Fisheries Committee on May 26th, 2010

[The Chair, Conservative, Rodney Weston]

I call this meeting to order.

Ladies and gentlemen, thank you for coming out this morning to meet with your Standing Committee on Fisheries and Oceans. Thank you for the opportunity to come to Deer Lake, and thank you for coming to meet with us, taking the time out of your busy schedules to offer some opinions and thoughts and to answer some questions that committee members might have.

It's generally a custom, when we travel as a committee to a certain area, that we ask the member from that area to say a few words to open up the proceedings.

I'll ask Mr. Byrne if he wants to make a few comments.

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

Thank you very much, Mr. Chair.

I welcome all of my colleagues to western Newfoundland, to Deer Lake in particular. We're celebrating our 60th anniversary of municipal incorporation this week in Deer Lake.

Deer Lake is also a place where, while it's not a port city, fishers and fishing industry stakeholders have met before. It's a central location that allows easy access for people from Labrador, the northeast coast, the west coast, and from all over the province. We're back at a table where we've been before.

Mr. Chair, this is a great opportunity for us to study and be involved in an issue that is of critical importance, not only to the province of Newfoundland and Labrador but to eastern Canada. The House of Commons Standing Committee on Fisheries and Oceans decided to embark on a study of the eastern Canadian snow crab industry because this industry is in a certain amount of turmoil, no doubt about it.

The issues throughout eastern Canada are not identical. In Newfoundland and Labrador, for example, it's not so much based on a resource issue, per se, although there are definitely resource concerns. Economic issues, rationalization and long-term industry stability and viability issues, seem to be the predominant considerations that you may or may not want to bring to the table. In the southern Gulf of St. Lawrence, as we know, the issue is starkly different. They have had a 63% cut in quota, which is impacting their industry extremely negatively. On the eastern side of Nova Scotia there are other management issues.

The committee will be travelling throughout eastern Canada to hear from various industry stakeholders like you, to hear your input on not only specific issues but on specific recommendations for solutions as well. The objective of the committee will be to table a report in the House of Commons based on the testimony that each of you provides us and to synthesize that testimony into specific recommendations to the federal government for action. That's why I think it's exceptionally important for you to be here today, as key industry stakeholders, as opinion leaders, but as people who understand the industry in-depth as well.

It goes without saying that this industry is absolutely vital to the overall well-being of rural Newfoundland and Labrador, but it's important to rural eastern Canada as well.

Some of you have travelled far distances to be here. I appreciate that. I wish that everyone who was invited would have made the effort to be here. I think it would have been extremely valuable if the Association of Seafood Producers had taken the call and responded positively to the opportunity to testify, because this committee will be making recommendations. It will analyze the industry as it exists, as you present it to us, and we will be making specific recommendations to the federal government. We want everyone to be included in that, and that's why we asked all industry stakeholders and representatives to be here to be part of that. Unfortunately, the Association of Seafood Producers declined the invitation to attend and therefore declined the invitation to be part of this process. But our work goes on. We will be making recommendations based on what we hear.

The committee has assembled to hear this testimony because of a motion that I tabled before the Standing Committee on Fisheries and Oceans. I'm delighted that each and every one of you has taken the opportunity to be part of it, and I'm delighted that my colleagues have chosen to come here.

With that, Mr. Chair, I think it's time to hear the testimony from the witnesses.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Byrne.

Gentlemen, I believe you've all been made aware that you have approximately four minutes to make opening comments. As you can see, we have quite a few people who wish to participate. I'd ask that you try to stay as close to that four minutes as possible. You'll hear a beeping noise up here; I have a little timer that will go off when you reach the four-minute mark. I'd ask when you hear that to bring your comments to a conclusion, or shortly thereafter.

We'll start with Mr. Andrews, if you have some opening comments.

The microphones are all automatic. They're controlled by the staff behind me, who will turn them on when you speak. You don't have to do anything but begin with your comments.

Mr. Andrews.

[Clarence Andrews, Fisherman, As an Individual]

Thank you very much.

I'm a three-hull-based full-time crab fisherman. I bought my first boat when I was 22. I have two sons-in-law involved in the fishery with me now. Unfortunately it's becoming more and more difficult coping with the policies and regulations that DFO is putting on us. I'd like to outline some of the regulations that maybe we could change, and I'd like someone to look at them.

We have a family business, and DFO is telling us that we cannot fish our three licences on one vessel. They're telling us to buy a second vessel. I don't see why we should have a second vessel when we can bring all licences in on one. Also, crab has a four-month season. DFO put a 12-month rule in place. I don't see why a boat in your name has to stay there for 12 months. That's hindering us when we're changing boats to catch our three licences. I don't see why DFO can't change the wording and maybe put in one change per calendar year.

Two or three years ago, I remember DFO took the 12-month rule out and put in a six-month rule. The following year, they put the 12-month rule back in place. So it's not as though they can't do something about it. When we're fishing, our two buddied-up individual quotas take about 10 weeks to catch. The other licence takes four weeks to catch.

So this 12-month rule, when we're trying to combine licences, or purchase more licences to build up our business, is crippling us. We're not able to do it without buying a second vessel. I don't want to invest another $300,000 or $400,000 to buy a vessel.

Also, this year in particular, our fishery opened April 1. So fishermen went in and picked up their licences April 1. Because I was buddied up with my son-in-law, my licence wasn't available until April 12. So I lost 12 days of fishing time. Our season closes July 30. I don't know if they're going to give me 12 days more than the other fishermen at the end of the season. I'm very doubtful. So paperwork should be available April 1 or even before April 1.

Our vessel can carry 55,000 pounds in an RSW tank. It's top-quality crab. We've been doing it for 10 years with RSW. DFO is telling us we have trip limits. Now the trip limit for an RSW vessel I think is 50,000 pounds. Some boats can carry 55,000 or 60,000 pounds, and I don't see why we have to judge how much crab is in those tanks. We fill them up. They can stay in the tanks forever. Quality is not an issue. So fill up your tanks, and bring them in. If the production plant can handle it, offload it. Having trip limits to me is not conservation; it's interference, especially for RSW boats. Trip limits should be gone. To my mind, DFO shouldn't have anything to do with trip limits. Let the processor deal with his own fishermen. If the processor can handle it, bring it in.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Andrews.

Mr. Sackton, go ahead, please.

[John Sackton, President, Seafood.com News, As an Individual]

Good morning.

I'm John Sackton. Just to give you a very brief background, I publish Seafood.com News and I'm a market analyst. I deal a lot with fish commodity prices. I've been involved with the Newfoundland crab fishery for about 12 years.

After a strike in 1998 or maybe 1997, I came in the following year because the province developed a final-offer selection process and wanted a third-party market analyst to report on crab prices in the U.S. and Japan. Those crab prices were used at that time by the FFAW and FANL to negotiate a formula that adjusted the prices to the boats. The rationale behind this was to get the season started without either side or either party taking excessive risk.

The history of the crab fishery, particularly with the heavy landings that occur towards the end of May, is that the prices invariably go down in the market from the start of the fishery in late April and May until the end of May or the beginning of June. If you know that these crab prices are going to go down, it's very hard to judge who's going to take the risk, so at that time the market-based formula was designed to adjust prices to the harvesters up or down, depending on the market performance. Adjustment was initially on a biweekly basis. Also, for most of those years there was a much more favourable Canadian dollar exchange rate in the U.S. market for crab exporters, and because of that there was room in the value of the commodity for all of this to adjust.

My role in terms of providing a market price that then adjusted actual vessel prices ended in 2008 or 2009. It ended in the first year that the U.S. and Canadian dollars got to parity, which I think was 2008. That put a tremendous amount of pressure on Canadian crab exporters, and the market-based formula in that year would have returned a crab price to harvesters below $1.50. I'm not quite sure how it was decided, but at that point there was certainly a feeling that the $1.50 price had to be maintained. As a result, the market-based formula was abandoned.

In that year, it so happened that if you took all of the prices into consideration, $1.50 was in fact a good, accurate price. Even though for a few weeks you might have seen $1.45, in other weeks you would have seen $1.55 or whatever, and it averaged out.

For the last two years I've been under contract from the province to do market monitoring for the crab markets and give a report at the end of the year, but I've had no involvement in directly providing information for price-setting.

The point I want to make is that I think a lot of the stress the industry's been under is directly related to the U.S. dollar exchange rate. When we had the price formula, the U.S. exchange rate was included as a factor in the formula. When the prices were changing every two weeks, often the biggest single factor in that change was the volatility of the exchange rate, and when the exchange rate moved towards parity, it made a very significant reduction in income to the entire industry.

Looking back at the last 10 or 12 years, my view is that when the exchange rates were favourable for exporters, it really provided the industry with a cushion to negotiate. There was room for processors to make money and there was room for harvesters to make money. Now that the cushion has been eroded and our dollar is at par, it's put an extreme amount of pressure on the industry.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Sackton.

Go ahead, Mr. Seymour.

[Leo Seymour, Fisherman, As an Individual]

Good morning. I'm Leo Seymour.

I want to speak a little bit about what John just said about dollar parity. I can understand a little bit about the exchange rate. I'm no expert on it, but Nova Scotia is a part of Canada, with the same dollar; in New Brunswick, it's the same thing. How is it that crab right now is $2.40 in New Brunswick to the fishermen, and to me it's only $1.35?

The list goes on, with cod and everything else. I got 50¢ a pound for cod last year, and in Nova Scotia it was $1.70 a pound. Does the exchange rate have anything to do with that? I don't think so. I just can't get my head around it. All I can do is say it in plain English: it's nothing but a goddamn rip-off, as simple as that.

I could go on. I've been fishing now for, let me see, 36 years. I got into the fishery with a loan of $300 from a fellow when I bought a power saw when I was 17 years old. I went into the woods and I built a skiff and I went fishing. Now it is all gone; we've been on a so-called moratorium since 1992, which doesn't even exist. It's just the likes of me who's not allowed to catch a fish, but everybody else—the foreigners and whatever—can do what they like. It's going on now, as we're sitting here. They're out there now, and our own factory freezer trawlers are out there catching shrimp. They caught 600 tonnes of shrimp in 21 days. What did they do? They destroyed 1,800 tonnes of capelin, the most precious fish in the water. Everything else has to depend on it.

Now we have another problem. I know you all see this. Even the scientists now will agree that there are around nine million seals. We know, we fishermen and sealers, that there are more than that. Where's it all going to end up?

This is the coast of Newfoundland and Labrador. The fishery is our mother, and she's on life support, and nobody cares. That's the way it seems to be. You can talk all you like, you can do what you like, and nobody cares.

If something isn't done about the seal population.... If we think we're in a mess now, then boy, listen here; wait and see what's ahead. Like buddy said, the perfect storm is yet to come.

I don't see any way out of it. This is total destruction. The only thing I know to do when I leave here is to pack my bag and head west, after 35 years of investing in boats and wharves and fishing gear and one thing or another. Now, if I go out in the summer and get a few capelin, while my buddy is there having bad luck, I'm not even allowed to give them to him. I have to dump them. Then they talk about conservation. Sure, they don't have a clue what they're talking about.

I'll go on a little bit more. I'm not going to stick to the crab fishery, because as far as I'm concerned, the fishery is the fish.

One of these days there will be a food fishery open. You're allowed five fish a day. If you get a tomcod only so long, you have to keep it. You're not allowed to throw it away to try to get a better one; you have to keep it. I asked DFO the question why. He said that catch and release could harm the fishery.

I can haul a fish out of thirty fathoms of water in probably less than a minute and unhook to let it go. But at the same time, you have a regulation up on the rivers. There's a salmon up there to spawn, eight months pregnant. I can heave out the hook and I can battle it for a full half-hour, maybe an hour, trying to get myself a salmon of 14 or 15 pounds. Does that make sense to you? And right now, this summer coming, I'm not even allowed to carry a dead salmon. If I get a salmon tangled in my gear and he's dead, I'm not even allowed to carry him in. I have to throw him away.

Saint-Pierre and Miquelon, with their ten-mile corridor that extends out beyond the 200-mile limit, are catching away at our salmon all summer long.

I could go on and on. I could write a jaysus book, but what's the good of it?

Anyway, thank you.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. Seymour.

Mr. Small.

[Lyndon Small, President, Independent Fish Harvesters Inc.]

Good morning, Mr. Chairperson, members of the Standing Committee on Fisheries and Oceans, and fellow panellists.

I want to thank the Standing Committee on Fisheries and Oceans for the opportunity to make a presentation concerning the snow crab industry in Newfoundland and Labrador.

As an introduction, my name is Lyndon Small, president of the Newfoundland and Labrador Independent Fish Harvesters Association, NLIFHA, and co-owner and operator of a 65-foot fishing vessel.

The NLIFHA consists of members in the over-40-foot fleet in division 3K, which extends from Cape Freels to north of Cape Bauld. The mandate of this association is to ensure that the issues and concerns that affect our enterprises daily are being presented to both levels of government.

The crab industry in this province has great potential but has been crippled by low raw material prices in comparison with those in other jurisdictions within Atlantic Canada. Today, dry crab in New Brunswick is at $2.15 a pound; RSW crab is at $2.40 a pound; and in this province dry crab, and RSW, is at $1.35. At this price differential, fishers will lose thousands of dollars in income and revenue for their fishing enterprises.

What are the reasons for this huge difference in price? It's simply that competition is non-existent in this province's crab industry. Provincial legislation prohibits outside buyers from coming into the province to buy and truck the crab to their plants in the Maritimes. This form of protectionism enables the processors of this province to have a monopoly on the industry and provides an avenue for collusion to seep in, resulting in basement prices for crab fishers.

Presently, the NLIFHA have a confirmed buyer in the Maritimes willing to buy 3K crab at $1.90 a pound, but the provincial government will not allow this form of free enterprise to flourish.

The second major reason why the raw material price is deflated in Newfoundland and Labrador is the control processors have over the harvesting sector in this province. Over the years, fish companies have provided financing and loan guarantees for the purchase of vessels, licences, and equipment. Essentially, the processors own and control the vast majority of enterprises within this industry. This control guarantees the producers a lock on the crab before it is harvested from the water and the ability to dictate a low-end price to the fisher.

In this era of combining and rationalization, trust agreements are alive and well. Just under the surface, the fleet separation policy has been seriously eroded, to the point that vertical integration, which the processors so much desire, is a reality.

In conclusion, former provincial Minister of Fisheries John Efford discussed the same problems in a recent fisheries magazine interview, which stated:

In order to be a truly free industry, the market has to be opened up to outside buyers and harvesters can't be forced to do things they don't want to with their products, he now argues. “Processors actually own large numbers of fisheries enterprises. So that gives them an extra advantage and that is then one of the reasons why a lot of the small boat fishermen can't increase their quotas, ” he says. “Their own boats could keep the plants going. So they can squeeze.”

Therefore competition, free enterprise, and independence have to be the cornerstones of a viable crab fishery in Newfoundland and Labrador.

Thank you.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Small.

Mr. Wimbleton.

[Ray Wimbleton, Fisherman, As an Individual]

Thank you very much for giving me the opportunity.

I want to talk about snow crab. When we got into the crab fishery, 15 or 16 years ago, it was after the moratorium when they took away our cod fishery, which was a deepwater fishery for us.

Over the years we've been successful in lobbying to get into the bays for small boats under 40 feet. Most of us are in the 27- or 28-foot range. When DFO allotted that portion of water to the small boats, they said, “You live and die within that”, with regard to crab. That's fine, but the problem with it is that there are too many of us in those bays to make a living off that amount of crab.

I'm not faulting DFO on their management of the resource. It's about the only species there is for which we have a relationship with DFO in which we basically sit down and between the two groups come up with a quota that doesn't devastate the bay. We try to stay within a sustainable quota, and I must say it's worked well. The problem we have in the bay is that there's not enough resource for the number of us harvesters there; that's problem number one. Number two is that there are so many regulations in place that we can't economize on what we have, such as by fishing with three or four in a boat, or changing the boat around, as you suggested. That's crippling us.

Take Green Bay, where I fish. We have 11,000 tonnes of crab and basically little or nothing else. It makes a lot of sense to us as harvesters if we can get the most dollars we can out of that by economizing and buddying up. Whatever we need to do, we should do it. We can't survive on that.

The question I ask here today is this. Everybody's talking about a fishery that “can” be good, but you gave us four minutes to talk, and I think that's more than we've got to fix this: there's nobody after me. I'm 57 years old. There's nobody after me. In my community, the one I fished out of, is dead. I had to move out of it two years ago, because nobody has an interest. Nobody wants to go into a fishery in which they can't survive. They don't have enough money for groceries on a regular basis; they can't make their payments. We haven't got a resource.

When we fished cod, we didn't have a limit. We worked hard and caught what we could get, but with crab we have a quota. You can't make the resource any bigger than what it is, but we have to fix it. Today, this thing called the independent owner-operator has been pushed by everybody...and I support it; you can't own a licence unless you're a fish harvester, and that's the way it should be. But I'll tell you something right now, and you mark my words: within the next five to ten years, you'll see people like me out on the street lobbying you and the provincial government to let us sell our licence to buyers.

When I'm ready to get out--and I have no choice, because my age and health tells me to--no one else is there to buy it. If we don't fix this now—and we don't have another 15 years, or another 10—there will be no fishery; there will be no little bays; there will be no little communities.

So what happens to all these licences and this quota? Someone has to catch it; it's going to come out of the water. What I'm saying is that we have to fix this fishery.

Leo spoke about seals. One guy killed a seal in Green Bay this year, one hooded seal, and he documented it. He took the pictures and he posted them on the Internet. It had 85 female crabs in its stomach. I've been fishing crab for 16 years, and—I think Lyndon can back me up—I haven't destroyed five female crabs. That one seal took 85. How long can that resource last?

When I fished cod in deep water, that's all we knew. We fished, 150 of us, out on the water with gillnets. If we cut its throat and slit the stomach, we used to ruin our knives on the crab. It was female crabs. We don't want the cod back to that state anymore, or we won't have a crab fishery. We need to get control of this and we need to put something in place so that there's a future beyond me.

I have seven or eight years left, but every little community in Newfoundland is going to be gone without that resource. It's like Leo said this morning, coming in: do you know the biggest employer in Newfoundland today? Alberta.

That's stupid. We have a fishery that can support three times what is there, if we had run it right in the first place.

I'd like to close by saying that right now, in my opinion, and I speak for a lot of small-boat fishermen, the problem in this fishery is that there's not enough fish in the industry and too much politics.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Wimbleton.

Mr. McCurdy.

[Earle McCurdy, President, Fish, Food and Allied Workers]

Thank you and good morning. I'm Earle McCurdy with the Fish, Food and Allied Workers Union. I'll just touch on a few points. A lot of the points I wanted to talk about have been made and I'll just try to be brief.

It's not quite clear what exactly the focus was to be, other than the crab fishery, but I think the crab fishery, as one of the previous speakers said—it might have been Leo—is really all part and parcel of an overall fishery. Crab for the province as a whole is the single most important species in terms of total dollars in export value. In terms of the degree of dependence on it, crab is number one, although not everybody in all areas of the province has access to it.

I guess one of the principal issues of federal jurisdiction, because really we're dealing with a federal committee here, is the whole area of resource management, but there are some issues under that that I would just like to touch on. One has been raised already by Ray and Leo and perhaps others.

You hear a lot about ecosystem management. I really find myself wondering what that means when people say it, because if there was an ecosystem management, we could at least say what are our aims and objectives with respect to the management of the seal herd, with respect to the cod fishery, with respect to the crab fishery and the shrimp fishery. When you set a goal for one, that has a real impact on another.

For example, COSEWIC, the Committee on the Status of Endangered Wildlife in Canada, recently came out with a pronouncement that cod was in danger, within the definition that's in their legislation. It's absolutely a ludicrous outcome, yet the implications are very serious in our province. They're twofold: first of all, the amount of crab people have access to, and the issue Ray just raised, the impact of cod on species like crab, of which it's a predator.

I don't think it's realized at all by either level of government, I have to say, the extent of the financial crisis that exists in the harvesting sector of our fishery. A lot of it is the unfinished business of the moratorium on cod stocks, not only the northern cod but the other cod stocks as well, back in the 1990s, when the number of people who remained in the industry was just insufficient for the amount of resource available. What Ray described for his area is absolutely true of other areas as well.

There is a solution. We do have an opportunity to have a future of some sort in this province for a fishery. It will not happen without the conscious effort and contribution of the two levels of government to really a rationalization and a rebirth. The number of people who are there now, there are too many for the amount of resources there. A public sector investment would allow for an orderly transition of the baby boomers—we have an aging population of licence-holders—and allow them to leave.

Policies that say the solution is self-rationalization, which was proclaimed by the two levels of government back in 2007, and the people buy out each other, have really proven to be kind of a poisoned chalice. What it does is it encumbers the person who does the combining with so much debt that it makes a bad situation worse. If there's a single problem that exceeds all others in our industry, it's the huge amount of debt that is there.

There are a number of provincial issues. I won't dwell on them, other than to say that there has been a process between the industry and the provincial government to try to deal with some of these things. The federal government has been noticeably absent from that table, which is unfortunate, particularly given the principal responsibility of the federal government in the management of the fishery and in really creating the crisis of the late 1980s and 1990s that we're still finding the effects of today and that are having such an impact on our industry.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. McCurdy.

Mr. Decker.

[Trevor Decker, Director, TriNav Marine Brokerage Inc., TriNav Group of Companies]

Good morning.

My name is Trevor Decker. I'm part owner and director of the TriNav Group of Companies. We're involved with marine brokerage and fishing licences, vessels. We're involved with fish harvesters in Nova Scotia, brokering crab for those guys in the water. We publish a navigator magazine. We have other companies that are involved with the fishing industry throughout Atlantic Canada.

I'd like to speak on three areas, one being competition, two being marketing, and three being financing.

When it comes to competition, as I see it, competition ends at the wharf. When the fishermen land their product there is one buyer for the product, and that's where it stands. The price is negotiated and nobody else from outside is coming in. To allow outside buyers won't solve the problem, but it would ensure that competition exists.

We have many diversified fishing operations throughout Newfoundland and Labrador, therefore the loss of product to outside buyers will be very minimal due to the fact that many people who'll come in will probably only be looking at one resource, and that will be crab. As people have already said, many fishermen in Newfoundland depend on turbot, shrimp, capelin, mackerel, herring, and so on.

What has happened in Nova Scotia, New Brunswick, and P.E.I. is that they have commissioned buyers who channel product to buyers from outside that particular province. Therefore the price has a tendency to stay. We see this, we've been involved with this, and I'll explain a little more as I go on.

Looking at the marketing of our product with respect to the quality of crab, there is no incentive for RSW vessels that have invested in Newfoundland. Extras are paid in other provinces. New Brunswick has a tendency to pay more for crab that are landed with RSW vessels. Newfoundland does not, as earlier on Clarence Andrews referenced the problems he has seen.

The area 19 model we are involved with concerning the crab fishermen in Cape Breton, we market product in the water. We broker the product. We take a percentage of the fishermen's product and we sell it not necessarily to the highest bidder but to the best qualifier, somebody who has a good financial background, somebody who can offer the fishermen what the fishermen are looking for. This is an association of fishermen in the Cape Breton region that markets their area 19 crab, which is known to be top quality.

If we want to look at the general promotion of snow crab overall in Atlantic Canada and if we compare that to the Alaskan king crab, Maine lobster, and even look at Newfoundland tourism, the marketing that is there with respect to the tourism industry is phenomenal. Wherever you go, you see it. When it comes to Alaskan king crab, there are things they have done; Deadliest Catch gives that more limelight than anything else you look at. Now, Maine lobster: Maine lobster is known to be the best.

This is all through the marketing campaigns that have existed.

There is something I want to throw on the table that I'd like everybody to look at: an Atlantic Canadian crab council.

The last point I want to focus on is financing. Rationalization is happening. Fishermen do need extra product, but we need to have proper bank security and fishermen need to have better terms.

Fishermen have bought out other fishermen for years. This is not something new. It's been passed down from an older generation to a younger generation, but with a lot less money. But I'm into the business. People buy and sell on a daily basis, and the selling is done voluntarily. People come in. They offer. Someone puts something up for sale. The market comes forward and they offer on a licence or quota, whatever it may be.

Nobody has been forced to do anything. However, this is the way things happen offshore. Things are happening more like this inshore. Fishermen need to have the ability to get adequate financing.

The minister has the right, as we see in New Brunswick with the percentage cut...the value of that licence has dropped tremendously. So if people want to invest in the fishing industry, the government needs to be involved with respect to at least guaranteeing the financer that the product, the quota in which they finance, has not lost 50% of its value overnight.

Fishing enterprises are businesses and should have the right to grow or consolidate, or do what anybody else would have to do in the industry. But there are more restrictions existing within the industry that we need to see relaxed. I've seen it over and over and over, the CCRA rule with respect to fishermen wanting to buy licences with the corporations. Yet they're taxed individually, so this is another area of concern. That's on the minister's desk right now, and has been for probably a year and a half. The industry voted in favour of the companies owning a fishing licence, and that hasn't been signed off on.

There are other issues that I'd like to bring forward, and probably as we speak today I can, but I'll end it at that.

Thank you very much.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Decker.

Mr. Barnes.

[Phil Barnes, General Manager, Fogo Island Co-Operative Society Ltd.]

Good morning, Mr. Chair and committee members. My name is Phil Barnes. I represent the Fogo Island Co-Operative Society Limited, out of Fogo Island. The co-operative was formed back in the sixties as part of an initiative that was taken on by fishermen on the island, and with the aid of the provincial government they developed an industry and continue to build in that industry. I wanted to give you a little bit of background about that.

My presence here today basically is to speak on some of the issues and challenges that we face in the industry, as a processor. We have an aging population, as was mentioned by some of the people here earlier. We have young entrants trying to get into the industry, young entrants in terms of fish harvesters. I have been presented with this challenge for the last two years. There's a couple of fishermen I've devoted my time to trying to put into a boat, and the challenges are that the banks won't look at them. These young people are in their twenties and they don't have the cash or the equity to put into an enterprise at this point in time. However, they've been fishing for seven or eight years and have good backgrounds. They have their licences. They're qualified. Yet we run into stumbling blocks. The banks won't look at them. They have no equity.

Those are only a couple of issues. Skilled labour continues to be a big issue at our plant. How do you replace an electrician? Today I'm going to run my shrimp operation in Fogo without an electrician. You have a tremendous cost. You'd probably end up making more money than I do if you came to the island to work for us, but that's the challenge we face. Skilled labour, maintenance people, and the list goes on.

I want to go back to the aging population. In our workforce today, it's tough. We have people who are in their mid-fifties, the average age in our plants. How do you replace these workers? There are no young people staying around who want to work in this industry. There are no jobs they're going to want to do, as young people graduating from school and so on. So these are big, big changes, and we have to look at modernization of our plants, new technology. Or we have to look at immigration, workers coming in from other countries. So those are some of the challenges that we do face.

I want to also touch on, I guess, the biggest question. Every time I go anywhere, someone asks how the Fogo Island co-op could open its doors this year at $1.35 on crab and all the other processors could not.

Well, we do a lot of thinking when it comes to this time of the year, and we looked at the dollar being at par. Basically, that's what we built our business model on, that we'd look for a break-even, because at the best of times the only thing we're trying to do is to keep our fishermen and our plant workers working. We're a different beast. We're a different animal. We have a different chemistry.

The Fogo Island Co-Operative Society has a membership and the fishermen and the plant workers own that business. We're not profit-driven to the extent that the big corporations are, so in a nutshell, I'd have to say that that's what it came down to. You have two risks basically. The risk not to open, and the risk to open, and we felt the former was the worst to do at the time.

That's where it was, and I hope that answers the question that you were looking for, Gerry, in terms of our position. If there are any other questions, I'll gladly take them.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. Barnes.

I'm sure the members have lots of questions for many of you here this morning. Thank you very much for your presentations, your opening comments.

Mr. Byrne.

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

Thank you, Mr. Chair.

Thank you to our witnesses for their very concise but as well very compelling testimony about issues in the industry.

I want to thank Clarence Andrews for providing the committee with very specific recommendations on issues that affect your industry. You've provided us with specific ideas and recommendations as to how we can improve your industry.

We have over an hour of further discussion, so if there are other things that you want to raise, hopefully we'll be able to do that through our question and answer period.

What strikes me, Mr. Chair, in addition to some of the things we've heard, is one compelling but interwoven thread amongst just about all the testimony, and that is the price differential between Newfoundland and the Maritimes. For the purpose of the record, Mr. Sackton raised the issue of the final offer arbitration by the price-setting panel. For the purpose of the record, as we discuss this in our report, this year the price-setting panel set a price of $1.35 a pound, based on that final offer selection. The price was initially refused by the buyers, by the Association of Seafood Producers. It was accepted, albeit begrudgingly I guess, by the harvesters, the FFAW, but eventually the fishery did start at $1.35.

What we're hearing testimony about is the confusion, uncertainty, and frustration about the fact that the price differential seems to be extreme between the Newfoundland and Labrador region and the Maritimes region.

Lyndon Small said that the Independent Fish Harvesters Association has secured a Maritimes buyer at $1.90 a pound.

We've heard Phil Barnes, who is a former member of the Association of Seafood Producers, say that he is initially going to purchase at $1.35 a pound. I think Mr. Barnes will also indicate that he was actually thrown out of the Association of Seafood Producers for agreeing to buy at $1.35 a pound, which was the established rate.

What I'd like to do is ask Mr. Lyndon Small to further elaborate on his association's acquired offer of $1.90 a pound, and ask Mr. Sackton if he could elaborate further on what he perceives as the reason for the price differential between Newfoundland and the Maritimes.

[Lyndon Small]

In terms of the product that we have to offer, as our members of the NLIFHA, the 3K crab, within the industry the Japanese market, the Japanese technicians who come to Newfoundland and Labrador, have very high standards and quality. They are fully aware, with our correspondence that we've had with Maritime buyers...and I'm not saying just one single buyer, but I've spoken directly to several buyers who have expressed extreme interest.

This one particular buyer—we had correspondence with the provincial government, and it was there in black and white—was willing to come to Newfoundland to truck the crab back to his processing facility in New Brunswick and make a handsome profit, in a good business venture.

I also spoke to another producer, last night actually, and there's a boat landing from 3L this morning as we speak, to a plant in New Brunswick, with RSW aboard. They've expressed a lot of interest in buying our Newfoundland crab, and if the present barrier in place now, that doesn't promote free enterprise, was lifted, I'm sure the price of crab right now would be significantly higher than $1.35.

I'd also like to add that currently there's a community on the northeast coast with a processing facility, and the price being paid is $1.50 a pound...landed to the plant. That's open and above board. From what we see with the extreme growth that's been in the marketplace, $1.35 is a very non-viable price.

Just to reiterate the comments that I made earlier, Maritime buyers are willing to come in and buy our product at $1.90 and still make good business out of that transaction.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Sackton.

[John Sackton]

Thank you for the opportunity to comment more.

Pricing is a complicated issue. I think what you've got to start from is understanding that buyers generally pay for value offered. One of the reasons the fishery is so complicated is that there is no single price for crab. In the marketplace an eight-up or ten-up section will get 40¢ to 50¢ more than a five to eight section. In the marketplace a four-ounce section is heavily discounted, sometimes for a dollar less than what you're getting for a five to eight section. Yet when a boat is landing a load of live crab, that crab is a mixture of all of these different sizes. So in any given time the buyer is trying to judge what is in that mixture that he's buying and how is it going to translate economically.

There is this idea that competition among buyers raises the value of crab. I think there is something to be said for that, but there's also a caution. In the lobster industry, and particularly in the Maritimes, there's been a system of dock buyers, and it's very easy to get a lobster licence to show up on a wharf and start buying lobster. Nova Scotia, New Brunswick, and P.E.I. have all taken steps to start restricting the activities of those unrestricted, unlicensed buyers because the feeling was they destabilize the industry. The way they destabilize the industry is that it's very easy for a guy with no investment--for example, a guy in the Maritimes who's short on product, who has orders from Japan, this year, and has had his quotas cut in the gulf--to go out and increase his crab. So for him it makes economic sense to go and say, okay, I can pay whatever I need to pay, whether it's $1.90 or $2, because I'm filling in for my order.

But that's not going to be a long-term viable system, because the next year when he has his orders, he's not going to do that. So what it ends up doing--at least this is what they found in the lobster industry--is it depresses the ability of the industry as a whole to market and get the highest value for the product.

I've always been a believer that maximizing the total revenue for all sides of the industry, harvesters and processors, is the best long-term approach. I just think that when looking at pricing it's important to look at what's the value being offered in a particular area. Area 19 does have an extremely good product, and an extremely high reputation, and for that reason they get more money for their crab. It's an excellent product.

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

Thank you, Mr. Chair.

I'll just make one quick comment to say that the other side of this argument would of course be offered by the Association of Seafood Producers, who were asked to attend this committee hearing. They did not; they declined to attend the committee hearing.

One of the questions I would ask them is that if $1.35 was an inappropriate price to pay a month ago, why are they now not only paying $1.35 but offering some an extra 30¢ bonus on top of the $1.35? But I can't ask them that question, because they're not at the table.

That said, Mr. Chair, I think my colleague has a question.

[Scott Andrews, Liberal, Avalon, NL]

I've actually got three questions, and I'll put them out and then you can answer. I'll lead off by continuing on with what Gerry was just saying, and my question is to Mr. Small.

Is this under-the-table price that is being offered to a number of harvesters out there now...? As you said, the true price of what we're getting for crab is not really true, the $1.35 is not true, because there are things being paid under the table there. How prevalent are the under-the-table negotiations in this and why isn't that being brought out on top of the table when we set the price?

The second thing to you, Mr. Small, is how do we separate the processors from the harvesting fleet right now? We've got a problem. The harvesting and the processors are very close. How do we break that separation between the two fleets?

To Ray and Phil on your points about new entrants into the industry and who do we pass this on to, the future generation in the fishing industry, we are coming to a crossroads in the fishing industry right now, as Ray alluded to, in terms of who are we going to pass these enterprises on to. There will always be a need for product. There will always be a need for food in the world, but we don't have the mechanism or a plan in place to start passing on these enterprises. Maybe the two of you could elaborate a little further on how we do that.