A. Are Private Quotas Property?
B. Rationalization, Concentration, and Corporatization
C. Conservation, Monitoring, and Enforcement
D. Social Equity, the Distribution of Wealth
E. Employment and Community Surviva


THE CONTROVERSY

A. Are Private Quotas Property?

[Individual quota] programs do not confer property rights to either the fishery or the fish. They are conditions of a licence that provide the fishermen with access to a specified quantity of fish. They are an extension of the limited entry licensing system… They do not create private rights. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

If the rights are not perpetual -- if they end at some point in time -- the rights holders will respond to that end point. -- Dr. Ragnar Arnason, Professor of Fisheries Economics, University of Iceland in Reykjavik, 22 October 1998

Without implementing private property, it is trying to provide the tools that private property would provide if private property were implemented. Quasi property. -- Bruce Turris, Executive Director, Pacific Blackcod Fishermen’s Association, 28 April 1998

The fatal flaw in our system is that we have a quasi-property rights system. The minister’s discretion can erase, extinguish, adapt and change these rights at any time. -- Brian Giroux, Executive Director, Scotia-Fundy Mobile Gear Fishermen’s Association, 21 May 1998

First, I want to remind everyone that the public or common property concept in the fishery has not existed for years. … The decision that there would be specific rights given to specific people in the fishery was made years and years ago. -- Ron Bulmer, President, Fisheries Council of Canada, 13 March 1997

The Minister of Fisheries and Oceans has discretionary licensing powers and can revoke or change our licence conditions. The latter point creates uncertainty about yearly sector shares and quotas and can destabilize investment plans, marketing and production plans. -- Michael O’Connor, Fleet Operations and Government Relations, National Sea Products, 28 May 1998

The trouble with the quotas so far in Canada, unlike New Zealand and Iceland, is that these are very frail rights. The fishermen do not have any guarantee. From a legal point of view, their rights have very little security. We are only talking about changing the rights of fishermen to catch them. We are not changing the ownership of the fish from public to private. -- Dr. Peter H. Pearse, Professor, University of British Columbia, 5 May 1998

… [I]f we think of property as a bundle of rights, then clearly these things have characteristics of property. The most important characteristic … would be exclusivity. -- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

Concerning ITQs, I would also raise the issue that it is hard for us to see how governments have the right to hand over a public resource to private interests. How can the government bestow fish resources to a few, turning what is a public resource into private wealth? -- David Coon, Policy Director, Conservation Council of New Brunswick, 7 May 1998

In fisheries, "property" is very much a chameleon term. Property rights-based fisheries may be viewed as falling along a continuum, from unknown property fisheries (e.g., in the case of open access, unrestricted or unregulated fisheries), to regulated common property fisheries (e.g., when access is restricted to those holding licences), to "privatized" or exclusive fisheries. Proprietary rights, in turn, vary in terms of their "intensity." Such rights are usually perceived by their advocates as the next logical step in a natural progression or evolution.

Committee members were informed by DFO officials that a fishing permit, whether it be a quota licence or a traditional one, is only a "privilege" authorizing its holder, at the discretion of the Minister of Fisheries and Oceans, to participate in a given fishery; it is not a grant of property, either in the fishery or in the fish, and does not "privatize" the resource. Indeed many proponents of quota licences in Canada regard them as very frail fishing rights with weak legal status.(20) Property rights-based fisheries, they argue, work best when the rights become more "complete"; that is, when they are more exclusive, of long duration, more transferable (giving licence holders the opportunity to realize the value of the rights), and more secure.

In a related vein, defenders of proprietary rights in fisheries claim that Canada’s policy of "limited-entry" in commercial fisheries has already "privatized," at least to some extent, the fishery resource.(21) This is because, once issued, traditional fishing licences confer an almost perpetual benefit because their annual renewal is usually automatic. Limited-entry also restricts access to a fishery thereby creating significant value in fishing permits, which are bought and sold, often for substantial sums (e.g., lobster licences); there is very little objection to this. It may also be pointed out that fishing licences in the competitive fishery may be regarded as forms of property because, in some past cases, the federal government has opted to "compensate" licence-holders (by means of licences buy-backs) for the withdrawal of the so-called "fishing privilege."

The following excerpts from the testimony convey the rather confusing and ambiguous nature of the discussion:

Because the fishermen [in New Zealand] have property rights under the fishery, they can borrow money from a bank, whereas in the past they had to borrow money from the fish merchants. The fish merchant has access to capital and can lend the money to buy the licence. The banks will not lend the money in our system. -- Brian Giroux, Executive Director, Scotia-Fundy Mobile Gear Fishermen’s Association, 21 May 1998

You cannot take quotas to a bank and borrow against them; you cannot transfer them flexibly; you cannot subdivide them. -- Dr. Peter H. Pearse, Professor, University of British Columbia.

Property is involved here. As I am not a lawyer, I could not list all the technical and legal aspects of property for you, but they do seem to be in here. For example, quota holdings can now be used as collateral on loans. They might even be split up in divorces. There are all sorts of indications that we are dealing with property. -- Dr. Anthony T. Charles, Professor of Management Science, Saint Mary’s University, 30 April 1998

From the point of view of people who have ITQs it is private property. It is bought, sold, and leased. I know of at least one case where it has been identified, by the courts, as private property in a divorce settlement. If it walks like a duck and quacks like a duck, it is a duck. In the opinion of coastal communities, we are talking about property. ... Someone in our community tried to find out about individual allocations under the ITQ program, but was turned down. This person then went through Access to Information, and was turned down again. The justification for this was that the requested information was individual information; that is, it dealt with individual property. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

Some witnesses stated that DFO had been promoting private quotas, in particular ITQs, by telling fishers that they would own essentially a share of the fish. Officials of the DFO told the Committee that quota licences had a limited time span; yet, one recent press release on ITQs issued by the Department twice refers to them as being "permanent."(22) Regardless of whether individual quotas are permanent or not, it is certain that the ability to sell or lease them, at the very least, implies an enduring, if not permanent, fishing access privilege. This is because of the substantial capital invested, it would be very difficult and expensive to undo an individual quota-managed fishery. As one witness explained:

It is difficult to reverse the process. The ITQs have been passed out for free in the first instance. They are now worth millions of dollars. If the government wants to reverse the process and pay off the people who bought these ITQs in good faith, some of which cost several hundred thousand dollars, then it will have to compensate those people who bought them. It is difficult to reverse the situation, so we have been more or less stuck with the system -- Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

Quota licences are usually perceived by their owners as private property. If they are ever construed as such in the courts, jurisdictional questions may arise; for example, if they are in fact private entitlements, should they not be subject to the provincial law relating to property and civil rights in the province? Would it then be constitutional for the federal government to regulate a fishery (e.g., cancel a quota) once access to it had been transferred from common property to private property?

Lastly, Committee members were advised by the BC Aboriginal Fisheries Commission that the question of extending private quotas should not be raised until such time as more fundamental questions have been answered relative to the rights of the Aboriginal peoples to fish certain stocks.(23)

 

B. Rationalization, Concentration, and Corporatization

We do not believe that the ITQs lead to corporate concentration per se. After all, in any exchange there is a buyer and a seller. If [a licence] is of value, the small fishers will likely hold on to it. I have frequently heard, particularly from union representatives, that corporations want to buy licences. Time after time, companies have shown that they are unwilling to buy licences, and some of them have expressed that to me both verbally and in writing. They ask why they should do so. They want a steady supply of fish, and they do not want to be involved with the licensing process -- owning licences, running boats, and hiring fishermen to do it. It is unnecessary, expensive and difficult. It leads to labour problems and capital expenditures. Corporations themselves are not instinctively interested in that type of concentration. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

Individual quota approaches are quite powerful in that they allow individuals to make decisions about consolidating quota to support the fishing operation they want to conduct. It is in that context that the term "rationalization" is used. -- Leslie Burke, Director, Policy and Economic Analysis (Maritime Region), Department of Fisheries and Oceans, 20 February 1997

Some communities have lost vessels and some communities have won vessels, but that happens even in ordinary licensing systems. -- Brian Giroux, Executive Director, Scotia-Fundy Mobile Gear Fishermen’s Association, 21 May 1998

Where these quota systems have been instituted, there has not been any major concentration. -- Ron Bulmer, President, Fisheries Council of Canada, 13 March 1997

In the case of New Zealand, you have seen a considerable increase in corporate ownership of the quotas. They started with large holdings, and the initial allocation saw Fletcher Challenge and others receive enormous quotas. It depends on the starting point. -- Bruce Turris, Executive Director, Pacific Blackcod Fishermen’s Association, 28 April 1998

There are cases where serious consolidation has occurred under ITQs -- which is not necessarily bad, particularly in this day and age where the fisheries are so overcapitalized. -- Dr. Daniel E. Lane, Professor, Faculty of Administration, University of Ottawa, 11 June 1998

The quota system works well for those who are renting their licences and for those who sit home and have that privilege, but it is not working well for the people who are actually producing the wealth. I do not think that is what the Government of Canada intended. -- John Radosevic, President, United Fishermen and Allied Workers Union, 5 May 1998

I know several villages are actually now without quota. They have been forced to sell. … That is what is happening in my district in several villages. No village has been entirely emptied so far. … Many economists say this is just a natural evolution and that mobility of labour has always been tremendous in Iceland. That is how we built the villages in the first place. However, in the early years it was different because people did not build expensive houses and, as poor people, they could move more often, and faster. -- Olafur Hannibalsson, Political Commentator and Deputy MP in Iceland, 29 October 1998

The ITQ system -- if the individual quotas are perfectly transferable -- would generate the most efficient company structure. If the fishery is suitable for large-scale fishing operations, then that is going to be the outcome. Due to economies of scale in processing and marketing, there a high likelihood that large corporations and conglomerates will become dominant in a freely transferable fishery. -- Dr. Ragnar Arnason, Professor of Fisheries Economics, University of Iceland in Reykjavik, 22 October 1998

The ITQ was an invention of economists. Therefore, one might expect that … in terms of economic efficiency, the ITQ would have some advantage. I would say that this is true. For the purposes of short-run improvements in economic efficiency, at least, the ITQ does have an advantage. -- Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

The most important justification for individual quotas, their raison d’être, is the increase in economic efficiency they afford to individual fishing operations. Capital investment to purchase more equipment in order to increase fishing power is largely unnecessary since vessel owners have a guaranteed share of the catch and may fish throughout the entire season in the most economical way. From the perspective of fisheries management, measures to control fishing effort (e.g., restrictions on boat size) are no longer essential because each operator has a specific and guaranteed allocation of fish.(24)

When private quotas are made transferable (as in the case of ITQs), they also become a powerful management device to reduce fishing capacity in a fleet by reducing the number of fishers and fishing vessels. Operators who believe their quota to be too small to make a profit may buy or lease quotas from others, or sell their shares and leave the fishery rather than continue fishing. Those who find it uneconomic and leave and those who retire receive a financial return for their investment in the fishery, at no cost to government (or the taxpayer) in terms of government licence retirement or buy-back programs.

The consolidation of fleets (i.e., fewer fishers and fishing boats) and the concentration of wealth are the inevitable outcomes of ITQ-managed fisheries.(25) This is not necessarily bad if the objective is to reduce overcapacity (i.e., the number of fishing vessels). However, a pivotal issue that the DFO has failed to address to this Committee’s satisfaction is whether recent depletions of fish stocks in Canada’s commercial fisheries were caused by "overcapacity," defined in simple terms as "too many fishers chasing too few fish," or by too much fishing effort, two very different concepts. This Committee has never accepted the stark proposition that the depletion in stocks was the unfortunate result of "too many fishers."

The monetary value of an ITQ licence depends on expectations of present and future catch levels, as well as the market price for the species in question. Concerns were repeatedly expressed during the Committee’s hearings that, contrary to conventional economic theory, interests with access to capital, such as large companies, are more likely than the more efficient fishers to purchase licences. The following statement sums up much of the underlying theme of the discussion:

With the passing out of ITQs, one invariably provides a mechanism for those who have access to financial resources to buy up larger shares of the fish stock access. Therefore, fewer private individuals have access to the fishery. This is not privatization of the fishery; it is "corporatization" of the fishery, with more and more of the access to the resource going to those who have the finances to purchase it. --Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

In southwest Nova Scotia, the Committee learned that under an ITQ system for groundfish instituted 1989, the number of boats operating mobile (dragger) gear had been reduced by over half. ITQs are credited with having prevented massive bankruptcies because fishers who sold their quotas were able to realize a return on their investment in the fishery. However, most of the boats are now considered to be owned or controlled by three large companies. Federal policy for the fleet is that ITQ licences are to be owned by owner/operator fishers, with no one licence controlling more than 2% of Total Allowable Catches.(26) Federal regulations under the DFO’s fleet separation policy also state that fishing licences cannot be issued to companies involved in the processing sector.(27)

One witness told the Committee that the reason for this concentration of ownership or control in southwest Nova Scotia was the refusal of financial institutions to accept individual quotas as collateral for loans(28) (although other witnesses gave conflicting testimony).

If you have a system that gives the fishermen a quasi-property right rather than a concrete asset on which they can borrow money to purchase the licence, you are basically throwing them into the hands of people who can lend them money without the security of an asset. Brian Giroux, Executive Director, Scotia-Fundy Mobile Gear Fishermen’s Association, 21 May 1998

It should be noted that individual quotas suit the industrial needs of fish processing companies, both large and small, since they lengthen the fishing season and even out their production cycles. Private quotas can also assure such companies of a greater security of supply. In regard to the fleet separation policy, the Committee heard that the restriction is being circumvented.(29)

The DFO’s licensing policy for Scotia-Fundy says that there is a fleet separation policy -- that is to say, the enterprise must be owner-operated. To have a licence you must run the enterprise yourself. This policy is not enforced, however. It is possible for a plant to buy not only the quota, but also the enterprise. The plant can then run the enterprise. The man in the wheelhouse, who, on paper, is the owner/operator, is, in fact, an employee of the company. This is happening on a large scale in all of the ITQ fleets. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

When I say company-owned, I am not talking about owner/operator, but company-owned boats with fishermen who have signed an agreement under the table because these companies cannot own the licences. A DFO regulation states that they cannot own those licences. Therefore, they have "front fishermen" captains fishing on boats they do not own. … It can be stopped if the will is there with DFO to stop it. -- Sarah Huskilson, Chair, Eastern Shelburne Fishermen’s Association, 21 May 1998

Opponents of individual quotas also fear that the expansion of these will result in more individuals (sometimes referred to as "armchair fishermen") who profit simply by leasing their quotas for others to fish.(30) This practice would appear to undermine the whole concept of individual quotas: although the number of fishing vessels may be reduced, the leasing of quotas does nothing to reduce the total financial capital invested in the resource, which must be paid for from the harvest.

In Iceland, the inclusion of small vessels between 6 GMT and 10 GMT into the quota management system was said to have had the following consequences:

On January 1, 1991, the government incorporated 1,043 small boats into the ITQ system. Only 44 months later, the big companies bought approximately 700 of those boats and moved their quotas to their offshore ships. Also, they used their renewal rights to enlarge these very same ships. To top it off, these same companies have used the freedom of transferring quotas to annually lease these very same quotas to the small boats that did not sell out. -- Arthur Bogason, Chair, National Association of Small Boat Owners, 29 October 1998(31)

Lastly, some worry that with the globalization of trade, the federal government will be unable to protect Canada’s fishery resource (once "privatized") from being controlled, perhaps even owned, by foreign interests. Fish processing companies that have a foreign ownership level of more than 49% now are prohibited from holding Canadian commercial fishing licences.(32)

 

C. Conservation, Monitoring, and Enforcement

[Individual quota] programs have been perceived to increase the incidence of discarded small or unwanted fish. In practice, however, [they] have been more effective than previous management regimes in promoting conservation, and in achieving economic objectives. … With [individual quotas] there is a proprietary feeling of responsibility, which is helping to eliminate the problem of highgrading, and of throwing the less valuable or smaller fish overboard. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

Our experience has generally demonstrated that individual quota regimes have been more effective than previous management approaches in promoting conservation and achieving economic objectives. -- Jacque Robichaud, Director General, Resource Management Directorate, Department of Fisheries and Oceans, 20 February 1997

The single most important benefit of privatization and quotas of any kind in fisheries is the responsibility that it internalizes in the owner and what is owned. -- Dr. Daniel E. Lane, Professor, Faculty of Administration, University of Ottawa, 11 June 1998

Experience in New Zealand and elsewhere shows that quota holders, once they find themselves with new and substantial assets in fishing rights, become very sensitive to any actions on the part of other fishers or poachers that encroach on them, or to anything anybody does to impinge on those assets or diminish the value of those rights, including governments. -- Dr. Peter H. Pearse, Professor, University of British Columbia, 5 May 1998

An ITQ system encourages the fishermen to select from the stocks. The more the quotas are limited, the more they will select. Our cod stock is like a cake of many layers. Selecting from a cake is not considered good manners. The cream is scraped off -- in this case the spawning stock -- and some might dig in here and there in search of the goodies. We can tolerate this at a child’s party, but should we regarding a fish stock? -- Arthur Bogason, Chair, National Association of Small Boat Owners, 29 October 1998

Every fish that comes off the wharf is counted. No one is counting the ones that are dead in the water. -- Henry Surette, Director, West Nova Fishermen’s Coalition, 19 February 1998

The enforcement issue is an important one because the DFO has faced very serious cuts, as we know, and there is very little enforcement on any fleet now. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

I spent some time within the fisheries area but then moved off to other areas and returned. I was struck by the fact that the observed behaviour of the fishing companies, as they sat in policy meetings and so on, did not seem to coincide with the theoretical prediction that once fishers owned quota, they would be very capable stewards of the resource. -- Catherine Wallace, Senior Lecturer in Public Policy and Economics, School of Business and Public Management, Victoria University of Wellington, 27 October 1998

Privatization through the ITQ system will not in itself lead to greater sustainability. Sustainability comes from setting the Total Allowable Catch, not from privatization of the fishery. … For New Zealand, it is not the God-send we thought at various times it might be. It is not the Holy Grail. --Hamish Rennie, Lecturer, Department of Geography, University of Waikato, New Zealand, 4 June 1998

Ideally, … people would actually own fish, just as people on land own cattle, horses or sheep. At the moment we do not have the technological capability for that, but I fully expect that technology will be developed over the next century that will allow people to have property rights in individual fish. -- Dr. Ragnar Arnason, Professor of Fisheries Economics, University of Iceland in Reykjavik, 22 October 1998

Private quotas, at the very least, imply "ownership" and grant their holders a guaranteed share of the fishery. According to blackboard economic theory, people fish more responsibly when they "own" the resource; that is, when a renewable resource is common property, there is no incentive to preserve and conserve it. Presumably fishers in a property rights-based management regime have a keener interest in matters of fishery enforcement and a greater incentive for self-policing and are more likely to report on each other. In short, the assumption is that private property will always be diligently conserved by its owners.

In fisheries, catches are often inadvertent or incidental to the species sought (i.e., the wrong species is harvested as a by-catch because of low selectivity in certain types of fishing gear). Since presumably the race to the fish is eliminated under individual quotas, an additional benefit put forward by their advocates is their potential for reducing by-catches. Moreover, in some cases, fishers may agree to transfer by-catches to other licensed fishers (when allowed), thereby, it is said, further lessening the by-catch problem.

This conservation argument in support of private quotas was repeatedly challenged during the Committee’s hearings.

You cannot separate out the individual fish, as a farmer would do with animals on a farm. The farmer controls all of the elements which bring those animals to market. Under ITQs, fish that will be looked after by individuals are not identified. ITQs only give individuals a right to a certain amount of fish; they do not require those individuals to look after the fish. -- Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

Individual quotas exacerbate the fundamental flaws of the entire spectrum of quota management, starting with the Total Allowable Catch. … TACs are determined typically as a portion of the total fish stock, the total biomass, but the number of fish in the ocean is surely one of the most uncertain numbers on earth; amazingly uncertain and never going to be fully knowable. … One of the main causes of the collapse of the groundfish industry was the belief that we could set TACs knowing the number of fish in the ocean. -- Dr. Anthony T. Charles, Professor of Management Science, Saint Mary’s University, 30 April 1998

You might ask why Canada is privatizing its common property fisheries. You know that one very popular shield the government throws up for nearly every criticism is that they do it for conservation. However, the conservation record in privatized fisheries -- that is, those fisheries that have either individual transferable quotas or those fisheries that have stackable transferable area licences -- is dismal. … We fear that DFO is driven by cost-cutting considerations alone, without due concern for fish, for people, for quality of product, or the needs of coastal communities. --John Radosevic, President, United Fishermen and Allied Workers Union, 5 May 1998

The debate, which is mainly a media debate about the role of science in the groundfish collapse, is largely, in my judgement, phoney. … The DFO science enterprise was, in effect, co-opted by the powerful build-up in Canadian fishing power since 1977. It is absolutely phoney to go after the scientists. They did not have a chance in a climate driven by powerful monied interests. -- Michael Belliveau, Executive Secretary, Maritime Fishermen’s Union, 14 May 1998

How on earth can we claim that a corporation with executives in one place, shareholders in another, and a board of directors and employees, operates with the same psychological motivations to its property as we identify with an individual? Corporations may be persons in law, but that is all. -- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

The dumping and discarding of fish has become so bad that some fishermen have written letters to the minister. One fisherman wrote to Minister Mifflin right after he docked his boat. He wrote to tell him that he was ploughing his boat through dead fish. He has a large boat and he could see dead fish for miles around. This has been documented, yet nothing has been done. That was 18 months ago and not one thing has been done. The government has encouraged more and more individual quotas and quota systems. The dumping and discarding are continuing. -- Sarah Huskilson, Chair, Eastern Shelburne Fishermen’s Association, 21 May 1998

Marine fisheries have remained common property longer than other sectors or resources for a very good reason. Boundaries can be drawn in agriculture, or around mining and forestry resources for purposes of assigning private property rights. Fish, on the other hand, are hidden from view, often migrate (sometimes over long distances), and intermingle with other stocks, making it difficult to isolate specific populations and assign specific property rights to them. One might say that the major problem with individual quota management is the plain and simple fact that fish in the wild are not (and cannot) be enclosed or "fenced in."

During its hearings, Committee members were told that property rights-based fisheries require more accurate stock assessments than traditionally managed fisheries. For individual quota management to be successful, stock conditions must be stable and known with sufficient confidence for biologically sound TACs to be prescribed so as to parcel out shares of the fishery to individual interests. But fish stocks undergo unpredictable fluctuations, however. At best, assessing the size of fish stocks is a "black art," one in which the DFO has not excelled notably with respect to some very major commercial stocks.

Another weakness of private quotas is that stock assessments may easily become embroiled in controversy since they influence catch limits and the value of licences. Conservation may require in-season reductions in quotas or even the closure of a quota fishery in mid-season; this can easily discredit the system and lead fishers to join in a "race for fish" at the beginning of the following season for fear that fishing will again be halted prematurely. Governments may therefore be more reluctant to reduce Total Allowable Catches (for reasons of conservation) in property rights-based fisheries.(33) Anxiety and uncertainty about the future can cause individual quota holders to become just as oriented to achieving short-term profits as fishers in highly competitive fisheries. Although in-season changes to annual TACs (as a result of changes in scientific advice) are possible in theory, the Committee was advised that such changes have been very rare in Canada.

There may also be a reluctance on the part of government to cut TACs because the value of private quotas depends on the amount of fish that may be caught. In New Zealand, the situation was described in the following terms:(34)

We see strong pressure to keep catch limits high, and that pressure has actually become more intense as the property right has become more defined. It is striking that the industry has been very keen to have quota that is bankable. Something that they can have on their balance sheet and obtain loans against and so on. One effect of that is that they are doubly resistant to reductions in catch limits because that is an asset against which they have a loan. -- Catherine Wallace, Senior Lecturer in Public Policy and Economics, School of Business and Public Management, Victoria University of Wellington, 27 October 1998

The industry is not homogenous. Some people bought fishing vessels this year or last year. Other people have paid off their fishing vessels. The people who have them paid off are quite prepared to consider a reduction in the TAC, because they have already recovered their costs. Those most adamantly opposed to reductions are the people who have major borrowings they are trying to meet. They do not want to be reduced in that sense. They are united against the government in this area. They will fight out their own battles internally and then they will fight with the government. -- Hamish Rennie, Lecturer, Department of Geography, University of Waikato, New Zealand, 4 June 1998

Another phenomenon can seriously impair the factual basis in managing a fishery. In anticipation of private quotas, fishers in competitive fisheries may increase fishing effort, or even over-report their catches, because initial allocations are based largely on "catch histories," the historical performances of fishers. As one spokesperson explained:

… [E]very fisherman realizes that, sooner or later, there will be an allocation based on past performance. The result is that people who have more than one licence, instead of fishing each one in turn, are fishing all of them, if possible, with different vessels, thereby creating what is called "history" so as not to be discriminated against. -- Klaus Sonnenberg, Treasurer, Eastern Fishermen’s Association, 28 May 1998

Perhaps the major damaging feature of quota licences, and the one most often mentioned in the literature, is the powerful incentive they offer to fishers to discard low-value and undersized fish (which count against the individual quota) for higher-valued fish, especially if individual quotas are too small to be economically viable for individual operators. This is especially likely where fishers have gone into debt to buy expensive quotas from other fishers in the expectation of a reasonable return on their investment.

Over the years, this destructive and grossly wasteful behaviour, known as "highgrading," a kind of strip-mining of the ocean, became entrenched and tacitly accepted as the way of doing business in the Atlantic fishery.(35) The Committee was first made aware of this unconscionable practice during the mid-1980s,(36) and members continue to deplore it to this day. Even advocates of quota licensing concede that private quotas create this incentive to highgrade.(37)

Another result of highgrading -- a practice that is seldom voluntarily reported -- is the deterioration of the quality of the catch data used in stock assessment, the very information on which to a large extent management decisions are based. Fisheries scientists underestimate actual catches, overestimate stock levels, and recommend Total Allowable Catches that are not sustainable. Although the extent to which this illegal practice has contributed to the disastrous collapse of certain Canadian fisheries has yet to be ascertained, the evidence suggests that the so-called "common property problem" was not the problem. On this, one leading opponent of private quotas made the following observation:

In Canada, in the early 1990s we had a collapse of our groundfish stocks. That was the first time in history that ever happened. It happened about 10 years after we introduced and gradually increased the use of ITQs in our fisheries on the East Coast. That happened in conjunction with the problem of discarding perfectly good fish. Is it a mere coincidence that we had this disaster with our fisheries precisely at the time when you could expect the impact of several years of ITQs to be felt in the fishery, particularly with the discarding problem we had? Iceland has had an ITQ system for over a decade. The most important stock in Iceland, cod, is at its lowest level ever. That again is after 10 years of ITQ impacts. … It is rather striking that, in the countries which have used ITQs, major problems are being observed in the fisheries. -- Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

Although the highgrading of fish does take place in competitive limited-entry fisheries, the "personalized benefit" of discarding is considered to be less because the incentive is for fishers to land as much as they can catch, as quickly as possible. In regard to dumping fish at sea because they are incidental to species sought, the Committee learned that in southwest Nova Scotia (Yarmouth County) handliners are assigned a "dollar quota" (a value-based quota, as opposed to a quantity-based quota) and therefore land whatever is caught.

Certain types of fisheries may not be well suited for individual quota management. This is the case in fisheries where estimates of abundance vary over the fishing season and harvests are highly variable from year-to-year. Quota licences will not slow the pace of fishing or extend the fishing season over a longer period if the species of fish are migratory and remain in the same area for only a limited time. For example, the overwhelming consensus during the Committee’s hearings was that a system of individual transferable quotas would not be feasible in highly uncertain fisheries, such as that for Pacific salmon.(38) The more ideologically driven proponents of proprietary rights, however, advocate exclusive, perpetual, and transferable quotas even for Pacific salmon.(39)

Further complications arise in multi-species fisheries,(40) where multi-licensed participants target different stocks depending on their fluctuations and on market and environmental conditions. Individual quotas are set on a species-by-species basis, and there is little likelihood that a fisher’s catch (the species mix) would conform to the proportions of the various species quota allotment.(41)

Private quotas "personalize" the benefits of discarding and under-reporting catches, making enforcement, monitoring, and surveillance more problematic and costlier. Quota licensing regimes have therefore led to a fundamental rethinking of how to monitor fishing activity. In Canada, the DFO chose industry-managed, designed and funded dockside monitoring programs aimed at verifying and tracking the landings of each fisher at the wharf. Dockside monitors are certified by the Department, but are under contract to the responsible fleet sector; the collection of monitoring charges is a business matter between the fleets and the party contracted. However, individual quotas may well be too difficult to monitor adequately and enforce in this way in fisheries based in numerous widely-dispersed small communities and involving large number of fishers and many potential landing sites and customers.(42)

The practical evidence given to the Committee suggests that, in some very fundamental ways, private quotas may encourage behaviour that is contrary to good conservation or what is known as the "precautionary approach" to fisheries management ("erring on the side of conservation").(43) One witness offered us this advice:

In assessing experience with ITQs in other places and in Canada, I would say: wait a bit. Often, these things are proclaimed as a success and a cure-all before the long-term evidence is in. I was reading an article, written in 1988, on the massive success from a conservation standpoint of enterprise allocations in the East Coast of Canada. It took us a number of years on the East Coast to really destroy a fishery. There is evidence coming in now, at least from one of the New Zealand cases, that the long-term effect, once the resource goes through a full cycle, may be different. … Cleverly crafted legal obligations, whether related to the total allowable catch or quotas, will not force the resource to behave in predictable, amenable ways which suit a business plan. That is at the root of the problem. It worries me when I hear that one of the key advantages of an ITQ is that it will enable industry to plan over the longer term for its investments. … It might let them pretend to plan their investment but, unless someone convinces the fish to cooperate, that planning is largely an illusion. --Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

The Committee was surprised to learn that the Fisheries Resource Conservation Council (FRCC), an arms-length agency created to hold public hearings on resource assessments and conservation measures and to provide the federal Minister of Fisheries and Oceans with public written advice on recommended harvest levels and conservation measures, does not have a position on property rights-based fisheries.(44) The subject of individual quotas is considered beyond the FRCC’s mandate, even though it has most obvious and important consequences for conservation.

On the sustainability of fisheries in New Zealand and Iceland, the opinion of spokespersons from those countries was deeply divided:

A reasonable analysis of the sustainability measures and the results which are being achieved in the fisheries management system in New Zealand would suggest that fisheries are being managed sustainably, in general, and that those fisheries which have been depleted in the past are clearly showing signs of stock rebuild and recovery. The overwhelming majority of fisheries are currently at biological maximum sustainable yield or better. -- Alastair Macfarlane, General Manager, Trade and Information, New Zealand Seafood Industry Council Ltd., 3 November 1998

… [D]espite many claims that New Zealand’s quota management system is highly successful, when we actually look at the information about the fish stocks, we find that actually we have no idea what those stocks are, what their yield is, how that compares with maximum sustainable yield, what the original biomass was, and so on. The striking thing about the New Zealand story is how many claims are being made and how little information we actually have. We do know that something like 50% to 60% of the total allowable commercial catches are risky, either because we do not know what the yield is, or because the catch limits are set at least twice the size of the sustainable yield. That is a big overrun. We actually only have fish stock information for a few of our stocks. We know some of them are in real trouble. Some of them are not. -- Catherine Wallace, Senior Lecturer in Public Policy and Economics, School of Business and Public Management, Victoria University of Wellington, 27 October 1998

We think that the results of our fisheries management system are very favourable, both biologically and economically. The catches have been very much in line with the predetermined limits. It has been much easier, based on individual quantity limitation, to prevent overfishing. We have seen very good signs of recovery in the cod stock, which was in very serious condition. Other stocks are in good condition too, generally speaking. -- Ari Edwald, Special Adviser to Iceland’s Minister of Fisheries, 22 October 1998

Since 1947, the cod fishery has produced less than [this fishing year’s 218,000 tonnes] only three times, and all cases were after the enactment of the ITQ system. As you can see, since 1968, Greenland halibut catches have never been smaller. If this goes on, I believe that halibut is on the way to the endangered species list. -- Arthur Bogason, Chair, National Association of Small Boat Owners, 29 October 1998

 

D. Social Equity, the Distribution of Wealth

We certainly understand the opportunity of recovering the economic rent from fisheries, and we have attempted to do that in a number of programs. This is a ballpark figure, but I think we collect around $50 million one way or another from the fisheries community for various fees and other charges, which essentially is to charge for the resource. That is a free resource given to them. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

The increased value of these rights is a reflection of the improved economic performance of the fishery. To that extent, it should be welcomed, for it is evidence that the system is working. -- Dr. Peter H. Pearse, Professor, University of British Columbia, 5 May 1998

Today, after the initial resistance of the fishermen at the time, if you asked the fishermen now what they prefer as a management system, the vast majority would tell you they would prefer to keep the current [IQ] system. -- Jean Saint-Cyr, Executive Director, Fédération régionale acadienne des pêcheurs professionnels Inc., 7 May 1998

Basically, those who win, whether it is Norway, Iceland or Nova Scotia, are going to be very much in favour of the approach. For the people who do not have ITQs, not too many of them support ITQs, let me put it that way. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

You can imagine the force of the lobby from those individuals and groups who stand to gain from the privatization of the country’s marine resources. --Michael Belliveau, Executive Secretary, Maritime Fishermen’s Union, 14 May 1998

The basic criticism of those who are not in the system concerns the alienation of what they regard as a public resource in the hands of private ownership. It is a philosophical, political opinion. -- Dr. John H. Annala, Manager Science Policy, New Zealand Ministry of Fisheries, 27 October 1998

If anyone is to have rights, then everyone should have rights. Otherwise, those without clearly defined rights become marginalized. -- Catherine Wallace, Senior Lecturer in Public Policy and Economics, School of Business and Public Management, Victoria University of Wellington, 27 October 1998

The Icelandic legislation for the ITQ system states that the exploitable marine resources on Icelandic fishing grounds are the public property of the Icelandic nation. This is a terrible joke. An ITQ system can only be a system of privatization. It lies in the name itself. "Individual" is not an indication of common property. … How can an individual transfer, lease or sell something that does not belong to him alone? -- Arthur Bogason, Chair, National Association of Small Boat Owners, 29 October 1998

Why these rights should be granted free of charge? I do not think there is any economic response in that regard. I think there could be a response based on legal considerations, however. … There are certainly moral aspects to this question… -- Dr. Ragnar Arnason, Professor of Fisheries Economics, University of Iceland in Reykjavik, 22 October 1998

A purely economic analysis of individual quotas does not take into account their effects on the distribution of incomes generated by the fishery. In fact, there would appear to be no argument in their favour in terms of improving social equity.(45)

Members of the Committee were made aware that fairly apportioning initial individual allocations can be problematic and contentious.(46) In Canada and elsewhere, initial allocations within a fleet are based largely on fishers’ "catch histories," the amount of fish caught in previous years, with the aim of rewarding those who have been active and have demonstrated an attachment to the fishery. Historical catch records, however, may be unjust, flawed or inaccurate for a number of reasons. For example, fishers may have fished longer and harder, or they mayhave over-reported their catches in anticipation of the individual quota program. They may also have fished even if it was not to their advantage to do so. One witness warned of this worrying trend in the Atlantic lobster fishery.

What we are finding, for example, in the lobster fishery, is that, too often, people are fishing increasingly harder simply because, if it is turned into an IQ fishery, they want to make sure that their history is such that they will become millionaires in the future by the present use-it-or-lose-it policy that Minister Tobin condemned. -- Klaus Sonnenberg, Treasurer, Eastern Fishermen’s Association, 28 May 1998

Catch history may also reward inappropriate behaviour, such as highgrading and dumping. In fact, the tragic irony in some Atlantic fisheries is that catch records were calculated precisely in the period when stocks were being abused. Catch histories benefited those who placed the most pressure on the resource, in effect penalizing those who responded to declining fisheries by shifting to other species or even other types of work.

Here is the simple truth: The more you bent the rules during that time, the more you used a liner in your nets, the more you high-graded and discarded fish, the more you bashed the stocks, the more you are now rewarded into perpetuity with a nice fat quota. There is absolutely no justice in that, certainly not from a conservation point of view. … It is not, in fact, the most efficient who buy-out the others; it is those with the most access to the money to buy the quota from the others. How did they get that capital? Well, who knows, but one possibility is that they obtained it by catching large amounts of fish over that period when the fish stocks were declining. -- Dr. Anthony T. Charles, Professor of Management Science, Saint Mary’s University, 30 April 1998

In property rights-based fisheries, initial allocations of quota convey considerable personal wealth to initial (first generation) quota-holders. The situation is frequently described as a "windfall" for those who get them, since private quotas are given out freely at the outset. Predictably, those who hold such licences are usually very supportive of proprietary rights in fisheries, once these rights are in place. As such, individual quotas will likely constitute formidable financial barriers to entry by future generations of small-scale fishers. Another controversial result of assigning initial quotas to licence holders is that fishing crews may believe they have a historic right in the fishery and are entitled to some form of compensation. Private quotas are also frequently criticized as being unfairly exclusive for other reasons; the midshore snow crab fishery in the Southern Gulf of St. Lawrence is illustrative of this point.

Since the early 1990s, 130 individual fishers from New Brunswick, Quebec, and Nova Scotia have harvested snow crab in the Southern Gulf of St. Lawrence (Crab Fishing Area 12) under a system of individual (non-transferable) quotas (IQs).(47) Under a co-management agreement with the association representing the quota holders, the federal government recovers a portion of the costs of managing the resource (e.g., for research and monitoring the fishery). In return, the federal government "guarantee(s) its partners a big enough share of the resource to generate a level of income that will enable them to meet the(se) financial obligations."(48) While the Committee heard that the quota system for crab had worked quite well, others who testified had a very different, directly conflicting perspective:

That fishery, in a sense, has made millionaires of relatively few people, and the battles that have ensued over this have been very dramatic and emotional. It is because the access to the resource has been very restricted. -- David Coon, Policy Director, Conservation Council of New Brunswick, 7 May 1998

I will try to be more specific by following up on one of the DFO’s prize models for privatization, which is the so-called partnership with the New Brunswick snow crab fleet. This is a group of 81 midshore licence holders, who have had quite a time of it over the last 15 years. One respected accountant told me that this group of 81 licence holders is estimated to be worth something like $500 million, which would mean that the average Area 12 snow crab licence holder is worth approximately 60 times more than the average Canadian. This is the group that the DFO planners have actively wooed as a model partner. The basics of the partnership can be boiled down to the DFO using the full powers of the federal state to grant private ownership of most, if not all, of the southern Gulf of St. Lawrence snow crab resource to this group. In return, the group of crab licence holders picked up some of the annual costs of the science and management of this resource. This appears fine, until you remember that there is another fleet in the southern Gulf of St. Lawrence. This inshore fleet is made up of some 4,000 owner/operator fishers who pursue a well developed and well regulated multi-species fishery, relying first on the productive and widely dispersed lobster resource, and then on a range of licences to make up a full fishing season. The inshore fleet has permanent access to 10% of the snow crab resource. -- Michael Belliveau, Executive Secretary, Maritime Fishermen’s Union, 14 May 1998

In regard to income distribution, the federal government eventually will have to tackle a number of fundamental and contentious policy issues, such as whether the considerable wealth often created by quota licences should be limited, shared in some way with other fishers,(49) or returned to the federal government as "resource rent" in exchange for the granting of the exclusive harvesting privilege.(50) As one witness explained:

It is a public resource, and it belongs to the taxpayers of Canada. There are many ways for the Government of Canada to access proper returns to the people of Canada. Those benefits should not necessarily go just to the communities who already benefit from their association with the fishery, and from the various landings. The Government of Canada should take up policies on issues like resource rent, and the capture of those rents. -- Bruce Turris, Executive Director, Pacific Blackcod Fishermen’s Association, 28 April 1998(51)

In Iceland, the situation was described to us in the following terms:

In Reykjavik and similar areas, there is a wide acceptance of this biological and economic model. However, they maintain that the fishing sector should be paying higher dues for these rights to be utilizing what was, at least before, perceived to be a common resource. Those outside Reykjavik would be very much opposed, generally speaking, to any kind of increased resource taxing because they would see it as an economic pressure on the company in the area for whom they work, and it would be contradictory to their interests. This is how the debate about the fisheries policy has advanced. Critics outside Reykjavik would like a new deal that would give fishing rights to people that are not involved in the fishery today because they would like to start up just like the guy next door. In Reykjavik, the critics would be pushing mainly for increased taxation. -- Ari Edwald, Special Adviser to Iceland’s Minister of Fisheries, 22 October 1998

In New Zealand, resource rentals were replaced by a cost recovery scheme in 1994, since when, the "avoidable costs of managing, researching, and enforcing commercial fisheries" are to be paid by the fishing industry through levies. The notion of "avoidable costs" requires the industry to pay for those costs which would not be incurred if the industry were not there. We were told that quota-holders consider their rights to be pre-eminent in disputes with other stakeholders, and that the cost recovery scheme had reinforced this view. Although the stock assessment process leading to the setting of TACs was described as inclusive of other stakeholders groups (e.g., recreational fishers, the environmentalists, Maori organizations) and "completely open and transparent," the influence of the "club of quota holders" compared with that of other stakeholders was said to be disproportionate because they pay a large portion of the costs of managing the fisheries. On the amount paid, we were told that initial assumptions about the level of cost efficiencies that companies would achieve were unrealistic, that only about 80% of the costs of management are being recovered, and that the industry appears to be unable or unwilling to absorb total costs and has been extremely reluctant to spend money on fisheries research and environmental protection. Another effect of cost recovery was said to be the formation of commercial fisheries stakeholder groupings(52) based on geographical location or species fished.

 

E. Employment and Community Survival

Community management can be a very effective tool, but it is not always supported by fishers. … You must recognize that somehow transferring the political pressure to divide up the quota to a smaller or a more local level is not always the way to achieve the needed success. Sometimes political pressure cannot be resisted at the lower level any better than at the intermediate, the provincial, or the federal level. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

I do not think it is the role of government, in the long run, to use artificial means to sustain communities. -- Dr. Peter H. Pearse, Professor, University of British Columbia, 5 May 1998

…[O]ur society is based on economic progress and economic growth. … I put to you that people today would not like to go back to the pre-Industrial Revolution days and say "we will not enclose any land because that will hurt farming communities." -- Dr. Ragnar Arnason, Professor of Fisheries Economics, University of Iceland in Reykjavik, 22 October 1998

Now that we have had the trend … toward consolidation and better business performance, the disputes over fisheries policies are much wider. You can see a very clear distinction between the more populated areas, such as Reykjavik, and those rural areas where many people are working directly in the industry. -- Ari Edwald, Special Adviser to Iceland’s Minister of Fisheries, 22 October 1998

Since 1991, the debate has been turning towards the injustices of the system. People in the villages are seeing with their own eyes when a man who had been living in the community for 30, 40 years and been a pillar in the community, all of a sudden gives away something to which they feel they have contributed. … The communities have been at the mercy of the individual quota owners, which has proven to be a serious financial burden for many communities that have found themselves forced to interfere when a local ship owner has sold his vessel. Another result of the quotas is that there has been an accumulation of factory trawlers which can process the fish at sea. -- Olafur Hannibalsson, Political Commentator and Deputy MP in Iceland, 29 October 1998

That concern [over the effects of transferability] does not exist in New Zealand because of the nature of the economy and the fact that there are very few, if any, communities that rely solely or mainly on fishing. It is a very diversified economy. That concern has not arisen. -- Dr. John H. Annala, Manager Science Policy, New Zealand Ministry of Fisheries, 27 October 1998

We have a public resource which has been privatized without any public debate, and which has gone into the hands, not of the fishermen, but of the companies on land. What is the next step in that sequence? In coastal communities, we do not know the answer. We have no control over the next step. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

[The DFO’s] primary and probably only function is to consider how much it is going to cost. It is a short-sighted view because they do not think beyond that and ask, "What is it going to cost if we do not see fisheries thriving in these coastal communities?" -- John Radosevic, President, United Fishermen and Allied Workers Union, 5 May 1998

If the vision of fisheries is one of privatization and more control of fisheries resources residing in fewer hands, then the approach of ITQs succeeds. If the goal is to provide a few individuals and companies with exclusive rights of harvest to what is a common resource, ITQs succeed. If the objective is to maximize profits and minimize the benefits to the public from these profits and marginalize coastal communities, then ITQs succeed. -- Cliff Atleo, Member of the Nuu-chah-nulth Tribal Council, 17 November 1998

Geographically-based communities that have been historically dependent on the fisheries, should have the proprietary right to the common fishery. That is not to say they should have property rights which flow from ownership, as in the case with ITQs, but, rather, proprietary rights in terms of trusteeship. … ITQs work in the opposite direction. They are the antithesis of this. --David Coon, Policy Director, Conservation Council of New Brunswick, 7 May 1998

… [T]he motivation and time horizon for an individual in a community, or perhaps the community itself, may be based on something longer than a financial quarter, because they intend to stay. … I will admit, however, that it is easy to be romantic about this and there are blocs and interests within the smallest community that can lead to the same types of problems. … I do think that a community-based approach is, ultimately, more in tune with the way this part of the country works. -- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

Employment in property rights-based fisheries is said to be more stable, permanent and less seasonal than that in competitive common property fisheries.

However, it must be emphasized that in Canada the commercial fishing industry is the economic and social foundation of a vast number of mostly small, isolated rural coastal communities. In the case of small-scale fisheries, fishing is not only an economic activity, but also the base of local societies. Individual quotas, especially transferable ones, invariably lead to a smaller fleet and fishing workforce, fewer fish plants and employees, and less demand for associated onshore services.

The Committee shares the very real concerns of those who fear that transferable quotas will not only lead to a concentration of licences in the hands of a few privileged individuals or corporations, but also to the demise of local economies and small communities, where fish quotas and the processing of catches are moved away. When one considers the considerable indirect economic multipliers of fishing, a scenario in which fish quotas and processing were shifted to other locations would be nothing short of disastrous for coastal communities and in the end would prove to be very costly to the taxpayer. On this, we may just be beginning to see and understand the fall-out created by ITQs on the East Coast.

In practice, we have seen fish plants in Atlantic Canada closed down by those companies that hold those enterprise allocations, and those allocations have then been moved to other locations. That I think is a failure of that process. You might recall Canso. -- Dr. Anthony T. Charles, Professor of Management Science, Saint Mary’s University, 30 April 1998

In this regard, non-transferable individual quotas are not problematic. Alternatively, transfers of individual quotas could be restricted to interests inside prescribed geographical areas narrowly defined as "communities," in order to minimize such effects.

"Community-based management" and "community quotas" were also advocated during the Committee’s hearings as a better way to manage fish stocks, and a way of protecting local employment.(53) In certain parts of Nova Scotia, Committee members learned, some small boat fleets of the groundfish fishery had developed community quotas, whereby a set amount of fish is allocated on a community basis, with the coastline being divided into sections to allow for local management. First pioneered in the community of Sambro (near Halifax), this community-based approach has spread to other areas. For example, on the Nova Scotia side of the Bay of Fundy, fixed gear fishers have signed a contract with a management board known as the Fundy Fixed Gear Council. Fishers set their own quotas week-by-week within the larger quota set by the DFO. The preferred method of local management, "days of fishing," is said to discourage the discarding of fish at sea.

The Committee also heard of a proposal put forward by an incorporated organization established to represent inshore fishers in the Gulf of St. Lawrence region of Nova Scotia (from the New Brunswick border to Cape North). Made up of representatives from eight inshore organizations, the Gulf Nova Scotia Fleet Planning Board (FPB) represents about 75% of the 685 bona fide(54) inshore fishers in the area, plus 16 enterprises described as "core fishers," nine of which are groundfish draggers operating under ITQs. Through the FPB, inshore fishers were hoping to purchase those ITQs, whose owners had already voluntarily signed agreements to sell them. Subsequently, the Board expected to re-distribute the fish quota amongst its fishers, who would pay a fee (on a per pound basis) to the Board for loan repayment.(55)

In British Columbia, members of the Committee were told that there is a strong movement promoting the concept of regional fish allocations as a means of stabilizing local coastal economies. On the feasibility of instituting such quotas, representatives of 14 First Nations who reside on the West Coast of Vancouver Island argued that the DFO already allocates food fish to a large number of Aboriginal communities this way; they also informed us of their proposal for a Regional Aquatic Management Board to manage, on an interim basis, fisheries in the area until such time a treaty with the government is negotiated.

Although community quotas and community-based management are promising and are most welcome developments in certain fisheries,(56) they are not as well defined as individual quotas as models of fisheries management. Basic problems associated with the approach include defining the term "fishing community" determining where the various "communities" are located, and extending them equitably as lines at sea.(57)

In New Zealand, Committee members learned, there are no restrictions on quota transfers, nor are there formal systems to evaluate the socio-economic impacts of the ITQ system on the people; that the only rigorous assessment of the management regime’s performance lies in the sustainable levels of fish stocks. Another spokesperson from that country stated that, unlike the situation in Canada, the fisheries in New Zealand do not figure as prominently in the consciousness of citizens; thus, community-based planning had been abandoned in favour of the Quota Management System, and the community or social consequences of individual quotas had never been factored into equations on the benefits and costs of introducing ITQs. Researchers in New Zealand have only just begun to study the social impacts of ITQs on rural communities.

In Iceland, individual quotas are transferable between vessels within the same geographical region. Inter-regional transfers are subject to some restrictions to stabilize local employment, but these are not considered to be significant and very few are actually blocked. Committee members were, however, surprised to learn that attention is paid to the country’s eight political (electoral) constituencies (represented by members of Parliament) when the question of approving a proposed transfer arises. With respect to quotas received initially at the beginning of the fishing year, the Committee learned that restrictions were recently introduced: fishing vessels may only transfer or sell 50% of their allocation, and all transactions are put onto the market. When a fishing vessel is transferred from one community to another, along with its quota, the fishing community and municipal authorities have the first right of purchase for that vessel.

On the movement of quota between communities in Iceland, we heard the following:

Iceland has a community-based constraint on their transfer arrangements. … One of their big concerns was that the remote communities would lose all their quota to Reykjavik, the capital, and other areas. Instead of giving community quotas, per se, they used a right of first refusal. If a quota was going to move from a given area, it had to be offered first to people who lived in that area. Interestingly, they are finding … that the quota is migrating away from Reykjavik. That is an idiosyncrasy of Iceland. The quota is actually moving out rather than in. -- Leslie Burke, Director, Policy and Economic Analysis (Maritime Region), Department of Fisheries and Oceans, 20 February 1997

Neither the quota system nor our management provides any protection for the communities. It does not do them any harm, either. We have seen a flow of quotas between constituencies from the initiation of the quota system. There is no direct or clear trend from some constituencies to another or to a particular constituency. These transfers are between and within the same constituencies mainly. The changes in landed catches from one year to another are not more radical after the initiation of the quota systems than before. -- Ari Edwald, Special Adviser to Iceland’s Minister of Fisheries, 22 October 1998

 

A "PUBLIC RIGHT TO FISH" A PRIVATE QUOTA?

63. …[T]he subjects of our realm shall have and hold all the aforesaid liberties, rights and concessions, duly and in peace, freely and quietly, fully and entirely, for themselves and their heirs, from us and our heirs, in all matters and in all places, forever, as has been said. Moreover it has been sworn, on our part as well as on the part of the barons, that all these above mentioned provisions shall be observed with good faith and without evil intent. The witnesses being the above mentioned and many others. Given through our hand, in the plain called Runnymede between Windsor and Stanes, on the fifteenth day of June, in the seventeenth year of our reign. -- The Great Charter of English Liberty Decreed by King John at Runnymede, 15 June 1215

I am trying to avoid going back to the Magna Carta. My students always glaze over when I do this, but I must return to the Magna Carta. … Post Magna Carta, there will be no grant in fisheries by the executive, by the Crown, but ... the legislature, by clear and explicit act, [can] grant such a right. The position that a licence to fish is simply a privilege may be overstating it as simply a privilege. -- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

King John of England, when he signed the Magna Carta in 1215, also relinquished the Crown’s authority to grant private fishing rights, and entrenched the idea of public fisheries. -- Dr. Peter H. Pearse, Professor, University of British Columbia, 5 May 1998

Bill C-62 really concerned us. You may have the Minister of the day being a very nice person, maybe a benevolent dictator. We could have a really good situation or one where we get someone who decides to abuse those powers. -- Roy Alexander, Advisor to NTC Fishermen, Nuu-chah-nulth Tribal Council, 17 November 1998

It is highly questionable whether this is a legitimate way to alter rights in a parliamentary democracy founded on the rule of law. … After a life of almost 800 years, the public right of fishery deserves this much: that each member of Parliament have the courage to debate the issue and to vote on it according to conscience, not party politics. -- Christopher Harvey, Q.C., "The Abolition of the Public Right of Fishery Proposed by Bill C-62," Vancouver, 25 November 1996

The so-called "public right to fish" was a matter raised during the Committee’s hearings on privatization and individual quota licensing in Canada’s commercial fisheries.

Section 7(1) of the Fisheries Act(58) (first enacted in 1868) sets forth the legislative authority of the Minister of Fisheries and Oceans as follows:

7. (1) Subject to subsection (2), the Minister may, in his absolute discretion, wherever the exclusive right of fishing does not already exist by law, issue or authorize to be issued leases and licences for fisheries or fishing, wherever situated or carried on.

(2) Except as otherwise provided in this Act, leases or licences for any term exceeding nine years shall be issued only under the authority of the Governor in Council.

As mentioned earlier, it is being proposed that the Act be changed to allow the Minister of Fisheries and Oceans to enter into legally-binding, long-term, multi-year "partnership agreements" or "partnering agreements" with certain fisher groups. According to the DFO, such agreements, among other things, will formalize the role of stakeholders in the decision-making process for the management of their particular fisheries, and provide greater security of tenure for fishing licence holders.

However, it is somewhat unclear what is meant by "long-term" and whether amendments to the Fisheries Act similar to those proposed in the last Parliament (Bill C-62(59)) are actually needed to institute such partnership agreements; whether current co-management arrangements between certain fisher organizations and the federal government are "legal" has been the subject of much debate. Critics of Bill C-62 argued that, although not stated explicitly, sections 17 to 22 on "fisheries management agreements" were meant to extend the process of privatization in Canada’s fisheries and to extinguish the centuries-old (common law) "public right to fish."

In Canada, the Constitution Act, 1867 incorporated British constitutional practices and common law into Canadian law. Members of the Committee were informed that in common law (since the Magna Carta), there has been, and there continues to exist, a public right of access to fisheries in tidal waters. We were also told that in such waters, an exclusive right to fish (or exclusive fishing rights) can be created or recognized only by the explicit sanction of Parliament (by statute). In other words, there is a "public right to fish" that can be abrogated only by the enactment by Parliament of competent legislation. On this, one legal authority made the following observations:

When you move towards an ITQ, you go beyond a licence. You are into an identifiable entitlement.

There are legal arguments out there now … that to act by administrative fiat would clearly be the Crown acting without explicit legislative authority, and that is an abrogation of the public right to fish which is permissible since the Magna Carta. I suspect that issue will be determined in court.

The problem that arises in the legislation -- and partly this is a political debate -- is how far do you go in assigning discretion to the minister to assign or not assign these rights or to take them away. … That would really have to go to a court.

… [P]ushing the partnership arrangements as an administrative matter, pushing them to the point of property and restricting the public right to fish in that way, may be an unacceptable abrogation of that public right to fish. I think that is where the issue comes now. -- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

The common public right of access to fisheries is a matter that has also figured in the controversy over certain aboriginal fisheries operating under the federal government’s Aboriginal Fisheries Strategy in the Province of British Columbia.(60) In regard to Aboriginal fisheries, it may also be fairly observed that the subject goes beyond "fisheries" matters (as usually defined) and has much to do with land claims, treaties, autonomy and self government, and demands for a greater share of the resource as a means of redressing perceived historical wrongs and promoting economic self-sufficiency. It is interesting to note that the Chief Justice of the Supreme Court of Canada, in an Aboriginal rights case in August 1996, said the following:

It should also be noted that the Aboriginal rights recognized and affirmed by s. 35(1) exist within a legal context in which, since the time of Magna Carta, there has been a common law right to fish in tidal waters that can be abrogated by the enactment of competent legislation: the subjects of the Crown are entitled as of right not only to navigate but to fish in the high seas and tidal waters alike... [It] has been unquestioned law that since Magna Carta no new exclusive fishery could be created by Royal grant in tidal waters, and that no public right of fishing in such waters, then existing, can be taken away without competent legislation.(61)

 

CONCLUSION AND RECOMMENDATIONS

My vision -- what I would like to see in the future and what we are working towards -- is a fishery that is viable, sustainable and efficiently managed. We need a fishery that provides a good living for independent, professional owner-operators and employees, and one that supports economically healthy coastal communities. It must be a fishery composed of healthy inshore, midshore and offshore sectors. It must be a fishery that supports a flexible, versatile and self-reliant industry, largely self-regulated and operating without government subsidies. It will have room for all sectors – commercial, aboriginal, and recreational, and it will be a fishery in which government and industry work together to achieve these goals. -- The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998

There is no question as to who really owns the fish swimming in the ocean. The fact is that I own them, and so do you and all Canadians. In fact, a major reason that … Canadians care about our ocean resources is that Canadians own them and benefit from them. … It should be clearly understood that the fish remain public property. That point must be clearly acknowledged, as it is with oil, with gas, with timber on Crown land. In all those cases, we do not give away our oil or our trees, and so on. -- Dr. Anthony T. Charles, Professor of Management Science, Saint Mary’s University, 30 April 1998

We may have identified the problem as a lack of property rights … but this conclusion is wrong if the assumption is wrong. It looks as if we are wandering around with a hammer and everything starts to look like a nail. --- Philip M. Saunders, Assistant Professor, Dalhousie Law School, 1 October 1998

Just dropping a property-rights template on the problem will not, in itself, provide a solution. You must have a mix of policy instruments, and all of the stakeholders, scientists and those in power, must be vigilant during the system -- Catherine Wallace, Senior Lecturer in Public Policy and Economics, School of Business and Public Management, Victoria University of Wellington, 27 October 1998

Most of the fisheries economists are desk-bound individuals who do not know the intricacies of the fishery. That explains their uncritical acceptance of ITQs in many cases. However, it is a wonderful theoretical device, if you go by theory alone. -- Dr. Parzival Copes, Emeritus Professor of Economics, Simon Fraser University, 21 May 1998

Emerging community-based management models … are now in operation in Nova Scotia. There are other cases of community-based management emerging in Atlantic Canada as well. It is important to know that this is probably the major world-wide trend in fisheries management. -- Arthur Bull, Co-Chair, Nova Scotia Coastal Communities Network, 30 April 1998

Any attempt to privatize fisheries through the introduction of a quota-based system should be managed within a vision of the future society that you want. I do not think we sat down and figured out what exactly we wanted in New Zealand, but we had a very strong drive in the 1980s for a market-based system. … There were good arguments for doing it in New Zealand. I am not sure those arguments are nearly as strong in a country like Canada. -- Hamish Rennie, Lecturer, Department of Geography, University of Waikato, New Zealand, 4 June 1998

Icelandic officials have managed to make [the Icelandic management system] world famous, and, at home, reports rain from foreign institutions and media, praising the system as one the world should enact… These reports rely on information that is produced, selected, forwarded and, in most cases, interpreted by the creators of the system. -- Arthur Bogason, Chair, National Association of Small Boat Owners, 29 October 1998

The political system has been unable to solve these questions because every party in Iceland is divided on the issue. No party has been able to put up a platform exclusively with these issues so that the electorate in Iceland could take a stand for or against the system. -- Olafur Hannibalsson, Political Commentator and Deputy MP in Iceland, 29 October 1998

There are two courses open to Members of Parliament on the issue of the Fisheries Act amendments. One is to adopt the government’s bill, which would allow the government to grant a fishery as a private right to any exclusive group, … a course that would be abandoning a fundamental freedom wrested from the Crown by the forced signing of the Magna Carta in 1215. The other course would be to maintain the fishery as a public resource… -- John Radosevic, President, United Fishermen and Allied Workers Union, 5 May 1998

Proponents of proprietary rights tend to attribute all the problems of the fishery to its common property nature; however, the evidence placed before us suggests that individual quotas are certainly not the panacea for which government, fishery managers, certain newspaper columnists and editorial commentators, and many economists had hoped. Although their most fervent advocates claim they can be designed to overcome every criticism, private quotas have very serious shortcomings and bring new problems. In many cases, the Committee was advised that the property rights-based approach had proven to be disastrous with respect to conserving fish stocks and the fishing communities dependent on those stocks.

Canada’s fisheries are very different from those in Iceland and New Zealand. The more we heard, the more this became evident. We question, however, the claim made by many, including DFO officials, that examples show it is possible to have property rights in fisheries and still have vibrant, local, small-scale and medium-scale fisheries operating on an individual, owner/operator basis. The testimony, often scathing of the consequences of ITQs, given to us by leading and candid authorities in those countries that use them, suggests otherwise.

The DFO and others have stated many times that there are "too many fishermen chasing too few fish" in Canada’s fisheries. Although ITQs are undoubtedly a most effective means of rationalizing or reducing the size of a fishing fleet (the number of fishers), some members of the Committee question the need to do this in small boat sectors, which place a lower capital demand on the resource than do the more technologically intensive fleets. Indeed, overcapacity in fish harvesting has much more to do with technology, catching capacity, and overall fishing effort than with the number of fishers. In fact, reducing the number of fishers may have very little effect in terms of reducing harvesting capacity. On a related point, the Committee was frequently told that history had shown the small-boat sector and small fish plant operators to be capable of adapting, adjusting and remaining competitive in the face of changing circumstances. In a boom-and-bust industry like the fishery, such adaptability should be highly valued by policy-makers and decision-makers.

The DFO argument that quota licences promote "efficiency" -- defined by economists as getting the most from the resource at the least cost in terms of labour and capital -- is too facile and narrow when applied to the fishery. In terms of safeguarding the public interest, a more reasonable objective may be to achieve the greatest net benefits per fish caught. On efficiency, the compelling argument can be made that traditional (competitive) fishing, since it rewards those who work the hardest, is more compatible with the "free enterprise" system than are individual quota fisheries.

The Committee was reminded during its hearings that the limited-entry common property framework, although not perfect, can be fine-tuned to achieve desired public policy objectives, such as reducing excess fishing capacity (if this should this be the goal). For example, licence buy-back programs may be implemented without resorting to property-based fishing rights. It is worth noting that common property fisheries are often erroneously assumed to be synonymous with "open-access" fisheries; in Canada, common property fisheries are limited-entry fisheries. Nor is common property a problem; the East Coast lobster fishery is managed as common property, with effort controlled and without quotas, and it is the most successfully managed of all our fisheries.

Ideally, a fisheries management system should be tailor-made for each unique circumstance because the fishery is a complex biological, economic and social system with many tiers. Species of fish vary widely with respect to their behaviour, abundance, distribution and market value. The length of fishing seasons varies not only by species, but also by area and from year to year. Fishers hold different types of licences, work from boats of different sizes, use different types of gear, belong to different organizations, and invest different amounts of time and money. The complexion of the operation changes notably from one area to the next, and the social circumstances vary enormously. Fish processing too, is as diverse as the harvesting sector. The fishery defies simple generalizations; thus, a one-system-fits-all approach is not the best approach.

Individual quota licensing should therefore be regarded as only one management tool to be used in conjunction with others and should not be applied indiscriminately. From what we have heard, such licensing should be restricted to sectors with relatively few participants, relatively stable stocks, and relatively little in the way of community dependence. The more highly industrial fisheries would seem to be the better candidates.

Another important issue is whether to limit the incomes generated by quota licences; should the wealth be shared in some way with other fishers or returned to the federal government as resource "rent" in exchange for the exclusive privilege of fishing a "private," yet "publicly-owned" resource. In some situations, private quotas, whether transferable or not, have allowed millionaires to be created out of a badly over-exploited and, in many cases, a seriously depleted resource.

It was also brought to our attention that the United Nations Convention on the Law of the Sea calls for the conservation and management of fishery resources to take the economic needs of coastal communities into consideration. In recognizing the link between local fishing communities and the stewardship of adjacent fishery resources, the UN Code of Conduct for Responsible Fisheries (Section 6.18) calls for states to protect the rights of indigenous and local fishing communities. As a signatory to this convention and other UN agreements, the federal government has a duty to safeguard the interests of its small-boat fishing fleets. In small-scale fisheries where individual owner/operators predominate, community-based approaches, in which the rules and regulations of fisheries management are set locally, may be more suitable alternatives to private quotas. Property rights-based approaches ignore the possibility that communities might already have well-established (traditional) social processes for allocating access to a fishery.

In past reports, the Standing Senate Committee on Fisheries deplored the fact that for too many years the fishery has lacked a clear, consistent, and explicitly articulated vision, including an explicit statement of objectives, priorities and strategies to provide government and industry with a longer term rationale for decision-making and to ensure that both are moving in a common direction. Reaching common goals in the fishery will require that all stakeholders share an understanding of what is meant by terms such as "overcapacity," "efficiency," "property," "co-management," and "partnerships." Whether they are "allocation rights," "use rights," "quasi-property rights" or indeed "property," it is certain that individual quotas represent a fundamental break with the fishing traditions of the past.

ITQs work over the years to concentrate access to the fishery in the hands of those fewer and fewer interests with the deepest pockets; in fact it may be fairly said that such "rationalization" (i.e., fewer fishers and fewer boats) is their raison d’être. Many fear the eventual outcome will be a "corporatized" fishery, an industry run like a factory, whose employees are those who had previously and traditionally been independent fishers. In some sectors, views are very much coloured by the long-standing debate about the economic, social, and environmental merits of small-scale, labour-intensive, individual vessel ownership versus larger-scale, capital-intensive, corporate ownership. Another worry is whether, with the globalization of trade, the federal government will be able to protect Canada’s fish from being owned or controlled by foreign interests. Those communities and families whose livelihoods have long depended on the fishery deserve to have these concerns more adequately addressed.

Time and time again over the past decade, this Committee has heard that many participants in the small-vessel sectors believe that government and policy-makers have had a hidden agenda favouring property rights-based fisheries. The perception of these participants is that proprietary rights are being imposed on them. Their trepidation and apprehension would appear to be justified. Individual transferable quotas are without a doubt a wonderful device to reduce the number of fishers at no cost to government in the short term. Moreover, in the longer term, private transferable quotas would likely simplify the DFO’s task of managing the fisheries because such quotas involve fewer fishing operations, landing sites, and processing plants.

In Canada, the privatization of fishing rights, which began in the early 1980s, has very much been a bureaucratic initiative. The process has taken place gradually over several years and under several ministers of fisheries. Co-management agreements have also been negotiated by DFO officials with certain fishing industry groups. New powers are now being proposed for the Fisheries Act to allow the Minister of Fisheries and Oceans to enter into long-term, legally-binding "partnership agreements." On this, members of the Committee were advised that proposed amendments to the Fisheries Act introduced in the last Parliament (Bill C-62) included provisions on fisheries management agreements designed to abrogate a fundamental public right to the fishery that has existed in the common law since the signing of the Magna Carta. Under the Constitution Act, 1867, which incorporated British constitutional practices and common law into Canadian law, it is only with the express sanction of Parliament that the so-called "public right to fish" can be displaced in tidal waters and an exclusive fishery be either recognized or created. We believe the views of Canadians should be heard before legislation similar to Bill C-62 is reintroduced in this Parliament.

Lastly, the discussion over individual quotas has thus far been confined to academic circles, government officials, those who speak on behalf of the fishing industry, and certain newspaper columnists and editorialists. The Canadian public should be made more aware of the matter. Taxpayers, in particular, should be wary of trite clichés and the rhetorical claims of the more zealous proponents of privatized fisheries. In the end, it is the taxpayer who will have to foot the bill if small fishing communities are left high and dry.


RECOMMENDATIONS

1. The Committee recommends that the Government of Canada issue a clear, unequivocal and written public statement as to what individual quotas are and what their role will be in the future fishery.

2. The Committee recommends that the Department of Fisheries and Oceans issue a clear, unequivocal and written public statement on what is meant by the terms "legally-binding, long-term, multi-year government/industry partnerships" (or "partnering agreements"), and state whether such agreements are meant to extinguish "the public right to fish" that exists in common law. The Department should indicate the impediments in the existing Fisheries Act that prevent the Minister of Fisheries and Oceans from entering into such fishing agreements with industry groups.

3. The Committee recommends that the issue of privatization and individual quota licensing in Canada's fisheries be debated in the Parliament of Canada.

4. The Committee recommends that no new individual quota or individual transferable quota licences be issued in Canada until written public statements on individual quotas and partnership agreements (recommendations 1 and 2) are issued, and a parliamentary debate (recommendation 3) has taken place.

5. The Committee urges the Department of Fisheries and Oceans to more thoroughly consider the long-term social and economic effects of individual quota licences, especially those that are transferable, on Canada's coastal communities, Aboriginal and other, and not extend the individual quota regime until the needs of coastal communities, Aboriginal and other, have been fully assessed.

6. The Committee recommends that the Department of Fisheries and Oceans issue a clear, unequivocal and written public statement on whether it views Canada's commercial fisheries as primarily industrial or rather as the economic basis of a traditional Canadian way of life.

7. The Committee recommends that the Senate refer the Estimates of the Department of Fisheries and Oceans to the Standing Senate Committee on Fisheries for parliamentary scrutiny.

8. The Committee recommends that the Department of Fisheries and Oceans immediately begin to enforce its Atlantic fleet separation policy -- that is, regulations preventing the vertical integration of processors into fish harvesting -- and policies aimed at restricting the ownership of individual quotas to certain maximum limits. The Department should continue to enforce regulations restricting the ownership of fishing licences by foreign interests.

9. The Committee recommends that the Department of Fisheries and Oceans more equitably distribute the resource in order to allow small-scale fishers a better opportunity of participating in the fisheries.

10. The Committee recommends that the Department of Fisheries and Oceans stop using the examples of individual quota management systems in New Zealand and Iceland until the Department has taken full account of the criticisms of individual quotas emanating from those countries.


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