The Newfoundland Fisheries Innovation and Adjustment Fund

Last Tuesday, the Globe and Mail published a story about a $280 million federal contribution to a fund intended to help the fisheries industry in Newfoundland and Labrador. The fund had been promised during the negotiations around the Comprehensive Economic and Trade Agreement (CETA) with the European Union. The story has Premier Paul Davis of Newfoundland saying that the federal government was reneging on its commitment, made in 2013, that would allow Newfoundland to spend the money to create a “fishery of the future” if the province removed its minimum processing requirements (MPR). The MPR require that, by and large, fish landed in Newfoundland be processed in Newfoundland. Federal Conservative Rob Moore, however, is quoted in the story as saying “[t]he MPR fund was created to compensate for anticipated losses from the removal of minimum processing requirements” and not as a “blank cheque”.

An exchange of letters, made public in December 2013 by then-Premier Kathy Dunderdale suggests Premier Davis is right. In a rapid-fire exchange of letters, the federal government at first insisted that the $280 million contribution be spent only to compensate workers displaced as the result of elimination of the MPRs. But faced with a determined statement from the province saying that the fund must also be available to support the future development of its fish and seafood industry, the federal government gave in and explicitly agreed to allow the money to be used for purposes other than compensation for displaced workers.

The first mention of the fund is in a May 24, 2013 letter sent to Ed Fast, the federal Minister of International Trade by Keith Hutchings, then the Newfoundland Minister of Innovation, Business and Rural Development. Apparently written in the aftermath of a May 20 meeting between the two ministers, Hutchings requests a “Fisheries Innovation and Adjustment Fund” as one of the conditions for dropping its MPRs as they apply to the European Union. He requests $400 million to be used for a variety of purposes, only one of which is “Fishing Industry Adjustment”. The federal government apparently rejected the Hutchings plan because, on May 27,  Hutchings writes to Fast to express his disappointment at this development but notes the federal position on the fund:

On the matter of a fund to help restructure the industry, you have advised that the Federal Government could consider a modest step towards this, but you also asked the Provincial Government to cost-share such a fund. We believe a fund is necessary to help industry restructure to take advantage of opportunities that open as a result of real market access to the EU and to assist the communities and the people that could be displaced or adversely impacted by a move to narrow the application of MPRs. (Emphasis added)

On May 28, Fast reiterates the willingness of the federal government to support a fund for Newfoundland in return for its elimination of the MPRs. He offers “… a transitional package of up to $400 million for those workers who experience job displacement as a result the time-limited carve-out of MPRs for fish and seafood exports intended for the EU…”. No mention is made in this letter of using the fund to help the fishing industry restructure. Moreover, the Minister asks that Newfoundland pay for half of the “up to $400 million” cost of the fund.

Hutchings makes the next move. He writes on May 29 that Newfoundland is not willing to have the fund be “limited to worker adjustment” and that “… it should sustain the programs necessary to ensure that the industry is positioned to fully avail of opportunities emerging from the deal …”. Hutchings also rejects the notion of federal-provincial cost-sharing.

Fast responds the next day with a letter offering a 70-30 federal-provincial cost-share for the fund but still characterizes that fund as “a transitional program … for those whose jobs are displaced as a result of MPRs no longer being applied to product destined for the EU.” Hutchings agrees to Fast’s offer of a 70-30 cost-share but asserts that “… it is imperative that this program facilitate industry adjustment”.

The issue is truly engaged in the next exchange of letters on May 31 in which Fast writes that the fund of up to $400 million (emphasis added) “…must be cost-shared and only for worker displacement” while Hutchings writes back accepting the 70-30 cost-share “… but only if this program provides for industry transition, development and renewal”. Fast caves in, writing on June 1 that “… we are prepared to instruct our officials that the transition program address industry development and renewal as well as worker displacement.” Hutchings now accepts the offer “for a total expenditure of $400 million” (but does not put an “up to” before the  “$400 million”) to be cost-shared on a 70-30 basis.

With this issue seemingly resolved, the overall CETA negotiations go forward and an agreement-in-principle is made public on October 23, 2013. On October 29, Premier Dunderdale triumphantly announced that “We have negotiated an agreement with the federal government to create a $400 million fund to transform our fishing industry.” She made no mention of the fund being limited to worker displacement or being defined as worth “up to $400 million.”

The federal government could not have believed that $400 million could be spent on worker displacement alone. (Of course, they might credibly have believed that “up to $400 million” could be spent.) In the short- to medium-term, the elimination of the MPRs on fish and seafood destined for the EU is highly unlikely to cause any major damage in Newfoundland. In 2013, in Newfoundland, there were 86 active fish and seafood processing plants that employed about eight thousand people. In that year, Newfoundland exported $117 million of fish and seafood to the EU, a sum that was only 14 percent of its exports to non-EU countries. Moreover, CETA is expected to increase provincial employment in the fisheries sector as Newfoundland companies take advantage of duty free access to the enormous EU fish and seafood market. All this will happen with minimal risk of higher import competition.

To be sure, fish processing workers tend to live in remote Newfoundland communities (see the map here on p.28) and these communities will be likely to be under threat for the foreseeable future. But there is no immediate danger than any jobs will be lost. While there is apparently a nascent fish and seafood processing industry in Europe, there is no reason to think it will pose a threat to Newfoundland’s industry for some time.

Based on the public record, therefore, it would seem that the federal government is indeed reneging on its promise to create a cost-shared fund (albeit one of “up to” $400 million) that can be used to build a “fishery for the future”.

About Saul Schwartz

Professor School of Public Policy and Administration Carleton University Ottawa, ON K1S 5B6 Canada
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