Fisheries Committee on May 11th, 2023

[Clifford Small, Conservative, Coast of Bays—Central—Notre Dame, NL]

If individuals or corporations had to divest these licences, where do you think the price would go? Do you think the price would drop and those licences would be more affordable to harvesters, or would they remain at the level they are, and possibly even the fisheries loan board wouldn't be able to provide financing?

[Emily Orr]

That's a tricky question to answer in advance. I think you would probably see the value stay the same for the first while.

I know that the fisheries loan board, in some of the examples on the east coast of Canada, offers loans upward of a million dollars. That would be significant on the west coast for somebody to be able to achieve owner-operator status and buy a licence and a vessel.

It's difficult to say what would happen in terms of the volume, because on the west coast, we have a huge number of corporate-owned licences and quotas. To see that trickle out into a new set of ownership would be interesting to see and predict, for sure.

[The Chair, Liberal, Ken McDonald]

Thank you, Mr. Small.

We'll now go to Mr. Cormier for four minutes or less, please.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you, Mr. Chair.

I will begin with Ms. Sutcliffe.

Ms. Sutcliffe, do you think it's normal that in 2023, Canadian resources, which belong to Canadians, are so easily accessible to foreign companies?

[Tasha Sutcliffe]

I'm sorry. I missed the first part of the question. Can you repeat the framing?

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Do you think it's normal that in 2023, Canadian fisheries resources are so easily accessible to foreign companies?

[Tasha Sutcliffe]

Thank you for the question.

I guess it depends on the definition of “normal”. Unfortunately, I think this is seen across a lot of our sectors in Canada and has become somewhat normal, but I definitely don't think it's good, because of the havoc it's wreaking on our ability to participate more fully in the benefits of the resources.

Again, for me, it's not so much about who it is or where they are; it's the impact, and it is definitely instrumental in affecting the decline of the benefits we're seeing from our fisheries.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

What would your recommendations be for a win-win solution for the plants, the fishers and the plant workers? What solution would you propose to change the way things are?

[Tasha Sutcliffe]

I would very much repeat what Emily said. It would definitely limit future foreign ownership and investment in licences and quota, and fleet separation policy and owner-operator policy. As Emily said, it would be a multi-year transition to get there.

No one is talking about people suddenly losing their assets with no compensation, or about this being something that happens overnight. We're talking about recognizing that it will take time and that we will need to put financing supports in place for harvesters.

I will add that I think, from some of my recent analysis, that licences would go down in value. I know they're extremely expensive in Atlantic Canada, but that is more proportional to an extremely valuable fishery. I think licences that are overinflated well beyond the production value will go down, because they're overinflated for other reasons. Other fisheries will not go down. Those licences are actually worth that much money because the fishery is so valuable.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you very much.

Ms. Orr, I know that Unifor represents many workers across the country. Right now we're talking about the fishery, but as you know foreign investment is still allowed in other sectors of our economy, such as the technology and oil sectors, for example.

Why do you think it should be different with the fishery? Why should we prohibit or reduce foreign investment?

[Emily Orr]

Thank you.

It's important to recognize that we're not asking for no foreign involvement or no foreign business to take place inside our fisheries economy. What we don't want is the vertical integration of those companies so that they have the entire chain, from the value of taking fish out of the water to overseas transport, the full line from start to finish. When we have that level of vertical integration, it makes it incredibly difficult for owner-operators to compete.

We know of companies that are headquartered overseas but have branches in Canada. They're fish buyers. I don't think that's the issue. I don't think anyone here is saying that's the issue. It's when they take the bulk of the licences and quotas and control the productivity of the fish that we have the problem.

[The Chair, Liberal, Ken McDonald]

Thank you, Mr. Cormier. That's all the time we have now for this first session, or the first 45 minutes.

I want to thank Ms. Orr, Ms. Sutcliffe and Mr. Louis for appearing before the committee again today, and for sharing their knowledge with the committee as we try to get this study done and a good report written on it.

As I said earlier, if there's anything you think you didn't get a chance to say today, by all means please submit it to the clerk and we will make sure it gets included in the study as well.

We will suspend for a moment now as we switch out panels and start up for the last bit of our committee meeting.

[The Chair, Liberal, Ken McDonald]

Welcome back.

We would now like to welcome our witnesses for the second hour.

We have Jennifer Silver, associate professor, University of Guelph, who is appearing as an individual.

Representing the Fisheries Council of Canada, of course, and no stranger to the committee, is Mr. Paul Lansbergen, president.

Representing the Nuu-chah-nulth Seafood Limited Partnership, we have Andrew Olson, chief executive officer.

You have exactly five minutes each for opening statements.

We will start with Ms. Silver, please.

[Dr. Jennifer Silver, Associate Professor, University of Guelph, As an Individual]

Thank you.

I'm really happy for the invitation to be here. Thank you for that.

The topic is timely and important. It relates to urgent questions that we've been hearing about already on who benefits from the culturally significant, nutritious and economically valuable fish in our exclusive economic zone.

I spoke to FOPO in 2019 about my west coast research. Today I'm going to give an overview of some relevant points from that work that do indeed point to concentration. I'm going to use the last couple of minutes to summarize some arguments from scholarly literature about why fisheries access and benefits ought to be systematically considered by state-led management systems, like the one we have in Canada.

With respect to the west coast research, the starting point—which is now a review at this point, as you heard from folks in the first session—is that fish harvesting operations can register and hold numerous licences and different types of quota. In turn, they can participate in a range of fisheries or earn revenue by leasing out some or all of their licences and quota to others. These licences and quota can get very expensive.

The research I have led counted all west coast licences registered in 2019—so within a single year—noting who held what and how many. Licence-holding and identification information came from a publicly available spreadsheet. My research is exclusively focused on publicly available information. The spreadsheet can be downloaded. It's very complicated. There are hundreds of thousands of lines in the spreadsheet, and many columns. We used a computer code to basically extract and match identifying information across licences and fisheries.

In 2019 we counted 6,563 licences registered by 2,377 unique holders. There were, indeed, a small number of holders—38, in fact—that had 20 or more licences, and six that had 50 or more. Together, these 38 holding entities—the individuals, companies and so on—controlled 26% of all west coast licences in 2019. There were 1,357 with one licence only and 499 with two licences only. These together accounted for 36% of all licences.

As you've now heard a number of times, in contrast to the Atlantic region policy, which defines and supports an inshore owner-operator fleet, no such distinction exists in the Pacific region. There are no limits on what a holding entity can hold, be they fishermen, processors, or speculative investors,. Licence holdings, leasing arrangements and other types of economic arrangements do not get considered in the context of fisheries evaluation, and they're not considered against any type of socio-economic objective. In this sense, access and the distribution of benefits to Pacific fisheries are left to market forces.

In the last minute or two of my time, I want to relay fisheries science and marine policy research relevant to Canada, as well as other countries that have similar fisheries management systems. These points are pertinent beyond the Pacific region and in the contemplation of foreign and speculative investment.

The first point is that foreign financing and ownership shape industrial fisheries and seafood value chains. In 2016, a meta-study was published that documented the disproportionate size and international reach of a small handful of private transnational corporations. They estimated that 13 transnationals controlled 11% to 13% of all marine catch and 19% to 40% of catch from the largest and most valuable stocks. These firms owned and operated subsidiaries. About six of the transnationals owned 100 or more subsidiaries. The authors of this study observed that the firms are large and powerful. Their business activities usually encompass numerous nodes across seafood value chains, and they frequently pursue “strategic mergers with major market or quota holders via direct acquisitions”.

To conclude, the second message from the literature is optimistic. Fisheries science tells us it is entirely possible to rebuild fish stock such that year-after-year yields stabilize and grow. The science-based benchmarking approach plays a critical role. The 2019 amendments to the federal Fisheries Act helped to make the rebuilding, monitoring and benchmarking that's built into DFO's integrated fisheries management plan framework.

This committee knows that rebuilding fish stocks requires a lot of work. It's intensive and expensive. Indigenous and non-indigenous communities throughout coastal Canada have put and continue to put their hands up to lead, support and invest in this work, especially in the work of supporting ecosystem health and function.

The federal government also plays a leadership role through funding, science and the costs of management. We as a country are investing and will continue to invest in fisheries rebuilding. This is the right course of action. Science tells us that investment pays off for ecosystems, people and pocketbooks. The question of this study is, whose pocketbooks?

That question is still an open policy question. For this reason, access and benefits must be seen to be squarely under the purview of fisheries management policy and not left entirely to market forces.

[The Chair, Liberal, Ken McDonald]

Thank you.

We'll work our way across the table now and go to Mr. Lansbergen for five minutes or less, please.

[Paul Lansbergen, President, Fisheries Council of Canada]

Good afternoon. Thank you, committee, for the invitation to appear before you today.

As many of you know, the Fisheries Council of Canada is the national association representing wild-capture processors across the country and all of our members' harvest as well.

FCC members are all privately owned. Most are family-owned and family-operated, some for multiple generations. Some are indigenous community-owned and operated, and many of these have specific mandates to invest back into their communities. A few members are processor companies or co-ops owned by a group of independent inshore harvesters.

All of our companies care about their employees, their partners and their communities. They are responsible stewards of our resources, and collectively we promote a healthy resource and a prosperous industry.

I should note that even our largest companies are relatively small compared to global competitors.

On the whole, I would say that we should be celebrating the successes of our entrepreneurs, who have worked hard to build their businesses and have been able to grow from owning one fish plant to two and then to three or more.

The same goes for those who have been successful enough to expand beyond one vessel. Being successful and contributing back to one's community should be celebrated and not seen as a negative outcome.

As a small open economy, Canada has always struggled with industrial policy to support growth of Canadian companies and entrepreneurs. This is very difficult, and market forces are much more dynamic than the speed at which government policy tends to move.

I should note that in fisheries the supply chain is much more integrated than what appears from government policy on paper. In many ways, the success of processors depends on the success of harvesters and vice versa.

Mr. Chair, as the committee knows, DFO is conducting a beneficial ownership survey, and earlier this week DFO reported preliminary results for Atlantic Canada: Some 98% of licences are domestically owned. I suspect the eventual result in B.C. won't be vastly different. I look forward to the full results to add more evidence to this discussion.

I would like to make some comments about foreign investment, in part to differentiate it from foreign ownership.

The seafood sector, as many of you know, is a tough business. For those outside the industry, it's difficult to understand the sector, and this also goes for financial institutions. As such, our sector can be underappreciated by lending institutions, which can lead companies to solicit funds outside of our chartered banks, possibly at higher rates.

Foreign financial institutions that understand the sector can be an attractive option for companies making large investments. An example would be Icelandic banks interested in lending to Canadian companies. I don't see this necessarily as a negative thing.

We certainly aren't the only sector in Canada that has to look outside our borders for financial capital, and we need to continue to invest, to compete and to meet customer expectations.

The other element of this study is corporate concentration. The Competition Bureau uses the four-firm concentration ratio: If the top four firms have less than 65% of the relevant market, the bureau is generally not concerned. Even beyond this threshold, other factors are considered before making a judgment on market power.

Besides the threshold number, the other key to this ratio is the definition of “relevant market”. Seafood is the most globally traded food commodity. I would argue that the relevant market is not a town, a country, a province, a region, or even Canada as a whole. It would be tough to argue perhaps that even North America is a relevant market for most Canadian fisheries. We export to upwards of 130 countries annually. Our imports for the domestic market come from as many as 150 countries.

With all due respect, and not to diminish the importance of this study, I have to admit that I am preoccupied by other challenges. I'm focusing on how DFO addresses gaps in fishery science and its implications on fisheries management decisions and broader policy work. I'm focusing on ensuring our sector is meaningfully consulted on marine conservation. I'm focusing on how to ensure indigenous reconciliation is based on voluntary relinquishment of commercial licences. These are the key issues affecting the prosperity and the future of our sector and my members.

I thank you for your attention and I look forward to your questions.

[The Chair, Liberal, Ken McDonald]

Thank you.

We'll now go to Mr. Olson, please, for five minutes or less.

[Andrew Olson, Chief Executive Officer, Nuu-chah-nulth Seafood Limited Partnership]

Thanks.

My name is Andy Olson. I'm the CEO of Nuu-chah-nulth Seafood. We're a commercial fishing enterprise that is owned wholly by five first nations on the west coast of Vancouver Island. We're part of the PICFI program. Our company also owns St. Jean's Cannery in Nanaimo.

I'll begin by speaking about foreign ownership and corporate control in the Pacific region.

There's a real concern with foreign ownership and corporate control in the fisheries resources of Canada. It impacts the cost of reconciliation. The risk to Canada and its citizens is significant, from the loss of opportunity and benefits for indigenous, rural and coastal communities to the impacts on the cost to re-enter and buy back licences and quota access.

The next steps to me are evident, and that's protecting Canada's fisheries resources as strategic assets. The work has already begun with Canada's rare mineral resources, and fisheries should begin immediately. This type of complete government review and process will begin to unravel the damage from the last 150 years of business as usual.

Indigenous, rural and coastal communities are the backbone of Canada's coast, and without benefits from local resources and work opportunities remaining in their areas, they can't survive. Without these coastal and rural communities, who's going to monitor the vast areas, the border and contentious food security issues? If we continue down this path, Canada will be buying back its own seafood from people who control it in corporate offices or foreign countries.

The cost of reconciliation isn't going to stop growing while resources like licences and quotas are being sold into an uncontrolled market that allows for foreign ownership, corporate concentration and investor speculation. Unfettered access to licences and quotas for sale to foreign owners wasn't allowed in the past, and until about 20 years ago, the majority of the directors of a company owning fishing licences had to have be Canadian citizens. This restriction has been dropped entirely.

Foreign investment is one thing; control of Canadian resources by a foreign and unknown organization is another, and very concerning. The recent licence and quota ownership survey was a complete failure at anything but pointing out that Canada knows nothing about who owns or controls licences in the Pacific region.

Corporate concentration, foreign ownership and investor speculation don't end with licences and quotas but now extend into the primary production and processing side. This means they control the ice, dock unloading, cold storage, processing and distribution networks. Harvesters should be partners and share the benefits, rather than taking most of the risks and much less of the rewards.

Right now, with the control of licences, the control of the shore equipment, and in some cases control of the fishing vessels, harvesters are left in the middle, with a smaller share of the revenue. The few companies left are almost all owned in part or owned wholly by large corporations or foreign investors. They work with licence and quota holders, owners and investors, and do so to add a layer of cost, with high lease rates making it harder for fishers to make a living.

In some dive fisheries, if you aren't working with select buyers, it can be difficult if not impossible to get your products hauled to market by one of the few trucking companies that carry live seafood. Last summer, I heard of fishers who couldn't get ice and fuel because they weren't working with the few companies that were buying large volumes of salmon.

When companies make harvesters beholden to them with aggressive and sometimes unfair practices, it makes it more challenging for them to survive. When large companies with vast amounts of licences and quotas don't work with indigenous, local and rural coastal communities but instead send resources to metropolitan areas or even in some cases to other countries for processing, the benefits are lost to Canada, other than to the few shareholders who benefit and can afford to invest.

Canada needs to move fisheries into a strategic asset program and protect them for future Canadians. Indigenous and non-indigenous coastal and rural communities need this work to begin immediately so that we don't lose what's left and can begin to rebuild what is gone. Programs like the Blue Economy, PICFI, NICFI, AICFI and the Ocean Supercluster should be growing the whole Canadian economy and supporting locally-owned, indigenous-owned and coastal community businesses and people.

As programs like AICFI, NICFI and PICFI are trying to support indigenous people engaging in commercial fisheries, they are forced to compete with foreign interests and investor speculation while spending Canadian taxpayers' money. As funds are committed to the budgets, the prices continue to rise, outpacing the funding and leaving indigenous groups behind. They are left to find ways to bridge the gap.

Wouldn’t it be a disaster for Canada to find out, in the not-too-distant future, that a large portion of its food and fisheries resources are owned by another nation or a foreign-controlled company? I don't think we want to see that happen.

[The Chair, Liberal, Ken McDonald]

Thank you for that.

We'll now go to our first round of questioning. We have Mr. Small for four minutes or less.

[Clifford Small, Conservative, Coast of Bays—Central—Notre Dame, NL]

Thank you, Mr. Chair.

My question is for Mr. Olson.

You finished off by mentioning food security. That's interesting. Ultimately, what could the worst result be, in terms of national food security, if more foreign ownership occurs?

[Andrew Olson]

There's a reason that they want to control access to the food. It's because they know they need food in other places. They want to control it so they can be assured that they're going to have future access and control of those resources one way or another. Through the harvest, the processing or through value-adding, whatever it takes, they're going to control every piece of that action.

The problem is that we are the ones left beholden to those organizations and we don't even know who owns them. We don't know where they're owned, who owns them or where the fish is going. In many cases, the fish goes to other countries to be processed; then it's brought back here to be sold. We don't know whether it's the same fish. There are counterfeiting issues.

There are all kinds of concerns.

[Clifford Small, Conservative, Coast of Bays—Central—Notre Dame, NL]

Mr. Olson, do you still have a percentage of independent owner-operators in B.C.?

[Andrew Olson]

I'd say a very small percentage is still owner-operator.

One challenge we're up against is that fishermen, rather than retire and sell their licences.... That licence itself has enabled them to stay on as, essentially, a landlord. They become a landlord rather than an active fisherman and they derive revenue from a piece of paper they had the opportunity to buy because they had the capital at the time it was for sale. The fisherman doesn't have that access.

[Clifford Small, Conservative, Coast of Bays—Central—Notre Dame, NL]

Mr. Olson, are they able to shop their fish around in a competitive nature or not?

[Andrew Olson]

Well, fishers who are buying or leasing their access through companies are often either leasing.... They may come to me to lease a licence from my PICFI CFE, for example, and then go to the fishing company to borrow the money. That company then controls the fish. That company is going to tell that fisherman how much they're going to pay for that fish at the end of the day. They may or may not control the licence, one way or the other, but they're going to control the price in that way. The fishermen are beholden to them because they have to get the money to get the licence.

An owner-operator owns his licence. He pays the licence fees to Canada and goes fishing. When a lessor—Kyle, for example—leases a licence, that lease cost is borne by everyone on that vessel. The owner of the vessel, who owns the licence, is now spreading that cost to his crew. All of the crew have to absorb those costs now, while before they didn't. An owner-operator wouldn't have that cost, and it wouldn't be a vessel expense. It would be an individual expense.