Proceedings of the Standing Senate Committee on
Fisheries
Issue 12 - Evidence, October 22, 1998
OTTAWA, Thursday, October 22, 1998
The Standing Senate Committee on Fisheries met this day at 8:30 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. We have two witnesses this morning in our study of the privatization of quota licences. Our first witness is Dr. Ragnar Arnason, professor of fisheries economics at the University of Iceland. Dr. Arnason is a world renowned scholar and prominent advocate of individual quotas. He has published a number of papers on Iceland's fisheries and has done major work as a consultant in a number of countries, including Canada. His latest book, The Icelandic Fisheries: Evolution and Management of a Fishing Industry, gives a detailed analysis of the evolution and structure of the Icelandic fishing industry. He holds a master's degree from the London school of Economics, and a Ph.D. from the University of British Columbia. Dr. Arnason, we welcome you to our committee.
Professor Ragnar Arnason, Department of Economics, University of Iceland: I understand that this committee is examining the privatization of fishing rights.
First, my basic axiom is that the objective of commercial fishing is to maximize the social benefits that flow from the fish stocks.Second, the basic fisheries problem is caused by the common property arrangement of most ocean fisheries.
The common property problem is all-pervasive in human society. Almost any use of resources entails reduction of these resources, leaving less for other people to use. We have dealt with this problem by evolving, defining, specifying and developing property rights. This approach has not made the problem disappear, but it has alleviated it.
There are many examples. Land, capital, factories, equipment, material, and most possessions we can name are private property. This system of property rights is so ingrained that it is the exception from the institution of private property rights that catches our eye. Over the course of human history, the institution of private property rights has been expanded gradually into more spheres of human activity.
We may infer that new steps in the development of private property are always controversial, and often there is conflict over them. It is the consensus within the economic community that the recent economic growth in the world -- and the relative affluence of the western world -- are based on the institution of private property. Now we are faced with a similar historical step in the fisheries of the world.
Since roughly the 1970s, there has been a clear trend toward the adoption of property-rights based fisheries management regimes world wide. The most prominent of these property rights are the territorial user rights. Canada has some of these rights on the East Coast. These have evolved spontaneously without the interference of the government.
We have access licences, which are also property rights of a sort. These are far removed from the basic natural resource -- that is to say the fish stocks. Canada also has access licences in some fisheries. We also have individual harvesting rights in the form of quotas, transferable quotas, and individual quotas.
These are three versions of property rights. Of the three, individual transferable quotas have been the most successful. Individual quotas, that is, non-transferable harvesting rights, are already quite common. They are used widely in Europe, Russia, southern Africa, America and Japan. Individual quotas tend to evolve into individual transferable quotas over time. This evolution occurs as the holders of individual quotas realize they have something valuable, and they trade those quotas with other people to their benefit. This evolution has taken place, for instance, in Iceland, Holland, Greenland and Libya.
Individual transferable quotas are probably more common in the world today than most people realize. Slightly more than five per cent of the global ocean catch is currently taken under ITQs.
Currently at least six important fishing nations are using ITQs as their main fisheries management instrument. These nations are: Australia, New Zealand, Greenland, Iceland, Holland and Namibia. These nations are in at least three continents. Several other nations are using ITQs in some of their fisheries, including Canada, Chile, Norway and the United States. Very important fishing nations -- including Peru, Argentina and Morocco -- are actively preparing the introduction of ITQs as the main fisheries management system in their fisheries.
This process has been taking place over the last two decades. We had the first ITQ system around 1975-76. We already have a lot of experience with those ITQ systems and how they work. Moreover, these experiences are not from isolated parts of the globe.
This experience has generally been quite positive. We have usually seen a reduction in fishing efforts and in fishing fleets, we have seen depleted fish stocks recovering, and we have seen the quality of the landed catch improving. Finally, and perhaps most importantly, we have seen an increase in the economic rents generated from the fishing activity, which is the main purpose of this particular production activity. No other fisheries management system can claim this rate of success.
In Iceland, ITQs were introduced in an incremental fashion from 1979 onwards, first in our herring fishery, in our capelin fishery in 1984, and then in the demersal fisheries. Since 1991 we have had an ITQ fisheries management system for all our fisheries. ITQ management is the fisheries management system in Iceland.
Our experience with the ITQ system has been very good. We have had most of the benefits. We have had declining fishing efforts; we have seen a contraction of the fishing fleet. It is important to realize that this reduction in the fishing effort and in the fishing fleet takes place internally. It is not government-directed or controlled. It is simply that, under the ITQ system, fishing operators find it to their own advantage to reduce the fishing effort and get rid of redundant fishing capital.
We have also had a significant improvement in the quality of fish products -- the landed catch. My guess is that prices are 10 per cent to 20 per cent higher, on average, for the fish because of this quality improvement. The quality improvement was made possible by the ITQ system, because, with ITQs in hand, the fishing companies can take the time they need to catch their quotas. They no longer have to race for the catch.
Most importantly, we have seen a substantial increase in the value of ITQs; the annual value, not the value of the permanent ITQs. They have increased as well, but the annual value of the rental price of ITQs has also increased significantly, reflecting an increase in the profitability of running or operating a fishery from year to year.
Right now the annual value of ITQs in Iceland represents almost 40 per cent of the total revenues of the fishing fleet. We do not think this will be so in the long-run. We think this number will not increase greatly, and that it may even decline. One of the reasons the annual quota rental prices are so high is that our fishing fleet is still too large. The capital costs or the opportunity costs of the harvest are low because the fishing vessels are basically free.
What are the drawbacks? No system is perfect. There are certainly some drawbacks to the ITQ system. The most important drawback is that the ITQs are not perfect property rights. They are not property rights like the property rights to a chunk of land or a factory. They are property rights to the right to extract from the resource.
Ideally, we would like property rights to individual fish so that 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. When that happens, we will also see people investing in genetic improvements of fish stocks and in breeding. This is not possible today because we have limited property rights -- the ITQs.
ITQs are limited property rights, and one of the consequences of that is the problem with cuts and the drawbacks of ITQ systems. It is has been demonstrated that under an ITQ system there is an increased tendency to discard fish. That is to say, from a pile of fish on the deck of the boat, more fish would be discarded. Counteracting this tendency, however, is the fact that there is a higher degree of selectivity by fishers under the ITQ system. That is, since they have ITQs, they have the time and the opportunity to more carefully select the catch that comes aboard the fishing vessel.
How do they perform the selection? They use the appropriate fishing gear, go to the appropriate fishing grounds, and fish at the appropriate times. What we have seen in Iceland -- and in other fisheries managed on the basis of ITQs -- is that people are using smaller-scale fishing gear. They are using fewer nets and bigger mesh sizes to select a better quality catch.
This discard is a drawback, but it is not clear whether the actual quantity of discarded fish goes up or down under ITQs, because there is a higher degree of selectivity. We have investigated this question in Iceland, and the rate of discarding in our demersal fishery -- and there is almost no discarding in our pelagic fisheries -- is about 4 per cent or 5 per cent of the total volume of catch.
Another drawback to the ITQ system is the cost of enforcement. In some cases the cost of enforcement of ITQs is very high indeed; in others it is not so high. It depends on the landing ports and other variables.
We have what some people might regard as a drawback and other people as an advantage -- that is, the distribution of benefits and costs. The allocation of ITQs means an allocation of very valuable property rights in most fisheries. This allocation is found to be contentious in society. The benefits of the introduction of ITQs are not equally distributed from the outset. I hasten to add, however, that it is technically possible to have a perfectly equal allocation of ITQs to any group of people found to be deserving, and perhaps to the whole nation. The distribution question can be solved within the framework of the ITQ system, but it is quite frequently a bone of contention associated with the introduction of an ITQ system.
The costs of the ITQ system may not be equally borne by everyone. For instance, if an ITQ system leads to a reduction in the fishing fleet and a reduction in the number of fishers, one could say that the fishers are paying disproportionately for the cost of the system, while the quota receivers gain disproportionately. This is certainly something which one has to consider.
Another drawback of a similar nature, which some might not even think is a drawback, is the social restructuring that occurs as a common consequence of the introduction of an ITQ system. An ITQ system is introduced to enhance the efficiency of the fisheries.
Before the introduction of the ITQ system, the demersal fishery was inefficient, and, because of that, we were bound to see significant restructuring of the industry. Some communities may encounter trouble during this process, because industry may move away from them. Economists will tend to regard this as a benefit, saying that communities in that situation were not justified at the outset. If this is found to be disagreeable from a socio-political point of view, this tendency can be counteracted by requiring that the ITQs allocated to a particular community stay within the community. The transferability should be restricted to a particular community. As an economist, I do not recommend this, but it is a way to achieve an objective.
From an economic point of view, the conclusion must be that ITQs and other private property rights in the fisheries are generally a good thing. The big question is whether it is feasible and possible to introduce and use them.
There are two basic problems. First it must be determined if the property right is enforceable. Property rights would not be easily implemented in certain fisheries under the ITQ. The greater the number of landing points, the higher the value of the unit of catch, the higher the price of the fish, and the closer the final consumption market is to the landing ports, all complicate the ability to enforce an ITQ system. ITQs are always enforceable, but in some cases the cost of doing so may be prohibitive. This is the basic problem with the ITQ system and, by inference, with other property rights systems in fisheries.
The second question of feasibility concerns the social politics of the matter. Is there or is there not sufficient support for a property rights regime in the fishery? Is the nation or society as a whole willing to take that step? The decision depends on the benefits that are foregone if the step is not taken.
In a country like Iceland, which is dependent on fisheries, there is no question that we have to go for the most efficient fisheries management system. That is one of the reasons why we were so quick to embrace the ITQ idea.
I am open to questions and comments.
Senator Stewart: I would like to know about the nature of your fishing fleet or fleets before the introduction of the ITQ system, and what change, if any, came as a result of the ITQ approach. Specifically have you moved from relatively small boats -- 36 or 45-footers -- to larger, perhaps dragger-type craft?
Mr. Arnason: The composition of the fleet has not changed drastically. I should add a qualification, however. At the outset of the ITQ system we left out the very small fishing vessels. Fishing vessels below 10 gross registered tonnes were not included. Those vessels less than 10 metres or 12 metres were exempted from the ITQ restriction.
As the stocks improved, there was an explosion in this segment of the fleet. The restriction was first below 10 tonnes and then below six tonnes. We have seen an increase in very small fishing vessels in Iceland -- not a reduction but an increase.
This increase is explained by the time it took to bring people into the system. Now we are seeing a reduction in that fleet again. Any impact on the fishing fleet was for vessels of over 10 gross registered tonnes, because the small ones were exempted for a large period of time.
There has not been a great change in the composition of the fleet, but there has been a certain reduction in the mid-sized fishing vessels. Mid-size vessels are those of approximately 100 gross registered tonnes. There has also been an increase in the deep-sea trawlers. That trend started before the introduction of the ITQ system, so it is not clear whether it is as a result of the ITQ system.
The main thing which determines the composition of the fishing fleet under an ITQ system is the size of the fish stocks. There are indications that the cod stock is improving rapidly. The smaller fishing vessels will become more efficient than the larger vessels. Therefore, the declining trend will be reversed as more spawning cod come to the inshore fishing grounds.
Senator Stewart: You spoke about social reconstruction. A recent study of Canadian society found that the rich are getting richer and the poor are getting poorer. The restructuring of Canadian industry is credited with this trend.
That is relevant to this problem, because many of the fishermen in Nova Scotia are concerned that large corporations will control the fishing of all the profitable stocks -- for example, the lobster fishery. Fishers fear that former owners of fishing boats will become deckhands on large company boats.
It may be that the social structure of Iceland was very different from what we have in Nova Scotia, but I would like you to respond to my question from the Icelandic view point. How would the Icelandic experience be different for a small lobster fishery in small communities?
Mr. Arnason: 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.
The situation in Iceland was quite dissimilar from the small scale fishery of Nova Scotia and Newfoundland. Iceland always had a very highly capitalized fishery which was operated by large companies. We did not have many family-owned fisheries. We had family-owned fishing corporations that had evolved from small boat owners. Basically, however, our fishery had a capitalized structure and we did not have, to any significant extent, individually owned fishing vessels. Thus, this particular concern did not arise in Iceland, and there have been very few complaints of this nature in Iceland.
At the same time, however, even the largest fishing companies in Iceland had no more than, let us say, 5 per cent or 7 per cent of the fishery. Therefore, these companies are not huge by your East Coast off-shore fishery standards. I think the concern you are expressing is valid. This is something that could easily happen, but it can also be easily counteracted by restricting the transferability of quotas.
You should also keep in mind that this does not impoverish the small operators because, under all normal ITQ systems or other property rights systems, the existing operators are given the rights. Therefore, it is up to them to decide to sell to a big conglomerate. If they do that, they receive automatic financial compensation. It is not as though the ITQ is taken away from them; they decide for themselves. A whole group of people is involved in this, and even single individuals sell out, which causes some trouble for the rest.
Senator Stewart: You beg additional questions on that topic, but let me ask you another question of a different nature. Normally, when land was granted in North America, grants were made without payment to the Crown. What is happening in the fishery now, according to the approach adopted behind ITQs, is that that same model is applied, at least on the East Coast of Canada. In effect, quotas are granted to particular individuals.
Why should the Crown or the government bestow these quota grants free of charge? If there is a good answer to that, I want you to deal with a second question. Why should the quotas be perpetual? It is as if the king of England in the old days were endowing barons. It seems to me that it is a somewhat outdated approach.
You say that you are looking for the most efficient system. Given that these companies received their perpetual quotas free of charge from the Crown -- or whatever the granting agency was -- do they pay extra tax in recognition of the fact that they are the recipients of a valuable resource for which they paid nothing? If not, why not?
Mr. Arnason: As to 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. Original rights -- conventional rights -- should not be paid for if these are the same fishers who were fishing before. There are certainly moral aspects to this question as well.
From an economic point of view, I can say quite firmly that there is no reason for the rights to be given away free, and that there is no reason for the other thing as well. It really does not matter from an efficiency point of view.
From an efficiency point of view, you could argue that the right should be given to the most efficient people, but who knows who the most efficient people are? In any case, if the rights are transferable, they would go to the most efficient people anyway. Thus, there is no argument against or for. It can be either.
I would like to respond to your question about perpetuity. Why should these rights be perpetual? There is a very good economic reason for that. If the rights are not perpetual -- if they end at some point in time -- the right holders will respond to that end point. It is the same dilemma as whether it is better for people to own their houses or to rent their houses. Those people who own their houses have a definite asset. They will always care for that asset as well as they can. However, those with rights that are limited in term will tend, toward the end of the term, to go a little bit downhill in terms of taking care of the property properly.
Taxation is another thing. As an economist, I would recommend that profits from ITQs, or property rights in fisheries, be taxed in the same way as other assets are taxed in society. That is to say, we should not distinguish between assets. At the same time, however, if it is felt to be fair to extract a good part of the expected resource rents, then that could be done at the outset through the initial allocation of the quotas, or by selling them, or by charging a price for them, or even by having a competitive bid for the initial recipients.
Senator Butts: Professor, you have left us in no doubt as to where you stand on the issue. If I think about land, minerals and so on, I accept your opinion about property rights. However, would you not concede that there is a difference when talking about fish?
Mr. Arnason: No, I would not concede that.
Senator Butts: Why not?
Mr. Arnason: This is a productive resource, just like minerals and land. You use land to produce meat and cereals. You use fish stocks to produce fish products. From an economic point of view, there is fundamentally no difference; both are productive assets.
It is just historical coincidence that, since we live on land, we started our property rights system on land. We then moved on to the ocean. If we lived on the sea, we would probably have started our property rights on the sea. We might now be discussing the problem of introducing property rights on land.
Senator Butts: The mobility of fish makes a big difference, especially when you live next door to the United States.
Mr. Arnason: Yes. There are particular problems associated with fish when compared to minerals and land. There are other natural resources that are held privately which are also mobile, such as cattle, sheep and horses. They also cause similar kinds of problems, but not to the same extent.
Basically, any property rights system in the ocean fisheries has to take into account the possibility that other sovereign states might get involved in that property right. There is a very well known way to deal with that in ocean fisheries: for the participating nations to agree on an overall quota for the fish stocks, and then to allocate that overall quota between the countries.
Having said this, I do recognize that, when you do not have an agreement of this nature, you may not achieve your efficiency aims by introducing an ITQ system on your own citizens.
Senator Butts: I would like to move on to something to which the Chair alluded. I agree that if I am talking only about economics, I will worry specifically about efficiency. Have you had any studies on the social concerns related to fishing communities?
Mr. Arnason: I have not carried out any studies of that type myself. I know that anthropologists -- in particular some sociologists -- have researched the issue at great length, and that there are many publications on that subject. I actually have a degree in sociology myself, so I have a certain feel for these problems.
My general response, however, in my usual hard-headed economic way, is that our society is based on economic progress and economic growth. In the process of economic growth, we have sacrificed many communities of many types. We might ask if that is for the better or for the worst, but 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." I think that we have to do these things for our children and grandchildren.
We are civilized societies, and we can therefore take good care of the people and the societies that are displaced, if indeed they are displaced, by the introduction of new property rights.
Senator Butts: Would people in those communities receive government assistance to move elsewhere?
Mr. Arnason: Why not? Whatever is fair is okay.
Senator Butts: Are there any small communities left on your coast?
Mr. Arnason: There is nothing but small communities on the Icelandic coast. Iceland is a very small country, as you know. We have found that the stability of the smallest communities has improved under the ITQ system. Why? When people have ITQs, they can protect their own fish resources from the encroachment of big companies and other communities. A small community that wants to survive only has to hold on to its own ITQ, and it can be fairly sure that it will have a continuing supply of fish. Under the old free-access system, small communities in Iceland were being wiped out all the time and new ones were taking their place. That is because people could not protect their interests, and big fishing vessels might take the fish away.
Senator Butts: Are there restrictions on the transferability of those quotas in the small communities in Iceland?
Mr. Arnason: There are some restrictions, but they are not very significant. If a quota is being transferred from one community to another, the ministry of fisheries -- or the fisheries directorate -- has to have the opinion of both municipalities. Sometimes they object, but it is usually not taken into account and the transfer is allowed.
When a fishing vessel is being transferred from one community to another, and the quota with it, the fishing community and municipal authorities have the first right of purchase for that vessel. They can actually step into the contract and buy the fishing vessel if they like.
Senator Butts: These sound very much like community quotas, and not individual quotas.
Mr. Arnason: No, they are individual quotas. It is just that the community has a say in the transferability of the quotas and the fishing vessels.
Senator Butts: Does the "T" in "ITQ" belong to the municipal authorities?
Mr. Arnason: I would not say that. ITQs are held by individual companies. The municipal authorities have a small influence on the transferability of these ITQs to other communities, and that is all.
Senator Robichaud: When you put your ITQ system in place, how were the fishers involved in allowing and devising the system? Was that done by some authority that was outside the community? How were the fishers involved in the whole process?
Mr. Arnason: The most important ITQ system in the demersal fisheries was introduced after a fairly extensive consultation with all members of the industry -- that is, all the associations in the industry. In Iceland, we have national associations for fishermen and vessel owners, as well as for fish processors and processing personnel. All of them were brought into the discussions. There was a general agreement -- but not a unanimous agreement -- that ITQs were the way to go.
It was also agreed that the ITQs should be allocated to fishing vessels -- basically to the owners of the fishing vessels -- on the basis of the historical catch record of those fishing vessels for the three years before the introduction of the system. That is roughly how it went.
Senator Butts: I wish to pick up on your problem concerning the cost of enforcement. Who is responsible for enforcement? Is there any self-regulation among the owners of these ITQs?
Mr. Arnason: Are you asking specifically about Iceland?
Senator Butts: Yes.
Mr. Arnason: The enforcement is carried out by a specially appointed government office. It is the Fisheries Directorate. There is almost no self-enforcement, at least not institutionalized self-enforcement, although there is some experience with people or companies making the Fisheries Directorate aware of violations made by others.
Having said all this, I should say that there is now considerable discussion in Iceland over whether a greater part of the enforcement should be taken over by the industry itself. This follows a similar lead from New Zealand.
It seems that there is now a stronger feeling that the industry should pay for the cost of enforcement. The industry is already paying quite a bit; but the suggestion is that it should pay for the whole cost of enforcement. If the industry is required to pay for enforcement, their feeling is that they should then take it over, if they must pay for it anyway.
Senator Stewart: I sense that there is a considerable difference between the fisheries in, let us say, Nova Scotia on the one hand, and Iceland on the other hand. You may have noticed, sir, that I referred to the lobster fishery. My general question is: What are the percentages of the different kinds of gear involved in your fishery? As a percentage, how important are lobster and crab traps?
How important, as a percentage, are the lobster and crab traps? How important are bottom draggers? How important are, let us say, mid-water trawlers? Most of the objection to ITQs that I have heard where I live -- which may not be adequately representative -- relates to the lobster and crab fisheries.
Mr. Arnason: I can answer that fairly quickly. We have no lobster traps. We have a lobster fishery, a Norwegian kind of lobster, which you would probably call langoustines, and we catch about 2,000 tonnes a year of that. All of it is taken with bottom trawlers. We have no traps. We have no crab fishery to speak of. The combination of fishing gear in Iceland is probably, in that respect, very different from what it would be in Nova Scotia.
Our most important fishing gear for the demersal industry is bottom-trawl gear, but mid-trawl, inlets and longline are all very important. Bottom trawl is about 40 or 50 per cent, gillnet is 20 or 30 per cent, and longline makes up the rest. We also have some small fishing gear that is not significant. Mid-water trawl is no more than 5 per cent.
I cannot help wanting to interject here. I do not think there is any reason to expect ITQs to work differently for different fishing gears. In fact, I am sure that the ITQ system would work fine in the lobster fishery as well.
Senator Stewart: I am convinced that you are wrong on that, but I do not think we are going to solve that problem this morning. You are familiar with the proposal, which just recently seems to have expired, for a multilateral agreement on investment. Is your country prepared to go ahead with such an agreement, and will that allow foreign owners to buy up ITQs, or are you going to distinguish on the basis of nationality?
Mr. Arnason: I do not think it is a question of what we are going to do. It is a legal requirement in Iceland that only Icelandic nationals can hold Icelandic fishing quotas. In fact, foreigners are not allowed to invest in the Icelandic fishing industry at all. So the question of what we are going to do does not really arise in that context. There is currently no discussion in Iceland on allowing foreigners into the fishery, and no support for doing so.
In a sense -- and I just thought of this -- it is like your community quotas. Iceland is a small community of 260,000 people, and they trade ITQs among themselves, but they do not allow the outside world to trade.
Senator Stewart: Here is the scenario that some of the people whom I represent fear. If there were an international agreement on investment which included investment in fish plants, foreigners -- perhaps from Spain or even from the United States -- would buy up a considerable part of the shares. Since some of these fish plants are vertically integrated -- that is to say the same company owns the draggers and trawlers -- that would be an indirect approach. My question then is: Do you also exclude foreigners from owning shares in your processing plants?
Mr. Arnason: The next witness is probably more qualified than I to comment on that, but I believe we restrict foreign investment in our processing plants and fish marketing companies to 25 per cent.
Senator Adams: I live in a territory that is probably familiar to you in Iceland. Do your fishermen derive income from activities other than fishing in Iceland? People in Newfoundland are able to hunt 280,000 seals a year. I thought that perhaps you allowed your fishermen to catch other species, such as whales or seals.
In our new territory, Nunavut, we have a regulation that allows fishers to kill one whale every two years. How does the system in Iceland work with regard to whales and seals?
Mr. Arnason: First, let me talk about the seals. We have traditionally caught seals in Iceland, both for the skins and for the meat. There are no restrictions on that activity in Iceland, and there have not been for decades. It seems that the activity itself does not threaten the stocks at all. In fact, the feeling now is that the seal stocks are growing too fast because, as a result of the drop in price of seal skins, the harvesting activity on seals has been reduced. We do not have any restrictions on seal hunting in Iceland. I do not think you even need a special licence to hunt seals; you only need a gun licence.
For whales, it is an entirely different story. We have been hunting whales in Iceland from the beginning. This century, we had two kinds of whale fishery. We had a small-scale whale fishery for minke whales, which was a community-based fishery operated from fairly small boats. We also had a large-scale fishery for large baleen whales -- basically fin whales and sperm whales -- and that fishery was closed due to international pressure.
In fact, the minke whale fishery, the large baleen whale fishery, and the sperm whale fishery were closed due to international pressure in 1988, and they have not reopened since. There is now increasing pressure for resuming the minke whale fishery -- the communal-based small-whale fishery -- following the lead of Norway, which restarted its minke whale fishery two or three years ago. I predict that that fishery will reopen next year.
As to the large baleen whale and sperm whale fishery, we would like to resume that fishery because these whale stocks have increased greatly, and are now causing a lot of problems on the fishing grounds.
Senator Adams: Did you say that people need a licence to kill a seal? If that is so, do you need to belong to the fishermen's association to get one or is it only locals who are allowed to kill seals?
Mr. Arnason: No. My understanding is that everyone who wants a kill a seal can kill a seal anywhere, provided it is more than 50 metres from the shoreline, or something like that. If it is closer to the shore, the landowner has the right to kill it.
The Chairman: I have one question for you, professor. I refer to some of the questions asked by Senator Stewart, especially the question of property rights as they relate to ownership of the ITQs. You indicated that Iceland had placed a limit on ITQs, in that they could not be sold to people outside the country. You make the point that property rights should be property rights. If someone owns something, should they not be allowed to sell it to whomever they wish? Is Iceland doing the right thing by not allowing these property rights to be sold to foreigners?
Mr. Arnason: Property rights should be regarded as a spectrum. There is something called a perfect property right; a property right that you can do anything with, providing you do not hurt other people. There is also a limited property right, which only allows to you sell to certain people. It involves limited transferability, and so on. It is still a property right, but it is just not a perfect property right.
I cannot judge whether or not all property rights should be perfect property rights or complete property rights. That is a political, social and moral question, as well as an economic question. Limitations on the transferability of any property are likely to reduce the overall welfare of the world. It is possible that these limitations may actually improve the welfare of a small part of the world, however. In that sense, if the concern is for that part of the world, such limitations may be justified.
In Iceland, for instance, the argument for not allowing foreigners to buy into our ITQs is that if foreigners had our ITQs, they might want to move the fish processing industry from Iceland to Europe -- or even to America -- in which case the population of Iceland would decrease. It might well be the case that most people would benefit from this. They could take their capital gain from selling the quotas and move abroad. Our conception of an Iceland with as many Icelanders as possible would then be radically changed. That suggestion certainly has some economic value, however. This is the conundrum, and I cannot say which is right and which is wrong.
The Chairman: As an economist, you would probably say anything less than a perfect property right is not very efficient. As a social scientist, however, you would say that countries and nations must live up to a much higher ideal and try to attain what is right for their nationals. There is a need for public debate or social debate within the community as to whether we ought to adopt a perfect neo-classical economist efficiency ideal, or do what is best for the constituents of the nation. That is where I am coming from. As an economist, you would definitely err on the side of perfect property rights, but the role of legislators is to go beyond that and have a debate.
Mr. Arnason: Yes. You more or less hit the nail right on the head. As an economist, however, I could also say that if the objective is to maximize the welfare of a given community -- be it a small village in Nova Scotia or the whole of Iceland or Canada -- an argument could be made that the welfare of that community might be enhanced by restricting transferability outside the community. From a global perspective, perfect transferability and complete property rights are definitely the preference, yes.
The Chairman: Your presentation this morning has been extremely helpful to us. When we are looking at how another country has dealt with a problem, it is very enlightening for us to speak to people from that country. We appreciate your taking the time to appear before us to contribute to the important study that we are conducting.
Our next witness is Mr. Ari Edwald, Special Adviser to the Minister of Fisheries for Iceland. The Directorate of Fisheries is the government department charged with managing Iceland's fisheries, implementing fisheries legislation, and issuing regulations. The ministry is responsible for general administration, long-term planning and maintaining relations with other fisheries institutions on the international level. I am quite sure Mr. Edwald will expand much further on this.
Mr. Edwald, if you have any opening comments to give to the committee before we go to questions, please do so now.
Mr. Ari Edwald, Special Adviser to the Minister of Fisheries, Directorate of Fisheries, Iceland: It will be helpful if I make some brief comments first. I will try to limit myself to the main picture of the fisheries. We can then exchange our views, and I can respond to what is of interest to the members of the committee.
First, I should like to mention that, in our policy-making, we are very much governed by the importance of the fisheries to the Icelandic economy. Fish products represent between 75 and 80 per cent of our goods exports, and about 55 per cent of our foreign currency earnings. About 12 per cent of the workforce is directly involved in the fisheries, and about 16 per cent of GDP is directly derived from the fisheries.
The fisheries' direct importance is believed to be much higher. It represents about 40 per cent, which is how much our GDP would decrease if it were not for the fisheries. This highlights the fact that we have no means of either subsidizing or running the fisheries in any way other than by looking at it as a business, and maximizing the economic benefits that the nation will reap from the industry.
For most of this century, we have based our economic growth on developments in the fisheries. We did not have an exclusive authority over our 200-mile zone until about 1976.
We were in competition with fleets from other nations. We were seeing increased investment by Icelandic parties into the fisheries. It was not possible to talk of any productive management structure until we gained authority over the 200-mile zone.
In 1977, we tried various methods of managing the fisheries -- mainly effort limitations with regard to the cod, our most important species. That did not go very well. We were seeing the traditional problems; increased investment and poorer economic performance by the companies, and deteriorating fish stocks.
The cod stock has always been our most important species. Even when cod was only 11 per cent of our catch, it still represented 25 per cent of the value of our fish product exports. As a percentage of our fish product exports, cod has never been lower than that figure. Again, fish product exports represent between 75 and 80 per cent of our total goods exports.
In 1984 we established the ITQ system in the demersal fisheries based on the past experience for each vessel in 1981, 1982 and 1983. Since then, we have seen quite a development in the system. In the beginning ITQs were on relatively few species, and only for one year, then for two years, and then for three.
Comprehensive legislation on fisheries management was passed in 1990. Today, 15 species are involved in the ITQ system and we have a relatively simple fishery in Iceland. There are relatively few species of economic importance compared to New Zealand, where there are more than 100.
The 15 species that we are catching under the ITQ represent more than 95 per cent of all catches in our economic zone. Actually, about six or seven of those species represent the bulk of all catches. Today, all fishing vessels have to have licences.
The cornerstone of our fisheries management is the TAC decision, which is made nationally once a year by the Minister of Fisheries. His or her most important task is to make that decision based on advice from the Maritime Resource Institute.
We also have the permanent quotas, which the government does not change from one year to another. For most species, those quotas were 100 per cent allocated some years ago. However, if a new species is taken into the ITQ system, the ITQ is determined from the previous three years' catch, and is applied for the three succeeding fishing terms.
We also have the annual quota. It is a tonnage quota, while the permanent quota is a percentage quota. The annual quota is a simple multiplication of the national TAC for that species and the vessel's permanent quota share.
Both the permanent and the annual quota are then divisible and transferable back and forth. With regard to the annual quota, though, we have recently introduced some restrictions. Each vessel can only transfer or sell 50 per cent of the allocated annual quota each year. These transactions are put into the market, so there is no direct connection between the seller and the buyer.
These new regulations were a part of a program to solve disputes between fishers and vessel owners. Previously, it was prohibited by law to connect transactions in annual quotas on one hand, and on selling of catches on the other. Fishers maintained that such a dual relationship between fish processors and vessel owners led to the vessel owner buying quota from fish processing plant owners, even though a quota always has to be tied to a vessel for a lower price. They believed that the vessel owners were then selling the catch for a lower price to that same processing plant. It was actually partly taken out of the fishers' pockets, because their salaries are connected with the total revenue of that vessel, percentage-wise.
To end the connection between dealings in quota on the one hand and in raw materials on the other, we had to set up such a structure. However, what I have described here is the model that is universally applicable to our fisheries today.
We have management measures other than the ITQ system. We have replacement regulations, although those are becoming less important. I can explain that if you are interested. We have various fishing gear regulations -- sorting grids to prevent the killing of smolts in the shrimp industry, for example. I understand that, in the trawl end, we have the highest mesh-size requirements anywhere in the world. For example, in the cod fishery the mesh requirement is 155 millimetres.
We also manage by areas. We have both permanent and short-term closures. Those short-term closures are usually decided in the long term. That is, the same area is closed for a certain period every year, and this is based on both the spawning areas and the spawning periods. Therefore, a substantial proportion of our economic zone is actually fully packed.
The biggest exemption from the quota system is the small boats. Small boats are defined as those measuring less than six gross metric tonnes. Together, these boats have 13.75 per cent of the annual cod catch. Cod is the most important species for these fishermen. They take less than 10,000 tonnes of other species -- 2,500 to 3,000 tonnes of haddock, 2,000 tonnes of pollock and 3,000 tonnes of catfish, but their main target species is cod.
There are specific regulations on how the cod is divided between them. For some time they were allowed to choose between a limitation system based on their collective catch experience and a system of fitting their own experience into a system with transferable quotas, comparable to the ITQ system.
Those small boats that represent 91.5 per cent of the catches in the reference period -- 1992, 1993 and 1994 -- have opted for a system within their group that is similar to the ITQ system.
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.
In 1991, we were having an annual cod catch of 330,000 tonnes. This we had to cut down to 155,000 tonnes for two consecutive fishing years, 1994-95 and 1995-96. The fishing year is September 1 to August 31. At that time, 1995, the fishable stock was believed to be 580,000 tonnes, and at that time also, we were forming the harvesting rule for cod that 25 per cent of the fishable stock should be caught annually. It was a very well thought-out rule. It took two years of work between biologists and economists to find out, based on both known interrelationships between species and economic factors, what would be the desirable size of fishable stock for cod. Our long-term objective now is for increasing the fishable stock up to 1.5 million tonnes and to have an annual TAC then of 300,000 to 350,000 tonnes.
This is not the biggest size of cod stock we had. In 1955, it was believed to be about 2.5 million tonnes. However, this was the most economical size. Just to mention one example, our shrimp catch was about 70,000 tonnes last year. It was believed that this increase in the cod stock would decrease our shrimp catches annually by about 40,000 tonnes. This year, we are already seeing that the shrimp catches are coming down. That was to be expected, but then we were choosing to increase the cod catch by 200,000 tonnes annually at the expense of decreasing the shrimp catch by 40,000 tonnes.
Such decisions were involved in this long-term planning.
Business-wise, we are seeing much improved cost efficiency in the industry, and a stable operating environment. All the indicators that we have show that instead of the companies competing with each other for a bigger catch from the stocks, they compete now with themselves for lower costs. We see this in the fleet structure. However, just generally speaking, we can see it also from the living standards and the positive influence this all has had on the economic variables here in our economy. Since 1994, we have had a 20 per cent increase in purchasing power, with still low inflation, less than 2 per cent last year. I mentioned the importance of the fisheries sector and it can be seen that we would not have such development for the economy as a whole without the fishing sector contributing to it.
I would also like to state here at the end that I think that this reversal of this trend for the cod stock could not have happened without the share quotas. Previously, we did not have the strong support from the fishing industry for following the scientific advice on the TAC. That happened when the industry started to believe in the permanency of the quota percentages, that the vessel owners and those larger companies can believe that the same percentage that gives them one kilo today would give them two kilos in five years if we follow responsible management guidelines. I think that this is the single, most important factor, increasing the support for following scientific advice.
Also, in the period when we had to decrease the catches so much, the transferability of quotas in various species was the tool that allowed the industry the flexibility to respond and specialize in a certain species, consolidate, and so on.
I would just like to point out something that I saw in a booklet from an Icelandic fishing corporation, entitled Environmental Principles. It provides very good figures on most of these matters. A web site will also be opened at the beginning of November and the path to it will be Icelandic@Icelandic.is.
For example, with regard to cod, it gives an overview of how the fishable stock and the national TAC has been able to go up from 155,000 tonnes in 1995-96 to 250,000 tonnes this year, being the same percentage of the fishable stock. It explains how the catch per unit has changed for all fishing gear. For the trawl, it has gone up from 100 in 1991 to over 140 in 1997, and for gill net and longline to over 170 in 1997, a more than 70 per cent increase in catch per unit in those five years. The fishing effort has gone down from 100 in 1991 to 45 in the gill net to little over 30 in the trawl and about 40 in the longline. These are really the figures behind the better economic performance of the fishing industry.
With the increased stock sizes, we see even higher increases in catches per unit. Instead of investing further, as we would have seen in our previous period of, for example, 1977 to 1984, and also from 1985 to 1990, when we reintroduced some effort limitations partially in the demersal species fisheries, we see the continuation of the cost-cutting efforts by the companies nationwide, both with regard to the fleet structure and other elements. I think that is the inherent motivation that this system allows for.
I think I have said enough.
The Chairman: You have certainly covered a lot of territory. It will be extremely helpful to us because we are now getting information first-hand rather than third-hand or fourth-hand. It is going to be extremely valuable for us to have this information in our records.
As the last witness was leaving, Senator Stewart mentioned to me that the circumstances between Canada and Iceland are indeed very different. The more we hear the testimony, the more this becomes evident. Having said that, there are areas that do still concern us and on which we want to expand a bit more. With that in mind, I ask Senator Stewart to open the questions.
Senator Stewart: Mr. Chairman, for mentioning on the record that observation of mine. I was going to begin by saying that, having heard Dr. Arnason, I concluded that the Icelandic situation is very different from the Canadian. First, there is the heavy reliance of the country as a whole on the fisheries in Iceland. Second, there is the difference in species. Third, it appears that we have some very large corporations such as National Sea Products or Fisheries Products International, whereas there are probably no such big players in Iceland. There are more of what we would call middle-sized players there. In any case, it seems to be very different.
We were told by Dr. Arnason that there is a reserve for so-called small boats, and you yourself mentioned that just now. Are there limits or restrictions on the larger boats? In other words, are there zones or spheres that are preserved for the small boats as distinct from the larger boats?
Mr. Edwald: On the size of the companies, the single largest company has about 7 per cent. If we calculate all quotas into cod-equivalent tonnes, all in all the largest company has about 7 per cent of the total ITQ in all species. Two companies have around 6 per cent. All in all, the largest five have between 20 and 25 per cent. The largest 10 would be up to over 40 per cent, combined.
Apart from them, there is a large number of smaller players. All in all, there are approximately 1,000 licensed vessels in the ITQ system.
As to the areas, generally speaking, I would not say that there are specific areas. The EEZ -- Exclusive Economic Zone -- is one area in our management. There are no quotas or fishing limits or licences tied to a section of the country or a section of the economic zone. There are small exceptions for some crustaceans, the inshore shrimp fishery and scallops, but they are small exceptions. However, generally speaking, the EEZ is one area and the ITQs are decided for the whole area.
Within the ITQ system, there is no distinction between the sizes of boats. It is the same quota, transferable between all ITQ boats big and small. We could have a boat less than six gross metric tonnes in that system, but there is only a limited number of boats meeting this size requirement that have been in this special section since 1990.
Having said this about the EEZ being one area, I would mention, though, that we have closed some areas off to vessels larger than or more powerful than a certain limit. Generally speaking, we would not allow bottom trawls within the 12-mile zone. Even though there are exceptions to this, based on how the bottom is, generally, bottom trawling cannot take place within the 12-mile limit. All of the cod fishery takes place within the 50-mile limit. Inside 12 miles is more or less where the smaller boats can catch: that is not only those less than six gross metric tonnes but the larger sizes with the lighter towing equipment. What you would call the regular bottom trawl is not within the 12-mile zone. Then of course there are other areas, as I mentioned, here and there where towing is not allowed.
Senator Stewart: Why was there a move to downsize the smaller boats?
Mr. Edwald: I would say it was more when we introduced the ITQ system. They left loopholes open for increased investment and an increased number of small boats. We are not particularly worried about the activities of a limited number of small boats fishing with hook and line. However, when we imposed heavy restrictions on the fisheries generally, we could not leave such loopholes open for a longer period. For even though it is uneconomical for the nation as a whole, we see investment pooling into that section of the fleet. I see it like the Dutch story of the boy with the finger in the dike.
From 1984 until 1990, the quota restrictions were only applicable to boats larger than 10 gross metric tonnes. You could buy boats less than 10 gross metric tonnes and have a licence for it. In that period in 1984 to 1990, 2,000 such boats were imported, 9.9 gross metric tonnes in size, and they can catch quite a bit. Today, the highest catches by one boat less than six gross metric tonnes is over 300 tonnes of cod. If we would have 2,000 boats with 300 tonnes each, that is 600,000 tonnes.
In 1990, it was decided that boats between six gross metric tonnes and 10 had to be incorporated into the ITQ system. Boats less than six gross metric tonnes could choose themselves whether they would go into the ITQ system or stay in that group of small boats.
Let me now go over the history of this small-boat group. In 1990 and 1991, they were about 1,200. When I came into the ministry, in 1995, it was a similar size, 1,156. In 1991, it was decided that they could be free to catch. They were banned from catching only on certain days, but they had about 200 effort days, which they could utilize. In other words, they were banned for 150 days, but they were the same days for the whole group.
It was decided that if the catch between 1991 and 1994 increased more than 15 per cent annually, those would be placed in the ITQ system. They would be assigned a combined catch limit of 3 per cent. The increases between 1991 and 1994 were significant.
They had, as a group, increased from 3,000 tonnes to 25,000 tonnes of cod. In 1994 it was decided that they could not be reduced back to those 3,000 tonnes. The Minister of Fisheries suggested 12,000 tonnes. Parliament decided that the average catches for the three years prior to 1994, 21,500 tonnes, would be the limit.
There was not to be a decrease even though the ITQ fleet catches had dropped from 330,000 tonnes down to 155,000 tonnes. They would have a fixed tonnage. When the TAC increased again they would remain at 21,500.
As the number of commercial boats increased, newer smaller boats were introduced. In 1994-95, the catches had increased to 36,000 tonnes of cod and 12,000 tonnes of other species.
We then allowed them to have a new reference period. We would have individual references for those years -- 1992, 1993,and 1994. They could have 70 per cent of what had been the catch for the last three years.
In 1996, it was decided to link the figure of 21,500 tonnes to the TAC. At that time the TAC was at a low, 155,000 tonnes. We had a very serious disagreement with the ITQ system. They expected to have 100 per cent of the increase but now 13.75 per cent would go to the small boats. They now had increased by more than 60 per cent since 1991. Since the spring of 1996, the allowable catch has increased from 21,500 tonnes to over 34,000 tonnes.
The number of boats less than 6 GRT has gone down from 1,156 to 800. The consolidation of quantitative limits arranged between the boat owners themselves is the major reason for this decline.
We have seen a large increase in the activities of small boats. This was not a very important factor before because Icelandic fishing had been more of a heavy industry.
Even though we were catching 2 million tonnes of all species last year, the number of fishermen is just about 5,000.
Senator Stewart: Earlier, we were told by Dr. Arnason that when there is an occasion when an individual transferable quota might be moved away from its base community or municipality, that the community or municipality which is facing the prospect of losing that quota in its area, can raise objections. In those cases, who decides? Is it correct that you make a recommendation to the minister who then makes the decision? It appears that you have a highly structured industry that assists to preserve viable communities.
Mr. Edwald: Any interference with the community is not practical. On the transfer of permanent quotas, there are no restrictions.
The community has some pre-emptive rights but they are not practical. If the buyer and seller are from two different communities, it is difficult to determine the limit because the catch was in a different community.
The only practical restriction on the movement of annual quota is to transfer only 50 per cent of what you received initially at the beginning of the fishing year. The new quota market regulations necessitates this application.
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.
The rise and fall of companies is unchanged. Companies had to sell a vessel because of a fall in business before the quotas. People were losing their jobs just as much as they do today when the vessel is sold away with a quota.
The Chairman: We have had testimony that 11 of Iceland's largest harvesting firms now hold 33 per cent of the quota holdings. This is approximately a 20 per cent increase over the last five years. It appears that there is a tendency towards concentration. I had the impression from your testimony that concentration was not happening. Is there a tendency towards concentration?
Mr. Edwald: There has been concentration to some degree. I actually thought that the 11 largest had more than 33 per cent of the quota holdings. I had said earlier that the five largest companies had about 20 to 25 per cent of the quotas. The 10 largest companies would probably have over 40 per cent.
My opinion is that this does not go in any one direction. We have a varied industry here, and many things can be economically sensible within the total picture. We issued legislation just last year prohibiting further consolidations. It did not interfere with anything we have seen happening. As I mentioned, the largest company owns about 7 per cent. The legislation we now have in place says that no single company can own more than 8 per cent, which is the general rule. If the company meets certain requirements with regard to the number of shareholders and is listed on the stock exchange, it can be up to 12 per cent.
The Chairman: I do not want to sound flippant, but I wish you better luck with your rule in Iceland than we have had in Canada, where the rule is 3 per cent. The ITQ for groundfish is something like 3 per cent maximum concentration. That limit has been broken many times already.
Senator Butts: When you used the word "constituency" in your presentation, were you referring to coastal communities?
Mr. Edwald: No. It is a larger than that. It is more electoral. When we have parliamentary elections, it refers to the geographical area. There are eight constituencies in Iceland. It refers more to the sections of the country.
Senator Butts: It is a riding with a representative.
Mr. Edwald: Yes. It is a constituency represented by a certain number of members of Parliament.
Senator Butts: With regard to your regulations, when you bring in a moratorium or cut back on things, does your government have a program of social assistance for the people in those communities?
Mr. Edwald: No, generally not. We have never had a moratorium. The most severe cutback was the 50 per cent cut in the TAC for cod. The area of the country that was hardest hit was the west fjord country, the northwest corner of Iceland. Cod represented some 70 per cent of their TACs at the beginning of that period. Since the quotas are not for all species combined but for individual species, that area suffered the most. At one point in time, the government was initiating programs there. There was some financial help from the government towards a restructuring of companies and for other programs in that area, but I would not call it a comprehensive program. It was not directly connected with the cuts in quota. There is no direct connection between them.
Even though they were the hardest hit, the unemployment rate never went up for this period. Instead, we have seen a lot of people move from that area. We only saw the population go down. Many would maintain that this situation was affected by the outlook. Now we see the cod coming back, and they are short of labour in that area. They are importing foreign labour temporarily or for the long term in some instances. And now we still see a decrease in the population there. So the quotas are definitely not the only factor. It is one of the most rural areas of Iceland.
The areas that are most dependent on the fisheries are the east and west coasts, with 40 per cent direct involvement, even though it is only 12 per cent nationwide. It is only 2 per cent to 3 per cent in Reykjavik.
Senator Butts: With regard to that moratorium on the cod from 1994 to 1996, did your scientists find any specific reasons for the decline in the cod, or did you have some studies to that effect? For example, did it show up in the capelin catch at the same time?
Mr. Edwald: It was not a moratorium. The TAC was decreased by half. The opinion of the scientists was generally that it was due to overfishing. They acknowledged other factors that we do not have any control over. There are circumstantial factors. We can be unlucky with the new recruits. Even after we initiated the ITQ system, the TAC decisions made by the Minister of Fisheries were higher than the advice he received. The combined catches amounted to about 1 million tonnes of cod between 1984 and 1991. This was beyond the Maritime Resource Institute's advice, which in some years was 100,000 and in other years was less.
Scientists maintain that the main reason for the recovery of the cod stock in the last two years has been due to the decrease in the fishing effort and the decrease in the mortality rate. We have had very few new recruits. I do not know if you can see this, but I have with me a transparency of an index. This is an indexed figure of the zero year for the new recruits in the cod stock. Since 1984 we have not had good new recruits. They said that even though we would follow the 25 per cent catch rule, we would not see good success until we got more new recruits. However, when the cod stock is stronger and we have a higher proportion of older fish, the spawning will be better. Last year, we had the greatest number of new recruits since 1984. In 1998, the zero-year class was higher than this bar over here. It is the highest it has been since 1970 when they began those studies. We are now hopeful that in 2001-02 when these recruits come into the fishable stock -- those fish over three years old -- we will actually see a fishable stock of 1.5 million tonnes.
Senator Butts: In 1990, you brought in your comprehensive legislation on the ITQs. Was the public consulted or was there debate on these issues? Was there any input from the stakeholders or any agreement of the stakeholders on the legislation?
Mr. Edwald: There were very extensive consultations with all parties involved, from all areas of the industry and areas of the country. Some of the committees that worked on this had more than 20 members. Afterwards, many of those committees worked on the legislation.
However, to begin with, the deliberations were mainly within the industry. Within the industry, it was the fishing sector's issue to solve. Vessel owners were generally very sceptical of the ITQs because, when they were introduced, their purpose was to decrease what they were allowed to do before. They did not see being allowed to catch less than 70 per cent of what they had caught the year before as being of any value to them. In the beginning, it was seen as a rationalization of the fisheries.
Now that we have had the trend that we have had over the years 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 industries.
Outside Reykjavik, the dispute is that consolidation and the power of capital is creating uncertainties for them, even where we have disputes or critics. It is more widely accepted now, since the cod stocks have started to grow again and the companies are doing better and are investing in further products involving their raw material.
I think that we see less of this today. However, the critics we have outside Reykjavik would maintain that it is giving those holders of quotas too much power, and it is creating uncertainties for them. 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.
The Chairman: I just want to be absolutely sure that I understand what you have said. I think I heard you say that, in fact, you did have a public debate on the whole question of the implementation of ITQs, privatization and so on prior to establishing them. This is quite a radical departure from the way Canada is implementing the system right now, with no parliamentary or public debate on the subject.
Did I hear you say that there has been a public debate on this question?
Mr. Edwald: Yes. However, I think the debate is more public today than it was in 1984. It has been increasingly public. Now that we have solved the problem of overfishing and overcapacity, the biggest problem for us is the problem of success. It is very much debated whether they have been given too much or if the rights vessel owners have been granted are unjust and if they are paying enough or not. That is one of the largest issues in politics today; and it will be for the next parliamentary elections in 1999.
Senator Stewart: I have a peripheral question that springs from something that Mr. Edwald said. Some species of fish migrate. As a cause of the decline starting in 1984, how important do you think overfishing by foreigners beyond your territorial sea was?
Mr. Edwald: Do you mean before 1977 or 1976 or today?
Senator Stewart: I mean whenever the decline became important.
Mr. Edwald: It was not very important because most of our species, as they are utilized within the 50-mile zone, are not travelling stock but are quite local. The cod stock was overfished by foreigners and by us in the period before 1976 -- in fact, ever since World War II. In the last years, I think we cannot claim that anyone other than ourselves is responsible.
Outside the 50-mile zone, we are only catching saithe, redfish and Greenland halibut, which is now being overfished. The halibut is being overfished by fishers from Greenland, Iceland and F<#00E5>ro Island. Even foreigners like the Norwegians are catching them in international waters. We have not managed to exercise control. Those are the examples of overutilization of such travelling stocks today.
Senator Stewart: For the record, what was the significance of 1976?
Mr. Edwald: That is when the foreign vessels ceased their activities and when they accepted our 200-mile zone.
The Chairman: I wish you all the best in your ongoing debate with your fishing communities. I hope you will be able to resolve some of the conflicts that may be happening between the centres that are in conflict.
Mr. Edwald: Mr. Chairman, I would like to thank you for having me. I am willing to do it again, if the committee wants to hear my lengthy explanations some other time.
This was the first time that I have taken part in such a televised bilateral communication. It was quite interesting and I thank you very much.
The Chairman: If we can identify the problems, we are halfway there.
I have one last item that I did want to note in passing. We would like you to extend to your Minister of Finance best warm regards from his old friends Senator Comeau and Barbara Reynolds.
Please feel free to look at the results of our study that will be published around December 10 or thereabouts.
The committee adjourned.