Proceedings of the Standing Senate Committee on
Fisheries and Oceans
Issue 13 - Evidence - December 4, 2012
OTTAWA, Tuesday, December 4, 2012
The Standing Senate Committee on Fisheries and Oceans met this day at 7 p.m. to study the lobster fishery in Atlantic Canada and Quebec.
Senator Fabian Manning (Chair) in the chair.
[English]
The Chair: I am pleased once again to welcome you all to this meeting of the Standing Senate Committee on Fisheries and Oceans. My name is Fabian Manning. I am a senator from Newfoundland and Labrador, and I am the chair of the committee.
Before I give the floor to our witness this evening, I would like to invite the members of the committee to introduce themselves.
Senator Harb: Mac Harb, from Ontario.
Senator Unger: Betty Unger, from Alberta.
Senator McInnis: Tom McInnis, from Nova Scotia.
Senator Raine: Nancy Greene Raine, from B.C.
Senator Poirier: Rose-May Poirier, from New Brunswick.
The Chair: We may have some more senators join us later and we will take care of their introductions at that time.
The committee is continuing its study of the lobster fishery in Atlantic Canada and Quebec. We are hearing today from a representative of the Department of Fisheries and Aquaculture of Newfoundland and Labrador. The committee heard from the departments of fisheries of the governments of New Brunswick and Prince Edward Island last week in Moncton. We look forward next week to hearing from the Nova Scotia Department of Fisheries and Aquaculture.
On behalf of the members of the committee, I would like to thank Patrick McDonald for being here today. I believe he has some opening remarks, which will be followed by questions from the senators.
We may have a vote at any time in the Senate, so if the bells ring, we will have to decide then what we will do in relation to our meeting this evening. If we have the opportunity to finish up with Mr. McDonald, I would rather that senators stay around for a little while to have a little in camera session on some other business we have to deal with.
Mr. McDonald, the floor is yours.
Patrick McDonald, Acting Assistant Deputy Minister, Marketing and Development, Department of Fisheries and Aquaculture, Government of Newfoundland and Labrador: Good evening and thank you very much for this opportunity to speak to this committee. Unfortunately our minister, Derrick Dalley, and our deputy minister, Alastair O'Rielly, were not able to be with us this evening. They send along their regrets. I would like to thank the committee for the opportunity to speak and provide some perspectives on behalf of the lobster industry in Newfoundland and Labrador and to maybe give you some idea of our strengths and weaknesses in the industry.
I have a small presentation, and we have distributed copies of it. There is a short outline, and I will talk a bit about the Newfoundland and Labrador industry, some of our challenges as we see them, some potential solutions and a couple of options that we see for the Newfoundland and Labrador industry, and I will offer a few conclusions.
Our Newfoundland and Labrador lobster industry really is a Newfoundland-based lobster industry, because no lobster is harvested around Labrador. In 2012, we had 2,746 active lobster licences; 27 per cent to 30 per cent of Canadian licences were in Newfoundland and Labrador. Combine that with landings of less than 2,000 tonnes, which is 3 per cent of the Canadian landings. We had roughly 30 per cent of the licences and 3 per cent of the Canadian landings. It is a very different industry than you see in some of the other Atlantic provinces and Quebec.
Over the past five years our average landed volume has been around 2,500 tonnes and has a landed value of $23 million. When you look at a $1-billion industry, it is a small proportion. Of concern is that the landed value has declined over the past five years from about $28 million in 2008 down to about $17 million in 2011, which is the same issue that is facing the rest of the Atlantic lobster producing areas.
We are a small player in the industry, but the industry has significant regional implications. The number of licences we have is certainly an indication of the overcapacity within the system. Our industry is concentrated on the southwest coast of Newfoundland, the west coast and the northern peninsula. We have a slide in the package with a map that shows the areas. I think it is page 9. These are all lobster producing areas. Area 11 is probably our biggest producing area.
The Newfoundland lobster product is a good one. We have cold water temperatures, which provide a good environment for producing lobster. Our industry is dispersed over a wide geographical area, and because of that we have a higher cost of collection and transport to market. We have a short harvest season, which is 10 weeks. Sometimes that benefits us. Our season generally runs from the third week in April to early in July. This year, it was a time after that when the prices really plummeted and hit the rest of the industry badly. We sort of escaped it this year because of our season being early.
The next slide shows the lobster fishing areas, LFAs, and you can see the number of areas we have around the province. This one shows the active licences and the lobster licences we have. In some areas, most of the people have active licences and in other areas there are many licences that are no longer active. Some of these graphs are put in just for your information.
Our landings and value by LFA can be seen on the next slide. As you can see, Area 11 is our key producing area, and it has a lot of the licences and the landed value for our industry. In some other areas, like Areas 6, 7, 8 and 9, we have people that fish lobster but it is a very small part of their income.
Our government has been very supportive of the Newfoundland lobster sector. Our government has provided funding to the Lobster Council of Canada and before that to the Lobster Round Table and the groups that were looking at forming the Lobster Council. We see benefit and we have contributed to the Lobster Council of Canada. I know you have had a presentation and some other representatives of the council to address your committee as well. We see the benefit of the council and have contributed accordingly. We have also provided funding for things like lobster enhancement in Placentia Bay under one of our funding programs. We have put some money into science and traceability-related projects. We have invested in value-added processing with some of our processing companies. We have contributed significantly to the lobster conservation and sustainability plan in terms of plan development and implementation. This is a plan that I will talk a bit more about in a moment or two, and it was also funded by the Government of Canada and the Fish, Food and Allied Workers.
The conservation and sustainability plan has three components. One is conservation measures, and the overall budget for that is about $3 million. Capacity reduction was about $11 million, and enterprise buyout was $17 million. The goal is to remove enterprises in each of the participating LFAs, which are LFAs 11 to 14. Reverse auction is used and the prices are driven by market forces. The way it works is people submit a bid. It is made known that we are prepared to retire licences in certain areas — the group or team and not just the province — and people submit a bid for what they feel they can give up their licence for, what value they think the licence is worth. There is a sliding scale, and a certain number of bids are selected based on the market value. Those licences and all others they have are then retired. The objective of this exercise is to reduce the number of harvesters to allow those that remain to have greater opportunity to earn higher incomes and reduce harvesting pressure, which makes the industry more sustainable.
As you note on the coloured map, those are the areas that the lobster sustainability measures are in place for, which are from LFAs 11 to 14B.
The next slide is interesting. It probably sums up the information I have mentioned about the number of harvesters we have and the size of our industry. There are three graphs. One shows the number of harvesters, and it was broken up by province. As you can see, Newfoundland has the smallest metric tonnes. You can see the number of harvesters we have, and we have a significant number of buyers and processors.
It is also interesting to note that the Canadian industry lands about 50,000 to 60,000 metric tonnes, and the U.S. industry lands 40,000 to 50,000 metric tonnes. We have 10,000 vessels and they have 7,500. We have 25 processing plants, and they have four or five. We export 80 per cent of our product and they export 35 per cent to 50 per cent of theirs. Some of the product they export comes into Canada and, as you are probably aware, is processed and may be re-exported as well.
What do we see as challenges? Certainly the Canadian lobster industry, as you heard in the sessions in Moncton and other places, is highly fragmented. There is overcapacity within harvesting; we have many undercapitalized buyers and processors. We have a lot of sellers and not many marketers. We have a wide geographic distribution of landings, and a requirement for greater collaboration between harvesters, buyers and processors.
What it comes down to is that we have too many people trying to earn a reasonable living from the resource. We also need a coordinated industry voice. That is one thing we can take from the involvement we have had in the Lobster Council of Canada, the Lobster Round Table before that and the Lobster Summit. Our marketing challenges are many as well. In addition to our structural issues, we have too many sellers, and many are forced to discount and lose. Therefore, we lose value from the industry. We have a lack of a coordinated marketing strategy. The Lobster Council of Canada and its members have worked strongly to put a strategy together. We have issues related to seasonality and continuity of supply, especially when it comes to live product. Most of our product is still marketed live.
We have an over-dependence on the U.S. market. These are not new issues to you, I am sure. I am probably just repeating a lot of what other people have said as well. We have competition from Maine and then the issues related to exchange rates and market access in some countries.
I had a conversation with one of the senators concerning seals, and it is interesting that in some countries we are having issues related to husbandry of lobster in the same way that the seal industry has been targeted. There is the feeling that we are shipping poor lobsters in a little crate across the world and that that is not the right thing for us to be doing.
What kinds of solutions do we have? What types of things can we look at as potential solutions? There is definitely a need for industry-government collaboration. We see the Lobster Council of Canada as one means. Unfortunately, the council has been underfunded. It needs stable and sufficient long-term funding. It needs money to be able to do more than have one employee who tries to keep things together. I know you have heard from Geoff Irvine, a capable individual. The organization has done well under his couple of years in place.
The council is a direct result of the Lobster Summit that was held in Nova Scotia in 2007 and the Lobster Round Tables held from 2008 onwards, which brought government and people from all areas of industry together at the table for the summit and the round table and now for the council. You had five Canadian provinces, the Government of Canada represented by a number of departments, buyers, harvesting groups, harvesters, processors from big and small companies all sitting at the round table.
What are the benefits? What types of things could the council be doing? The things they are doing and the things that they could continue to do with proper resources are things like effective and efficient organization. They could be doing market research and Canadian branding and positioning. The issue with the council — and I am sure the issue has been raised by others — is that there is no way to collect funds at the present time. I do not know if it is a question of the way or the will to collect a mandatory levy because that is what is required. Other places, like Alaska, have a levy that they put on their seafood, especially their crab and their salmon. There are other ways, but you have one state. Here, we have five provinces and the federal government. As our deputy is fond of saying, it is kind of like five provinces and the federal government joining hands and taking a leap together because that is what it requires.
We need sufficient funding. A lot of the other organizations, like the Alaska Seafood Marketing Institute and the Norwegian groups, contribute a large percentage. Maybe 0.5 per cent to 1 per cent of the industry's value goes into marketing and promotion. For our industry, which is worth $1 billion, you could be looking at $5 million to $10 million annually. Right now, even $1 million or $2 million annually would go a long way to getting things off the ground.
Canada Pork is another example of an industry that does a check-off. They are able to do some good promotion nationally and internationally.
When we look at targets, we could be targeting markets like Asia and Europe on a more coordinated basis. About 10 per cent of our product now goes into Asia. We have 80 per cent of our product going to the United States, 10 per cent going to Asia and almost 10 per cent going to Europe. There are opportunities in those areas as well. I realize that the economy in Europe is not in great shape right now, but it will, as things do, come around, especially since we will get a Canadian as a governor of one of the big central banks in Europe; that should make a difference.
What are the options for Newfoundland and Labrador? We have had some discussions about this. What can we do? The status quo? The status quo is not really something that any of us aspires to. In Newfoundland, we have talked about the possibility of doing niche marketing. We have small volume and a short season, but here again we have issues around the number of harvesters and buyers that we have in our own province.
The other option is an improved Canadian approach. Maybe we should be looking at the state of Maine as well because, between the two of us, we have pretty much all of the Atlantic lobster or the American lobster that is produced. Our competition, then, is the lobster that does not have claws.
In conclusion, we have a great product. We have market strength. If you just look at the Canadian side of it, 60 per cent or 70 per cent of the lobster that is produced is produced in Canada or by Canadians. We should be able to be drawing a good amount of money. If we work together we should be able to get a reasonable return for our product, not making it to the point where people cannot afford to buy it but to where people who are deriving their income from this industry are in a position of being able to survive financially. We feel that collaboration and cooperation is essential to the success of the industry. Thank you very much.
The Chair: Thank you, Mr. McDonald. That was an interesting take on the industry in Newfoundland and Labrador.
I have a quick question before the other senators ask their questions. You touched in your presentation on the fact that close to 30 per cent of the licences and 3 per cent of the landings are in Newfoundland and that there has been a decrease in landings over the past number of years. That begs the question why. You talked about some of that in relation to the short season that we have in Newfoundland and Labrador and also about the trucking costs or the collection and transportation costs.
Where is most of the lobster in Newfoundland and Labrador processed? Maybe you could give us some more information on the transportation. Because of the large geographical region that you are covering on the south coast of Newfoundland and up the west coast and the northern peninsula, could you give us more information on how it is collected and transported, where it goes and who the processors might be in that area?
Mr. McDonald: A lot of the product that is harvested in Newfoundland is collected, as you mentioned, in all of these small areas around the province. Some of it is used for local markets. There are a number of buyers that buy for local consumption within the province. The bulk of it, though, is collected by different buyers and shipped to other companies. A lot of it goes into the live market. It is combined with product from Nova Scotia, or some of it may go into New Brunswick for further processing. Our companies, by and large, do not market lobster on their own; they are buyers. We have some processing done in the province. We have one or two plants that are doing some secondary value-added processing. However, by and large, ours is a live market for lobster. It is shipped with other product. It can end up in the U.S. market, but it is not marketed as Newfoundland lobster; it is marketed as Canadian lobster.
The Chair: It intrigues me that we have such a large number of licences and such a small amount of landings or activity. When you look at some of the areas in your presentation to us, on page 5, and at lobster licences and the active ones, in some areas there is great discrepancy, and in some areas we have very little activity and, in others, more.
I am wondering about the buyback relative to the number of offers that came forward. Basically, you are saying that some licences are no longer active but they will be registered licences. Will these people still be licence holders?
Mr. McDonald: No. The ones that are no longer active through the buyback program will come out of the system altogether. They will no longer be licensed lobster fishermen. By accepting a buyback for whatever value their licence was, they effectively are giving up their right to that licence. They are no longer members; and they are no longer lobster fishermen.
The issue, though, is that a lot of people have these licences and they are not fishing them. In some cases, there are few lobster to fish. My understanding is that the federal government does not take back licences just because they are inactive. We have policies in my province where certain processors have licences that are no longer active. After a certain period of time, those licences are gone. However, I do not think that is the case for harvesters. My understanding is that it does not happen with lobster licences.
The Chair: In relation to the offers that were put on the table for the licence buyback, what is your take on the numbers? Were you surprised that there did not seem to be a whole lot of take-up? There were more offers the second time around, but there did not seem to be a whole lot of take-up in relation to people wanting to sell their licences. Is that because in inactive areas the value may have been less than what was on the table? If we have over 27 per cent to 30 per cent licences and only 3 per cent with landings, it means there is a lot of inactivity.
Mr. McDonald: Yes. There have been a number of rounds of buybacks; and the process will continue over two years. The end of March will probably bring us to the end of the first fiscal year.
I assume that the first bids were high because people were trying to get an idea of where they would be. There seems to be increased interest. In the last round of bids, we saw quite a few new people coming forward with bids. The process is going as it should, and we should reach the targets.
Senator Raine: For clarification, are the licences issued federally?
Mr. McDonald: The lobster licences are federal.
Senator Raine: Are they bought back by the federal government?
Mr. McDonald: Yes, but it is a cost-shared program. Financing the buyback is from provincial and federal funding and the Fish, Food and Allied Workers. I believe that you heard from Mr. Sullivan from FFAW last week.
Senator Raine: Yes.
Senator Poirier: Last week at committee we heard from P.E.I., New Brunswick and Quebec. There was discussion about the size of the carcass of the lobster. My understanding from Prince Edward Island and New Brunswick is that the level is set at 72 millimetres, which P.E.I. will go up to this year. Quebec is already fishing at 81 to 82 millimetres. New Brunswick would like to see it raised from 72 to 75 or 76 millimetres eventually. Prince Edward Island does not agree with that at this time. I am curious to know what size they are fishing in Newfoundland.
Mr. McDonald: I should have that answer, but I do not. I can certainly get it to you.
Senator Poirier: Can you get that for us and send it to the clerk so that we can compare the differences?
The Chair: Mr. McDonald, you can forward that to the clerk.
Mr. McDonald: Yes.
Senator Poirier: My second question is a bit of a follow-up on what the chair started. When you retire the licences that are not active, and you talk about buyback, is there an option for anyone out in the market who would like to start a business of lobster fishing to buy these licences or do you want to take them out of the system?
Mr. McDonald: We want to take them out of the system.
Senator Poirier: Okay.
Mr. McDonald: There is an option whereby a person with an active lobster licence can sell it to someone who wants to buy it.
Senator Poirier: Not the inactive ones.
Mr. McDonald: No, not the inactive ones.
Senator Poirier: In 2006, the Government of Newfoundland and Labrador established the Standing Fish Price Setting Panel. Can you explain to me in detail exactly how lobster shore prices are set in Newfoundland? Was this effective? What are the pros and cons of the different price-setting methods in Atlantic Canada? In your opinion, is this still being used today?
Mr. McDonald: The Standing Fish Price Setting Panel is being used for a number of species, such as snow crab, which is our biggest export; shrimp; cod; and two years ago, we added lobster to the list. The harvesters requested that lobster be added to the list.
The processing association and the FFAW negotiate to try to reach a settlement on a price for the species, for example, lobster. If they cannot come to an agreement, then they put it before the standing panel. There are certain dates, and I can provide information on how the panel operates as well. There is a hearing. At that point after going through the process, the panel accepts one of the options. They do not usually make any modifications. You make your best offer and the panel accepts one of the options.
Senator Poirier: Are you talking about the price that the fishermen get from the buyer?
Mr. McDonald: Yes, that is the price that the fishermen get from the buyer or processor. With lobster, it has not been that successful to date. It worked somewhat this year. Two years ago, the processors decided not to buy at the price that was set, and there were some negotiations.
Senator Poirier: I was questioning that because normally the price is determined by market supply and demand. I was wondering how you could set a price.
Mr. McDonald: In the case of lobster, the market price is reflected in a formula set up for lobster, which is a bit different from the other species. A certain percentage of the formula is based on the Boston market price.
Senator Poirier: Do you have two lobster seasons or just one?
Mr. McDonald: We have only one season.
Senator Poirier: Every year, you have to look at the price.
Mr. McDonald: Yes.
Senator Poirier: Thank you.
The Chair: The panel, Mr. McDonald, is a process whereby the union and the association of processors in Newfoundland meet over a period of time. However, as Mr. McDonald said, the price was set but then the processors did not buy. If you do not have processors buying, then you do not have harvesters selling. That created quite a problem in Newfoundland, but that is part of the process. No one is held to it, but the rater comes up with the price.
Senator Poirier: If I understand correctly, the panel has the right to recommend a price.
Mr. McDonald: They set the price from the final offer selection. They select the price.
Senator Poirier: Yes, but the groups have the option of refusing, is that not right?
Mr. McDonald: I guess that is like saying, ``You do not have to buy the product. If you feel that you are not being paid enough for it, you do not have to fish it.''
The Chair: You pretty well have an agreement on the price beforehand, but if you do not agree, that is what happens.
Mr. McDonald, concerning the selling of the licences, not just anyone can buy a licence; you have to be a licensed fisherman, do you not?
Mr. McDonald: That is right. You are not really buying the licence as such; you are asking the federal minister to transfer the licence. Technically, you cannot buy or sell a licence. I guess you are asking to transfer it, but you are getting a benefit back for that.
Senator Poirier: They are buying the boat and the equipment.
Mr. McDonald: Yes, in some cases. In some cases, they are just buying access to the licence.
The Chair: That is right. You have to be a registered fish harvester in order to be able to purchase a licence and be able to transfer a licence to you, is that not correct?
Mr. McDonald: That is right.
Senator Harb: Thank you very much, Mr. McDonald, for your presentation. On page 7, you list some of the initiatives that your government has participated in. At the bottom of it, there is an implementation of $9.1 million. What would that be spent towards?
Mr. McDonald: That is the implementation of the Atlantic Lobster Sustainability Measures program, the plan to retire the licences. The plan itself is around $30 million, and the province contributed $9.1 million, as did the federal government.
Senator Harb: During our hearings, it became quite evident that there does not seem to be a lot of coordination between the different stakeholders — that is, of the people who are out on the ocean trying to harvest the lobsters.
I want to look at the other type of stakeholder: Newfoundland, Prince Edward Island, Nova Scotia and Ottawa, including the development agency in Ottawa. To what extent do you guys cooperate together, knowing what is required in the industry?
Mr. McDonald: That is probably hard for me to comment on. I can speak to our involvement in the Lobster Council of Canada. All four of the Atlantic provinces and Quebec have contributed to the funding for the Lobster Council of Canada. Newfoundland has not contributed 3 per cent of the funding, based on our volume; we contributed a bit more than that.
The council has had funding from the federal government, as well, through the Department of Fisheries and Oceans. Some projects have been done through ACOA and Agriculture and Agri-Food Canada. Unfortunately, the Department of Fisheries and Oceans has not been able to put core funding into this, which is what this amount of money is that I identified for the Lobster Council of Canada — which is the core funding for the council — which we have put into it over the last couple of years. The federal government has not contributed to that. They have worked on project-specific things. That becomes the issue when it comes to the council.
We do cooperate. The ministers meet on a regular basis to deal with the lobster industry, among other parts of the seafood industry, as well. That is through the Canadian Council of Fisheries and Aquaculture Ministers and the Atlantic Council of Fisheries and Aquaculture Ministers.
Senator Harb: Thank you very much for that answer.
My final question deals with science. Would you agree perhaps that there is not enough science to determine the state of the industry, per se — for example, to predict where the industry is heading 10 or 15 years from now? Also, would you agree that perhaps one of the recommendations we should be making to the government would be to put more emphasis on research?
Mr. McDonald: That is a hard one for me to answer because science is not my background. However, from the indications I am hearing, this industry could certainly benefit from more scientific details.
Another thing about science is that the availability of good science means that our industries, like the lobster industry, can look for the Marine Stewardship Council certification. When you are talking about exporting to places like Europe, that is a big feature for market access. It is not so much about getting the price, but getting into a market. A lot of major buyers and retailers in Europe want that. The science background does give you that benefit.
The Chair: You may not know the answer to this question but I will ask it. If you do not, that is fine. Is the $118,500 here for core funding?
Mr. McDonald: Not all of that; some money went into specific projects.
The Chair: How is the amount that Newfoundland and Labrador puts into the council determined?
Mr. McDonald: That is based on the request. We have been funding the council for the last three or four years now, and we have contributed the same amount each year. It was based on almost a notional account: ``We need this amount of money.'' Therefore, such and such an amount from Quebec, Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island. There was no hard-and-fast formula; it was just a request and the provinces agreed.
The Chair: We had that discussion in Moncton, also, and here in relation to trying to talk about a cent a pound. They talked about a cent a pound and some way of deriving funding for the Lobster Council of Canada. I do not know if you have reached any decision on that, but I guess some ideas are floating around.
Mr. McDonald: The cent-a-pound idea was based on a half cent from the harvester and also from the first buyer. This was outside of this; this was an industry financing model. As I said earlier, it is difficult to do that, because there is no legislation in place anywhere in any of the provinces where you can do that. As I said, it would be a leap of faith for the provinces and the federal government to do that scheme, which would be ideal for the industry.
As with any industry, it is difficult for some people to fund an organization if others will derive a benefit and not have to fund the organization.
The Chair: Yes. Everyone would have to be involved; it has to be a community effort.
Mr. McDonald: Yes.
Senator Raine: Thank you very much for being here; this is very interesting.
I think we have heard a fair amount that one of the problems is lack of a marketing plan that has some resources to allow you to go out and market to the world. We have a great product.
Mr. McDonald: Yes.
Senator Raine: It is coming from cold water, clear water — all the right things.
Perhaps you could combine the idea of some kind of a levy per pound or per lobster to go toward marketing and also toward maybe getting the eco-certification. Do you think if you are to go down this route and develop a system of raising the money based on money from the sale going into the marketing cost for joint marketing, it would make sense to do it with eco-certification and the overall marketing together in some form?
Mr. McDonald: When we talk about marketing, I think the industry — certainly the Lobster Council of Canada — is looking at more than just actual marketing in terms of getting together and trying to market in an orderly fashion. For example, certification, structure, quality, branding — you have to look all of those things as part of your marketing piece. It would be a larger piece than just saying, ``We will advertise on so many billboards or newspapers'' or what have you.
The eco-certification side of it would certainly be part of it. That would be a real benefit, because that certification would be part of your brand. You can say, ``We have a certified product.''
Senator Raine: Yes. I think of the live lobsters with the claw things on them. Could you not put a tab on the claws that shows right away that it comes from the right source and it is all approved and it has a bar code on it that can be scanned?
Mr. McDonald: There has been a lot discussion about that ability to mark them in certain ways so you can scan them. There has been a lot of talk about that sort of thing.
Senator Raine: Is that possible?
Mr. McDonald: I do not know. It would be hard for me to say, but these types of things are possible. You could certainly put some device on the lobster that would identify where they came from, for sure.
Senator Raine: It is not just the advertising and the marketing; it is also for chain of supply.
Mr. McDonald: Yes.
Senator Raine: You know exactly which harvesters harvested that lobster by the code. That is all possible now.
Mr. McDonald: That is possible, yes.
Senator Raine: Is that kind of the direction that everyone is going in?
Mr. McDonald: I do not know. If you had the resources to do some marketing of that, that is one way you could look at it; you could identify. A lot of people like to go into a restaurant and see the person who harvested that fish. That is certainly a possibility.
Senator Raine: As you say, the council is a start, but there is no legislation to put that in place?
Mr. McDonald: The council brings together a lot of willing people to try to work together. However, as of right now they do not have the resources required to do some of the things you are talking about, whether it is marketing or branding.
Senator Raine: Do the resources come from the fishery itself or from government funding in some way? That is not popular these days. Everyone is trying to budget.
Mr. McDonald: When you look at a $1-billion industry, it would be good if there were some mechanism in place so the industry could contribute financially to the structural and marketing issues.
Senator Raine: We are going to do a study with some recommendations. Could you suggest a recommendation, perhaps, that would put that in place?
Mr. McDonald: The funding.
Senator Raine: No, the mechanism to have it come from the fishery.
Mr. McDonald: I guess the only way you could do it would be some sort of a check-off or requirement that for every pound of lobster or every lobster that is sold, a certain amount of money would go toward the Lobster Council and/or marketing activities or some other type of fund. I would not be able to guess how you could bring legislation to bear to do something like that.
Senator Raine: You are saying there are fisheries, such as in Norway and Alaska, that do that.
Mr. McDonald: Yes, but in both of those cases they are federal governments. In Norway you are talking about one country, not all the provinces. Their federal government is the one that does it in Norway.
Senator Raine: The last time I checked we were still one country.
Mr. McDonald: Yes.
The Chair: For clarification, the processing of lobster, like the issuing of licences to lobster harvesters, is done by the federal government. The processing falls under the jurisdiction of the provincial government. If they are going to take, as an example, a cent a pound at the point of processing, that would have to be the provincial government. We could be part of that in relation to some type of structure, but that would have to be a provincial government initiative. In our case, what we are talking about here is five provinces. Having five provinces agree, because you could not have one thing in one province that is different from the others, it would have to be a collaboration in order to make this. You need the federal government involved to assist in some way, I am sure, but the processing is the jurisdiction of the provinces and the federal government would not be able to be involved in that.
Senator Raine: As a supplementary then, and it may be a naive question, but lobster have to be a certain size to be kept?
Mr. McDonald: Yes.
Senator Raine: Once they reach that size, if there is a tag does is matter if they are bigger or smaller from that point? If the price that you are paying for your check-off fee or whatever is set as it is caught by the licence, it could be a federal government tag you get that is per lobster, rather than worrying about the per pound thing. You want to encourage them to perhaps have bigger lobsters, so you will have a little bonus.
The Chair: Not necessarily. We heard in Prince Edward Island last week that they do not want bigger. They have what they deem to be a niche market for smaller lobster. Quebec fishermen wanted larger lobster because they have a market for that, so it is not as cut and dry as what you are saying.
Senator Poirier: She is also talking about price per pound, and with the canner lobster and the market lobster there are different prices her pound. The market lobster is bigger so therefore you pay more per pound than you to for the canner lobster. If you are going to set something as per pound, then it would be different depending. Like I said, in Quebec and in part of New Brunswick they are looking at fishing the larger lobster because that is what the demand, their market, is for. In P.E.I., the market they are supplying is for the smaller lobster, which is a different price per pound.
Senator Raine: I thought if you wanted to start with per lobster rather per pound, maybe it would work itself out.
The Chair: The per pound system works. Harbour Authorities, and I will use the example of Newfoundland and Labrador, is a volunteer board that oversees the operation of the harbour and collects fees from harvesters on a per pound basis. They collect fees from processors who use the facilities and trucks on a per pound basis. That is per province. I am not sure how you could come up with a plan that would be the same in the five provinces. After our meetings in Moncton, I would not want to be the person trying to bring that together, to be honest with you.
Senator Unger: Thank you for your presentation. My question is more to the marketing side. You said you sell 10 per cent of the product to Asia and 10 per cent to Europe. How is that marketing done? Is it through trade missions and if so, by whom?
Mr. McDonald: The marketing is generally done by the companies that purchase the product. It is done through trade events. Some of the larger processing companies in the region have dedicated offices in China or different locations within Europe. They market directly, as part of a variety of species they make available to the marketplace; it is done. However, in addition to that, the provinces participate in a number of trade shows that take place. One is in Brussels, where each of the provinces has a booth within the Canadian pavilion. We have companies there within the pavilion as well. It is a trade show, so we have a lot of the buyers from the countries coming into the show to meet with the companies and purchase that way.
It is the same way in China. They set up relationships at the major Chinese show. It takes place every year, and the companies, provinces and federal government cooperate on a booth — a pavilion — in that show. Our companies are there and they meet with purchasers.
In addition to that, the companies make special trips to market in different countries. Some of the producers of processed product, for example in New Brunswick, would be strong on the processing side, and they attend some other events as well.
The Lobster Council of Canada has had a presence at the Boston Seafood Show for the last couple of years and has attended the other events as well, but in most cases it is done by the individual companies producing the product.
Senator McInnis: This is supplementary with respect to the Lobster Council of Canada. It was amazing when they appeared before us. I was speaking to one of them after and they paid their own way here, which is quite remarkable. It speaks to the dedication.
At the moment, they are into the branding, marketing and so on. How can you see their mandate broadening in the future? I have not seen their terms of reference, so I do not know.
Mr. McDonald: Actually, their mandate is pretty broad. They can do many of the activities that we have been talking about here this evening. The financial resources have been the issue, but they could organize trade missions and pay members to go with them. However, they would need to have the resources to do that.
They can do many of the types of activities that we see other groups doing. I mentioned Canada Pork. If you have been to any meat or food shows, you see the Canada Pork brand there. That is the industry association working together. You have companies within that association.
The mandate of the council is very broad, but the council mandate could be broadened. The issue is that they would need the resources to hire. They would need to hire some communications people, some researchers and people like that in order to do these types of things.
Senator McInnis: The last thing we want to see is another level of bureaucracy, but, at the same time, if there is some combination of government funding and funding from the industry, that normally keeps a balance in place.
On page 5, has this number of fishers been basically like that for that period of time in Newfoundland?
Mr. McDonald: Yes.
Senator McInnis: For quite a while?
Mr. McDonald: For quite a while.
Senator McInnis: The reason would be what? They do not want to fish? There are licences there, but there is not the abundance of lobsters?
Mr. McDonald: In a lot of cases, with the licence that they have, there are not many lobsters in that area to be caught. When a person goes out to harvest any species, if they are not bringing back enough money to pay for their investment, for their time, gas and things like that, after a while they just do not do it.
Senator McInnis: Thank you for that.
As for the Marine Stewardship Council certification and eco-labelling — I forget where I saw it in here — I was looking at Newfoundland and the dollars that you put in with respect to conservation, sustainability and so on. Somewhere in here, I saw that there are three core principles that are or should be put in place in order to meet the environmental standards for sustainable fishing. There is sustainability of the exploited fish stocks, maintenance of the ecosystem on which the fishery depends and effective and responsible management.
It seemed to me, when I was listening to you and looking at this, that Newfoundland might be there.
Mr. McDonald: It is a possibility, yes.
Senator McInnis: Has anyone looked at that?
Mr. McDonald: It is been talked about. It has been considered. Industry is the driver on that type of thing. It would be up to industry to drive that.
Senator McInnis: But you are putting money into it.
Mr. McDonald: Not in this case.
Senator McInnis: Is that just to withdraw all of the licences?
Mr. McDonald: Yes. The money that we put into that has been for other conservation issues. It is not really related to certification or anything like that.
Senator McInnis: All right. We have an abundance of lobster all dressed up and no place to go, it seems. There is a market problem and a price and so on. You said earlier that you are not a scientist and I appreciate that, but are we exploiting the stock?
Mr. McDonald: From what I can understand, the stock seems to be harvested at a sustainable level. That is my understanding. Here again, it is only my understanding. Like I say, I am not a scientist.
Senator McInnis: Who would know?
Mr. McDonald: The federal government is the one that sets the amount of product that could be harvested. The science people at DFO would be able to tell you.
Senator McInnis: They did not seem to know when they were here. You have seen it, in years gone by, with northern cod.
Mr. McDonald: That is right.
Senator McInnis: There was the abundance that was there, and all of a sudden the cliff came. That is the concern that I have. I have no reason to be concerned because there is certainly plenty of lobster, but it would be interesting to know whether we are actually exploiting it.
Mr. McDonald: There is not a whole lot of science being done on lobster. There has been, as you mentioned earlier, a retrenchment of the amount of science that is being done. However, as I say, I cannot really speak to that.
Senator Unger: As a Newfoundlander, you live on an island. How much do the people of Newfoundland and Labrador feel a part of this industry? Looking at your statistics, they are different from some of the other provinces. I know that the petroleum industry is becoming important, and I wonder if this is sort of a declining issue for you.
Mr. McDonald: The way I see it right now is that the seafood industry in Newfoundland and Labrador is still worth $1 billion. Even though our lobster industry is small, when we talk about the Canadian lobster industry, we are talking about $1 billion of exports. The Newfoundland and Labrador seafood industry is a $1-billion industry as well, thereabouts. It varies from year to year. Lobster is not one of our larger species, but it is very important to the 3,000 or so people involved in the industry. It may not mean hundreds of thousands of dollars for these people, but it is a case of being part of a number of different things. Some of these people may take herring or other species as well. The fishing industry is still a very strong part of our province.
We produce more crab than any other jurisdiction in the world. We produce an awful lot of northern shrimp. We produce a large volume of cold-water shrimp. The industry is still very strong and employs a lot of people. The lobster industry is a little different because it employs a large number of people who derive a portion of their income from it. Even though we have oil and gas, the seafood industry, as Senator Manning can attest, is still a strong part of the fabric of the province, and it keeps people in a lot of rural areas. That is why they are there and continue to be there. That is where we started in the beginning, so it is very important to these people.
Senator Unger: That $1 billion is a lot of money.
Mr. McDonald: Yes. It has been largely sustainable. Of course, we had the collapse of the northern cod, but the industry rebounded after that. Our exports are higher now than they were when cod was our big fishery.
The Chair: It is a renewable industry, and there is new money. Landing on the wharf creates new dollars in our communities, which is a big plus. To be honest with you, we all are delighted that we have the oil and gas industry, and it creates a lot of economic activity. However, when John Cabot sailed into the shores of Newfoundland, he took out baskets of fish, not baskets of oil. That is why we are there and why it is important to keep it going and to find ways to improve it.
I live in the southern area of Newfoundland, and, while we have lobster fishermen right in my home community, it is a supplement to their income; it is like the sealing industry in some way. We do not have seals in the south. Up in the northern part, sealing is a supplement. It is a supplement to other fishing that these fisherman and people are involved in. It creates a leg up, in some cases, for them.
Senator MacDonald: We have heard a lot of testimony in the last few months, and I have had lots of discussions with many friends of mine who fish lobster for a living back home. The real problem seems to come down to marketing. I think you said that 80 per cent of the lobster from Newfoundland goes to the U.S.?
Mr. McDonald: Eighty per cent of our Canadian lobster exports. That does not include our domestic consumption.
Senator MacDonald: Do you think that it is fair to describe that as dumping lobster on the U.S. market? Are we dumping them?
Mr. McDonald: I do not think so. I think that our industry tries to get as good a return as possible. The U.S. market is such a large market, and it has traditionally been a market for all of our seafood. Probably what has driven a lot of our industry — lobster included — over the years is the proximity to the U.S. market.
Senator MacDonald: I wonder what percentage of that lobster going to the U.S. market has been purchased by low- end users, such as Red Lobster, as opposed to more upscale restaurateurs. Do we have any numbers on that?
Mr. McDonald: We would not have those numbers; and I do not know if they exist, because they would come from companies like Red Lobster. I would not know.
Senator MacDonald: Do you know how much more reselling occurs once the lobster gets into the U.S. market?
Mr. McDonald: No, but much of our Canadian product goes into the U.S. and is distributed to other brokers. It is hard to determine. I would not be able to comment on how much is resold to other people. I know that often our product goes in through brokers and ends up in different markets.
The Chair: We have had discussions around the table on traceability and in Moncton also. If that were in place, would it be possible to answer Senator MacDonald's question?
Mr. McDonald: It probably would be possible. We have heard, anecdotally, that some of our product goes into the U.S. My colleagues from Nova Scotia, New Brunswick and P.E.I. would be able to address that more succinctly. We have heard that some of the product going to the U.S. is marketed as Maine lobster because that is what the market in the U.S. is for. That is where the money is.
The Chair: When you create a brand that is popular and sells well, it becomes the marketing tool.
Senator MacDonald: I want to get back to marketing because I think it is the key to this. We made the point that licensing is federally mandated and processing is managed at the provincial level. When it comes to marketing, it is all ad hoc and in the hands of whoever purchases the product and redistributes it.
Mr. McDonald: That is right.
Senator MacDonald: I am afraid to ask about the supply management of lobster in this country. Dairy products and eggs are supply managed. How successful has that been? Mind you, it is all domestic.
Mr. McDonald: Yes.
Senator MacDonald: Is there an argument to be made that we should have some sort of supply management system to ensure that we get the proper return for this product? I am so frustrated because I know what this product is selling for in Japan, Korea, Southeast Asia and the United States. I am befuddled by the fact that 80 per cent of this product is not going to Southeast Asia rather than to the United States.
Mr. McDonald: One comment I suppose before I avoid your question on supply management is that it takes money to develop markets in places like Southeast Asia. If you were to put into Asia the volume of product that goes into the U.S. without proper marketing efforts, you possibly would depress the price over there as well. That often happens. In parts of Asia, lobster is seen as exclusive in that only people with a lot of resources can afford to buy it.
Senator MacDonald: It is an expensive product in the supermarket over there, and they cannot keep it on the shelf.
Mr. McDonald: There may be some possibilities for our companies to do that. When it comes to supply management, you realize that the fishery is a common property resource. I am sure that people have thought about it in the past, but when you are going into places like the U.S., they do not want to hear about supply management.
Senator MacDonald: They may not care as much about it in Asia.
Mr. McDonald: That is possible.
The Chair: You are another wise man from Newfoundland who will not touch that one.
Mr. McDonald, thank you. It has been interesting for a number of reasons but mostly because there is such a concentration in the lobster industry in New Brunswick, P.E.I., Nova Scotia and even parts of Quebec, while not so much in Newfoundland. It is nice to hear a different perspective with some of the information that you put forward this evening. We appreciate your taking the time to give this presentation and answer our questions openly and honestly. Certainly, we look forward to seeking more information in the future as we prepare our study. You were asked by Senator Poirier to send some information, I believe. When you get the opportunity, please forward it to the clerk; we would appreciate that.
We will recess for a couple of minutes to allow Mr. McDonald to leave, and then we will have an in camera session.
Mr. McDonald: I appreciate the opportunity to make a few comments here. Thank you for your questions; it was a very interesting process. Good luck with your study. I will wait to see how you resolve the issues.
The Chair: We will attempt to resolve them.
(The committee continued in camera.)