Fisheries Committee on Feb. 28th, 2008

[Dr. Rashid Sumaila]

The reason we say this is that if the income support is designed properly, it can actually help fishers without leading to overfishing, so it is good. But if it is not designed properly, it can actually lead to overfishing. EI, employment insurance, has been cited by some researchers as actually tending to encourage overfishing. Because the way it was designed before--I think there have been some modifications recently--it encouraged fishers to keep trying to fish, even when they didn't make money, to meet targets in order to get their EI. In those cases, it just led to more capacity than there would be.

So that is where we stand in our report in terms of what income support can lead to.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Okay, but would the capital gains tax exemption and all this play into the same role?

[Dr. Rashid Sumaila]

You said the capital gains tax.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I mean the exemption for fishermen.

[Dr. Rashid Sumaila]

Oh, yes. Another key point about subsidies is that when you give one sector an advantage vis-à-vis the rest of the economy--if the rest of the economy is paying capital gains tax and the fishery sector is not--that is a subsidy.

[Lawrence MacAulay, Liberal, Cardigan, PE]

The small craft harbours repair, the $100 million that goes in every year--and everybody here at this table is looking for more money to be put into this program--would look to me like that's in the red box too. It could be considered a subsidy that is illegal according to the WTO, should we agree to it.

[Dr. Rashid Sumaila]

Yes, it could be.

[Lawrence MacAulay, Liberal, Cardigan, PE]

In fact, it is already in the red box.

[Dr. Rashid Sumaila]

Yes.

[Dr. Marc Bénitah]

Please, I would like to add that the category is at least subsidies that do not have any meaning in the WTO, so it's not a good idea to answer these questions by, for example, saying this subsidy is ugly--you don't find this word.

The answer to your question on income support is of course that it is prohibited. There is no doubt about that. If you provide income support under, for example, a target for the--

[Lawrence MacAulay, Liberal, Cardigan, PE]

But, sir, that would include everything I indicated: small craft harbours repair, capital gains tax exemption--

[Dr. Marc Bénitah]

Yes.

[Lawrence MacAulay, Liberal, Cardigan, PE]

--employment insurance, gas tax cards.

[Dr. Marc Bénitah]

Yes, it's an operating cost, and every time you have a tax exemption, it's a subsidy according to the WTO, because it's explicitly written.

I would like to add another thing, please. When you discuss the subsidies in the WTO, you have to take the technical definitions, because sometimes economists for their own reasons take a very broad approach to what a subsidy is. But from a legal point of view, of course, you have to have the technical definition of subsidies, and that means you have a financial contribution by the government, and you have a benefit for the recipient. For example, a tax exemption is clearly a subsidy, so it would be in the red box without any doubt.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Just to confirm, everything else that I've mentioned will also be in the red box.

[A witness]

Yes.

[Lawrence MacAulay, Liberal, Cardigan, PE]

So what does this cover? What do we do? What involvement do you feel we had to this point in order to let this type of thing happen?

To me and to the people I represent this is not a problem--it's a disaster.

[Dr. Rashid Sumaila]

It's a disaster?

[Lawrence MacAulay, Liberal, Cardigan, PE]

Yes.

[Dr. Rashid Sumaila]

In what respect, sir?

[Lawrence MacAulay, Liberal, Cardigan, PE]

In the respect that the fishermen end up with no money.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Anyways, we're here to question the witnesses, not to....

[Dr. Marc Bénitah]

Excuse me. You know I didn't have the time to talk about it, but there is a second box—the box of subsidies that are not prohibited. There is leeway here, and there is some room to manoeuvre to help fishermen, but not in the way of the red box. It's important to have a look at the non-prohibited subsidies, because the goal of this box is to avoid the disaster you talk about.

You want to know what is....?

[Lawrence MacAulay, Liberal, Cardigan, PE]

In what way could that happen?

[Dr. Marc Bénitah]

Perhaps, if you want, I could tell you what is in the--