Proceedings of the Standing Senate Committee on 
Fisheries and Oceans

Issue 12 - Evidence - November 30, 2012 (morning meeting)


MONCTON, Friday, November 30, 2012

The Standing Senate Committee on Fisheries and Oceans met this day at 9:05 a.m. to study the lobster fishery in Atlantic Canada and Quebec.

Senator Fabian Manning (Chair) in the chair.

[English]

The Chair: I am pleased to welcome you 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 this committee.

Before I give the floor to our witnesses, I would ask the senators who are joining me here this morning to would introduce themselves to our witnesses.

Senator McInnis: Senator Tom McInnis, Nova Scotia.

Senator Unger: Senator Betty Unger, Edmonton, Alberta.

Senator Harb: Mac Harb, Ontario.

Senator Hubley: Senator Elizabeth Hubley, Prince Edward Island.

Senator Poirier: Senator Rose-May Poirier, Saint-Louis-de-Kent, New Brunswick.

The Chair: I take this opportunity to remind members of the committee, our witnesses and the general public that there are simultaneous interpretation services, so feel free to speak whatever language you are most comfortable in.

Our committee is continuing its study of the lobster fishery in Atlantic Canada and Quebec. The committee has heard from provincial fisheries departments and harvesters yesterday, and we are looking forward today to hearing from lobster shippers, buyers and processors.

On behalf of the members of the committee I thank you for being here and joining us today. I would ask now that you introduce yourselves. I understand you have some opening remarks, and we look forward to asking you questions and engaging in some conversation.

We had a great day yesterday. We learned very much about this industry, the great opportunities that are here and the serious challenges that it faces. We are hoping over the next few months to be able to assist in whatever way we can, but today we look forward to hearing from you. The floor is yours.

Marc Surette, Executive Director, Nova Scotia Fishpackers Association: Good morning. I am Marc Surette from the Nova Scotia Fishpackers Association

I left Halifax with an education and some life experience under my belt and returned to Yarmouth with visions of getting involved in the lobster business. What better for a budding accountant than the glitz, glamour and excitement of being part of the richest fishery in Canada, LFA 34 lobster. That was 1997.

If I had the same decision to make today I would do it in a heartbeat. Regretfully few if any of my peers would view it in the same way they would have 15 years ago and who could blame them.

Catches today are nearly double what they were, yet the landed value is only up modestly. Costs are skyrocketing, margins are evaporating, and for the first time the best lobster in the world is questioning if it can still legitimately claim that moniker. Yet it remains the staple of the economy for my town and countless others throughout Nova Scotia.

As Executive Director of the Nova Scotia Fishpackers Association, I represent over 60 small and medium size companies that cover the gamut of Nova Scotia seafood. About a third of those members are lobster buyers, dealers and shippers. Some have been in it for decades. Others use it to offset the collapse and moratoriums in the ground fishery. But the common denominator is that they are community-based companies that offer employment to hundreds of families all around them. In many cases these are family businesses with three generations working side by side, more common than you would think.

I learned the lobster industry inside two family enterprises that did just that. To this day I feel honoured and privileged to have been given those opportunities to see how to be successful and in these times just survive. What you can learn from gentlemen who started in this industry at the tail end of the Great Depression make the parchments and papers that hang in my den seem worthless.

As we move into the 2012-13 lobster season in Southwest Nova, people are worried, anxious and scared. This is not limited to the harvesting sector but to the buying side of the equation as well. I have members who have decided that they would not participate this year. There is only so much that you can bear before you realize that the profits are no longer there.

Some members have refused to take on new boats, new supply. Others have gone as far as turning away loyal fishermen simply because they cannot handle the volume profitably. Others keep going status quo, admitting that they too are only going to be able to handle this for so long before they will have to make drastic changes to their business models.

With the strengthening Canadian dollar the industry has watched a large portion of their advantage in profit disappear. Add to that record and near-record landings over the past number of seasons and the supply is at an all-time high. Coupled with sluggish economies in the EU and United States we are seeing the demand shrink. China, along with other Asian markets, has been the bright spot.

Through tremendous efforts from the industry, with the support of provincial and federal governments, the lobster sector has been able to find a spot to expand while the traditional markets shrink. But with a new market comes competition, not from outside but from within.

As with any industry once a market is found people want to jump on the bandwagon. The wagon is usually loaded with people who are new to the industry and have little to no experience in running successful enterprises. They see fast money and little risk. They work on bargain basement prices and suck the value out of the market. It happens all the time in this industry. People jump on, lose a bundle, shut down and leave many in the industry holding the bag with millions in unpaid invoices. They do not make investments in plants and holding facilities. They do not employ people in the communities where the lobsters come ashore.

As the adage goes, their office is a phone booth and their overhead is a light bulb in the box of their truck: no investment, no long term strategy, no consequences. Within months they re-establish as a new name on the same truck. They are a problem, a huge problem. They will always be willing to pay a dime or a quarter more than the well- established buyers are. They artificially inflate shore prices without facing the repercussions. When times are as tough as they have been people will jump for the extra money, but few understand what damage that causes.

It is difficult from the industry level to do anything to stop this behaviour. It becomes a cost of doing business, a cost we certainly can do without. But as an industry we do not have the organizational structure to come together to push to have this cycle stopped. This is where government can truly effect positive change in this industry.

As is happening in the harvester sector mandatory dues and membership to an industry association is the beginning to organization. As you can appreciate businesses have differing business plans. They do not always want to brag about how tough things really are. As I have learned in my position it is my job to convey the real and damaging effects that are being felt throughout the industry. But without mandatory membership only a small fraction come to the table and contribute to having someone take their plight to the public to air their concerns to government departments. The rest ride the coattails, free riders. Eventually the voice will become too small to be heard. That is what my members hope you can help them avoid.

Self-rationalization will work. The strong will survive; the weak will leave. Until we get a commitment to stop allowing everyone entry, stop propping up poor business models and poor choices, this cannot happen. With strong, well-managed companies on the shore buying and paying for lobsters this industry can survive. If we continue to allow people entrance who take value from the industry while leaving a trail of unpaid bills with no assets backing their credits the industry will not be able to strengthen.

In this regard you can recommend following what has been spelled out in countless studies: support good business with sound ideas while letting the remora starve.

Legislated limitations to access without a proven track record in community investment, jobs without government propping, is key. Everyone seems to want capitalistic approaches. Let us have some capitalistic reality as we achieve it.

Fleet separation and owner operator policy must be revisited. Under the current structure we are headed for a two- tier arrangement that allows vertical integration for harvesters while making it illegal for buyers and dealers to do the same. The fear of big corporations buying up the fishery is an illusion.

As we hear repeatedly harvesters are having a difficult time making ends meet. Why would people think that corporations are going to want to take on that? The majority of the companies involved in trust agreements are small community-based businesses. They provide the opportunity for harvesters to enter the fishery who would otherwise be excluded if forced to use traditional means of financing. They use these arrangements to put local fishermen on the water which in turn creates shore based jobs for others in their community. What is the difference between a shore buyer with a couple of trust agreements and a harvester who owns two or three vessels and a holding facility? Perhaps someone could enlighten us because we do not see it.

The elimination of trust agreements will be another stumbling block for an industry that is already under enormous pressure. Allowing for current arrangements to be left as is and moving forward with consultative change is the least my members can accept. We ask that you support the negotiations regarding CETA and other trade agreements. Eliminating and reducing tariff on lobster products will put more money into the Canadian industry for harvesters through to processors.

This is what governments are expected to do. We are not asking for intervention but for support. Allow what is a component of a global machine to do its job, not mask it. Just support our rural communities and the economies they strive to keep above board. With support on trade policies our industry could become more competitive.

The Lobster Council of Canada is an initiative that is addressing the broad-based concerns of the industry as a whole. By bringing together all parties within the fishery we are trying to effect change with broad strokes. The work must be allowed to continue with government's continued support. It must continue to be an industry-driven part of the solution process where industry groups and associations could bring their vast and varying concerns to a forum where people understand each other's language, share ideas and rebuild the value of this important resource.

Support, consultation and transparency, those are the fundamentals we need you to provide Canada's most lucrative fishery.

Jeff Malloy, General Manager and CEO, Acadian Fishermen's Co-operative Association Ltd.: Good morning, honourable senators, ladies and gentlemen. My name is Jeff Malloy. I am the general manager and CEO of Acadian Fishermen's Co-op. We are located in Abram Village, a small fishing community on the south shore of Prince Edward Island. I also sit as vice-chair on the Lobster Council of Canada. I am a board member of the Fishery Council of Canada and the current President of the P.E.I. Seafood Processors Association.

I will give a bit of background on our company. Acadian Fishermen's Co-op was formed in 1955. It is located in a very small fishing community, an Acadian community on the south shore of P.E.I. AFC is a seafood processing company specializing in lobster and crab but also produces several other species such as scallops, herring, mackerel, et cetera. We are owned 100 per cent by 99 shareholder member fishermen. It is a co-op that is completely owned by fishermen.

All member fishermen are from seven different ports in LFA 25. These fishermen have been hit very hard by the decline in shore prices over the last several years. The products we process in the fall season are direct from our fishermen, but we also buy lobsters from a commissioned supplier in area 24 which we call the spring fishery. We also buy lobsters sometimes out of Nova Scotia.

Our present business model does not include bringing lobsters in from the U.S. As we can talk about later that is a completely different business model from what a lot of the processors on P.E.I. are involved with right now.

Figures from the Department of Fisheries and Oceans indicate that average net income of fishermen from LFA 25 varies depending on catch rates and obviously shore prices but over the last number of years it has been as much as 87 per cent lower than that of north side fishermen in LFA 24.

Turning to sales for our company, just to give some context of what it means for a small community, the sales for our small company were close to $24 million in 2011. We have a plant payroll for 2011 of over $3 million with an additional $1 million paid out to fishermen's helpers for a total of over $4 million. The total number of T4 slips issued to plant workers and fishermen's helpers totalled over 400.

I am sure you spent the day yesterday listening to the challenges. I probably do not have a whole lot more to add. I guess specific to our company, and these are not in any particular order of importance, things have hit the processing industry over the last number of years. Certainly a big change was the exchange rates between the Canadian dollar and the U.S. dollar. Many people said in the past that any idiot could make money when we were getting $1.59. It was very easy at that time to mask the problems the industry was facing.

Many of us met in those years because we could see the exchange rates and that problems were coming for the industry. But when people are making money they do not want to meet. With all the meetings we have had over the last three or four years and because of low shore prices in the industry these challenges have come to the forefront. These challenges to the industry are not something new, not something that has only taken place the last three years because of low shore prices. They were masked in the past because of the extremely high dollar which allowed us to get through some very difficult situations.

Obviously the world economy over the last few years has not helped. One of the big problems has been the higher than normal landings in most areas of Canada and the U.S. When we have landings of 120-odd million pounds this year out of the U.S., the landings that have occurred in the Bay of Fundy, and what has been landed and is expected to be landed this year in Southwest Nova, we do not have as an industry the infrastructure to handle those kinds of increases. That has contributed to the problems we are facing today.

With regard to some of the problems for the processing industry, we would certainly like to have an even playing field. Over the last few years some provinces have certainly provided a number of subsidies that have created an uneven playing field which in itself is not a huge issue except that it has affected what those companies are able to sell in the marketplace and pushed the market down. Because of the lack of money in the industry the market now has adjusted. Whoever the low guy is, that is where the new market price is. None of us is in a position that we can hold inventory, allow it to work itself out of the system and wait for the price to increase in the marketplace.

The industry itself is starved for cash. When we have these seasons pressure is put upon the companies to sell the product as quickly as possible. When it comes to the processing sector, we are forced to push a big part of the product that traditionally takes 12 months to consume, especially on P.E.I. where it is landed in a two-month period in the spring and then another two-month period in the fall, through and into the marketplace in a very quick manner. That does not allow for the best return to the plant and in turn to fishermen.

Canada is falling far behind the U.S. in its marketing efforts. For the last few years the LCC tried to push to have the provinces put something in place that could allow money to be taken from the industry and put into efforts that would increase our marketing ability in the world and try to keep up with the U.S. That has not happened. The LCC in particular has now relied on government to prop it up and to limp through this last two years.

There have been many discussions that have worked well in bringing all facets of the industry together, which is very good, but at the end of the day there needs to be some money injected into this industry. We are hoping it would come from the industry itself. I do not think it is healthy that it all comes from government. In order to own it the industry itself should be paying for it. That is where the whole idea of a penny a pound came from to begin with. Whether it is that program or some other program we have to allow industry to own these programs.

Another problem is much higher freight costs out of Canada than out of the U.S. I know it is a big problem in the live business. A lot of product makes its way down to the U.S. just to be shipped out of there. That has taken jobs away from Canadians. It is a lot more stress on the lobster. To be honest with you, it allows the U.S. lobster to become a lot higher standard because it is Canadian lobster being shipped out of the U.S.

It does not affect the process sector it as much, but even freight rates, containers and those types of things are much cheaper out of the U.S. than out of Canada. The new employment insurance reforms we anticipate coming through will certainly have an impact on the processing sector, which is a seasonal industry. Some of those reforms will make it very difficult for us to keep many of our main employees that we need in key positions such as engineers and those types of things that we only need at a certain time of the year.

We focus too much on the problems of the industry in general and do not take the time to understand that the industry is made up of many different parts. We have a variety of seasons and catch rates, along with two completely different industries using the resource: the live business and the processing business. Even within the processing sector there are two completely different models. One is in New Brunswick which they have done an excellent job at taking advantage of it. The other model takes place in particular on P.E.I. We need to examine smaller pieces at a time, take the time to look at them individually and hopefully they will make a difference in the larger picture.

We certainly have some positive, very good new markets in Asia. Five years ago 75 per cent to 80 per cent of our company's product was sold within Canada and the U.S. Over the last 12 months 70 per cent to 75 per cent was sold within Europe and Asia and 20 per cent to 25 per cent was sold within Canada and the U.S. There certainly is a huge emerging market in Asia. We hope that will continue because of the huge volumes now coming in.

We have a stable resource. We talk about the volumes coming in. Obviously the things we have done in the past are working but that has come with its own set of difficulties. The history of the people in the Maritimes and the Atlantic provinces shows they are very good at adapting and overcoming major problems in a number of the fisheries over the years. If we all work together I think we can get through these.

Thank you very much for the opportunity to speak today.

The Chair: Before I give some senators the opportunity to ask some questions, I want your feedback on the lobster resource monitoring program. We heard a lot of that yesterday, but what is your take on that from a quality perspective? I understand the program has been instituted on Prince Edward Island to a great extent.

Mr. Malloy: There have been a number of things. The resource has been strong. There have been increases size-wise. P.E.I. in particular is going up to 72 millimetres. That certainly covers off the egg reproduction that is needed, something that we can get into a bit later.

There have been discussions over the last number of weeks because of some issues that have taken place in LFA 25 and because of the timing of the season there. Weather-wise there has been a lot of discussion. DFO hosted a meeting a few weeks ago where New Brunswick and P.E.I. got together.

A lot has to be done in terms of the quality of products out of that season. The quality has changed. I mean I used to run a live business out of Southwest Nova for several years and every lobster that came out of the water was as hard as this floor. You had fractions of a per cent that were soft.

The environment has changed. In the last number of years we have had issues with the quality of product coming out of the water. I guess that is something we certainly have to work on, but at the end of the day the resource is very stable. We hope this is not just a high and it goes back the other way. A number of things have to be looked at on the resource side and the quality side. The two have to be worked together. The government has to do a little bit better job of putting the two together. In the past we have focused primarily on the resource and the management of it, but there is a model somewhere that we can go with to allow a lot more input from the business relations side which has not been looked at in the past. It has just the resource itself and conservation that have been looked at.

Mr. Surette: I will echo that. Quality from my neck of the woods was never a problem. I mean these lobsters came ashore. They were world-class lobsters. We are hearing reports already that this year catches are as strong or stronger in the first days of the season, yet the quality is still not there. We were hopeful water temperatures were down a bit this year but we are not seeing it. We definitely need to have a look at this if we are to have quality standards across the board. It is going to become a necessity.

We do need to have the Canadian brand and the Canadian quality lobster. It is going to be a requirement to ship to Europe and to ship to China. They want to know they will get the same kind of lobster time after time. We have to look at that especially in Southwest Nova where there is such a tremendous amount of lobsters coming ashore that basically are not of a quality where they can spend 48 hours to 72 hours in a box getting them to Beijing. We need to address that. It is a program we have to continue to support and make more widespread.

The Chair: Going back again to a lot of the feedback we received yesterday, what is your view with regard to opening dates for the season?

Mr. Surette: In our area the Fishermen's Management Board attempted to change the season. From our perspective for the dealers it was not a great idea at this point because of the time for making Christmas markets. Not knowing what you are going to get, how much are you going to get or what the quality is, a few more days or losing a week was not going to make a big difference to the quality. What it was going to do was shrink up the window to both deal with lower quality lobsters and establish what you will be able to supply your markets for Christmas.

Changing the season is not necessarily a correction at that end of the province. Closing part of the season in the middle of winter where there is a lot less fishing anyway is something that has been discussed, but as far as changing the start date I do not think a few days is going to make the difference and changing it by two or three weeks is going to devastate the industry.

Mr. Malloy: I was not here yesterday to hear what was discussed, but I can go back to the meeting of a few weeks ago with P.E.I., New Brunswick and DFO. Certainly there have been major discussions in LFA 25.

As far as thing go that is a unique situation because of the weather when they are fishing lobsters. It is not only difficult to keep those lobsters alive. This past season there was a lot of media attention on that. I bought 1.4 million pounds. I lost less than one-half of 1 per cent but that is because our fishermen have done a tremendous job looking at the quality aspect.

Is it the ideal time to be fishing lobster? It certainly was not in August this year, especially when it was 90-odd degrees. When a concerted effort is made by both fishermen and buyers by supplying ice and by looking after them once they leave the boat to get them to the plant, it can be worked through. We all have to make a more concerted effort in that regard to maximize what we are getting from this resource. If the reports we have all seen in the media this past year are all true, that certainly is not happening. I can only report on what ours are. I am in the situation where I am a co-op. My business is sort of an open book. I have to report back to my fishermen and have a meeting once a year where our books are completely open. At the end of the day we all have to do a better job.

Is it an ideal time to be fishing? No. Are the lobsters in most of those ports at that time? Yes. Can it be changed? I do not know because to be perfectly honest with you we have not had the science. We have not had money put back into this industry like many other industries have had. The odd report comes back on lobster, but if you compare it to industries like the snow crab where they can tell you down to the day when crabs are molting, where the soft crabs are, where the best places to fish are, et cetera, that type of work has not been done in the lobster industry. It is remarkable considering how much of an economic impact the lobster industry has in the Maritimes. Whether it is through government or whether it is through programs where we take a bit of money back out of the industry to invest in those types of things, it is information that we need. If we make decisions right now on such as changing seasons, in all honesty people would be doing that on a guess and not on facts and hat is something we need to change.

Senator Hubley: Welcome and thank you both for your presentations. It has been certainly a learning experience for our committee and I think we are really encouraged by the interest the fishing associations and the fishermen are taking in our project.

I was taken with the amount of attention that has been given to the carapace size by all of our fishermen. I am wondering if you might comment on the difference in the carapace size. Are you prepared for an increase from 71 to 72 millimetres next year in Prince Edward Island? Is Prince Edward Island uniquely situated to be able to process those smaller lobsters and have the market accept them as well?

We have heard about the Asian market take-up several times so I am just wondering if you would comment on the smaller lobster and how it fits into that market and if that 75 per cent for Europe and Asia includes the addition of that smaller lobster.

Mr. Malloy: Certainly there is a different model in particular on P.E.I. There are only two producers that bring lobsters in from Maine, for instance, to process meat and tails. That is what I said earlier. The processing industry has two different models that it is running under right now. New Brunswick has done an excellent job with their industry. They have gone with the model of a lot bigger volumes per day. They have focused primarily on a meat and tail business, with the exception of the spring when the canner fishery out of LFA 24 is on. They bring in a lot and do it into a popsicle pack for Europe, which is also a high volume model.

Like I have said, they have gone primarily with 10 months of the year almost and strictly pushed the volume through. There are two bigger plants left on P.E.I. There is one that has gone after that model. It is a U.S. company down the eastern end that bought a plant. They brought in foreign workers. They primarily are bringing up Maine lobsters and producing out of the old Beach Point plant that they bought from Ocean Choice.

In our case I do not buy any market lobsters out of the spring fishery whatsoever. I buy 1.4 million or 1.5 million pounds of what everybody refers to as canner lobsters. That product is very highly sought after in Europe and Asia. They prefer that product. If a lobster is 350 or 400 grams or whatever they can get more pieces per 10-pound box, for instance. Therefore the price per plate is much cheaper. It fills a niche in the businesses like cruise lines, on buffets in Vegas, Atlantic City, Florida and those type of places. With a product like lobster tail that could run, we all hope, $15, $16 or $17 a pound they can use the smaller lobster in those types of situations. They can say they have lobster but yet it is not a big cost per plate for them.

In Europe, and especially Japan, they prefer the smaller lobster. They prefer the smaller tails. That is where a lot of that product is going, whereas if you are focusing on meat and tails and higher volume, you might have a list of probably 20 products.

Our company and Royal Star, the other big co-op on P.E.I., have specialty products. I have, for instance, two four- inch binders with different products. We offer a lot more specialty products. That is the model we have gone after.

We cannot compete. A plant here in New Brunswick can do 100,000 pounds a day of Maine lobsters. If I did it, it would be 15,000 pounds of meat and tails because it is highly intensive labour-wise to get the meat out. At the end of the day with low volumes I cannot make the margin off it. That is why we go that way.

The majority of plants on P.E.I. want to keep the canner fishery alive because it is a niche. There is only a limited volume of it. Instead of putting more product into the overall big pot of all markets, which limits very few different products, we should not necessarily be expanding but taking advantage of the unique things we have that are sustainable and try to get more back for the fishermen in that regard.

Senator Hubley: The reason you do not bring product in from Maine, is that a cooperative decision? Is that something your fishermen would not want to see happen or is it because you have enough product from your fishermen?

Mr. Malloy: In our case we do not bring it in because I cannot make any money off it. I cannot bring in the huge volumes you have to be set up for. Typically it is not huge margins but you make up for it with volume. My plant in particular and most of the plants on P.E.I. are smaller plants. The only big one that we had is closed so we cannot put the volume through in order to make up the difference.

It is a dollars and cents thing. If I could make money at the end of the day it would go back to my fishermen. We would do it but we cannot make any money off it. To New Brunswick's credit it has done a wonderful job being able to explore it.

Senator Poirier: I have a couple of questions. Actually Senator Hubley in her first line of questioning dealt with where I wanted to go. The size of lobster seems to be an issue that has come up quite a few times. For the sizes we received yesterday we went back to the old measurements which we understand a bit better because that is what we learned in our days in school. The 72-millimetre lobster was equivalent to approximately half a pound and the 76 would be approximately .75 of a pound in size. That is what we got yesterday.

Mr. Malloy: Seventy-two will not give you half a pound. That is an eight-ounce lobster. Right now we are running at 71 millimetres and I would say in our case less than 4 per cent run from eight to ten ounces. Less than 4 per cent of the canner product that comes in is in that size range.

Years ago when the size allowance was a lot smaller we used to do a pack of two-ounce tails. They do not really exist anymore. We do two to three packs but that is product that is usually two and a half or closer to three ounces.

I would say eight-ounce lobsters that are 71 would be a per cent maybe.

Senator Poirier: If you are fishing a canner right now at the 72-millimetre level, it would be approximately what? Would it be an eight-ounce lobster? Is that what you are telling me?

Mr. Malloy: When we go to 72 you will not see any eight-ounce lobsters.

Senator Poirier: What will be the size approximately?

Mr. Malloy: The size will be a minimum of nine ounces but you will have very few of those. They will be closer to ten ounces.

Senator Poirier: At 76 millimetres what size of lobster am I looking at? It is still a canner but what size am I looking at in ounces?

Mr. Malloy: You are probably up to 14 ounces.

Senator Poirier: I think you said awhile ago that 75 per cent were sold in the Asian market. If I understood the answer you gave to Senator Hubley, it is that your market for that is more the hotels, cruise ships and different things like that. They are looking for more in a box, more bang for the buck, to be able to serve in restaurants.

In packing that many lobsters in a box that you are selling off to the Asian market or whatever, how many lobsters difference would that be?

Mr. Malloy: If we were talking of going to a lobster out of Southwest Nova, for instance, we would not have anything under a pound. So it would be a one-pound lobster. As we get down to 10 to 12 ounce lobsters, 12 to 14 or 14 to 16, we could have 14 to 15 lobsters 10 to 12 ounces in a 10-pound box. It is increasing the per piece price by a third.

Senator Poirier: Of the 75 per cent that is sold to the Asian and European markets, what percentage is the canner market?

Mr. Malloy: In our case?

Senator Poirier: Yes, in your case right now.

Mr. Malloy: In our case when I bought 1.4 million pounds out of the spring fishery I did not produce any markets. One hundred per cent of what went into Europe and Asia was canners.

Senator Poirier: You also mentioned that there were only two processing plants in P.E.I. that brought in lobster from Maine. That is two out of how many plants in P.E.I.?

Mr. Malloy: I mean some dabble in it, bring a bit in, but there are two that do it with any regularity. Right now there are eight plants left altogether that are processing. So it would be two of the eight.

Senator Poirier: You mentioned in your slides that you had close to 400 copies of T4 slips. That is the amount of employees you have in your plant, but a portion of that goes to help pay for fishermen helpers. The balance of it was for people working in the plant, I assume.

Mr. Malloy: Yes.

Senator Poirier: Because you are doing all of your plant work basically with the lobster from home, not from United States, how long a season do the people in the fish plants get to work? How many months a year or how many weeks?

Mr. Malloy: Our workers work generally from May 1 through until we just stopped two weeks ago. We are starting back up again Monday and will run a minimum of three weeks through December doing Southwest Nova lobster.

Senator Poirier: Is that pretty well full time all the time?

Mr. Malloy: Yes.

Senator Poirier: Is it full weeks.

Mr. Malloy: Yes.

Senator McInnis: You received a sizeable block of money from ACOA, that is to say the processors in terms of marketing and in terms of innovation in the lobster facilities. Were the $3.6 million and $514,000, respectively, well spent? Did those taxpayers' dollars go to a worthy cause?

Mr. Malloy: I cannot speak for the other provinces as far as the different programs and how they took advantage of some of that money. I can say on P.E.I. some money went into some product development and some equipment development. Actually we have two pieces of equipment that are ready for the marketplace to help control costs for the ease of extracting meat from the claw and arm of lobster. That project there was around $280,000.

There was another project on P.E.I. where we put almost $200,000 into product development. I know some of those products have been taken advantage of by some of the plants.

At the end of day I think some of that money could have been pulled together a bit better. Some of the stuff was helter-skelter type projects. When that money was announced everybody was scrambling to get their piece of it, obviously. Some projects were not completely thought out like they should have been. More time could be spent on evaluating those projects, on evaluating how we could bring other people together to work on those types of projects.

When money gets put into the pot from ACOA and everybody sees their portion of it, I think there is a rush to take advantage of it. A lot of times some more communication and working together would allow that money to be spent a little more effectively and allow more people to take advantage of it. A lot of programs or projects took place that would be beneficial to other provinces and other areas in the business. Delay on that is harmful to the overall goodness of the project.

Was that pool of money well spent? I think some really good things came from it. Could it have been better spent? Probably, yes.

Senator McInnis: I presume as opposed to policies, in that policies normally come from the top down, these funds normally emanate from the industry. I presume there was a request and there were discussions, meetings and so on as to the need.

Normally there are not sufficient funds. That is always a problem and that brings about some scrambling, but obviously it was presumably thought out reasonably well.

Mr. Malloy: Yes. I think each individual area, each individual association and each individual province looked at what was best for them, but a lot of times when there is that scramble on to get your piece of it you are concentrating completely on what is best for your individual, smaller area. Sometimes there should be a bit of a step back to take a look at the bigger picture to see how much better some of these projects could be with the inclusion of more people, more areas, more pooling and those types of things, but sometimes that does not happen in my opinion.

Senator Unger: With this helter-skelter approach, people trying to get their share of the money from the government, should government money be targeted?

Mr. Malloy: It should be targeted in some degree. Like I said there are lots of different components to the industry. Therefore there are lots of different problems that affect everybody. Again I think there is a bit just too much of a rush to satisfy the needs of a particular area. With that same money or maybe putting some money together from different sectors, different areas, different provinces or whatever, more could be done with as much or even sometimes in some cases less money. I do not know who does it. I do not know who you get to actually be the one that is the overall coordinator or brings all these groups together, but when you have systems that allow any project or whatever it is every region, every different sector or whatever that is putting their own project together and is competing for that money. Inherently you are looking after your own interest.

When we have money available for some things that may be beneficial to more people, somehow we have to come up with a way to bring people together and maybe take more advantage.

Senator Unger: Is that something the Lobster Council of Canada can help to organize? I am just trying to understand that process.

Mr. Malloy: I certainly think it is. The Lobster Council of Canada has been trying to get everybody around the table. Again that has brought its own share of problems because, like I said, the live industry in Southwest Nova is completely different from the live business out of Newfoundland or the process business in P.E.I.

We have all come together. We all have our own sets of problems. When you have that many problems with that many different agendas and groups it makes it very difficult. The Lobster Council of Canada certainly has its hands full.

That is why we have narrowed it down. Right now at the end of the day we hope we can increase the price but at the end of the day I think we can all agree that we need marketing for Canadian lobster. We also need to improve the quality of the Canadian lobster to be able to market the brand of Canadian lobster. That is something that is generic that we can all agree upon. If a focus could be put on that and we tackle that one first some of the other things can come along. I mean there is certainly a place for the Lobster Council.

On a lot of these things they have already made inroads to allow a lot of these groups to be together. When some of these projects come up, yes, I think they would be a decent vehicle to allow them to bring together some of the groups so that we could benefit most from some of these projects. We could work on them together and I think it would be better for everybody.

Senator McInnis: Does ACOA ever come back and ask? Do they ever do an analysis after the fact as to effectiveness?

Mr. Malloy: I think they do. At the end of the day we have to prove the money was well spent and that type of thing. I do not know the inner workings of ACOA by any stretch so I cannot really speak for them on how they analyze whether a project or a program worked, but I think there could certainly be more communications.

I have been part of many projects. When that is done maybe a role for ACOA would be to bring the people around the table that it may affect or may benefit from it. They could say they have spent $200,000 on a project. It is federal money along with provincial money but who else can it help? Let us bring them all around the table and discuss this to see what we can extract that may be of benefit to other regions, other provinces and other parts of the industry. I think we could bring more benefit from the dollars at the end of the day. In my history I have not really seen that.

Should that be a role that ACOA takes on? Probably in my opinion it should be part of the projects. When they see the results at the end or see the final report that is written up, they would not just write an initial and say "Good job, here is your final cheque." They would ask "Okay, who else in the area under ACOA's jurisdiction could benefit from this?"

We could take a day and we ask for the presentation of the person or the group that did the project. We could we are going to have a day, an afternoon or whatever to bring other people around the table. We will chair it and share with everybody else to see if there are other things that could be beneficial." Maybe in another province, another group or whatever the work would only go so far. They may have some money or something they can add on to extend the project, make it better or whatever.

Has ACOA done that in the past? In my opinion they have not.

Senator McInnis: Mr. Surette, in your brief you talk about buyers and suggest there should possibly be some kind of legislation with respect to fly-by-night buyers. I will use those words; those are not yours. The test that you were alluding to is that they have a credible business background.

I am not sure but you will tell me whether there is an association representing buyers. I presume there is not but if there is normally when the harvest lands ashore it is the responsibility of the provinces to regulate how that is handled. I only presume that you would be talking about legislation under the auspices of the provinces.

Legislation sometimes can be a little strong. It takes two parties to waltz and in this instance you have the harvesters who are willing when they come in, presumably some of them, to sell to whoever is there that will give a buck more or 50 cents more a pound or whatever it is.

Elaborate on that, will you? Is it a possibility that they can police themselves? It appears to me that legislation might be a bit strong as to how to do it. We heard yesterday from the minister from P.E.I., quite a flamboyant, practical guy. They have peddlers that go around and sell and in order to do that they have to be licensed. Is there a licensing procedure now with buyers?

Mr. Surette: Yes.

Senator McInnis: How do they get in?

Mr. Surette: They basically pay a fee.

Senator McInnis: And that is it?

Mr. Surette: It really is that simple. There are associations in Nova Scotia, for example, that represent buyers and I represent 20 of them. But there are 300-plus lobster buying licences issued in the province of Nova Scotia. I represent such a small part that I cannot really go to the Lobster Council and speak on behalf of Nova Scotia buyers. I can only speak on behalf of the buyers that I represent. It makes it very difficult.

As far as these fly-by-night buyers are concerned—and that is what I called them during one of the Lobster Council sessions this past winter—they literally will show up and buy for a couple of weeks, fill an order or fill a commitment for somebody and disappear. These same boats will return to their original wharves. They will sell to the buyer they were selling to before these people showed up and they are back again. The minute somebody else shows up with their little truck and a chequebook they will take it.

We have other companies that basically are just brokering and they are working on extremely small margins. They do not have facilities. They have an office in Halifax or an office in Sydney or an office in Charlottetown. They do not have a plant. They are basically getting other people to pack the lobsters for them. They are shipping them overseas and dumping them into the market at bargain basement price, undercutting everybody else that is trying to look at 1.5 billion people in China saying "There should be plenty of market for all of us." Instead people are going in there and doing the same thing that they like to do, that is move more lobsters cheap and if they go under they will close their doors. They will say "We are somebody else next week and who cares who we hurt?"

Millions of dollars have been lost in Yarmouth County alone in the last five or six years. The number would easily be $30 million that has been wiped out from people who just show up, pay for product, sell it for the cheapest they can possibly get it, and if things do not work they will not pay for their lobsters. They will take the last cheques. It has got to stop. I think legislation is the only way. We cannot police ourselves.

We are having trouble with the Lobster Council, for example, with the penny a pound and trying to get five provinces with identical legislation to go forward with. At some point it is going to become a necessity for DFO to play a part in having that legislation even at a provincial level. It is going to take a partnership to get that instated. With that could come other things as far as associations and mandatory memberships that can come off of licensing. It is much like they are doing with harvesters in Nova Scotia right now. They are in process. The legislation has passed. It basically gives a cohesive voice for sectors of the industry.

I think that is what we need at this point. We cannot have fragmentation anymore. It is really starting to show how bad it can be for the industry. Our backs are against the wall today. There is no doubt about it. To have this sort of behaviour continue is something, as I have been preaching within the Lobster Council for the last year and will continue to preach, that is hurting our communities.

Senator McInnis: I am trying to understand because the committee will write a report. If this is such an urgent problem we want to try to resolve it.

I presume there are regulations now if they have to get a licence. Is it the test or the questions before a licence is given? When licences are given normally there is some form of a test or questions that have to be responded to. Is that not the mechanism you are looking for?

Mr. Surette: Really the mechanism I would like to see is a moratorium on issuing buying licences, much as we have done with harvesting licences. A moratorium would be the ultimate solution. If somebody leaves and all of a sudden we have somebody that has a spot open, we can take a new person into the industry. At some levels they are trying to close the door but it is not happening. We do seriously need to put a stop to this.

We have too many people. We have overcapacity as it is. We do not need more people trying to wriggle more nickels and dimes out of an industry that is running out of nickels and dimes. There is a litmus test of sorts to get your licence but it is really not a fantastic process. I am sure that within a week or two with the right pieces of paper and an idea I could have one. I sure as heck do not want one. I see what the people in my communities are going through.

If you are going to have a licence you need to have a plan. You need to be certified by CFIA. You need to follow all these rules that so many people have to follow. You need to allow others to be in the same industry and to be given the same credit. Literally they have a truck and nothing else. They have no fixed address. It is ruining the industry. Part of the problem that has been snowballing for the last 15 years is that everybody wants to get in, grab their scraps and run. There are no scraps left.

The Chair: If I could follow up on that for a second, is that a provincial buyer's licence?

Mr. Surette: That is provincial.

The Chair: That is what I thought. It is under the provincial government. We have heard about the differences and the challenges in the different provinces, but from a federal legislative point of view it would be a Canada-wide piece of legislation.

Mr. Surette: Yes.

The Chair: They would not be in a position to legislate provincial legislation. I just want to make sure that we are clear on that.

Mr. Malloy: Yes, that is true.

Mr. Surette: I understand, yes. It would have to become a nationwide.

The Chair: In order to have it nationwide we would have to set the same rules for every province.

Mr. Surette: Yes. With no slight to Senator Unger, I do not think we will have to worry about too many people applying for buying licences in the province of Alberta.

The Chair: No, but from what we have heard in the past couple of days there are different concerns in different provinces in relation to how things are purchased, how they are shipped and the size. Someone made a comment yesterday, and I am trying to listen to it all, as an example that Clearwater does not sell any lobster under 84 millimetres. Would that be correct?

Mr. Surette: I would think so. Where would that be? Is that the Nova Scotia measure?

Mr. Malloy: That is not true.

The Chair: It is not true?

Mr. Surette: It is possible.

The Chair: Somebody made that comment here yesterday and I find it rather strange that we keep talking about 72 and 76. I do not know what their market is, but I am saying it is difficult. I agree with you. I am from a small community in Newfoundland and Labrador. I know very well what you are talking about in that regard. I am trying to address that concern. It has been an ongoing concern for the past two decades but it is a provincial matter to a great extent. It has to be dealt with now.

Whether we can assist in coming up with something as a recommendation from our committee to the federal government to begin that process or something, I do not know. We would have to discuss that but it is an issue of licences. I just want to make sure we are all clear it is an issue of licences.

Senator McInnis: That is the point I was getting to.

Mr. Surette: I am fully aware that it would be a provincial issue. We are facing that problem. It is an issue in all provinces at this point. Basically at some point we are going to need some help to get this done. I have stacks of reports on my desk that talk about that.

Mike Gardner has produced several for different factions of the industry and they all point to that as being one of the problems. Overcapacity is one. Self-rationalization is another and the fly-by-nighters have constantly been a problem in various sectors. The lobster industry at this point is the only one left that has got money in it, so they will keep coming. They will keep stealing a little money out of it, stealing a little more value and taking a little more value. At the end of the day that value is not being returned to communities in Nova Scotia, New Brunswick, P.E.I., Newfoundland and Labrador, or Quebec. That money is escaping. Instead, like I said in my county, we have companies in Nova Scotia that lost millions and millions of dollars from people who performed these sorts of stunts. I am sure everything is done with the best of intention. I would not say that these people are intentionally going out and running away from their bills, but what they are doing is basically another example of a helter-skelter process. They buy, sell or do whatever is going to be easy. They will do this but it is not as easy as they think. I mean it is tough to make money.

That goes to a question I heard Senator Unger address last night, wondering about the middlemen making two and three times their profits based on the backs of harvesters. It is untrue. The lobster industry is riddled with myths, folklore and a lot of the time basic lies. The margin used to be that you wanted your 50 cents and anything you could make above 50 cents was great. Today you are playing with 35. It is going to cost you 15 to 18 cents just to get that product to market on a truck and then you have to pay your employees. All of a sudden you are skating on very thin ice.

These are all major problems that need to be addressed and the Lobster Council, which I am proud to be a part of, is making great strides in that. Legislation is about the only way we can do it. It would be great if it could be recommended to the provinces that they address this problem. If the federal government sees that it could play a role in facilitating again that would be great, but industry has its back against the wall and it is from harvesters straight through to the processors. This is getting tougher by the minute. We need to be cohesive. We need to be on a level playing field. We need to be investing in this industry, not stealing from it.

Senator Poirier: On that issue and knowing that the legislation for the buyer's licence is provincial jurisdiction, are there any communications or any ongoing talks? Have you approached the provincial governments to see if this can be addressed? Are there amendments you want to suggest to change the legislation? Are you working with the province on this at all?

Mr. Surette: Yes. I sit on a committee for Nova Scotia, a processors' committee that is co-chaired by industry and the province. They are fully aware and every time we meet at the top of the agenda is: When are we going to start addressing these issues? It is not popular politically and therefore it gets pushed to the back of the room.

Like I say these reports have been out for over 10 years in some instances in salt fish and ground fish. These are the sorts of problems we need to address and regretfully nobody has the will on the political side of the spectrum to go forward with these tough changes.

People are losing money repeatedly. There are shrinking workforces. I am watching my province move to Alberta. The jobs are not there anymore because we do not have the value. That value is being sucked out of the industry and we need to put a stop to it. Yes, we are working but it has not been taken seriously.

The Chair: On that note we went through it back in Newfoundland and Labrador a few years ago in relation to trying to create a raw market sharing system. The big issue that came up—and maybe this is an opportunity for you to address it here—over and over and over again was the elimination of competition for fishermen to be able to sell. That seemed to be the concern of the people in my neck of the woods in Newfoundland. They were afraid of consolidation of the fish buyers, consolidation of plants or consolidation of people who were actually on the wharf buying their product. The concern was the negative impact that it would have on fair competition and free enterprise for the fishermen to sell to whom they liked.

We all know that many fishermen are tied in with different companies and so on and so forth, but that was the concern raised with me. I was a provincial MLA at the time. Over and over and over again everywhere I went that was a concern to people.

There may be an opportunity to address that when it comes to reducing the amount of buyers. I understand where you are coming from because I have people I know very well in the processing industry also. It is balancing that with the issue you raised here this morning in that regard in my view.

Mr. Surette: I fully understand and I am not asking to see competition eliminated. I mean I would like to see a cap. I do not want to see the number of buyers shrink, much like I do not want to see the number of harvesters shrink. Nor do I want to see the number of harvesters increase. I think we need to have a level playing field on both sides.

As for the owner-operator policy Minister Ashfield made very clear that is here to stay. That is creating a two-tier system. By allowing anybody and everybody to come in and buy lobsters while fishermen are basically capped with licences—they are not issuing those anymore—we are creating a two-tier system and that is not going to help matters.

I do not want to see the lobster industry reduced to three lobster buyers in five provinces. I do not want to see that. The companies that have been there for 60 and 70 years have made contributions to their communities. They have put infrastructures in their communities. I want to see them be allowed to survive because they put in the effort, because they are planning and because they are trying to run a business. They are not in there trying to make a fast buck. That is what we have got to see go.

No, I do not want to see a consolidation that would reduce the number of buyers. I think we need to see a cap on it, much as we have got a cap on harvesting.

The Chair: That is a good point.

Senator Unger: I have one question that could be to both of you. Since 2009 the federal government has invested millions of dollars in the industry and money has been provided from that to the LCC. Has this situation changed beneficially in any way? If not, are there one or two reasons you could give me?

Mr. Surette: I want to say that money has made a world of difference within the industry. If for nothing else it brings people together in a room where they can actually have conversations.

At my first Lobster Council meeting I was nervous to be in that room basically because there were some people in that room that I had known for a long time through the business. I knew who they were, reputable people, big-time players. To see them in a room with harvesting groups I assumed was going to come to fisticuffs. That is the way the lobster industry is at wharf level. I mean they are adversaries. Although there were 15 people in the room there were probably 25 opinions. People did it respectfully and courteously. That in itself is a step in the right direction. That is what the Lobster Council is doing and that is what the Lobster Council I think is going to continue to do in different ways.

It was phenomenal to see what the working groups went through last winter. People sat around the table from many different areas of the country and different areas of the industry to bang their heads together, to be productive and to come out with what they came out with. It is a big step for the lobster industry. It has always been a divisive and adversarial industry, much more so than many of the other fisheries.

It is refreshing to see at this point that we all realize we are in it together. There is one lobster industry. We are all part of it. To see us be able to sit around the table is your money's worth right there. Only good things are going to come from that if we continue to do that and we are seeing that now. I think Mr. Malloy will agree.

Mr. Malloy: At the end of the day a lot of money has been put into this problem as far as money that was put into the LCC. More or less our statement is that we appreciate what government has put in but by no means is it enough. The problem is that you have an organization, the LCC, where you have one employee, an executive director. All the other work is done is by the executive and then by the board of directors.

We stretch out as much as we possibly can to as many members. The whole idea is trying to push for more funding, for it to be self-funded, to get that pot of money. You can look at models like Alaska and what is taking place in Maine. They have a problem. They have an issue. They need to put money into marketing. When we bring it up it is that you have to jump though this hoop and you have to jump through that hoop.

Provinces really do not want to give you that money, but it is politically not the greatest if they bring in legislation to extract a penny a pound or whatever the number is from the industry. It might take the next five years before that will ever happen.

The provinces and the federal government have to either step up and fund the LCC properly so that we have people in there for communications, so that the information is communicated to fishermen in both official languages, so that we can expand the marketing efforts and that type of thing, and not have just one executive director that is constantly for 11.5months of the year trying to get enough funding to keep the LCC going. Half of the time of our meetings is taken up in figuring out how we can keep the funding going. Who we are going to get? Can we get some money or some contribution from processors, fishermen groups and all the rest of an industry that has not been making any money? Can we get them to kick in money to do this on an individual basis?

In my opinion we have to do some of the things that other jurisdictions have done. I am not saying easily. Maine decided that they were going to bring in a marketing program and extract money from the industry. They brought in legislation. Instead we have talked with the provinces. Yes, we are talking with five different provinces and it is against a brick wall.

What about money from other areas? There is the great job that the Alaskan project has done. We can pick up any magazine. We can go to any seafood show. We can go to any of those types of things and they are front and centre. They have done a remarkable job of marketing their product.

Maine lobster right now is creeping up there and it has surpassed us. I mean customers over in China. There is Canadian lobster going in there and they are calling them Boston lobster, just because they have done a lot better job of marketing their brand. We have to do that. Whether it is the industry, whether it is government or whoever it is that is going to fund this, let us just get it done one way or the other. If the governments are not willing to take it on themselves and they want industry to do it then give us the legislation to allow us to do it and be done with it so that the money can be spent and spent in the right manner to increase the value of what we are bringing out of the water.

Senator Unger: In what way has ACOA helped in your efforts and provided assistance, money or otherwise?

Mr. Malloy: I can only speak for my company. It has used ACOA over a number of years in different projects we have taken part in. It has given us the ability to be able to do different projects. One project we have through ACOA was a crab line that has enabled us to extend crab season and so on.

As far as the industry in general and ACOA I think the intentions were right. I think there were some good projects. I do not know enough about what was accomplished in the other provinces or how all the money was spent. I know with the money spent through ACOA on P.E.I. there were some good projects done that will help the industry in the long run. All that information has to be coordinated and shared a little more by ACOA. At the end of the day I think the money that was spent was not completely wasted on their part.

The Chair: Since we began our study, we have heard nothing but positive comments on the Lobster Council of Canada. I have been involved with some of these organizations over the years and it takes a while to get a footing, but I am sure my committee members and I think it is headed in the right direction. Maybe we need a little extra push from some of the suggestions you made today.

As with any avenue of government, if you see a concentrated effort by the industry it bodes well. I think we need to get to a point but how we get there could be through legislation or some other route. It is always a little easier to get a dollar when you have a dollar. If there is something on the table from the industry and all the players in the industry in my experience of 20 years it makes it a hell of a lot easier to get both levels of government onside too.

As you go forward with the Lobster Council there certainly needs to be a concentration on how to do that and how to organize that. We will certainly be discussing the Lobster Council in our deliberations because certainly in my view anyway it is playing a very important role here and now. These things take time. When you are talking about five different provinces and even different sectors within the provinces that have different issues and different challenges, it is not an easy job to set common goals. I wish you all the best with that.

Senator Harb: I hear you both saying that federally we need to do a better job. From Mr. Malloy's perspective it is the fact that we need to have more feedback, we need to interact more. From Mr. Surette's point of view it is the fact that trade and commerce seem to find ways to allow people to go through the hoops without being caught.

As it is we have many rules and regulations governing what is legal and what is not legal in a sense. Would you mind just taking us through a scenario whereby you could explain a situation where somebody would have broken the law in conducting trade or commerce within your industries?

Mr. Surette: With all due respect, senator, I am not saying that anybody is breaking any legal rules. What I am saying is people are breaking moral rules. People are basically out and doing things that somebody with any kind of a conscience would not be able to do. I could not go to sleep at night knowing that I sold product A to company B without paying supplier C.

Those are the sorts of things that go on repeatedly in the lobster industry at levels that I am sure are not acceptable in any other industry in the country. I think that is where the problem lies.

I am not accusing anybody of being a criminal or anything like that. I do not think it is criminal activity. I am saying that people are not looking at their business with any kind of ethical approach at all. They are not looking at the community that is around them, the community that they are supposed to be there to support with a natural resource. What we are seeing is people that want to steal as much of that money as they can and leave. A lot of these companies do have backing from outside of Canada.

Senator Harb: Mr. Surette, could you explain something to me? If I am a seller, if I am Mr. Malloy and I have a product I want to sell, and somebody comes to my door, would it not be prudent for me to ensure that this person is going to pay for the product that he is buying from my store?

Mr. Surette: One would think if you are set up with a business registration number and a buying licence from the province that person is a legitimate business, yet in many cases it is a front. How somebody can operate like that is something I have not yet been able to get my head around in 15 years in the business. I cannot do it.

Senator Harb: Could you give us a scenario?

Mr. Surette: A company sets up shop to ship lobsters to Europe and Asia. They do not buy lobsters from a boat. They do not pack lobsters in a box. They do not own a truck. They own an office space 200 or 300 miles separated from where their transactions are originating, i.e., the shore of Southwestern Nova Scotia. They go about doing business by working on small margins and forcing everybody else in the industry to work on small margins. They find out at some point they cannot continue to operate in this way and they declare bankruptcy.

The list goes around to the companies because we are all interwoven in this business and you see who got stung. You are looking at friends that owe you money that just lost $7 million to a company that closed up.

That would be bad enough but the fact is that six months down the road they are issued another buying licence, operating under another name and doing the same thing. I am not going to say a name, but many people in the industry will point to one in particular that has been doing this. I am not going to be accused of slander or any kind of libellous statements, but we know who some of these people are. That is where the value in our industry is going.

How a company that employs seven or eight people can take a hit of $7 million when their gross profit for the year was probably $100,000? How are they going to swallow $7 million in losses? Legitimate companies go bankrupt every day. Yes, that can happen, but we will have a domino effect if we continue to allow people to jump in and out of the lobster industry, take whatever they can get while they are there and basically walk away with money in their pockets while everybody else is standing around hurt. The fly-by-nighters are the problem. This is the problem.

Senator Harb: Senator Hubley, Senator Poirier and I love lobsters.

Mr. Surette: Thank you.

Senator Harb: However, let's say we just do not have licences but we decide to come up to Mr. Malloy to buy a bunch of lobsters because the price is fantastic. If we are to go to a grocery store we are going to pay like five times the price of what you are selling.

Can you under present rules sell us lobsters so we can pack and take them with us home to enjoy for the next eight months. or are there rules that prohibit you from doing so? If so, what are the things that need to be done so you can have the capacity to sell directly to consumers?

Mr. Malloy: That opens up another discussion. You say it is so expensive for you to buy that lobster in the grocery store or whatever. When shore prices were down it was an opportunity for those of us in the industry to expand our markets which would in the long run help the industry.

What is happening now — and you have probably all experienced it yourselves — is that you go into a restaurant and you have been exposed to these meetings. You know what the individual fisherman on the wharf is getting for lobster and you say "Why the hell am I paying 30-odd dollars a plate for a lobster dinner?" Why is it that the shore price in P.E.I. is $3 a pound and at the grocery store that is five kilometres away is $11?

At one time before the downturn in the economy retailers, restaurant chains and so on would make the adjustment. When the shore price went down inevitably the consumer would buy more because the price would be down. That creates more product being sold. It clears out inventory and therefore then gradually rises the shore price back up to fishermen. That is what was happening.

To be honest with you, what happens now is that the marketplace, the in-between guys, the brokers, the distributers and those types of people see a low shore price as an opportunity to make more money. We can still sell X number of pounds and still make more money because we are buying it for less from Acadian Fishermen's Co-op, for less from Clearwater or whomever. We have lost the advantage of what typically took place with a low shore price: an increase in people trying the product, using the product and clearing out more inventory. That seems to have disappeared.

I do not know what the answer to that is but it certainly in my opinion is a problem that has been exasperating the issues we are facing, especially this last year to a year and a half in that there has not been price goes down so consumption goes up and inventories go down so the price on the shore can go back up. That is not happening now in my opinion. We have had steady increases in landings but the consumption certainly has not matched what the price has gone down to in the U.S. and Canada. It certainly has not matched the decrease in what the fishermen and the processors are getting for the product.

That is something that should really be looked at it. Maybe somebody with a lot more education than I have could certainly see what the difference has been over the last number of years. Has the margin for the in-between guy, the distributor, the restaurant or whatever gone up on a product like lobster?

The Chair: It is always a struggle, even with catfish in Newfoundland today. It is very difficult to explain to fishermen how they sell their product on the wharf for 47 cents a pound and they drive up the road for 20 minutes to Sobeys or Dominion and it is $9.99 a pound on the shelf.

Boy, I'm telling you, I have been around 20 years and I do not have the answer to it. There are a lot of people in between those two entities and I guess that is where we are too. With cod and with every part of the industry that has always been a difficult one for me.

Senator Poirier: We have been gathering some good information over the last couple of days and are adding it on to what we have heard in Ottawa and what we will continue to hear in the next while. Hopefully it will help us to be able to write the report and make some recommendations at the end of the day. Maybe they will not solve all issues but will help at least to move things along.

You mentioned to me, Mr. Surette, in your presentation that you represent over 60 small and medium size companies and that about a third of those are lobster buyers, dealers and shippers. Am I to assume that two-thirds of them are the processors or the fishermen, or who are the two-thirds that you represent?

Mr. Surette: The other two-thirds are in ground fish, salt fish, bait and a bit of crab and shrimp.

Senator Poirier: Fishermen?

Mr. Surette: No.

Senator Poirier: Processors?

Mr. Surette: Yes, fish processors. In my 60 members I have one company that processes lobsters and does not process them in Nova Scotia, oddly enough. He actually has a shore-buying, live-buying presence in Nova Scotia but processes outside of the province.

Senator Poirier: There are no companies you represent that actually deal with the lobster industry.

Mr. Surette: No, they are shore buyers. They buy direct from boats. They ship direct to markets in Asia and China, to the United States and to Europe. Some of them will sell to another buyer or what they call a commission buyer. They will get 50 cents a pound. This guy will just show up at their wharf and take their lobsters away with his truck to his pound. He takes on the responsibility of marketing that into the stream of the marketplace.

Senator Poirier: Zone 25 has fishermen from New Brunswick, P.E.I. and some from Nova Scotia, I see from the maps. Are some of these fishermen the people that you represent?

Mr. Surette: No.

Senator Poirier: Maybe you have the answer and maybe you do not, but the reason I was going there is that there seems to be a difference in demand as to what size of lobster fishermen from P.E.I. are looking for, what they feel they need, compared to what New Brunswick fishermen are asking for, what they feel they need. Are you aware of the position of the fishermen in zone 25 in Nova Scotia?

Mr. Surette: No.

Senator Poirier: Then I will not go there any further. I will wait to be able to talk with some other people from Nova Scotia.

I know price is market-driven or whatever the industry wants. Either one of you can answer this question. I know that the economy, the dollar and a lot of other things come into play when the price is identified. I am just having a hard time understanding, and maybe you can help me, why in such a short period of time, for example last year, the market value for spring lobster was so much higher than it was in the fall. Why was there such a difference in the market-driven price in that period of time in the same year?

Mr. Surette: A lot of it has to do with supply. In Southwest Nova this time of year we have got 1,700 boats on the water just in 33 and 34 alone. In 34 last year they caught 40 million pounds. We get tremendous catches in the fall.

In the spring catches are, as a rule, much lower than they are in the winter fishery, in 34 for example. Generally the quality has been historically better the last year. We did see that the shedder, the soft-shell lobster, the molted lobster, was showing up at the end of May in my area, which is a rarity. You would see one perhaps, but to see them repeatedly in many different fishing grounds was something that caught a lot of people by surprise. There is that factor.

The reason prices slid so quickly is the dollar. The biggest factor is the dollar. If we couple that with landings that have nearly doubled—Maine more than doubled—it is just all too many factors coming together at the same time with demand in Europe and demand in the U.S. flat. It has been flat for five or six years. Slowly that is starting to take its bite in the industry.

There are a million and one factors driving that price but supply and demand is still a big part of that. Once you get the supply and demand portion worked out what is the quality of that supply?

Senator Poirier: In the zones where fishermen are fishing what plants you represent are processing is the demand for the size of the lobster more the canner size, the market size, or is it for a larger canner? What actually is the size market they are supplying?

Mr. Surette: In my area, as Mr. Malloy pointed out, we are on the larger size. A pound is about as small as you can get. The prime market there is one to three pounds and sometimes you can get a demand for four pounds.

Senator Poirier: That is the demand.

Mr. Surette: That is really where the demand is.

Senator Unger: Mr. Surette, I have a point of clarification. You mentioned shore buyers. What is the difference between shore buyers and the fly-by-nighters that you talked about earlier?

Mr. Surette: A shore buyer is generally someone that has a small lobster holding tank right on the wharf. They have an office. They probably have a freezer to hold bait and they probably do a bit of ground fish. What they do differently is that they will buy at the shore and deal with the fishermen. They deal with all that entails, whether it is supplying bait at two o'clock in the morning or basically arranging for a mechanic to come in and all these sorts of things. They take on helping fishermen right at the wharf-side.

In my last job I worked for somebody that had bought lobsters for 60 years. He decided a long time ago it was worth paying an extra 50 cents a pound not to have to deal with those sorts of issues anymore. I suppose when I am 80 I may choose to do things much differently from what I do now.

They are not fly-by-nighters. A lot of these people have been sitting on these wharves and running family businesses. There are many wharves, many portsand many fishermen, especially in 34 where you have 980 boats spread out over a very small geographical area. It would be impossible for everybody to be at one large wharf so every wharf has a buyer. That is basically how it works. They in turn will sell to the dealers, the shippers, the people who are going to sell them into the United States or the people who are going to pack them and ship them to Europe or Asia. They are a big part of the industry and have been for a long time.

Senator Unger: The main difference is they conduct business in an ethical manner whereas these other people do not.

Mr. Surette: They have a presence in the community. A lot of times the people I am speaking of are in an office tower in downtown Halifax. They have no interest in being anywhere near fishermen or near the wharves in any of the rural communities. The people called buyers, these guys are again family generations. Several have been doing this job in their communities in the same locations. They hire people within the community. They are not going anywhere. They pay their bills. They do the best they can with what they have. Their intent is to put something into the community, not take it out.

The Chair: Mr. Malloy and Mr. Surette, it has been an interesting couple of hours and I thank you for your time.

The committee will now learn more about the lobster fishery from the perspective of First Nations communities.

On behalf of the members of the committee I thank you, Mr. Simon, for being here today. I invite you to introduce yourself. I understand you have some opening remarks and then we will get some questions from our senators. The floor is yours, sir.

Rick Simon, Director of Fisheries, Atlantic Policy Congress of First Nations Chiefs: Good morning. My name is Rick Simon. I am the Director of Fisheries at the Atlantic Chiefs Policy Congress of First Nation Chiefs. I am representing my boss, Mr. John Paul, the executive director, who sends his regrets. He had to attend a funeral this morning in Maine for one of the chief's brothers who died over the weekend. He had to do what he had to do.

I am new to the director of fisheries position. Effective September I came to the position I have. I am no stranger to what is happening with the First Nations here in the Atlantic as in my previous life I was the Assembly of First Nations Regional Chief for the Nova Scotia and Newfoundland regions for 17 years. Over the course of that time we made many presentations as the AFN to standing committees and whatnot.

As far as fisheries issues I am coming up to speed very quickly. That is just the nature and reality of the climate that we work in. I have a specific presentation I would like to make to you and I would be open for some questioning after my presentation.

Thank you, senators, for inviting me to appear before your committee to address the lobster fishery. Your report in 2009 was both timely and it was a roadmap to a sustainable future. Your review at this point is equally timely and appropriate.

First let me tell you about the Atlantic Policy Congress Secretariat of First Nation Chiefs. The APC, as I will refer to it, is first and foremost a policy research organization that analyzes and develops culturally relevant alternatives to federal policies that impact our 37 Mi'kmaq, Maliseet, Inuit and Passamaquoddy communities and peoples here in the Atlantic. Through research and analysis we develop and we table policy alternatives for matters affecting First Nation communities in Atlantic Canada, Quebec and Maine. More recently we have worked collaboratively with the Department of Fisheries and Oceans on behalf of and with our First Nations to build and enhance our capacity in the fishery.

As a result of the Marshall decision in 1999 the Government of Canada recognized the treaty rights of the Mi'kmaq and Maliseet First Nation communities. In so doing First Nation community members across Atlantic Canada and the Gaspé communities first began to exercise their right to a livelihood fishery including the lobster fishery. The APC commissioned a report on the tenth anniversary of the Marshall decision. Although it is now somewhat dated it demonstrates that revenues to First Nation commercial fisheries had increased from $4.4 million in 1999 to $35 million in 2007. The standard ACOA seafood industry multiplier used in the study indicated that our communities gained between $58 million and $76 million in financial return over this period. The report also showed many jobs were created in fishing and many more in support sectors. A copy of the report is available on the APC website.

First Nations have become an integral part of the fishing industry. Among our key fisheries First Nations' access represents 16 per cent of all shrimp licences, 6 per cent of snow crab, 4 per cent of scallop and 3 per cent of lobster. This is a direct result of interim fishery agreements between individual First Nations and the Government of Canada.

Resource conservation was sustained by complementary retirement of non-native fishers, which in turn saw fishing boats and gear transferred to First Nations. This new income is supporting broader community objectives and reinvestments in the fishery. More important, it is generating essential knowledge of the fishing industry that will inform trilateral treaty negotiation processes now being established in each of the Atlantic provinces and Quebec.

First Nations firmly believe that neither the spirit nor the intent of the Marshall decision has been fulfilled by Canada. There are many important outstanding issues such as a greater role in management, increased access, licence diversification, inactive licences, access to capital, partnerships, et cetera. Some of these issues will be deferred to the tripartite treaty negotiation process. Others concern the survival and development of our current interim fishery arrangements and must be addressed now.

It is no understatement to say that First Nations share in the same struggle as the rest of the fishing industry. Lobster, for example, represented over 25 per cent of all First Nations fishery income in 2007.

Earlier this month you heard from representatives of the Lobster Council of Canada. APC is fully supportive of the council. In fact an Atlantic policy congress fisheries director served as a past chair of this new organization and has continued to be supportive of its various efforts. However our First Nation members also struggle to develop the knowledge and experience necessary to our industry. The challenge is immense. Government support programs are essential.

You heard last month from DFO officials on the Atlantic Lobster Sustainability Measures program. I will refer to it as the ALSM. They reported that the program has been largely successful overall. However it has been of marginal benefit to First Nations for three reasons.

First, those hardest hit by the 2009 crash were ineligible for short-term relief because the formula did not take into account the price crash of 2008.

Second, First Nations are hard-pressed to find the required 50 per cent funding for the ALSM program.

Third, ALSM and industry supported licence retirements have the propensity to increase resentment among non- native fishers for a full utilization of our capacity where stock productivity improves.

This is not to say that First Nations are not working with the non-native industry stakeholders on sustainability, planning and factors affecting price. First Nation members and their technical support organization AAROM, the Aboriginal Aquatic Resource and Oceans Management, have been and continue to be active in planning initiatives specific to individual lobster fishing areas.

In some lobster fishing areas First Nation capacity is underutilized. First Nations may designate their fishing licences to non-natives. Many First Nations opt to do so for a variety of reasons not only in lobster but in other fisheries as well. Negative industry reaction to First Nation licence designation in lobster fisheries was seen in both 2011 and recently in 2012. This has the propensity to become a more significant issue in the future unless steps are taken now to ensure full development of First Nations' capacity in the commercial lobster fishery. This would be the main message we are trying to give you today.

Fortunately the appropriate programs are in place. The Atlantic Integrated Commercial Fisheries' Initiative was launched in 2007 as a second phase to the federal government's response to Marshall. In 2010 it was linked to a strategic partnership initiative in the Atlantic Commercial Fisheries Diversification Initiative, the ACFDI. AICFI expired last March and it was renewed for one year in budget 2012.

DFO officials have indicated that renewal for a four-year period at current resource levels is seriously being considered and like everybody else are waiting to see a decision in budget 2013. Renewal and/or continuation of the AICFI which focus on diversification efforts are much less certain as funding becomes less available.

The APC has been working hard to demonstrate the critical importance of these programs and to help with the success of the First Nation fishery. First Nation achievements and independent evaluations have demonstrated their importance. For example, the prestigious Macdonald-Laurier Institute reported that AICFI is a completely new and different policy approach unlike anything ever seen before in Canada.

Participation is completely voluntary. It is performance based and it is tightly controlled. Its services are confidential. It offers fisheries business planning, management, training and diversification support. To date, some 31 of the 34 eligible communities have subscribed to the AICFI program.

First Nations are a part of the lobster industry and are prepared to be part of the solution. As mentioned earlier, APC supports the focus of the Lobster Council on quality and branding as a means to increase export demand and strengthening price. We firmly believe the creation of an Aboriginal brand with superior quality product will increase demand for First Nation lobster and other species.

At a recent national Aboriginal fisheries forum we were briefed on one such success story involving Pacific salmon. Those involved told us that there are opportunities to create similar partnerships in Atlantic Canada through partnerships and intertribal trade with successful native organizations and the United States.

Several First Nation communities have superior product, integrated fishing and processing, and may now be in a position to consider such ventures. We will be exploring this in coming months in close collaboration with the Lobster Council of Canada and First Nation communities.

In closing, I would like to thank you once again, senators, for the opportunity to appear before you. The challenges for First Nations are significant but not insurmountable. Mi'kmaq and Maliseet chiefs in the Atlantic and the Gaspé are seeking your support to advance these programs essential to develop First Nation capacity in the fishery.

I would be pleased to try to answer any questions you may have.

Senator Hubley: Welcome to you this morning, Mr. Simon. We are hearing it from another part of the industry and it is very important information for us to consider.

I am going to ask a question on marketing. I was intrigued to read that there may be an Aboriginal brand of lobster at some point in time or it may be marketed in that way. I am wondering if you could expand on that vision or that idea. Would you be doing this independently or would you be working maybe through the Lobster Council? To that end, also in your presentation you mentioned that you had a superior product and that there was an integrated fishing and processing sector.

Could you tell us a bit about the processing facilities that First Nations have and where they are located here in the Maritimes?

Mr. Simon: Thank you, senator, for your questions. A number of us from the Atlantic attended and were co-hosts at the Atlantic Policy Congress for a forum that was held in Nanaimo on Vancouver Island in early September. One of the presentations was given by a group from Washington State, the Swinomish. They presented the work they have done to date around Pacific salmon and the branding that they did with it.

They have a product that is very specific to them. They have used their capacity as tribes in the U.S. to very clearly articulate and set themselves apart from other things that are going on around them. In their presentation they talked about cross-border trade.

There was quite an interest on the part of the delegation from the Atlantic in listening to them. We have been working very closely with them since to try to create our own dynamic here in the Atlantic around the possibilities that we may have as First Nations to do something very similar.

We are not there yet. We are starting the whole discussion and trying to get a good handle on our own capacity if we are going to step into an arena in which we offer ongoing exports to the U.S. in relation to lobsters. We need to be clear and positive among ourselves that we have the capacity to keep it ongoing.

The second part of your question was whether we working on our own or as individuals or with the Lobster Council of Canada. We work closely with the Lobster Council in relation to some of the initiatives that it currently has under way. We are aware that they are talking somewhat the same language, although I am assuming what they are doing would be in relation to the Atlantic itself. We are trying to set ourselves apart from that very specifically to do something in relation to the First Nation fishery.

Our capacity is growing in relation to specifics like processing. As an example, the Lennox Island First Nation in P.E.I. right now is at full capacity in a processing plant specific to lobster. In fact I am trying to get over there next week to see the operation. I was there a couple years ago when they first opened. They went through a series of growing pains and now they are back up and running. They have better capacity than they did previously. They are hoping that this time they can get it right. Part of our initiative is to create a capacity and markets for them.

As well the communities of Big Cove, Elsipogtog and Burnt Church in New Brunswick have some capacity in the processing area. I believe they are a bit more specific to shrimp but I am not really clear on that. My plan is to look at and review their operations.

Senator Hubley: It certainly is marketing and branding is an ongoing theme that we have heard in the last couple of days. There is a move in marketing to try to establish the Canadian brand, the Canadian lobster and not necessarily the Atlantic province lobster or the Maritime lobster.

I am just wondering how successful you feel you can be in having another branding of First Nations lobsters. Who would you see as your market for that product?

Mr. Simon: To be quite honest the jury is still out on the go-forward strategy for sure. The groups we are dealing with, the tribes in the U.S., have some very specific markets currently. There is potential for us to tap into those markets. We are creating the dynamic right now to be able to go there.

As an example in the States they are very organized around the casinos. Every one of the casinos is looking, in some way or form to put fresh Atlantic lobster in their casinos as a special seven days a week all across the U.S.

One of the chains we have been having some discussions with is the Seminoles tribe in Florida. I am not sure if you are aware but they own all the Hard Rock Cafes across the U.S. We have been looking at some means or some capacity to supply them on an ongoing basis.

That is where we are hoping to find some means or mechanism around some brand. Be it Marshall, be it treaty or be it First Nations, we are not sure. We are working our way through that but we feel we have the capacity to set ourselves apart. We just need to explore the idea and the notion further.

Senator Hubley: With regard to new entrants into the fishing industry and the First Nations, how aggressively do you encourage young people to get involved and how successful are you in getting new fishers to come on board?

Mr. Simon: That is a very good question, senator. As you are aware, earlier I referenced a program that is called AICFI. In that program we have been doing a lot of training, a lot of training. Through the Atlantic Policy Congress we have created six training modules over the course of the last three or four years. To date, we have delivered five modules. We are in the process of developing a sixth and each of these modules is very specific to industry requirements as far as being able to get on a boat to do everything that is involved as far as being a fisherman. That is one example.

Another example would be the North Shore Mi'kmaq District Council in the Miramichi, New Brunswick. They set up a structure whereby they are training new entrants into the fishery, individuals or young people who may have an interest in the fishery. They are trying to prepare them for the possibility of upcoming jobs.

Theirs was a bit more unique than ours in the sense that it was a relationship with HRSDC through some special project. Their tribal council in the Miramichi has been delivering the program not only in New Brunswick but into the Gaspé region of Quebec and the two First Nation communities in P.E.I. being Lennox Island and Abegweit. Yes, there is a lot of training and there is a lot of interest. I guess our next key is to create the jobs for the people we have trained.

Senator Poirier: Thank you for being here, Mr. Simon, and for sharing your points of views and concerns with the committee. I think it is important that we hear from as many people as possible.

How many processing plants do you have in First Nation communities right now in the Atlantic region?

Mr. Simon: My understanding right now is that there are three: Lennox Island in P.E.I., Burnt Church and Big Cove.

Senator Poirier: Are First Nations lobster fishermen selling their lobster to First Nation processing plants? Is the catch you are getting all going to the First Nations or are you selling to the buyer and the buyer has to go someplace else because you do not have enough plants to process the fish that you are getting?

Mr. Simon: Currently it is a combination. On Lennox Island, being up and running again, they are buying currently wherever they can. They are doing a lot of legwork with us and working with the communities in the Atlantic to try to find a way or means to run our product through them. It is work that is in action.

Senator Poirier: I am from the Saint-Louis, Richibucto, Elsipogtog area. That is where my home is. As an example a lot of First Nations fishermen have their boats on the Richibucto wharf. When they come in with their catch would they be selling their catch to the buyers there like any other fishermen who are not from First Nation communities?

Mr. Simon: Yes, they would.

Senator Poirier: Therefore we do not know if the buyer has control of where he is bringing the catch, right?

Mr. Simon: Yes.

Senator Poirier: Do you know what the demand is with regard to processing plants in First Nations communities? Are they dealing with all sizes of lobsters? Do they have a bigger demand for the canner than the market? What is their demand? What are they supplying right now?

Mr. Simon: To be quite honest I could not be very specific on that. I could not be. Although we could find out and if you require that information we could get it back to you.

Senator Poirier: It would be interesting to have if you could supply that to the clerk of the committee because there is a difference of opinion of market demand in different areas. Are there any buyers on the wharves in First Nation communities for the fishermen there?

Mr. Simon: I would have to say no. Stepping outside of the provinces into Newfoundland I know Conne River has a wharf right in their community. Their boats are there and that is where their buyers do their business.

Senator Poirier: Is that a First Nations community?

Mr. Simon: Yes, it is. Unfortunately they are in the commercial fishery like everybody else. The government never recognized them as being beneficiaries of Marshall. They are in the commercial industry as well but that is the reality of how they have to do their business.

Senator Poirier: Would the price they would be getting for their product be similar to the price all other fishermen in the immediate area or zones would be getting?

Mr. Simon: I would say yes.

The Chair: I am quite familiar with the Conne River community. There are some great people there involved in the fishing industry. They have certainly contributed very much to the crab fishery especially in Newfoundland and Labrador. A lot of people are employed and doing very well. They work side by side with Newfoundlanders and Labradorians.

Senator McInnis: I have some questions arising from your brief where it states that the APC is first and foremost a policy research organization that analyzes and develops culturally relevant alternatives to federal policies that impact our 37 Mi'kmaq, Maliseet and other communities.

Are these federal government policies that negatively impact that you are opposed to or are they just alternatives? Will you give me the explanation of analyzing and developing culturally relevant alternative? I take it the federal policies are not satisfactory.

Mr. Simon: In many cases that would be an understatement. Policies are continuously being developed within government that are in our best interest from the government perspective. That was the original intent of the Atlantic Policy Congress when it was first put in place in 1992. I was one of the first employees of the APC before I was regional chief. The intention when we set up the structure of the organization at that time was a commitment from government that as policies are being developed and are coming through the system within government they would share them with us. We would be able to work in some sort of collaboration and the final product would ultimately reflect our issues and our concerns around policy within government. It has never really worked to the effect that we wanted. I am sure as senators you are aware of how government policy is designed and formulated.

There are many steps along the way that it becomes internal to government. We could never find a way or a means to go beyond that. Many times we have stepped up and challenged policies and in many cases we have drafted our own structures around policies on a number of issues, be it health, economic development, taxation or whatever. We see the bigger picture at some period in time as these rights negotiation tables develop and they look forward to some means for more governance capacity. We see it as something that can be very beneficial to our own structures in helping draft policies.

Senator McInnis: Will you do it as a matter of course and not necessarily because a policy has been enunciated by the federal government that you do not agree with?

Mr. Simon: The reality is that if we are going to talk about running our own show we need to be able to have the capacity to draft our own policies around it as well. It is all around governance. Yes, it is.

Senator McInnis: It is encouraging to see the success of the commercial fishery in the sense that it has grown by over $30 million in a short period of eight years. What percentage of that would you attribute to the lobster industry?

Mr. Simon: Our numbers indicate that of all licences held by First Nation communities in the Atlantic the lobster area represents a small percentage compared to other fisheries. I believe it is 3 per cent of lobsters but in other areas like shrimp we are much higher.

We are trying to work our way through certain problems. I will give you an example. The licences vis-à-vis Marshall to First Nations communities are not strict commercial licences. They are what they refer to as a commercial communal.

It is more along the lines of community ownership versus the normal lobster licence being held by an individual. The dollars made in the lobster industry go into the communities in real broad terms versus into a single family that may very well pass it on from generation to generation.

In our case the whole structure is different. It creates certain instances where it is not in our best interest. Would we like to grow our capacity? Yes, we would. We are looking into taking our profits and trying to buy into more lobster licences. There are communities doing that currently. A couple would come to mind very quickly: Membertou in Cape Breton and Wamaco. They have bought additional lobster licences. They are basically coming at it from a very successful commercial aspect. It still does not give them that capacity around the whole notion of commercial communal. It is different.

How we deal with it is something that we are working our way through. I know we are trying in a couple of areas that I am taking the lead on. We are working with the Department of Fisheries and Oceans around this whole notion of underutilized licences.

When Marshall came down many of the licences were bought them out and they were complete packages. In their rush to meet the industry feedback around the fact that there were all these new players in the industry all of a sudden, many licences were bought at a way higher value than what they were really worth at the time, boats included.

Many of the licences were in areas that it was not worth the band's while to put a boat or have people go there because they would not make any money. One of the areas that we are trying to work on now is these underutilized licences to get some way or means to trade them among communities so that there is closer area adjacency. They can trade licences back and forth and it becomes worthwhile for that community because it is closer to the action.

Senator McInnis: Would this be native communities?

Mr. Simon: Yes.

Senator Unger: My question concerns the fishing licences. First Nations may designate their licences to non-natives. What typically happens with those licences that are designated to non-natives?

Mr. Simon: The example I will give you there is two communities that I can speak to immediately. In the broad context it is very similar to what I described for Senator McInnis. Sometimes it is not worthwhile for communities and/ or they do not have boats. It becomes an easier set-up for them to sell their licences in the water to individuals. They would agree on a price. In that agreement on price they would also agree on having First Nation peoples on board their boats while they are fishing our licences. The band would be able to see X amount of dollars come back without having to be managers of the whole fishery. That would be an example of communities designating their licences to non-native fishermen and fishing on our behalf.

Another example would be Indian Island. Last year they took their licence and designated it to a P.E.I. fisherman. Once they landed the New Brunswick catch on the wharves on P.E.I. the whole issue broke out around New Brunswick catches going to P.E.I. to be processed.

What just happened up in Grand Manan is another example. The communities from Tobique, and Perth-Andover were a distance from where they were fishing their licences. They had the same idea. They designated their licence to a fisherman from Nova Scotia. All of a sudden Grand Manan is up in arms about the same idea of what happened last year with Nova Scotia fishermen and boats coming into their ports and fishing native licences.

I guess in their view it is unheard of and not allowed but in our view it is a necessary capacity to try to utilize our licences and try to make money from them.

Senator McInnis: You mentioned a number of issues that you are working on through the tripartite treaty negotiation processes. One of the recommendations of the Royal Commission on Donald Marshall was a tripartite committee that would deal with these issues. There was always difficulty getting that committee up and going. Part of the difficulty at the time was some of the native communities getting together and cooperating, but I am hoping your answer will be that yes, the native community, the province and the federal government now have an ongoing process to deal with these matters. Am I overly optimistic in putting it that way?

Mr. Simon: I would say yes, you are correct. I can speak to probably each of the provinces in relation to current structures that are under way.

In Nova Scotia it has been ongoing for approximately seven or eight years. We sat down in a tripartite arrangement with the province and the federal government around the whole notion of definition of treaty rights vis-à-vis Marshall, and the next steps. As you are aware the whole fisheries agreements were interim arrangements. They were never meant to be the final tally. The Supreme Court spoke about specific issues around moderate livelihood. We have never defined a moderate livelihood is.

With these structures and processes we hope to see some arrangement around governance and our own capacity develop. In the tripartite process in Nova Scotia they appointed an executive chair to oversee the whole process. When I was AFN regional chief I was appointed by the Mi'kmaq, the federal government and the provinces. I served in that capacity for two terms over six years. I was called the executive chair of the whole tripartite forum.

We had many unique structures within the tripartite forum around development in a whole range of areas. They had seven working tables within these structures. They had a health table. They had an economic development table. They had a taxation table. It was all the areas of governance we envisioned moving into as we moved forward. We had working groups at each of these tables that were creating some capacity for all of us to work jointly at a higher level. That was the whole idea and the thinking around developing tripartite tables.

The Gaspé region of Quebec was also party to the Marshall agreement. The Listuguj, Viger, Gesgapegiag, Mi'kmaq and Maliseet communities were also referenced in the Supreme Court decision. They have a tripartite structure as well. They have been at it for a couple years after Nova Scotia. As well P.E.I. came on board maybe three or four years ago. It was the same structure. As recently as the last couple years in New Brunswick they are in the same situation. They have a tripartite table at which they are sitting to try to draft the terms of reference and some sort of strategy to go forward in their treaty negotiations and discussions.

Senator McInnis: It is unfortunate that Donald Marshall Junior had to go to the Supreme Court for a ruling and setting it out as they did. It should have been the responsibility of the tripartite committee. Unfortunately it just could not get off the ground. I am glad to see that it is now working and that the provinces are buying into it. It is marvellous.

Mr. Simon: I would say the jury is still out as to any final details and/or agreements. They are negotiations just like any negotiations.

Senator McInnis: I agree.

Mr. Simon: They may definitely not see eye to eye at the end of the day but the fact is that these tables are up and running. The jury is still out as far as the end result.

Senator McInnis: On another topic, you have already talked about a variety of reasons for designation. What does a native community gain by designating a licence? How do you designate it? Do you lease the licence?

Mr. Simon: Yes. The gain is in having the community own a commercial communal licence per se. They have the ability to designate it to whatever fishermen may have an interest. It would be based on the best price. Everybody would come in at a different price and say what they would offer to fish their licences. It could be a combination of monies and/or the ability to bring two, three, four or whatever First Nation fishers from the community on board the boat while they are doing their business.

There are many reasons they would do that. They may not have a vote. They may not have the capacity. It is a way and a means of their utilizing the licences they currently hold.

Senator McInnis: On a parochial note, I come from the eastern shore of Nova Scotia. I was delighted to see that the Millbrook Nation, headed at the time by Chief Lawrence Paul, constructed a fine mooring in Sheet Harbour at considerable cost. I am saddened now to see that it is for sale.

This question was broached already by one of my colleagues. Is it because they were unsuccessful in obtaining the requisite fishers to take an interest in it? You cannot force people to go fishing. There is high unemployment in the native community. Many of those individuals are good friends of mine. I was terribly disappointed to find out about a month ago that the wharf in LFA 31B was for sale. Is there anything that can be done?

You do not have to answer this question now. You could take it back with you. I would like to think that something could be done to resurrect it because it would be extremely beneficial to every individual that works in that community of high unemployment.

Mr. Simon: That is a fair analysis. I am not able to speak to it specifically but I would be more than happy to find if there is any potential or what are the possibilities in terms of Millbrook's priorities for the wharf.

Senator McInnis: I will give you my card.

Mr. Simon: Okay, sure.

Senator Harb: Mr. Simon, in the first paragraph of page 3 of your presentation you talked about the Department of Fisheries and Ocean and the Atlantic Lobster Sustainability Measures Programs. Although the department has indicated that this program was a great success, from your perspective you saw it differently. You outlined the different reasons you saw it differently.

You raised a very important point in stating that one of the side effects of the program was that it would encourage natives to retire their licences to non-natives and therefore create sensitivities within the community. You very bravely brought that to the forefront.

In the last paragraph your main point to the committee was that you wanted to see the government renew a program called the Atlantic Integrated Commercial Fishery Initiative launched in 2007 and link it to the Strategic Partnership Initiative in the Atlantic Commercial Fisheries Diversification Initiative. I guess that was your main point. You want us to take home with us the fact that you want that program to be renewed.

Mr. Simon: We only spoke so much about that program in our presentation. We wanted to flag it because of An Atlantic Fishing Tale report by the Macdonald-Laurier Institute, a very good report in which they outlined everything that we knew. In my view the program was one of the very few out of government that showed beneficial results for us.

They set up a structure from day one. We announced the program back in 2007. As AFN regional chief I had the fisheries portfolio on a national scale. We sat down with government at that time and jointly announced the program. I believe we are into year six because the government rolled it over for a year to give it some serious consideration. We are hoping there will be another four-year commitment to it.

It is very important to us because it gave us our own capacity in the fishing industry on a whole range of fronts, especially training. I spoke earlier about some of its training initiatives. We have seen our capacity grow immensely, even our financial capacity. We have referenced some numbers that have seen us go way beyond X amount of dollars. That was based on a couple years ago. It is even higher now.

Yes, that is one of the key areas we are hoping you will take a long, hard look at and will speak in favour of. From my boss's perspective, I know Mr. Paul is making presentations three or four times a month to different levels of government; whether it is PMO, the senators or anybody in upper hierarchy that will listen and has the capacity to move it through the system.

We are really pushing to hopefully see at least a minimum of another four years. I say four years for a reason. . There was discussion and questioning on some of Mr. Paul's presentation around maybe doing it for another year. It is what it is. Ultimately if we do not have a long-term commitment it makes it harder for us just like anybody else in industry. Then you are working from year to year and there are challenges around that. We tried to make very clear to anybody who listened that it was fine if it was a year but ideally a commitment for four years would mean that we could plan over the course of those four years.

Senator Harb: The program had a direct impact on your community. Perhaps you could give us a little synopsis in terms of the employment rate, the size of the communities and how the program improved the quality of life for your people in terms of employment rates.

Mr. Simon: I am sure the document gets right into the details and numbers. I do know about my involvement with it. In the way they set up the structure there was a series of components within the AICFI program. Each component addressed specific areas. Whether it was employment, buying boats, fixing boats or whatever requirement we had within the industry, it had these different areas. It was based on notional amounts, the size of First Nation communities in the Atlantic and how big their fishing industries were currently. Through that structure in each community we set up a board that reviewed proposals under the AICFI diversification component. Each proposal coming in from the communities would be vetted through a team and/or a board of industry people, First Nation communities and government. I know because I was one of the members of the board that reviewed proposals. We did our due diligence. The whole team worked with communities to make sure anything that was approved was successful.

It was a very different process from what I have seen in the past. The reason I say that is that during my tenure as regional chief we used to work very closely with what was then referred to as Department of Indian Affairs. I believe it is now Aboriginal Affairs and Northern Development. They used to have a structure as well around their federal government programming in relation to economic development. We used to have a committee in the Atlantic. First Nation communities would put in their proposals and we would do the same thing. We would vet them to make sure we felt they had the capacity to be successful. It was also based on the community's priorities.

We had no structure or process to follow up and ask what it would take to make it successful. In relation to this one, the supports were there. We have a business development team that is a combination of the Atlantic Policy Congress and what we refer to as an Aboriginal capital corporation. In the Atlantic we have one called the Ulnooweg Development Group. The two organizations work together to structure the business development team. The business development team worked directly with DFO, with us and with the First Nation communities to develop these business proposals. Once they were in place and if they were approved they would work with the communities. Business supports were available and the results have shown they were successful. I believe 32 of 37 eligible First Nation communities in the Atlantic accessed it. We have created over 200 jobs.

In my view it is a very successful program based on things that have come forward in the past. We are hoping that it would give Atlantic communities vis-à-vis Marshall the capacity over the course of the next four years to go to a totally different level. I say that in a positive way.

The Chair: Thank you, Mr. Simon, for your presentation and your very open and frank discussion. It has been a worthwhile experience. We look forward to hearing from you at any time. If there is something you need to follow up on or feel that you did not get the opportunity to put forward today, please feel free to contact us in writing.

Mr. Simon: Yes.

The Chair: We hope to present our report to the Senate sometime early next spring. That is our schedule. There is plenty of time to contact us if you think of something afterward. Once again thank you for your time today and we wish you all the best.

(The committee adjourned.)