Harmful fisheries subsidies have historically contributed to fleet overcapacity and continue to be allocated to the fishing industry to artificially maintain its profitability. However, in this contribution we show that removing harmful subsidies and reducing overfishing will help to recover the resource biomass, subsequently leading to increased levels of sustainable catches, income and well-being of fishers, and reduces inequities in income and consumption when fish stocks are not effectively managed. Maintaining harmful fisheries subsidies is socially and economically inefficient. Taking the example of the EU fishing fleet, one of the largest fishing fleets in the world, we use the total factor productivity to show that small-scale fishing fleet’s productivity is almost two-fold in the North Atlantic and 16% higher in the Mediterranean and Black seas compared to large-scale vessels. This result is explained because the harmful fisheries subsidies disproportionately allocated to large-scale vessels introduce distortions in the efficient allocation of inputs. With critical WTOnegotiations ongoing regarding the global rules on fisheries subsidies, the EU must take advantage of the opportunity to lead a desirable transformative change while also supporting developing nations to truly achieve global sustainable and equitable fisheries.