Learning from 40 Years with the 200-Mile Limit – Part II

Last month’s column dealt mainly with how Canada obtained the 200-mile limit in 1977, leading to great optimism about the future of the fishery in Atlantic Canada, but things did not turn out as expected.

Starting in 1992, just 15 years later, we imposed a series of moratoriums on fishing groundfish stocks to try to conserve what was left of those resources.

However, things were not going well even before the moratoriums. In 1981, there was a Royal Commission to investigate problems in Newfoundland’s inshore fishery. A year later, in 1982, the federal government appointed the Task Force on Atlantic Fisheries, headed by Michael Kirby, to investigate widespread problems in the industry throughout Atlantic Canada and more specifically, to focus on how to deal with bankruptcies of the large, vertically-integrated companies.

Although there were many issues contributing to these difficulties, a key one was that the expanded industry dramatically increased its production of cod blocks with the expectation of selling them in the United States. But the U.S. market could not absorb the additional output, unsold inventories backed up, and companies ran out of cash, forcing them into bankruptcy.

Despite these difficulties, people continued for a while to be optimistic that the future could be much better, due to the 200-mile limit and a resource base that was expanding because of it. The focus became finding ways to improve the economics of industry operations. That led to industry restructuring — with considerable government financial assistance — and efforts to improve raw material quality, produce higher-value products and increase operational efficiency.

Progress was slow but steady, until the problems with declining fish stocks started to come into focus and changed everything.

Quota cuts starting in 1988 and the moratoriums, starting in 1992, led to further studies and provision of assistance in various forms to people who were affected. The Task Force on Northern Cod was set up, to investigate the decline of that resource.

As people were forced out of the industry because of the decreasing quotas and catches, a variety of assistance programs were provided to encourage people to leave the industry and/or support those who remained. Overall, billions of dollars of public money were spent to study the problems, offer solutions and provide assistance as people adjusted, adding to the multi-millions of dollars spent to build up the industry in the first place.

Then, a ray of hope appeared.

Shellfish resources showed signs of increase, leading to growing catches of crab, shrimp and later, lobster. Although the quantities were smaller, they were high-value species, so they replaced much of the lost revenue.

However, they were less labour-intensive to catch and process. Instead of biting the bullet and reducing capacity, governments tried to spread the revenue around by issuing too many licences for harvesting and processing these species — but there wasn’t enough to support all the capacity or jobs those licences represented. The industry has struggled with the excess capacity ever since, because it reduced incomes and returns on investment, in many cases to subsistence levels.

The industry came to depend very heavily on Employment Insurance to top up the income earned from industry operations.

Landings reached a post-moratorium peak in 2004. Since then, they have been in decline again, seemingly due to climate change.

In 2014, they were 25 per cent lower than they were in 2004, approximately at the same level as they were in 1994. Starting in 2011, market prices began to increase and a weakening Canadian currency allowed us to convert those higher prices into even more Canadian dollars, helping to offset the value lost from lower landings.

But prices and exchange rates are cyclical and will turn against us again. If and when they do, the effects will be devastating.

We are now undergoing another major change in our resources. Climate change is increasing water temperatures, causing changes in the abundance and distribution of different fish species worldwide, with different effects in different areas.

So far, it has increased lobster catches in the Maritimes and decreased crab and shrimp catches in Newfoundland and Labrador, among other things. As the ongoing shrinkage of crab and shrimp stocks continues, it looms over the industry and creates uncertainty about its future. On the other hand, the same factors underlying the reductions in those species are also contributing to rebuilding of cod and other groundfish resources. In the reasonably foreseeable future, we will be able to create a new industry based on harvesting those resources.

Will our experience in the future be much different from what we experienced in the past? If history is any guide, we are heading toward a lot of grief.

In the short term, the industry is facing another period of upheaval. Some people are very optimistic about the return of cod, while others are lamenting the loss of shrimp and crab. Investment in assets for catching and processing shrimp and crab is losing value as those resources decline, but we will have to make some substantial new investments if we are going to take advantage of the developing opportunities in groundfish.

To muddy the waters a bit, we can expect to see an increase in foreign fleets fishing in the NAFO zone, as the groundfish resources rebuild.

On November 6, 2015, Seafood.com ran a story with the headline, “Russia Plans to Increase Catch in the Northwest Atlantic.” The story itself said, “Russian fleets will be returning to the Northwest Atlantic in the next few years. The reason is that Russia will again begin to fish its NAFO quotas of cod, redfish, and flounder so that it will not lose its historical fishing rights. In 2015, NAFO awarded Russia quotas of 893 tons of cod, and 18,629 tons of redfish. This represented 28.77 per cent of the redfish quota in NAFO areas outside of 200 miles. They also have a TAC of 1473 tons of Greenland halibut (turbot).”

If the Russians are interested, can France, Spain, Portugal and others be far behind?

But it is not only the foreign fleets we need to worry about. There will also be challenges in developing the Canadian fishery. Decisions made in both the public and private sectors will determine how successful we will be.

The closest parallel to our present situation is when we obtained the 200-mile limit in 1977.

Within three years, the industry was beset by widespread problems. As one set of problems was overcome, others came along, with increasing severity. The disaster that unfolded was mostly due to unfortunate decisions made in the private and public sectors. And we repeated that pattern as we developed the shellfish resources that presented opportunities after our groundfish disappeared.

As we contemplate what to do with our rebuilding groundfish resources, some people seem to want to rebuild the good old days of the 1980s. Those days may now be old but they definitely were not good. I lived through them and remember them well.

To paraphrase a well-known saying, if we don’t learn the lessons of history, we will be doomed to repeat them. We have a lot of work to do to prepare for the industry of the future. If we are going to make mistakes, let us at least make new ones and not repeat the ones we made before.