FOPO Committee Meeting

STANDING COMMITTEE ON FISHERIES AND OCEANS

COMITÉ PERMANENT DES PÊCHES ET DES OCÉANS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 25, 2001

• 0909

[English]

The Vice-Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, since we now have our translation services in place, we have enough members around the table to form a quorum. Since our presenters are all at the table, in fairness to you people who have travelled to be here this morning and to present, let me welcome you to the table. I trust our discussion this morning will be meaningful. We realize this is a very complex issue. As someone who comes from the farming community, I relate somewhat to your concerns, since we have a problem in the shrimp fishery in Newfoundland. That's our purpose for being here this morning. Time is of the essence, so let's move right into the program.

• 0910

I'm going to designate about seven minutes per speaker this morning, in the order they're listed on your program. You will be given a time, and we will call you at that time. Because of the short timeframe we have, we trust that you may be able to further elaborate as questions are brought to the table.

So let us begin. We'll start with Dr. David Bevan, who is the director general of resource management from the Department of Fisheries and Oceans.

Dr. Bevan.

Mr. David Bevan (Director General, Resource Management, Fisheries and Oceans Canada): Thank you.

I must make one slight correction. I'm Mr. Bevan, not Dr. Bevan, but thank you, Mr. Chairman.

The Vice-Chair (Mr. Paul Steckle): We look at you as an esteemed individual.

Mr. David Bevan: I appreciate that.

On July 3, 2001, following discussions with the harvesting sector, the Newfoundland shrimp processors announced that they were temporarily suspending purchases of shrimp. Fishing operations by the inshore fishing sector were suspended, affecting about 3,000 workers in the harvesting and processing sectors. The combination of very low prices for shrimp on the world market and the existence of a prohibitive tariff on shrimp entering the EU market led to this decision by the Newfoundland shrimp industry.

I would like to mention at this point that the Gulf of St. Lawrence shrimp fishery also suffered from this market situation, and fishing and processing ceased for part of the season.

The department did not close the gulf's or Newfoundland's inshore fisheries. Those were decisions not related to the fish and taken by the participants in these fisheries.

At the time of the shutdown in Newfoundland and Labrador, inshore landings were about 19,000 tonnes, out of 50,000 tonnes of quota allocated to these fisheries. The offshore sector continued to operate, as it carries out processing of the shrimp onboard and targets different markets than the inshore sector. The offshore sector also has been negatively impacted by the low prices and the EU tariff.

I should note as well that fishing has continued to take place in the NAFO regulatory area outside the 200-mile limit, although at lower levels than in the year 2000 in the area 3L. It has continued on the Flemish Cap as well. Those are under NAFO control and are subject to Canadian and European Union inspections.

The federal government officials are currently consulting with the industry and Newfoundland government representatives regarding possible options to improve access to the EU for shrimp products. A working group led by DFAIT has already met with industry in the Atlantic provinces and Quebec to explore options to reduce or eliminate the impact of EU tariffs on the Canadian shrimp sector. It is anticipated that solutions may be possible only in the long term.

Thank you.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. Bevan, and for your brevity. I'm sure the questions will take up the rest of your time.

Mr. Russell, acting director of the resource management division, Newfoundland region.

Mr. Roy Russell (Acting Director, Resource Management Division, Newfoundland Region, Fisheries and Oceans Canada): From our perspective, I don't have anything to add at this time. The statement by Mr. Bevan has covered things for our department.

The Vice-Chair (Mr. Paul Steckle): Okay. Thank you very much.

Now we'll move to the Department of Foreign Affairs, Robert Hage.

Mr. Robert Hage (Director, European Institutions Division, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman. I will be a bit more lengthy.

I'm pleased to note that despite reductions in Canada's fish and seafood exports to the European Union during the past decade—

Mr. Lawrence O'Brien (Labrador, Lib.): Excuse me, but before we continue, do you have a prepared statement you could pass around to us?

Mr. Robert Hage: I have one and I've given it to the interpreters, but I don't have enough copies for everyone else. I'm sorry. They can run off copies if you like.

Mr. Lawrence O'Brien: I'd like to have one.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. O'Brien.

It's in both languages?

Mr. Robert Hage: No, it's only in English.

The Vice-Chair (Mr. Paul Steckle): Oh, that would have to meet with the consent of the group here. Are they preparing further copies right now?

Mr. Robert Hage: I didn't ask them to. I just gave the two copies to the interpreters.

The Vice-Chair (Mr. Paul Steckle): I wonder if we could have those copies made, given that this group would give its consent.

Mr. Roy, do you consent to that this morning?

Mr. Jean-Yves Roy (Matapédia—Matane, BQ): Yes.

The Vice-Chair (Mr. Paul Steckle): Okay, the consent's been given. I don't see any opposition to that. Have copies prepared for all members around the table—and there are some more members coming so you might want to prepare some extras.

Thank you very much. Let's carry on, Mr. Hage.

Mr. Robert Hage: Despite reductions in Canada's fish and seafood exports to the European Union during the past decade due to reduced supplies of groundfish, cod, haddock, and flounder, Canadian shrimp landings and exports of shrimp to the European Union have increased dramatically in recent years.

Last year, cooked and peeled cold-water shrimp was the leading Canadian seafood export to the European Union, valued at almost $58 million. The EU market for this product is particularly important insofar as it is the world's biggest market for shrimp and constitutes about 75% of world consumption.

• 0915

In 2000, Canada supplied about 9.7% of total EU imports of cooked and peeled shrimp. Regrettably, the price for cold-water shrimp has dropped about 35% during the past year. The low prices have exacerbated a long-standing market entry problem caused by a high EU tariff—which has been mentioned by my colleagues from Fisheries and Oceans—and the preferential access the EU extends to our principal competitors.

The EU fisheries market is protected behind a high tariff wall. One of the prime concerns is the 20% tariff rate for cooked and peeled shrimp, which has been in place since at least the early 1970s. Under bilateral trade arrangements, some of Canada's principal competitors, Norway, Iceland, the Faroe Islands, and Greenland, are able to take advantage of 0% tariffs. While these preferential arrangements place Canadian fish and seafood exports at a competitive disadvantage, it should be noted that these tariffs are fully consistent with the World Trade Organization rules and cannot be challenged through its dispute mechanism.

Canada's Icelandic and Norwegian competitors, for example, have duty-free access to the EU market under free trade arrangements established between the EU and members of the European free trade area. Whereas it is true that this EU free trade arrangement discriminates against Canada, this departure from the most favoured nation principle is sanctioned under WTO rules governing regional free trade arrangements. We're familiar with the same arrangements that have blessed the NAFTA with the United States and Mexico. NAFTA is also WTO consistent and allows us to discriminate as well against products that come from outside that free trade area.

The Government of Canada has worked energetically for more than the past two years on this issue with the Government of Newfoundland and Labrador and industry and labour by encouraging the EU to establish tariff-reduced quotas for cooked and peeled shrimp. Following an important lobbying effort, the EU in 1999 created a 4,000-tonne autonomous tariff rate quota—that's called an ATRQ in trade talk—for cooked and peeled shrimp at a tariff rate of 6% instead of the standard 20%.

This was increased in 2000 to 5,000 tonnes with a 6% tariff. A year ago, the quota was extended to cover the years 2001, 2002, and 2003. In addition, the EU council has autonomously suspended for an indefinite period the 12% duty on frozen unprocessed shrimp, provided it is intended for further processing in the European Union.

While of benefit to Canadian shrimp processors, the main impetus for the ATRQ's creation was the European fish processing industry's own needs for greater imported supplies. By their nature, ATRQs are temporary, that is, they are not part of the EU's WTO tariff commitments and may be withdrawn at any time. It should also be noted that the ATRQ is administered on an MFN or first come, first served basis and hence is not exclusively allocated to Canada.

ATRQs in the fisheries sector also have end-use requirements that ensure that the quota may only be used in the event that the imported product is intended for further processing in the European Union. We will certainly be hearing more about the end-use requirement. This is certainly the case for the shrimp ATRQ, and the comments now being circulated list the definition of the end use. It's rather lengthy—I won't read the whole thing.

The definition for the end use says “this quota is available for products intended to undergo any operation unless it is solely for one or more of the following operations”, and then there's a list. It includes things such as packing, chilling, and freezing, which are activities that are undertaken by some European countries. The question is, can that qualify as an acceptable end use?

Earlier this month, Denmark requested the European Commission and the European member states to increase the ATRQ from 5,000 to 7,000 tonnes for this year. Canadian diplomatic missions in Europe will be lobbying in support of this request. Canadian ministers have brought this issue to the attention of their European counterparts and will do so again. There's been one letter from Minister Dhaliwal to his counterpart, Commissioner Fischler, and there's a letter going from our minister to his counterpart, Commissioner Lamy, who's responsible for trade, on the question of increasing the quota to 7,000 tonnes.

However, the more fundamental objective of eliminating or seriously reducing EU fisheries tariffs—particularly the 20% tariff on cooked and peeled shrimp—can best be achieved in the context of a multilateral round of trade negotiations when a broad range of market access questions is up for discussion. Indeed, it is tariffs such as these that underscore the importance of launching a new round of WTO negotiations at the Doha ministerial meeting that will take place in another two weeks.

• 0920

Apart from this, Canada will continue to press as a matter of priority for a quota increase as well as for modifications to or elimination of the end-use requirement of the EU's ATRQ. It is important to underline that in dealing with ATRQs it is vital to have allies within the European Union who can press the case with the commission and member states to overcome any opposition.

Thank you, Mr. Chairman.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. Hage.

We'll now move on to the Canadian Association of Prawn Producers. We have with us this morning Mr. John Angel, the executive director. Mr. Angel, please.

Mr. John Angel (Executive Director, Canadian Association of Prawn Producers): Thank you, Mr. Chairman.

I have a series of slides I was going to present, but I can work from the table here. I have a number of copies.

The Vice-Chair (Mr. Paul Steckle): Do you have copies you wish to circulate? Again, are they only in English?

Mr. John Angel: Yes, they are.

The Vice-Chair (Mr. Paul Steckle): I'm really sorry about this, Mr. Roy. I hate to do this to you.

[Translation]

Mr. Jean-Yves Roy: I understand. I accept the situation. I would not want to deprive the committee...

[English]

The Vice-Chair (Mr. Paul Steckle): Thank you.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Mr. Chair, would it be possible for the clerk to get them translated at a future date?

The Clerk of the Committee: I will have all week to translate it, sir.

The Vice-Chair (Mr. Paul Steckle): For Mr. Roy's benefit, they will be translated.

I realize that presenters oftentimes aren't aware that documents have to be brought to the table in both languages unless we have unanimous consent.

Thank you very much for your cooperation, Mr. Roy.

Mr. Angel.

Mr. John Angel: Thank you again, Mr. Chairman.

The Canadian Association of Prawn Producers is an organization of offshore shrimp-fishing companies. We have members from Newfoundland, Nova Scotia, and New Brunswick: Fisheries Products International, Newfound Resources Ltd. of Newfoundland, Clearwater Fine Foods Inc., Mersey Seafoods Ltd., M.V. Osprey Ltd. of Nova Scotia, and Caramer Ltd. of New Brunswick. Our companies have been fishing northern shrimp off Labrador and Baffin Island since 1977.

The offshore shrimp industry is a factory freezer and trawler industry. All products are processed to the consumer level at sea and packaged. Our vessels are quite large, probably ranging from 50 to 75 metres, and carry crews of up to 40 or 45 people, double crew. The replacement cost for one of our vessels is about $25 million.

Our fishery is a year-round one. It begins off Labrador in the early part of the year, January, and continues northward as the ice flow allows us to proceed, until we're way up in the Davis Strait in July and August. We fish approximately 50,000 metric tonnes of shrimp, which has a processed value of $170 million.

As I mentioned, our products are all processed and frozen at sea. It's a completely different market from that of the cooked and peeled industry, about which my colleagues will be speaking later. Ours is a shell-on, head-on product, very much like mussels and lobster. Lobster is sold in the can; it's also sold as a fresh and frozen product in the shell. Ours is a frozen product in the shell. Basically, our marketplace is China, Russia, Europe, and Japan. We have expanded our Chinese and Russian markets considerably in the last few years as a result of a number of factors I'll touch on in a minute.

We're having trouble internationally in the northern shrimp industry. There are many reasons for that. Price is a huge problem; we've had a devastating impact on our prices. You'll see by the slide there that in 1997 our average price per tonne of processed product was $4,600 a tonne. In 2001, at the end of September, it was $2,600. That's a 44% drop in price over four years, and a very significant portion of that has been in the last three years. A price drop of this magnitude means the industry is approaching collapse. What is more disturbing is the trend, which is down, and we see no signs of recovery. We get the odd blip now and again suggesting that prices are maybe going to improve, but there is certainly no sign of any recovery.

• 0925

There are many reasons for the decline. Supply is a problem. If we had dreamed five years ago we'd have this amount of shrimp, we'd have been ecstatic, but it hasn't been good for the price. We basically increased the worldwide supply of shrimp by 25%, and it's nearing 400,000 metric tonnes now.

A second problem for us is the Japanese economy. We used to sell a high-priced product into the Japanese market. That's no longer possible. Not only has the luxury market dried up, but the quantities have dried up. We are not able to attain the size levels required for the Japanese market, and that's been a factor as well.

The third factor is tariffs. We're going to talk a lot about tariffs here today. There's a 20% tariff on the cooked and peeled shrimp, as Mr. Hage has just mentioned. There's also a 12% tariff into the EU on our cooked product, which has basically dried up our European market. We send very little of our shrimp to the European market because we can't compete at 12%. So we have a 20% tariff on the cooked and peeled product, we have 12% on the whole cooked product, and in China we have a 23% tariff on our product.

What can we do about these things? We obviously can't do a lot about supply unless we stop fishing ourselves, and that's cutting off your nose to spite your face. We can't do anything about the Japanese economy—God knows they're having enough trouble with that. It seems we can do two things. We can find new markets, which we are continually doing. That's an industry responsibility. We take that upon ourselves, and we are doing it. The development of our China-Russia market is an example of that.

The second thing we can do—and this is where we need government help—is to open up the existing markets. We have to eliminate and reduce these tariffs, and we see that largely as a government responsibility. We can do a lot in talking to our industry colleagues in those countries to help break down those barriers and get their support, and we've done that, with some success and sometimes without success. But we have to be able to compete on an equal footing with our competitors in the international marketplace, and we can't do that. Norway, Iceland, and Greenland all have preferential tariffs into the European Union, and we don't. We have one hand tied behind our back. We have the biggest shrimp industry in the world, and we are unable to benefit from it because of these unfair tariffs.

Thank you.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. Angel, and thank you for sticking to your time limit. You've been right on the money.

We now move to the Fish, Food and Allied Workers Union and Mr. Earl McCurdy. Mr. McCurdy, please.

Mr. Earl McCurdy (Fish, Food and Allied Workers Union): Thank you, Mr. Chairman.

We have a number of people here from the corporate sector who are involved directly in marketing and with dealing with the market end of it. I think the desire here would be to avoid being redundant in the presentations, so what I'd like to do is just focus a bit on what happened this past summer and why. I'll also touch on the importance to people, in a region of the country with a high unemployment problem, of this shrimp resource.

Our union represents both fish harvesters and fish plant workers throughout Newfoundland and Labrador. We represent the crews on all the approximately 360 less-than-65-foot fishing vessels that participate in the northern shrimp fishery. As well, we represent the workforce in five of the ten shrimp plants in the province.

In most cases those plants are in communities that were devastated by the collapse of the northern cod stock in particular and of groundfish stocks generally in Atlantic Canada. For example, the plant in Port Union, on the northeast coast of Newfoundland, was the largest fish plant in the province. Prior to 1992 it had a workforce in the vicinity of a thousand, which is very large by our standards. There'd be very few workplaces certainly in Newfoundland and Labrador that would have that kind of workforce, and it was the mainstay of a whole section of the province.

• 0930

Those jobs were all lost with the collapse of the northern cod stock. One of the things that happened in the wake of that collapse was a tremendous explosion in the shrimp population. The general thinking is that the two were related because cod is a predator of shrimp. Therefore, the dramatic reduction in the cod plus other factors, like environmental conditions, water temperatures, and so on, created that. In any event, there was this explosion in the shrimp population, and this inshore sector developed in which boats under 65 feet, which are essentially owner-operator enterprises, caught the shrimp and landed it at the peeling plants.

It's hard to get an exact figure, but the investment by the harvesting sector in boats, equipment, and so on was probably in the order of $60 million to $70 million in gearing up vessels for that fishery.

I mentioned that the Port Union plant had 1,000 workers in the heyday of the groundfishery. There hadn't been a day's production in that plant from 1992 until it finally opened its doors for shrimp, in late 1999, as I recall.

Similarly, the Saint Anthony plant, on the tip of the northern peninsula, once had 600 people working in a groundfish operation. It too had been closed for several years, and about three or four years ago it opened its doors for shrimp, with again in the vicinity of 150 employees—in both cases 150 to 175 employees, a far cry from what they had, but a darned sight better than zero.

So for those communities, the emergence of this shrimp fishery provided opportunity for economic activity that was desperately needed. You had numerous small businesses in these areas go out of business, because when you get product being landed at the wharf, you get truck drivers on the road; you get activity. You get people staying in hotels, buying gas, and buying food in restaurants, and you get dollars moving in the economy. So the shrimp has played a really significant role in at least providing some jobs and substantial economic activity. In Saint Anthony, in particular, on the very tip of the northern peninsula in Newfoundland, there has been a phenomenal amount of activity associated with the shrimp industry, because that's the major landing port in the province.

So this industry has been a real lifeline for people in these communities. Considering that we're starting from scratch with a brand-new industry, I think it went reasonably well, on balance, from 1997 through to this year. But this year the generally weaker markets caught up with us, and where we could in a strong market situation survive the tariff problem, the payback wasn't there in a reduced market to allow us to do that. The industry took the unprecedented step of shutting down right in the middle of the summer, which is normally a time during which people expect to be busy. We had in the vicinity of 3,000 people thrown out of work directly, just in the harvesting and processing sector. That's not counting truck drivers, monitors, people who weigh and grade the fish, all those kinds of jobs, and the spinoff, plus the activity in the restaurants and hotels, and so on—just 3,000 direct jobs in harvesting and processing. It came to a standstill, and we very nearly lost the balance of the season.

We were eventually able to work out a resolution to catch about half the uncaught quota this fall, and we reopened as of, I believe, September 21. The fishery since then has been proceeding reasonably well, but within a few days we'll be finished for the year, and there will be uncaught quota, not because of a lack of ability to catch it. We could easily catch the present quota plus 50% more, but it's just a question of available market, and we want to participate in an activity that's economical.

It was our joint assessment, ourselves and the companies, as to what would be a feasible amount to try to produce this fall. We targeted 25 million pounds over five weeks. Four weeks in, we're at almost exactly 20 million pounds, so we're right on target. But there will still be an uncaught amount that will have nothing to do with anything other than market circumstances.

• 0935

The tariffs are killing us in terms of the most important market in the world for cooked and peeled cold-water shrimp. The European market is more discerning as to taste. Cold-water shrimp, to our minds, is a superior product in taste, but it's very tough to compete in the United States where, as an overall market, they haven't made the same distinction, and it's hard to compete with the farmed warm-water shrimp from third world countries. So operating in the world shrimp cooked and peeled market in cold-water shrimp without reasonable access to the European Union is really operating with your hands tied behind your back.

If the purpose of this meeting is to deal mainly with the tariff issue, that's fine. If there are other aspects of the fishery, allocation issues or others, that members want to hear about, I would certainly be glad to respond to any questions on that. But that's a quick overview.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. McCurdy. Certainly we're not going to be limiting ourselves to tariffs this morning. It's a full gamut of discussion here, and so if the line of questioning doesn't deal with your particular issue, you, with your other partners here at the table, are certainly free to raise those issues.

We'll now move to the Fisheries Association of Newfoundland and Labrador, Mr. Alastair O'Rielly, president.

Mr. O'Rielly, please.

Mr. Alastair O'Rielly (President, Fisheries Association of Newfoundland and Labrador): Thank you, Mr. Chairman.

I must also start by apologizing, especially to Mr. Roy, for not having my material translated. It's only available in English.

The Vice-Chair (Mr. Paul Steckle): May I intervene for a moment?

Mr. Roy, again, I will seek your advice every time.

Mr. Jean-Yves Roy: Yes.

The Vice-Chair (Mr. Paul Steckle): Thank you very much.

Yes, have it prepared and circulated, and then we will have the translation done at an appropriate time.

Mr. Alastair O'Rielly: Thank you, and Mr. Roy particularly.

By the way, the directions I was provided specifically said we'd be asked to bring eight copies, and in brackets it said “translated or not”. So there was no indication that we needed—

The Vice-Chair (Mr. Paul Steckle): That's an internal issue that we will have to tend to.

Mr. Alastair O'Rielly: Thank you.

I'll skip through this as quickly as I can, because I had targeted something a little longer to communicate our information to you.

The people I work for, the Fisheries Association of Newfoundland and Labrador, represent about 80% of the province's processing and marketing activities within the fishing industry. Most of the shrimp activity is represented by our member firms.

A couple of facts may bear reiteration. Canada is now the world's largest supplier of cold-water shrimp. We would account for about 30% of the total world supply. As others have mentioned, we are targeting the EU market, which is about 75% of the total world market for this particular product.

Since 1997, the inshore sector of our industry, which is predominately the sector that accounts for cooked and peeled production in Canada, has invested approximately $200 million. That includes harvesting and processing investments. It's important to note that none of this money has involved any public sector financing, loan guarantees, tax holidays, or any other kind of financial support whatsoever. In fact, we have explicitly indicated that we do not seek such support. It's of little or no benefit to us as an industry.

I think it's also important to note that it's a really clean fishery from a bycatch point of view, from a conservation point of view. It's one of the fisheries that is probably the most defensible in terms of sustainability and adherence to conservation. The exploitation rate on the resource is only on the order of 12% to 15% of the estimated biomass, which is ultraconservative. Others will tell you that, globally, 30% to 35% exploitation rates are probably considered acceptable. Overall, we think this type of industry development is rather unique in Atlantic Canada for all these reasons.

On the tariff issue, we are the only ones selling cold-water shrimp who are faced with these tariffs. Canada is the only country that has this problem. All other countries, all the producing countries, have cut a deal with the EU. Canada has to consider how it's going to do the same.

• 0940

The basis for these EU tariffs is historical; it's not current circumstances. The domestic supply within the EU country member states is declining. They are not self-sufficient in supply. They have very little domestic processing capacity and there is an increased reliance on imports.

Within the EU, as complicated as the EU is, as complicated as tariffs are, there's really only a couple of countries here that are of consequence. The U.K., which is 50% of the total world market for cooked and peeled shrimp, obviously wants tariffs reduced. Denmark, which is the primary producer and marketer within the EU, seeks to have these tariffs maintained for their advantage, for their own self-serving interests, for a very small segment of their processing industry related to cooked and peeled production. There are really only a couple of processing plants and companies involved here in Denmark that are influencing this agenda.

This tariff costs our industry, we estimate, about $45 million, based on 2000 values. I won't go through the math here, but I can explain it later if you want me to elaborate on it.

It's important to note that last year we sold about 12,000 tonnes of our 20,000 tonnes to the EU; we exported about 60% of our total production to the EU. This year our total exports, for the reasons indicated in terms of reduced harvest and so on, will be considerably less than the 20,000 tonnes, probably in the order of about 16,500 tonnes, 17,000 tonnes. The reduction in the EU is going to be quite dramatic. Instead of last year, where we were in the order of 12,000 tonnes, this year it'll be less than 7,000 tonnes exported to the EU. So we are losing out in that market, primarily, if not exclusively, because of tariffs.

I won't go through some of the detail on the history, but we've worked on this for several years, and we have achieved some small gains. The original 4,000-tonne, now 5,000-tonne, tariff quota has been increased slightly, but it hasn't been a significant accomplishment. There's a further processing requirement that negates most of the advantage.

We now have to move toward finding short-term and long-term solutions. I agree with Mr. Hage that the long-term solution is probably in the order of working within the context of the WTO. Within the short term we have to find a deal that's exclusively for Canada in terms of reduced tariffs or eliminating that tariff, or alternatively, we have to fix the range we have by increasing the volume and removing the end-use restriction.

What we've done so far has involved persuasion. We've used force of argument and goodwill to achieve the accomplishments that have been made thus far. That's not going to carry us any further. For us to make any more gains, any more progress, we have to be able to negotiate with some degree of strength. We have to give up something.

In the fishing industry we do not charge the EU any tariffs on anything, so we cannot give that up. We have no fish to give them, so we cannot offer that. We have to look at what the other trade levers are. Does Canada have anything else in its trade relations with the EU that's of comparable importance, in relative terms, to our industry that can be used to lever a deal? That's one of the issues.

Alternatively, what can we do to make life more difficult for them? Most of the harvest of the 50,000 to 60,000 tonnes of shrimp on the Flemish Cap just outside the Canadian zone ends up in the EU market duty free. We facilitate that fishery by allowing them to land here. We can either stop that or we can impose an export tax. Either way, that would cut off the supply and would give us a tremendous advantage. These are the choices we face.

If we do not make some progress here in the next short while, I don't see circumstances in 2002 and 2003 changing materially. There's a greater than even probability, at least, that we are going to leave more fish in the water again next year.

What can your committee do? Individually and collectively, we'd like you to support our efforts, particularly in making representations to Minister Pettigrew to elevate this to a higher profile within the trade file within Canada. We'd like you to recognize and acknowledge that we're going to have to give something to get something, so we need to negotiate a deal.

Thank you.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. O'Rielly. That's very informative.

Now we move to the Harbour Grace Shrimp Company Limited, and Steinar Engeset, president.

Mr. Engeset.

• 0945

Mr. Steinar J. Engeset (President, Harbour Grace Shrimp Company Limited): I also have the written presentation for the members, but I just did it so I haven't had it translated.

The Vice-Chair (Mr. Paul Steckle): Again, we have consent. We have a very cooperative Mr. Roy this morning.

Mr. Steinar Engeset: Mr. Chair, ladies and gentlemen, I would like to start by thanking you for the opportunity to appear before this committee today.

Our company, the Harbour Grace Shrimp Company, goes way back. I can only echo some of the comments that have been made here today, where we had a lot of people working, and through the cod moratorium we went, basically, to zero. We have tried to build this up, and this is a critical time for the industry in Newfoundland and Labrador. The market prices for our product, the northern shrimp, have declined, probably in the area of 40%, 45% in the last two and a half years.

I know you are particularly interested in the crisis in the inshore shrimp fishery. I have worked with the northern shrimp industry from its infancy in 1977. I was part of receiving the first licences from the minister then, Romeo Leblanc. And it has been an interesting time since. I hope to bring a little broader perspective on the industry.

The owners today of Harbour Grace Shrimp Company have been pioneers in the business. And there is no mistake that it is a tough business. Shrimp vessels ply the northern ice-laden waters of Newfoundland and Labrador way up into the Davis Strait. Five large vessels have been lost at sea in this fishery, and it is only through the grace of God, good luck, and stringent safety procedures that no fishermen have lost their lives as the result of those accidents.

Safety, quality, and markets have been our guide in developing and building the types of vessels we now operate today.

We were on the Ocean Prawns, which fished for us. We lost her in 1984, and she was the first vessel to have survival suits. And that also contributed...because it was a bad storm.

Today, Ocean Prawns, that is, the new vessel, is one of the most modern fishing vessels. They fish the quota of Harbour Grace Shrimp and Pikalujak Fisheries of Labrador.

The vessel is basically as my colleague, Mr. Angel, described. I can indicate to you that when we take the shrimp out of the tank, until it is frozen, depending on what product it is, it takes us about 18 to 20 minutes. This is necessary in order to achieve a first-class product. It is sold as a premium product and it is recognized as a premium product throughout a demanding world market. It is recognized for its quality and consistency by chefs from Helsinki to Tokyo.

The intervening years were both frustrating and satisfying as the industry and DFO struggled to understand the distribution of a resource that stretched from the Arctic to the waters of Maine. My own company, Harbour Grace Shrimp Company, has also had to fight hard to survive the northern cod moratorium. We were only able to do this by concentrating our efforts on the shrimp fishery.

Today the northern shrimp is a leader in one of the most technologically advanced fisheries in the world. Our companies are also working to assist and to help the rural Newfoundland and Labrador economy. We have shared our expertise with new entrants in the fisheries. We have worked to partner with Inuit groups that have been granted quotas in the fisheries.

• 0950

In general, the people of rural Newfoundland and Labrador live in a very difficult economy, and they have an understandable sense of entitlement to quotas in the waters adjacent to the shrimp resource.

Shrimp income has been used by our Inuit partners in Pikalujak Fisheries, for example, to create the Dimension Stone Quarry in the Nain area. They are supplying a world market. I have to say that this has been a success story in Labrador.

I also want to comment that it might have been difficult for them to make that quarry without the support they had from the shrimp licence.

Indeed, adjacency is the key principle in the international law of the sea. Quotas are allocated first to adjacent populations, and access to excess stock must then be provided more widely, even to foreign fleets. Canada has managed its fisheries resources in accordance with the adjacency principle since the 200-mile zone was declared in the late seventies.

However, we question whether this principle is honoured fairly, consistently, and with clarity in the management of domestic fisheries on the east coast of Canada. Certainly the principle is upheld in certain key fisheries in the region. For example, the vessels that harvest scallop off southern Nova Scotia, for instance, are all based in that province. So are vessels that harvest inshore and offshore lobsters in southern Nova Scotia. We can also find other similarities in other provinces.

Quotas of Newfoundland and Labrador shrimp, however, are not harvested exclusively by Newfoundland and Labrador fleets or companies. Vessels and companies based in Nova Scotia, Quebec, P.E.I., and New Brunswick, as well as Nunavik in the north, have been given quotas to harvest shrimp off Newfoundland and Labrador. Newfoundland and Labrador, and Nunavut, are adjacent to the shrimp resource and share their resources with each other.

Those of you who sit on this committee don't have to be told how much controversy the P.E.I. quota caused in Newfoundland. This should not be a surprise to you. Imagine the uproar if Nova Scotians were told they had to share scallop quotas on the Georges Bank with vessels from other provinces. Frankly, we would have nothing against sharing with other provinces as long as the principle is applied equally and consistently.

What we are asking for today from DFO is both a clear policy on the issue of adjacency and consistent implementation of that policy across all fisheries. What is fair and just for the lobster industry in Nova Scotia or P.E.I. should also be fair and just for the shrimp fishery in Newfoundland.

The owners of the Harbour Grace Shrimp Company, and our partners, Pikalujak Fisheries, have a long history in the shrimp fishery. We have a history of providing economic benefits in one of the most deprived areas of Canada—rural Newfoundland and Labrador.

The partners of Harbour Grace have a big part in the developing, harvesting, and processing capacity that has made shrimp a sustainable fishery, and I refer here to the northern shrimp fishery.

In closing, I would like to gently remind this committee that adjacency has also been a key factor in the distribution of new quotas in Atlantic Canada. We support the decision to give extra quota to the northern coalition, whose members live adjacent to the northern shrimp resource. But we would also note that existing Newfoundland licence-holders, namely Newfound Resources Ltd., the two FPI licences, Harbour Grace Shrimp, and the one Labrador licence-holder, Pikalujak Fisheries, were excluded even though they are adjacent to the shrimp resource. See the enclosed charts and tables with my presentation.

We recognize it is not our role to set policy or allocate quotas, but we do think we have made a logical, fair-minded argument that the principles of fisheries management should be equitably applied in all provinces and on behalf of all provinces. What I'm asking today is that this committee seriously consider that argument and take whatever action you think is appropriate in the name of fairness.

Thank you for listening.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. Engeset.

• 0955

In fairness to another party who is here this morning, who believed he was coming to the table, we've allowed him to come to the table. This is Mr. Bulmer, who is representing the Fisheries Council of Canada.

We're going to give you as much time as the others.

Mr. Ronald Bulmer (President, Fisheries Council of Canada): Thank you, Mr. Chairman.

I think most of the facts have been covered off by my colleagues and I'd rather just participate in the questions. Our role here in Ottawa is very broad-based in terms of trade, trade policy, etc.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. Bulmer. That's certainly being fair on your part.

We have many presenters this morning. This is a very serious issue for those who are involved in the shrimp industry and we want to make sure that as many people as possible can ask questions.

We're going to ask you to be succinct in your responses, and I'm going to ask that my questioners be succinct in their questions so that we can have all the people around the table at least make their comments known. And if there's some place where you feel you have something to add, even though you're not particularly directly addressed, feel free to ask my pardon on the question and I will see that you get in to respond.

Mr. Cummins, for ten.

Mr. John Cummins (Delta—South Richmond, Canadian Alliance): Thank you very much.

Mr. Chairman, I want to apologize to the witnesses for being late. I was in attendance at another committee; it was a fisheries matter that we've been following since the early 1990s and my presence was required.

So I do apologize.

I want to note the presence of Mr. Bevan this morning. This morning is probably going to be the first time we haven't been able to throw rocks at DFO. So that's got to be a first too.

Mr. David Bevan: You can still try.

Mr. John Cummins: But, Mr. Chairman, I want to state from the get-go here that we certainly support efforts to elevate this issue with the international trade minister, and I'm sure members on both sides of the table here would agree with that.

That being said, right now if the committee would agree, Mr. Chairman, I'd like to defer to Mr. Hearn and allow him to begin the questioning.

The Vice-Chair (Mr. Paul Steckle): I would ask you, Mr. Roy, since you've been so cooperative, to take the ten minutes, starting now.

[Translation]

Mr. Jean-Yves Roy: I will do the same as Mr. Cummins. I am going to defer to the members from this area, particularly Mr. Hearn. Of course, I am very aware of the problem but I will simply ask Mr. O'Rielly a short question on the proposed solutions.

[English]

The Vice-Chair (Mr. Paul Steckle): The question is to you, Mr. O'Rielly.

[Translation]

Mr. Jean-Yves Roy: My question is quite simple. You have mentioned some possible solutions in your presentation. I would like you to tell us a little more because, basically, according to the picture you describe, short-term perspectives are very somber. In the mid-term, do you think that the price of shrimp could increase? Do you think that the industry could operate again reasonably well? Presently, it is a real tragedy.

[English]

The Vice-Chair (Mr. Paul Steckle): Mr. O'Rielly.

Mr. Alastair O'Rielly: Thank you, Mr. Roy, for the question. I understand, I think, why this is so important to you, because the Quebec industry is suffering from the same consequences we are. In fact my guess is we'll leave about 5,000 tonnes of shrimp in the water in Quebec this year from the gulf fishery for Quebec-based vessels. Because of these very similar market circumstances, you've also had plant closures and so on, but the answer I think is really difficult to speculate on.

I can only say that a couple of years ago, when we began the northern shrimp fishery and the inshore sector, markets were at historic highs. They are now at historic lows in terms of market prices.

Even if you're just being clinical about it, you'd have to believe they'd come back somewhat over the next while, but as long as we have this tariff wall that we have to climb over at 20%, we're going to be at a very distinct disadvantage.

I think the real message for us in the industry is that we believe, and I think we have evidence to show, that we have the most cost-competitive and quality-competitive industry anywhere in the north Atlantic.

We're not afraid of a competitive environment. Our problem is that we need a level playing field, and if we have that field, we don't need any other support or assistance of any kind. The Quebec industry is certainly equally competitive with ours.

[Translation]

Mr. Jean-Yves Roy: Thank you, Mr. Chairman. I am going to let my colleagues ask the next questions.

[English]

The Vice-Chair (Mr. Paul Steckle): We will go to Mr. Matthews, for ten.

Mr. Bill Matthews (Burin—St. George's, Lib.): Thank you, Mr. Chairman. Thank you, gentlemen, for coming.

I have a couple of questions for Mr. Hage.

How long has the tariff been in place in the EU?

Mr. Robert Hage: I believe it's been there since 1973.

Mr. Bill Matthews: And it's only now that we realize how serious an issue it is, because of other factors in the shrimp industry.

• 1000

Why hasn't the Government of Canada taken steps before now to get a reduction and work towards eliminating that tariff? Why are we doing so now? Is it because we're in a crisis state?

What I sense here is that even though the tariff has been in effect since the early seventies, it has now been put forward by some people to be the major problem with the industry. Perhaps it is. But Mr. McCurdy alluded to other issues that I think we should address here as well—allocations and fisheries management and other things.

Can you answer that? Why hasn't there been a move by the Government of Canada until now to get some progress with the European Union to reduce, and in the final analysis to eliminate, that tariff? Where are we now? Are we doing anything now?

Mr. Robert Hage: The way the world tariffs work is generally they're negotiated in what we call rounds of international trade negotiations. The last one was the Uruguay Round, which concluded a number of years ago. Now we're waiting for what I guess might be called the Doha Round.

The nations of the world get together and they horse-trade on these questions. They say, well, I'll lower my tariff on X if you lower your tariff on Y. They might not be related. You might find that a tariff on machinery in one case is being affected by a tariff on an agricultural or fishery product. This is what has been going on for the last 50 years, since the start of the General Agreement on Tariffs and Trade.

The government certainly has said it will follow up on that. If there is a new round, this 20% tariff is going to be one of the items we're certainly going to be approaching the European Union to get lowered. The government hasn't been in that situation before now—I assume—because the shrimp industry is a relatively new industry as far as our exports to the European Union are concerned.

You've heard that it has been built up over the last few years to where it's now our major seafood export to the European Union. We have achieved, and I mentioned that, what they call the ATRQ, this autonomous quota, which is now 5,000 tonnes. We very much hope it will go to 7,000 tonnes. There are restrictions on that. We've heard that commented on as well. We certainly haven't been idle on this file to get access to the European Union.

Mr. Bill Matthews: Mr. Chairman, this is to Mr. O'Rielly.

He mentioned a couple of possibilities that the Government of Canada could pursue to try to get around this issue. I think you mentioned an export tax, Mr. O'Rielly. There was something else.

Could you just expound a bit on this for the committee so that we may have some options of what we might recommend on the situation to Parliament or to the Minister of International Trade? I'd be quite interested in hearing your views as to what else the Government of Canada can do in addition to working towards reducing and eliminating the tariff to.... I guess it's a matter of supply and demand, and there's just way too much shrimp. That is a part of the problem. But can you expound on that for the committee please?

Mr. Alastair O'Rielly: Thank you, Mr. Matthews.

I can elaborate a little on what I said earlier. Again, there's a concurrence of views with Mr. Hage in terms of the penultimate solution being the total removal of this tariff. That probably can only be achieved in the context of multilateral trade negotiations at the next WTO round, whenever that is.

There are a number of other interim or short-term measures we think can be achieved. It's either a bilateral deal between Canada and the EU that specifically provides something for Canada or provides a tariff quota that meets our needs. A larger quantity is a desirable thing. But the most important thing is the modification or removal of the end-use restriction that is currently associated with the present ATRQ. The effect of that—I don't want to get too technical about it—is the current quota requires further processing be carried out within the EU.

That works okay for the Danish brining industry. It gives them a lower-cost raw material for their industry. It does nothing for the prime U.K. market. The end-use restriction is just a show stopper on that particular issue. So we have to find a solution to that.

As I mentioned earlier, we're not going to use any force of persuasion. You cannot engage anybody in Europe—I've tried—in an argument on this issue. No one will begin to mouth a defence for this tariff. They acknowledge up front that it's indefensible, it's unconscionable, it's prejudicial, and so what? Will they remove it? Yes. For what? The issue is, what is Canada going to offer to the EU to do this? Then, remembering what I said earlier, it's really only Denmark we have to influence.

So either we do something with the EU in total or we do something with Denmark on a bilateral basis to influence them. This is achievable because it is so focused in terms of the issue within the EU. It just requires some currency and I don't know what that currency is. I'm not aware of all the trade issues existing between Canada and the EU. I just happen to intuitively believe that there must be something Canada can offer to achieve some leverage here.

• 1005

The Vice-Chair (Mr. Paul Steckle): Mr. Matthews has deferred to Mr. O'Brien for four minutes.

Mr. Lawrence O'Brien: I have a couple of questions. First of all, while I agree with the discussion on tariffs, whether it be the 20%, which is the predominant one on the cooked and peeled, and the 12% relative on the other, that is very much an issue we all have to work on. That's a motherhood issue to be worked on collectively in order to put it into perspective.

I was in Brussels in late April on behalf of the Minister of Fisheries and Oceans. I've had this discussion, and I do agree. We've discussed this around the table. I believe we may not be working as hard on resolving this one as we are on the softwood lumber. As a country, we need to work harder on this, and I support you. But I also feel there's another problem.

The other problem is that this 20% wasn't such a big problem until we built the allocation up the ying-yang and far exceeded the 100,000-something tonnes. We had this resource offshore and last year all of the stakeholders, except myself and the minister, wanted another 20% added to that. I can see the rationale behind it, but I couldn't support it for various reasons and, hindsight being 20/20, you can see why, looking at Alastair's situation with his plants and so on.

There's also a third point that I am concerned about and that is conservation of the resource. I hate high-grading. I just can't stand it, particularly the 13 boats fishing offshore, particularly, Mr. Angel, your operation. I have a very huge distaste.... I've seen your correspondence to me. It's been quite nasty over the years—what your operation has written to me and the statements on that. The high-grading at sea by those big offshore boats is nothing short of atrocious in any kind of an operation. You are taking I don't know what percentage—it could be as much as 50%—and shooting it down the shoots and under and there's a hideaway. It's going back into the sea as dead fish. DFO hasn't dealt with it. The industry hasn't dealt with it. Only Mother Nature is dealing with it. I'm afraid the same thing is happening on high-grading shrimp that happened on high-grading cod back when they destroyed the Hamilton Bank and lots of other places.

Now that's a major issue. I don't care who likes it or who doesn't, but it has to be brought to the table, and the right players are here and the discussion is on, Mr. Chairman.

The Vice-Chair (Mr. Paul Steckle): I realize that was a long question, but if we could summarize shortly, we have about one minute left for that.

A response, please, Mr. Angel.

Mr. John Angel: That was simply unbelievable what I just heard.

Mr. Lawrence O'Brien: I knew you would say that, sir. I'm not surprised.

The Vice-Chair (Mr. Paul Steckle): Mr. Angel has the floor.

Mr. John Angel: I can't remember any nasty correspondence, Mr. O'Brien.

Mr. Lawrence O'Brien: I'll get it for you.

Mr. John Angel: I'm not in the business of writing nasty correspondence. So I don't think you'll find any nasty correspondence with my name on it.

Secondly, our fleet does not high-grade. We have—

Mr. Lawrence O'Brien: Tell the truth, sir. You're at a table where truth is required and truth must be told.

The Vice-Chair (Mr. Paul Steckle): Please, Mr. O'Brien, let Mr. Angel respond.

Mr. Lawrence O'Brien: Well, I want the truth, Mr. Chairman. I want the truth. Fifty fishermen from Labrador are not liars, sir.

Mr. Peter Stoffer: I have a point of order. Mr. O'Brien, I have the greatest respect for your attempt, but no parliamentarian at any time has the right to challenge a witness, whether their statements are true or false, so—

Mr. Lawrence O'Brien: Carry on.

Mr. John Angel: May I carry on, Mr. Chair?

Mr. Lawrence O'Brien: I'd like to say I'm glad, Peter, you're a friend of—

The Vice-Chair (Mr. Peter Steckle): Mr. Angel, please.

Mr. John Angel: I fully intend on telling the truth, Mr. Chairman. I don't know how to operate any other way, and I can tell you that the facts completely refute what Mr. O'Brien is saying.

We have a DFO observer on every one of our boats 24 hours a day. If there was high-grading of the nature Mr. O'Brien is describing, surely to God we would have seen some indication of it in the observer reports since 1987. We've had 100% observer coverage—for which we pay.

• 1010

Second, the Department of Fisheries and Oceans, in response to Mr. O'Brien's allegations, has investigated this matter and found it to be completely without merit. I believe the Minister of Fisheries himself came to this table and said exactly that. I would challenge anybody who talks about high-grading in our fleet to give me the facts, give me the boat, give me the name of the company, and I will see that they're brought to justice. But it is not happening.

It happened years and years ago. It was a common practice in shrimp fisheries throughout the world to size high-grade. It does not happen any more. The facts that are on the table, that are available from anybody from DFO, will completely refute that.

Let me wrap up for a second. What we need here is collaboration. We need people pulling the oars in the same direction. We do not need potshots at various fleets and other players in the industry. We need to pull together on this. The industry has been trying to do that for the last two years, and we don't need distractions like this, which are entirely without merit.

Thank you.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. Angel.

Now we'll go to Mr. Hearn, and I'm going to give him ten minutes, since we've been deferring here, and Mr. Hearn is from that region.

It's yours for ten minutes.

Mr. Loyola Hearn (St. John's West, PC/DR): Thank you very much, Mr. Chairman. I'd like to thank Chairman Wayne and the members of the committee for bringing the issue to the table, and for taking the suggestion of Newfoundlanders in relation to the witnesses who should be here on this extremely important topic.

Mr. Chairman, I have three or four questions. I'll ask the questions to one or another of the groups and somebody can respond.

We'll start with adjacency. One of the concerns we've had is around that very word, and of course, we saw the P.E.I. allocation last year and the request from my colleague in Quebec and others looking for what we call “our shrimp”. We're talking about increases in quotas and new entrants, and we see the people who are in the industry practically starving because of the 40%-plus drop in the price and the soft markets. So it doesn't make much sense.

A couple of weeks ago, at another meeting, one of the DFO reps made a remark that there will be no new entrants in the shrimp fishery unless there is an increase in resource or value. Some people will maintain the stocks cannot take an increase. Some say there's a great stock out there and there can be an increase in quota. What is the sense of increasing quota if you're just bringing more players on to add to the aggravation of those already in, instead of trying to help those who are in the field?

I think Mr. Engeset mentioned adjacency. In relation to increasing quota, should there be one? If there is an increase, where does it make sense to put it?

I guess everybody can have a shot at this one.

The Vice-Chair (Mr. Paul Steckle): Mr. McCurdy.

Mr. Earl McCurdy: Thank you, Mr. Chairman.

I think a lot of people misunderstood the nature of the controversy and the uproar over the allocation of shrimp. It was “Poor little Prince Edward Island. What have you got against them?” It had nothing to do with the fact it was from Prince Edward Island. In fact, I firmly believe Prince Edward Island is, and was last year, fully entitled to a bigger share of the shrimp resource. Where we differ is that I believe the stock they should get their excess from is the one immediately adjacent to their shores—the southern gulf, of which they get a very infinitesimal share, as I understand it.

The issue really was that we thought some of the early decisions as to allocations of northern shrimp were very controversial. I think there were both good and bad decisions on some of the allocations. What emerged gradually after the moratorium was a new understanding as to how resources would be allocated, and the principle of adjacent people receiving priority was pretty consistently applied. It was clearly stated in Mr. Mifflin's shrimp plan of 1997, when he laid out principles that would govern the management of the resource.

• 1015

When we went through the dark days of the moratorium, which was described by a federal task force as a crisis of biblical proportions, we neither asked for nor received a single pound of raw material other than in our own traditional waters, adjacent waters, except for a very, very small number of Newfoundland fishermen who had an infinitesimal amount of quota off, for example, Cape Breton. There are a few people who live in that part of Newfoundland who had a little history that had gone back for many years. But for all practical purposes, we got no new access to any stocks other than in our immediately adjacent waters.

So what was really controversial was that all of a sudden the rule book was out the window. It was an allocation of shrimp today, but what would it be tomorrow? In the area of P.E.I. that received that allocation, 3L, there are 160 under-65-foot shrimp vessels. They have the lowest shrimp quota per vessel of any fleet of comparable shrimp boats in Atlantic Canada, including Newfoundland, New Brunswick, and Quebec fleets. The quota for 3L is by far the lowest share per vessel in the entire Atlantic Canada for that category of vessel, and it's the very area in which the allocation was made.

So it wasn't a matter of anyone having opposition to P.E.I., or any mean-spiritedness, it just seemed to us, after all we suffered through the bleak years of the moratorium, which we're still trying to pick our way out of.... And we're only partway out of it—I described 175 jobs in a plant that used to employ 1,000.

So that was really the reasoning behind that. We believe it's critical that adjacency be clearly established as a fundamental principle, because a lot of damage was done, in our understanding of it.

Mr. David Bevan: I don't think we need to visit all the controversy around that decision, but it's clear to say there's more than just adjacency involved in allocation decisions. That's a very important principle, but it's also matched by others, such as historical dependence and those who have developed fisheries. There are a number of issues that do influence the decisions to allocate, in particular new access issues. That's why there's an independent panel, which I believe has been described to this group, was set up to look at, if there is an increase in quota coupled with an increase in value, what kind of decision-making criteria should be used to determine who gets access to that extra quota or extra value.

There's a process underway now to study that issue and then come forward to the minister with recommendations by the end of the year. I think that will help bring some clarity to it.

But clearly, there are issues where the historical dependence and historical involvement of developing a fishery has led to access. Newfoundland fishers are fishing turbot off the waters adjacent to Nunavut. That's where they started that fishery, and as a result of that, they're sharing the resource with the people of Nunavut.

Mr. Loyola Hearn: Thank you, Mr. Chairman. This is not the time to get into arguments, because of the timeframe, but it certainly shows this is an issue that all of you over there on that side have to be very much aware of. P.E.I., God bless them, certainly didn't have much of a history of fishing northern shrimp, and you shouldn't bring new entrants into a fishery that's almost in a state of collapse. So we have to be very conscious of any recommendations coming down the pipe.

Alastair, you mentioned the ATRQ, going from five to seven, hopefully. How much of that do we get, just roughly?

Mr. Alastair O'Reilly: Well, it isn't allocated, I think. It's an autonomous quota, so it's available to anybody.

Mr. Loyola Hearn: I know, but how much?

Mr. Alastair O'Reilly: There's nobody else really interested in that quota, so it's effectively—

Mr. Loyola Hearn: It means nothing. That's what I thought. Okay, thanks.

The other thing is in relation to the competition. We talk about Norway, Iceland, and Greenland beating us in those markets with shrimp from the Flemish Cap. Isn't it time Canada looked at extending at least management jurisdiction over the Flemish Cap? We should have taken control of it, and the nose and tail, I guess, when we extended the 200-mile limit. But isn't it time we made an effort to try to take some control over the management? We get very little from the allocations on the nose and tail and the Flemish Cap. Of course, some of these are transient stocks, but not necessarily the shrimp. Although some people will say there were no shrimp there a few years ago, it came from somewhere, probably the northern stocks.

Unless we do that, we're always going to have that problem; we're going to be beaten in our markets with what could at least be our managed product, if not ours.

• 1020

Mr. Alastair O'Rielly: Thank you, Mr. Hearn.

The Flemish Cap issue, the whole issue of extended jurisdiction, is a huge debate, and one that at some point Canada has to decide on. We don't have time to get into a debate about NAFO and its efficacy, but there's clearly an argument here for doing something.

But in the case of shrimp, what is really galling is that, as you suggest, the scientists believe the Flemish Cap is being replenished with larval drift from the coast of Canada. There's no other plausible explanation for how that resource remains so prolific in the face of unfettered fishing by foreign countries. What is even more galling is that the shrimp is then moved into the marketplace, tariff-free, against our product.

The Vice-Chair (Mr. Paul Steckle): Okay, that's the end of the ten minutes, within a few seconds. I don't think we can get a question in, unless it's very short.

Mr. Loyola Hearn: I'll ask a very short one on the tariff in relation to the rounds of negotiations. Do we have to wait for one of these rounds to address the topic? I can just picture where Newfoundland and fish are in the pecking order. Softwood lumber is being discussed now. Why can't we address that outside the rounds?

Mr. Robert Hage: The softwood lumber debate is taking place within the context of the Canada-United States Free Trade Agreement under NAFTA. That's a different situation from the European Union.

Outside of a free trade arrangement, our vehicle for dealing with countries is the WTO. It's the usual rule. You don't get something for nothing. It's hard to go to the Europeans and say that the 20% tariff is unreasonable. We certainly have said it, just again this week at a high-level meeting with the European Union. But they're not going to give it up unless they get something in return.

I think Mr. O'Rielly indicated that we don't have high tariffs to give up on the fisheries side. We've lowered our tariffs there. So we probably have to look for areas other than fisheries. That's the reason for this horse-trading that goes on in the rounds.

Basically, we can continue underlining to the Europeans the problems this tariff causes for our industry. They need supply. They are also being supplied by our competitors at a favourable rate, because they have these free trade arrangements with the European Union.

You also asked about the tariff rate quota. I think Mr. O'Rielly's response was that we basically get the whole thing. The others do not fill that quota. We don't have all the figures, because it's hard to know how the quota is allocated—they don't tell us who's filling it—but we understand that most of it goes to Canada. Even if we increased it to 7,000 tonnes, the vast majority of that would go to Canada as well.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. Hage.

We're moving to Mr. Stoffer for five minutes.

Mr. Peter Stoffer: Thank you, Mr. Chair.

Thank you, gentlemen, for appearing before the committee today.

Mr. Hage, you mentioned a letter Mr. Dhaliwal had sent to his counterparts in Europe to try to get the tariff reduced. I wonder if the committee can get copies of those letters, so that we can perhaps assist in some way—maybe with a follow-up letter.

Mr. Angel, you said that observer reports had indicated that no high-grading was going on. I also wonder if you have copies of those reports for our committee. I'm certainly not here to challenge you, but I myself have heard indications from various fish brokers and fishermen, out of Nova Scotia and P.E.I., that high-grading is going on.

In fact, Mr. Robert Bateman himself was at a Nova Scotia Nature Trust meeting last Saturday with a group of over 300 people, including some fishing representatives. He said that 14 kilograms of shrimp were high-graded to make one kilo for the market. Nobody questioned him—and I certainly didn't understand the statistical arrangement around that argument. But I'd like to just give you an opportunity to respond to that.

As well, in your report you say that the Flemish Cap is virtually uncontrolled. Can you elaborate a bit on what you meant by that?

Thank you.

Mr. John Angel: Thank you, Mr. Stoffer.

• 1025

The 14 to one discard ratio is a figure you'll see quoted for shrimp fisheries time and again. That figure comes from warm-water shrimp fishing, specifically in the Gulf of Mexico and other points to the east. Apparently what happens is that the 14 pounds is not just shrimp; it's generally other fish as well, including small shrimp.

That's not the case with cold-water shrimp—we have no bycatch. With the use of more and more grates in our trawls, both inshore and offshore, we have practically eliminated bycatch. We have an enviable worldwide record for that. So that 14 to one ratio you see quoted does not apply to cold-water shrimp.

The Vice-Chair (Mr. Paul Steckle): Mr. Bevan, did you want to say something?

Mr. David Bevan: I just want to support the fact that the observer reports obviously come to DFO, and we have no evidence, either through those reports or any other investigations, that this is going on. I was going to make the same point as Mr. Angel regarding the 14 to one ration: it's the result of studies done elsewhere and has nothing to do with the Canadian fishery.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. Bevan.

Mr. Stoffer.

Mr. Peter Stoffer: Thank you.

Someone mentioned a decision to allocate some northern shrimp to Prince Edward Island before the last election. When I went to Newfoundland, I remember how outraged the people there were—especially in St. John's. Unfortunately, it had no political effect on the Liberals in Newfoundland and Labrador. I'm still trying to figure out how that happened.

But I want to ask, Mr. McCurdy, not only about the families and communities affected by the tariff before the groundfish collapse, but also about the fishing industry itself. I'd like to get a fisherman's perspective, and a family perspective, on what's happening in the small ports throughout the area. Is the shrimp fishing industry voluntarily shutting itself down? What effect has the tariff had?

Perhaps I should reiterate Mr. O'Hearn's point about the pecking order in Newfoundland and Labrador on international negotiations. Can you put a more human face on it?

Mr. Earl McCurdy: Perhaps the group that's most vulnerable to the combined impact of the market and the tariff is fishers who depend solely on shrimp. There's no question that there are other factors this year—the world market is less than it was. But if we didn't have the tariff problem as well, I believe we would have been able to keep operating this summer. In a better market, we could survive the tariff; in the current market, we can't. The tariff puts us out of business in that critical market.

Without exception, I think, the plant workers depend on shrimp alone. There are 10 plants, with 100 to 175 workers per plant, so in total there are somewhere around 1,300 shrimp plant workers. It's hard work; they're standing up most of the day. It's a tough living: a limited season, and nothing to fall back on if they lose their season. So if we hadn't been able to salvage a portion of the fishery this fall, they would have been exposed to severe hardship

The shrimp fleet is about 60 vessels on the west coast of Newfoundland, in the Gulf of St. Lawrence, that for all practical purposes only fish for shrimp. This has a very significant impact on them. All the owners have made a significant investment in outfitting their vessels for shrimp, and that's an important part of their livelihood. Of course, all of them have families that rely on it too.

And there is no other way to bring new dollars into those communities. You can look around those outports and just ask, would this little town be here if not for the fishery? The answer would be no. These people have money and spend it in the local economy. Then there are the suppliers—restaurants, gas stations, etc. That's the economic lifeblood of those small communities. It allows people to stay and populate them. Otherwise, we'd have an even greater out-migration than we have now.

So the resolution of the problem is important. Thousands of families really depend on having this matter successfully dealt with.

The Vice-Chair (Mr. Paul Steckle): Thank you very much, Mr. McCurdy. Your five minutes are up.

We'll go to our second round now for five minutes. Mr. Cummins.

• 1030

Mr. John Cummins: Mr. Hage, you suggested that as far as your department is concerned, there's nothing to trade off with the European Union to lower these tariffs. Of course, Canada's difficulties with the European Union on trades and tariffs extend far beyond just the issue of shrimp. For example, the tariffs, and the support Europe gives to its own agricultural industry, have certainly had a huge impact on Canada's agricultural industry. So if there aren't any trade-offs—at least, I can't see any—what other measures is your department taking to address this issue?

Mr. Robert Hage: As I mentioned, the vehicle we've used—and it's been quite successful—is developing this ATRQ. We have access to the European market through that. It's not perfect. But a good part of the $60 million in shrimp exports to the European Union is due to the ATRQ of 5,000 tonnes—which we're trying to increase to 7,000 tonnes.

These things are not easy. There are producers in the European Union with sources of supply, and they want to maintain their production. They want protection so they can keep their processing industry in the European Union rather than outside it.

The ATRQ is one response. Another one is from the Standing Committee on Foreign Affairs and International Trade. It published a report in June calling for a free trade agreement with the European Union.

But again, that's not an overnight sort of thing. Government response to that proposal will be forthcoming. It's something that's been suggested in various forums before, and it would take time to negotiate. Again, there are trade-offs. There's no decision on either side whether that's something we would want to proceed with. Tariffs would obviously be part of any free trade arrangement we negotiated with the European Union.

But immediately, in the short term, we're working at trying to increase this ATRQ. We're looking at the end-use restriction, to see if we can interpret that to allow us better access to the British market—that's a key market for us, as Mr. O'Rielly mentioned. Then, if there is a Doha round—and we'll know that in the next few weeks—certainly the 20% tariff will be one of the many things on our agenda to discuss with the European Union. It's one of our principal goals to get that tariff reduced or eliminated.

Mr. John Cummins: Your comments raise a number of questions about just how proactive the government has been on this issue. The committee will probably address that later. But I've got a question for Mr. Bevan—we've let him off the hook too long.

Mr. Bevan, I know my colleague Mr. O'Brien has always been reasoned in his comments in the past. I've never doubted his word. And I certainly don't doubt Mr. Angel either. So I'm sure that somewhere in the middle there's got to be some truth.

You commented—as did Mr. Angel—that there are observers on these vessels. Our past experience with observers hasn't exactly been positive: in years gone by, testimony we've heard before this committee has been that these reports aren't really reviewed with any consistency.

So perhaps you could outline for the committee the process that takes place when an observer comes in and presents his papers. Who looks at them? What assurances can you give the committee that these observer reports actually get the attention they should get?

Mr. David Bevan: Just to back up a little, first of all, there's been a process in place for years for hiring, training, and deploying observers. The Canadian government contracts...and the successful companies put observers on the vessels. These observers are trained to DFO standards, certified by the local or regional director general, and are subject to performance standards, etc. The companies are accountable for quality control and so on.

• 1035

When the observer lands, therefore, the report goes to the company. If there's anything in that report relevant to compliance, that has to go immediately to a contact in the conservation and protection group for further investigation. Dumping and discarding, etc., are issues relevant to compliance.

There's also a component of the information that goes to science relevant to the size, distribution, anything that might be noteworthy involving anything other than the directed species being in the catch—bycatch or whatever.

So there are two streams it can follow, depending on the nature of the report. If somebody were misreporting, discarding fish, etc., that being a violation, it would go to conservation and protection.

Furthermore, there's a review, not just by science, but conservation and protection have the reports available and can do the audits on those fisheries, if there's any indication of a problem. We have had accusations made, and investigations have not come up with any evidence to support the accusations at this time.

The Vice-Chair (Mr. Paul Steckle): I know it's very difficult to keep everything within the parameters of our time. In fairness to the members who haven't yet asked questions, I wonder if we could perhaps be a little more succinct—and our questioners, also, please—because we're not getting through this quite as quickly as I had hoped.

Mr. Roy, you're next for five, if you wish to take your five.

Mr. Jean-Yves Roy: No.

The Vice-Chair (Mr. Paul Steckle): Are you going to defer?

[Translation]

Mr. Jean-Yves Roy: Yes, Mr. Chairman. As I told you earlier, I would like to defer to the other members of the committee who did not have an opportunity to ask questions or to those in the regions which are most affected.

[English]

The Vice-Chair (Mr. Paul Steckle): We'll go to Mr. Easter first because he's on the list first.

Mr. Easter, for five.

Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr.—

Mr. Loyola Hearn: A point of order.

The Vice-Chair (Mr. Paul Steckle): Yes, Mr. Hearn.

Mr. Loyola Hearn: I'm just wondering, because of the importance of this issue, if there's any way we can extend this meeting by half an hour or so.

The Vice-Chair (Mr. Paul Steckle): Let's see how the timeframe works. Is there any problem with you people, as presenters, carrying on? We'd like to get through everyone.

Mr. Wayne Easter: Paul, it depends on whether the interpreters have to be elsewhere and if somebody else has the room booked. Let the clerk check it out, and we'll continue on.

The Vice-Chair (Mr. Paul Steckle): Okay. We'll get back to you.

Mr. Easter.

Mr. Wayne Easter: Thank you, Mr. Chair.

Thanks for chairing, by the way. I had meetings last night in P.E.I. with some Chinese businessmen and parliamentarians, so I didn't know whether I could be here.

I am going to resist the urge to get into the adjacency argument. I don't think it would be productive, although I believe it was the right decision at that time.

I think the key question at this meeting is what do we do? Our intent to the witnesses, as a committee, is to either put together a letter or a report that will go to whomever it has to go to, including the Prime Minister, to deal concisely with this issue.

DFAIT is here, and my familiarity with negotiators at DFAIT is mainly on the agriculture side. I will say, Mr. Hage, I oftentimes find our negotiators, especially when dealing with the U.S. on some tough trade issues, are a hell of a lot better diplomats than they are negotiators. They're too damn soft, and they don't take a hard enough position on Canada's interest in some of those issues. I say that from the bottom of my heart. It's not the place to make friends; it's the place to do tough negotiations in Canadian interests, even if it costs you friends. I say that up front.

To the witnesses, if you were us drafting a position paper to the Prime Minister on this issue, what would be in it? What are our points of leverage? Is there anything we can do on the Flemish Cap? Do we need to take a position internationally, as Loyola says, to extend our jurisdiction out, whether it's as a threat or in earnest?

What kinds of positions do we, as a country, need to be taking through our various departments, whether it's DFAIT, DFO, or prime ministerial discussions with other leaders around the world at the G-8, or wherever? What kinds of things do we need to be doing to solve this issue?

The tariff issue, I know, is a problem with shrimp, and it's a problem in a number of other areas. But how can we deal with it concisely, from your perspective, in what we may recommend to the various people and departments in government?

The Vice-Chair (Mr. Paul Steckle): Mr. Bulmer wants in here.

• 1040

Mr. Ronald Bulmer: I would like to make just a very quick response because I was very much involved at the time of the last Uruguay Round. Let's remember that every time we wanted a reduction in fish tariffs in Europe, they wanted access to our zone. That was always on the table. They never walked away from wanting fish on our side of the ocean.

I guess my first response is that any letter or recommendation that goes forward from this committee must reiterate the industry and government position of the time that fish are not to be in these negotiations, and there will be no access to the Canadian zone for European vessels. That's absolutely key. Once you put that up on the table, it really drags you right to the conclusion that this cannot be solved inside the fish file exclusively.

As Mr. Hage has said, there are very limited low tariffs on anything that comes from Europe to Canada. We know there have been some initial thoughts about expanded, almost free trade, or freer trade discussions between Canada and the EU bilaterally. Ask yourself, where would the EU be without wine sales to this kind of country?

I guess the point I want to put forward—and I know DFAIT hates this—is we're not going to solve the fish issue inside the fish file exclusively.

The Vice-Chair (Mr. Paul Steckle): Do you have a question, Mr. Easter?

Mr. Wayne Easter: I just think I need to hear what other suggestions people from around the table have. I won't go to another question, although I'd like to know what we can recommend specifically, if people have it in the top of their minds.

Mr. O'Rielly.

Mr. Alastair O'Rielly: Thank you.

One of the problems we face is we are not dealing with a lot of information we can react to. I have a couple of things I would recommend to the committee. One is this issue of the bycatch problem, with the high-grading issues, and so on. To my knowledge it's a bogus issue. You need to get the evidence, the information, the observer reports, and so on, and satisfy yourselves of that. Don't chase it because it's not meaningful.

The issue of the tariff is a critical matter. To go to Mr. Easter's question and Ron's point, we must go to other matters we have with the EU and be prepared to put something outside of fish on the table. This is the normal bargaining process. What do we have in the litany of things we deal with in the EU, and what are they worth to us? How do we trade them off, relative to the cost to our industry?

I mentioned the cost to Newfoundland is about $45 million, and for all of Atlantic Canada it's probably $65 million or $70 million. Again, about 5,000 people are impacted here. So what's it worth in that order of magnitude, in terms of money and people, and what else do we have to trade there?

If there is nothing—and I don't know that there is—I think DFAIT should tell us that and provide that information, that context. If there is nothing, then we have a stick approach, which is the Flemish Cap. Extending the jurisdiction is absolutely warranted, but that's a long-term solution.

The issue of closing off the transshipment out of Canada is real and doable. It's something we can pursue or threaten. The only option is an export tax on products transshipped through Canada. These are meaningful things that can be done expeditiously, and we need to explore them.

The Vice-Chair (Mr. Paul Steckle): I would like to inform the members here that we have been extended the use of this room for another half hour, if we need it. I will try to follow the order we're in.

I think Mr. Cummins deferred to the next questioner.

Mr. John Cummins: I would like to ask a quick question, if you don't mind, just to follow up.

The Vice-Chair (Mr. Paul Steckle): Sure.

Mr. John Cummins: I'd like to know what Mr. Hage has to say about Mr. Bulmer's comments. Mr. Bulmer suggested that the issue can't be settled with fish. The comment has been made that Denmark is the problem, so what efforts have been made to deal with Denmark? What kinds of pressure can be put on those folks to come to their senses?

Mr. Robert Hage: We're in a bit of a quandary with Denmark because they are the advocates now for the 2,000-tonne increase, from 5,000 tonnes to 7,000 tonnes. In fact, they were the advocates to take it from 4,000 tonnes to 5,000 tonnes. They're not totally altruistic; they're doing it because their production industry wants more shrimp. They want to protect that production industry in Denmark, so they are advocates for this end-use requirement we've discussed.

If we try to sort of punish Denmark, or do things they regard as unreasonable, then we'll lose the ally that's going to increase our quota from 5,000 tonnes to 7,000 tonnes. We've looked at other things that Denmark may want. We haven't found things in the panoply of the non-fish area that we could use to entice the Danes in some way.

• 1045

That's why you get back to the round. When Mr. Bulmer says you have to look at non-fish items to deal with the shrimp, that's what these world trade negotiations do. They allow you to go across the whole country and the whole EU to try to locate those issues where you can find some balance and some trade-offs. Canada will do that with India, Uruguay, or whatever countries you want to name. The way you find these non-fish items is through these international trade negotiations.

The Vice-Chair (Mr. Paul Steckle): Next is Mr. Stoffer for five minutes.

Mr. Peter Stoffer: Mr. O'Rielly, you mentioned putting the controversy of high-grading to bed. I agree with you. My understanding is that the DFO reports can't be made public because of proprietary information, but if your organization were willing to allow us to look at those reports, in camera or whatever, I'm sure our committee would greatly appreciate having a look at them.

If I understand correctly, Mr. Bevan, you said the report goes to the company first.

Mr. David Bevan: It goes to the observer company on its way to DFO. It does come to DFO.

Mr. Peter Stoffer: We need to look at those reports, if it's possible, in order to move it.

But my question, Mr. Angel, is for yourself. You said that the Flemish Cap is virtually an uncontrolled fishery. What do you mean by that, sir?

Mr. John Angel: Just quickly on the observer matter, we don't see the reports. The reports are proprietary to DFO. So the individual fish companies don't ever see the report. The company that David was referring to was the observer company.

I meant to cover that in my remarks, but I was trying to get it all done in seven minutes. “Uncontrolled” was perhaps not the right term, although it's pretty close.

NAFO has developed a management scheme on the Flemish Cap that is rooted in effort days on ground. Each contracting party had the option of notifying the NAFO secretariat of the number of days it had on ground between a certain historic period. We have found those reports and those claims of days to be without any substance and without any backing, with thousands of days being claimed by countries. I believe that right now they fish only 40% of the days that have been allocated. That's why I call it an uncontrolled fishery. Forty percent of the days allocated are fished, and we are exceeding the scientific advice by almost 50%.

If 100% of the days were employed, we would be fishing four or five times the scientific advice. So for all practical purposes, we do have controls, but they're absolutely meaningless. NAFO has not been able to come to grips with developing a proper management scheme for Flemish Cap shrimp. So, virtually, the sky is the limit.

Mr. Peter Stoffer: My last statement, Mr. Chairman, is that I couldn't help but notice that the Prime Minister was in China the other day promoting the sale of CANDU reactors very vividly, very loudly, and very proudly. We disagree with that in our party. But I've never heard the Prime Minister talk about shrimp during one of his trips to Europe. I would say to my Liberal colleagues that it would go a long way, especially for the good folks in Newfoundland and Labrador, if the Prime Minister while in Europe were to say with regard to this tariff, we have to deal with this issue and help out the people in Newfoundland and Labrador. I may be wrong. I've never heard him say that. Yet he's willing to go to China and stay an extra day to promote the sale of CANDU reactors. If he had that enthusiasm for the people of Newfoundland and Labrador when it came to shrimp, I think that would carry some weight. That's just a statement.

The Vice-Chair (Mr. Paul Steckle): That's an unpaid political announcement, by the way.

Are there any comments in terms of how we might address the whole issue from the Prime Minister's perspective or from the government's perspective in putting forward a case in areas that perhaps some of us here are not aware of? I think there are many areas. Mr. Hage and others know those issues better than most of us at the table. Do you have a comment in terms of how we might respond, other than those venues we've already talked about this morning? Are there others?

• 1050

Mr. Robert Hage: I don't think I have anything more to add. Reference was made to the softwood lumber dispute. Again, that's within the context of NAFTA. It's not a dispute over tariffs. It's a dispute over the American's application of trade remedies.

In this particular case there is no breach of international trade law. We don't like their tariffs, but they are applying them legitimately. So there's no case we can take to the WTO to say that they are misusing the WTO rules. So in a sense, until we get into a multilateral trade round, our focus, as I've mentioned, is on the ATRQ and dealing with the ATRQ on two fronts: to increase it, and to see what we can do about the interpretation of the end-use requirements.

We will not stop telling the European Union that the 20% tariff is unreasonable. There's a product they can have for a reduced price, which is in demand in Europe. The moneys are not going to Denmark or the United Kingdom. They are going into the coffers of the European Union. We're not going to stop pursuing that particular objective. But I think that, realistically, as everybody has mentioned, the solution is probably within the multilateral round, and we're hopeful that will begin very soon.

The Vice-Chair (Mr. Paul Steckle): Answer very quickly, please. Mr. Byrne is next.

Mr. Earl McCurdy: Just on that whole point, what's asinine about this is that the tariff isn't of substantial benefit to anyone, other than our competitors. The overwhelming interest in the European Union is to get rid of the tariff, because it would give them better access and would help them in terms of what price they would end up paying. If that 20% tariff were to disappear tomorrow, it would be reasonable to suggest that we wouldn't get the whole 20%. We would get a very substantial benefit, and in all likelihood so would the consumer by the time it all shook out. It's very frustrating to have it sit there. It's not as though there is this total European interest in protecting. Even Denmark is split. There are interests in Denmark who promote the idea of the autonomous quota because they derive a benefit from that. There are separate interests, primarily one company, that have a thing.

At the end of the day it doesn't help us directly in terms of our return from our product if an export tax is levied on our competitors. But if all else fails, what that does is level the playing field a bit. I think the government should make it clear that's where we're prepared to go if we can't fix it. In today's world it makes a lot more sense to remove barriers than to build them. But if we have to do that in order to protect our industry, then that's what should be done.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. McCurdy.

Mr. Byrne.

Mr. Gerry Byrne (Humber—St. Barbe—Baie Verte, Lib.): Thank you very much, Mr. Vice-Chair. I'm pleased to be a guest at this committee, and I appreciate the time that has been afforded me.

I'll start off with a series of snappers. Remember, this is Parliament Hill, so phrase your answer in the form of a question, please.

Some hon. members: Oh, oh!

Mr. Gerry Byrne: I'd appreciate it if you could be very quick with your answers.

This is bilateral trade, Mr. Hage. You mentioned that a lot of horse-trading goes on in this process. Has the European Union come forward and said they will reduce or consider reducing the tariff barrier if Canada provided greater access to fisheries resources on the Atlantic coast?

Mr. Robert Hage: That has not been mentioned.

Mr. Gerry Byrne: They have not made that specific request.

Mr. Robert Hage: Not on the question of—

Mr. Gerry Byrne: If they were to make a request, does Canada have a specific position as to whether or not they would entertain such a request? Have we formulated a policy, or are we prepared just to consider that after the fact?

Mr. Robert Hage: You are asking me about something that I'm not directly involved in now. Perhaps the fisheries representatives could speak to that. I know of no Foreign Affairs policy to open up access to Canadian waters to European vessels—

Mr. Gerry Byrne: In the process of bilateral negotiations.

Mr. Robert Hage: No, I know of no such policy.

Mr. Gerry Byrne: Mr. Bevan.

Mr. David Bevan: Generally, inside our exclusive economic zone we do not have surplus stocks available to allocate to any foreign interests. All the stocks that are within our EEZ are currently in use by Canadian companies.

Mr. Gerry Byrne: You mentioned that it is a process. Just to basically recap, what you're saying is that it is not and will not be the position of the Government of Canada to entertain any such requests under bilateral or multilateral agreements today or in the future.

Mr. David Bevan: If we don't use all the resources within our EEZ, we have an obligation to make those available to others. That is not the case, of course.

• 1055

Mr. Gerry Byrne: Have we in the past entered into such bilateral agreements whereby we have, as a matter of fact, parlayed fish for other commodities, other services—in terms of barriers?

Mr. David Bevan: No. We have not done any of that kind of bartering.

What we have done in the past is make surplus stocks available years ago to foreign interests and foreign countries that were supporting us in other fora, such as NAFO, etc. But those days are long gone, and all the resources within the Canadian exclusive economic zone are currently allocated to Canadian companies.

Mr. Gerry Byrne: Given the fact that this is a specific activity that was obviously outlined in specific agreements with foreign countries or groups of countries, could you provide this committee with details about those agreements, those deals that were cut in days long gone?

Mr. David Bevan: They would be 20 to 30 years ago.

Mr. Gerry Byrne: Would you be able to provide details to the committee, though, on those deals?

Mr. David Bevan: I could undertake to see if those details are still available. They would be under our international group, and I'd have to see if we can go back into the files.

Mr. Gerry Byrne: Mr. Hage, it's been mentioned that this particular issue should be referenced vis-à-vis the softwood lumber deal and the negotiations that are currently underway with the U.S.

How does this situation differ from the softwood lumber agreement? It's my understanding—correct me if I am wrong—that Canada views the current tariffs and barriers to Canadian softwood lumber exports that are being put in place as being contrary to current trade guidelines and rules. Therefore we are prepared to initiate a potential legal action because we view the action by the U.S. as illegal. But I've heard testimony from you that the European Union's decision to impose the 20% tariff is considered by all at this table as being a perfectly legal action.

Is that correct?

Mr. Robert Hage: Let me just explain.

With the softwood lumber situation—and I'm not Mr. Softwood Lumber; that's a different bureau in Foreign Affairs—we're dealing in a NAFTA context, where I think pretty well all of the tariffs with the United States have now been eliminated, so that the product is going into the United States without duties.

The problem with the softwood lumber case is that the Americans have applied what they call trade remedies against this and have accused the Canadian manufacturers of dumping softwood lumber in the United States.

So you're in a different situation than tariffs. We of course refute that and that's the basis for the dispute.

Mr. Gerry Byrne: We view the action as illegal, then, in other words.

Mr. Robert Hage: We say there is no evidence either of dumping or of subsidy, and that's been the focus of the debate.

In the case of the shrimp, we're dealing with tariffs between non-free-trade partners. And we maintain tariffs against the European Union imports into Canada on a number of different products.

They maintain tariffs against Canadian products that are going in, as well as Uruguayan products or Brazilian products or whatever they happen to be. Those tariffs range in value from perhaps 300% in some cases—in a worldwide sense—down to perhaps what they call nuisance tariffs, which are a very low percentage.

Generally, the way these tariffs are eliminated or reduced is through multilateral negotiations. That's where I was talking about the trade-offs, when you're looking not just at fisheries or not just at automobile parts or telecom parts or whatever. I'm talking about a broad range of questions, and this is where this trading is done.

Mr. Gerry Byrne: Which is precisely why I think it would be valuable for this committee to understand what happened in the past to be able to determine an equitable position, given the fact that fisheries—it appears—has been used as a bargaining chip. However many years ago, fishery products were used as a bargaining chip for other commodities and other industries. That's why, Mr. Bevan, I asked for a clear answer on it.

Mr. David Bevan: I think I need to clarify that it was not used as a bargaining chip for other commodities, for other industries at all. It was used as part of a process involving fish. For example—

Mr. Gerry Byrne: Fish for fish.

Mr. David Bevan: Fish for fish—essentially our interests in, for example, NAFO or another forum. If we were to provide a bit of fish in our zone to one contracting party, we might get support for measures important to us in that international forum. But we never went about tariff bartering or trading fish for fish, and certainly nothing relating fish to any other commodity.

• 1100

Mr. Gerry Byrne: It's very important for this committee to understand that, to make that point clear. That's why I think I'd still like to follow up—not suggesting this may not be completely correct. But we'd like to see a report or analysis of that to make sure this committee can view the results of it and determine it for themselves. We'd appreciate that.

The Vice-Chair (Mr. Paul Steckle): Mr. Byrne, your questioning is finished for now, but there may be time further.

I think, Mr. O'Rielly, I'm going to take the opportunity to allow you in for just a very short comment, if you wish—short.

Mr. Alastair O'Rielly: Thank you, Mr. Chairman.

This reference to something 20 years ago...I think it was called the EU long-term agreement. It was a fish-for-fish matter, which didn't work, and it's not really productive to go there.

What I think is important for the committee to consider, at least from my perspective, is that Canada has not engaged either the EU or Denmark in negotiations on this shrimp tariff issue. All we've done is, from the sidelines, try to encourage them to release this. We haven't actually said, we want to cut a deal with either party. In our view, that's where we have to be in order to deal with this. If we can't get a deal, if it's too expensive, then maybe we'll all live with that. But we haven't really engaged—

The Vice-Chair (Mr. Paul Steckle): Thank you very much.

Now Mr. Hearn for a round.

Mr. Loyola Hearn: Thank you very much, Mr. Chairman.

I just want to come right back to the last couple of remarks. You know, here we're not talking about a European problem. They have a major concern about our shrimp going in and have imposed a tariff. We're talking about maybe one or two companies in one country that's part of the EU.

Can you picture if Rodriguez with his wine operation in Newfoundland had a concern? Would Canada keep a tariff on wine coming from Europe because Rodriguez had a concern? We know what the answer is. Tell me, what is the difference?

I think you're dead on and I think that is the approach.... Alastair just hit the nail on the head, Mr. Chairman, in all of this. We're not dealing with a European problem. We're dealing with a little problem in one country in Europe, because one company has a pretty good thing going for itself right now. We should zero in on that and so should the department.

In relation to Mr. Bulmer's remarks earlier—and we're not going to solve this within the fish file—he's dead on. I would think, regardless of what is said, over the years if you look at the history of giveaways of Newfoundland fish, I would think that cars and wheat and a lot of other products were sold because somebody got a good deal on our fish. History will show that.

Mr. Chairman, a couple of quick questions. One is in relation to DFO involvement in funding. I think Alastair also mentioned earlier—or maybe it was Mr. Angel—the effort the companies are making in relation to establishing markets. How much government assistance are we getting to identify and promote products generally, not just shrimp but any of our products? Are we getting the type of help we should be getting?

Mr. John Angel: Well, we're not getting any help. Whether we're getting the help we should get I guess is for others to determine.

The Department of Fisheries and Oceans used to have an extensive marketing branch years ago. But I think over the past few years they've gotten out of that business. So the answer is, from our perspective in the offshore industry, we've had no government assistance at all.

Mr. Ronald Bulmer: Just to get it on the record, at the time of program review, DFO defined their mandate as conservation and fish in the water. When it became a caught product, DFO said it was no longer their responsibility. At that time, Industry Canada had a small program in support of industry. They moved that over to agriculture. When those funds were done, that program sunsetted.

At this point, we have one person in the food bureau of the Department of Agriculture who is designated as our “point of entry” to the federal government. That person is totally unfunded. So other than their ability to phone around to see if there's some other program you might qualify for, that's the end of support of fish in the federal Government of Canada, as an export commodity worth $4 billion.

Mr. Loyola Hearn: Mr. Chairman, I certainly hope we're taking note of this, because again—and I've said this on record and I'm sure my colleagues have said the same thing—it's only fish and in most cases it's only in Newfoundland. So it's an issue that we have to address.

In relation to cutbacks, Mr. Russell, how much research have we really done into the shrimp stocks? Are we aware? For example, we hear stories about the biomass getting smaller, maybe not in magnitude or in biomass, but in actual size. The shrimp are smaller, and that might lead to some of these suggestions, whether they be true or not, about high-grading and the concern of smaller shrimp going into the market where it's less competitive.

• 1105

Mr. Roy Russell: There has been some indication that smaller shrimp are caught at times of the year, and it's probably an indication of new-year classes coming in. I'm not a scientist so I won't try to get into the details of the science.

Mr. Loyola Hearn: I was concerned about the amount of scientific research we have and the funding, because every section of the department we talked to have talked about cutbacks in their funding, and the department itself has been cut tremendously.

Mr. Roy Russell: Again, I'm not in the science side of things, but the shrimp science is largely based on an extensive outer trawl survey that's done primarily in the fall in the northern areas. It doesn't extend all the way north for all the shrimp grounds, but it's more concentrated in the southern part of the shrimp fishing areas.

Mr. John Angel: To add to that, it should be noted that DFO has cut its multi-species surveys into G and H, and we have complained bitterly about that from a shrimp perspective because we are cutting our time series, and fairly soon the work we've done in the past will have been meaningless.

They cut out, I believe either last year or the year before...they have no intentions of returning to 2G, and then they have admitted—and Roy, you can correct me if I'm wrong—to doing 2H every second year.

So we have seen cuts, and remember this is in a resource that is in need of knowledge and attention.

The Vice-Chair (Mr. Paul Steckle): Mr. McCurdy wants to respond. Then I'm going to have to cut off the questions. We're over our time now.

Mr. Earl McCurdy: The magnitude of the cutbacks under program review to DFO science and enforcement and management have caused severe damage to the department's ability to do its job in the areas of science and enforcement generally. The example Mr. Angel just described is just one of many examples.

On the issue of the marketing, we should contrast what we have. There is a very small federal-provincial agreement between the Government of Canada and the Government of Newfoundland for marketing, and it's in the order of some $300,000. By way of comparison, Norway has a joint industry-government marketing program, which I understand to be in the order of $60 million annually, and in the State of Alaska there is one in the order of $12 million. That's what our competitors are doing and that's what we're doing.

The Vice-Chair (Mr. Paul Steckle): Mr. O'Brien, let's keep it to one question so that everyone can get in at least.

Mr. Lawrence O'Brien: Mr. Bevan, I'm coming back to high-grading. Mr. Angel said it's not happening. I say it is happening because fishermen tell me. You're saying it's not happening. What are we going to do to settle the score?

Mr. David Bevan: There's been a request for information. We can provide summaries of the observer reports or we can provide observer reports provided they're in camera and not to be distributed publicly.

The observer reports are in fact subject to Privacy Act requirements. Therefore, if you have private companies' reports, that is not to be made public and we don't do that. But we may be able to make arrangements with the standing committee to avoid having those go out into public distribution, and we could provide summaries of those reports.

Mr. Lawrence O'Brien: That's fine, as long as the committee can have access.

The Vice-Chair (Mr. Paul Steckle): Does that answer your question?

Mr. Lawrence O'Brien: Yes. That will be a good starter.

I have a second question, if you wouldn't mind. Labrador is taking it on the nose. And it was just pointed out about the 2G and 2H science and the lack of...and so on. A massive amount of this shrimp taken out of the northern Atlantic is taken off the Labrador shores.

We have another fishery. It's called the crab fishery. It brings more jobs ashore to Labrador than the shrimp does. The shrimp is a bigger, more vibrant political issue because of the kind of people sitting here at the table.

How do you account for safeguarding the fishery that is of utmost importance to the people I represent—that is, the crab fishery—and stopping the conflict? We're supposed to have done some work, and the work hasn't happened in terms of resolving the issue of conflict and zoning off some zoned areas where the major crabbers go and keeping the shrimpers out. I want to save the crab stock and at the same time I want to maintain a solid shrimp industry as well.

• 1110

The Vice-Chair (Mr. Paul Steckle): Who wants to respond to that? Mr. Bevan?

Mr. David Bevan: As a result of concerns over the crab stock a couple of years ago, particularly when that 25% reduction took place, there was a commitment made by the department to evaluate the potential impact of shrimp trawling on the juvenile crab or on crab stocks in general. That work has been undertaken and we have at this point found no evidence to indicate that this is causing a problem.

Also, we're looking at the distribution of shrimp fishing versus the distribution of crab, and again, we're finding that there are some good signs there that shrimp fishing does not take place in the same grounds as the crab. So there's work being done to try to ensure that what we do in one fishery is not going to have a deleterious effect on the other.

Mr. Lawrence O'Brien: That creates another problem, because my own companies that I deal with back home tell me they're really worried about this. I have to listen to those fishermen who bring this fish to shore; I have to listen to those fish plants that own those companies. They are me, and that's what I represent.

I hear this all the time from DFO. I heard it before when I was a PS, and I'm hearing it again. Something just doesn't jibe. And it doesn't jibe under high-grading, it doesn't jibe under conflict, it doesn't jibe under science. Nothing seems to come together and make common sense. That's my problem.

Mr. David Bevan: We have an obligation to ensure there's a good communication between the stakeholders and their scientists and the fish managers and the enforcement side. And perhaps we're dealing here with a problem where we need to spend a little more time on that communication, put the facts on the table, so people can see what we're seeing and hopefully we'll come to a common understanding.

Mr. Lawrence O'Brien: I think you're right.

One last point, Mr. Chair, is on the science in area 5. Mr. Angel just mentioned the 2G, 2H, and so on. That's a serious issue to me. The farther north you go, the less science you get. And wherever the concentration of pressure is in terms of politics, that's where DFO puts a science to: south is where it is, farther south is greater, and the farther north, good-bye and clean up. Take what you can out of there farther north because there are too few people, nobody there to...Lawrence O'Brien and that's about it. But we have a great big land; pull her away.

And that seems to be the issue with DFO.

It's time we put this into perspective. If we're taking the kind of fish off the north as we are, it's about time it gives us a fair crack back in terms of putting the science and other things into perspective. Do things in fairness and understanding or stop taking more fish up there.

The Vice-Chair (Mr. Paul Steckle): Okay, that's his last question. Who wants to have the last word on his questioning?

Mr. David Bevan: I think we have to keep in mind that the minister has announced increases in the budget for both enforcement and for science following the program review. So there's been some reinvestment in those areas.

On the point of view in enforcement, there were decisions taken throughout the country on the enforcement side to hold harmless the cadre of fishery officers. There are more fishery officers in the country today than there were before the start—

Mr. Lawrence O'Brien: But not off Labrador, Mr. Bevan.

Mr. David Bevan: I can't argue that.

Mr. Lawrence O'Brien: I can. I can certainly tell you not one.

The Vice-Chair (Mr. Paul Steckle): We're moving on to the next questioner.

Mr. Stoffer.

Mr. Peter Stoffer: How is the stock? Is the biomass of shrimp healthy, as we speak?

Mr. David Bevan: There's uncertainty, obviously, with the exact size and distribution of the stock. It's fair to say that the last scientific advice we had was that it could sustain even more fishing. As some of the witnesses have pointed out, the exploitation rate is low on this stock, relevant to what is taking place elsewhere.

Mr. Peter Stoffer: Very good.

Mr. Engeset, in your presentation you showed us a Faroe Islands vessel. Do they fish off the Flemish Cap?

Mr. Steinar Engeset: Yes.

Mr. Peter Stoffer: Was this a recent picture?

Mr. Steinar Engeset: No, that one was taken probably four or five years ago.

Mr. Peter Stoffer: Do you still have vessels from the Faroe Islands coming into Harbour Grace?

Mr. Steinar Engeset: Yes. In the cod moratorium we had to try to do something to keep the people working at Harbour Grace. And we have approximately 90 to 100 jobs, where we are offloading, of course, Canadian vessels. It is sorted, repacked, and sent out in containers all over the world.

• 1115

Mr. Peter Stoffer: Okay. The reason I ask that is because in Mr. O'Rielly's presentation he mentions in the box here Canada's choices in terms of reducing the tariff or at least applying some sort of pressure. He says “Stop facilitating the Flemish Cap fishery for our competitors”, and at the top, under “Other Trade Levers”, “Closure of Canadian Ports to the Flemish Cap Fleet” as, I would imagine, some sort of retaliatory action or at least to apply some pressure. Would you agree with those?

Mr. Steinar Engeset: No. Of course, it's a possibility. I think what you will find will happen is they will go to St. Pierre.

Mr. Peter Stoffer: St. Pierre.

Mr. Steinar Engeset: Yes. It would be a little bit longer.

Harbour Grace is geographically a very good point for coming here. They leave a lot of business behind, because they need fuel, fishing gear, all sorts of different services, and that is of benefit, no question about it. That will go, for example, to St. Pierre. I know the American boats, for example, have tried to land swordfish in Newfoundland. They are still not allowed to do it, and some of them have done it at St. Pierre.

Mr. Peter Stoffer: My last question is to put on the record, Mr. Bevan, because we've heard otherwise from idle conversation.... Is there absolutely no foreign fishing for shrimp within our 200-mile limit, yes or no?

Mr. David Bevan: That's correct. They're all allocated to Canadian companies.

Mr. Peter Stoffer: The foreign fleet is all outside, then.

Mr. David Bevan: That's correct.

Mr. Peter Stoffer: They don't dip into our lines?

Mr. David Bevan: No. We're pretty confident of that, based on the air surveillance.

This committee was provided some time ago with some information on the air surveillance, and we're very confident in the air surveillance, coupled with our patrols.

Mr. Peter Stoffer: Okay.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. Stoffer.

We'll go to Mr. Easter, although.... Did you want to comment, Mr. McCurdy?

Mr. Earl McCurdy: On the issue of St. Pierre, I'm not convinced that St. Pierre is much of an option, certainly not in the short term.

First of all, there are a couple of ways to approach that question, and as I say, that's a secondary objective. If we could get rid of the tariff and be on an equal basis, that's preferable for us, because then it's an attractive proposition for us. But in the absence of that, first of all, St. Pierre does not presently have the facilities to handle that. This is not something you just snap your fingers and produce. You need the infrastructure, wharves, freezing capacity, and so on. We're geographically advantaged as opposed to St. Pierre. So even if they decided to do it, at any time they don't know we could go back in that business again. So it would be quite a gamble for them to invest a lot of money into the equipment when, if we decide to change our policy, we'd once again have the upper hand of geography.

Secondly, St. Pierre is very dependent on Newfoundland for a lot of its services, everything in terms of health care and a whole host of things. I think they would have to think twice about effectively intervening against us in a manner like that, so I'm not convinced about St. Pierre. It's a possibility, but I think we have a couple of things going for us in that regard. Clamping down or making it more problematic, more costly for people to use our ports, if we allow them to use them all, is in fact a valid option.

The Vice-Chair (Mr. Paul Steckle): Thank you, Mr. McCurdy.

Mr. Easter.

Mr. Wayne Easter: Thanks, Mr. Chair.

On the point on surveying and research, on the increased moneys that went in that area, Mr. Bevan, is there any being targeted for this area? We need to keep track of our fish stocks or we're going to be back with some of the problems we had. Given all the other things that are happening now and a potential budget in December, there's going to be a lot of pressure on those areas, so I need to know from you what's happening in that area.

But my primary question is, in Mr. O'Rielly's paper...you mentioned that we need to negotiate a deal for the Canadian industry as other non-EU countries have done. Are there any examples or any correspondence you can provide us with, even after this meeting, that might be helpful in that area?

Mr. Alastair O'Rielly: Each of the other countries we were talking about negotiated deals at separate times and for separate considerations. In the case of Iceland, I believe it was a fish-for-fish deal, the kind we talked about that we did 20 years ago. They got a reduced tariff in consideration for some access to fishing grounds or some concurrence to fishing grounds that they had rights to. The same is true for Greenland and I think for the Faroes as well.

In the case of Norway, I think their quid pro quo had more to with the accession of Sweden to the EU and their sale of shrimp to Sweden. Anyway, prior to that process, they all managed, under their own circumstances and for their own needs, to cut their own deals. I'm just making the point that we have to do the same.

• 1120

Mr. Wayne Easter: Yes. You're basically saying we haven't engaged the EU or Denmark.

Mr. Hage, where have the discussions gone on, then, if we haven't basically sat down face to face with Denmark or the EU on this issue? Can we?

Mr. Robert Hage: We have, actually. We got the 4,000 tonnes in 1999 increased to 5,000 tonnes a year later, and we got that through negotiations with Denmark and the United Kingdom. So we've been engaged in that since 1999.

These things are not easy to achieve. You have a group of countries in the European Union with their own interests to defend, and we have to speak to them. We have to assure them that by granting us one concession, it won't affect other members of the European Union, and then we have to work through the European Commission, which is responsible for all European trade, and convince them that an ATRQ is in Europe's interest.

So we got that in 1999, it was increased a year later, and now we're working with Denmark to increase that to 7,000 tonnes. So we've certainly been engaged on that score.

On top of that, we've raised the 20%. I think everybody here has said in regard to that 20% tariff, we don't like it, but eliminating it or reducing it will likely be within the confines of a multilateral round. Nevertheless we are continuing to raise that with the European Union at the ministerial level, and we are trying now to work to see if we can deal with that end-use requirement through perhaps an interpretation that will allow us to get access again to the U.K. market. So we are heavily involved in this process.

Mr. Gerry Byrne: To follow up on some of that, we heard testimony that Canada has never ever traded fish access for commodities other than fish, a point that astounds me, quite frankly, because it's completely contradictory to what I understand; however, silence is consent, and we haven't heard anyone contradict it.

We've heard that basically the EU tariff is a legal tariff. It's not considered to be an illegal tariff by anyone sitting at the table. We understand that we are not prepared to enter into any negotiations with the EU on the basis of fish. There doesn't seem to be too much left for us to negotiate with on a bilateral deal.

Would anyone like to comment on that, given the fact that we're not prepared to negotiate on another commodity or service, we're not prepared to negotiate on fish, and it's not an illegal tariff? Where do we go? What hearty suggestions could be presented from the table? But very quickly, please, because I really have a short amount of time.

Mr. Robert Hage: As I mentioned, we are working on the ATRQ and the 7,000 tonnes.

On the 20%, you're right, we're stuck, in a way. We looked at what we could do on a bilateral negotiation on the 20%. Our tariffs are very low, and so it's very difficult for us to say, all right, we'll eliminate our tariffs on fish and you eliminate your tariff on the shrimp, because there's nothing to trade. That's when you get into these broader negotiations where things are traded back and forth, such as a shrimp tariff for something on farm machinery—I'm just giving diverse examples that may or may not come to pass.

That's where you find the balance, but in a broader context, and it's very difficult to find that outside of that large context. That's why we're concentrating now on the ATRQ.

To repeat, we're not surrendering on that. We're not saying, oh well, we won't think about this until the end of a Doha round, if one is launched. We're raising it with them, and we're looking at what we can do with regard to that. But it's clear that our bargaining powers in this situation are limited.

Mr. Gerry Byrne: I want to get into some technical questions.

The Vice-Chair (Mr. Paul Steckle): Mr. O'Rielly has a comment.

Mr. Gerry Byrne: Certainly. Sorry about that.

Mr. Alastair O'Rielly: Thank you, Mr. Chairman and Mr. Byrne.

On the issue of what to do, and to explain an earlier comment in response to Mr. Hage's point, yes, Canada has, in a manner of speaking, engaged in negotiations inasmuch as encouraging the EU to do something, but they've only done what serves their own interests. Canada has not offered anything to cause them to do something more than what's in their own self-interest—to provide access for the Danish brining industry. They haven't done anything beyond that. That's the issue. We've explained there are no carrots. We have no fish to give and we have no tariffs to eliminate on the fish file. And if we have sticks, do we want to use them? Port closures or export taxes are these options. If we're not going to use sticks, do we have carrots outside the fish basket that we're prepared to put on the table?

• 1125

I think, from an industry point of view, all we need to know is what are these things? What are they worth? Let's engage in a negotiation. If we get a deal that's acceptable to Canada.... And I'm not suggesting that we give up $500 million or a billion dollars for the benefit of Ontario for the sake of our $50-million or $60-million consequence. I'm not. I'm only suggesting, let's see what's in the basket and let's negotiate. If it's acceptable, if the deal is worth it, let's do it.

Mr. Gerry Byrne: I think it's a very valid point that we have to find a solution, but it doesn't seem that the answers are completely obvious, and we have to identify what it is we can do and what it is we can't do.

On that point of what we can and cannot do, it is my understanding that we moved about 9,000 tonnes of shrimp into the EU market from Canada—cooked and peeled shrimp. I would assume that we used approximately 5,000 of the tonnes under the ATRQ, plus an additional 4,000 tonnes at 20%. Given the fact that the EU tariff has been perceived to be, and largely understood to be, prohibitive, in terms of our ability to gain market access, it's my understanding that at the time the Newfoundland and Labrador inshore industry shut down, we had actually only used approximately 35% of the 5,000-tonne ATRQ assigned to nations such as Canada.

It's also my understanding that we have engaged in a process whereby we've elicited the support of the U.K. and Denmark to increase the ATRQ to a point of 7,000 tonnes, but only on the provision that we at first achieve 50% utilization of the existing 5,000-tonne ATRQ. It wasn't until mid-August that we used the 50% of our ATRQ, and to my knowledge we still have not taken full advantage of the 6% ATRQ.

Have we done enough to encourage this file to move forward, from the industry's own point of view?

I'll put it in this perspective: if the 20% tariff was the major prohibitive factor in shutting the industry down, and we had access to 6% and we didn't fully utilize it...the Danes and the U.K., who would be the sponsors of this in the EU, came back and told us, get over 50% of the existing 5,000 tonnes and we will be the broker or the sponsor to increasing it to 7,000 tonnes. But we cannot, they told us, broker this deal until you go over 50% because we will look foolish going before the European Union and asking for more when you still haven't used what you have.

Given the fact that August is beyond the six-month timeframe to use the existing 50%, why would it be perceived that we would need an additional 2,000 tonnes, given the fact that in the first six months of 2001 we had only used less than 50%, and given the fact that if you were to extrapolate over the following six months you would not actually even fulfill the existing 5,000 on quota?

Mr. Alastair O'Rielly: I realize this is convoluted, and the information Mr. Byrne has is largely correct. We are only now using the remaining 5,000 tonnes. But what that speaks to is how palliative that remedy has been. It really does not address the problem. This is something that's only for the benefit of the Danish briners. We are losing our access to the U.K. market. Last year we sold them a substantial quantity. This year it's going to be a lot less. The $58-million number for 2001 will be about half what it was last year.

So the Danes are giving us the sleeves out of their vest. They're saying, yes, you can have.... That 2,000 tonnes, by the way, was an industry-negotiated deal that we cut in January of this year, by which the Danish industry agreed to support the Danish government seeking that 2,000 tonnes. But it's not costing them anything. As long as the end-use restriction remains, we're frozen out of the U.K. market. If that number goes to 9,000, 10,000 or 15,000 tonnes, it's not going to solve our problem.

The Vice-Chair (Mr. Paul Steckle): I'm going to cut off the meeting at this point in time. We've exhausted our time—unless there's a real urgent and real short question. I realize it's very sensitive, it's your area, and I want to accommodate, but we have already gone over time.

Mr. Loyola Hearn: There is, Mr. Chairman, because these people across just had over 15 minutes, so I think we should at least have time for the final question.

The Vice-Chair (Mr. Paul Steckle): Yes, I quite agree.

Mr. Loyola Hearn: Mr. Chairman, first of all, because we're finishing up, I certainly want to say thank you to the committee and to the members for coming. I think we've had a tremendous day. We've seen what cutbacks to the department do, and we've seen our marketing problems, our research problems, the problems with the tariffs and with the shrimp fishery generally. It's an education for all of us. I think the ball is in our court.

• 1130

But I would recommend to all of them, coming out of this, that maybe each group should give us some bullets we can use in our report to the minister to summarize what we've talked about. It would be helpful.

I have one observation on the closure of ports. We saw that when we had the overfishing on the Grand Banks with the Spanish and the Portuguese. The only people who really suffered at the time were the people in St. John's, those in the longshoremen business. They took their business elsewhere and they continued to fish.

We have to stop them from perhaps fishing on the Flemish Cap, because Argentia and Harbour Grace and those places have been hard hit. The last thing we want to do is take jobs away, unless it is the only alternative, which it might be.

Mr. Chairman, there is one other short point, and that is in relation to inshore versus offshore. In the shrimp fishery we're talking about the cooked and peeled. A lot of that product is caught by the smaller boats, but it is also the labour-intensive part of the industry in the province and it creates a lot of jobs.

I noticed in the offshore shrimp, two of the markets, Russia and China, more so than the others.... Is there value-added work done in these countries, and is there a way that we can do more value-added work in Newfoundland on shrimp? When you look at the total value of the industry, the number of jobs, except for the people who work on the small boat part of it, is not great. There should be more opportunities, if it's possible, depending on market conditions. Is there any way we can get more jobs out of the shrimp industry?

The Vice-Chair (Mr. Paul Steckle): Who wants to respond? Mr. McCurdy.

Mr. Earl McCurdy: The offshore and inshore, for the most part, are into two different markets and are two different products. But there is some overlap. A percentage of the offshore catch is in fact smaller shrimp, what's called industrial shrimp, which does have the potential for providing jobs. I think over time we should have a program for moving towards having that processed in plants in this country as opposed to having those jobs exported.

There's an issue of timing and maybe phasing in that could be looked at. I think the details could be subject to negotiation. I think there is a benefit that could be realized in Canada that to date we haven't realized on that percentage, which in some years is as low as 8% or 10%. I think it's gone over 20% because of the size breakdown of the shrimp stock at the moment.

The Vice-Chair (Mr. Paul Steckle): Mr. Angel, quickly.

Mr. John Angel: Yes. There are basically two products that are made from cold-water shrimp, a peeled product and a frozen on-shelf product. They're completely different markets, completely different products.

If you bring it ashore, you peel it; it's no good for the other market. You can't bring it ashore, process it, freeze it, and get it into the shell-on market. You have to freeze it live or cook it live and freeze it at sea.

They are basically two completely different market niches. Canada should be filling both of them.

The Vice-Chair (Mr. Paul Steckle): Can we agree to conclude?

Mr. Peter Stoffer: I wanted to ask the witnesses something.

The Vice-Chair (Mr. Paul Steckle): Make it very short, because I'm going way beyond my time.

Mr. Peter Stoffer: All right.

I couldn't help but notice that McDonald's has a new shrimp wrap. Is the American market an option if you can't get through to the EU? Or is it already saturated?

Mr. Alastair O'Rielly: There is an opportunity, but it will take some considerable time and money in all likelihood to develop it. It's a non-differentiated product. The Americans buy shrimp on size and colour.

We do not do well in the marketplace on the basis of size. Our attribute on selling is taste. Until the American consumer understands that and is educated to it and adopts a preference for it, that's going to take a while to do.

The Vice-Chair (Mr. Paul Steckle): With that we will conclude our questioning.

Thank you, gentleman, for coming. You've added quite a flavour to this discussion this morning. It's obviously a very difficult issue. You've given us lots to work from. We thank you for coming this morning.

For the committee members, certainly you're aware that many of the members around this table are familiar with the issue because they represent those ridings in which the catch of shrimp is very prominent.

Mr. Wayne Easter: Paul, I'd like to mention as well that if anybody has any further information, we'd like to have it within four or five days, because we really want to deal with it and get this off our plate quickly.

The Vice-Chair (Mr. Paul Steckle): We'll end with that. The next meeting is Tuesday, October 30. We'll be dealing with the Atlantic Salmon Federation and the Canadian Aquaculture Industry Alliance on aquaculture.

The meeting is adjourned.