Friday, February 14, 2014

An 'unfair question': will lifting of minimum processing requirements result in NL job losses?

The House of Commons Standing Committee on Fisheries and Oceans has launched a study of the challenges and benefits of the proposed Canada/EU free-trade deal (the Comprehensive Economic and Trade Agreement). On Wednesday, Feb. 12, the committee questioned Patrick McGuinness, president of the Fisheries Council of Canada. The following are my questions and McGuinness' answers: 

Mr. Ryan Cleary (St. John's South—Mount Pearl, NDP): Thank you, Mr. Chair, and thank you, Mr. McGuinness, for your presentation.

Coming from St. John's South-Mount Pearl in the province of Newfoundland and Labrador, I can tell you, sir, the overwhelming response from all sectors of our fishing industry is positive to this deal. 

When it comes to processors, the processing Association; when it comes to the Government of Newfoundland and Labrador; and when it comes to the union, the Fish, Food, and Allied Workers' Union, which represents plant workers, fishermen, and trawlermen, everybody's in agreement that this is seen as a positive, as a good deal.
Also as a former journalist myself I have covered fisheries for a lot of years, and I know firsthand the impact of high tariffs on our industries like shrimp.

That said there are some questions that are outstanding. In Newfoundland and Labrador the province is being compensated to the tune of $280 million from the federal Government of Canada, and $120 million from the province—the province is kicking in money as well—for compensation for giving up minimum processing requirements, which we have had in Newfoundland and Labrador for a dog's age.
My first question is, from the perspective of the association representing processors across Canada, from your perspective, sir, what do you see as the impact of Newfoundland and Labrador lifting minimum processing requirements?

Mr. Patrick McGuinness: I'll use an example.
Bottom line, our position is that minimum processing requirements don't protect jobs. The bottom line is, if the harvesting and delivering that product to shore, and then in terms of also then putting it into the processing plants, if it's not going to make economic sense, then that's not going to happen. The government can introduce rules but the company really operates in terms of making sound decisions.

What happens there is you don't necessarily protect that job, but what happens is, in the harvesting side, that quota is either not fully harvested or it's basically left in the water.

I'll give you a good example. Bottom line, in terms of minimum processing requirement, as you say, Newfoundland and Labrador has them in place, Nova Scotia doesn't have them in place, New Brunswick doesn't have them in place, PEI doesn't have them in place, and British Columbia, no longer.
Fisheries Council of Canada worked with the industry in British Columbia, and with Minister Fast's office, in terms of eliminating that last vestige. You have a roe herring fishery in British Columbia, you have a roe herring fishery in Alaska. The salted roe hearing business was absolutely excellent because basically, you sell it into Japan and it was a high gift price, in terms of their new year.

What happened over time, two things happened over time. The market for that product declined quite substantially, and then at the same time in terms of the stocks, both in Alaska and in British Columbia, what was happening was is that certain components of them were becoming extremely small. That resulted in the fact that, with respect to the prices, it was not economical any longer to be able to take out the roe from the small females.

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Mr. Ryan Cleary: Can I interrupt? I've only got a few minutes to ask questions and I want to stick to the impact of minimum processing requirements.

Mr. Patrick McGuinness: I'll tell you. What happened is the Alaskans, without a minimum processing 
requirement, basically adjusted. What they did is they sent the smaller products to, for example, Korea, that was further processed there and then sold into Japan. Meanwhile, basically what was happening in B.C. is that the smaller herring, the seiners would not be going out to harvest them. We were reducing landed value. Then in the marketplace, the Alaskans could sell to the Japanese and say, "we not only have roe herring here, but we have food herring", where our people could only sell that.

Bottom line is, it was understood then that what was happening was the overall pie was declining.
Mr. Ryan Cleary: Let me cut to the chase and ask you.

Mr. Patrick McGuinness: I just wan to say—

Mr. Ryan Cleary: No, no. I've only got so much time, sir.
The lifting of minimum processing requirements in Newfoundland and Labrador, the elimination of those rules, that will not result in any job losses in Newfoundland and Labrador? That's a question.

Mr. Patrick McGuinness: I'll tell you what, I'll give you what Earle McCurdy said in the Telegram with respect to union exploring shipping out unprocessed cod.
Mr. Ryan Cleary: I've read those stories, sir, I'm looking for your opinion.

Mr. Patrick McGuinness: I'll tell you what it said.
More broadly, McCurdy said he believes minimum processing requirements are a relic of a different era. In 2013, the regulations made it uneconomical to fish, which meant part of the quota wasn’t caught

That whole policy area really has to be rethought. There is no good having a bunch of regulations and having fish left in the water. That benefits no one.

Mr. Ryan Cleary: So let me ask you this question again, sir.
The lifting of minimum processing requirements to Newfoundland and Labrador, do you think that will result in any job losses in our plants? Yes or no?

Mr. Patrick McGuinness: As a result of that, it's an unfair question.

I look at the fishery overall. I'm saying that the continuation of those processing plants, of those processing rules, will cause a reduced value of the fisheries.
We already see this in yellowtail flounder. You know that. In Newfoundland and Labrador, because of the small size of yellowtail flounder, because of the minimum processing requirement, some of those quotas are left in the water. If you just want to look at one little piece you can make some sort of comment, but you want to take a holistic kind of approach to an issue, and that's what the Fisheries Council of Canada does. You come to the only conclusion that maintaining a minimum processing requirement is negative to the benefits of people working in the fishing industry, whether it's processors or harvesters.

Mr. Ryan Cleary: Again, Mr. McGuinness, I want to highlight the fact that this deal is generally seen in Newfoundland and Labrador as a good deal. There are also questions, and one of the questions that's being asked, a simple question, is what exactly Newfoundland and Labrador is giving up by agreeing to the elimination of minimum processing requirements. What impact that that will have on the processing sector. But as you just note, you have to look at the big picture and not just one piece of the pie, but the whole pie.
Another concern that's being raised and this was a concern that was raised shortly after last fall when the Conservative government announced the Brock and CIDA deal. The concern that was raised as a result of a media reports out of the EU, and the media reports basically the way the EU was selling this package is that as a result of the CETA deal, the lifting of minimum processing requirements, EU countries like Spain and Portugal for example, will have access to more raw Canadian fish.

Let me read it to you. Under Fisheries, the memo states,

and in addition to the elimination of tariffs, the fish package also includes other elements of interest EU firms such as better access to Canadian fish for the EU processing industry.
So again, simple question cut right to the chase, will this deal result in EU processing companies getting more access to raw Canadian fish?

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Mr. Patrick McGuinness: Newfoundland is not unique. A cod in Newfoundland, a cod in Nova Scotia are relatively the same. They have access to all sorts of Atlantic Canada fish because there is no processing restrictions in Nova Scotia. There is no processing restrictions in New Brunswick. There's no processing restrictions in P.E.I.

It's really difficult to see that the fact that Newfoundland and Labrador has a minimum processing restriction, in terms of the impact on the marketplace in terms of getting raw material, I mean it's never come to me that that's a problem, from the foreign countries and foreign buyers.
Mr. Ryan Cleary: So the $400 million, $280 million from the Feds for example, $120 million from the province, what exactly is that for if it's not compensation for a loss?

Mr. Patrick McGuinness: There's no question on what's happening. Whether you have the CETA deal or whatever, is the industry in Newfoundland and Labrador has significant problems. And you know that. There was that major study that identified that 30% of the harvesting vessels were not profitable. Forty percent of the processing plants were not profitable. Basically that report is there. So there's no question, there has to be consolidation. There's no question that a number of those plants and those communities around Newfoundland are going to evaporate.
Now the effort I think in terms of this funding is basically to help that transition. And those plants now are very much populated by people in 45, 55, 65. So there's some intent, if you will, to hopefully transition those people and those communities in terms of just the evolution. The evolution, if you will, in terms of the fisheries and things of that nature.

So whether CETA came in or not, that was going to happen. Now what CETA may do is that because of seeing the opportunities, if we don't restructure ourselves to see the opportunities, we may lose some opportunities. So it may accelerate, if you will, people saying, “hey, we've got an opportunity here, we're going to have to work more collaboratively”. We're going to have to have better communications, better working together between the harvesters, the unions and the processors. So that is what we hope will happen.
Now that in itself, the evolution of that type of approach will mean that companies will, the very group, will maybe start looking at it with collaborations and so forth.

That is what we see happening. Now bottom line, CIDA may give the pivot to make that thing go forward. In our view and I think in the view of the fishing industry and also the view for Newfoundland and Labrador, that's a good thing. You're either going to move forward or you're going to be swept away.

The Chair: Thank you very much.

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