Evidence of meeting #11 for Fisheries and Oceans in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was terms.
A recording is available from Parliament.
3:40 p.m.
Conservative
The Chair Conservative Rodney Weston
I'll call this meeting to order.
Before we get started, Mr. Chisholm wants to read a notice of motion.
3:40 p.m.
NDP
Robert Chisholm NDP Dartmouth—Cole Harbour, NS
Thank you, Mr. Chairman.
I forwarded this to the clerk earlier this week, but I'll just get this notice of motion on the record, “That, in light of the Department of Fisheries and Oceans’ consideration of changes to the existing Pacific wild salmon commercial licensing model, the Committee conduct a study on that matter at its earliest opportunity, invite witnesses to comment on, among other things, implications of a quota system on independent fishermen and coastal communities.”
3:40 p.m.
Conservative
The Chair Conservative Rodney Weston
Thank you, Mr. Chisholm. It has been noted.
We're ready to begin.
Mr. McGuinness, thank you very much for joining us today. I know you're familiar with the proceedings of the committee, so I probably don't have to go through how it works, but once again thank you for coming and sharing your thoughts on the Canada-European trade agreement.
Whenever you're ready, Mr. McGuinness, the floor is yours.
3:40 p.m.
Patrick McGuinness President, Fisheries Council of Canada
First of all, thank you for the invitation to appear before you. I thought I'd start by giving you a short description of the Fisheries Council of Canada and then of our industry.
The Fisheries Council of Canada, FCC, is a national association right from British Columbia to Nunavut. It is basically a $6-billion industry. We employ about 83,000 people. The FCC members produce most of that production. We also are significant harvesters in British Columbia through the BC Seafood Alliance, which represents about 90% of the value of the fish and seafood landed in British Columbia. In Atlantic Canada, we're predominantly harvesters of shrimp, groundfish, scallops, and herring.
Our members, the people who pay my salary, are primarily what we would call integrated companies, in the sense that they own and control their own harvesting vessels and the processing plants, and are involved in the marketing and exporting of the products. In the FCC, we're also very proud of the main fishermen’s cooperatives in New Brunswick and Newfoundland and Labrador. I should say P.E.I., but at this time in P.E.I., the processors association is floundering and hasn't been able to pay its bills. We hope to have them back in shortly. Fishermen's cooperatives are basically fishermen's associations that have forward integrated into the market, in the sense that they not only harvest but also own and operate a processing facility.
Our industry is an export industry. We export about 66% of what we produce. Sixty per cent of those exports go to the U.S.A. One could say that we are very much dependent, if you will, upon the United States, but if you look across the industrial sector of Canada in terms of exporting, you will find that for most of our sectors, whether it's meat or whatever, they're into the 70% or 75% dependency on the U.S. market. We've been somewhat involved in a strategy, if you will, of market diversification. Our dependency on the United States on exports is 60%. That's progress, but it is still high.
In the last number of years in terms of the strategy, we've been very much focusing on Asia Pacific. At the time, the EU was not particularly attractive. What we were facing there was that our main competitors, the Scandinavians, had duty-free access to the European Union, and for developing countries, most of them had duty-free access to the EU. Fish and seafood is the largest traded food commodity in the world. Right now, developing countries in terms of volume supply about 40% of what's being traded around the world.
In terms of our strategy, we feel that we have been successful. If we look at our top five markets, we find that three of them are in Asia Pacific. Our number one market is the United States. Our number two market is Canada itself. Our number three market is China, at $440 million. Our number four market is Japan, at $260 million. Our number five market is Hong Kong, at $130 million.
In that scenario, what's missing? What's missing is a European country, despite the fact that the EU is the largest seafood market in the world. The first significant market for us in terms of an EU country is the United Kingdom. The United Kingdom is now seventh, with about $90 million of our exports. It comes behind Russia, which is sixth, at $104 million.
What we see with respect to CETA is it will be changing this picture that I've just presented to you. It's a game changer. It's a game changer for a number of Atlantic fisheries: for shrimp, particularly cooked and peeled; lobster processing, which will also then have spillover benefits to the live lobster sector; herring; and mackerel. There's no question that CETA also has positive things with respect to British Columbia groundfish and salmon fisheries, and also in terms of Yukon and the Northwest Territories, with respect to the freshwater fisheries of walleye and pickerel.
In summary, reducing the tariffs of 15% and 20% to zero in the world's largest market is really going to help us put our diversification strategy into high gear.
What we've noticed over a number of years is that the EU has expanded from about 13 or 14 countries to 28. In doing that it has become the world's largest seafood market, but if you look at Canadian exports into the EU, we haven't participated in that growth. Between 2006 and 2012, the value of exports to the EU dropped 38%. Meanwhile, our exports to the United States remained stable, and obviously, we've had significant increases in China, Russia, and the Asia-Pacific in general.
Basically, the EU high tariffs have been forcing us to really focus on emerging markets, particularly emerging markets that are growing with middle-class populations. These markets, China and Russia, are lucrative markets, but they are risky markets. What we find in many of these markets is that the WTO trade rules, the Codex standards, are having a hard time getting traction. There are really some significant problems in terms of dealing with that.
With respect to CETA, I'll give you two examples where we think it's a game changer. Cooked and peeled shrimp, which is basically in Newfoundland, New Brunswick, and Quebec, the market for that product is the U.K., Denmark, and Sweden. The tariff rate in the EU right now is 20%. Our access to that market is totally dependent upon the EU unilaterally establishing what we call autonomous tariff reductions that allow our products to go in at a reduced rate or zero provided there's further processing of those products in the EU.
We've been in this game for at least 10 years, particularly as the shrimp industry expanded in Newfoundland and Labrador. We started off with maybe a 5,000 tonne quota at 7%, and the last quota that was negotiated for the period 2013-15 is 30,000 tonnes at 0%.
What's happened in those years and more recent years, is that trying to get some form of agreement with the Europeans has been much easier than in the beginning. That's primarily because the last industrialized shrimp peeling plant in the EU closed a number of years ago. However, we see that changing.
What we're seeing now is hand peeling developing in Poland, Bulgaria, and Estonia. Our concern in terms of the cooked and peeled shrimp industry, which is vital to Newfoundland and Labrador and very important to New Brunswick and Quebec, is that when the 2013-15 arrangement expires and you have to have one for 2016, there will be voices in the EU in terms of either eliminating the type of access or reducing it. Really, the CETA is coming just in time in terms of this oncoming significant challenge.
What CETA does, is it gets that industry out of that dysfunctional mess of what we call ATRQs. It was particularly difficult for the east coast of Newfoundland, where they would start their shrimp fishery in late June, July, and then, say for example, by September the duty-free quota into the EU would be fully exhausted by supplies from other provinces, and also from the west coast of Newfoundland and Labrador, and then the quota would jump up to 20%.
What the industry would do is we'd continue to fish, harvest, produce, put it in cold storage, either in Canada or in the EU, pay for that, and then on January 1 of the next year just dump it on the market. As I said, that's totally dysfunctional, but people were living and making a few dollars. CETA will get us out of that.
Lobster processing is very important to P.E.I. and New Brunswick. Eighty-five per cent of the processed products that we produce in Canada goes to the United States. What's been happening in recent years is a growing worldwide market for lobster tails and claws. With that type of product, because it is an excellent product for restaurants and high-end restaurants, we've actually had good inroads to the EU despite the 16% tariff.
The tariff is 16% for that particular product, and for the processed lobster meat it's 20%. What we see there is that the elimination of that tariff will open up a market for those products in the EU leading to what we feel will be expansion in the lobster processing sector. That will also be very positive for the live lobster sector because what we have right now is an oversupply of live lobster markets from Canada and from Maine hitting the marketplace and causing a significant reduction in prices.
Those are just two examples that we think are game changers.
I could mention, for example, herring and mackerel. It's certainly positive there in the sense that we used to have very good exports of those products into what is called eastern Europe in terms of countries such as Bulgaria, Estonia, Poland, and Czechoslovakia, because they are basically a low-cost food item. We were doing well in there. They joined the European Union. No question it was economically beneficial for those countries, but at the same time, in joining the EU, they have to also adopt the EU tariff structure.
Previously, we could get into those markets at 0%. They joined the EU, and the tariff is now up to 15% on those products. Now in that market we only become a residual supplier, residual in the sense that if the European and Scandinavian stocks are down, then we have opportunities. Now with CETA we have to go back. Hopefully we'll be able to get back into the herring and mackerel food markets of eastern Europe and also expand throughout.
The Fisheries Council of Canada fully supports CETA. We see it as further ammunition in terms of our market diversification strategy. It will enhance prosperity, and we will also see some increased processing, particularly on the cooked and peeled shrimp side and also in lobster processing.
I'd like to end by thanking the trade officials at international trade Canada and the Department of Fisheries and Oceans who kept us informed of issues and who listened to our comments. We felt that our comments and suggestions were considered. We had very positive relationships, and we're very thankful for that type of opportunity.
That's my presentation. I hope I haven't taken too long.
3:50 p.m.
Conservative
The Chair Conservative Rodney Weston
Thank you very much, Mr. McGuinness.
We'll start off with a 10-minute round of questions.
Mr. Cleary is going to lead off.
3:50 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
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, that the overwhelming response from all sectors of our fishing industry is positive to this deal. When it comes to processors and 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, everyone is in agreement that this is seen as a positive, as a good deal.
Also, as a former journalist myself, I covered fisheries for a lot of years and I know first-hand 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 giving up minimum processing requirements that we have had in Newfoundland and Labrador for a dog's age.
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?
3:50 p.m.
President, Fisheries Council of Canada
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 putting it into the processing plants is 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.
You don't necessarily protect that job, but what happens is on 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 requirements, 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. P.E.I. doesn't have them in place. British Columbia no longer has them in place . The 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 herring business was absolutely excellent because basically, you sell it into Japan and it was a high gift price in terms of their new year.
Two things happened over time. The market for that product declined quite substantially, and at the same time, in terms of the stocks both in Alaska and in British Columbia, certain components of them were becoming extremely small. That resulted in with respect to the prices, it was not economical any longer to take out the roe from the small females.
3:55 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
Could I interrupt, as I only have a few minutes to ask questions and I want to stick to the impact of minimum processing requirements.
3:55 p.m.
President, Fisheries Council of Canada
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. It 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 that they not only had roe herring here, but they had food herring, where our people could only sell that.
The bottom line is, it was understood then that what was happening was the overall pie was declining.
3:55 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
No, no. I only have 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, will it? That's the question.
3:55 p.m.
President, Fisheries Council of Canada
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”.
3:55 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
I've read those stories, sir. I'm looking for your opinion.
3:55 p.m.
President, Fisheries Council of Canada
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, he said.
“That whole policy area has to really be re-thought,” he said. “There’s no good having a bunch of regulations and having fish left in the water. That benefits no one.”
What I'm saying—
3:55 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
Let me ask you this question again, then, 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?
3:55 p.m.
President, Fisheries Council of Canada
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, if you will, 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 if 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.
3:55 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
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 central questions that's being asked is what exactly Newfoundland and Labrador is giving up by agreeing to the elimination of minimum processing requirements, what impact that will have on the processing sector. As you just note, you have to look at the big picture, not just one piece of the pie, but the whole pie.
There's another concern that is being raised. This concern was raised shortly after last fall when the Conservative government announced the CETA deal. The concern raised was as a result of media reports out of the EU. Basically, the way the EU was selling this package was that as a result of the CETA deal, the lifting of minimum processing requirements, EU countries like Spain and Portugal, for example, would have access to more raw Canadian fish.
Let me read it to you. Under “Fisheries”, the memo states that in addition to the elimination of tariffs, “...the fish package also includes other elements of interest to EU firms, such as better access to Canadian fish for the EU processing industry.”
Again it's a simple question cut right to the chase: will this deal result in EU processing companies getting more access to raw Canadian fish?
4 p.m.
President, Fisheries Council of Canada
Newfoundland is not unique. A cod in Newfoundland and a cod in Nova Scotia are relatively the same. They have access to all sorts of Atlantic Canada fish because there are no processing restrictions in Nova Scotia. There are no processing restrictions in New Brunswick. There are no processing restrictions in P.E.I.
It's really difficult to see 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, it's never come to me that that's a problem from the foreign countries or foreign buyers.
4 p.m.
NDP
Ryan Cleary NDP St. John's South—Mount Pearl, NL
The $400 million—$280 million from the federal government and $120 million from the province—what exactly is that for if it's not compensation for a loss?
4 p.m.
President, Fisheries Council of Canada
There's no question on what's happening. Whether you have the CETA deal or whatever, the industry in Newfoundland and Labrador has significant problems, and you know that. There was that major study which identified that 30% of the harvesting vessels were not profitable, and 40% 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. Those plants now are very much populated by people who are 45, 55, 65 years of age. There's some intent, if you will, hopefully to transition those people and those communities in terms of just the evolution in terms of the fisheries and things of that nature.
Whether CETA came in or not, that was going to happen. What CETA may do is, if we don't restructure ourselves to see the opportunities, we may lose some opportunities. It may accelerate people to say that we have an opportunity here and we're going to have to work more collaboratively. We're going to have to have better communications, better working together among the harvesters, the unions, and the processors. That is what we hope will happen.
That in itself, the evolution of that type of approach, will mean that companies, the Barry Group, maybe will start looking at it with collaborations and so forth.
That is what we see happening. Now, bottom line, CETA may be pivotal in making that thing go forward. In our view, and I think in the view of the fishing industry, and also it's 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.
4 p.m.
Conservative
The Chair Conservative Rodney Weston
Thank you very much.
Next up is Mr. Kamp. I believe you're going to share your time with Mr. Leef.
4 p.m.
Conservative
Randy Kamp Conservative Pitt Meadows—Maple Ridge—Mission, BC
Mr. Chair, if you could help me to split my time with Mr. Leef, I'd appreciate it.
Welcome, Mr. McGuinness. I appreciate your perspective on this.
Can you remind us again what role the council played during the CETA negotiations?
4:05 p.m.
President, Fisheries Council of Canada
Basically I had to sign confidentiality papers with the Government of Canada, but from time to time the negotiators would have a question and concerns about the situation from the viewpoint of the fishing industry and what its reaction would be to this or that. I guess my job was to try to convey a comment and help them with negotiations to ensure that they had a good sounding of what's happening in the fishing industry
4:05 p.m.
Conservative
Randy Kamp Conservative Pitt Meadows—Maple Ridge—Mission, BC
Thank you for that.
You say that your members are mainly involved in the wild capture fishery. Does that mean you have no members who are involved in aquaculture?