Archived - Government of Canada Response to the Report of the House of Commons Standing Committee on Fisheries and Oceans: The Canadian Lobster Fishery: Trapped in a Perfect Storm

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October 19, 2009


The Government of Canada would like to thank the House of Commons Standing Committee on Fisheries and Oceans (SCOFO) for its report: The Canadian Lobster Fishery: Trapped in a Perfect Storm. The Government has thoroughly reviewed and given careful consideration to the recommendations contained in this Report.

The Government agrees with the Committee’s assessment of the need for government assistance for the lobster fishery, particularly given the effect of the recent global economic and financial crisis.

Atlantic lobster is Canada’s most lucrative fishery and a high-quality, healthy food with high consumer appeal.  In 2008, lobster landings were valued at $585 million (or 38% of Atlantic Canada commercial landings).  In 2008, lobster exports earned $920 million (or 24% of all Canadian seafood exports). Lobster is exported around the world, with the main destinations in the United States (US), European Union (EU) and Japan.

There are almost 10,000 licenced lobster enterprises, employing almost 30,000 harvesters. There are 41 Lobster Fishing Areas across Quebec and Atlantic Canada.  However, they vary greatly in numbers of licence holders (i.e. from a few harvesters to many hundreds), and as a result they vary greatly in level of fishing effort and economic value of the fishery.

The current global economic crisis presents two key challenges for the Atlantic lobster fishery. First, there is lower demand from US and European food service markets for a product that is commonly perceived as a luxury item. The reduction in market demand has resulted in a significant decline in lobster price.  Second, harvesters and buyers (i.e. processors in Canada and importers in the US and Europe) are having difficulty securing working capital to finance inventories and have thus slowed their purchase rate. This decline in the purchase of landed lobsters has caused a significant price decline in the 2008-2009 lobster season.  In lobster dependant areas where incomes are traditionally lower than in most other lobster fishing areas, the impacts are significantly more acute.

The current short-term economic challenges are unmasking the underlying longer-term problems facing the fishery which governments have been working to address over the past few years.  The current economic context presents an opportunity for achieving important changes in the lobster fishery.   The challenges include responding to emerging global market access demands (e.g. buyer and retailer demands for ecocertification or other proof of fishery sustainability), addressing over-capacity (and therefore a need for the fishery to self-rationalize or self-adjust), building organizational capacity, improving access to credit challenges and improving long-term sustainability.

On June 10, 2009, the Minister of Fisheries and Oceans announced a new $65 million investment to create two programs to help lobster harvesters in Quebec and Atlantic Canada to adapt to the extraordinary market conditions created by the global recession and emerge from the current economic crisis on a sound footing for future generations.  Implementation of these programs will begin in the fall 2009.

The first program, the Short-Term Transitional Measures (STTM), provides $15 million to assist qualifying low-income lobster harvesters severely harmed by the collapse in market demand for their products due to the global recession.  Available only during this particularly difficult year (2009-10), eligible lobster-dependent fishers will receive a grant for a portion of their lost revenue caused by reduced landings.  

The second program, the Atlantic Lobster Sustainability Measures (ALSM), provides a five year, $50 million to support the development and implementation of lobster sustainability plans which will help the fishery make needed changes to enhance its economic prosperity (through self-rationalization) and improve long-term sustainability.  This funding includes $15 million specifically allocated for sustainability plans developed by those who work in low-income areas and have experienced significant losses. 

There has also been a range of other federal activities and programs that support the lobster fishery and industry to manage through these difficult times (i.e. the Community Adjustment Fund) and address longer term challenges (i.e the Canadian Agriculture and Food International program).  These efforts are further described in this Government response.

Once again, the Government wishes to thank the House of Commons SCOFO for its report.  The Minister of Fisheries and Oceans, in collaboration with the Ministers of Foreign Affairs and International Trade, Agriculture and Agri-Food Canada, Atlantic Canada Opportunities Agency and Canada Economic Development for Quebec regions,  will continue to work towards supporting the economic prosperity and long-term sustainability of Canada’s Atlantic lobster industry.

Recommendation 1:

The Committee recommends that the Government of Canada explore, in cooperation with the lobster industry, all the options to provide the industry bridge financing or loan guarantees that they need to get through the current global economic and financial crisis.

Response: The Government partially supports this recommendation.

The Government agrees that these are supportive tools for the lobster industry.  Fisheries and Oceans Canada (DFO) is working with Quebec and Atlantic provinces to promote the complementarity of current and future provincial programs that may provide financial or loan support to lobster harvesters and the federal programs for the lobster fishery: Short Term Transitional Measures (STTM) and the Atlantic Lobster Sustainability Measures (ALSM).  Funding under the ALSM may supplement and help lever other sources of funding obtained by harvesters such as from provincial programs, financial institutions or others.  The STTM will provide grant payments to low-income lobster dependent licence holders who have been particularly negatively affected by the economic crisis.

Recommendation 2:

The Committee recommends that the Government of Canada encourage Export Development Canada to provide insurance on receivables to processors that export lobster products abroad.

Response: The Government supports this recommendation.

Export Development Canada (EDC) provides accounts receivables insurance, as well as a number of other financial services, to processors that export lobster products.  Since the onset of the global financial crisis, EDC has been the only source of such insurance for the lobster industry and has expanded their support for the industry to mitigate the impact of the crisis in the Icelandic banking sector.

Through Budget 2009: Canada’s Economic Action Plan, the Government provided EDC with increased flexibility and capacity to respond to the needs of Canadian business during the economic crisis - in all sectors, including the lobster processing industry.  As a Crown Corporation operating at arms length of the Government, EDC makes all decisions related to its day-to-day activities including whether to support individual transactions and the exposure the Corporation holds in any specific sector.  EDC is aware of the work of the Committee and its recommendations and will consider taking appropriate action, including any expansion of product and service offerings for viable transactions, to support the lobster industry at this critical time.    

Recommendation 3:

The Committee recommends that Export Development Canada provide a report to the House of Commons Standing Committee on Fisheries and Oceans on its fishing industry portfolio.

Response: The Government supports this recommendation.

As agreed to earlier this year through an invitation from the Committee, EDC would be pleased to participate as a witness to answer questions on its portfolio with respect to the lobster industry.  

EDC provided insurance and financing in support of $990 million exports by 204 customers in 2008, an increase of 18% over 2007.  As of July 31, 2009, EDC has provided support to 215 customers from the fisheries sector for $826 million in export volume. 

Recommendation 4:

The Committee recommends that the Government of Canada develop initiatives to increase access to credit for fishermen and fishing enterprises, as well as encourage private lenders to ease credit restrictions on the fishing sector.

Response: The Government supports this recommendation.

Through Canada’s Economic Action Plan, the Government has taken steps to improve access to credit in all sectors of the economy, including the lobster fishery and industry.  It has enhanced the capacity of Export Development Canada and Business Development Bank of Canada to extend additional financing to viable Canadian businesses, including:

While the 2008 Supreme Court of Canada decision in Saulnier v. Royal Bank of Canada does not fetter the Minister’s discretion to issue or refuse to issue licences under the Fisheries Act, the decision holds that a fishing licence can be “property” available to a trustee or creditor for the limited statutory purposes of the Bankruptcy and Insolvency Act and the Nova Scotia Personal Property Security Act.

DFO has also implemented a Notice and Acknowledgement system to provide additional comfort to lenders and thereby facilitate access to capital by inshore fish harvesters.  Where the harvester uses the fishing licence as collateral to obtain credit from a Recognized Financial Institution (RFI), the system allows the RFI, jointly with the harvester, to notify DFO of the financial arrangement (the “Notice”).  Once a Notice is on file, the system requires the RFI’s signed “Acknowledgement” before processing a request for the licence’s relinquishment and the issuance of a replacement licence to another harvester (commonly known as a “transfer request”) in order to ensure that the RFI is aware of the proposed transaction.

The combination of the Notice and Acknowledgement system and the Saulnier decision should give a higher level of comfort to RFIs from the moment of lending through to the completion of any legal proceedings available to deal with loan default.

Recommendation 5:

The Committee recommends that the Government of Canada increase the visibility of existing specific federal financing programs for which fishermen are eligible, and that Fisheries and Oceans Canada play a coordinating role in that respect.

Response: The Government supports this recommendation.

The Government of Canada has been promoting programs that support access to credit, lobster product marketing, innovation and others throughout its participation in multi-stakeholder engagement processes such as the Lobster Roundtable, the Lobster Steering Committee and multi-stakeholder meetings related to the development of the Short-Term Transitional Measures (STTM) and the Atlantic Lobster Sustainability Measures (ALSM) programs. 

Implementation of the STTM and ALSM will commence in the fall 2009.  These programs will be launched through a number of activities, including a webpage on the DFO website where the program details and contact information will be provided.  DFO will ensure that this webpage includes information on other relevant federal programs as well as relevant website links.

Recommendation 6:

The Committee recommends that the Government of Canada, in partnership with the lobster industry, explore the idea of some form of income support for lobster fishermen to address immediate concerns.

Response: The Government supports this recommendation.

Under the STTM, $15 million is being provided to Quebec and Atlantic lobster licence holders (individual commercial licence holders and Aboriginal groups holding a commercial communal lobster licence) who meet the qualifications of this grant program.  Some licence holders, who are highly dependent on lobster and who normally have relatively low overall harvest landed value, have experienced a significant decrease in their income from landed harvest in 2009.  Therefore the grants specifically target the most vulnerable lobster licence holders and will be available until March 31, 2010. Among other criteria, recipients must have: a valid lobster licence in both 2008 and 2009; earned income from lobster fishing in both 2008 and 2009; had a gross value of lobster landings below or equal to $50,000 in 2009; experienced at least a 25% decline in their lobster landed value between 2008 and 2009; and been lobster-dependant. This dependency means that an applicant’s lobster landed value must have represented at least 50% of their total value of landings from the commercial fishery in 2008 and the applicant must have had a minimum landed value of $2,500 from lobster fishing in 2009. Grant payments to those that meet the eligibility criteria will provide 75% of the difference in 2008 and 2009 lobster income.

As part of its Economic Action Plan, the Government passed legislation that increases the maximum number of weeks a claimant can receive Employment Insurance (EI) benefits. This change provides nationally the benefits of the current Extended EI Benefits Pilot (Pilot Project 10) that until now has only been provided in regions with the highest unemployment rates. Depending on the region, this change increases the weeks of regular benefits individuals can receive by up to five weeks and increases the maximum number of weeks from 45 to 50. The change took effect on March 1, 2009 and will apply to all regular claimants whose benefit period has not ended before March 1, 2009 or where the benefit period does not begin after September 11, 2010. The pilot project will cease on February 28, 2009. Claimants who live in a region currently covered by the Extended EI Benefits Pilot, were already entitled to receive 5 additional weeks, up to a 45-week maximum. Because of the increase of the 45-week maximum to 50 weeks, they may be entitled to additional weeks benefits. Members of the lobster industry eligible for further support under these enhanced EI benefits would include individuals such as crew workers on lobster vessels and processing plant employees.

Recommendation 7:

The Committee recommends that Fisheries and Oceans provide assistance to the lobster fishermen to reduce their costs.  The review of the fishery licence fee structure should be expedited.

Response: The Government partially supports this recommendation.

In keeping with the Government’s commitment to fair and equitable user fees, DFO continues to ensure that Government-imposed fishery costs do not unduly increase the cost burdens of fishing enterprises.  DFO fees are for the most part limited to annual registration and licence fees, which are currently under review.

Per the recommendations of a recent Report of the Auditor General of Canada, the Department has started identifying the costs associated with the issuance of fisher and vessel registrations for which fees are set under regulation. Costs will be compared to the revenues collected for the issuance of these registrations, and the Department will determine the necessary action to be taken, including adjusting registration fees if required. Because of the complexity of the regulatory process, adjustments to fisher and vessel registration fees would be completed by 2011.

The Government acknowledges that a review of commercial licence fees needs to be advanced.  The principle of DFO’s commercial fishing licence fee policy is that licences provide privileged access to a valuable public resource and it is fair and equitable that fees be levied that reflect the value of that privileged access.  

The Department has periodically reviewed commercial fishing licence fees.  The most recent review was announced 12 April 2007, and has assessed changing factors within the commercial fishery as well as long-term approaches that would allow for timely and automatic updating of commercial fishing fees. However, the Department must adhere to the regulatory and legislative requirements associated with changing fees including those of the User Fees Act, which requires extensive public consultations and Parliamentary oversight.

In addition, the ALSM program may provide funding to eligible groups within a Lobster Fishing Area (LFA) which assists these groups in reducing their expenses to improve economic prosperity and long-term sustainability within the fishery.  For example, ALSM funding may be provided to support: improved organizational capacity and governance within an LFA; gear or habitat improvement infrastructure in support of the program; and, commercial licence retirements.

Recommendation 8:

The Committee recommends that the Government of Canada, in partnership with all provincial governments and industry representatives encourage the creation of an Atlantic-wide multi-stakeholder marketing research and advertising council to promote Canadian lobster domestically and abroad.

Response: The Government supports this recommendation.

Agriculture and Agri-Food Canada (AAFC) is responsible for international market development of seafood. In 2006, AAFC funded a lobster benchmarking study at the request of the industry-led Seafood Value Chain Roundtable (SVCRT) leading to numerous industry recommendations to improve the sector’s competitiveness, notably the creation of a lobster marketing council. These initiatives were supported at a Lobster Industry Summit in 2007, leading to the creation of the Lobster Roundtable (LRT). The SVCRT has agreed to develop a long-term sector strategy around the following key elements: access to capital; market access; brand attributes validation; and regulatory impediments to competitiveness.

DFO and the governments of Quebec and Atlantic provinces are supportive of the establishment of the Canadian Lobster Council.  Once created in 2009-10, this industry council will work in a collaborative way to address issues facing the lobster industry and establish a long-term means of improving value for the entire industry.  The mandate of the Council will be to focus discussion and action on identified industry challenges such as: market access issues (e.g. ecocertification, food safety, traceability); regional, national and international market research and marketing; market development; and innovation.  The Board of Directors will comprise only industry members.  Federal and provincial officials will participate as ex-officio members. Once created, the Canadian Lobster Council would provide the industry the capacity it needs in order to access current and future funds (i.e. the CAF and the new AgriMarketing program administered by Agriculture and Agri-Food Canada) for continued marketing efforts and to implement a long-term lobster marketing strategy.

On May 22, 2009, the Minister of Fisheries and Oceans announced that the Government is directing $10 million from the Community Adjustment Fund (CAF) to the Atlantic Provinces and Quebec for activities to improve marketing, assist in innovation and develop products and technologies in the lobster industry.  This funding will be provided through the Atlantic Canada Opportunities Agency and Canada Economic Development for Quebec Regions.  Under the 2009 federal budget, CAF provides $1 billion nationally over two years to quickly help create jobs and maintain employment in communities impacted by the current economic downturn, particularly single-industry communities dependent on the resource and manufacturing sectors.  

In addition, on February 27, 2009, the Atlantic lobster industry received a significant marketing boost of over $455,000, primarily provided under the Canadian Agri-Food International (CAFI) program and with contributions from Nova Scotia, New Brunswick and Prince Edward Island.  This funding has resulted in world class promotion of Atlantic lobster in international markets.

Recommendation 9:

The Committee recommends that Fisheries and Oceans in partnership with the lobster industry explore the idea of a Canadian certification system for fishery products that would comply with internationally established management guidelines on responsible fisheries.

Response: The Government does not support this recommendation.

A variety of changes in the international marketplace are demanding that Canada’s fishery products provide verifiable proof of sustainability as assessed by a third-party against external ecocertification standards or meet other fishery sustainability criteria.  Canada is not only being required to demonstrate the traditional sustainability of fish stocks, but that the harvest practices and the management regime also protect the marine ecosystems and environment (e.g., other species and habitat including vulnerable marine ecosystems).   The ecocertification assessment process assesses the management regime for a given fishery by examining, among other things, its management planning, regulations, and practices. The decision to pursue ecocertification is a voluntary one made by industry, in response to demands by the market.

DFO is the regulator and manager of the wild capture fishery in Canada. To develop a government ecocertification standard would not be viewed by market actors as credible (i.e. government would be viewed to be certifying its own fishery management regime for sustainability) as would be an independent standard.  Therefore, the role of DFO is to actively support any Canadian seafood industry that chooses to pursue third party ecocertification, rather than develop a government certification standard and program.  DFO’s support role is to respond to industry’s decision to pursue ecocertification and is extensive and includes: providing timely and accurate information on the status of the fishery resource and its management regime; working with certifying bodies to ensure that they consider the unique aspects of the Canadian fishery; and working with industry to make changes to management practices in a fishery to meet conditions on a certification.

A Canadian certification system would not remove the need for Canadian industry to comply to key sustainability requirements coming from international markets. To date, the marketplace is predominately choosing the ecocertification program developed by the Marine Stewardship Council (MSC) as the standard against which products must be assessed, and if they successfully meet that standard, bear the MSC eco-logo.   MSC is a non-governmental organization that has become the world leading certification and ecolabelling program for “sustainable seafood.” As a result buyers, retailers and others who are demanding that seafood products bear an eco-label which has a robust standard behind it, are seeking, as their first choice, products that bear the MSC eco-label.  It should be noted that ecocertification of a product may not guarantee its purchase by a retailer whose own purchasing policy may have stricter requirements.  Increasingly, large food retailers are developing their own sustainable seafood purchasing policies based on consideration of ecolabelling standards (like MSC) but also the sustainable seafood rating schemes of environmental groups and the views of their customers. For example, the retailers Waitrose (UK) and Safeways, recently announced that they will not sell New Zealand hoki (a white fish), a fishery certified by MSC, because of perceived concerns about the fishery’s impact on marine ecosystems.

Recommendation 10:

The Committee recommends that Fisheries and Oceans Canada support the efforts of the lobster industry to obtain and maintain the international certification of their lobster fishery for sustainable management.

Response: The Government supports this recommendation.

Global markets are placing new demands on the fish and seafood industry to demonstrate, with supporting evidence, that products are derived from a sustainably managed fishery.  Many markets are specifically demanding that seafood products be accompanied by the MSC eco-label.  The lobster fishery in Maine is currently under MSC assessment with a view to successful completion in 2010-11.  This decision by the Maine fishery had led to an increase in interest in the MSC ecocertification by Canada’s lobster fishery, particularly since Canada exports approximately 80% of its lobster products to the US.

There will be significant challenges to a successful MSC ecocertification for the Canadian inshore lobster fishery.  To meet MSC’s ecocertification demands, fishery self-rationalization will likely be required to reduce the conservation risk posed by the current number of participants in most fisheries on the stock over the long term.  MSC ecocertification will also require new strong measures to ensure sufficient egg production in order to protect recruitment potential into the fishery as well as improve catch and effort monitoring and reporting. Sustainability plans to be developed under the ALSM program will include conservation measures which will be implemented across an LFA. For example, conservation measures aimed at improving the prospects for biological productivity could include measures to increase egg production, by, for instance, ensuring that at least half of females are mature at the time they recruit to the fishery. In addition, sustainability plans will also include improved catch and effort monitoring and reporting, using methods such as paper log books, electronic monitoring, dockside monitoring or others.  This component will result in improved fishery information to support management and science processes.  The nature and exact range of these measures will vary according to the variable ecosystem and fishery characteristics among LFAs and the number of participants in any given LFA.  Where appropriate these plans may include self-rationalization measures which in some cases may enhance conservation efforts.  Successful implementation of these sustainability plans may better position the fishery to successfully complete an ecocertification assessment such as the MSC program.

In addition to this ALSM program (with $50 million in new funding), DFO officials are working with stakeholders in the Canadian fishery, including the lobster fishery, that choose to seek third party ecocertification, such as MSC, to provide the required information for individual assessments. As the regulator of the wild fishery, DFO is the depository of the documents and evidence (science and management) needed to support the assessment process and is working to provide timely and accurate information to assist the ecocertification assessment process.  DFO is also working with any fishery that has received MSC ecocertification with “conditions” that require improvements to be made to the management of the fishery within a specified time period. 

Recommendation 11:

The Committee recommends that the Government of Canada, in collaboration with the government of Atlantic Provinces and Quebec, support an industry-led rationalization plan for the Canadian lobster fishery (publicly-funded where appropriate) that must take into account regional needs and requirements.

Response: The Government supports this recommendation.

Under the Atlantic Lobster Sustainability Measures (ALSM) program, sustainability plans may include actions to reduce the harvesting effort in a given Lobster Fishing Area, including through self-rationalization.  Federal funding under this program may therefore be used to support lobster harvesters within an LFA that choose to seek additional funding (i.e. other federal programs, provinces, private lending institutions) to retire a portion of their licences (self-rationalization).  The ALSM program will be launched in the fall 2009 and operate for 5 years, until March 31, 2014.

Office of the Auditor General Canada (2008, May). Report of the Auditor General of Canada to the House of Commons Chapter 1: Management of Fees in Selected Departments and Agencies.

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