Five Years Later: The Newfoundland Fisheries Adjustment and Innovation Fund

 

Roughly five years ago, the federal government under the Conservative Stephen Harper was engaged in a protracted dispute with the Newfoundland and Labrador government of Conservative Kathy Dunderdale. At issue was a $400 million “fisheries fund” – 70 percent of which would come from the federal government and 30 percent from the province.  This fund was intended to help Newfoundland adjust to the removal of its minimum processing requirements (MPR), a removal that the European Union was demanding as part of the negotiations around the Comprehensive Economic and Trade Agreement (CETA).  Newfoundland apparently thought that an agreement had been reached but it rapidly became clear that there was disagreement about (a) whether the value of the fisheries fund was really $400 million or merely “up to” $400 million, depending on the losses resulting from the lifting of the MPRs; and (b) whether the fund could be used to modernize the Newfoundland fisheries industry or could only be used to help affected workers and firms.

Newfoundland’s minimum processing requirements restrict the export of unprocessed seafood.  With the MPRs in place, processing is done in Newfoundland, often in small coastal communities.  Their removal, it was argued threatened employment in processing pnalts and therefore the viability of the coastal communities. For European Union trade negotiators, however, the MPRs were a barrier to trade that needed to be removed.

Talks between the federal and provincial governments aimed at  coming to an agreement about the fund did not go well.  In May 2015, Newfoundland’s Conservative premier Paul Davis, who had replaced Kathy Dunderdale in September 2014, withdrew the province’s offer to lift the MPRs in return for the fisheries fund, saying “[w]e’ll keep our MPRs in place if we don’t reach an agreement”.

In October of 2015, though, the Liberals under Justin Trudeau came to power in Ottawa. Shortly thereafter, in December of 2015, Liberal Dwight Ball became the premier of Newfoundland and Labrador. By November of 2016, Ball and Trudeau were close to a deal.  Then, in March 2017, cabinet minister Judith Poole, standing next to Dwight Ball in St. John’s, announced that the $400 million Newfoundland fisheries fund was off the table and had been replaced by a $400 million Atlantic Fisheries Fund (AFF), with a 70% federal contribution, to be shared among Newfoundland, Nova Scotia, Prince Edward Island and New Brunswick.  The AFF is not directed toward workers and firms negatively affected by CETA but is instead intended to help modernize and improve the fisheries in all four provinces.  Not surprisingly,  Conservatives in Newfoundland saw this as giving up on the promise of $400 million for Newfoundland alone.

In September 2017, parts of CETA came into force.  Article 2.11 of the agreement prohibits export restrictions like the MPR.  Paragraph 4 of Article 2.11 “carves out” an exception for Newfoundland’s minimum processing requirements, allowing them to remain in place for three years, after which they must be lifted.

Discussion

What does all this mean? In my view, the original push for a Newfoundland fisheries fund was simply an explicit attempt by Newfoundland to extract money from the federal government in exchange for its agreement to lift its minimum processing requirements as they applied to the EU.

Writing about this fund in 2014, I pointed out, as had many others, that Newfoundland had leverage in these negotiations because the MPRs could only be removed by the provincial legislature, no matter what the federal government promised the European Union.

But a $400 million fisheries fund was always too big an ask, even split 70-30 between the federal and provincial governments.  What would be the cost if the federal government agreed to phase out the requirement, as it eventually did, but the province refused to follow suit?  The federal government could potentially be held accountable for damages to EU firms and the reputation of Canada as a reliable trading partner might be (slightly) tarnished; hardly  worth a $280 million federal contribution.

The cost to Newfoundland and Labrador of lifting the requirement was never likely to be large. The requirements only had to be lifted with regard to exports to the EU and exports to the EU are only about 10% of Newfoundland’s fishery exports; the US (50%) and China (24%) are far larger markets. Moreover, it is not at all clear that the Newfoundland fish processing plants needed the requirements; the economic case for transporting fish to the EU for processing seems tenuous at best. The benefits to be gained from the reduction in EU seafood tariffs — a prospect that might have been cast into doubt if the MPRs were not lifted — were greater.

Only two years have passed since tariffs on Newfoundland seafood exports to the EU were  reduced and, while there are clearly opportunities to increase exports, the eventual impact is difficult to predict. Although price is an important factor in determining export levels, it is not the only factor. More time will have to pass before the effects of tariff reduction are known.

Moreover, the MPRs are still in effect, with one more year to go before they must be lifted. The Newfoundland government seems to think that great increases in the export of unprocessed seafood to the EU are not on the horizon but once again, it is still early days.

About Saul Schwartz

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