Fisheries Committee on May 15th, 2023

[The Chair, Liberal, Ken McDonald]

I call this meeting to order.

Welcome to meeting number 68 of the House of Commons Standing Committee on Fisheries and Oceans.

This meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. We will begin today's meeting in public to hear witness testimony. Afterwards, we will switch to in camera for the last 45 minutes.

I remind everyone to please address your comments through the chair. Screenshots or taking photos of your screen is not permitted. In accordance with the committee's routine motion concerning connection tests for witnesses, I am informing the committee that all witnesses have completed the required connection test in advance of the meeting.

Pursuant to Standing Order 108(2) and the motion adopted on January 20, 2022, the committee is resuming its study of foreign ownership and corporate concentration of fishing licences and quota.

I would like to now welcome our panellists for the first hour and a bit.

By video conference, we have Claudio Bernatchez, general manager of the Association des capitaines-propriétaires de la Gaspésie. From Ocean Choice International, we have Carey Bonnell, vice-president of sustainability and engagement. Representing the P.E.I. Fishermen's Association, we have Molly Aylward, executive director, and Ian MacPherson, senior adviser. Representing the Bay of Fundy Inshore Fishermen's Association, we have Colin Sproul, president.

We'll start off with our five-minute statements.

Mr. Bernatchez, you have five minutes or less, please.

[Claudio Bernatchez, General Manager, Association des capitaines-propriétaires de la Gaspésie]

Thank you, Mr. Chair.

Members of the House of Commons Standing Committee on Fisheries and Oceans, good morning.

Thank you for inviting me to take part in your study.

My name is Claudio Bernatchez, and I've been the general manager of the Association des capitaines-propriétaires de la Gaspésie since 2020. Our offices are in Rivière‑au‑Renard, the marine fisheries capital of Quebec.

There are several ways to approach the concept of foreign ownership. In terms of catches, business licences can be fully transferred from one province to another. They also have the distinction of being transferable to foreign interests up to 49% of the licences. For example, it would be easy to think that 51% of Canadian licence holders could be assisted or controlled by the foreign holders of 49% of the licences. At this time, we don't know if such transactions have taken place in our region.

With respect to processing plants, foreign ownership is already present in two shrimp processing plants in Eastern Quebec. This is obvious in the case of the first, since it flies the Danish flag, while it's more subtle in the case of the second, since it's a Newfoundland entrepreneur backed by an American investment fund. In addition, the first one has obtained a permit to process snow crab from Quebec and a permit to process lobster from outside Quebec. The second is trying to do the same. So we can see that when the door is ajar, a foreign-owned plant can expand its operations on Canadian soil, especially since processing is under provincial jurisdiction.

While I subscribe to the principles of free enterprise, I remain convinced that the fisheries resources of Canadian waters must serve Canadian interests first and foremost, especially those of the many coastal communities that have traditionally depended on the resources of the sea for their livelihood and development. Sometimes we have to wonder whether the fisheries resources really belong to all Canadians. Take, for example, the large proportion of commercial fishing quotas that belong to large corporations. Why is it that our decision makers ignore this reality when allocating new quotas?

As I was preparing to appear before you, I started thinking about some of the mechanisms that other countries have put in place to control fishing activities in Canada.

I'm thinking in particular of the restrictions imposed by our neighbours to the south on the protection of marine mammals, such as the North Atlantic right whale. There is also the mackerel fishery, which has been under moratorium since last year. How is it that the Americans can still fish it, when it is recognized that it is largely the same fish stock as that in the Gulf of St. Lawrence?

Furthermore, a French actress came to tell us that we shouldn't hunt seals anymore. We listened to her. Decades later, the Department of Fisheries and Oceans is beginning to pay lip service to the imbalance caused by the overabundance of seals. Meanwhile, the Canadian fishing industry is paying dearly for it.

Let's talk about the concentration of licences. It takes money to make money. We're seeing this more and more, with fishing licences being sold at exorbitant prices. Sellers know who to go to when they need to get rid of their licences. The average fisher simply cannot compete with those with greater financial capabilities. Those who do risk it sometimes find themselves in a vulnerable economic situation. Imagine the hurdle faced by aspiring owners who are tempted to take over an existing fishing business.

The concentration that develops will pose a risk when holders of large licence portfolios are ready to sell. Foreign interests may emerge to take control of these quotas. We can also expect purchasers obtaining financial support from a processor to acquire one or more licences, which in itself is a control agreement. It's still the case today that a fisherman entrusts the financial management of his business to the plant that buys his fish.

The concentration of licences may, in some cases, help keep the holder away from fishing activities, because the holder can't be everywhere at the same time. This can contribute to a results-oriented culture on board fishing vessels, which increases the risk of accidents.

In conclusion, several factors are perceived as threats to the Canadian commercial fishing industry. Foreign ownership and licence concentration are two examples, but there are others, and they’re closer to home. We need to start thinking about integrated management, which would simplify the various regulations in place, and more importantly, we need to start thinking about an ecosystem approach in collaboration with the Science Sector and resources of the Department of Fisheries and Oceans.

The government must stop announcing moratoriums just before the start of fishing seasons. These announcements have too many consequences for us not to be prepared for them. There have been several in recent years. We're concerned that the next moratorium will be on northern shrimp. However, redfish are consuming about 14 times the quota allowed this year.

[The Chair, Liberal, Ken McDonald]

Mr. Bernatchez, we're over time. We have to end it there. Hopefully anything you didn't get to say will come out in questioning.

I'll now go to Mr. Sproul for five minutes or less, please.

[Colin Sproul, President, Bay of Fundy Inshore Fishermen's Association]

Committee chair and members, thank you very much for this opportunity to share our views. I appear before you today on behalf of the Bay of Fundy Inshore Fishermen's Association, where I serve as president.

For 28 years we have represented owner-operator fishing families on the shores of the Bay of Fundy in Nova Scotia. Our group has a distinguished history of advocating sustainable fishing practices and community-based fisheries management. Over this time, our commitment to that responsible use of resources has led us to partnerships with many groups in academia and the conservation community. We have a history of co-operation with governments and regulators at all levels, earning us a reputation as a valuable ally on ocean issues. Our members are proud of this legacy and are committed to preserving our way of life for future generations of Nova Scotians.

Corporate concentration and foreign ownership are two sides of the same problem facing Canada's coastal communities. This is the clash between, on the one hand, medium-sized to large corporations that are solely focused on reaping ever-increasing profits from public resources and, on the other hand, the duty of government to protect the interests of fishing families, families that are existentially dependent on those same resources.

Primary issues relating to this are the conglomeration of lobster processing capacity into fewer and fewer hands and the unlawful purchasing of lobster licences by corporations outside the owner-operator framework that our members abide by.

The question that begs to be asked is why fishermen would be concerned about ownership changes in independent maritime lobster processors. The answer deserves attention by government for the benefit of fishing communities.

When fishermen sell their lobster catch tonight on the wharves of Nova Scotia, be it in Yarmouth, Sydney, Digby or Lunenburg, they can all expect to receive the same price, but in a free market situation, how can this be? Obviously, someone or some group is fixing that price. If not, fishermen would see variations in the price of their catch, based on normal supply and demand pressures from many different exporters. Instead, they face a concerted effort to control pricing at the dock.

These actions must be a violation of the federal Competition Act and may constitute a cartel. Section 45(1) of the act states, “Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges to fix...the price...of the product”.

Fishermen recognize that lobster markets are ultimately influenced by consumer demand, but they also recognize the downward influence on lobster pricing from this collusion. Harvesters cannot ignore the clear message that a region-wide pricing fix sends.

After having already suffered for decades in this system, fear is now rising in our communities that things could become even worse due to an onslaught of acquisitions in the processing sector by food distribution mega-corporations, both foreign and domestic.

The second avenue whereby big business threatens the interests of fishing communities is through attempts to vertically integrate the lobster industry through the buying of lobster licences by unlawful means. These companies seek access to lobster at cheap prices and cut out fishing families in hopes of gaining an unfair and profitable advantage.

While DFO and the government have made significant progress on this front through recent changes to the Fisheries Act, the resolutions proposed by the department are simplistic, ignore huge opportunities for reconciliation and may ultimately be damaging to coastal communities.

Specifically, the department's plan to terminate lobster licences bought by these companies, while certainly demonstrating deterrence, is a policy direction that will be damaging to the prospects of new entrants to the fishery that changes to the act were meant to favour.

It also seems beyond reason that the department would ignore the potential for this access to integrate Marshall rights holders into Atlantic fisheries, especially while DFO continues to expropriate access to other species without compensation, arbitrarily move lobster access from one area to another in defiance of its own integrated fisheries management plan and make ominous statements about expropriation in lobster fisheries.

These issues will only be resolved through good faith collaboration between the government and Canada's fishing families. Regulators must recognize that small-scale users of Canadian resources deserve special consideration, given the huge yet diffuse economic and cultural benefits that they deliver to our communities.

Committee members, thank you very much. I invite questions.

[The Chair, Liberal, Ken McDonald]

Thank you for that.

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

[Carey Bonnell, Vice-President, Sustainability and Engagement, Ocean Choice International L.P.]

Thank you.

Good afternoon, Mr. Chair and committee members, and thank you for the opportunity to appear before the Standing Committee on Fisheries and Oceans.

I'm here today representing Ocean Choice International.

Ocean Choice is a family-owned and family-operated Newfoundland and Labrador seafood company that was started over 20 years ago by brothers Martin and Blaine Sullivan from the southern shore, an area of the province with deep roots in the fishing industry.

Today Ocean Choice is a global seafood company, vertically integrated from the sea to the plate. We operate five processing facilities in rural coastal communities, where we process high-quality seafood that we buy and source from approximately 1,900 independent inshore fish harvesters.

We also own and operate a fleet of offshore vessels that catch and process species harvested through quotas that we have access to.

Headquartered in St. John's, Newfoundland, Ocean Choice has developed a strong global presence by establishing our own international sales network with offices throughout Canada, the United States, Europe—specifically the United Kingdom—the Netherlands and Italy, as well as China and Japan. Our global sales team proudly sells Canada's high-quality seafood to over 30 countries around the world.

Through these activities, we employ about 1,700 people from over 300 communities throughout Newfoundland and Labrador. We take our responsibility to the people and the communities that rely on us very seriously. It is what drives our investment decisions and long-term planning.

In recent years, we have committed to investments of over $100 million into the seafood sector throughout Atlantic Canada. This is what successful family-run businesses do in the seafood sector in Canada. They reinvest.

As we are a business entirely dependent on a healthy ocean, sustainability is very much at the heart of everything that we do. We are responsible for delivering one of the last sources of wild protein to the world and we must make sure it's always available. That's why over 90% of the species that we harvest are sustainably sourced through the Marine Stewardship Council gold standard for certified fisheries or through a robust fishery improvement program.

We understand and respect the immense value and role that all sectors play in creating value for Canada's fisheries and the local economies that rely on the fishery. All players—small, medium and large—are needed to ensure a balanced fishery that can return maximum benefits for Canada.

It is disappointing to continuously see our employees and our company targeted just because we're one of the larger seafood companies in Newfoundland and Labrador. Our 1,700 employees work hard at sea and on land, many of them year-round, to build a sustainable and successful fishery for the future of Newfoundland and Labrador and the broader region.

Ocean Choice believes in the future of our company and of our home here in the province of Newfoundland and Labrador. It's a future that requires vision. It requires planning and commitment.

We make investments today that will support a thriving, sustainable fishery for generations to come. We have invested heavily in the fishery, from paying fair market value for every single pound of quota that we access, to developing markets to ensure the best possible price is paid for Canada's high-quality seafood, to investing in new state-of-the-art technology to modernize the fishing industry.

The MV Calvert is a great example of this. Creating 70 new year-round, full-time jobs in Newfoundland and Labrador, the Calvert is the first new Canadian offshore groundfish vessel to join the offshore fishing sector since the 1980s. Besides direct employment, the Calvert generates millions in annual salaries and economic spinoffs, supporting people, businesses and industry in Newfoundland and Labrador.

As previously mentioned, Ocean Choice operates a fleet of five vessels, and we also partner with 1,900 independent inshore harvesters. Each of these represents about 50% of our business. There is a role, obviously, from our standpoint, for all sectors in this industry.

Improving collaboration within the fishing industry is essential for achieving a more sustainable, equitable and efficient fishery that will benefit everyone. A shared responsibility between the harvesting sector, plant workers, processors, governments, unions and other fishery stakeholders is required for Newfoundland and Labrador to continue to have a successful local industry that competes on a world stage.

For the purposes of your study, I want to reaffirm that we are a 100% Canadian-owned and operated business and that we fully respect and abide by government policy with respect to the independence of the inshore fleet in Atlantic Canada.

I hope my statement and subsequent commentary today has instilled and will instill a message that we are an unapologetically proud Newfoundland and Labrador seafood company that provides significant employment and value creation in the coastal communities where we operate, communities that we support. We are bullish when it comes to the future of the seafood sector as an environmentally sustainable product, with well-documented health benefits and global demand that is expected to grow substantially over the next decade and beyond.

Thank you for the opportunity to make a statement. I welcome the committee's questions and comments.

[The Chair, Liberal, Ken McDonald]

Thank you, Mr. Bonnell.

We'll now go to the P.E.I. Fishermen's Association for a statement of five minutes or less. I don't know which of you is doing the statement or if you're doing it jointly, but you have five minutes.

[Molly Aylward, Executive Director, Prince Edward Island Fishermen's Association]

Thank you very much.

Both Mr. MacPherson and I will be presenting the statement. I will start and he will conclude. Thank you.

On behalf of the Prince Edward Island Fishermen's Association, I would like to thank the chair and the fisheries committee for the opportunity to once again respond to issues that impact our fishing community.

Our organization represents over 1,250 Prince Edward Island captains on important topics that affect fisher livelihoods and futures. Today’s topic of foreign ownership and corporate concentration of fishing licences and quota is one such topic.

We all understand that industries need to change and evolve to meet customer demands, be it on the boat, at the plant, in the store or in the restaurant. We understand that as transportation and refrigeration techniques improve, our local seafood resources are enjoyed by an increasing number of people around the world. We also understand that supply chains must be efficient to meet these needs.

The traditional supply chain of local independent fish harvesters supplying plants for processing and then furtherance to national and international markets is a good model of spreading wealth, keeping coastal communities vibrant and maximizing government returns and investments. There are many checks and balances in the current system to keep this supply chain efficient and profitable.

Ownership concentration can lead to reduced competition for products, fewer or eliminated jobs in coastal communities and a potential loss of food sovereignty in Canada.

Today we would like to expand on the concept of food sovereignty and food security.

Growing up in a country of bountiful food resources, we have never had to think of our food resources being restricted or, even worse, being grown or harvested here but not under the direct control of Canadians.

Our seafood industry has many challenges in terms of declining stocks and how the stocks are managed, but this is not the focus of discussion today.

In terms of corporate concentration, we are seeing more plants owned by the same ownership groups, in addition to refrigeration assets and other parts of the supply chain.

Ownership of offshore licences by corporations is also a concern. This makes it difficult for independent operators to access supply chain resources at competitive prices. With a primary focus on shareholder value and growth, these can be elements that not only put pressure on ocean resources but also expedite the closure of many major employers in coastal communities.

It is important to note that in some cases, foreign companies have varying degrees of government ownership, which does not make for a level playing field. These companies are also driven by growth and the maximizing of shareholder return, regardless of where the shareholders reside. The majority of their profits go out of Canada.

In many of these discussions, it is lost that owner-operators are independent small businesses, many of which employ two to three crew members. These business owners have significant personal investments, pay taxes and contribute to the volunteer base in their local communities. The resources of these small businesses are contingent on a well-functioning supply chain. Fishers are looking for a fair and equitable return, not an adversarial relationship that has winners and losers.

I will turn it over to Mr. MacPherson now.

[Ian MacPherson, Senior Advisor, Prince Edward Island Fishermen's Association]

Thank you, Molly.

What may be some of the potential solutions to ensure that food sovereignty and food security are maintained?

Number one, declare Canadian seafood a critical resource. This designation will enhance current controls on concentration and foreign ownership.

Number two, lower the Competition Bureau trigger threshold for all seafood company acquisitions, domestic and foreign. Right now, only large acquisitions are investigated by the bureau.

Number three, make a concentrated effort to market seafood to Canadians, as we typically have one of the lowest seafood consumption rates in the world.

Number four, work with fishing organizations to develop licence retirement plans that will increase the viability of current and future independent owner-operators. This will also lead to an increased diversification of catches and operating efficiency.

Number five, re-evaluate the drive to be the top seafood exporter by volume. Focus more on value-added products.

Number six, exempt seafood-related products that enter and leave Prince Edward Island from Confederation Bridge tolls.

Canada is the envy of many countries in terms of our resources. Our plentiful fresh water supplies, clean oceans and ample food supplies are not easily duplicated.

Our current system is not problem-free, but we must look proactively down the road. Companies and countries are after our resources, and this pressure will only increase. As dead zones become larger in the oceans, the seafood that feeds the world will come from more concentrated areas.

The Government of Canada must make food sovereignty and food security a top priority. Once we lose control of our resources, it will not easily be regained, if at all.

Thank you very much.

[The Chair, Liberal, Ken McDonald]

Thank you, Mr. MacPherson. That was almost dead on time, which usually doesn't happen when there are two people giving an opening statement.

We'll now proceed to our first round of questions.

I'll go to Mr. Small for six minutes or less, please.

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

Thank you, Mr. Chair.

Thank you to all of the witnesses for taking part today.

Mr. Bonnell, have you heard talk of any supply agreements in the Newfoundland and Labrador fishery between harvesters and processors?

[Carey Bonnell]

Thank you, Mr. Small, for your question.

There are a variety of relationships that occur between the harvesting sector and the processing sector in the province. We are part of those relationships, of course. Some of them would involve direct engagement between a harvester and a processor in terms of supply agreements, and some of them could involve just direct relationships between harvesters and processors in terms of harvesting and processing product and helping to get product to market.

There are a wide variety of agreements that take place between the harvesting and processing sectors in the province to ensure a fair market price for harvesters and to ensure we take the product and get it to market in a proper form.

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

In your opinion, Mr. Bonnell, is the current shutdown of the crab and the shrimp fishery linked in any way to corporate control in the fishery in Newfoundland and Labrador?

[Carey Bonnell]

No. Newfoundland and Labrador is a bit unique from that standpoint. We actually have a collective agreement in this province whereby fish prices are set based on negotiations. It's an independent process established by the Government of Newfoundland and Labrador.

We take a position forward to the independent arbitrator every year, and the processing sector and the harvesting sector do the same. A round of discussions will take place. In some cases agreements will be reached on price. When an agreement can't be reached, it will go to arbitration, and an independent arbitrator will select that price. Whether there are two companies negotiating on that front or 20 companies negotiating, it's an independent process that sets the price in the province.

I would say that in terms of corporate concentration, there is a very healthy level of companies in the processing sector in the province of Newfoundland and Labrador, which I can speak more accurately on. If you compare it to other forms of food production in Canada, other industries in Canada, the level of corporate concentration would pale in comparison, I think, if you were looking at the beef sector or the dairy sector or some other sectors of the economy.

Again, Newfoundland and Labrador is a bit unique, but we have very much an independent process to establish pricing in this province.

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

When Mr. Pretty gave testimony last week, he was mentioning control over harvesters by processors. I just want to give you an opportunity to speak to this.

If harvesters are completely independent of processing companies by means of either financing arrangements or anything else, is there free and open competition for harvesters' products between processors in Newfoundland and Labrador?

[Carey Bonnell]

I think, yes, there is free and open competition between harvesters and processors in Newfoundland and Labrador.

I can speak for our company. We completely abide by the Atlantic policies that exist right now in owner-operator and fleet separation policies and the preservation of the inshore fleet.

Like any group, we look to have relationships with harvesters. We manage five land-based processing facilities in Newfoundland and Labrador that employ about 1,000 people. You have to have a steady supply of raw material to operate those facilities to ensure that you can employ people on a seasonal basis, and in some cases on a year-round basis. Those relationships exist. They're critical to maintain the capacity and the infrastructure that we have.

In terms of pricing, what I will say is that this year is a unique year. Your committee has talked a lot about the situation in the snow crab fishery this year. If you go back over the past number of years, you'll see that 2022 and 2021 had record prices for snow crab for harvesters in Newfoundland and Labrador. Going back, we've had a fairly stable regime in place in terms of pricing, so I think fair market price has certainly been attained in the harvesting sector.

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

Thank you, Mr. Bonnell.

I'm going to turn over the rest of my time to Mr. Perkins.

[The Chair, Liberal, Ken McDonald]

This will be for over a minute.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

Mr. Sproul, do lobster understand where the line is drawn between lobster areas LFA 33, 34 and 41?

[Colin Sproul]

No, they don't. They don't understand where those lines are or who catches them.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

In LFA 41, which is about three times the size of Nova Scotia, one company has a complete monopoly on all of that and has asked for an increased TAC as a result.

What would the impact of that be on the inshore lobsters, since lobsters don't seem to know where that border is?

[Colin Sproul]

Ultimately, the impact of any increase in lobster TAC that's given to a mega-corporation fishing on one vessel would be out of the back pockets of inshore fishermen. There's one lobster resource in the Gulf of Maine, and there's no science to support that those areas are separate or that a fishery take in LFA 41 won't have an effect in the adjacent LFAs.

It's also important to point out that a vast majority—80% or 90%—of Clearwater's landings come from the most important place for lobsters in Canada, which is the lobster box of Brown's Bank, which is adjacent to the closed area. They fish intensely right up to the border of that. There are really serious implications for us.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Does anyone police it to make sure that they don't go over?

[The Chair, Liberal, Ken McDonald]

I'm sorry, Mr. Perkins, you've run out of time. It's a few seconds; you wouldn't get the question in anyway.

We'll now go to Mr. Morrissey for six minutes or less, please.

[Bobby Morrissey, Liberal, Egmont, PE]

Thank you, Chair.

I have a question for Mr. Sproul.

In your opening statement, you referenced the corporate backing for lobster licence purchases. You also referenced “the buying of lobster licences by unlawful means”.

Do you care to expand a bit for the committee on what unlawful methods are being used?