May 2005

 

 

WHAT DO WE WANT FROM BC’S COMMERCIAL FISHERIES?

THE CASE FOR REFORM

 

 

I: Introduction

 

Treaties and Transition: Towards a Sustainable Fishery on Canada’s Pacific Coast, the 2004 Joint Task Group report prepared for the federal and provincial governments by Professors Peter Pearse and Donald McRae, advocates sweeping changes to BC fisheries in order to respond to new challenges such as treaty settlements, stricter requirements for resource conservation, and the need to save the salmon fishery from “economic ruin.” 

 

Fundamental to these sweeping changes is reform of the licencing system to define rights and provide more clarity and security.  Pearse/McRae proposes building on the individual quota system already established for some key fisheries by moving to non-discretionary, transferable, quota licences, issued initially for five years but eventually on a 25 year evergreen basis that equals terms provided to First Nations under Harvest Agreements.   Pearse/McRae’s inclusion of the salmon fishery in this process has sparked much discussion of IQs rights in general and as they might apply to salmon in particular.

 

While the principles laid out in Pearse/McRae have received widespread support from the commercial industry, the report has also generated considerable criticism  Two recent examples are Ecotrust’s Catch-22: Conservation, Communities and the Privatization of BC Fisheries and the UFAWU/Native Brotherhood’s A Rich Fishery or a Fishery for the Rich? A Critique of the Pearse/McRae Report.  The concerns raised include conservation, declining employment, impact on communities, corporate concentration and windfall profits.

 

The debate over Pearse/McRae suggests that there is a clear, philosophical divide about the results we are trying to achieve with the fishery.  The choice is between a sector that creates wealth from a valuable, sustainable natural resource or one that dissipates that wealth at considerable public expense.

 

  

II: The Pacific Fishery

 

Pacific fisheries are diverse, valuable and make a substantial contribution to the economic well-being of British Columbia.  According to Gordon Gislason’s The BC Seafood Sector: Strengths, Weaknesses, Opportunities and Threats (BC MAFF, 2004), the seafood sector contributes:

 

  • 1.3 billion in seafood sales
  • 1 billion in exports
  • $450 million in wages
  • 13,000 employment PYs from 30,000 jobs
  • Contribution to GDP of $750 million

 

Gislason’s analysis includes aquaculture as well as commercial fisheries, but the latter contribute the lion’s share with 69 per cent of the wholesale value of all BC seafood products in 2003.

 

Over the last 15 years, most commercial fisheries (halibut, sablefish, roe herring, groundfish trawl and the dive fisheries) have moved to a reformed management system that assigns participants a share of the catch and reduces competitive fishing, leaving fishermen free to focus not on how to catch more but on how to improve the value of what they catch.  It’s a system that has consistently improved both conservation and economic performance.  These fisheries have the following hallmarks of success:

 

  • public and market confidence that the fishery is sustainable
  • ability to deliver economic and social benefits
  • participants who are self-reliant and able to adjust to changes in stock levels and markets
  • participants who are accountable and are involved in decision-making
  • participants who pay all or a significant amount of the cost of management of the resource
  • improved relationships between participants and the management agency

 

The BC salmon fishery shows none of these characteristics.  On the contrary it is characterized by:

 

  • endless allocation conflict and competition for the catch
  • politicized decision-making
  • too many participants
  • low economic viability and a bleak economic future
  • increasingly complex conservation challenges
  • complete lack of public confidence in the management of the resource
  • high management costs
  • inability to fund research and management
  • subsidization of participants through EI and periodic costly bailouts
  • harvesting practices that are unresponsive to markets and decrease value

 

The outcome of all this is that the economic value of what should be a lucrative public resource, one that merits its status as a cultural icon, is dissipated.  Industry makes little money, management and other costs are unsustainable and conservation is jeopardized.

 

III: The Need for Reform

 

Besides the economic argument for reform, there are two other compelling reasons for fundamental change: the need to make progress on the fisheries component of treaty negotiations and the requirement to meet increasingly complex conservation challenges.

 

III: I. Treaties

 

British Columbians want to see progress on treaties.  Negotiations between Canada, BC and First Nations are currently underway at 45 separate tables.  Four tables have agreements in principle (AIPs) in place and are in negotiations to finalize treaties; several others are close to this point.  Virtually all the tables will include provisions for fisheries.  Yet this is one of the thorniest components with widespread opposition to treaty protected sale of fish and harvest agreements without equivalent security for the remainder of the industry.

 

Despite this opposition, the commercial sector understands and accepts that there will be increased access to fisheries by First Nations both through the treaty process and outside it.  The challenge is to move forward in an equitable way, assuring a level playing field so that no one group of commercial participants has a competitive advantage over another with fair compensation to the existing commercial sector for the cost of settling treaties through increased access to fish.    

 

The model for fisheries provisions in treaties under negotiation distinguishes between fish used for food, social and ceremonial purposes within the treaty and fish for commercial use under a harvest agreement.  Harvest agreements give First Nations property rights—a specific, defined share of the commercial catch under a long-term, renewable, contractual commitment.

 

In order to maintain a level playing field, commercial fishermen in all fisheries, not just salmon, need the same kind of long-term security of access.  Equity demands that a defined share for one group means a defined share for everyone.  Critics of Pearse/McRae appear to find it acceptable that First Nations get defined shares and long term security of access but non-aboriginal participants do not.  Equity also demands that governments should formally declare that they will fairly compensate harvesters for the transfer of access.  In salmon, for instance, governments should accept the recommendations of the Commercial Salmon Advisory Board (CSAB) on quantification of licence entitlements by area and species for the purpose of transfer to First Nations. 

 

Shortly after the release of the Pearse/McRae report, the First Nations Summit and the BC Aboriginal Fisheries Commission released a parallel report, Our Place at the Table: First Nations in the BC Fishery, prepared by a group of aboriginal fisheries experts. Like Pearse/McRae, this report proposes solutions intended to bring a high degree of certainty to aboriginal and non-aboriginal interests alike while ensuring the conservation of the fisheries resource.  

 

Governments could make an important first step to bridging the gaps between the two reports if they moved immediately to create an independent crown agency with a base capital fund of say $200 million to acquire licences in various fisheries for present AIP arrangements or for interim agreements to provide economic benefits to First Nations until comprehensive agreements are complete.  While this process is underway, these licences could be leased back to the existing commercial industry to generate additional revenue to supplement the original investment.

 

III: 2.    Conservation

 

The second reason for fundamental change primarily affects the salmon fishery.  DFO’s precautionary approach to management has already sharply reduced fishing opportunities and exploitation rates.  This approach, if anything, will become more rigorous not less as the implementation of the Species at Risk Act profoundly changes the way DFO manages fisheries.  Whether individual salmon populations are listed under the act or not, large-scale, large fleet, mixed stock fisheries are a thing of the past.  Protection of weak stocks, especially on the Fraser, combined with the need to provide more fish under treaties and to meet constitutional obligations requires flexible, non-competitive, small scale fisheries that can take advantage of modest harvest opportunities.  Pilots such as the successful pooled seine fishery in Barkley Sound indicate that, contrary to some claims, assigning shares of the catch can work in the salmon fishery.

 

Under the current management regime, conservation goals are difficult to achieve, which means that fishing opportunities will continue to decrease.  Reform is essential: Canadians will not tolerate repeated sagas of missing fish or missed fishing opportunities due to the inability to control fishing pressure.

 

IV: A Proposal for Reform

 

The Pearse/McRae Joint Task Group report offers recommendations for reform that would encourage progress on treaties, enable the fishery to meet new conservation challenges, improve its long-term economic performance, and begin to reverse the decline of the salmon fishery.  Its prescription for reform is based on seven key changes:

 

  • an integrated fishery with all participants fishing under the same rules and priority
  • a more responsive management regime
  • greater co-management and accountability for both stakeholders and managers
  • enhanced security of tenure (25 year evergreen licences)
  • enhanced certainty of harvest share through defined allocations
  • transitional arrangements to accelerate First Nations’ access to commercial fisheries
  • legislative change to provide authority for reform and to depoliticize decision-making

 

These principles are widely accepted in the commercial sector and are not necessarily at odds with the recommendations of the First Nations Summit report.  Instead, the debate over Pearse/McRae has focused almost entirely on the recommendation to extend IQs to salmon.  The use of IQs as a management tool draws strong opposition from some who fear loss of employment, adverse affects on communities, poor conservation performance, corporate concentration of quota, and unfair windfall profits and adverse changes in the distribution of income and wealth.   The question is whether these concerns are valid.

 

V: Operational Experience with IQs

 

There is a good reason why many Pacific fisheries are performing well, improving both their conservation and their economic record, and rarely hitting the headlines—they are all managed under IQs.

 

The performance of these fisheries has been extensively documented in Managing Fish: Ten Case Studies from Canada’s Pacific Coast (Laura Jones, Fraser Institute, 2003).  Jones provides a detailed look at whether the introduction of various forms of quasi-property rights into ten BC fisheries have delivered benefits in terms of improved conservation, economic viability (increased profitability, better marketing, new product forms, reduction in subsidies) and better working conditions.

 

As the updated table on p. 6 adapted from Managing Fish shows, eight of the ten case studies show marked improvement in all three measures of success.  Actual catches rarely exceed allowable catches, third party monitoring and effective enforcement provide reliable information on catches and responsibility for stewardship has increased.  On the economic front, costs generally declined while revenue increased.  Harvesters were better able to serve the markets and able to make significant contributions to science, management and enforcement.  Working conditions also improved with most harvesters indicating that a safer working environment was one of major benefits of IQs.

 

Two fisheries are more ambiguous.  Abalone was the first fishery to move to an IQ system in 1979.  The fishery was closed in 1990 and remains closed today with little prospect of re-opening in the foreseeable future.  Participants and DFO generally agree that the problems with abalone are not attributable to IQs per se but to the failure set up effective monitoring and enforcement for all participants, including recreational users.

 

 

 

 

Fig. 1 The Case for Change: updated from Managing Fish (Jones, 2003)

 

Fishery

Date of Change

Conservation

Economic Viability

Working Conditions

Abalone

1979

=

=

=

Geoduck

1989

+

+

+

Sablefish

1990

+

+

+

Halibut

1991

+

+

+

Green Urchin

1994

+

+

+

Red Urchin

1995

+

+

+

Sea Cucumber

1997

+

+

+

Groundfish Trawl

1997

+

+

+

Roe Herring

1998

+

+

+

SOK*

1975

N/A

N/A

N/A

 

  

*SOK has been under IQ management since its start in 1975; = neutral impact; + positive impact; comparative statistics under development

 

Spawn on Kelp (SOK) has been an IQ fishery since its commercial beginnings in 1975.  It is therefore not possible to assess whether conservation, economic viability and working conditions have improved.  We do note, however, that the main problems with this fishery stem from DFO’s disregard of two key principles of effective quota management—a level playing field for all participants and arbitrary increases in licences and quota.  DFO has permitted both inconsistent standards for on-grounds monitoring and enforcement within the fishery and increases to the number of licences and the amount of the quota without buying out existing quota.  This has created two separate, unequal management systems and threatens both conservation and economic viability.

 

Besides the BC experience, IQs have been used extensively in other jurisdictions such as New Zealand, Australia and Iceland with generally positive results.

 

VI:  The Halibut Example

 

Halibut has been fished commercially in BC since the 1880s.  It is regulated jointly with the US through the International Pacific Halibut Commission.  1n 1991 the Canadian fishery went to a two-year trial of IVQs which became permanent after a 91 per cent vote by licence holders in favour in 1993.  IVQs were a means to deal with increased fishing power (whereby harvesters were able to take 8 million pounds in only six days), conservation concerns and the inability to supply fresh product on a consistent basis. 

 

In 1990 the halibut season was six days; in 1991 under IVQ it increased to 214 days.  This long season put an end to supply gluts and meant fresh halibut was available to the market for most of the year.  A comparison with landed prices in Alaska which only moved to an IVQ system 1995 shows the immediate effect on harvester revenue.  Prior to the introduction of IVQs, BC halibut obtained a modest premium in the market place of about $0.24/lb.  In 1991 that premium grew to $0.75/lb and in 1993 to $1.46/lb.  The improved prices are credited to more distributed landings of halibut resulting in a steady flow of fresh fish to markets over a much longer period.  Ending the race for fish also provided an incentive to improve product quality which in turn helped increase prices.  In the course of these changes, production has shifted away from the major processing companies to more specialized BC companies who have also become importers and marketers of Alaskan halibut.

 

Fig. 2 Average BC and Alaska Halibut Landed Prices, 1998-1993 (Source: PHMA)

 

 

In real terms, as the graph below shows, landed prices have risen steadily since the introduction of IVQs as markets increase in response to stable, consistent, almost year-round supply and greatly improved product quality. 

 

 

Fig. 3 BC Halibut Landed Prices (Source: PHMA)

 

 

Since the implementation of IVQs, the fleet has consistently met the TAC with little or no overage.  Tagging and dockside monitoring means that all fish harvested are accounted for and the fleet is now moving towards a full at-sea monitoring program.  In addition, the increase in income means that the BC fleet now covers most of the management costs of the fishery as well as additional conservation measures for bycatch.

 

Fig. 4 Catch Overages & Underages (Source: PHMA)

 

 

 

VII: Objections to IQs

 

VII:1.    The Conservation Record

 

Detractors point to the failure of IQs with abalone and with groundfish on the East Coast as well as a recent “resource crisis” with sablefish to argue that IQs are often detrimental to conservation. 

 

It is true that IQs by themselves do not necessarily improve conservation.  As is the case with any resource management approach, effective IQ systems demand rigorous monitoring and enforcement if conservation goals are to be met.  Similarly IQs do not necessarily eliminate stock declines or even crises in the resource.  Effective management systems do guarantee, however, that there will be fair and equitable ways to deal with these situations as happened with sablefish (so that within three years the quota returned to above average levels) or the recent reduction in geoduck quota.  Participants put the long-term interest of the fishery and the resource before their own short-term economic gain.

 

In BC, with the exception again of abalone, there has been little evidence of quota busting, high grading, or increased by-catch, three problems often cited by critics of IQs.  What is important is that the IQ systems be set up carefully so that there are comprehensive monitoring and enforcement programs to deter unsustainable practices, prevent abuse and address problems.

 

The BC experience to date, including the complex groundfish trawl fishery, clearly demonstrates that properly implemented and managed IQ fisheries deliver conservation benefits.  Actual catches rarely exceed the TAC, monitoring and enforcement work, and fishermen consider themselves stewards of the resource.

 

Reforming the salmon fishery, which in some ways is even more complex, must therefore take this into account.   In our view, the first step must be effective enforcement and independent catch monitoring for all users of the resource.  Without this, successful management and conservation are impossible, and conservation problems, such as we saw in 2004, will continue.

 

VII: 2.   Declining Employment

 

Employment in the fisheries in Ten Case Studies has declined.  But while fewer people work in the fishery, the jobs have generally been better paying, less seasonal, as well as much safer.  As Jones notes, “while critics lament reductions in employment, they have the problem backwards: there were too many people in those fisheries to begin with.  Excess employment in fisheries is not wise as it puts too much pressure on the stocks.”

 

Many of the critics of Pearse/McRae fail to note that employment in the fishery will continue to fall whether changes are implemented or not.  Technology, global markets and poor economic performance will reduce the number of participants. The UFAWU report, for instance, appears to think that the salmon fishery would be better off if the Mifflin Plan reforms had not reduced the number of salmon harvesters by 50 per cent through a buyout after harvest volumes dropped by 75 per cent.  There is no question that there will be reduced employment in the salmon fishery if fundamental reform takes place.  There will equally be reduced employment if it does not—a fishery of 20,000 or 25,000 tonnes cannot support 3,570 people, especially if its management structure precludes tapping into the demand for consistent, innovative, high-quality products.

 

VII: 3    Impact on Communities

 

A related criticism is that IQs are, as Ecotrust argues, “significantly more detrimental to rural communities than urban.”  Ecotrust’s own analysis shows, however, that quotas are not the dominant factor in the loss of rural licences.  It also somewhat overstates the number of urban licences as the licence-holder’s address may well be a business address rather than a personal one.  The 2003 analysis of fish harvesting employment (based on 2002 data) in Gordon Gislason’s BC Seafood Sector: Strengths, Weaknesses, Opportunities and Threats suggests a somewhat different picture with the number of licences in rural and urban areas declining in roughly equal proportion but with 65 per cent of fish harvesting jobs still located outside Vancouver and Victoria. 

Whether we proceed or not with the Pearse/McRae recommendations is not going to change the trend of migration from rural to urban areas—and governments should not be in the business of telling people where they must live.  Sustainable, profitable fisheries are more likely to deliver long-term benefits to rural communities, including aboriginal communities, than unsustainable, uneconomic fisheries—for example, the proportion of halibut and groundfish landed in communities has increased since the introduction of IQs.  Strong fisheries mean that fishermen will be in coastal communities more or less year round buying services and supplies even if they do not choose to live there.  Pearse/McRae offers a way to make progress on treaties and reform fisheries, allowing those who want to leave the fishery to do so in a fair and equitable way.  Failing to implement the full range of recommendations will condemn fisheries and the communities that depend on them to economic dependence on subsidies, EI, and buybacks, none of which have much appeal to the Canadian taxpayer.

 

Communities also have a range of options open to them should they wish to maintain fishing fleets including purchasing vessels and licences and offering incentives to fishermen to keep or purchase vessels and licences, just as they might offer incentives for any other industry.

 

VII: 4.   Corporate Concentration

 

Critics of Pearse/McRae like to raise the spectre of the Jim Pattison Group owning the entire fishery with working fishermen as mere serfs, their livelihoods bought, sold and traded without their consent.  As Jones notes, however, corporate concentration is not unique to quota fisheries.  Indeed in BC today the most notable examples of corporate concentration are in the seine salmon and herring fisheries and groundfish trawl.  Salmon is not subject to quota management and any concentration in herring and groundfish trawl predates quotas and has not increased since their introduction.

 

Concentration is also not necessarily bad in so far as more efficient fishermen buy out less efficient ones on a willing seller/willing buyer basis that benefit both parties.  Detractors of Pearse/McRae ignore the BC experience that fisheries generally move to IQs because they are failing—they are not “rich” fisheries in any sense but ones that have become unmanageable and deliver little in the way of economic benefits to the participants.

 

Indeed the BC experience suggests that in some fisheries IQs have changed the balance of power from processing companies to harvesters.  Once fishermen have a fixed share of the catch, they can break ties with existing processors, schedule fishing time to maximize market returns, shop around for the best price, and co-operate in the development of new products and new markets.  In the case of halibut IQs, the then Fisheries of Council of BC, representing the major processors, vehemently opposed their introduction for fear of losing access to raw material.  FCBC’s prediction proved correct with most of its members losing this business to smaller, more specialized processors.

 

 

 

In addition, the Pearse/McRae recommendations would give fishermen more security and certainty as well as a more secure asset that they can take to the bank.  Not only does this mean reduced dependence on processing companies it can also make it possible for rural harvesters and processors to access the capital they need.

 

VII: 5.   Windfall Profits

 

Both Ecotrust and the UFAWU consider “windfall” profits—the increase in licence values often seen when IQ’s come into effect—as an unacceptable consequence of IQs.  Much of the time, however, this increase merely reflects the improved prospects for the fishery.  A sustainable, profitable fishery, albeit for fewer people, is surely preferable to a fishery in constant crisis dependent on government subsidies.  As Jones notes, “if the choice is between a failing fishery and a successful one where there are some windfall gains, there is no question that the latter is more attractive.”

 

A related criticism is that the increase in the value of licences makes it difficult for new entrants to the industry.   This is not necessarily the case as the more secure the future of the fishery the less risky an investment becomes.  The fishery that is having the hardest time attracting new entrants, whether licence holders or crew, is salmon—simply because it is not profitable.

 

The groundfish trawl experience also shows that it is possible to design a complex quota system that explicitly includes economic and social objectives as well as conservation.

 

VIII:      The Case for IQs in Salmon

 

Fisheries often move to IQs only when the current management system is unsustainable.  The Alliance fully accepts that the decision to move to IQs is one that individual fleets must make for themselves.  We believe, however, that the experience of other fisheries combined with the need to meet conservation challenges, make progress on treaties, and improve its dismal economic performance requires a long, hard look at how IQs would work in salmon. 

 

The potential benefits include:

 

  • a mechanism for defining shares for First Nations
  • a mechanism for fair compensation of existing users
  • more fishing opportunities
  • more effective management
  • ability to pay for research and management
  • less conflict between users
  • more market responsiveness
  • better quality products

 

 

 

In April 2005, the Minister of Fisheries and Oceans signaled endorsement of many of the  principles behind Pearse/McRae and the need for reform. DFO and industry can now, sector by sector or area by area, develop plans to change the management regime, bearing in mind that effective, efficient, non-competitive systems are essential to improving conservation, economic viability and working conditions.  Only by giving participants a real say in development and change will we make real progress.

 

  • IX: Recommendations

 

Following the Minister’s April announcement of an action plan to reform Pacific fisheries, DFO should also announce specific action with the necessary resources for enforcement, catch monitoring, habitat protection and transfer of allocation to First Nations. The Alliance proposes the following recommendations:

 

  • Governments should formally declare their commitment to fairly compensate harvesters for transfer of access to First Nations

 

  • Governments should create an independent crown agency with a $200 million base capital fund to acquire licences for existing AIPs or interim agreements;

 

  • Governments should accept the unanimous recommendations of CSAB on quantification of salmon licence entitlements by area and species for transfer to First Nations;

 

  • The Minister of Fisheries and Oceans should announce that third-party catch monitoring for all fisheries for economic opportunities will required for the 2005 salmon season.

 

X:  Conclusion

 

The BC experience—and to a large extent experience from elsewhere in the world—shows that IQ management systems and successful, modern, responsible and responsive fisheries go hand in hand.  

 

Seafood is a global business, one increasingly dominated by aquaculture.  By world fisheries standards, British Columbia is a small producer with high costs, a largely small boat fleet and weak infrastructure.  Seafood customers around the world, including here at home, expect quality, consistency, innovation, sustainability, traceability and competitive prices.  Under the current management regime, especially for salmon, it will be a challenge to maintain our existing markets as well as develop new, niche, high value ones.

 

Critics of Pearse/McRae offer no alternative prescription to deal with the more rigorous approach to conservation exemplified by SARA or the need to move forward on the fisheries component of treaties.  They cling to a mythical status quo that they present as a superior outcome.  The choice is not between a desirable status quo and a fishery with reduced employment controlled by a corporation.  It is a choice between whether we want a robust, sustainable fishery that delivers wealth to First Nations and other participants, one with fewer but better jobs, or a fishery that has plenty of people involved, few of whom earn an adequate income, with all the others relying instead on government subsidies and periodic bailouts at a net cost to the taxpayers of Canada.  Decision-makers should ask themselves which vision they think Canadians will support.

 

*****

 

 

 

 

   

 

 

 

 

 

 

 

 

 

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