NOTES

1. The origins of this perspective can be traced to an influential analysis by Garrett Hardin, "The Tragedy of the Commons," Science, Vol. 162, 1968, p. 1243-1248. The example used was a pasture (a "commons") open to all herdsmen for cattle grazing. Hardin pointed out that eventually the pasture becomes overgrazed because each herdsmen can capture all the benefits of adding more cows, while facing only a fraction of the costs, that is to say the harm caused by excessive grazing, since all users share the costs. The "tragedy" is that each individual is locked into a system of competition for grass that leads to ruin.

2. On 1 January 1977, Canadian jurisdiction over coastal waters was extended to 200 nautical miles (370 kilometres) from the previous 12 miles, taking in most (but not all) of the best fishing grounds along the East Coast. In the years that followed and in anticipation of a boom, banks provided loans to fishers and processors to expand their operations and government subsidies were handed out for the purchase of new vessels, the expansion of existing fish plants and the building of new ones. The planned gradual displacement of the foreign fleet was seen to provide a particularly good opportunity to expand the Canadian offshore. By 1981, however, the industry experienced the pinch of depressed markets and large inventories made up especially of frozen fish destined for the United States market. The problem was compounded by high interest rates, a relatively strong Canadian dollar which undermined the industry’s competitiveness in export markets, and good catches of competing species of fish from other countries. The industry’s crisis was essentially financial and it centred on the offshore. In January 1982, the federal government appointed Dr. Michael Kirby to head up a Task Force on Atlantic Fisheries. The Kirby Task Force Report (Navigating Troubled Waters: A New Policy for the Atlantic Fisheries, also known as the Kirby Report), released the following year, predicted that the trawler fleet would play an important part in the future of the groundfish fishery. A "restructuring" process followed to refinance and amalgamate a number of major processing firms operating offshore trawler fleets. Two large vertically integrated industry companies emerged, one based in Newfoundland (Fishery Products International) and the other in Nova Scotia (National Sea Products). The offshore now operated under a new system of Enterprise Allocations.

3. Interestingly, well before economic theorists began to popularize the concept of individual quotas, a system of vessel quotas had already been introduced by the Department of Fisheries and Oceans in the Bay of Fundy purse seine herring fishery as part of a complex restructuring of the industry in 1976.

4. The Honourable David Anderson, PC, MP, Minister of Fisheries and Oceans, 26 November 1998.

5. Announced in March 1997 by federal Minister of Fisheries and Oceans and the BC Minister of Agriculture, Fisheries and Food.

6. For example, the federal government’s Green Plan in 1990 proposed to establish a system of individual transferable quotas for various fisheries.

7. The 200-mile limit led to the development of New Zealand’s deepwater fishery. Prior to 1978, the commercial fishery was a small-scale fishery dominated (in numbers) by part-time fishers. Although there were many small vessels, they did not venture much beyond the inshore. Between 1938 and 1963, the sector was managed by a restrictive licensing system, controls on fishing gear, and area controls that required vessels to fish from designated ports. In 1963, the small-boat inshore sector was completely deregulated. Following Britain’s entry into the European Community and the OPEC oil shock, a variety of initiatives were introduced during the 1970s to bolster exports, including incentives to expand fishing. The government subsidized entry into the fishery and encouraged more fishing (e.g., through loans, investment allowances, export tax incentives, price supports, and joint venture arrangements with foreign firms).

8. Reforms in regard to the delivery of fisheries management services include: the transfer of research in fisheries stock assessment to a Crown Research Institute, the establishment of a "stand–alone" Ministry of Fisheries, and the provision of "contestable services." Contestable services are said potentially to include all the functions currently performed by Ministry of Fisheries, including the administration of quota and permit registries, catch and fishing effort data management, satellite vessel monitoring, and the observer program. "Non-core" services are defined as those that the government does not have to deliver to fulfil its responsibilities, and include: fisheries research, administration, non-criminal compliance (e.g., fisher education), the collection and payment of Crown revenue, and the running of databases (e.g., the quota register).

9. Iceland’s population is about 270,000 people, and about 12% the total national workforce is employed directly in fishing or fish processing. Fish harvesting and processing is characterized by a large number of vertically integrated firms. A typical company is based in one fishing community and operates one or more processing plants and one or more fishing vessels.

10. Jaque Robichaud, Director General, Policy and Economic Analysis (Maritime Region), Department of Fisheries and Oceans, 20 February 1997.

11. It was agreed that: any further introduction of IQs/ITQs/EAs should not confer or take away access to the fishery; there should be support by a clear majority of licence holders in the fishery in question; an intervenor process should be available to any group of fishers who believe they would be adversely affected; and there should be restrictions on the transferability of licences in order to prevent undue accumulation of quota.

12. D. Leslie Burke and Leo Brander, "Behind the Cod Curtain: A Perspective on the Political Economy of the Atlantic Groundfish Fishery," The Dalhousie Law Journal, Spring 1995, pp. 58-64.

13. AIMS Commentary Series, January 1996.

14. Nova Scotia Coastal Communities Network, "CCN Takes Community Concerns to Politicians," CCN Newsletter, Vol. 3, No. 2, 1997.

15. See for example, Paul Macgillivray, Program Planning and Economics, Department of Fisheries and Oceans (Pacific Region), "Canadian Experience With Individual Fishing Quotas," in Fisheries and Uncertainty: A Precautionary Approach to Resource Management, Daniel V. Gordon and Gordon R. Munro, editors, University of Calgary Press, 1996, pp. 155-160.

16. The "public right to fish" in tidal waters figured in the discussions over proposed amendments to the Fisheries Act (Bill C-62), which was tabled in the House of Commons on 3 October 1996 but which later died on the Order Paper when Parliament was dissolved. Critics of the proposed legislation maintained that the real objective of the bill (clauses 17 to 22), although not stated explicitly, was to extinguish the centuries-old public right of access to fisheries by giving the Minister of Fisheries and Oceans, by means of "partnership agreements," broad authority to extend the process of privatization in fisheries, and to legitimize commercial fisheries under the federal government’s Aboriginal Fisheries Strategy.

17. The Canadian Council of Professional Fish Harvesters, Discussion Paper: Co-Management in the Multi-License Inshore Fishery, Prepared for the Department of Fisheries and Oceans, 10 June 1998, p. 6.

18. The Terms of Reference noted that the Standing Committee on Fisheries and Oceans of the House of Commons had "acknowledged those concerns" and had "recommended that the Department change its model for partnering." In fact, the Fisheries Committee concluded in its April 1998 report on the West Coast fishery that witnesses had "expressed opposition to the partnership provisions contained in the new Fisheries Act," that "witnesses said that sections 17 to 22 of the Bill would limit the public right of access to the fishery," and that Committee had "heard opposition to this aspect of the Bill on the East Coast." That Committee therefore "urged the federal government to revise the partnership provisions contained in the new Fisheries Act … to address the concerns of fishermen before the Bill is reintroduced" (Recommendation 6). See Department of Fisheries and Oceans, "Panel to Study Partnering in Canada’s Fishing Industry," News Release, 11 September 1998; "Terms of Reference -- Panel Studying Partnering," Backgrounder, September 1998; Standing Committee on Fisheries and Oceans, The West Coast Report, April 1998.

19. Some aspects of the new management system included: a management plan incorporating a two-year trial of IVQs based on historical catch (70% of the quota based on the best annual catch of 1988 or 1989, and 30% on the licensed vessel’s length); transferability of non-divisible quotas for one season only, with quotas reverting to the licence-holder at the end of the season; and quota monitoring being contracted out to a private firm, with the costs paid for by the licence holders; observers stationed at designated sites to validate landings.

20. ITQs in New Zealand are said to be held by companies or individuals in perpetuity. They are divisible and bankable assets which can be sold or leased like real estate. Most quota transactions are made through personal contacts and advertisements in daily papers and seafood trade magazines, and there are also a number of well-established quota brokers.

21. In commercial fisheries, the DFO determines, among other things, the conditions of entry into a fishery and the total number of participants and vessels permitted.

22. Department of Fisheries and Oceans, "Anderson Announces Changes to Vessel Replacement rules for Scotia Fundy," News Release, 17 April 1998.

23. The BC Aboriginal Fisheries Commission was created in 1984 to protect and enhance the Aboriginal fishing rights of the First Nations of British Columbia. The role of the Commission is not to represent First Nations, but rather to provide a forum for discussion on policy issues. In New Zealand, 20% of all new quota is to be allocated to the Maori. In 1987, a High Court injunction was obtained by the Maori that prevented the NZ Quota Management System from being expanded into every commercially important fisheries. This led to uncertainty in regard to the status of property rights and the future of the Management System. A final settlement reached with the Maori in 1992 provided for a full and final discharge of the Government's obligations. The settlement made the Maori the single largest player in the industry, but also prevented them from advancing further commercial fisheries claims through the courts.

24. For example, we were told that there are no limits on vessel size in New Zealand. In Iceland, vessel replacement regulations were said to still be in effect (as well as restrictions on fishing gear, mesh size, and other such input controls).

25. In this regard, critics of the quota system in New Zealand point to the degree of rationalization that has taken place there. We were told by one witness that, excluding the smaller owner/operators in the inshore fisheries, about 60% of the quota was held by the 10 largest concerns in 1986, that this had increased to 80% by the early 1990s, but had since fallen to about 60%. Another witness informed us that information on the ownership structure of the industry is not readily available or simply does not exist, and that many companies have interlinked ownership. In Iceland, one witness estimated that the largest company there held about 7% of the total quota (when calculated in terms of cod equivalents). The largest five companies were said to represent between 20% and 25%; the largest 10 about 40%. There are, however, many difficulties in making such estimates because some firms who own subsidiary companies transfer quotas among them.

26. The NZ Fisheries Act sets limits (known as aggregation limits or ALs) on the amount of quota that any one person or company can own so that no one company or individual can develop a monopoly on fishing in any one area or for any one species. In the smaller-scale, inshore fisheries that are mostly owner-operated, such as lobster and abalone, the AL limit was said to be as low as 2%; in the offshore industrial sector, it is reportedly as high as 35%. Minimum limits were also put in place to address concerns about having too many vessels operating on the fishing grounds and to reduce the administrative costs of servicing and policing many small quota holders. In Iceland, no single company can hold more than 8% of the total quota. If the company meets certain requirements with regard to the number of shareholders and is listed on the stock exchange, its quota can be up to 12%.

27. Some grandfathering provisions, however, do apply: processing companies that already hold licences in the inshore (small boat) fleet may continue to do so, but they may not acquire additional licences. The fleet separation policy does not prevent licensed fishers from becoming plant owners.

28. Lending institutions do not accept fishing licences or quota as security because they are not allowed to take ownership of these privileges if the borrower defaults on the loan. Licences may also be revoked for fishing infractions. The monetary value of an ITQ licence depends on catch levels (i.e., the allowable catch) and market demand for the species in question.

29. In its 1995 report (The Atlantic Groundfish Fishery: Its Future), the Senate Committee recommended that "the Department of Fisheries and Oceans review and assess the effectiveness of its regulations for restricting the ownership or control of ITQs to certain limits." The Deputy Minister’s response was that the long-term experience with many of these restrictions was that "they become increasingly ineffective as industry adjusts (either legally and/or by bending the rules)," and that "these type of rules are rarely applied in other industries and hinder the evolution of an efficient self-supporting industry." Letter to the Chair of the Standing Senate Committee on Fisheries, February 1996.

30. Absentee ownership of quota was said to be an issue among inshore fishers in New Zealand, particularly lobster fishers. In that country, anyone can buy quota and have someone fish it on his or her behalf.

31. In 1996, a total of 2,132 vessels were licensed to fish in Icelandic waters. Of these boats 1,644 were under 12 gross tonnes. There are about 100 trawlers, of which 50 process and freeze their catches on board. Trawlers account for around half of the average annual groundfish catch.

32. Section 14 of the East Coast Commercial Fisheries Licensing Policy 1996 states that: (1) Subject to subsection (2), if foreign interests acquire over 49 percent of the common (voting) shares of a Canadian-owned corporation which holds fishing licences, the licences will not be reissued to that corporation upon expiry of the licences; (2) If such a foreign corporation having a subsidiary in Canada which holds fishing licences is taken over by another foreign-owned corporation from the same country, the licences may be reissued to that corporation as part of its continuing Canadian operation (i.e. no net increase in foreign ownership); (3) If a foreign interest purchases a minority ownership interest in a Canadian corporation or establishes a jointly­owned subsidiary with a Canadian corporation in which the Canadian corporation owns more than half the voting shares, licence eligibility will not be affected. In Iceland, we were told that only Icelandic nationals can hold fishing quotas, and that there is no discussion or support in that country on allowing foreign interests into the fishery. New Zealand has restrictions on foreign ownership: no "overseas person" can be allocated, purchase, own, or have an interest in any catch history, quota, or annual catch entitlement unless the overseas person has obtained the permission of the Minister. An overseas person is defined by the Fisheries Act and includes ‘any company in which 25% or more of any class of shares is held by any overseas person or overseas persons.’ The Minister, however, may declare that a company whose shares are listed on the New Zealand Stock Exchange is not an overseas person and has discretion to grant investment up to 40%.

33. The New Zealand Parliament passed a new Fisheries Act in 1996. The Act concluded a review of fisheries legislation that had been ongoing since 1991, rewrote the previous statute, and refined some aspects of the Quota Management System. Stocks must now be maintained at or above defined levels. The effects of fishing on other species must be taken into account, and the biological diversity of the aquatic environment must be conserved.

34. We were told that fishing companies in New Zealand had taken the government to court to obtain compensation for reductions in quota, and that whenever marine reserves are proposed, the issue of compensation for the loss of fishing grounds is immediately raised.

35. For example, a Canadian Atlantic Fisheries Scientific Advisory Committee (CAFSAC) study for 1986 put the level of discards for northern cod (2J3KL) by the domestic trawler fleet operating under enterprise allocations at nearly 25% by number and 10.7% by weight of all cod removed from the water.

36. Over the years we were told that companies sometimes gave fishing operations specific instructions as to what species to land and in what quantities (known as a "shopping list"), and that the only way to stay within the required species mix was to highgrade, dump and discard. See for example, Proceedings of the Standing Senate Committee on Fisheries, Issue No. 13, 12 June 1990.

37. Although believed by some to be a major problem in Iceland and New Zealand, the extent of highgrading is largely unknown or anecdotal. Both countries have legal prohibitions against highgrading. In Iceland, we were told that the rate of discarding may be as high as 15% of the catch. In New Zealand, anyone caught highgrading is potentially guilty of a crime against the property.

38. The management of Pacific salmon is based on "escapement": allowing a target or optimum number of salmon up river to spawn. Each spawning stock functions as a genetically distinct population and, ideally, should be managed separately to ensure conservation. This can be a problem because stocks often mingle and migrate together on the fishing grounds. Each of the five species of salmon (chum, coho, chinook, pink and sockeye) has a distinctive life cycle. Some salmon stocks are relatively small, while others are massive. Fisheries managers must forecast accurately the size and timing of salmon runs; this involves "real-time" in-season management (e.g., closing a fishery on short notice). The fish are harvested by several user groups in different locations. If not strictly controlled, fishing can eliminate entire stocks in one season.

39. For example, in May 1996, the Fraser Institute held a major conference on the feasibility of introducing ITQs in the salmon fishery. See also Fish or Cut Bait! The Case for Individual Transferable Quotas in the Salmon Fishery of British Columbia, Laura Jones and Michael Walker, editors, May 1996.

40. In New Zealand, where multi-species management has been especially difficult in trawl fisheries, various types of complex balancing systems have been instituted to deal with bycatches.

41. A multi-species, diversified fishing strategy (or mixed fishery) is an important means whereby enterprises can respond flexibly to fluctuations in the state of the resource and market conditions. One way of deterring fishing in times of resource scarcity is to allow fishermen to turn to other fisheries (or even other occupations) when stocks are low. A multi-licence strategy therefore has a built-in conservation feature. The Committee recommended in its 1995 report (The Atlantic Groundfish Fishery: Its Future) that the fishery "be premised on participants’ diversification of their fishing activities," and that the licensing system "promote multi-species, rather than single-species operations."

42. New Zealand and Iceland are perhaps in a relatively more favourable position to cope with problems of quota compliance because their geographical isolation and small domestic markets which make it more difficult to dispose of illegal catches. In New Zealand, instead of relying on dockside monitoring and at-sea observers, fisheries managers monitor the flow of documents to establish a "paper trail." This is said to have shifted the focus of monitoring from fishery officers to accountants and persons with experience in fraud investigation. Fishers must sell only to licensed fish receivers, and all persons who sell, transport or store fish must keep business records. Monthly fisher and buyer reports, logbooks and the reports of all quota transfers are tracked by computer. In Iceland, where fisheries enforcement is carried out by the Fisheries Directorate, we were told that is considerable discussion on whether a greater part of this activity should be taken over by the industry itself.

43. In its December 1989 report on the marketing of Atlantic fishery products, this Committee concluded that, in the absence of comprehensive knowledge and in the face of uncertainty, fisheries managers and "policymakers should err on the side of conservation" and caution, a statement that the Committee has since reiterated many times.

44. The Fisheries Resource Conservation Council (FRCC) was created in 1993 to form a partnership of scientists, academics, and the various sectors of the Atlantic fishing industry. The Council replaced the Canadian Atlantic Fisheries Scientific Advisory Committee (CAFSAC) and the Atlantic Groundfish Advisory Committee (AGAC). The Council is also responsible for advising the Minister on matters dealing with straddling and transboundary stocks that are managed by international organizations, such as the Northwest Atlantic Fisheries Organization (NAFO). The FRCC advocates a "precautionary" and "ecosystems" approach to decision-making.

45. In Iceland, the controversy over equity stems from Article 1 of the Fisheries Management Act of 1990, which states that the fish stocks in Icelandic waters are the common property of the Icelandic people. Although, ITQs are not irrevocable and do not create proprietary rights in the legislation, we were told that they are used in mortgages, that their values are included in the annual financial statements of companies, and that the shares of those companies are assessed according to their quota holdings.

46. In New Zealand, initial ITQ allotments (based on the catch histories of fishers) exceeded the Total Allowable Catches for many inshore stocks. A voluntary buyback scheme was therefore implemented so as to allow individuals to decide by themselves whether to remain in the fishery at their historical catch levels, sell out, or restructure their operations. The buyback involved two tender rounds. The first round was competitive, with fishers making bids to leave the fishery or reduce their effort. This established price levels at which fishers would retire quota. However, because the desired reduction in quotas was not achieved in this first round, the government made a fixed price offer that was 20% below that determined by the competitive tender. This second tender still did not achieve the targeted reductions in quotas for a number of species. The government therefore administered prorated cuts and reportedly spent NZ$45 million to buy back 15,800 tonnes of quota. The reduction sought was 21,500 tonnes.

47. Although the DFO’s Integrated Management Plan (Annex V1, English version) refers to "ITQs," the individual quotas for crab in Area 12 are in fact non-transferable, except for the last 5,000 pounds of an IQ. The IQ holder may transfer, for the current year only, a maximum of 5,000 pounds to another quota holder who exceeds his quota at the end of the season.

48. Supplementary Presentation from the Fédération régionale acadienne des pêcheurs professionnels, 7 May 1998.

49. For example, the five-year Integrated Fisheries Management Plan for the Gulf Snow Crab fishery in Area 12 includes a sharing formula to allow temporary sharing of crab in years when the value of the Total Allowable Catch exceeds a particular level and financial returns to crab licence holders rise above a threshold.

50. When introduced in 1986, ITQs in New Zealand were denominated as fixed amounts of fish (tonnages). The government planned to increase or decrease Total Allowable Catches by either selling or buying quota; a charge in the form of a resource rental was therefore imposed that year. Facing the prospect of having to make large payments to compensate quota holders in 1990 (for reductions in the Total Allowable Catches for orange roughy, hoki and lobster), ITQs were redefined (under the terms of an "Accord" with the industry) as a proportion of Total Allowable Catches. Resource rentals were frozen for five years (except for increases in line with the Consumer Price Index), during which time compensation for reductions in allowable catches were paid out from the resource rental pool.

51. The Pacific blackcod fishery is assessed a charge to cover the full costs of fisheries management and monitoring. There are also access (licensing) fees and various charges in Canada’s fisheries.

52. On this, we were told that one stock of orange roughy, a major species in New Zealand, had gone into major decline. Managed by such a grouping, the biomass was said to be 4% of the original estimate when fishing first began in 1994. For most stocks, we were told that biomass is unknown. In 1997, status of 56% of the 150 stocks managed by the QMS was unknown in terms of the Maximum Sustainable Yield.

53. See Conservation Council of New Brunswick, Beyond Crisis in the Fisheries: A proposal for Community Based Ecological Fisheries Management, 1997.

54. Since 1982, the objectives of the Bona Fide Licensing Program in the southern Gulf of St. Lawrence have been to ensure access to the benefits of the fishery to those who depended primarily on fishing for a livelihood, to provide as many licences for as many fishers as possible, and to stop the increase in the number of people relying on the fishery. The only method of becoming a bona fide fisher has been by obtaining the bona fide status of an existing fisher who is leaving the fishery. The policy established qualifications for holding certain fishing licences and formalized inshore fishers’ traditional multi-species fisheries.

55. The Committee was told that the FPB had already purchased a small amount of quota from revenues generated by the crab sharing arrangement in the Southern Gulf of St. Lawrence (Area 12).

56. A form of community level management is the regime in much of the Atlantic lobster fishery. For many decades, the lobster fishery has been managed with effort controls (e.g., limiting entry licensing, setting minimum carapace sizes, closed seasons), rather than quotas.

57. In 1982, the Kirby Task Force on Atlantic Fisheries estimated that on the East Coast alone, commercial fishing in Newfoundland, the Maritimes and the coastal areas of Quebec were the lifeblood of more than 1,300 small communities, about half of which were single sector economies. Task Force on Atlantic Fisheries (1982), p. 70.

58. Under "Fishery Leases and Licences."

59. Bill C-62, An Act respecting fisheries, was tabled in the House of Commons on 3 October 1996, but subsequently died on the Order Paper when Parliament was dissolved.

60. In May 1990, the landmark ruling in the Sparrow decision of the Supreme Court of Canada established that an existing Aboriginal right to fish for food, social and ceremonial purposes is a constitutionally protected right, the first priority after conservation. The Court told the federal government that it had a fiduciary (trust-like) duty to safeguard the rights and well-being of Aboriginal people. The Supreme Court also set out the necessity of consulting with Aboriginal peoples when their fishing rights might be affected. In response to Sparrow, the federal government launched the Aboriginal Fisheries Strategy (AFS) in 1992. The AFS is a multi-year program for the negotiation of agreements with First Nations for the management of their food, social and ceremonial harvest. Most of these agreements have provided funding to support their participation in stock assessment, monitoring, enforcement and habitat enhancement. However, the DFO has also authorized the harvest and commercial sale of fish by Aboriginal organizations in three areas of British Columbia under what is known as the AFS Pilot Sales Program.

61. R. v. Gladstone, Supreme Court of Canada, 21 August 1996; per Lamer C.J.C. at para. 67. Section 35(1) of the Constitution Act, 1982 guarantees existing treaty and aboriginal rights.

36^th Parliament