The Wall Street Journal Interactive Edition -- November 25, 1997

Rivalries Grow for Global Fishers, As Fleets Expand and Hauls Wane

By JONATHAN FRIEDLAND Staff Reporter of THE WALL STREET JOURNAL

USHUAIA, Argentina -- Odd Areld came to this town at the end of the world five
years ago in search of fish.

"At first it was El Dorado," says Mr. Areld, a lanky Norwegian whose body is
flung over the captain's chair that commands the bridge of the Antarctica III.
"But now there are no more fish."

Stubbing out his Marlboro cigarette, Mr. Areld looks out at the nearly empty bay
in front of the world's southernmost city. "There were 20 ships when I came
here," he says. "None now, except us."

Such is the state of the world's fisheries. The United Nations Food and
Agriculture Organization says 11 of the world's 15 main fishing grounds are
seriously depleted. Still, a big expansion of the global fishing fleet continues,
with the Southeast Asian nations and China among the most aggressive.

Growing Disputes

Fishing conflicts are among the most visible of a new set of international
security and diplomatic concerns caused by environmental degradation and resource
depletion. Even the friendliest of allies, the U.S. and Canada, faced tensions
earlier this year when talks broke down over salmon quotas. The U.N. says more
than 100 countries are involved in fishing disputes, ranging from confrontations
between the Philippine navy and Chinese fishermen to clashes between the
Icelandic and Danish coast guards.

Fishing rights "are going to be a big source of future conflict," says Ann Platt
McGinn, a fisheries expert at the Worldwatch Institute, an environmental group
based in Washington. "There are way too many boats and not enough fish to go
around. The industry is totally out of line with what's economically feasible and
biologically sustainable."

The pressure on the resources of remote countries like Chile, Namibia and the
Pacific Ocean island state of Vanuatu is intense and growing, magnified by
unlicensed trawlers that illegally fish their waters.

Stuck at the Dock

Chile is clashing with American Seafoods Co., the biggest U.S. fishing company
and the owner of the Antarctica III. The government has refused to license a $65
million factory trawler built by American Seafoods to operate in Chilean waters.
The Seattle company's appeal to the Chilean Supreme Court to immediately overturn
the government's decision was rejected earlier this month. American Seafoods
plans to pursue its appeal in the lower courts.

Chile's refusal to let the American Monarch into its waters "is both a strategic
defeat for us and a symbolic one," says Michael Nordby, president of the
company's South American operations. "We built a hell of a boat and now it is
stuck fast to the dock."

That is likely to happen more and more, and not just to American Seafoods. The
company's majority owner, Kjell Inge Rokke, has moved to diversify as a hedge
against scarcity. His flagship Oslo-based Resource Group International AS merged
this year with Aker AS, a big Nordic oil-services and cement-manufacturing group,
to create one of Norway's biggest listed companies, Aker RGI AS, with nearly $3
billion in annual sales. The handful of other major fishing companies have
diversified into food distribution.

Industry Transformation

The recent history of American Seafoods says a great deal about the modern
fishing business. The industry was transformed in the 1980s. Big Russian,
Japanese and Polish fleets that roamed the globe in the previous two decades,
fishing when and where they wished, gradually were locked out of the richest
fishing grounds by the 1982 Law of the Sea treaty, which extended internationally
recognized territorial waters to 200 miles offshore. The U.S. had started to
protect its own 200-mile swath in 1976, with congressional passage of the
Magnuson Act.

The gradual ouster of foreign ships from U.S. waters coincided with the arrival
in Seattle of a handful of Norwegian banks flush with cash from the North Sea oil
boom. Mr. Rokke convinced the bankers the time was ripe to buy used
U.S.-registered boats, refit them with state-of-the-art equipment in Norway's
shipyards to boost their fishing capacity and put them to work in Alaska. An
added bonus: The refitting process would benefit from subsidies given by Norway
to assist its hard-pressed shipyards.

American Seafoods was the most aggressive of several companies pursuing similar
strategies, using various foreign and U.S. shipyards. Dick Gutting, executive
vice president of the National Fisheries Institute, a U.S. trade group, recalls
what happened in 1989 when Congress approved a ban on the refitting of
U.S.-registered ships abroad. "There was a stampede before the deadline to take
advantage of the lower cost of foreign yards," Mr. Gutting says. "American
Seafoods was at the front of the pack."

In time, Mr. Rokke's boats commanded around 40% of the quota for Alaskan pollack,
a whitefish widely used by restaurant chains in the U.S. But competition among
factory trawlers has become so acute in Alaskan waters -- despite the complex
resource-management system established by the Magnuson Act -- that the annual
pollack quota is taken in about 75 days. To assure a year-round supply of fish,
Mr. Rokke began to look further afield.

One place was Russia. American Seafoods began to fish Russian waters for pollack
and cod in partnership with a Vladivostok company, using nine Spanish-built
factory trawlers. Another place was Argentina, where American Seafoods dispatched
five boats, including the Antarctica III.

Juan Carlos Cardenas, the head of the Greenpeace environmental group's
marine-ecology program in Santiago, Chile, has been tracking the growing presence
of American Seafoods and its mainly Japanese and Spanish competitors in the
southern oceans.

"As the catch of pollack and cod fell, the search for substitutes grew," Mr.
Cardenas says. First, he says, the companies concentrated on hake, whiting and
golden eel. When yields declined and authorities slapped on tighter quotas to
protect what was left, the companies switched to harder-to-catch fish like the
Patagonian toothfish, a big whitefish that lives thousands of feet deep in
oceanic trenches but commands a hefty $6,000 a ton.

Scores of Spanish factory trawlers that had been paid subsidies by the European
Union to stop operating in overfished local waters turned up in Argentina from
1992 onward. Although a supposedly strict licensing system was in place, abuses
became so common as competition intensified that by this past July authorities
imposed a total fishing ban on the most popular species in a 44,000-square-mile
area to protect the meager remaining stocks. That is equivalent to the U.S.
banning fishing for cod off New England.

"We hit the red-alert stage just like Canada and the North Sea," says Hector
Salamanco, Argentina's subsecretary of fisheries. He adds that it is difficult to
establish a regulatory system that works, mainly because of limited enforcement
resources.

Fighting the Monarch

Mr. Salamanco's Chilean counterpart, Juan Manuel Cruz, says he fears the same
thing could happen to southern blue whiting and Patagonian grenadier if the
American Monarch were licensed to fish his country's waters. These two species,
which are used to make surimi, a fish paste favored by Japanese consumers, are
harvested off Chile by one factory trawler, the Union Sur. "The resources here
just aren't sufficient to handle a boat like the Monarch," Mr. Cruz says.

The Monarch can stay at sea for months, processing as much as 700 tons a day of
surimi, fish meal and fish oil. The quota established by Chile for the two
species American Seafoods wants to harvest is less than one-third the amount of
fish needed to fulfill the ship's capacity.

Although Chilean coastal fishermen don't catch the two species, they have lobbied
hard against the Monarch on the grounds it would devastate the food chain in
their waters, a claim American Seafoods disputes. "Factory ships are already
wiping us out," says Felix Gonzalez, president of the local fishermen's union in
the central city of Puerto Montt. "The American Monarch would be the end of us."

Mr. Nordby says American Seafoods is willing to let the government put a
full-time observer on the Monarch to ensure it doesn't exceed its quota. He says
the government is withholding a license for the Monarch in order to protect the
Union Sur, which is owned by Japanese company Nippon Suisan KK in partnership
with a Chilean businessman who is a prominent contributor to the ruling Christian
Democratic Party. Mr. Cruz, the subsecretary of fisheries, denies that is the
case. "There are no political elements here," he says.

No 'Uncharted Horizons'

Chile isn't the only place where American Seafoods and others face stricter
limits. U.S. Sen. Ted Stevens, an Alaska Republican, has put a bill before
Congress that would ban new factory trawlers in U.S. waters. Norway last year
turned down a license application for a trawler less than one-third the size of
the Monarch.

"There are clearly limits to the future growth of the factory trawler fleet,"
says Walter Pereyra, chairman of Seattle vessel operator Arctic Storm Co. and
vice chairman of the regional council that manages Alaskan waters. Mr. Pereyra
says the best hope for big companies such as American Seafoods is more
regulation, not less. "The days of being able to go from one resource to the next
are gone," he says. "There aren't any uncharted horizons left."

Knut Djuve, operations manager for American Seafoods in Argentina, agrees. He
sees a clear message in diminishing catches and increasing conflicts between
authorities and pirates. "It is just as important for us to have regulated
fisheries as for the countries," he says. "You don't want to invest hundreds of
millions of dollars just to fish out the waters in a couple of years."