Oceans and Fisheries

Published in Inverness Oran & other local papers June 2006 and a good reference to the plight and possibilities for CBI’s fisheries.

New Paradigm required for Atlantic Fishery

Dear Editor,

The Daley Brothers’ plant closure in Cheticamp and Sea Treat’s troubles are directly connected with problems in the crab and shrimp fisheries, as well as the rising Canadian dollar, soaring energy costs and an increasingly stricter regulatory environment which is making it virtually impossible for fishermen and processors alike to turn a profit this season, and the trend
is expected to continue for the next two years. The Daley Brothers’ financial problems have also been further complicated because of continuing litigation over the compensation it received from an insurance company after its processing plant in Shippagan, N.B. was destroyed by fire in 2003.

The closure of the Cheticamp plant represents a loss of 200 jobs in a small community, and the impact on the community and surrounding region is huge. Similarly, the Highland Fisheries Plant in Glace Bay locked out its workers 13 weeks ago. These closures are a clear signal of more deeply-rooted infra-structural problems in an industry that is the most volatile, most complex and diverse (e.g. species and technology), most fragmented, most international, most bureaucratically regulated, yet most wasteful and least transparent, and the most misunderstood by consumers.

In my search to discover possible solutions for the problems and opportunities that face the fishery industry I have discovered that similar challenges are shared by maritime communities across Canada and around the world, including: New Zealand, Ireland, the UK and the US. In New Zealand for instance, the seafood industry is based on efficient utilization of a public resource with government as a key partner in its regulation and operation. Under their infrastructure the seafood industry in New Zealand has grown from around $25 million of exports in 1975 to $1.3 billion exported in 2004, representing a 50-fold increase in less than 30 years.

Between 90 to 95% of production is exported, and around 70% of returns arise from value added to raw product.

The fishery in Canada, unlike nearly all other fishing nations, receives little or no government subsidy, and given the vast majority of revenue results from export, it inevitably competes against subsidized production in foreign markets. It is obvious the industry is lacking institutional infrastructural support needed to aid its survival and to encourage its sustainable development. Consequently, the industry is now under extreme financial pressure, leading to business contraction including plant closures, fleet and vessel sell-offs, tying up other vessels, and rationalizing processing operations to reduce the cost of business.

Furthermore, such measures have effects in allied service industries creating more lay-offs. Without quick and decisive government action you can expect exodus from the industry. However, the Tory government of Nova Scotia has chosen not to get involved, leaving the industry fully vulnerable to current market anomalies.

To reduce the volatility of the commodity price-driven industry and fuel-dependent process, there is a need for government and industry co-operation to structure risk management for the industry so that companies like the Daley Brothers will not be operationally crippled whilst being held financially captive by reticent insurance companies who unduly tie up loss claims in litigation. In short, I envision the government and industry establishing some form of insurance facility for fishermen and processors alike, whereby provisional coverage could be provided for a timely release of capital for loss of fleet, equipment or plant.

Also, an opportunity exists for the Province of Nova Scotia to consider, in cooperation with federal and international interests, to create an Atlantic Commodity Exchange (ACE) whereby fish and seafood “Futures” contracts could be offered to commercial and institutional buyers as a form of hedging against product price movement, a long-established means for harvesters to ensure against unexpected price swings in their primary resource product. For instance, in the US, Futures contracts for agricultural commodities have been traded for more than 100 years and have been under federal regulation since the 1920s. And in the last 20 years, Futures trading has expanded rapidly into many new markets, beyond the domain of traditional physical and agricultural commodities, and are now offered on many energy commodities such as crude oil, gasoline heating, oil, and natural gas, as well as on a vast array of financial instruments, including foreign currencies. And, in recent years, new Futures contracts have been offered in other non-traditional commodity areas such as electricity, seafood, dairy products and crop yields.

The United Nation’s Food and Agriculture Organization reports that fish and fish products are the most traded of all the world’s food sectors. The seafood trade in particular is one of the world’s largest and fastest-growing international commodity industries and is worth more than
$60 billion a year, exceeding the world trade in all grains combined, and represents more than twice the combined world trade in all tea, coffee and cocoa. Almost 200 countries supply fish and seafood products to the global marketplace, consisting of more than 800 commercially important species of fish, crustaceans and mollusks, including 30 species of shrimp alone. These products take hundreds of forms, ranging from canned tuna to fresh, boneless salmon fillets, from salted herring roe to dried shark fins, frozen pollock block, individually quick-frozen breaded cod portions, smoked mackerel, clam juice, live lobster, fish meals and oil. Among these species a commodities exchange should be created for salmon, tuna and crab similar to the markets for shrimp which exist in Minnesota and Japan.

Close to 80% of global seafood exports are purchased by three markets - Japan, Europe and the US, and despite their import dependence present significant market access barriers. There is a very obvious need for coordinated government efforts to improve market access for our fishery exports, and creating an infrastructure with long-term market contract options is increasingly important. A top trade policy for our fishery should also include seeking trade liberalization from the next WTO negotiating round, including the elimination of foreign tariff and non-tariff trade barriers, and the elimination of import quotas by negotiating new WTO rules to eliminate trade distorting subsidization of fishing sectors.

Sincerely,

Mark MacNeill
RR#4 Mabou