January 3, 1997
(Fisheries and Aquaculture)

Minister releases FIRB report: A Policy Framework for Fish Processing

Fisheries and Aquaculture Minister John Efford today made public the Fishing Industry Renewal Board's (FIRB) final report entitled "A Policy Framework for Fish Processing."

In doing so, the minister also announced at a news conference that the report will form the basis of further consultation with industry and other stakeholders during January before a final decision is taken by government with respect to the 19 recommendations contained in the report. He noted that industry has requested more time to consider these recommendations.

Mr. Efford said that a final decision on the report will be taken in early February, but "many of the board's recommendations reflect my view of the changes needed to take the industry into the 21st century."

He noted that the policy objectives outlined by the board "are appropriate for the challenges and opportunities we will encounter as we move toward the fishery of the future. I believe that most people will agree with the desirability of pursuing a stable, self-sustaining and competitive processing sector; the importance of maintaining regional balance in the distribution of processing sector activities; and that plants, wherever possible, should operate for longer periods. These objectives will not be achieved without fundamental changes to the existing licensing policy."

The restrictive licensing policy introduced in 1981, combined with a freeze on primary processing licences in 1989 and other measures "are inadequate to take our fishery into the 21st century," the minister said, noting that since the first cod moratorium was introduced in 1992, very few plants have closed permanently. Today there are 212 facilities licensed for primary processing, 99 of which have freezing capacity for groundfish, traditionally the mainstay of the industry. While in the mid-1980s close to 400,000 tonnes of groundfish were landed, in 1995 total landings of all species amounted to 150,000 tonnes, including less than 17,000 tonnes of groundfish.

"We recognize that these plants represent more capacity than is needed to process the resources projected to be available in the foreseeable future," Mr. Efford said. "Changes are needed if the industry is to be placed on a firmer footing."

He said that while community groups and plant workers have been wondering which plants will remain open and which ones will close permanently, "Government has stated that it will not pick winners and losers on this issue."

Having also rejected the option of buying out redundant capacity, Mr. Efford said: "Government has therefore to address the issue of capacity realignment from a licensing policy perspective."

In late 1995, government directed the Fishing Industry Renewal Board to address the issue of capacity realignment in the processing sector and look in particular at the current policy framework for processing licences. It was to make recommendations to government for a new framework that would help the processing sector become more viable, taking into account other objectives such as a regional balance between processing activity and resource availability.

The board provided an interim report in April 1996, recommending that a licensing regime based on individual transferable plant production quotas be introduced to facilitate capacity realignment. This approach was tested on a pilot project basis during the 1996 capelin fishery, but while there was some measure of support for this approach, it did not receive widespread support for implementation on a permanent basis. "Overall, it was considered to be too interventionist," Mr. Efford said.

Subsequent to this, the minister directed the board to consider other options, in consultation with industry. He received the board's final report on November 8, following which he held a meeting with processors in Gander to brief them on the recommendations in the report and give them an opportunity to voice their preliminary observations.

KEY RECOMMENDATIONS

One of the principal recommendations of the FIRB report is the designation of a group of multi-species/core plants which would have the opportunity to acquire licences for a greater variety of species. However, plants that would not meet the requirements for core status would continue to operate with their existing complement of licences.

The FIRB report identifies three specific criteria plants would have to meet to be granted core status. They are: must have a groundfish licence; the licensed fish plant must be active and be able to meet appropriate requirements for fish processing no later than April 30, 1997; and must meet a certain minimum threshold of average annual groundfish production, based on historic performance.

On the third criterion, the board suggested that the threshold for production should be no less, if not greater than 250 tonnes of groundfish. This threshold would result in 103 plants receiving core designation, while higher thresholds would result in fewer core plants. For example, there would be approximately 65 core plants if a threshold of 1,000 tonnes of groundfish were used.

Another key recommendation, Mr. Efford said, concerns a policy by which processing licences could be transferred from one plant to another, but within a framework "that respects regional balance between resource availability and processing activity." Licence transfers within a zone (a NAFO zone such as 3K, 3L or 4R) would be approved automatically, but transfers between zones would require explicit approval of an arms-length agency within policy guidelines that would not permit a transfer into a zone where processing activity is greater than resource availability. Transfers would permit the consolidation of operations into larger, more diversified and financially sound plants that could attract capital to develop more sophisticated facilities and value-added products.

The FIRB also recommended that government establish an independent entity with specific responsibilities to work with government to deal with such matters as licence consolidation and transfers; adjudication of proposals for development of new emerging species, should it be decided to have restrictions on some species; and setting up an appeal mechanism for those who are not designated core licence holders. The board suggested that specific terms of reference for this independent agency be formulated through consultation with industry.

Mr. Efford said that while the FIRB outlined some options by which additional snow crab processing licences might be issued, it recommends that government withhold granting additional access to this industry at least until groundfisheries re-open to some consistent and acceptable level.

"The challenge with the snow crab sector, as indeed with all species, is to ensure that we reap the maximum benefits from the resource. This is one issue that I intend to raise with industry during the consultation process, especially in the context of deriving more stable employment and value from the snow crab sector," Mr. Efford said. "Presently, about 80 per cent of our crab production is exported in section form. I will be discussing options to increase value-added production, including the option of issuing several licences that would be linked to value-added processing only."

The board also addressed the issue of quality assurance in its report and has recommended that proactive measures be taken. Mr. Efford said he is "committed to working with industry to develop a comprehensive quality assurance program for both the harvesting and processing sectors."

CONSULTATIONS

Mr. Efford said that while he met with more than 100 representatives of the processing sector in Gander to discuss the recommendations, "Until today, the report has not been available to them in its entirety, for further consultation is both necessary and appropriate."

"Given the importance of this issue," he said, "the industry should have complete information and adequate opportunity to be heard. I will also provide opportunity for other groups to meet with me."

Mr. Efford said that the policy framework recommended by the board "offers useful ideas on how government should proceed. Many of the recommendations carry significant implications for individual firms, communities and processing workers. Given the magnitude of these issues and their potential impact on the future shape of the fishing industry and its many stakeholders, it is imperative that government move cautiously with the full benefit of informed and focused debate on the board's recommendations. The consultative process will provide an opportunity for all industry participants and interested groups to participate with government in taking this first critical step in structuring the fish processing sector of the future.

"Our final consultations will ensure that we get it right and that we proceed with confidence and commitment toward rebuilding the province's most important industry." he said.

Beginning the week of January 6, the minister will meet with industry organizations that represent many of the companies and groups of workers directly involved in the industry. Beginning the week of January 13, he will be available in different regions of the province to meet with processing companies not affiliated with an industry organization, as well as with groups with a vested interest in the future of the fish processing sector.

Mr. Efford noted that the regional offices of his department will contact companies and other groups when dates are confirmed, and times to meet with him can be arranged if they chose to do so. He noted as well that regular channels of communication are available to anyone who wishes to comment on the FIRB report (available on government's home page on the Internet), and he would welcome hearing from members of the public in writing.

The full text of the minister's statement, the FIRB report, backgrounder and related information are available on the Internet at /

Comments on the FIRB's recommendations can be sent by mail to the Minister at P.O. Box 8700, St. John's, NF, A1B 4J6; by facsimile to (709) 729-6082, or (709) 729-5304); or by e-mail to mwarren@fish.dffa.gov.nf.ca

Contact: Josephine Cheeseman, Director of Communications (709) 729- 3733.

-------------------------------------------

BACKGROUNDER

Optimistic projections for fish stocks in the early to mid-'70s led to a significant increase in fish processing capacity in Newfoundland and Labrador, particularly with the anticipated extension of Canada's economic zone to 200 miles. Other factors driving this increase included limited employment opportunities in other sectors of the economy, private sector competition for available fish resources, and the seasonal nature of the inshore fishery wherein capacity levels evolved to meet peak landings.

By the late 1980s, there were increasing signs that groundfish resources in waters adjacent to Newfoundland and Labrador were in decline, notwithstanding conflicting results from scientific research surveys. However, by the early 1990s, these surveys did confirm a dramatic decline in the biomass of the principal groundfish stocks. This led to the moratorium on northern cod in 1992, and moratoria on all major cod and flatfish stocks, including NAFO-managed stocks, by 1994.

Prior to 1981, most applications for fish processing licences were generally approved for groundfish and pelagic species. A restrictive licensing policy for the processing sector was implemented in 1981 to constrain new primary processing capacity, particularly for groundfish. Subsequent to the 1981 policy, few new plant licences were issued for primary processing, but the policy permitted secondary processing licences and licence transfers. In 1989, a complete freeze was imposed on all new primary processing licences for traditional species. However, licences for secondary processing and for new or underutilized species continued to be approved to further diversify the industry.

Very few fish plants have closed permanently since groundfish moratoria were announced. Today, there are 216 licensed fish processing facilities in the province, 99 of which have groundfish freezing capacity. The combined processing capacity in the groundfish sector is four times the average landings during the 1988-90 period, and is far greater than the capacity required to process the groundfish projected to be available in the year 2000.

In the mid-1980s, close to 400,000 tonnes of groundfish were landed. In 1995, total landings of all species amounted to 150,000 tonnes, including less than 17,000 tonnes of groundfish.

A directed fishery for northern cod is not likely for several years. However, the 3Ps and 4Rs, 3Pn cod stocks have recovered sufficiently to support a limited commercial fishery in 1997. Shellfish species such as snow crab and shrimp continue to contribute significantly to the industry's performance, and the development of new and underutilized species such as Atlantic king crab, porcupine crab, sea urchin, and seal has helped the industry diversify, with a gradual shift toward multi-species processing operations.

Canada-Newfoundland Fishing Industry Renewal Board

The Fishing Industry Renewal Board (FIRB) was initially established by the federal government as the Harvesting Adjustment Board with a mandate to make recommendations to reduce capacity in the harvesting sector of the Newfoundland and Labrador fishing industry. Provision was made for similar boards throughout Atlantic Canada.

In December, 1995, the Government of Newfoundland and Labrador and the Government of Canada reached an agreement to expand the board's mandate to include processing capacity in the province, and the board's name was changed to the Fishing Industry Renewal Board.

In April 1996, following consultations with industry, the FIRB presented an interim report on processing policy to government. In this report, the board proposed Transferable Production Quotas (TPQs) as a mechanism to facilitate capacity realignment in the processing sector. The Minister of Fisheries and Aquaculture approved a pilot project, based on this proposal, during the 1996 capelin fishery. After reviewing the results of this test project, and receiving the views of industry, government decided against implementing a TPQ-based licensing system. In the main, industry considered this approach to be too interventionist.

The FIRB was subsequently directed by the minister to consider other options. Following further consultations with industry, the board submitted its final report to government in November 1996. The board's 19 recommendations are based around a licensing framework which would eventually see multi-species, core plants having full access to all species once groundfish stocks have recovered to some acceptable level. The FIRB is of the view that "this type of regime holds the promise of reducing the industry's historic volatility, while maximizing returns to fishers, plant workers and processing firms."

Shortly after receiving the board's final report, the Minister of Fisheries and Aquaculture invited all processors to attend a meeting in Gander. At the meeting, the more than 100 processors who attended were informed of the recommendations of the FIRB's report, and their initial views were invited prior to the Minister briefing government on the FIRB report.

A series of meetings with industry stakeholders will be held during January 1997, following which gvernment will take a final position on the future licensing regime for the fish processing sector.