Proceedings of the Standing Senate Committee on
Fisheries
Issue 10 - Evidence - June 4, 1998
OTTAWA, Thursday, June 4, 1998
The Standing Senate Committee on Fisheries met this day at 9:05 a.m. to consider the questions of privatization and quota licensing in Canada's fisheries.
Senator Gerald J. Comeau (Chairman) in the Chair.
[English]
The Chairman: I call the meeting to order. Our witness, Mr. Hamish Rennie, is a lecturer in geography at the University of Waikato in New Zealand. Mr. Rennie obtained his MA at Memorial University of Newfoundland. His thesis was on the Labrador fishery and the role of the Torngat Fish Producers Cooperative. From 1985 to 1995 he worked for the Government of New Zealand, primarily for the Ministry of Foreign Affairs and the Department of Conservation. At the DoC, he held the positions of Senior Conservation Officer, Acting Manager of Coastal Section and Manager of the International Unit. Last April, Mr. Rennie discovered our committee's home page on the Internet, which shows that it has been working.
Mr. Rennie has been in regular contact since then. This week he is in Canada presenting papers at the Canadian Association of Geographers Conference and the conference of the International Association of Common Property. We are pleased he is here today. He comes with knowledge not only of the privatization of the New Zealand fishery but also of the Canadian fishery as well. Mr. Rennie, please proceed.
Mr. Hamish Rennie, University of Waikato, New Zealand: I am here speaking on my own behalf from my personal viewpoint of the fisheries, which is different from that of some of my former colleagues in New Zealand.
Canada's fisheries are at a very important stage. I felt it would be useful to give you a different perspective from what you usually see. We tend to speak positively about the New Zealand experience and brush over the cracks in the floor. If you are to head down that line, you should know about some of the cracks in the New Zealand system.
I have provided a couple of handouts this morning which you may not have had time to absorb. The first one sets out some of the key boundaries for our management of fisheries in New Zealand. The Ministry of Fisheries managed fisheries from all the inland waters right out to the 200-mile Exclusive Economic Zone. In the inland waters, the fisheries management covers the commercial aspect of fisheries, not the non-commercial aspects. The Department of Conservation manages the non-commercial aspects of inland fisheries.
The Department of Conservation and the Minister of Conservation, in conjunction with the regional councils around New Zealand, have responsibility for the coastal marine area, which is the area from the line of Mean High Water Springs out to the 12-nautical-mile Territorial Sea. There is a bit of an overlap in jurisdiction as a result. A marine farmer would need a permit from the regional council to have a marine farm occupying a particular space and to have the various environmental effects, such as effluent discharge and feeding discharge, from that marine farm. The marine farmer would also have to obtain a permit from the Minister of Fisheries because of the potential effects of the marine farm on fishing and on the capture of fisheries, as we refer to them, or the non-farm fishery.
We have marine reserves on the map. They are administered by the Department of Conservation under a separate piece of legislation called the Marine Reserves Act. There is also another piece of legislation, the Marine Mammals Protection Act, which allows areas to be carved up. Taiapure and Mataitai Reserve are special management areas essentially managed by the Maori in conjunction with the Minister of Fisheries. Some of the boundaries tend to overlap. The regional councils overlap with the fishery management areas.
We do not have an integrated coastal management regime in New Zealand, despite our commitments to Agenda 21 and the UN Convention on Biodiversity, to which Canada also belongs. That overlap has meant that there have been ongoing institutional conflicts between the various departments involved.
In New Zealand, we have a Department of Conservation, which is the same as a ministry. However, it usually has more land or things to administer directly, and the Department of Conservation actually manages the national parks and the marine reserves as well as giving policy advice on conservation issues. Part of its mandate is to advocate for the conservation of fisheries. So there has been institutional conflict between the departments. That needs to be kept in mind.
When the quota management system was introduced in New Zealand in 1986, there were approximately 4,300 boats in the inshore fishing fleet. There was not really an offshore fleet. New Zealand has a much smaller set-up than Canada. The most fish ever taken from the sea was approximately 536,000 metric tonnes, in 1992-93, I think. Again, it is not a large, productive fishery, although we have the fourth largest exclusive economic zone in the world.
I have not done the conversion, but one New Zealand dollar is worth about 70 cents Canadian. Your dollar is relatively good for us. In terms of export receipts, the most we seem to have taken out of the fishery is approximately $1.2 billion. It is not as substantial as the Canadian fishery.
Currently, there are approximately 9,000 full-time commercial fishers, or the equivalent, in New Zealand. About half of those are devoted to the processing sector. That places it in context relative to the Canadian situation.
The critical element in the privatization of the New Zealand fisheries and in the quota management system is the individual transferable quota, the ITQ. It is important to understand clearly what the ITQ is and is not and how it fits in. I have read a lot of material that is not clear on what ITQs are. They are, essentially, a right to harvest from an area. The area component often gets brushed over. I used to talk to a Ministry of Fisheries advisor who said there was no spatial component to an ITQ. However, it is a right to harvest anywhere within a quota management area.
If you look at the map that I have handed out, you will see that the 200-mile Exclusive Economic Zone has been divided into 10 fishery management areas. Those get combined in various forms to make up the quota management areas for different species, and they are defined on the basis of fish stock combinations for different species in those areas.
A quota management area is a reasonably large area in the marine environment. The narrow dotted line around the coastal margin is the Territorial Sea, which is an area administered by the regional councils and the Department of Conservation. There are other items there -- the marine reserves, Taiapure and some other protected areas.
There is no reason why any other country should follow our step in this, but in New Zealand, ITQs are in perpetuity; that is, they are permanent property rights. In effect, they are like a share to a land title or a shareholder's right. They are significant property rights in the New Zealand context.
The ITQs are set within a total allowable commercial catch level. Currently, that is determined by the government in consultation with the industry and set by the Minister of Fisheries. That total allowable commercial catch is set within a total allowable catch, the difference being that total allowable catch also, in theory, includes the recreational fishers and the scientific fishing and customary take.
Those total allowable catches, rather than the ITQs, determine the sustainability of the fishery. ITQs are not about sustainability in the fishery. They are about the distribution of rights to harvest in an area.
We started using ITQs in part because we wanted to increase efficiency and to enable market rationality to operate in the New Zealand fishery. Many people believe the ITQs have assisted in the achievement of efficiency in the operation of the commercial fishery. If one considers the direct industry costs alone, then they probably have improved the efficiency of the New Zealand fishing industry. However, we do not know for sure, and we have not factored in a number of indirect costs.
I probably will sound quite negative towards ITQs. I believe ITQs are not a bad idea. However, you cannot expect too much from them. Since their introduction, there has been a significant aggregation of ownership in most of our fisheries.
In the third handout, I should like you to look at the columns with the Xs and Ys. There is an X column labelled "Total Change". That is the number of quota holders that changed from 1986 through to 1996. Take, for example, snapper, the top species on the left; in that period, 409 entities -- companies or individuals -- who owned quota left the fishery. When they left, their quota was sold to someone else or reallocated in some way. The next column is percentage change; 54 per cent showed a decrease in the number of people involved.
The next columns are the "Y" columns, which give a sense of the aggregation involved. The first column shows the number of entities related to the potential of the quota hold; 81 per cent of the snapper fishery quota is held by 22 companies. That may not seem too bad, but if you go down the species column a little further to ling, nine companies hold 81 per cent of the quota. So, a significant level of control of the fishery is in the hands of a limited number of companies.
I have read that 60 per cent of the quota in New Zealand is held by the three largest companies. I cannot verify that, but that is the official number. I am still working to ensure that some of these figures, which were produced for various purposes, do match up. Either way, following my table or taking the 60 per cent number, in most of the fisheries, there is significant control in relatively few hands.
Until recently, the total allowable catch, the TAC, was set on a single species basis in isolation from the ecosystem. In 1996, the Fisheries Act was the outcome of considerable debate between the government departments. The Ministry of Fisheries and Agriculture lost the battle and since have been forced to take an ecosystem-based approach to managing the fishery. They must take into consideration, for example, the effects on the sea floor of dredging for scallops, and the effect of the incidental by-catch on albatross and other protected species. They must work out an ecosystem-based approach, and figure out how to implement it in practice. It is a difficult job. Currently, there are several meetings around the country trying to address the problem. That has been a major change. The Fisheries Act has been made to incorporate the principles of the Resource Management Act which included, in the fisheries case, sustainable utilization.
The ITQ gives each fisher the right to harvest in an area a proportion of the total allowable catch for a particular fish species. This was a change from the initial allocation of a fixed amount of quota and a government buy-back system when we wanted to reduce the fishery. The idea was that the government would reduce the fishery by an amount by buying back that tonnage of fish. The only problem was that although the government originally sold a lot of the quota, it did not isolate the funds from the sales in a separate account for the buy-back process. Instead, the money went into the consolidated fund with Treasury, and when we wanted to buy back quota, the money was not there to do it.
The move to a proportional system had actually been advocated for a long time by the environmental groups. In the proportional system, fishers own a right to harvest a proportion of the total allowable catch. If the total allowable catch decreases, the fishers still retain the same proportion, but their tonnage is reduced.
Because it is an area-based fishery, once the ITQs have been allocated, there is a basis for compensation claims when the community seeks to use the space of the quota management area in other ways. For instance, if a marine reserve is established, the fishing industry immediately starts to ask for compensation because there is now an area in which fishing is no longer allowed. The fishers bought a permanent property right to harvest anywhere in the quota management area.
When the government claims an area for port development, theoretically, the same argument can be made. However, usually compensation is sought only for something which takes up a larger area, like a marine reserve, a marine mammal sanctuary or marine farming. There have been significant court cases in New Zealand about marine farmers wanting to stake out claims to the sea bed for scallop farming. The commercial fishers already operate a quota management system in that area and they do not want that sea bed staked out for marine farming. So, there have been battles within the marine fishing industry as well.
New Zealand also introduced a cost-recovery regime to support the quota management system. This was to get away from any hint that the government was subsidizing the fishery by paying the cost of the research on the impact of the fishery on the fish stocks. We used a concept of "total avoidable cost". Basically, if there were no fishing industry, then there would be no impact on the fish species, and therefore no effects to be worried about.
As there is a fishing industry, the people in the industry are the ones creating the problem in the fish stocks; therefore, they should pay for it. If a factory on land wanted to pollute a river, they would have to pay the costs of monitoring and doing the environmental impact assessment for the pollution in the river. They would also have to pay the cost of mitigating the impact on the river. The argument was put forward that the fishing industry should operate the same way.
The cost-recovery regime has cost far more than the industry expected. They made unrealistic assumptions about the level of cost efficiencies that business would be able to bring to running the fishery. To date, they have managed to meet only about 80 per cent of the cost of running it. There is a general feeling that the total costs should be a lot higher if they are to cover all of the issues that need to be covered in the fishery.
Since those in the fishing industry are paying a large amount of the cost, they want a much greater say in the fishery. They do have a stronger say in the research that is done under the quota management system, which makes it difficult to introduce other stakeholders, other people concerned about the fishing industry, into the process.
Another key problem is the rights over the marine space. The New Zealand domestic fishery had a very large number of part-timers in it prior to the quota management system. Occasionally, it has been said that the introduction of the quota management system resulted in a 40 per cent reduction of the fleet in the fishery.
I draw your attention to the comments in bold on Page 5 of the document in the section headed "Governance and rights over the commons". It starts off "A key to the successful establishment..." I draw your attention to that because it is a very important aspect to consider.
In the early 1980s, the government introduced a regulation redefining who was to be considered a commercial fisher. Effectively, it removed the commercial status from all fishers who gained less than 80 per cent of their income or less than $10,000 New Zealand dollars a year from fishing. That has been a major factor in reducing the New Zealand fishing fleet and the numbers of fishers involved. They ruled out the part-time commercial fishers.
That was important especially in regions which were a little economically depressed, where people did a bit of fishing in the fishing season, a bit of timbering and a bit of construction work for someone. They had a year-round rotation of involvement in fisheries, and they suddenly discovered they were no longer allowed to work in the commercial fishery because they were not commercial fishers. They were not spending enough of their time earning from that area. That tipped the balance for them and plunged them out of business overall and they ended up on unemployment permanently. Parts of Newfoundland and North Labrador come to mind when I think about this.
It has affected the Maori, the indigenous people, more so than the rest of New Zealanders. It had a differential, though not racial, effect on the Maori. Partly by circumstance, the Maori tend to be in our areas of low employment; they tend to dominate in the Northland region in particular. They were very hard hit in that area, although it would be hard to prove a direct correlation.
In the Northland region, they had alternatives. It is a good area for growing things, including marijuana, and there is now a major drug problem there. There are areas up there where 50 per cent of the community is involved in producing marijuana. A direct correlation cannot be made, but they had to do something else involving money. I do not think it is possible for people in North Labrador to grow marijuana onshore, because the climate is different. What else do they do if there is no fishing?
Those costs and the impact of that on the community have never been factored into equations on the benefits or costs of introducing the quota management system in New Zealand.
After the regulation redefining commercial fishers narrowed down the numbers of people in the fishery, it was easier to introduce the quota management system because there were fewer people who could be allocated rights.
Another key difference between New Zealand and Canada is the climate. New Zealand does have other alternatives to the fishing industry, except in places like Northland and the Chatham Islands. A lot of people did move out of the fishing industry to areas of ecotourism. I hear that is happening in Newfoundland as well. They also moved into agricultural sectors.
Statistics suggest that about 16 per cent of New Zealanders are involved every year in some form of recreational fishing. While there are 9,000 full-time commercial fishers in New Zealand, 390,000 New Zealanders are involved in recreational fishing each year, which is a large predominance of recreational fishing versus commercial fishing. We are not the same as Newfoundland, which tends to think of itself as dependent on the fishing industry, or it used to when it had a fishing industry. I do not know the statistics on recreational fishing in Canada.
In New Zealand, the closest location which has a proportion of involvement in the fishery would be the Chatham Islands, way out on the outskirts. They are much further from New Zealand than Newfoundland is from Canada. In the Chatham Islands, statistics show that over 20 per cent of the labour force, the employed work force, is employed in the fishery. That is the highest concentration for New Zealand. The next highest is in the Challenger region, with 5 per cent of the labour force involved in the fishery. For the rest of the country, the percentage of the labour force involved in the fisheries disappears into the margin of error. So, the weight and political power that the commercial fishers have in New Zealand is quite insubstantial, except through the quota management, or ITQ, system.
The fisheries are a billion dollar industry in the New Zealand economy. No one has calculated the value of the recreational fishery. It is probable that the individual fish caught in the recreational fishery is much more valuable than the individual fish in the commercial fisheries. I would love to know the figures on the value of the recreational fishery.
I mentioned marine reserves. They are no-take areas except for one which is a bit of an anomaly. No one can fish within a marine reserve for recreation or commercial purposes. Marine reserves are increasingly in demand. New Zealanders like to know they have protected areas and want to visit them. The dates of establishment of marine reserves are listed in the table on my map. Of the 14 marine reserves, 12 have been established since 1990. It is a growth area in New Zealand.
Every time a marine reserve is proposed, the commercial fishers immediately raise the issue of compensation for loss of fishing grounds. So far, there is no compensation payable. It has been assumed that the government knew about the marine reserves. Fisheries legislation was implemented, and therefore they are viewed as being compatible; but the question of compensation is raised increasingly. The commercial fishers, particularly the lobster fishers, have some grounds in some of the areas.
At the same time, lobster fishers have been the ones to benefit the most from marine reserves from which they get seed stock. In some parts of New Zealand, they have become the best defenders of the boundaries of the marine reserves because they know they are adding to their local fishery. In New Zealand, the marine reserves are not part of fisheries management, but are seen as being for a different purpose altogether.
Marine farming is growing at a rapid rate. We are having major difficulty determining how to allocate space for marine farming, let alone deal with the issue of marine farms and other users. Marine farms are seeking more and more space, which increasingly is leading them into conflict with the wild fishing industry.
We have about 70,000 hectares of sea bed in Marlborough Sound alone which people want to turn into marine farms. We implemented a system under the Resource Management Act for allocating space to marine farmers. Immediately we were challenged in the courts by the New Zealand Maori who claim we do not hold the rights to the sea bed. That is currently before the courts. My opinion is that they have a very strong case. The Maori won the first round. It is now being appealed to the next level. The whole allocation of space for marine farming is up in the air.
The three major species that we farm are mussels, oysters and salmon. There are pens for salmon, there are suspended lines with barrel floats holding them in place primarily for mussels, and there is farming in the intertidal zone for oysters. There is a desire to farm scallops on the sea bed and there are other species being experimented with, but those are the three main ones.
The other major problem is with the total allowable catch setting. Prior to the 1996 legislation, if the government set a reduced total allowable commercial catch level, then the industry traditionally attempted to discredit the science used by the government. I have been at the meetings and have seen how they have attempted to create enough doubt about the validity of the data or the models used that they delay the implementation of any reduction.
They promote the move toward input controls, which, strangely enough, is exactly what they wanted to move away from when they brought in the quota management system. The fishers do not want the government to regulate how they do things. They want to move to an output-based system like the quota management system, but as soon as people want to reduce the total allowable catch, there are complaints. The fishers say that perhaps if regulations were introduced that said to throw back the ones over a certain size, then we would not have the same problem. They argue that the government should have looked at that option before it suggested reducing the total allowable catch.
There are real incentives in the industry for arguing against reduction of the TACC because the ITQ is a property right whose value will be reduced if it looks like the amount of fish that may caught on that property right is reduced.
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 TACC, 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.
That is not to say that there have not been reductions in the TACC. There have been in some fisheries and they have been very successful. The industry has done a lot of work internally to achieve those reductions.
The expectation was that if people were given a long-term property right, they would invest more in the sustainability of that resource. So far, the industry appears to be unable -- some would say unwilling -- to absorb the total cost of the research that is required. It is a significant cost, and they do not have the money up front to do that. The result is that by 1997, no agreement had been reached with the industry or anywhere in the sector on the state of 55 per cent of the 164 stocks in the New Zealand fishery. We are trying to manage them on a quota management system using total allowable catch. They could be okay or they could be disastrous. We do not know. Everyone has heard about our orange roughyproblems where we totally miscalculated the age length of orange roughy, and the species went into a major decline.
Privatization does not appear to have provided the incentives for research that we expected it would. The non-quota holders are the people who want marine reserves or who are concerned about the sustainability of some of these unknown levels and would like us to take a more precautionary approach when setting the TAC.
The recreational fishers have a lobby which is not well-organized. They are finding that ITQ ownership means that the government is focusing on the clubs of quota holders. Groups of quota holders stand together in most of the fisheries, and it has resulted in a shift of power.
In the old system, the non-commercial uses of the fishery had a bit more of a level footing. They were more involved. Now, a lot of the decisions are being made by the clubs of quota holders, who are, in effect, almost the only stakeholders being recognized, although the Ministry of Fisheries states that they recognize all people with an interest in the fishery, the non-extractive users and the extractive users, as stakeholders. In practice, it has become increasingly difficult for the environmental groups in particular to be involved in that process. They find themselves outnumbered and outgunned in most of the forums. Privatization has had that effect on them as well.
Privatization through the ITQ system will not in itself lead to greater sustainability. Sustainability comes from setting the total allowable catch, not from the privatization of the fishery. The ITQ will not replace input controls entirely. There will need to be forms of regulation. For New Zealand, it is not the God-send we thought at various times it might be. It is not the holy grail.
An ITQ system cannot be implemented without considering compensation to native peoples. Ways of negotiating with them over the rights to the sea must be figured out. I worked in Canada with the native people in North Labrador. When I came back to New Zealand, I went to the Ministry of Fisheries and said that I had some experience working with native people. Their response at the time was: "We have no problems with the native peoples in New Zealand. We have no problems with the Maori. We implemented the ITQ system. We are so far ahead of Canada there is nothing we can learn from them."
Within three months, the first of the treaty tribunal non-binding findings came through, stating quite clearly that the Maori of New Zealand had significant rights to the fisheries which had not been extinguished. That was followed up by court injunctions on the implementation of the ITQ system and resulted, in 1992, in a major settlement between the government and the Maori. The government did reasonably well in the settlement. I am not sure the Maori have come to grips with it. You must be prepared to negotiate through that. You also need to consider the other users in the fishery.
In 1983, the fisheries had community-based planning with fishery management plans. That stayed around long enough to keep the Fisheries Act separate from the Resource Management Act. There was an argument that because we had the fishery management planning system, we did not need to have the sort of plans that are under the Resource Management Act. However, as soon as the Resource Management Act went through with the fisheries separate from it, the fisheries management planning was removed from the fisheries legislation. So it was a bit of a con-job in my view. It was always intended that way.
We got rid of the community-based planning for the ITQ system which would solve all of our problems. The community-based planning is not a bad idea. It may even be a good idea when it comes to allocating space to users of the marine area, especially in the inshore area, and when it comes to considering some of the regulations, the input controls, that should put in place, particularly for ecosystem-based fishery management. We told them that at the time, but it fell on deaf ears.
I am not sure how your Senate committees are structured. I understand that you have adopted an inclusive approach, and I would like to congratulate you on that. You must continue to think of the good of all Canadian marine users. If you want to avoid the institutional battles which have taken place in New Zealand, you must consider the non-commercial users of the fishery. Otherwise, if you divvy up something focused purely on the commercial fishing industry needs, there will be problems down the line and you will be revisiting this issue in 10 years time. You are heading the right way, but keep looking broadly.
Finally, 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. We had very good grounds for that. We are so far from our markets. You are a lot closer. New Zealand is a long way from anywhere. The only way we could compete internationally was to cut all of our costs and to argue as strongly as we could for the removal of any form of subsidization. We combined with Canada and Australia and various other people in arguing for the removal of trade barriers on agricultural and fishery sectors. By cutting out a lot of our subsidies and by moving to that type of system, we were able to strengthen our argument that we had moved to a market-based economy.
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. You need a vision of what sort of society you want and what the mix of government and private sector management of the fisheries would be. I would not pretend to say what mix it should be in Canada, but I just draw that to your attention.
The Chairman: You pointed out in your last comments that we need to look at much more than the distribution of fish. In fact, last year Canada did pass the Oceans Act which paves the way for more protected marine areas in our oceans.
Many proponents of the wholesale privatization point to New Zealand as the ideal model on which Canada should base its future fishery. Many of Canada's fisheries officials did in fact help New Zealand set up the model, so obviously they have a stake in making sure that New Zealand is pointed at as the great vision for Canada. You point out that we are two very different countries.
The picture you paint is not all that rosy compared to some of the other testimony we have had from witnesses. You are from there. You know it much better than some of the witnesses who have appeared for us.
Senator Stewart: I gather that the New Zealand push to introduce individual transferable quotas was primarily intended to solve what the economists refer to as "the tragedy of the commons" or "the disaster of the commons"?
Mr. Rennie: Yes.
Senator Stewart: Would you tell us what is meant by that expression?
Mr. Rennie: With a common resource, one to which anyone can have access and from which anyone can take a product like fish, what one person takes from the resource cannot be taken by anyone else. There is an incentive built-in for people to overinvest in ways and means of exploiting that resource as fast as possible. There is no incentive for them to maintain that resource in the long-term.
There is an assumption now that people have open access to the fishery. There has been a lot of research on alternative management systems, most notably by Canadians like Evelyn Pinkerton from UBC, which says that open access is a rare phenomenon in the world and that there is usually some form of community management actually in place. It might be de facto, or it might be in place in law, but, over time, communities evolve a system of managing their resources in a way that is reasonably sustainable.
Senator Stewart: Should I conclude that a licensing system such as we use in our East Coast lobster fishery is one approach to solving the tragedy of the commons?
Mr. Rennie: A licensing system or an ITQ system is an approach to addressing that. It is essentially a way in law of limiting the number of people involved in the fishery.
Senator Stewart: In the part of Nova Scotia I come from, there is a good deal of suspicion about the ITQ approach. That leads me to ask about the nature of your fisheries before you went to your version of the ITQ system. Where I live, fishers are using 45-foot boats. They are catching lobster right now. They catch some groundfish, some scallops and so on. It is the basis for quite a healthy community.
What is feared is that with an individual transferable quota system, for one reason or another -- it may be because the quota holder ages or goes into debt -- the quotas come to be concentrated in fewer and fewer hands so that the people who now operate their own individual enterprises will become simply the deck hands employed by perhaps six or eight big companies. There are stories in Nova Scotia that some of these company owners require six or seven mansion houses in which to live. That does not make the notion of the individual transferable quota system any more attractive.
What was the situation before the individual transferable quota system was put in place? I am interested in seeing what the impact of this system has been on the lives of the fishers.
Mr. Rennie: It is an area that I am very concerned about, in particular because New Zealand has not done a lot of research on the impact. That is one of the areas for which I am trying to develop a research program at the moment. I have a student working on a comparison with an area for which we have good data from before the implementation.
Before the quota management system came into effect, we had a fishery that did have a lot of new entrants. A lot of people were encouraged into the fishery, particularly with the 200-mile Exclusive Economic Zone being put in place. Suddenly, there was this gold mine out there, and everyone wanted to be involved in fisheries. That was helped a bit by government subsidies for boat building and various other subsidies to assist people to get involved in the fishery.
At the time that the quota management system was brought in, it was in fact a small group of the fishers' representatives who looked at the situation and found that entry should be limited in some way. They bought into the idea of the quota management system and actively worked to have it put into place. They were people who were involved historically in fishing and who wanted to save the fishing industry in the small community. That was one of the driving forces. We have some data on aggregation, but we are looking at the social impacts now for the first time.
A number of fishers involved in the fishery do not necessarily want to be. Being a fisher is a dangerous, hard life. A number of them took the opportunity of quota to sell out of the fishery and move to other occupations on land where they saw more of their families and children. The ITQ system worked for some of these people, enabling them to leave the fishery where they had been trapped, and they stayed in the communities and continued to work there.
However, we are not sure of the overall level of that sort of movement. We are just starting to investigate the number of people who moved from the rural communities into the cities and what they did in the cities. Canada is way ahead of New Zealand in terms of its social research on communities, and fishing communities in particular.
There have also been a number of people who have gained or aggregated quota and who have done extremely well in the fishing industry. Some do have fairly large houses and nice lifestyles, and are totally devoted to the fishing industry.
Major fishing companies have come and gone, have bought in and sold out of the fishing industry. They seem to have been there primarily to make a quick dollar, getting the quota when it looked like a boom and then selling out in time to make a reasonably substantial ledger profit on their accounts. They tend to fish fairly intensively, getting the maximum amount they can out of the fishery. There have been cases of companies doing well, showing signs of ever-increasing profit, and then selling out and leaving it to the next person to pick up the state of the fishery.
There has been a mixed reaction. It is dangerous to assume the fishery is homogenous. I would highlight the Chatham Islands. The 1996 Fisheries Act enables the Chatham Islands community trust to have a special status: it is allowed to exceed aggregation limits and it is allowed to be allocated new quota amounts. This is in order to try to establish ownership of the fishery around the Chatham Islands by the islanders, because they were among the first people to sell out and they moved away from the islands to where they could get all the luxuries of living on the mainland. Some people were very concerned about that.
There is a 35-per-cent limit on quota aggregation in New Zealand, which we tend not to talk about. If the Multilateral Agreement on Investments (MAI) had ever gone through, we would probably have got rid of it over time.
Senator Stewart: You list a large number of species. Are there towns which are famous as fish processing centres? I think of Lunenburg in Nova Scotia as a place which is notable for fish processing.
One of the complaints that we used to hear when groundfish were fairly plentiful was that, because of the attempts of the processing companies to be more and more efficient, they tended to build bigger and better plants, but, of course, fewer plants. I am thinking particularly of Canso, which for centuries depended on the fishery. Canso is the place in North America where Europeans first collected taxes based on the fish industry. It has now been left high and dry. The fish which in the old days would have been processed in Canso are now processed elsewhere -- that is, if there are fish, because so many of the species have been virtually wiped out.
What is the situation in New Zealand? Do you have the problem that some of the towns which formerly depended on fish processing have been left high and dry by reason of the concentration of the industry?
Mr. Rennie: I do not know. After some inquiries, I have just recently received the current list of processors. We are now in the process of checking back to see what changes happened in the processing industry, but we do not have the data to say definitely one way or the other. I do not expect to have the data until next year.
Senator Stewart: Have you heard this complaint?
Mr. Rennie: I have not heard it, but that does not mean it does not exist.
There is processing in the Nelson Area, in Auckland, and some in Southland and Bluff, as well. Nelson, Bluff and Auckland have remained major areas in the current system. I have not heard of smaller areas, but it may be just that no one is talking about them.
Senator Jessiman: When ITQs were introduced in 1986, was it clear to everyone that if you were fortunate enough to get one it would be in perpetuity?
Mr. Rennie: Yes.
Senator Jessiman: Was that part of the legislation?
Mr. Rennie: Yes, it was definitely part of it. It resulted in a lot of fishing for quota in the years leading up to it.
Senator Jessiman: Was there any restriction at all in transferability? Could a quota be transferred to anyone in the world?
Mr. Rennie: It was always intended to be totally transferable. That was part of the whole theoretical basis of the ITQ.
Senator Jessiman: Are there more people working in the fishery now than there were prior to the introduction of ITQs 12 years ago? It may not be as a direct result of ITQs, but tell me that first.
Mr. Rennie: There are definitely fewer.
Senator Jessiman: Substantially fewer owners?
Mr. Rennie: There are substantially fewer owners, and I would be confident that there are also fewer people working in the fisheries.
The Chairman: Senator Jessiman asked whether the quotas were transferable to anybody in the world or within New Zealand.
Mr. Rennie: There are some restrictions on overseas ownership.
Senator Jessiman: So they are restricted to New Zealanders. Do corporations own some of these?
Mr. Rennie: Yes.
Senator Jessiman: Do they look behind the corporation to determine whether control of that corporation is inside or outside New Zealand?
Mr. Rennie: I am not sure. I would have to double check on whether quotas are restricted to New Zealanders. It is something I have not considered. There are some limits on foreign ownership, but it is possible.
Senator Jessiman: You stated that there were fewer people working in the fishery than before. Do you attribute that in some way to the ITQs, or to the equipment that has been introduced in the meantime, or to the way that the fish are caught?
Mr. Rennie: I would not know actually. The ITQs definitely had a role in the regulation decreasing the number of commercial fishers in the first place. Then, the aggregation of quota has meant that people have been able to move out of the fisheries, which has led to increased efficiency within the industry in terms of the number of people involved. This is also linked with the technological improvements which allow fewer people to do the same amount of fishing.
Senator Jessiman: In the 12 years that New Zealand has had ITQs, have there been various changes of government?
Mr. Rennie: We have had significant changes in the government. We had a labour government, which supposedly was left-wing but which introduced what were probably the most far reaching, right-wing reforms that New Zealand has had. They came in in 1984 when I was here in Canada. They surprised everyone by winning a second term and continuing their reforms, although they slowed down toward the end.
Senator Jessiman: Did they introduce the ITQs?
Mr. Rennie: Yes.
Senator Jessiman: Then the government changed?
Mr. Rennie: Yes. The original right-wing government continued on with the reforms initiated by the labour government. They actually negotiated the settlement of the treaty with the Maori.
Senator Jessiman: New Zealand has been using ITQs for 12 years. It is not all we think it should be. Is there some movement in New Zealand to change the system?
Mr. Rennie: No, I do not think so. My gut feeling is that ITQs have not been a bad thing, but they have not delivered all we expected from them. The major issue was the impact on the Maori. The Maori reached a settlement with the government and are now major players in the government fishery. They own the largest fishing company in New Zealand. As a right, they get 20 per cent of any new species brought onto the quota system. They get 10 per cent of any existing fishery on the quota system, and they are allowed to purchase as many more as they want. So the Maori in particular have come back into the fishery in a major way as a result.
Senator Jessiman: When fishers initially received their ITQs from the government back in 1986 or after, did they pay for them?
Mr. Rennie: There are two categories. For fishers who had been fishing in the fishery, the initial allocation of quota was based on catch history. The people fishing for quota realized this was coming. They suddenly increased their involvement in the fishery in a big way in order to get as much as possible.
Senator Jessiman: They got it for a nominal fee, did they?
Mr. Rennie: I would not want to say whether they had to pay much at all. The government reserved a large chunk of the total allowable catch for itself and sold some of it to fishers who wanted to buy more quota.
Senator Jessiman: The government owns land, they bank it and then they sell it, but they sell it at the market price. Does the government sell quota at the market price?
Mr. Rennie: There is a bit of a debate as to whether or not it was a market price. They made a reasonable amount of money from it -- many millions of dollars.
Senator Jessiman: Do they pay an annual fee?
Mr. Rennie: Fishers used to pay a resource rental. Despite strong argument in its favour, the resource rental was done away with in the early 1990s as part of the trade-off for getting fishers to take on full cost recovery. The resource rental they were paying did not come near to covering the full cost of administering the quota management system. The cost recovery would have amounted to more money than the resource rental and would have brought them closer to covering the cost of operating the fishery. Therefore, the government was prepared to accept doing away the resource rental.
Senator Meighen: The TAC is established by the minister, is it not, for each species? What has been the general feeling in New Zealand regarding the accuracy of those figures? Is it as enthusiastic as in Canada?
Mr. Rennie: None of the fisheries in New Zealand have yet done what some of the Canadian cod fisheries have done.
In my view, the Ministry of Agriculture and Fisheries tried very hard to be rigorous in their assessment of fisheries and to be reasonably independent of influence until they brought in the cost-recovery system. Then they became more influenced by the research priorities of the industry. The process they set up was not statutory but it did enable anyone who wanted to participate in the setting of the TACCs to be involved. That openness adopted by the Ministry was fundamentally helpful in ensuring that some of those things went ahead.
There were major problems with the setting of the TAC. A parliamentary commission on the environment did a report on the setting of the TAC for orange roughy, and we got it very badly wrong for that fishery. There has been concern from the general public about the levels of the TAC. There is a problem, though, because of increasing pressure from the recreational fishery. Around the Auckland region, the recreational snapper fishery takes up a about a third of the total TAC for that area.
Recreational fishers have not had to buy a quota, but the more fish they take from the total allowable catch, the more the commercial fishery must be reduced. They are slowly whittling away at the property right that the commercial fishers have bought in that area. There is a real conflict there. The community in New Zealand is generally concerned about the TAC setting for the snapper fishery, but every attempt that the Minister has made to reduce it on scientific grounds has been challenged in the courts. He has yet to be able to reduce the snapper TACC because of court challenges. There is a lot of competition for snapper.
There has definitely been community concern about the setting of TACCs for some of the major species, including orange roughy, snapper and a number of others. However, people are more concerned about the level of by-catch of yellow-eyed penguins, albatrosses and hooker sea lions. The squid fishery and the hooker sea lion are two cases in particular. If a number of sea lions are caught, the fishery must be closed immediately. The hooker sea lions are in trouble because of the impact of by-catch on their breeding. That has been of more concern to the public than the TAC levels. The environmental groups focus on the TACs.
Senator Meighen: Everywhere in the world there is, traditionally, a conflict between the recreational and commercial fisheries, and maybe increasingly so with the increasing popularity of recreational fishing. In your view, does the ITQ system have any effect on that problem? Does it exacerbate it or reduce it?
Mr. Rennie: I have not looked enough at other countries to see if it has an effect.
Senator Meighen: Does it have an effect in New Zealand?
Mr. Rennie: The conflict would still be there regardless of the ITQ system. What ITQs do, though, is give the commercial fishers a property right for which they pay and which they see being infringed upon by the recreational fishers. The recreational fishers see their right to catch a feed from the sea as being almost a birthright.
Our own fisheries review team looked at the possibility of a recreational quota, and they almost got lynched. They had 400 people to 500 people showing up at meetings. They were nasty, and the review team backed off very quickly. Every now and then it comes up again. Just before I left New Zealand, the major commercial interest said that the recreational fishery needed to be put on a quota system and have everyone licensed. How could that ever be enforced? It would be really tricky. As much as anything, it is a battle over the nature of rights. That is what the ITQ has done. It has shifted the ground of where the battle is fought.
Senator Meighen: How was the ITQ system introduced in New Zealand? Was it a matter of today there are no ITQs; tomorrow there are ITQs everywhere? Or was the introduction of ITQs a gradual process?
Mr. Rennie: It was done like this: "As of such and such a date, we will be moving to the ITQ system, and the backdrop will be such and such a period. The catch history will be built in." For a large number of species, the process was delayed considerably by the Maori litigation in the courts.
Senator Meighen: In your view, was there any particular type of fishery in New Zealand that lent itself better to ITQs than another?
Mr. Rennie: The offshore fisheries definitely lend themselves to ITQ systems, partly because there are fewer people involved in the offshore fishery. We say the ITQ system came in in 1986. That was across the board. They tried it in the deep-water fishery for three years before that with a number of companies who held rights to fish in one of the deep-water fisheries. I believe it was orange roughy. My gut feeling is it is still strong in deep water. I have not thought through all of the ramifications of the inshore fishery in that area.
Senator Meighen: Offshore, the system seems to be working particularly well?
Mr. Rennie: As a means of distributing rights to the fishery, it seems to work very well.
The Chairman: One of our members, Senator Jessiman, will be celebrating a birthday tomorrow, June 5. Although we would like to offer him our best wishes, we must go further because this birthday also means that he must retire from the Senate.
Senator Jessiman has been with the fisheries committee now since 1994. Since that time, he has applied the skills he refined with the study and practice of law to the study of the fisheries here in Canada. The committee has benefited very greatly from your contribution and you will be very much missed.
The committee is fortunate to have members from the East Coast, the West Coast and the Northwest Territories. Senator Jessiman is a member from the heart of Canada, the Canadian inland. Senator Jessiman came to this committee with an open mind, but also a very inquisitive mind. We will miss you very much, Duncan, and what you have contributed to the committee, and we will be less because of your leaving.
Senator Jessiman, on behalf of the members of the committee, allow me to present to you a small token of appreciation for your contribution to the work of the committee. We wish you well in your retirement and we hope that your interest in the fisheries, now that it has been kindled, will continue many more years into the future. Please accept this as a small token of our appreciation for the work you have done over the years.
Let me read to you what the inscription says. It is in both official languages, of course. "Senate of Canada, presented to the Honourable Duncan J. Jessiman, Q.C., on the occasion of his retirement from the Senate in recognition of his valuable contribution to the work of the Standing Senate Committee on Fisheries, Ottawa, June 5, 1998".
Senator Jessiman: Thank you very much. The reason I was so inquisitive is I started from scratch. I knew very little about fisheries.
The Chairman: Senator, please get it on the record.
Senator Jessiman: I come from Winnipeg. When I started this committee, the only thing I knew about fishing was the little bit I had done in some of the Manitoba lakes where we catch perch and pickerel, what Americans call walleye. I have done a little offshore fishing in Florida, but knew very little about this. I have learned a great deal and I have enjoyed it very much. Thank you very much.
The Chairman: I hope you do not forget us when you are back in Winnipeg practising law and doing real fishing.
Senator Stewart: I look at the large number of species on your list. With individual transferable quotas for each species, there must be a serious problem of by-catch. How is that dealt with? What, if any, effect has the introduction of the individual transferable quota system had on what we call high-grading?
Mr. Rennie: High-grading remains a problem that we have not resolved. We have no way of measuring it, but the people studying the fisheries are fairly confident that high-grading occurs. The fishing industry accepts that there is high-grading. The ITQ system is not designed to deal with that and it cannot deal with it.
The by-catch remains an issue. All sorts of modifications and balancing systems have been experimented with, including fishing against another's quota, to try to ensure that people had quota to cover the by-catch as well. That became very complicated and, indeed, the administration of the quota management system became very heavy work for the computer systems.
In the 1990s, they moved to separate the quota from the annual catch entitlement in the hope of simplifying the system. Ministry officials are finding that the ACE system is not helping to resolve some of the computer problems as well as they might have hoped.
If fishers catch a by-catch of another species, they must find someone else's quota against which to land it. They cannot discard it, although undoubtedly that happens. It seems that most of the fishing industry is reasonably responsible in trying to land the by-catch against someone else's quota. Occasionally it is landed against Crown quota.
Senator Cook: I read that where there is a Maori or a recreational fishery, an amount is set aside. Would you share with us how that is done?
Mr. Rennie: It is done largely by guesswork. The TAC is set largely on the basis of the commercial catch, which has been problematic in areas where there has been a significant recreational fishery or a Maori customary fishery. They take the total allowable commercial catch and the results from the data on the returns of the commercial fishery and use that as a basis for assessing the state of the stock and estimating what the maximum sustainable yield of the fish stock might be. Then they make an allowance in theory for the recreational or the Maori catch.
The Maori catch has traditionally been so small for the major species that they have not warranted setting aside any amount at all for them. However, they recognize that the recreational catch recently has become a major issue. Every time they try to reduce the commercial catch to leave a bigger gap for the recreational catch between the TACC and the TAC, the industry objects and they end up in court.
The legislation has given priority to Maori and recreational and scientific fishing. That means that when they do go to court, there is a clear priority ranking in the court case. So, if people can produce strong evidence that the Maori catch is being affected by the commercial catch, then the Maori have a strong case to argue, or the recreational fisheries have a strong case to argue. How will this affect the rights and law, rather than the actual allocation? They are desperately trying to get a better hand on the recreational fisheries.
Senator Cook: So it is done arbitrarily?
Mr. Rennie: Very much so, with the exception of the snapper fishery. They feel that about a third of the fishery is being caught by recreational fishers.
The Chairman: You indicated that you will be trying to determine the impact of the privatization on New Zealand. That will be extremely difficult. Will it be possible actually to measure the impact or success, other than by actually looking at communities and seeing whether they have died off or survived?
Mr. Rennie: That is where we are headed. We have some fairly good data for some regions, especially Northland and Stewart Island. Stewart Island had a couple of anthropologists who did some research before the ITQ system. One of the things I noticed was that bringing the licensing system in alone resulted in some community sense of isolation from the decision-making.
The fisheries do not figure prominently enough in consciousness of New Zealanders that students and academics come through wanting to do research. I struggle to think of another academic who is looking seriously at the social impacts of the ITQ system. There have been a couple of papers written by a good friend at Dunedin, but he has not really got into it in any depth.
I am working at the moment to try to bring through a group of students who actually understand the ITQ system at the undergraduate level so that they can be involved in graduate-level research. I am also looking at linking up with a couple of established research organizations in order to put in a significant research bid to get the funding to do detailed research.
One of the problems we have is that, with the general cost-recovery systems put in place in New Zealand, getting raw data from Statistics New Zealand is extremely costly. We do not have the funds to pull that together. There is no one who wants to develop that sort of data, so it is a little bit tricky getting that starting-point data. I try to develop a little more data base each summer.
The point of the paper I am giving at the Canadian Association of Geographers Conference is that trying to come up with fishery-dependent regions, which is the first level of data we managed to get, is not really feasible in New Zealand.
My student is in Northland looking at what happened to two communities which were clearly fishery-dependent before the quota management system came into effect. She will do in-depth interviews with some of the people in the community to explore why people left, where they went and what actually happened in the community. That is the direction I would like to get a lot more researchers in New Zealand heading.
At the moment it is not done. Graduate-level people are just starting to grasp what the quota management system is. They finally have a grip on it halfway through their research, and they wrap up a fairly quick case study which necessarily does not go into any depth.
The Chairman: If it makes you feel any better, my understanding is that it has not been done in Canada, either. Since you are much further along the road to privatization of the fisheries, if we continue the same trend in Canada, we can look forward to what has happened in New Zealand. Given that you are one of the very few people looking at the impact of privatization, we will be looking forward to your continued research on this. We have a stake in it in Canada. We will be able to find out where we are headed through your research and we will be following it closely.
I would like for the committee to continue the contact we have had over the past year. Thank you very much for appearing this morning.
The committee adjourned.