It's clear that the processing sector rationalization cannot be achieved without a concurrent reduction of harvesting sector capacity. Despite the high processing capacity levels that currently exist, gluts each spring are common, as a large percentage of the more than 3000 crab harvesting enterprises engage in the fishery at the same time, even though the extent of their fishing activity is usually only a few weeks.
A more orderly landing pattern brought about by major harvesting sector capacity reductions will facilitate associated reductions in processing capacity. The mechanisms to bring about this harvesting sector rationalization, and whether they will be self-financing or require government intervention, have not yet been determined. However, it is possible that these capacity reductions may be very costly, and to the extent that the fishing industry cannot self-finance the process, demands will be placed on governments to assist.
The other area of work under the MOU relates to seafood marketing.
Our industry is a predominant player in certain seafood sectors and should be able to achieve better returns. This is especially true in the case of snow crab. This year, we will account for 65% of all the North American crab supply. We are the dominant supplier in the marketplace, and we should be taking full advantage of this strength. This requires that we be as efficient as possible. While Newfoundland and Labrador has more than two dozen crab processing companies operating close to three dozen processing plants, Alaska, a key competitor, has four companies selling crab produced in 15 plants. Most Newfoundland and Labrador producers depend on intermediaries, such as brokers, to market their product, while Alaskan suppliers better coordinate their efforts and sell directly to end users.
Our industry has come to recognize that we are not being as efficient and effective in the marketplace as we could and should be. Consequently, the seafood marketing working group established under the MOU is actively engaged in identifying collaborative marketing opportunities with an initial emphasis on crab and shrimp. Some of the challenges that have to be addressed are underfinanced companies, the lack of collaborative marketing, the lack of continuity and stability, and an overdependence on brokers.
There is an important role here for the federal government in seafood marketing. Some valuable activities that can be enhanced are to work to reduce the tariffs and the trade barriers, including the removal of the EU tariffs on shrimp and crab; assistance with the formation of collaborative marketing structures to help processing companies market their products as efficiently and effectively as possible; assistance with eco-certification and eco-labelling of products; and continued efforts by trade offices in promoting Canadian snow crab in international markets.
In conclusion, the fishing industry continues to face challenging economic circumstances. The problems in the industry relate to a host of structural, resource, market, and policy issues that compromise the long-term economic viability of the industry. The current economic environment has exacerbated these problems, and the industry is seeking solutions to support long-term viability.
This matter is of sufficient concern to have led our premier to raise the issue twice with the Prime Minister over the past few months. The situation in which our province's crab industry currently finds itself has been created, in large measure, by the harvesting policies of the federal government during the 1990s. The inordinate expansion of the harvesting sector also contributed to the processing sector capacity growing to an unsustainable level.
When we developed the fish industry renewal strategy, both governments recognized that capacity adjustment is required. Unfortunately, the unanticipated challenges our economy has faced since 2008 dictate that a passive rationalization model will not bring about the required adjustments in a timely manner. More aggressive approaches must be examined. In particular, the federal government must find ways to bring about significant and timely capacity reduction in the harvesting sector.
It is likely that many small boat enterprises with limited resources will need assistance to rationalize. This may entail much more flexible buddy-up and combining policies, and quite likely significant financial inducements.
In recent meetings with federal government counterparts, I have concluded that the federal government appears to have no interest in financing the harvesting sector rationalization. This is not an acceptable position. In the case of the snow crab sector, the federal government chose the 1980s and 1990s to issue crab harvesting licences to virtually every fishing enterprise in Newfoundland and Labrador. While this served to mitigate the continued impacts of the groundfish crisis, we now find that the crab resource is so oversubscribed that even with reasonable margins, harvesters are unable to make a reasonable livelihood. This situation is compromising the viability of our fishing industry and indeed the future of our rural communities that rely so heavily on the fisheries. The federal government must acknowledge its responsibility for the extreme level of overcapacity that currently exists and actively participate in the necessary adjustment that must occur.
I thank you for the invitation. My point again is that even though it's rather lengthy, this document gives the background as to how we arrived at this place and, more importantly, the need for some activities to see how this fishery is going to be restructured and some of the requirements that are going to be needed along the way. I certainly hope you will take this and read it, as I've rather rushed through it a bit.
Dave and I would be more than willing to answer some questions.