The best policy?

Brodie Thomas
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How the elimination of two fishery policies could forever change rural Newfoundland

As the discussion started at St. Christopher’s Hotel in Port aux Basques on April 24, it looked as if most of the seats would remain empty.

Dr. Tom Cooper, left and FFAW President Earle McCurdy took part in a presentation in Port aux Basques on April 24 debating the pros and cons of fleet separation policy. The policy prevents plant owners from owning licences, and some say it is time to abandon it in an attempt to breathe new life into the inshore fishery.

To watch the Harris Centre's presentation, click here.

But minutes into the Harris Centre’s panel discussion on the Atantic fishery’s fleet separation policy, some stragglers trickled in, filling up the remaining seats. It seemed people were interested after all.

“Why the Divorce? The Merits and Shortcomings of a Fleet Separation Policy” featured a Memorial University business professor and the head of the Fish Food and Allied Workers union (FFAW) discussing and debating the 33-year-old policy, which keeps harvesting and processing clearly separated.

The owner operator policy goes hand-in-hand with fleet separation (see sidebar), and its usefulness was also discussed.

While talk of an obscure federal policy might not hold the attention of most, many fishers say the two could be essential for the survival of rural Newfoundland.

Critics say fleet separation and owner operator policies are part of the problem in the dysfunctional inshore fishery, and may even be contributing to population decline in rural Newfoundland.

Green Island Cove fisherman Loomis Way is squarely in the first camp. He believes the policy has been the backbone of rural Newfoundland’s fishery for 30 years, even through the moratorium.

“It means the fishermen fish and the companies buy and process,” said Mr. Way. “If that’s made away with, and the companies are allowed to gain even more control than what they have now, it’ll be the end of the inshore fishery as we know it and the end of a lot of communities.”

Mr. Way said he has read up on Canada’s West Coast fishery. The lack of a similar policy in the Pacific means control of the fishery is now mainly in the hands of large corporations.

“If that happens here, so the companies are allowed to own all the licences, that translates into owning all the quota. What you’ll see is a small number of factory freezer trawlers that will start down in Port aux Basques and come up where I live.”

He said a dozen workers on a single factory freezer trawler could take a 2,000 tonne cod quota in about a week. Currently the benefits of the cod fishery go to dozens of communities and fishers along the coast.

A factory freezer trawler won’t have to land at a Newfoundland plant, thereby bypassing provincial processing requirements. He said that will mean plant workers could lose out too.

“Right now up where I am, we have four shrimp plants. I mean, if the companies are allowed to own all the licences we won’t have a shrimp plant. They’re going to say it’s more economical for them to catch it, take in on board their factory freezer and take it someone over to China.”

Vertical integration

Dr. Tom Cooper, assistant professor in Memorial University’s Faculty of Business Administration, had the floor first at the Harris Centre presentation. He explained to the audience two basic business terms - vertical and horizontal integration - and how they apply to the fishery.

Vertical integration is when a company owns production from top to bottom. He gave the example of Exxon-Mobil, which explores for oil and gas, extracts the product, transports and refines the product, and even sells the finished product at Exxon gas stations.

The Newfoundland fishery is an example of horizontal integration, where there are many players along the production line. Dr. Cooper compared it to the tech industry, where software developers and hardware manufacturers come together to make laptops and cell phones.

Dr. Cooper argued that without more vertical integration, industry participants in the fishery are going to have mismatched goals. What is best for the fishers isn’t always best for the plants, and if they can’t reach an agreement, all parties lose out.

He suggested a middle-of-the-road approach where processors are allowed a non-controlling share of the licences and quotas.

For Burnt Islands plant owner Roland King, it’s a policy that makes more sense than the current model.

“There’s definitely a business side that says you want to own quota so you can have a continuous supply of fish into your plant,” said Mr. King.

He would like a small quota so he could operate a few boats and keep a steady flow of fish into his plant. He said that stability would help him purchase from other independent fishers.

However, Mr. King sees value in maintaining some aspects of fleet separation. He sees rural communities as depending on the symbiotic relationship between fishers and fish plants. He admits the policy has kept small-boat fishers in rural communities.

He worries about someone with deep pockets cornering the market.

“I’m not sure I agree with getting rid of fleet separation,” said Mr. King. “Even though we’ve been there I don’t agree with opening up the floodgates.”

Opening the floodgates is the big fear for FFAW president Earle McCurdy. While speaking in Port aux Basques, he gave examples from British Columbia and New Zealand of what happens when a fishing licence becomes a piece of paper with a number on it which can be sold, leased or traded.

He said New Zealand deregulated its fishing industry in the 1980s, setting up a system of individual, transferable quotas (ITQs). It led to the forcing out of small boats and the outsourcing of fishing work to Asian countries.

“It’s the fishery equivalent of sub-prime loans,” said Mr. McCurdy.

He said instead of numbering and selling off fishing grounds and quota, priority has to be given to fishers who are adjacent to the grounds and areas that have historic attachment.

All this talk about fleet separation and the owner operator policy has arisen because of hints from the federal government that changes are in the works.

The Department of Fisheries and Oceans (DFO) recently released a discussion document titled “The Future of Canada’s Commercial Fisheries.”

The document makes no reference to fleet separation or owner operator policies outright, but that is what bothers Mr. McCurdy. He said there’s no mention of coastal communities in the document either. Instead there is talk about maximizing the economic benefits of the resource.

“In whose interest do we harvest a renewable natural resource?” asked Mr. McCurdy of the DFO document.

Modern move

Derek Butler, executive director of the Association of Seafood Producers, is a proponent of eliminating the two policies.

“After 30 years we can say those policies have not saved rural Atlantic Canada,” he said. “We have the lowest birth rates and highest outmigration in the country, and an aging population. We can’t get people into the plants, and enterprise owners are having challenges finding crew.”

He said the faceless corporations critics seem to fear are actually entrepreneurial plant owners in rural communities.

Mr. Butler sees room for restrictions, but thinks the current policies are stifling rural Newfoundland, both fishers and plants.

“We think there can be parameters introduced to ensure the quotas are not owned by proverbial Wall Street, but why can’t a plant in Newfoundland invest in the boats that supply that plant? Why can’t harvesters seek funding and make business arrangements to acquire capital by letting other shareholders invest in his or her business?”

Mr. Butler notes that under the owner operator policy, a harvester can’t have a family member - not even his wife - invest in his license and jointly own it.

“That limits the ability to grow the business, share risk, and attract capital or other business skills to the enterprise. It simply does not make sense.”

Mr. Butler points out that fishers’ co-ops have adopted a vertical integration strategy, where they are both catching and processing their catch. A loophole in the fleet separation policy does allows a fisher to own a plant.

“If vertical integration is a bad model, why do co-ops do it?” he asked.

The way forward?

For Eastport fisherman George Feltham, elimination of fleet separation and owner operator policies would lead to wide scale protests, at least in his area.

“This would be the last straw,” he said. “Once that’s done people would be afraid to stay in the fishery because corporate control would be given. They don’t have to have 30 or 40 per cent of the license that may stay independent. Then they would freeze them out in prices. That’s what we saw happen in British Columbia.”

He said there needs to be modernization in the industry. For him, modernization would involve rationalization allowing some fishermen to retire, leaving available quotas for fewer fishers. He said even then, some quota needs to be set aside and not touched.

He believes eliminating the fleet separation policy is the easy way out for a budget-minded government. He has no doubt DFO and the provincial government would have an easier time speaking with a handful of corporations instead of the wide range of people and communities currently in the fishery. But he says the long-term effects on small communities would be devastating.

“Maximize the benefits for as many people as you can to make it lucrative. Don’t eliminate the inshore fishery, which it seems like they’re trying to do. It’s easier to control when you’ve got a corporate agenda but the benefit to this province is going to be much less.”

Organizations: Harris Centre, FFAW, Allied Workers union Department of Fisheries and Oceans Business Administration Exxon-Mobil Exxon Association of Seafood Producers

Geographic location: Newfoundland, Atlantic Canada, Port aux Basques West Coast China British Columbia New Zealand Burnt Islands

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