December 15, 2008
Honourable Gail Shea
Minister of Fisheries
We are writing to you with a sense of urgency on behalf of the more than twenty thousand small, independent commercial fishing enterprises that are the backbone of Canada’s coastal economy. Our owner-operator fleets provide 50,000 direct fishing jobs and sustain equal numbers in boat building, gear and equipment supply, processing, transportation and exporting. The owner-operator fishery is coastal Canada’s biggest private sector employer and, in most fishing communities, a way of life.
Ours is an export industry and over the last 15 years, through our concerted efforts, Canada has become a world leader in the export of high quality, sustainably harvested fisheries products. As an industry, we have also become much more forward looking as a result of the Fisheries Renewal process and the Ocean to Plate initiative. The considerable investments we have been making in our industry’s future, however, are now threatened by the global economic recession.
A disturbing bellwether is what is happening to lobster. Because of dropping US demand dockside price for lobster has fallen 35 percent a year ago; well below minimal returns on investment. The impacts of this are ominous given that lobster is our country’s most valuable seafood export and the first product to hit markets in the new cycle. If this price drop extends to our other major products (crab, salmon, shrimp) our fleets and communities will be losing hundreds of millions of dollars.
Already the global recession is turning a bad situation for our industry into a crisis. For the last several years our fleets have been caught in the same cost/price squeeze as our country’s manufacturers and the giants of the automotive and forestry industries.
For several years now fishermen have been tightening their belts, reducing family spending, forgoing new investment and drawing down the capital that should be set aside to replace depreciating assets. This strategy can’t be sustained any longer especially if the economic horizon offers no hope.
To date the Department has proposed that fleets deal with their overall viability through self-rationalization schemes. There are limits to what we can expect from self-rationalization. It will not deal with the underlying industry viability issues nor solve problems that are beyond our control and being compounded by the international financial crisis.
The effects of the cost-price squeeze and the financial crisis are cumulative and endemic. They affect all our fleets and all regions. In some areas the situation has reached a breaking point and entire fleets may not see any net benefits from their operations in 2009. We do not believe that self-rationalization is the appropriate response to the crisis our industry faces; just as it is not the appropriate response to the crises facing the manufacturing, forestry and automotive sectors.
A strategic intervention is required to deal with the most problematic areas and to address industry viability and renewal across the board.
We would therefore urge you to launch an immediate series of pre-budget regional consultations with industry organizations and provincial governments culminating in a national Round Table to build consensus around a comprehensive renewal strategy to restore viability to our industry.
Among the issues and options we would like to see examined are:
â€¢ Measures to ease access to capital and credit to support individual enterprises and licence transfers;
â€¢ The reactivation and expansion of provincial loan boards;
â€¢ The establishment of a special federal fisheries fund to help finance fleet rationalization programs i.e. licence retirement (in partnership with fleet organizations and provinces) for those fleets and areas in serious difficulty;
â€¢ A national agency to promote seafood marketing and support Ocean to Plate initiatives;
â€¢ Early retirement programs for plant workers and harvesters;
â€¢ Reductions in the burden of fees and other fish management costs;
â€¢ Fisheries research and development funds.
We cannot over emphasise the urgent need for action.
Our fleets and organizations are looking to your leadership and are prepared to assist you in any way possible to move these consultations forward and achieve consensus on the measures needed to help our industry through these difficult times ahead.
President Area 19 Crab Association SW Gulf of Saint Lawrence
President, Prince County Fishermen’s Association PEI
President, Maritime Fishermen’s Union
Vice-Président, Alliance des pêcheurs professionnels du Québec
President, Gulf Nova Scotia Bonafide Fishermen’s Association
President, PEI Fishermen’s Association
Native Brotherhood of British Columbia
President, United Fishermen and Allied Workers Union
President, Northumberland Fishermen’s Association
Association des pêcheurs professionnels membres d’équipage
Directeur général, Fédération régionale acadienne des pêcheurs professionnels
President, Gulf Nova Scotia Fishermen’s Coalition
President, Fish Food and Allied Workers Union
President, Area G Trollers
Chairman, LFA 34 Management Board
Cc: The Hon. James Michael (Jim) Flaherty, Minister of Finance
The Honorable Peter McKay, Minister of National Defence
The Honourable Gregory Francis Thompson, Minister of Veterans Affairs
The Honourable Gary Lunn Minister of State (Sport)
The Honourable Denis Lebel, Minister of State (Economic Development Agency of Canada for the Regions of Quebec)
The Honorable Keith Ashfield, Minister of State (ACOA)
Gerald Keddy, MP South Shore St Margaret’s
Grant Kerr, MP West Nova
Rodney Weston, MP Saint John
Senator Gerald Comeau
Randy Kamp, Parliamentary Secretary to the Minister of Fisheries and Oceans
The Cost Price Squeeze on Canada Fishing Industry
Ours is an export industry. More than 80 percent of the products we produce are exported making Canada the world’s 6th most important exporter of fish. As in most other export sectors the United States is our biggest customer, followed by the EU and Japan. So the health of our industry is contingent on the health of the economies of the developed world.
The current liquidity crisis in world financial markets revealed how globally integrated our industry is. The collapse of the Icelandic banks jeopardized access to credit for many Canadian fish processors and created a lot of uncertainty about the future. The situation could become quite serious if our traditional buyers cannot access credit to finance inventory and, as a result, demand for our products drops.
The global financial crisis comes on top of the cost/price squeeze our fleets have been under for the past several years. The following examples help illustrate the problems our industry faces.
â€¢ As an export industry our products are traded in US dollars. From early 2003 until the end of 2007 as the Canadian dollar steadily gained value on the strength of our petroleum exports it knocked more than 39 percent off the value of the exchange on the US dollars we received for our products. While exchange rates have improved somewhat over the last couple of months we have only recovered half of the exchange rate losses we’ve suffered since 2003.
â€¢ While the quality of our wild seafood products is second to none and the world wide availability of wild products is not increasing, the prices paid for our products have been kept low and in some cases have dropped because of increased competition from low cost aquaculture producers from countries with poor environmental regulation and labour standards. This is especially the case for two of our main products; salmon and shrimp. We have been able to maintain our market share in shrimp solely because of the efficiency and sheer volume of our production and the abundance of our stocks.
â€¢ While fuel costs have dropped over the last few months, during the 2008 fishing season they averaged a 60% increase over the previous year seriously eroding the profits margins of all our enterprises.
â€¢ The downloaded costs of management measures (observers at sea, video recording and viewing, dockside monitoring, log book maintenance), science costs, licencing fees, safety equipment and training are all additional costs that our enterprises have to bear because of our rigorous and demanding regulatory environment. These costs were always onerous. They are now prohibitive.
â€¢ Conservation measures, many of which were adopted voluntarily by our fleets, have also increased short term costs on a per pound basis. The benefits of these efforts will only be seen over the long term. Some of our fleets are also having to incur the costs associated with ecological certification just to maintain existing markets and without any indication that it will lead to improved prices.
â€¢ Our crews are also aging, with average ages well over 40, reflecting the absence of young people entering the fishery and raising concerns about who will be fishing in the future. Lack of availability of experienced crews tied up 1/3 of the Gaspé herring fleet last season and many British Columbia ports saw half of the fleet tied up in 2008.