Taylor-Baines report, and the significance of fishing is even greater.

12. Even though fishing as an economic activity is underestimated in the figure it still makes up 67.8 percent of the total, with the next largest sector, Agriculture, contributing only 16.4 percent. I now of no other region of New Zealand where fishing is so important, and indeed the figure is likely to be large by even the standards of most small sub-regions, although there is not data available for them.

13. The GDP table in the Taylor-Baines report is sourced to appendix C, where there is another set of data in the form of an input-output account for 1988 (Table C.l, page C10). GDP can be directly derived from such an account subtracting imports from primary inputs to the various sectors (since imports do not add value). I have been unable to reconcile the two tabulations, so I present here the figures derived from the input-output table.

Sector Value
% of Total
Farm & Forestry 1244 8.0
Fishing 8321 53.6
Mining & Quarrying 261 1.7
Food Processing 491 3.2
Building & Construction 793 5.1
Electricity etc 140 0.9
Wholesale & Retail Trade 773 5.0
Services 1207 7.8
Ownership of Property 326 2.1
Non-profit services 1023 6.6
Households 845 5.4
Total 15523 100.0

14. Unfortunately the aggregate figure from the input-output table is half the quoted figure from Table 3.1 of the same report. As we are here concerned with sectoral shares, the issue is not acute.

15. In order to validate the two estimates, and to provide more information on the Islanders, I used the 1991 Census to estimate the average adult resident incomes. The Census reported figure for males over the age of 15 was $28,000 for the 1990/1 year, and for females it was $14,300. In comparison the figures for the whole of New Zealand was $23,900 for males and $14,300 for females, which suggests that the average Chatham Islander male has a higher income and the female about the same. The total income of Islanders would seem to be about $12.4m in 1990/1, perhaps $llm in 1988. the input-output table reports a total of $6.5m of wages and salaries, and there will be additional self employed and investment income, and from social security benefits, I am inclined to the veracity of the input-output table rather than Table 3.1 of the Taylor-Baines report.

16. That the average Chatham Island adult has an income comparable to the Mainlander may be surprising. The judgement must be modified by the following three factors: -consumption prices are higher in the Chathams;
– the Island’s age structure is skewed towards the higher income earning years. When I adjusted for this I found that Islander male incomes averaged only 6 percent more than the national average, and females 6 percent less;
– the Islands are relatively deficient in low income people such as students and unemployment beneficiaries, because for various reasons these people shift to the Mainland. This is evident in the data because only 23.0 percent of the Chathams residents over 15 years of age report themselves as not working, whereas the figure is 39.6 percent of the New Zealand population .

17. The total GDP of $15.5m derived from the input-output table might be compared with New Zealand GDP for the 1988/9 year of $6,403m, or .24 percent. In comparison, the resident population on the 1991 Census night was .019 percent. In terms of land the Islands are 963 square kilometres, or .36 percent of the national total. The Chatham Islands would appear to be a very productive part of New Zealand, mainly because of the bounty of the seas around them.

18. The tabulation from the input-output table shows that 53.6 percent of valued added (measured at market prices including taxes and subsidies) comes from the catching of fish by residents and by non-residents who have the fish processed on the Islands.

19. In addition the fishing generates fish processing and related servicing of the two industries. Because the food processing sector includes both the meatworks and the fish processing factories resident one the island, and wholesale and retail trade sector includes the Fisherman’s Co-operative, it is not possible to separate out the exact contribution from fish processing. Including the share of fishing and fish processing in the Islands’ GDP would give a figure closer to the 67 percent of the earlier tabulation.

20. Because they are on a value added basis, these estimates do not include the inputs from industries which supply the fishing industry , nor the consequential contributions from downstream effects including the supply of goods and services to the workers in the fishing industry .If there was no fishing industry in the Chathams, the Islands would lose this activity and employment as well.

21. So the fishing industry produces around two thirds of the GDP of the Chatham Islands, even if we exclude the catch by non-residents in territorial waters which is processed elsewhere. In addition the industry generates other economic activity upstream and downstream.

The Importance of Fishing to the Chatham Islands

22. While all these statistics point to the fishing industry being an unusually large part of the Chatham Island economy, they in fact underestimate its contribution, because they ignore the upstream and downstream activities which arise from the fishing. Suppose there was no fishing. The Island economy GDP would not just be reduced by around two thirds. A whole range of ancillary activities would disappear as well. There would be fewer traders provendoring the ships, fewer shop-keepers selling to households, and fewer teachers because there would be fewer children, as workers left the Islands.

23. All that would be left on the Chathams would be a few farmers (probably less than today because costs would be even higher than today), just conceivably the rump of a tourist industry, and the odd government official, plus the unemployed.

24. Conversely if there was more fishing activity, the economic activity on the Island would be greater. The proportional increase in total economic activity would be far greater for the Chathams than it would be for a the same (proportional) increase in fishing activities for any other region.

The Implications of the Maori Fishing Quota Allocation on the Prosperity of the Islands

25. The allocation of the Maori fishing quota does not merely distribute the income implicit in the tradeable rights between iwi. It also affects the location of economic activity. It will not affect where the fish is caught, but it will affect where ships are provendored and where the caught fish are processed. The more quota allocated to an area, the more economic activity in that area.

26. This is true for every area. What is unusual about the Chatham Islands is that its prosperity is more sensitive to the allocation of quota than any of the other designated areas.

27. To see this consider the small fishing village, we shall call Ikakainga, which has exactly the same characteristics of the Chathams Islands, except it is on the Mainland, and is a part of a much large rohe for quota allocation purposes. Ikakainga will have access to the onshore related activities from the quota on behalf of its population, and of the much greater population of many people who have little connection with the fishing industry who live elsewhere in the district.

28. Ikakainga may not exist, for I am unaware of any comparable area which is as dependent upon fishing as are the Chatham Islands. What Ikakainga illustrates is the unique situation of the Chatham Islands, whose prosperity will depend on the quota allocation rule in a way no other region will be affected.