Controversial LIFO Policy Under Review: Prominent Economist Says Offshore Shrimp Fishery Provides More Benefits to Province

The federal government finally announced it will be setting up a committee to review the much-debated and hotly contested last in, first out (LIFO) policy.

The Department of Fisheries and Oceans announced that a ministerial advisory panel will perform an external review of the LIFO quota allocation policy and deliver its findings and recommendations to the Minister of Fisheries and Oceans by June 15, 2016. The yet-to-named panel will be conducting consultations in several communities across the province in the coming months. As a result, DFO indicated that there will be no fishing in shrimp fishing area (SFA) 6 until the review is complete. In addition, the federal government also announced 50 per cent of last year’s allocation for SFAs 4 and 5 to allow the offshore fishery to continue while the review is ongoing.

The LIFO review comes in the wake of months of speculation surrounding the fate of 2016 northern shrimp quotas, particularly in SFA 6, located adjacent to the northeast coast of Newfoundland and the southeast coast of Labrador.

On Feb. 23, the Fish Food and Allied Workers (FFAW-Unifor) surprised some when it publically called for an immediate halt to all northern shrimp fishing activity in SFA 6, setting off a series of union-organized public rallies across the province.

The call for a halt was in response to reports that the fishable biomass for SFA 6 has declined sharply over the past year. Recent indications from the Department of Fisheries and Oceans (DFO) science suggested that the fishable shrimp biomass in SFA 6 could be down as much as 40 per cent compared to the 2015 levels.

The Newfoundland and Labrador government’s All-Party Committee on Northern Shrimp Allocations said it was encouraged by the DFO notice to the Northern Shrimp Advisory Committee.

MUN Economist Wade Locke.

MUN Economist Wade Locke.

“This announcement indicates that the Honourable Hunter Tootoo, Minister of Fisheries, Oceans and the Canadian Coast Guard, along with our regional minister, the Honourable Judy Foote, Minister of Public Services and Procurement, and our Newfoundland and Labrador MPs are giving the future of our shrimp industry the careful consideration it deserves. While this is a step in the right direction, we continue to ask for an allocation policy which is fair to both the inshore and offshore sectors and based on adjacency and historical attachment. The completion of this review by DFO is essential as is a timely decision on Northern shrimp allocations,” said Steve Crocker, Minister of Fisheries and Aquaculture.

The all-party committee stated that it remains united in its view that LIFO should be eliminated and that the review should provide alternatives which are fair for inshore and offshore sectors and that management decisions are made based on the best available scientific information.

The FFAW was also quick to praise the LIFO review.

“While this announcement is welcome news, inshore harvesters, plant workers and rural communities will not rest until the LIFO policy is abolished in favour of policies that respect the principles of adjacency and historical attachment,” said Keith Sullivan, President of FFAW-Unifor. “The traditional inshore fishery is the economic backbone of rural N.L. The federal government should pursue fishing policies, such as moving the offshore out of SFA 6, which will keep the benefits of the fishery with the people and communities that are adjacent to the resource.”

The union claims that if LIFO is maintained and the offshore is allowed to sustain a large presence in SFA 6, the inshore sector will see a devastating loss of 3,000 direct jobs.
According to a 2015 study conducted by the provincial government, the cost to the corporate-owned offshore fleet of abolishing LIFO and moving the fleet off of SFA 6 is relatively small, with a loss of only 54 jobs. Unlike the offshore corporate-owned trawlers, who have access to other shrimp fishing areas, inshore harvesters can only access northern shrimp in area 6.

However, a prominent Memorial University professor has taken issue with the findings of the government report.

On March 29, well-known economist Wade Locke made a presentation at a gathering of the St. John’s Board of Trade, saying more study would help any fact-based debate and decision-making around LIFO.

Specifically, Locke said he was asked by the Canadian Association of Prawn Producers to look at a report from Pisces Consulting Ltd. from March 2015, submitted to the provincial Department of Fisheries and Aquaculture and relied on in LIFO arguments.

On close inspection, he said, conclusions in the report were not always supported.

“There’s a problem with the assumptions that were utilized,” he said. “There’s a problem, for example, when you put it into (economic) impacts per tonne, you look at impacts per tonne, the offshore has a bigger impact by about 24 per cent than the inshore.”

“One would expect the [province’s] GDP to increase by $2,246 per tonne transferred to the seasonal sector and to fall by more than $2,785 per tonne transferred from the year-round sector,” Locke explained.

“Or, on average, one should expect that each tonne transferred from the Newfoundland and Labrador year-round sector to the Newfoundland and Labrador seasonal sector will cause Newfoundland and Labrador’s GDP to fall by $540 per tonne.”

The government report had stated, “Any consideration of reassignment of shrimp from the offshore to inshore sectors will have negligible effect on the provincial economy, as the GDP and income effects are very similar for each sector.”

Locke said the review work was limited to the one report. As a result, he would not make any blanket statements on LIFO policy being of benefit, or not, to the province.

Kerry Hann

Managing Editor of The Navigator Magazine.

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