The Costs of Regulations on US Baitfish and Sportfish Producers

Abstract

The US regulatory environment has been characterized as complex due to the greater than 1300 laws promulgated at local, state, and federal levels. Recent declines in the growth rate of US aquaculture have been attributed, in part, to a complex, overlapping, and inefficient regulatory framework. This study is the first to examine this question by quantifying the farm-level regulatory burden and its economic effects in an aquaculture industry sector. A survey was conducted of baitfish and sportfish producers in the 13 major production states in the USA to identify the direct and indirect costs of regulation on producers. Survey responses captured 74% of the national volume of baitfish and sportfish production. The data revealed that only 1% of total regulatory costs are direct costs of regulation, such as license and permit fees, while 99% of the costs are due to manpower used for compliance, farm changes to remain in compliance, and sales lost without replacement. Costs due to regulations varied across states and farm sizes. Across all respondents, average total regulatory costs were found to be $148,554/farm, or $7383/ha. The farm-level cost to the US baitfish and sportfish industry was estimated to be in excess of $12 million. On 38% of the farms, the cost of regulations exceeded the value of profits on baitfish and sportfish farms. Our findings confirm previous reports of the complexity of the regulatory environment. Results show that the total regulatory burden has increased farm-level costs and restricted access to markets, thereby reducing profitability and contributing to reduced growth of the US baitfish and sportfish industry.