EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, February 4, 1997

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[English]

The Chairman: I call the meeting to order.

Good morning, ladies and gentlemen. My name is Joe McGuire and I'm the chairman of the standing committee.

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Before Christmas the committee as a whole decided we should have a look at the impact of cost recovery on the industry, or on as much of the industry as we could without getting too large. We're already twice as big as we anticipated. We went from 10 representatives from the industry to 20. So our presentations should be a little shorter, or we'll be here for a couple of days before we get through everybody.

I want to welcome you all here from all across Canada, from the east to the west, and we look forward to your presentations. If you would like to give verbal presentations and present your written ones, we'll include your written ones as part of the record.

To facilitate things this morning, maybe you could summarize verbally what you were going to say, if that's possible. Once everybody has made a presentation, we'll have an exchange among each other with the government officials and the members. It's a round-table format. It's not the old format with witnesses and then the members questioning the witnesses. This is a round-table format where we want members of the fishing community to ask questions. We want fishermen themselves or their representatives to ask questions to government or to each other, and government officials to ask questions of the fishermen's organizations. So we want just a general discussion here. We don't want just a presentation and a few questions and answers and then goodbye, see you later.

At the conclusion, we want to summarize and deliver to the minister a summary of what has transpired here this morning. Hopefully it will serve to enlighten him in his future endeavours in cost recovery about where the problems are, what's working, what's not, and so on.

If we can get your approval, we would like to go directly through to one o'clock so we won't have to come back after question period. If we can hear everybody in that amount of time - three to three and a half hours - I think we should get a pretty good feel for what everybody thinks and so on. So we'll go straight through till one, break for question period, do a summary, and send copies to you and the minister.

Maybe Cheryl can introduce herself and the government officials from Treasury Board. Then we'll start with Mr. Bernier and introduce ourselves all the way around the table. Then we'll ask Cheryl to lead off.

Ms Cheryl Fraser (Assistant Deputy Minister, Policy, Department of Fisheries and Oceans): Thank you very much. I'd like to introduce the DFO officials and I'll look to my colleagues from both the Treasury Board and the Auditor General's office to introduce themselves.

I'm Cheryl Fraser, assistant deputy minister, policy, for the Department of Fisheries and Oceans. I have with me Mr. Don Dickson, who is replacing Mrs. Linda Blackwell, who is ill today. Mr. Dickson is the director general of finance and administration as part of our corporate management group. Also with me is Mr. David Rideout, our director general with the inspection directorate in the Department of Fisheries and Oceans. Thank you.

The Chairman: Thank you.

Mr. David Miller (Assistant Secretary, Expenditure Management, Treasury Board Secretariat): My name is David Miller. I'm the assistant secretary of expenditure management of the Treasury Board Secretariat. It's our responsibility to develop the general principles and guidelines to help departments implement cost recovery and user fees, and at the same time ensure that the views of industry and other groups are reflected in those principles as well.

Mr. Douglas Timmins (Assistant Auditor General, Office of the Auditor General of Canada): My name is Douglas Timmins. I'm an assistant auditor general with the Office of the Auditor General responsible for areas of financial management and control and previously responsible for the Departments of Agriculture and Fisheries and Oceans. That's why I'm here. But we have also previously talked about cost recovery in a broader sense.

The Chairman: We'll start with our member from Gaspé, Mr. Bernier, and go down the line with introductions.

[Translation]

Mr. Bernier (Gaspé): Good morning. My name is Yvon Bernier. I am the Member for Gaspé and vice-chairman of the committee. Thank you.

[English]

Mr. Cummins (Delta): I'm John Cummins, member of Parliament for Delta in British Columbia.

[Translation]

Mr. Robert Haché (Director General, Fédération régionale acadienne des pêcheurs professionnels Inc.): My name is Robert Haché and I am director general of the Fédération régionale acadienne des pêcheurs professionnels Inc.

[English]

Mr. John Kearney (Executive Director, Fundy North Fishermen's Association): I'm John Kearney, executive director, Fundy North Fishermen's Association.

Mr. John Sutcliffe (United Fishermen and Allied Workers Union): I'm John Sutcliffe, with the United Fishermen and Allied Workers Union in B.C.

Mr. Earle McCurdy (Fish, Food and Allied Workers Union): I'm Earl McCurdy, with the Fish, Food and Allied Workers Union in Newfoundland.

Mr. Mike Belliveau (Maritime Fishermen's Union): I'm Mike Belliveau, with l'Union des pêcheurs des Maritimes.

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Mr. Roderick (Rory) McLellan (Managing Director, Prince Edward Island Fishermen's Association): I'm Rory McLellan, Prince Edward Island Fishermen's Association.

Mr. Mervyn Misener (President, Prince Edward Island Fishermen's Association): I'm Mervyn Misener, Prince Edward Island Fishermen's Association.

Mr. Ron Bulmer (President, Fisheries Council of Canada: I'm Ron Bulmer, Fisheries Council of Canada.

Mr. John Angel (Executive Director, Canadian Association of Prawn Producers): I'm John Angel, Canadian Association of Prawn Producers.

Mr. Denny Morrow (President, Southwest Nova Scotia Fish Packers Association): I'm Denny Morrow, Southwest Nova Scotia Fish Packers Association.

Mr. Chris Day (Executive Director, Deep Sea Trawlers Association of British Columbia): I'm Chris Day, from the Deep Sea Trawlers Association of British Columbia.

Mr. Brian Giroux (Executive Director, Scotia-Fundy Mobile Gear Fishermen's Association): I'm Brian Giroux from the Mobile Gear Association, Nova Scotia.

Mr. Culbert (Carleton - Charlotte): I'm Harold Culbert, member of Parliament for Carleton - Charlotte in the Bay of Fundy region of New Brunswick.

Mr. Dromisky (Thunder Bay - Atikokan): I'm Stan Dromisky, member of Parliament, Thunder Bay, Ontario.

Mr. Sterling Belliveau (Individual Presentation): I'm Sterling Belliveau, lobster fisherman, District 34.

Mr. Ronnie Newell (President, South West Fishermen's Quota Group Association): I'm Ronnie Newell, president, South West Fishermen's Quota Group Association and director of the Shabo County Competitive Fishermen's Association, southwest Nova Scotia.

Mr. Verran (South West Nova): Harry Verran, member of Parliament for South West Nova.

The Chairman: Thank you all very much.

We'll ask Cheryl to begin our morning with a presentation from the government side about why we're doing all these things.

Ms Fraser: Thank you very much. Bonjour tout le monde.

We've circulated, through the clerk, a copy of a very short deck we've put together on the highlights of the cost-recovery initiatives in the Department of Fisheries and Oceans with respect to the fisheries side of the business. With the permission of the chair I would like to run through this very quickly.

The Chairman: We should limit ourselves, if we can, to about ten minutes for presentations because time is going to be of the essence here.

Ms Fraser: I'll try to take even less.

The Department of Fisheries and Oceans revenue generation initiatives must be looked at in the broader context of the federal deficit reduction efforts. Fiscal responsibility is of benefit to every Canadian and every industry sector, but this requires sacrifices and contributions from everyone, especially from those who benefit from services.

The 1995 budget set the context for greater revenue generation within the department. In the Department of Fisheries and Oceans in 1994-95, the budget level was to be reduced by 33% by the end of 1998-99. This was through both program review and sunset programming. The budget further specified that the bulk of this reduction was to be achieved by expenditure reductions.

That said, program review also required most departments to generate new revenue where services are recoverable. A target of $82 million was set for DFO to be achieved by 1998-99.

When you look at our new budget levels you'll find that new revenue measures account for a very small portion of the budget - $82 million this year, or 9% of the total budget. In fact, for about every $1 of revenue levied the department is cutting between $3 and $4 in its programs.

The department's approach to revenue generation was framed within the Treasury Board policy on external user charges. Two main sources of revenue measures were introduced for different reasons, and they were cost recovery and access fees.

Cost-recovery initiatives are intended for individuals and groups that consume or benefit from goods or services provided by the government. It is intended that those groups or individuals will bear at least a portion of the cost, if not all of the cost, if the government is providing the goods or services.

Access fees are intended for those who obtain the privilege of using a public resource for their own benefit, so they pay a fair fee that reflects at least a portion of the value provided to them through gaining access to a limited entry resource like the fishery.

Through the exercise of both cost recovery and access fees our objective in the department was to promote fairness in the use of tax dollars, introduce discipline in the consumption of service, and ensure services are responsive to client needs. The user-pay, user-say principle was used.

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Measures were also always implemented in consultation with users and industry groups, and we continue to do so. For example, there is the recent work on inspections and the recent work through the stakeholder-DFO working group on licence fees.

There are several examples of revenue initiatives that the department has put in place or is planning to put in place over the next few years. The discussion today is focusing on the fisheries sector. Inspection fees are one example of a major new cost recovery initiative in that sector, and commercial fishing fees are clearly a new important measure on the fee for privilege of access side.

Of course we have various initiatives within the marine sector, and we would be happy to return to the committee to discuss cost-recovery fees related to the marine sector if the committee so wishes.

Given that there are a number of people doing presentations, I don't want to take the committee's time in order to get into the details of how we arrived at the individual fee levels, but let me give an example. I'll use the inspection fees as that example.

The cost to the taxpayers of the national fish inspection program has been reduced from $33 million to $22 million over the past six years. The remaining program costs are directly attributable to industry as the necessary cost of bringing the catch to market. Inspection fees constitute a very small portion of the value of Canada's fish imports or even of our domestic fish production value.

The $4.8 million inspection service cost recovery target represents approximately 20% of the overall cost of the fish inspection directorate which, if not all collected, will result in program reductions of equivalent value.

Cost recovery for inspection services appears to be working well. David will provide more detail on that later if required.

With respect to the access fees, this is based on the premise that taxpayers should get a return on their natural resource asset. The new licence fee structure tries to place a value on a privilege, the privilege of accessing a limited public resource.

Several policy decisions and refinements to the fee schedule were made by the minister after consultation with industry last year when the fees were implemented. Hence, our current revenue estimates for licence fees are lower than the initial program review targets would imply. The shortfall is being made up through further program expenditure adjustments.

The new licence fee schedule in all fisheries, with the exception of one in South West Nova, took effect January 1.

Incremental revenues from commercial licence fees are currently estimated to be about $28.6 million in 1996-97 and $31.2 million in 1997-98.

Total revenues - new fees and what is already collected - should be about $40 million. In other words, approximately $9.7 million was collected before the introduction of the access fees. In aggregate, the new licence fees amount to about 3% of the total landed fish value.

We recognize that the industry has concerns about the way the licence fees were implemented, and that's why the Minister of Fisheries and Oceans created the stakeholder working group last fall. We expect the report of that stakeholder working group very shortly.

The minister intends to give full consideration to the recommendations of that stakeholder working group, and once consideration is given there'll be a broader consultation on recommendations that will be made.

As well, when that working group report comes in, I will give a full briefing on it to the committee, if the committee so wishes.

I'll stop there. That was an overview in a nutshell of the fisheries side of the business, and unless my colleagues have anything else they wish to add, I'll finish here.

The Chairman: Thank you very much.

We'll now hear from David Miller, from Treasury Board.

Mr. Miller: Thank you very much, Mr. Chairman. I'd like to say a few words about the government's cost-recovery policy in general. I also have a few comments on some of the key issues raised by client groups, which are currently under discussion.

The government's policy, which has been in place since 1989, is to charge for services that provide direct benefits to identifiable recipients beyond those received by the general public. The government's policy is based on the principle of fairness in allocating and managing government resources. While deficit reduction is clearly important, it is not the only, or perhaps the principal, reason for user charges.

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I'll just say a few words on each of our basic principles. The first one is user pay, user say. If users are being asked to pay, they should have a right to know what they are paying for, at the very least. Hopefully, they will also have a say in how the service can be delivered more effectively and efficiently.

Prior to the introduction of many charges, no concern was expressed by recipients of government services. Since introducing the market test, there have been significant calls for restraint and for lower levels of service. Ministers see this as a strong impetus for establishing some form of charging.

The next area is that of costing and pricing. Identifying full costs is an integral part of the policy. It does not mean, however, that charges must be equal to full cost. The aim is to provide a readily understood, common starting point for determining appropriate user charges, from which any legitimate departures must be explicitly justified. Setting fees at other than full cost should be considered in the context of private versus public benefits.

On the impact of fees, we are aware that industry groups are particularly worried about the impacts that user charges have on the competitiveness of Canadian companies. This arises in part from fears about the potential impact of user charges from more than one department on a single industry group. The responsibility to assess the cumulative impact of multiple fees must be shared by departments and their business clients. We believe that information provided by clients through consultations provides departments with insights that can be factored into the determination of what is fair pricing and into the appropriate level of cost recovery.

That being said, other efforts are under way to obtain user-charge data from departments that might help identify areas of multiple impact. The Treasury Board Secretariat is in the process of updating a list of user charges for all federal departments and agencies for 1995-96, similar to that produced last year for the Standing Committee on Agriculture and Agri-Food.

In terms of parliamentary control over revenues, before departments can charge they must obtain the appropriate legal authority. This authority can be provided through specific provisions in program or enabling legislation, general legislative authority under section 19 of the Financial Administration Act, or through the crown's right to contract.

Most user charges are established by regulation conferred through legislation. In such cases, the requirements of the government's regulatory process must be followed, including publishing proposals in the Canada Gazette; preparing a regulatory analysis impact statement; carrying out a legal examination by the Department of Justice; and seeking approval by the special committee of council.

Even after user charges are in place, they are subject to review by the Standing Joint Committee on Scrutiny of Regulations and the Office of the Auditor General. It should be noted that regardless of the legal instrument or process used to establish fees, it is accepted policy and practice that charges for services and use of facilities cannot exceed costs. Consultations must be undertaken and fees must be published in the Canada Gazette. And fees, of course, are subject to review by a parliamentary committee.

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Communicating and facilitating a common understanding of policy and procedures is a priority for the Treasury Board. In this regard, we have contracted with the University of Toronto to write a sort of philosophical paper on the applicability of user charges to government activities. I have a copy of that paper, which I can give to the chairman. If others would like a copy, they could be made available.

Based on our experience to date, and to respond to client concerns, the government is updating the cost-recovery policy, in consultation with business and other interested groups. In fact, we are meeting next week in order to discuss that.

On that note, I would like to close. Thank you again for the opportunity to appear before this round table.

The Chairman: Thank you, David.

Before we continue, we have some late arrivals: Derek Wells, from South Shore; Ted McWhinney, the parliamentary secretary to the Minister of Fisheries and Oceans, from Vancouver Quadra; and Lawrence O'Brien, from the great riding of Labrador.

Okay, Mr. Timmins will continue.

Mr. Timmins: Thank you, Mr. Chairman. I'm not going to read my whole speech, my opening statement. I'll try to pick a few points to highlight.

On behalf of the Auditor General of Canada, Mr. Denis Desautels, I would like to thank the committee for giving our office the opportunity to participate in the round-table discussion.

The government is increasingly employing user fees as a strategy for coping with fiscal restraint, leading to heightened interest and sensitivity with respect to decisions in this area. Forums such as this round table, involving all of the shareholders, can make a positive contribution towards enhancing the fairness and transparency of cost-recovery initiatives.

In the next few minutes, Mr. Chairman, I would like to briefly set out, in general terms, our office's perspective on the major issues surrounding cost recovery and user fees. While our office has not completed any recent audits that specifically looked at cost recovery in the Department of Fisheries and Oceans, we have examined these issues in audits of several other departments. My comments are derived from those observations.

First, consensus is needed on what is and what is not a private benefit. In the fisheries sector, one might think of private benefits more as those resulting from services that facilitate commerce and trade, and public benefits more as those relating to health and safety. Since cost recovery is relevant to many government departments, a consensus on such principles across government is desirable.

The Treasury Board has provided some guidance on distinguishing between public and private benefits, but application is another matter. For example, there often appear to be significant differences between industry's perceptions of and the departments' views on what portion of a service constitutes a public benefit. The fact that most government services have elements of both public and private benefits adds to the complexity. In particular, the financial or economic health of the sector is often considered by industry to be a public good, an argument which effectively changes most private benefits to public ones. Criteria would be useful to help resolve some differences of opinion, and to promote consistency and fairness.

Second, departments and agencies need to have reliable data on which to base decisions. The government's financial accounting systems were not designed with cost recovery in mind, often making it a struggle to produce credible costing information.

There is also a need for reliable, activity-based management information, but in many cases it is weak or non-existent. Such information is essential to enable departments to more reliably base user fees on the actual consumption of services. Inadequate costing information could lead to creating an unintended competitive advantage for certain firms, industries or geographical areas. Consequently, good information systems are not an option; they are a necessity.

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[Translation]

Even where good information is available, departments must address the question of which costs are recoverable, in particular, which overhead costs. Users are typically skeptical when it comes to paying some or all of these costs, yet they are significant and real costs that need to be factored into any cost recovery proposal. Treasury Board suggests that, in most circumstances, recovery of full costs is appropriate. However, the question remains, will application of this concept be consistent across government?

For several reasons, departments face resistance in trying to impose user fees. It is difficult for beneficiaries to accept the user fees when they believe savings can be achieved through alternative means. Indeed, in many of our audits, we have been able to identify opportunities for departments to operate more cost effectively. Industry tends to question whether departments have done everything necessary to reduce or eliminate costs, arguing that cost reduction or avoidance should always precede any attempts to recover costs.

[English]

The number and complexity of issues I have raised suggest that plans to introduce cost recovery or to make significant changes to existing services or user fees require long lead times if they are to be perceived as well thought out, fair, equitable, and cost-effective. Time is also required for meaningful consultation to take place.

As a final point, I would note that government also has the responsibility of representing the interests of the public. There is a need to ensure that industry pays an equitable share of the cost of services, providing a significant degree of private benefit. Ultimately both public and private interests need to agree that the costs being recovered are reasonable and fair.

Mr. Chairman, I would be happy to elaborate on any of these points should you or the committee members have any questions.

The Chairman: Thank you very much, Mr. Timmins.

Mr. Cummins: Could I comment on that very briefly?

The Chairman: Well....

Mr. Cummins: It's important, because I had to go to Access to Information to get the information that was just given to us. In other words, to find out the revenue that government was expected to raise through these revenues, I had to go through Access to Information, and some of that information was blocked out - whited out - by the minister's office.

If you expect people to accept user fees, they should know how much those fees are bringing in and where the money is going. Yet that information was denied me by the minister's office.

The Chairman: Point well taken.

We'll now go to industry and start off with Mike Belliveau from the Maritime Fishermen's Union.

Mr. M. Belliveau: Mr. Chairman, thank you for the opportunity to address the standing committee. I had no idea I was going to be first on the list. This is not fair.

Some hon. members: Oh, oh!

The Chairman: We didn't want you to wait. We didn't want you to get impatient.

Mr. M. Belliveau: I don't have a prepared text at all. I wasn't really clear on your objectives for the meeting, other than I guess taking a cut at the cuts or taking a slash at the slashes or whatever.

Overall I'll make a couple of general statements about what's going on in the fishery.

Our organization, the Maritime Fishermen's Union, is based in the Acadian fisheries of eastern New Brunswick and in Nova Scotia, but I would say our dominant membership is in eastern New Brunswick. We're in the inshore fishery and we represent what we call bona fide fishermen, or the equivalent in Scotia Fundy. We represent roughly 1,800 of these bona fide types of fishermen, owner-operators, captains of their vessels, and so on.

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We did not holus-bolus object to some kind of increase in licence fees. In a sense I was impressed by our fishermen on that basis. When the idea of fees came out, of course it's money out of their pocket and they're going to react, but in principle they accepted some increase in fees.

They always tied it to the fact that they would like some say as to how those fees were going to be used. If they were going to be charged these fees, they wanted some direct input as to how they were going to be applied, and they all had very good ideas as to how they would be applied locally.

I noticed in the government's presentations they referred to it as ``user-pay, user-say''. I'm not really familiar with that term. I don't know why, but I haven't heard it that much. I've heard ``user-pay'' lots, but ``user-say'' not so much. I don't think our fishermen feel at all that they have much say in these things when it comes to the fees and how they're being utilized.

I could cite different examples, but I'll speak for a moment of the lobster fishery, a very important fishery, probably the most important fishery in Atlantic Canada in terms of its total impact on the region at this present time, excluding Newfoundland, which is in a different situation, as we all know. We don't feel the allocations to the lobster fishery from the Department of Fisheries and Oceans are in any way proportionate to the importance of that industry to Atlantic Canada. Our science in lobster is very weak and so on.

So in terms of the user-pay aspect, the protection of the resource is the number one preoccupation of our fishermen, and with the kind of protection lobster is getting, we don't have a very positive reaction to this idea of user-say in that context.

I don't know how long I get to speak, Mr. Chairman.

The Chairman: Five to eight minutes.

Mr. M. Belliveau: You give me some indication of when you want me to wrap up and I'll get it focused.

The Chairman: Yes, I'm keeping an eye on it.

Mr. M. Belliveau: I suppose you're well aware that since around 1989-90 we've felt an increasing burden in terms of costs of being in the fishery, and every day we're running into some new, inventive charges coming at us.

One of the ones that was very striking to me last year was the observer fees. This was for a sentinel fishery, where you send out small guys in the inshore boats with five gill-nets or 2,000 hooks, and you have to take an observer. The total cost of the program we were involved in was $100,000 for this sentinel fishery, and the observers cost $60,000 out of the total $100,000. That $100,000 included all of the other costs for the fishermen to get out to sea and do their work and so on and so forth. It was just absurd.

We're being leveraged on these kinds of costs and certain kinds of fisheries. Of course we want to get out on the water and see if there are any groundfish left. Of course our guys want to get out there, but to take an observer out and pay $60,000 out of a $100,000 program with five nets or 2,000 hooks.... It's just not sensible. It's not good economics. It's these kinds of things that are coming at us.

In the new fisheries, when you get an emerging fishery.... We have a rock crab fishery. Don't confuse it with the snow crab fishery; it's quite a different ball game. The snow crab fishery, as we know, is a paying proposition. As for the rock crab, there's hardly anything in it. We always thought it was garbage, but now you can get some nutrients out of it.

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But to get into this thing, you're going to have to enter into conservation harvesting plans, and there are going to be all kinds of new costs built in there. The guys getting in - because it looks like it will be a privilege only for a few - will tend to buy into all of those new costs the first time around, till they see what it's all about.

So those costs are coming at us. Dockside monitoring is coming at us. We're always relaxed about it. We felt that some of these high-volume fisheries have been going on for years without any counting, and particularly the herring fishery - the herring seiner fishery. We kind of know what happened there. It's one of the untold stories in the Atlantic fishery, what has happened with that Bay of Fundy herring stock. In my judgment - and I'm not there every day, but some of you boys are, over there - it's a disgrace. That fishery was never monitored and never counted for years, and we demanded dockside monitoring for that. Finally, it comes about, but then they turn around and now there's no end to the dockside monitoring.

The latest we hear is they want to monitor the lobsters. Why do you want to have dockside monitoring for lobsters? There are no quotas on lobsters, but they're talking that way, as if now we're going to have dockside monitoring for lobsters. It must be for Revenue Canada or something, because it wouldn't be for the purposes of counting the lobsters. There's no need to do it. We don't manage the fishery by counting the lobsters. So that will come at us, and that's another preoccupation of ours.

I guess I've covered some of those costs, but I'll wrap up these opening comments by saying, Mr. Chairman, that it's easy to grandstand in these kinds of situations, but I feel personally, and I think our organization does, that the regime that came into power three years and a half years ago was not voted in to take a run at the lower end of society or the weaker people in society the way it's done. Whether you're talking cost recovery or licence fees, if you watch how it's really playing out down on the ground, it's causing people to lose their jobs and putting a squeeze on the people at the lowest end in the fishing society.

In many instances I suppose it's no problem for the higher-end captains to pass on the costs, but somebody is paying in the end, and it's the people who earn the least from the industry who end up paying either with their jobs or with lower incomes. You can say it's user fees today, but it's a cut in UIC tomorrow, or yesterday, and it's happening out there. You people who are MPs know it's happening, and it should go on the public record that it's happening, and they'd better turn that stuff around. But overall that's, I should say, the negative side of it.

On the positive side, as I said at the outset, I was impressed by our fishermen's willingness to agree to some kind of licence fees. I don't want to be on the record as saying we're against fees of any sort, or we think we can't afford anything in the industry. There's some room in there, and we've made some agreements there.

I give the government credit that in the southern Gulf of St. Lawrence the kinds of licence fees that came at us were reasonable. We can live with them. But stop them there, and take a long look before you start any further down the road, because when you add it to all of the other things that are coming at us, it's destabilizing, and it potentially has the chance of ruining a reasonably good inshore fishery.

Thank you.

The Chairman: Thank you very much, Mike.

We'll now go to Ronnie Newell.

Mr. Newell: Thank you, Mr. Chairman.

I have a report here I compiled just before I came here the other morning. I'm just going to take a few things out of here.

I want to thank the fisheries standing committee for inviting me here. I've been at numerous round tables before with my local MP, and consultations, and never thought I would make it up here in Ottawa, but now that I'm here, I guess I might as well say my piece.

I represent the voices. When I speak, there are thousands behind my voice in my mind right now, and that's what I'm speaking on - my voice is theirs.

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The user fee system, as far as I'm concerned, is going to diminish any hope of survival for a lot of fishermen in my area. It's going to completely wipe out the hope of fishermen and families of striving to go on. That's what I'm here for, and you're going to hear the pain from many through my voice.

First of all, I have some facts, thanks to DFO, EI and and Human Resources, worker's compensation, and other government departments. I did a little poll on Shelburne County, and when I talk of Shelburne County I'm talking of almost 100% fish there, because Shelburne County is fish. If there's no fishing there, of course there's no county - it's that simple.

Every single business in Shelburne County is connected to the fishery either directly or indirectly, whether it's fishermen themselves or businesses that employ people who depend on the fishery. When something happens to the fishery, then something happens to the county - there's absolutely no question about that. When fish quotas decrease, so does employment, and businesses collapse, and I've seen that. When quotas rise, so does employment, and businesses survive. When fees rise for services, like user fees, then again it triggers lay-offs throughout the county. It's doing that now, and more so in my area than in a lot of others, because Shelburne County is almost 100% a fishing county.

We know that the fishing industry must contribute financially through a system - fees, licence renewals, vessel registrations, etc. - as other industries do. We accept that, but there has to be a line drawn somewhere or it starts the process of backfiring. It's started that process now - it's backfiring. It's triggering lay-offs and it's triggering families...giving them little hope. Fishermen were coming to me just last week, saying ``It's all over. I can't go on.'' They sit in my office and I see them break down - that's how bad it is.

Families are hurting now. It's triggering a loss of property. It's not only the user fees; it's probably tied into the low fish quotas, too. But it's loss of hope for the children, in their future and their education that maybe now they can't get. It's a loss of pride, a loss of employment, and a loss to the community. That's what happening.

To make things worse, the user-fee system comes at a time when there's extremely low fishing activity. I'll always remember what one fisherman told me one day. He said ``Ronnie, I don't mind paying some fees and I don't even mind paying a little more than what I used to, but why now? The government has me on the floor and now they're kicking me. They want me to leave the fishery. If they want me to leave the fishery, buy me out, don't starve me out, because I'm going to fight back.'' That's what people are telling me.

Anyway, in Shelburne County, according to DFO, there are 1,365 fishermen. Most of these fishermen have an average family of three, meaning approximately 4,100 are directly dependent on the fishery in Shelburne County. There are 1,065 residents in my town of Clark's Harbour; 259 of them are fishermen, and 777 are directly dependent on the fishery, or 73% of my town. The balance of people are retired seniors and others, many of whom are employed in businesses related to the fishery.

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Shelburne County pays out $68,250 in personal fishermen's registrations, up from $27,300. That's an increase of $40,950. There are 1,029 vessels in my county and they pay $51,450 in vessel registrations, up from $20,580 - an increase of $30,960. There are 885 groundfish licences; they pay $88,500 in annual renewal fees, up from $26,500 - an increase of $61,950. There are 617 lobster licences and some pay $1,890 and some pay $100. But the total renewal fees are $956,700 in my county. That's almost $1 million and that's up from $18,510. That's an increase of $938,000. I mean, can you believe it? There are 918 licences for all the kinds of swordfish, and Irish moss. They're all up and they now pay $369,000, up by another $40,000. The ports are now going through the harbour authorities and that's another $274,000.

Then we get into dockside monitoring. Shelburne County pays out approximately $300,000 for dockside monitoring, and that's increasing.

Then we get into a hailing system, where you have to call in and call out. To do that you need to have cellular mobile service aboard your vessels. That's another $256,000 for Shelburne County fishermen.

The steamboat inspection is another $254,000 for Shelburne County. There's workers' compensation - I know that's provincial - and that's 6.98% of all of the payroll.

It goes on and on. What I've just described totals $2.6 million in Shelburne County. We just cannot stand it.

There comes a time when the government or any government in any country that truly cares for prosperity, employment, the suffering of hard-working people and their families, children and their dreams of getting a good education, and anything other than just money has to step back, slow down, and say ``We have to stop''. Enough is enough. We can't stand it. We're not going to be able to stand it. There comes a time when the government has to say ``Enough is enough''. It has to look at all sides and not just its own. There comes a time when you have to call a truce, and we're asking for the government to do that.

We have a TAGS program that's going to run out. It's on its last end, and we haven't seen anything yet. That's when it's going to really have a big impact. When the TAGS program is over in approximately 12 months it's going to be very severe. The storm isn't here yet, but it's on its way and it's headed in our direction.

You want to give a community, its people, and its businesses some hope and some chance of survival, because I think Shelburne County can pull through if you'll just slow down and back up. If you want to give us a glimmer or trace of hope, you have to ease back. I think one of the ministers of fisheries said ``staying on course'' or wrote a document entitled Stay on Course. Well, I'm asking you to ease up on the throttle and alter course. In that way maybe we can all get to port safely.

As to user fees, I heard two or three here say user fees were a fair process, but I say it's not a fair process. When I see a lobster fisherman come to my house in a small 18-foot outboard that scrapes along the rocks with 200 traps and he pays out $1,890, and then I see another lobster fisherman who fishes a six-month season in a 45-foot fishing vessel who pays $1,890, can you tell me that's fair? That small guy in the outboard had to go to the bank to borrow the money to pay $1,890. He will be on his way out if you continue. This user-fee program, right now, is pushing and eliminating the small man from the fishery.

Thank you very much.

The Chairman: Thank you, Ronnie.

Ladies and gentlemen, I neglected to introduce Elsie Wayne, from Saint John. She's very quiet. She sort of sneaked in.

Mrs. Wayne (Saint John): [Inaudible - Editor].

The Chairman: We'll go now to Robert Haché.

[Translation]

Mr. Haché: I represent the majority of the mid-shore fleet under the New Brunswick individual quota. This fleet includes fishermen licensed for snow crab, shrimp, herring caught in a seine and ground fish.

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I have the privilege of sitting on the Fisheries and Oceans working group that has just completed a review of access fees. I will not go into detail, but I would like to raise some of the aspects of access fees that appear problematic.

First of all, and along the same lines as what the various government experts were saying this morning, there is the issue of fair treatment for all people who benefit from a service or have access to a resource. You are undoubtedly aware that the majority of access fees currently recovered by the federal government are collected by means of license holders who are governed by the individual or commercial quota program, which poses a problem.

Using a different formula for fishermen who have a commercial quota and those who have an individual quota creates inequities and problems. The most serious problem we have witnessed in the industry is that fishermen who, at some point, consider that an individual quota fisheries management program would be advantageous for them are discouraged from the outset, because the access costs are much higher than they are for commercial fishermen.

Moreover, we have noted that within the same small fleet, regardless of whether it is operating under a commercial or individual quota, there are rather significant inequities. I believe that Mr. Newel identified some of the inequities among various fishermen, including the level of access fees. If you are not already aware, we would like to point out a problem that we consider extremely important: all fishermen who are managed under an individual quota or an individual transferable quota have, for at least five or six years, an in some cases, about ten years, been subject to strict landing verification programs, which has enabled the department to obtain reliable and very precise data on the gross income of these fishermen. This is not the case for many commercial fishermen, where in many cases incomes are not necessarily declared or Fisheries and Oceans Canada is not aware of them. I think that is a very serious flaw.

Let me quote the very strong remarks that the official from the Auditor General of Canada's office made:

[English]

We need reliable data on which to base recovery revenue. Good information is not a preference; it's a must.

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[Translation]

We believe that a great deal of work has to be done on the major principles so that we can get accurate numbers for the gross income of the various fleets.

Now I'll say a few words about the fleets that I deal with, including the snow crab fleet. Obviously, the access fees for that fleet are not a problem. It's obvious, and we aren't challenging that in any way.

However, the situation is the exact opposite for the New Brunswick fleets that fish for shrimp and herring using seine nets. The New Brunswick fleet that fishes for shrimp is part of a fleet that operates throughout the entire Gulf of the St. Lawrence, so it has to travel very long distances to get to the fishing banks. The government is asking those fishers to pay exactly the same amount as their colleagues in Quebec who are located very close to the fishing banks.

Mr. Bernier can correct me if I'm wrong, but I do believe that Quebec shrimp fishers go out for two or three days, perhaps even shorter trips than that, whereas New Brunswick fishers have to leave for nine days to get to the fish, which increases their fuel costs and their other expenses considerably. Obviously, they think this is unfair to them in comparison with their colleagues from Quebec, who are paying the same access fees and whose operating costs are much lower. This is a problem.

There are six major seiners fishing from New Brunswick, and their situation is the exact opposite of the major seiners in Nova Scotia. The major seiners in New Brunswick do not fish for herring roe, and they never have. They hold 20% of the quota, and they only fish for herring for the meat industry. Eighty per cent of the quota held by New Brunswick herring roe fishers is used by inshore fishers. The Department of Fisheries and Oceans is aware of the situation.

Because of all kinds of administrative hassles, the New Brunswick seiners have never been able to catch their herring quota over the past ten years. Actually, this year, despite all the assurances from Fisheries and Oceans Canada, the seiners had to leave 3,000 tonnes of herring in the water even though they had paid the access fees. Can you imagine anything quite so ludicrous? They paid more than $50 per tonne in access fees for herring, and they were denied access. They were not able to fish it. So they paid for the access, and because of these administrative hassles, they were denied access. It's a pretty funny situation. So there you have it, Mr. Chairman.

[English]

The Chairman: Thank you very much, Robert.

We'll now go to the Canadian Association of Prawn Producers, and Mr. Angel.

Mr. Angel: Thank you very much, Mr. Chairman. Thank you for the opportunity to appear before the committee and participate in this round table.

Many of my colleagues have covered a lot of the points that I was going to cover. I'd like to stick to basically three issues: process, principle, and impact.

I think it's important to state at the outset that the Canadian Association of Prawn Producers, which is an association of companies that fish northern shrimp on the east coast of Canada between Labrador and the Davis Strait, does not object to the principle of paying a fair share of managing the fishery and paying for services that are rendered by the government. However, we do have some difficulty with the way in which the process is being implemented.

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I don't want to go over too much old ground here. However, I think it's important to set the context for why the industry remains upset about this issue.

With respect to licence fees or access fees, DFO started out with the objective of raising $50 million. There was no analysis of the programs. There was no analysis of the services given to the industry. There was a decision made that they were going to raise $50 million in licence fees. Secondly, with respect to inspection, there was a decision made that they were going to raise $4.8 million - $2.4 million out of the domestic industry and $2.4 million from the imports.

I attended consultation meetings at which the opening statement by DFO was ``We are here to discuss the user-pay consultative process, but there's one thing you must understand: we're going to take $50 million out of the industry.'' The inspection people said ``We're going to take $4.8 million out of the industry.'' They were prepared to discuss everything else. We found that to be unacceptable and indeed found it to be completely backwards.

What we were looking forward to was basically a three-step process. The first step was one whereby government and the industry would sit down to analyse what is required to manage each individual fishery, because I think everybody within and without DFO agrees that the system we have is not necessarily the best one. So we wanted to sit down and zero-base, if you like, fisheries management and fish inspection for the industry in order to make sure that we have an adequate, bare-bones structure.

Secondly, we wanted to sit down with DFO to cost out the delivery of those programs, including the discussion of those that could be delivered privately and those that could be absorbed by the industry, and come up with a remaining balance of government expenditures. Then and only then, in our view, would it be appropriate to sit down to talk about who pays, and in what amount.

Again, I don't want to go over too much old ground, but that is the factual context that I remember, and which we found so objectionable to start this process off.

I will say that I think the DFO people and government people have learned a lot in the last couple of years, and the process now is much better. Had we had the process and the understanding that we have now, we perhaps could have gotten off to a little better start. But I had a fundamental problem with the process, first of all.

Secondly, we found there was a decided lack of principles with respect to the cost-recovery, user-pay program. There was never a framework put on the table for discussion with industry people with respect to what the principles are. That continually got in the way, as we had a lot of ad hockery with respect to each individual industry, all with the aim of raising the $50 million at the end of the day. Principles were put on the table and were pulled off the table. They were fractured and massaged and so on, so we never really had a good framework.

With respect to user fees, I read a publication - I don't know whether it's still a valid one or not - called ``A Guide to User Fees''. It was published by the Treasury Board in 1992, and there was something in it that struck me as very instructive. It goes like this:

User fees involve the recovery of a fair share of the cost of providing goods and services from those who receive a direct benefit from them. They are not another form of taxation; they actually increase the equity of the revenue system by shifting some of the burden away from general taxation borne by the taxpayer to those individuals who derive a clear benefit from specific government activities.

I don't have any problem with that at all.

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The guide went on to say:

Determining how much to charge for an activity requires creativity, skill and a good business sense.

They refer to such principles as the cost of providing the activity, the demand for the activity, the value to the user, the impact of the fee on the user, the importance of the program among the government's priorities, and several others. Again, I have no problem with those, but that's not what we had.

There was a study done on user fees by a private consultant on the east coast, Gardner Pinfold Consulting Economists, and they concluded:

DFO has established a simple fiscal objective: recover an additional $50 million from the Atlantic and Pacific fisheries. ... The fees are simply a means of allocating aggregate cost recovery across fisheries based generally on ability to pay.

I have a problem with the process. I have a problem with the fact that there was no framework, no principles established, and I feel the government got caught up too much in trying to raise the money and really forgot about the principles and the process.

The last thing I want to touch on is impact. Many people have referred to that. Many others will today. My colleague Ron Bulmer will be speaking about it in more detail.

I believe David mentioned that individual departments have a responsibility to consult among each other on this impact issue. I don't think that was done. I've talked to many people in many departments - coast guard, DFO, communications, and various other departments - and I asked them the same question: do you realize what DFO is doing to us, or do you realize what coast guard is doing to us? The answer I invariably get is, look, I have my own problems; I'm trying to implement this cost-recovery program on the recovery of pollution response fees, and no, I don't really know what the licence fees cost you.

I don't think that was ever done. At least I have never seen any indication that it was ever done.

Second, the fish business is an international marketplace, regardless of whether you're dealing with fish that's caught by hook and line or whether you're dealing with fish that's caught by a factory freezer trawler. We usually send all of our fish offshore. Has anybody ever done any impact on that? Do we know what impact the user fees have on Canada's competitive place in the international market? We have a good idea. I submit to you that the only people who know are the people who are selling fish into those markets. Everything comes out of the price of that fish, and we don't control the price of that fish. That's controlled in the international marketplace.

So the more costs we have to bear...it doesn't come out of the price of the fish; it comes out of the wages of the people, out of perhaps a little less maintenance on boats and in plants, and so on.

My point is I don't think the analysis was ever done. Here we have the Government of Canada imposing user fees on an industry without having any idea of what impact it's going to have on that industry. I think that's the third fundamental flaw in this whole process.

Just to summarize, we don't object to a fair process. We're anxious to sit down and develop one. I'm not sure we can get there from here. We've got a lot of fees imposed on us now, and it's going to be very difficult to go back and start over again.

Thank you.

The Chairman: Thank you very much, John.

We'll now go to John Kearney.

Mr. Kearney: Thank you, Mr. Chairman. I thank you for being able to speak here today.

It is interesting and ironic and really funny to me personally that I wanted to make four major points in my brief presentation this morning and those points were made in the first three presentations by federal government officials. I want to give you our perspective on certain of those points that government officials made this morning.

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One of the things they said - and it was a point I was going to make - is there is a need for an analysis of the cumulative impact of all these fees on the industry. At least I thought I heard them say that.

Our fishermen have been saying for at least a year and a half now that we need an analysis of the cumulative impact, that the strain is too great, the strain is excessive, and there needs to be some coordination. But to my knowledge it is still today just talk that we need to have an analysis. I haven't yet seen an analysis take place on the cumulative impact of these user fees on the industry.

The second point I want to make is that user fees and cost recovery should result in better service by government to the industry. I believe I heard the government official say that this morning.

The experience of our fishermen during the past two years is we have received worse service from the federal government. I'm talking in particular about what DFO is calling its core mandate, conservation. We could understand if we were getting worse service in some of the areas DFO said it's getting out of, but when we're getting worse service in what DFO is calling its core mandate.... I'm talking about enforcement. I'm talking about science.

Before I came here I was talking to some of the fishermen about what I should say when I got here. One of them said to me, ``Well, we're getting worse service. A fisheries officer has not been aboard my boat for two years, but I see there's still an economics branch in Halifax and an economics branch in Ottawa. I thought DFO told us they'd have nothing to do with the economics of the industry any more. Why has there been no fisheries officer on my boat for two years and there's still an economics branch in Halifax and in Ottawa?''

The other point I want to make is if we're going to have user fees, there should be benefits to the users. I believe I heard the government official saying that this morning. Our fishermen are still waiting to see some of these benefits.

One example I will give you is we are now paying for the total cost of data entry on our catches into the DFO database. We pay the dockside monitoring company, the fishermen fill out their log books, they send those log books within 48 hours to a catch monitoring company, and they are immediately entered into the DFO database.

We are told it is important from a scientific and a conservation point of view to have this information on the resource and on our catches. We also thought this comprehensive database we're building would be useful to us in our own management functions, in those areas where we're taking over management of the fishery. We thought we were paying for good, quality data so we could use that data to understand the dynamics of our fleet and trends in the resource, to aid us in our cooperation with science.

What we have found is this data is totally inaccessible and useless to us. It goes into a computer where the database requires that anytime you want to pull any information out of that database, a Fortran programmer has to be hired to do it. I can do a lot more than that on my own desktop computer, but here we are paying for data entry that is totally useless to us.

So from our fishermen's perspective, we're not receiving a benefit. We see wasteful spending in the government being passed on to fishermen so they can waste their good, hard-earned money putting data into a computer that can't be used, or can only be used with extreme difficulty.

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The third point I want to make, and that I heard the government officials say, is user-pay, user-say. Again, down at the wharf, at the level of our association, we do not have any real sense of any greater say, not only over how the government spends its money, but over how we spend our own money.

I just gave the example of their computer database, but a much larger question is that of dockside monitoring. We are paying the total cost of dockside monitoring. It has become a key component of our surveillance system in the fishery. But in the Scotia Fundy region we have no say over how dockside monitoring takes place.

Right now the decisions concerning dockside monitoring are made by private companies. DFO certifies the companies, but then the fishermen are beholden to a private company as to how dockside monitoring is taking place. At least with DFO we had advisory committees to try to affect how monitoring occurred. We could go the political route and speak to our politicians about how monitoring and surveillance should take place. Now we are completely dependent on the decisions of private companies as to the way monitoring is to be implemented in our region.

If we're going to be paying these costs, we need to have say; we need to have control. Dockside monitoring is a very critical question. In the Gulf region, the Newfoundland fishermen and their associations can still participate in the board of directors or form the board of directors of dockside monitoring companies. In the Scotia Fundy region we are not allowed to do that.

That has to be changed. We have to be able to run these companies on a non-profit basis. There is no problem maintaining the arm's-length nature of monitoring operations themselves to maintain the integrity of these monitoring operations while still allowing fishermen to have control over the management of these companies so they can run these companies in a way that is in the interest of conservation, in the interest of fishermen, and in the interest of cost-effectiveness.

Those are the points I wanted to make. I thank you very much.

The Chairman: Thank you very much. Those are very good points.

We'll now go to Denny Morrow from the South Western Nova Scotia Fish Packers Association.

Mr. Morrow: Thank you, Mr. Chairman, for inviting me to speak today. My remarks will mostly concentrate on plant inspections and the cost-recovery program.

There are 42 companies in our association, from Halifax around the southwest shore to Annapolis.

According to DFO statistics in 1994 the Scotia Fundy region had 284 active QMP registered processing plants. That represented 27% of the Canadian total at the time. Most of our plants process and pack a variety of species and products. These are not just ``one season of the year'' operations.

What is happening in our markets? The shortage of supply of Canadian groundfish has meant our processors have had to access frozen or salted groundfish on the world market for further processing. Many plants have remained in operation by turning to foreign sources of supply. In many cases we are buying from our competitors, and many of these competitors have a built-in advantage, with lower-cost raw product, lower wage scales in their plants, and incentives from their governments aimed at boosting exports.

One large salt fish exporter in our association reports a decrease of 45% in sales for 1996 due to aggressive price competition. Other companies that specialize in the export of frozen fillets and portions report similar losses of market share. Our processors are trying to survive until our stocks recover, but any increase in operating costs at this time due to tax or fee increases from the government only increases the advantage to our competitors.

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In the last couple of weeks I've taken a survey of 15 of our member companies regarding fees and licences and their impact, comparing 1994 to 1996. That survey included fishing licences. We had seven companies in the survey who owned vessels. It included berthing, dockside monitoring, and vessel inspections. It also included federal plant licences, provincial plant licences, import inspection fees and licences, export certificate fees, landfill fees, and power rate increases. One company mentioned the drop in the Atlantic freight subsidy and the increase in ferry rates. Another company reported back on increases in local taxes.

What we found was a 621% increase from 1994 to 1996, and that's just the tip of the iceberg.

Here are some conclusions from those statistics. The cumulative impact on the bottom line, or what is left of it, is substantial. We understand the government's need to deal with its deficit, but we wonder if anyone in the government is monitoring the cumulative impact of all these costs from DFO, coast guard, dockside monitoring companies, and provincial and municipal governments at a time when the industry is so vulnerable.

My next point deals with the fairness of the DFO inspection branch cost-recovery program on processors. The inspection branch cost-recovery revenue target was to be approximately $4.8 million for the 1996-97 budget year. Plant licences from across Canada were to generate approximately $1.75 million. I have requested those revenue figures by region. An early estimate from DFO is that the Scotia Fundy region, now part of the maritime region, has paid in over $1 million in plant licence fees.

I've been able to obtain some additional 1995-96 DFO statistical information. The maritime region, as a percentage of DFO inspection expenses, is roughly 30%. The maritime region is paying, in projected domestic cost recovery, 48%. The maritime region has 41% of the processing. It has 45% of the landings. If I compare that with another region, let's say central Arctic, where DFO expenditures in that region are estimated at 13.3% of their budget, their projected domestic cost-recovery revenue is 7.4%. Their percentage of processing is 3%. Their percentage of landings is 4%. It would appear that the maritime region and to a lesser extent the Pacific region are paying a disproportionate share of inspection overhead costs in other regions and at national headquarters.

Revenue projections by region have been requested for the import fees and licence aspect of cost recovery. We have not received those projections or an interim revenue report to date.

I would say that the processor associations in Nova Scotia have formed an umbrella group. We are meeting with DFO inspection staff, we are requesting revenue figures, and we're trying to understand their budget, but it is a difficult process.

The notification fee on imports of low-risk groundfish product for further processing has been particularly galling to our members. We cannot identify any service that is connected to this fee, and it is just one more cost item that reduces our competitiveness in world markets.

We would very much like to see an analysis of import fee revenues by region and category in conjunction with the cost of delivering import inspection services. There should be a connection between the cost of services rendered by the inspection branch and the fees that are attached to those services so that industry can judge whether a fee level has been fairly established. The maritime region cannot afford to pay a disproportionate share of cost-recovery charges.

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Where is cost recovery headed? Processors need to know whether they are to have any hope of remaining competitive in world markets from a Canadian-based operation. Fish can be purchased on the world market, and plants can be purchased or built in other countries. Businesses exist to make a profit. Where is cost recovery headed?

The DFO inspection branch recovery target was $4.8 million or about 20% of its 1996-97 budget. What are the projections for 1997-98 and 1998-99? We know that these projections exist.

What percentage of seafood inspection costs should be borne by industry, and what percentage by the government? Guarding the health and safety of the consumer has been a traditional government responsibility in Canada. Shouldn't the aspects of seafood inspection that are related to the health and safety of the consumer be paid for by government? It would also seem reasonable that those aspects of inspection that are quality oriented would be the responsibility of industry. This philosophical question needs an answer.

Shouldn't the share of inspection costs that are to be borne by industry result in some meaningful industry input into the inspection service system? Industry should be a partner in designing the service delivery, so that costs are reduced and efficiencies are followed. Industry can only do this if it is knowledgeable about how the service is delivered and how costs are derived. Information sharing is required, and a mechanism for government-industry planning is needed.

The fee- and licence-setting mechanism is one that is driven by the bureaucracy's revenue requirement. It doesn't take account of the level of service that is needed or the most efficient way of delivering the service. What we have is a government-run monopoly service where industry's role is simply to write cheques and to balance the agency's books.

There is no impartial review mechanism, independent from the agency, to review the impact of cost to the industry or to see if the system is being delivered as fairly and efficiently as possible. We have used the example of the public utilities board in Nova Scotia as a type of review mechanism. This agency recognizes that consumers can only purchase electrical power from a monopoly that, because of a lack of competition, has no market-driven reason to be efficient. The PUB considers the economic impact of rate increases and it compares the cost of delivering power with the cost of delivering power elsewhere, in order to determine that some level of efficiency is being followed.

The single food agency, which will take effect as of April 1, presents several concerns in regard to the cost-recovery program. The licence- and fee-setting mechanism will continue to be driven by the budgetary needs of the bureaucracy. The present system is only being passed on through legislation to the new agency.

The seafood industry will only account for about 10% of the agency's workload, and representation from the seafood processing sector on the minister's advisory committee may not be adequate to protect the interests of the many sectors in the industry.

The industry can only help control what it can understand. A fully rationalized, integrated food inspection agency will be too large, and too remote, for processors or processor associations to understand. We have stated that inspection fees should have some relationship to the cost of providing particular services. We also don't believe in bleeding profitable sectors to cover bureaucratic overhead in other sectors. In order to promote these principles, industry must receive revenue and cost-recovery information at the regional as well as at the national level. Adequate control can only begin at the regional level.

Finally, the issues we have presented are real-life issues of great concern in our region. There are more than 200 processing plants in the southwest region. They provide direct employment for thousands of people and, indirectly, employment for many thousands more in supported industries.

Again, thank you for allowing me to address the committee.

The Chairman: Thank you, Mr. Morrow. We look forward maybe to Mr. Rideout responding, when the time comes, to a lot of your concerns in that regard.

Rory, do you want to wait for Mervyn to come back, and we can go to Mr. Bulmer, and come back to you?

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Mr. McLellan: Your preference, Mr. Chairman.

The Chairman: Mervyn, I think, should be here.

Mr. McLellan: Okay, fine.

The Chairman: We'll go to Mr. Bulmer, then, for his presentation.

Mr. Bulmer: Thank you, Mr. Chairman.

I thought I would in my short presentation just take a very quick look back at the decade of the 1980s to give a bit of a historical perspective on where we are today. I call it ``the industry that was.'' I recapped three critical years and laid out the key items that influenced whether an industry is profitable or not: exchange rate, interest rate, the consumption in your key markets, and whether you've got any raw material to work with. Just take a look at the 1980s, where we got into the restructuring mess, to see that we were in a period with a high dollar, high interest rate, low per capita consumption and just barely adequate resource.

By 1986 the dollar was down, interest was down, the demand was up, and the resource was up; and you couldn't do anything stupid enough not to make money in the fish business in 1986-87. By 1990 we were back down, going the other way.

At this time of the decade of the 1980s, of course, that's when we put another 20,000 or 30,000 people into the harvesting category. We expanded the number of plants in Atlantic Canada by over 100%. There was a general euphoria and optimism that all was going to be well, and of course then the resource wasn't there to support the increased structures. In fact, it really never was. In 1987, the peak volume-landing year, volume landed was up 27%, and as I stated, the number of plants was up over 100%. We were just dividing a little bit more resource into a whole lot more capacity to handle it.

That was the period when the dollar from the market was supplemented by so many government programs that the U.S. actually countervailed us and we were found guilty on something like 52 direct subsidy programs that were going to this industry.

Let's say that was the decade of the 1980s - the history. Now let's take where we are and look forward.

We're now into this new environment in government of fiscal restraint and cost recovery. What we want now is to take the dollar that comes from the marketplace and to share it around, not just as it's traditionally been, by the processors and the harvesters; now we want it also to cover, in addition to all those industry costs, compulsory government cost-recovery programs. We want it to replace some of the programs that government used to do that aren't cost recovery per se but that they want industry to pay for.

One thing we should keep in the back of our mind is that somehow this industry is going to have to have some retained earnings to redevelop the market, because as we do get increased groundfish coming back, we're going to have to be into an entirely different environment, getting into new markets and getting an entirely different product to the market, or we're going to be in a mess out of that.

I just recapped at a glance what I thought the key issues were that we have to keep our eye on. First I just looked at the department itself. I used the 1995 main estimates, with fisheries operations coming from about $420 million down to $152 million.

We've heard people around the table talk about how there's less service. Of course there's less service; there has to be. You can't cut $300 million and do all the things you used to do. We're going to have to do less. We're going to have to do it more effectively and we're going to have to do things differently. At the same time, I'm one who believes that the government is going to want more and more of what is done to be paid for by the industry it's being done for, or to, depending on your point of view.

The second issue is access fees. We've talked about those. They generate about $43 million. That's about a $29 million incremental increase - I broke it out according to the access fee, Canada Gazette part II, where it's coming from.

We've heard about inspection fees. That's about $4.8 million. That's up from about $900,000 now, which is all recovered from the import industry currently. That's all incremental.

Then there's what I call user fees. We're going to see small craft harbours where fishermen used to be able to park, docks got fixed, etc. - there's not going to be the money around to do that. That's going to be a new cost. We talked about the whole port privatization program. As these are privatized and run by companies, they're going to look for money. The fish industry, whether it's the harvester side or the shipper side, will all have incremental bills to pay coming out of that. The coast guard fee that we're looking at - that's all going to trickle down through the system, and again, this dollar from the marketplace is going to have to pay for it.

We've heard some of the people at the table talk about fisheries management issues: on-board observers, dockside monitors. My best guess is that's running somewhere around a $20 million bill that wasn't there before. Then there are some areas of science....

Then there's this concept of partnership that is being looked at, where even greater items that the department does would be charged to the partner - meaning the industry that they're partnering with.

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So that's the fishery side of the equation, but I won't stop there. I'll be looking at the coast guard beyond just the pure fishery. The pollution response side is being charged off to companies that are in fishing, as well as ship safety, radio service, ice-breaking, and maybe search and rescue. We don't know. Their objective is about $90 million. How much of that they hope will come from the commercial fishery I can't get a handle on at this point.

Currently Health Canada is not sending us any invoices, but we are all going into this new agency. We've been briefed. We know there's a $44 million problem there. The best early guess is that about $4 million of that will have to come from the fish program. That's on top of everything we've talked about today.

Foreign Affairs and International Trade used to provide all kinds of services to this industry. They now collect for consular services, and fairs and missions are now all charged out. The last person in the department who was assigned to the fish industry has left. There is now nobody who has a direct mandate to deal with the fish industry in that entire monolith of thousands of people. And of course, as I say, all the export services, promotion, market development, PEMD, and all of that sort of stuff is going to be a new cost to industry.

Environment Canada has programs. I like to use the example of dumping permits. It used to be $50; it's now $2,500 for the same little piece of paper. It doesn't matter if you're in Newfoundland and you have one barge of male capelin; you pay the same price as the port of Vancouver, which dumps 1 million tonnes 365 days of the year. We each pay $2,500. In fact, 50% of the entire amount of money that will be generated from dumping permits will actually come from the Atlantic fishing industry.

Again, Industry Canada has no programs left. There is not one person dedicated to the seafood industry. In fact, pretty much now if you want to deal with Industry Canada, you'd better be in high-tech or aerospace.

As for general cuts in the government, the Atlantic Canada Opportunities Agency was in the decade of the 1980s. That was an add-on to the dollar you got from the market. That budget's down 30%. There's a new focus on small businesses; you have to be less than $10 million. Most of our people would be right out of it entirely, and all the programs are loans.

Somebody already mentioned the freight rate. That was $100 million subsidy and now it's gone, at the same time as the Crow rate in the west. I don't know how much that impacts on fish, but if it's National Sea and they're shipping to Toronto and Montreal, obviously their shipping costs are up.

The International Development Association used to be a source of buying fish. They spent $28 million in 1989. Now it's down to less than $6 million and shrinking towards zero. Again, that's a reflection of fiscal restraint, cuts, etc.

Some other broad issues include provincial plant registrations. The provinces are in cost recovery and they're all going up. They've doubled it in New Brunswick, as an example. Then there is general tax downloading. For many small communities the most economic base there is the fish plant. That's what starts the whole dollar rolling. So if you want to keep garbage pick-up and the skating rink going for the kids, who do you go to for your extra tax dollar in the small communities?

Mr. Chairman, that's a recap of where we were and where we're going. It sets the big picture. I've heard some wonderful examples here of how you get that down to the microeconomics of somebody on a boat or in a plant, but the bottom line from my industry's point of view is if you're going to put in all these changes and if the government wants this to be the new environment, then you have to put maximum efficiency back into the industry to be able to pay for it.

This is a case where you can't have your cake and eat it too. If you're going to have all these changes, higher government costs, etc., then we as an industry are not going to be the industry you used to know. You're going to have to let it change dramatically so the economic units in the industry are in a position to pay the bills. You can't have bills and uneconomic units that can't pay bills. They just don't marry up.

Thank you very much.

The Chairman: Thank you, Ron.

We have six more presenters. We'll go now to the Prince Edward Island Fishermen's Association.

Roderick, are you making the presentation?

Mr. McLellan: Yes, I will make the presentation.

Thank you, Mr. Chairman. I won't take my full time; I know you are pressed for it.

Much of what is to be said on this topic has been said by my colleagues from Nova Scotia and New Brunswick. I am particularly aligned with the sentiments of Mr. Belliveau in that it seems to me we have a regime in place that is really desirous to tax and charge the people who can afford it the least, the little guys.

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When people like Mr. Bulmer pay higher fees, those fees come from somewhere. They come either from the resource or from the fishermen he would buy fish from. So at the end of the day, the costs trickle down, and the fellow who can afford it the least is left with the majority of the bills.

I'm very happy today that for the first time, the industry didn't do what I thought it would do. I thought that because these fees were so inequitable, the industry might end up fighting with each other, accusing the other guy. That didn't happen, and I'm very grateful that didn't happen. It's a maturity that has come to this industry.

A hundred years ago in this country a far-sighted statesman decided to build a railroad. The primary reason the railroad was built is that it was seen as something that would generate wealth for all Canadians, that would be good for the country. It by itself may not produce income, but the effects of it would definitely produce income.

After the Second World War, people in this country started building wharves throughout Atlantic Canada, not because the wharves themselves would make money, but because the fishermen who would use the wharves would be a net contributor to the Canadian economy. We have a document prepared by the national council, of which many of us are members, called Creating New Wealth from the Sea: Canada's Professional Fish Harvesters and the Atlantic Fishery. It is an academic study that shows the fishermen of this country have been good for the country and have contributed to the economy.

But as with the railroad, we now have a regime, we now have a group of people in power, who are saying, ``Oh, no! My God! Something terrible has happened: there's a success in this country. Let's ruin it, the same way we have the railroad.'' So now we will find anyone who is generating income, anyone who is successful, and tax them out of business. I don't think this is a good recipe for economic development in the country.

We in P.E.I, as elsewhere - and it has been explained - are undergoing evidence of poor or non-existent services provided by the government for higher and higher fees. We, like Mike Belliveau's people, have not kicked about this. Our people have paid the fees - not willingly, but they've at least acquiesced to it.

But there is a paranoia in the country - in the fishing country, anyway - about where this will end. People look at the federal government collecting fees much as you'd look at a wolverine. It's a bloodlust. Now that it has begun, where will it stop? Is there a cap? Is there a limit in sight, or will every last cent of profitability be taxed out of this industry?

If we can accomplish anything today, the message I would like to make clear to the government is, at what point will these fees stop? Is there an upper limit? If there's not, we'd better get ready for the lack of a fishing industry in the country.

That's about all I have to say for the time being. I look forward to the debate later.

The Chairman: Thank you.

We'll go now to the Deep Sea Trawlers Association of B.C. Mr. Day.

Mr. Day: Thank you, Mr. Chairman. I'd like to thank the committee for inviting me here today.

I want to touch on economic viability. I don't think anyone objects to paying their fair share, but there has to be an element of economic viability in order for us to do that.

If we look at the people I represent, the B.C. trawl industry, back in 1994 it was an economically viable fishery. Since then it's basically collapsed. We've had a series of programs forced upon us by the Department of Fisheries and Oceans. While I've heard the statement ``user pay, user say'', there's been no user say in the way these programs are forced upon us.

We have a 100% at-sea observer program. Every single trawler in the B.C. fleet has an observer on board her. Not only that; we have a 100% dockside management program. So every time a B.C. trawler lands, not only is there an observer on board when it lands, but there's also another observer, a dockside monitor, there to count the fish as it comes off the boat. This is a $3 million program and we had absolutely no say in its introduction.

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There's a single supplier of that program. There's no competition for that program. We're forced to pay the fees they charge. There is no appeals process to that program. Whatever they say goes. If we have to relinquish fish, we have to relinquish fish, with no appeals process.

In a number of cases - probably 50% - through November and December, when the weather was bad, the observer got more than the crew on these boats.

That's one program.

Back in 1994 the licence fee was $10 - a ridiculously low number; no one is arguing with that. But we've seen a fiftyfold increase in the basic licence fee to $500, and on top of that we have access fees to fish, which in 1996 amounted to around $15,000 per vessel. There was no guarantee you were going to catch that fish. In fact, in a number of cases that access fee was charged two and three times through the season.

DFO management plans cause all sorts of damage to the fishery. The season was split into three trimesters. You were able to pick any two out of the three in order to fish. So of course at the start of the trimester the whole fleet went out, caught as much fish as they could, and collapsed the market.

A number of the earlier speakers have touched on all the other cumulative departmental costs that are coming onto the fishing industry. I just wanted to touch on those.

I sat through some hearings of the new Canada Shipping Act, which is planned to be introduced later this year. There are going to be increasing costs to the industry for that. We've already seen the new regulations coming down, which include some horrific provisions in terms of manning and certification. These are all costs that are going to be dumped onto the fishing industry.

The fishing industry is under siege from the environmental movement at present. These are costs that have a huge impact on the fishery. There's a provision for a whole series of marine protected areas on the B.C. coast. Again, we've had no say in how those areas were determined.

I sat through a series of meetings last week on the new endangered species act. What sort of impact is that going to have on the fishing industry, let alone the aboriginal fishery strategies that could be included within the new Fisheries Act?

The B.C. trawl industry has gone through a restructuring process in the past year, which has had tremendous impacts on the industry. The net result of it is that we've lost around 10% of our fish to various community and provincial groups. There has been no compensation talked about for that. There has been no user say in this process. We were told that political expediency is forcing us to give up fish.

Just to conclude, all these elements added together produce basically an uneconomically viable fishery. Give us some economic viability and we'll be happy to pay the user fees.

Thank you.

The Chairman: Thank you, Chris.

We'll now go to Earle.

Mr. McCurdy: Thank you, Mr. Chairman. I appreciate the opportunity to be here. I'll try to avoid as much as possible being redundant in terms of what has already been said. A number of points I wanted to make have already been made in substance, so I'll try to address the subject at hand from a slightly different perspective than I had originally planned.

I think it's important in having this debate that we keep in mind the nature of the sector of the economy and the regions of the country we're talking about. The fishery is and has long been a very strong and positive contributor to our balance of trade. In 1994 it was roughly a $3 billion export industry. I'm not quite up to speed on the latest numbers. It's an industry that creates jobs and economic activity in regions of the country where both are, generally speaking, in very short supply. People often lose sight of the crucial nature of our primary industries in terms of the economic activity that flows from them.

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I was recently in a small hotel in a community in Newfoundland that was particularly hard hit by the groundfish collapse. They had a little sign on the table in the room - in all the rooms - apologizing to their guests for the deterioration in service from what used to be there a few years ago and explaining about the tremendous loss of activity. They had the largest groundfish plant in the province, if not in Atlantic Canada, virtually across the street, and it closed. They apologized for the decline in service. The number of jobs in the hotel went down from 20-some to two or three, and they were barely keeping the doors open.

That's the kind of impact that happens when you have the sort of downturn we've experienced. In an economy that's about 1.5 million jobs short nationally, we undermine job-creating primary industries at the national peril.

It's an industry that allows us to populate the coastline that faces the rest of the world. Someone might say, what the hell does that mean? What's so important about that? Well, think about if a group of boat people come ashore, which has happened. Who are usually the people who pluck them out and rescue them and bring them ashore? More often than not it's fishermen.

If we're talking about cost recovery and all those sorts of things, perhaps we should talk about a program with the RCMP whereby a portion of the proceeds of drug arrests in fishing ports that are accounted for by fishermen.... If we could only sell the stuff we help the police bring in, we could pay for those fees.

Some hon. members: Oh, oh!

Mr. McCurdy: The fact is it's very important to have that part of the country populated. Conventional economics that someone would apply to areas of dense population are not applicable or meaningful in areas of scattered population, great distance, and isolation. A little more imagination is needed in planning for these.

I won't repeat all the different fees. Most of them were touched on. People missed a few, but anyway, it gets to the point where there's one brick too many on the load. With the accumulation of all the fees and in many cases an increase of several hundred or even several thousand percent in a fee virtually overnight, you can forgive people when they start to feel a little tapped out by all that.

The industry on which all that was dumped in very short order was already in very grave crisis, with the loss of approximately 40,000 people in Atlantic Canada whose incomes had been partially or totally interrupted by the groundfish collapse. And of course B.C. has its own separate problems as well. These greatly increased costs were on top of all these other difficulties.

You always have to beware zealotry of any form, and I'm a little concerned that the ideologues will carry the day. I'm concerned about what the outcome of all this will be, because there's a couple of things that could very well take over.

For example, we can't let revenue goals for cost recovery dictate the type of fishery and the type of society we have in our coastal communities. With all due respect to my neighbour on the right here, it's too important a decision to allow somebody in Treasury Board to decide on revenue goals, which therefore dictate what would otherwise not be acceptable public policy.

We also have to be careful and DFO has to be very careful of not letting the zealots take over in terms of things like adding extra costs in conservation harvesting plans, which is esoteric stuff if you don't have to live with the consequences, but it's heavy-duty stuff when you do. When changes are made to regulations, they can have a tremendous cost impact on people. Dockside monitoring has been touched on.

There are ways the department can work with industry to have effective controls in those areas without making a religion out of it. That's something we really have to be careful of, because DFO is a department that stops a lot of bullets in the run of a week, and a lot of their pain is self-inflicted, but it is also an important institution to a lot of people in the country.

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I looked at the figures Ron Bulmer had in his paper concerning the operating budget for DFO and where it's headed. It's quite clear that what's in the process of happening is that DFO is having stripped away from it any capability of really doing even its core job adequately, because of lack of funding. That's quite clearly the track we're on. People will try to dress that up, but a lot of us are already feeling the pinch. John Kearney, for one, mentioned some of the impacts of the reductions that have taken place to date. But it looks to me as if we ain't seen nothing yet.

So there are very serious consequences for that, which in the long term will affect the viability of our industry, because things such as science and enforcement are going to be adversely affected, and that's the guts of fisheries management.

It also gets frustrating when you see logic turned so completely on its head and values we once believed in turned so completely on their head. In particular I was struck by a recent report done for a federal department that described loyalty to one's community as a liability. I have to rethink just about everything I believe. That was a recent report, saying, gee, one of the problems of these foolish people in the east is that they're loyal to the community they were born and grew up in. I have trouble getting my head around that as a liability. So I do have a lot of rethinking to do there.

At the same time, remember the uproar in London, Ontario, when the Department of Human Resources Development was so far off base that they found 15 displaced fishery workers from Cape Breton and assisted them to go to London, Ontario, to look for work. Everybody up there went back. They said, gee, don't send them here; we have our own unemployed, and we can't cope with any more. Well, where are they supposed to go?

``Get out and relocate''. They're told those are attributes. If you want to stay where you are, well, there must be something wrong with you. Yet when you go somewhere else, they tell you, not in our backyard. Well, if you can't go to London, Ontario, looking for work, where in Canada can you go? Do we have any prospects? At least people staying in the east might own their own home and have some basis for surviving.

What we have to do is try to get the whole issue of cost recovery, imposition of fees, and so on in some kind of perspective. What is the nature of the industry these are being imposed on? What are its characteristics? What are people able to absorb and cope with?

To summarize, right now there's a feeling that people are really tapped out. It's a total burden, and they're really taxes. You can call them this and that, but really they're taxes. A total burden is being dumped on people that is just more than the system can bear. Where are those loose millions lying around in the Canadian fishing industry, waiting to be scooped up? The answer is they're not there, and people are struggling to survive in that industry.

Somebody talked about a truce. It's really time to ease off for a while and let people try to cope with what's there.

As for paying fees, people accept that has to happen, and I think it is remarkable that the whopping increases have been accepted to the extent they have been. But there comes a limit to everybody's tolerance. I know our members are at theirs.

A voice: Right on.

Mr. McCurdy: Thank you.

The Chairman: Thank you very much, Earle.

We'll now go to your counterpart on the west coast, John Sutcliffe.

Mr. Sutcliffe: Thank you, Mr. Chairman.

I share and would echo the concerns of representatives of fishers' associations elsewhere in the country, but I won't take time to do that in any detail. I want to at least get on the table some general information, although specific to our major west coast fishery, that has recently come to my attention and raises some interesting questions.

The whole issue of costs of the fishery is one that really may need much closer examination and a more rigorous process than it's had to date.

In particular, on the west coast, as most people here know, there's been a very controversial fleet reduction plan in the salmon fishery, and a major driver there was the widespread, commonly held belief that the costs of managing that fishery were very high and somehow equalled roughly the landed value of that fishery. That's been the popular wisdom regarding that fishery for some time, and I think even such learned observers of the industry as Dr. Peter Pearse made that equation back in the mid-1980s.

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However, in a round table process launching the whole fleet reduction issue in the past year, a document was tabled - one that unfortunately nobody really looked at, at the time - and it was a discussion paper on government costs. There is some extraordinary information there. The direct costs associated with managing the salmon fishery were $19.2 million, and those costs also include consultative processes, both domestic and international, and a number of costs that one could argue would be there even if there were no commercial fishery and that resource were being looked after just for its cultural and esthetic benefits.

In 1997, $7.2 million will be recovered from access fees. So we're down to roughly a $12 million cost of managing a resource and a commercial fishery on that resource that is worth, in terms of landed value, between $200 million and $300 million a year, and double that for wholesale value. I don't know if that percentage of the landed value is a high cost for government to be bearing or not. It's between 3% and 5% of the landed value and less of course of the wholesale value. But I think that's an interesting question that should be looked at. I don't know whether that compares favourably with any other particular fishery in this country, and I don't know what the benefits, in terms of revenue, are from that fishery when you look at the income taxes fishermen pay, for example, and what benefits are lost now that we've restructured that fleet in terms of revenue recovery through other forms, mainly income tax.

In addition, there are clearly some new costs that will be transferred to the province to deal with the dislocations caused by that fleet reduction.

I would say that in the past I would have been very leery about the whole issue of cost recovery in a careful examination of costs, but in retrospect I think if we really did look at what it costs to manage a fishery and what the benefits were, some of our policies, and in particular the fleet restructuring policy we're now burdened with on the west coast, would have been designed in quite different ways and the impacts would have been accounted for in quite different ways. That's an interesting point, I think.

I might say, it comes as a surprise to very close observers of the industry that those management costs associated with the fishery are such a small fraction of anything anybody had previously expected. I remind you once again that it was the assumption that those costs were so much higher than in fact they are that made it acceptable public policy to have the kind of fleet reduction we have out there. I wish we'd paid closer attention to this obscure discussion document a year and a half ago. The issues of cost would have been dealt with a little more reasonably and maybe we could have had better policy.

I just want to make one other general comment. It's particularly relevant to access fees but to some of the cost-recovery initiatives as well.

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In my region there's a widespread perception that cost-recovery initiatives, and in particular licence fees, leave the region and in no way benefit the fisheries or the communities on the west coast.

I also know from discussions within the commercial fishing industry council, which I represented in the licence fee working group, that approaches on the basis of fees for landings, sort of a royalty-type system, which more closely reflects a user-pay approach to fees, are popular solutions, and in particular to some of the problems Ron mentioned earlier. Fees like that are quite acceptable as long as they remain in the region, or somehow there's a perception at least that those fees are benefiting the industry and the resource in the region. Without that - and there is no such perception at the present time - cost-recovery initiatives, increases in access fees, and so on, will continue to be very unpopular in my region.

Those are just some very general comments. Thank you once again for the opportunity.

The Chairman: Thank you very much, John.

We're winding down to our last two presenters, so if anyone wants to ask a question of the government officials, or if government officials want to ask any questions of presenters, just catch the eye of the clerk. He'll take your name and we'll start that discussion as soon as Brian and Sterling finish their presentations.

Now we'll go to Brian Giroux.

Mr. Giroux: Thank you, Mr. Chairman. I appreciate the opportunity to come here and represent the interests of our group.

I'll start with the market. This is one thing that has really been crushing us from the point of view that there has been quite a change over the last three years in what's been going on in the marketplace. I'm dealing with groundfish products. We catch cod, haddock, pollock, flatfish, different types of groundfish. This is very much a global industry. It almost always has been from the time the country was first settled. We've always exported far more of these products than we've ever consumed in the country. This industry has always been a very globally oriented industry. In the last few years, though, the competition has really intensified.

We compete in the American marketplace, which is the principal outlet for our products. We compete in the American marketplace with Russian products, Norwegian, Icelandic, the Americans' own production in the northeast and on their west coast. For example, in the quotas that were just announced for the Russia-Norway-Barents Sea area, off the northern tip of Norway, they've increased their cod quota from 700,000 metric tonnes to 850,000 metric tonnes in the upcoming season. We're already in tough competition with them, but now we have an additional 150,000 metric tonnes to go into....

Their haddock quota, for example, has been increased from 70,000 tonnes to 210,000 tonnes. In Iceland there has generally been about a 20% to 30% increase in their cod and haddock quotas. A ship lands every week in Shelburne and then goes on to Boston with fish products, dropping them off in Nova Scotia and in Boston. There's a plane that does the same thing, going directly into additional North American marketplaces.

The Bering Sea is producing at about 1 million metric tonnes of groundfish products a year. This doesn't include things like 250,000 tonnes of farmed catfish, which is a whitefish-equivalent kind of product that's doing very well in the marketplace.

I guess you could say that if you look at what's out there, there is a lot of competition, and this is without the 700,000 to a million tonnes of former Canadian codfish products that we used to have in this marketplace. We're not even there. I would venture to say we had 10,000 or 11,000 metric tonnes of cod products in the market. If you look at it, that's a minuscule fraction of what we used to do in that marketplace.

This is the third year in a row of these price declines. It seems that the market is full. A lot of this product is coming in from freezer trawlers. The American product out of Alaska, Iceland's product, some of the Norwegian product, and almost all of the Russian product is from freezer trawlers, with a very low cost of production.

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So we're getting hit by that. The consumers who used to buy relatively fresh market are now buying the frozen and then taking out amounts they need to get a good, steady, dependable supply. The fresh market still exists, but it's very small. We've had boats fishing in the last two weeks. Anything more than a few hundred thousand pounds in that marketplace and the price collapses 50% or 60%. There's just no depth to the market any more.

We're getting price swings virtually daily of as much as 40%. The decline from last year looks as though it's about 10% to 20% in overall value. It's initial now, but certainly in the year before this, 1996, there was a decline of about 30% in returns compared to 1995.

So there's a continuous, steady, intense competition and a continuous, steady slide in price. It's just the market - supply and demand. There's lots of supply.

If this continues, we speculate that prices will bottom out in the summer, when the summer fisheries open, at about 25¢ a pound for market products, groundfish, cod products, etc. That's to the fishermen. That represents a 15-year or more low price. That tells you the context we're trying to operate in.

The fees we're paying are based on markets such as the one from 1990 to 1993, before some of these rapid declines and intense competition. For example, back in 1990 the Norwegian fishery was closed. There was a lot less competition in these places.

To give you an idea of the cumulative impact of the fees on us, I'll use the base year of 1991 and I'll use 1997. In 1991, for licensing fees, vessel registrations, etc., we were paying about $9,800. I agree that is ridiculously low, but today we're paying $1,100,000 or $1,001,000, give or take. It depends on how you apply some of the ratios, but it's over $1 million. So we went from $10,000, basically, to $1 million during the calendar year 1996.

Interestingly enough, we represent about 2.5% of the national total in access fees for this system and we represent less than 0.5% of the claimed landed values to the department. The ratio here is absolutely stunning. We represent less than 0.5% of the landed values of the country and we're paying 2.5% of the licence fees for the country. That's what the numbers show.

In 1991 dockside monitoring was non-existent. Now we pay, as a fleet, over $300,000.

As to wharves, we've always paid a fairly large amount for wharves, because our vessels are larger. It was $1,500 or so in 1991 and it's gone up to about $2,700 a year now.

EI is changing to the tune of about 10%, we estimate.

Steamship inspections used to be $300 or $400 and now they're $2,000 plus, depending on the number of visits and other things.

There are licensing fees for communications, and a whole bunch of other things are building up.

As for worker's compensation - and I know Ronnie mentioned it - that's not an issue for this level of government, but certainly it's adding to the costs.

As far as we're concerned as primary producers, almost every new cost you add to the processing industry will come directly from the fish price. It's only logical. The market is not going to react to a 2% or 3% increase in costs at all; the market is simply going to say, look, we can get the same product down the street for the same price. Either meet that price or you're not going to sell to us.

So the bottom line is if those units are going to maintain their viability, they're going to pass all those costs down to the primary producer. As someone put it very succinctly today, it's going to continue to be passed down to the guy on the deck.

One of my predecessors had a saying: ``It all comes out of the caught end'', which means what you catch is what's going to pay for it, eventually.

So as you can see, we've had quite a dramatic increase in our operating costs. The cumulative impact we estimate to be in the realm of 6% - the gross impact, so to speak.

This brings me to the final part of my presentation. I agree 100% with what John said about the way this was implemented. As for the process, the principle, and the impact, we were not operating according to any principles; the process was very interesting, if I can use that term; and the impact was never analysed. We ended up with systems imposed upon the industry.

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One of my questions throughout it was, why aren't we doing an analysis of the net profit of some of the fleets, in a very general sense? You must be willing to accept the fact that there are high-value, low-volume species - tuna, for example - and that there are low-margin, high-volume species such as herring and groundfish, where the returns are in the single digits as far as profit margins are concerned. So if you walk in and take 6% off the top, you may well be taking most of the profit margin out of some of these sectors.

Even at the working group level, that was never thoroughly discussed. From what I understand, they envisioned it as being very complex, and every operator has very different operating conditions and stuff like that. But in a general sense it's a point that I thought needed further discussion.

In conclusion, I agree in a fundamental sense that we had to increase the fees. This concept of user pay, user say doesn't exist in our industry, but I somehow still am optimistic that it may evolve to that.

We have to have discussions on mechanisms. Here we are, two years into this thing, and we still don't have a mechanism to deal with things like price collapse or catch failures, such as what happened in the swordfishery in South West Nova last year. They paid their fee, they went out, and they couldn't catch anything. How do you deal with that issue? It's just not easy. You have to have a responsive mechanism where you can adjust to these things, if you are going to have it so it doesn't drive people into ruin.

I would ask you to give us some support here to do some cumulative impact analysis and foster some discussions on some of these issues that relate to the viability of this sector in the long term. If it continues like this and if the declines continue.... Some of those declines in price are already starting to show up in some of what we consider the higher-value species, such as crab and tuna now. The Japanese market is in chaos as their economy continues to deflate.

We're going to be in real trouble here unless we have the ability to justify why and what we're charging and to say with some assurance that it's not killing the sector it's being imposed upon.

Thank you.

The Chairman: Thank you very much, Brian.

We started with a Belliveau; I guess we'll conclude with one.

Sterling, you're up.

Mr. S. Belliveau: Thank you, Mr. Chairman. Going last sometimes has its privileges, and today I think I benefit greatly by being the last guy in line here.

I particularly noted the first two speakers spoke of fairness, and each and every individual here today spoke of a fair system dealing with the licence fee structure. What I would like to zero in on is the unfairness, particularly in South West Nova, concerning the lobster licence holders there. I want to bring out four or five points in the next five or ten minutes, and hopefully you'll bear with me.

I have no presentation. I just want to read a few paragraphs I put forward this last year or so and go from there.

It is difficult to believe that the DFO's objective is to preserve the fish stocks while maximizing economic benefits to the people involved in this industry. It is easier to believe that this user-fee policy is designed for a further fleet reduction and to create a larger gap between the average single fisherman and an elite corps with access to property rights in the hands of a wealthy few.

As for the multi-species licence holder, the success of the Scotia Fundy region has for generations depended on more than one licence per fisherman to survive, from time to time. DFO has never understood the importance of these dormant licences, but in their wisdom are creating and promoting a ``use it or lose it'' policy.

This system will take out large numbers of licences not in use by fishermen and will create more stress on all the species we are licensed to fish. This program, designed for cost recovery, may actually backfire and put more stress on some species such as groundfish, because fishermen feel compelled to maintain these licences.

Let's look at the Gardner Pinfold study more closely. A snapshot of the fishery was taken by Gardner Pinfold in the years 1990 to 1993. Most fishermen in this fishery know that nothing stays the same in the industry. For example, Pinfold shows a near bust for the gulf herring fleet while the swordfish and long-lining harpoon fleet of South West Nova enjoyed a boom for 1990 to 1993. These two fleet sectors have both flip-flopped in this short period of time.

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Perhaps the most important issue is the fact that the Gardner Pinfold study took into account the total number of landing revenues generated by fleet sector or district and region. However, with a large number of inactive licence holders in a fleet sector, this drastically distorts the outcome.

For example, the gulf herring fleet, the South West Nova groundfish fleet, the mackerel trap and herring fleet.... Without a complete understanding of this complex industry, it is easy for DFO to demand that the LFA 34 pay. However, fishermen in different areas can earn the same gross earnings using a combination of licences but only pay one-quarter of the licence fees that district 34 lobster fishermen pay. From the beginning this industry suggested a fourfold increase across the board for DFO to get a targeted amount of revenue. This may have been too simple.

With the present Gardner Pinfold study price structure, fishermen paying higher prices will demand more access to their share of fish stocks, thus moving an independent competitive fishery based on a privilege to a select rich few owners who will be the voice of the fishery. The fee structure of the future must protect the independent multi-licence holder, and a fair rate across the board is not too much to ask. The present Gardner Pinfold report is seriously flawed.

There are three or four points I just want to pick up on here today. I'm over-confident this afternoon because everyone here committed to fairness in the system. If I can get everybody here today to go back and review the formula being used, I'm confident that our lobster licence holders in our particular area will be revisited and their fee structures will be reduced.

If you look at some of the fleet sectors that I mentioned, the inactive licence holders, I predict the gulf and the gulf herring fleet, the mackerel trap fleet - there are a number of them in there. But if you look at the total number of fishermen and the inactive licences, that distorts the whole picture. To me that jumped out very clearly in the Gardner Pinfold study. The numbers are there.

The one trump card I have here today is that a fisherman - you can pick them in any region. Pick a fisherman with a package of licences who is holding the same licences in South West Nova. He can pay anywhere from four times more than the same type of fisherman using the same licences in some other region.

We all talked about fairness. That's the one I want answered here today, hopefully from somebody in the DFO.

As soon as the ink was dry on the Gardner Pinfold study, it was obvious that nothing stays the same in the fishing industry. It's a continuous cycle of sectors doing good, of failures, of a movement of particular fleets, more activity over here in this sector - you're always on a continual cycle of good and bad and high and low. The formula does not address that.

We have to have protection for multi-licence holders. I can remember as a young boy getting out of school at the age of 15 and starting off Irish-mossing, and depending totally on that. I think in the last 20 to 30 years I've depended on one licence for my main income in two or three years. Right now it's the lobstering. Four or five years ago it could have been herring or groundfish. In my early years it was Irish-mossing. So the formula has to take into account a multi-licence holder.

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The formula does not talk about new, non-traditional fisheries. The first one that jumps to my mind right now is the sea urchin, for example. The shark fishery is another one. Are the new guys on the block paying $30, or if it's not as much as the other guys down the street, are they going to pay their share, in fairness?

What about the reopening of the old moratorium fisheries? Are they paying on that? If they go out and produce and are successful, are they going to pay their fair share?

A year or so ago, I dubbed the guys at home the cash cows for DFO. That name is still sticking in our particular region.

A lot of fishermen are unsure. They have boats that are eight or ten years old, and they're very aggressive fishermen. They are beginning to be concerned. They want to make a plan for the next two years or the next five years, but the plans are being put on hold, because they want this clear picture.

Back in the 1970s, because of the 200-mile limit, there was a boom, a bonanza, and there was a saying: ``Get out there; you will be successful''. In the 1980s, the one that irritated me - and the DFO and everybody used it - was, ``Too many boats chasing too few fish''.

I'm asking you, what term will we use for the next decade? Hopefully it will be, ``The independent fishermen have a future''. Right now there's a question mark on that particular phrase, and that's one of the questions we have to have answered here. We have to show there is a future for the independent fishery.

I'm not going to dwell on these issues, but a couple of them are very important to me, in particular the fishermen holding the same package of licences in any other region and paying a quarter less. Hopefully we can have that reviewed.

Thank you.

The Chairman: Thank you, Sterling.

Mervyn, did you have a statement or a question?

Mr. Misener: I have a question, if I could.

The Chairman: Okay. Could you hold your question just for a second? We'll ask Cheryl to respond on behalf of the department and then we'll go to questions and discussion.

A voice: It's going to be a hell of a response.

Some hon. members: Oh, oh!

Ms Fraser: Thank you, Mr. Chairman and members of the committee.

I also want to thank you people around the table today for the very interesting and very important facts, comments, and arguments you've outlined in your presentations.

I need to come back for a minute to the very basics of the Department of Fisheries and Oceans from a budgetary perspective before we get into some of the specifics.

The 1994 federal budget set out a program review target for the Department of Fisheries and Oceans. That program review target mandated the department to achieve approximately $450 million in budget reductions over a four-year period.

Mr. Bulmer and others referred to it and outlined the severe budgetary impacts and the changes that have to be made within the Department of Fisheries and Oceans.

This was all part of getting government right. It was included in three broad objectives the government brought forward in that budget, looking at competitiveness of Canadian industries, value for taxpayer dollars, and the deregulation and deficit reduction components.

On that premise, the $450 million target is real for the department. I would love to be able to sit here and tell you it isn't, but believe me, it is.

With that, there was a recognition that there was a cost recovery and an access fee or an access to public resource component. The balance is if we chose to change the way targets were initially set out on access fees or on cost recovery, we would be further reducing the services provided by the department in order to meet our budget target.

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On the access fee, on broad principle, one of the things I'd like to mention is that yes, there's no doubt about it; there were a lot of discussions and a lot of questions, and there were problems when the initial discussions of the fee were outlined. But the licence fee, your access fee, was to be based on the principle that those who benefit from access to a public resource managed at public expense should be expected to pay a fair fee that reflects the value of that privilege.

With introduction, the value was determined through gross landed value, because at the time it seemed to be the only area where people could agree the figures were accurate. We could not get agreement on net numbers and we could not get agreement on other avenues. So the fee was set by a fishery based on the value earned from that fishery.

With that came the recognition that before introduction of the fee there had to be some changes that recognized downturns in the fishery, areas where there were concerns about how the fee was apportioned, and other aspects that came back through the consultations. With that, approximately $9 million of previously expected revenues from access fees were not achieved, and this has come out of our further budgetary reductions to cover the shortfall.

In October 1996 - and I admit this is about six months later than we had hoped to have the group up and working - the minister did announce the establishment of the DFO stakeholder working group to examine whether and how the fee schedule could be improved and to submit recommendations to him. I'm aware of the discussions of the committee, but I am not aware of what they've agreed on in the final report. That final report has not yet been submitted.

So if there are people around the table who are members of the group, I appreciated your comments on the report, but the bottom line is the report has not yet been received by the minister.

Just for your information, the working group was composed of a DFO chair, Mr. Michael Murphy from our economics group in the Maritimes region, and industry representatives, including CFIC on the west coast, FANL on the east coast, and the Atlantic inshore and the Atlantic offshore.

The group was asked to look at the net income issue, they were asked to look at individual landings information rather than fleet averages that were used in calculation of the fee, and they were asked to look at identification of other approaches. We'll see what the group comes back with.

I would like to mention one thing on the fee schedule issue. Yes, changes in the fee will have to occur as changes in the fishery occur. That was recognized at the time. I agree that we don't have a picture-perfect way of dealing with that issue yet. That's something on which I hope we'll get advice back through our normal advisory committee structures in the department as well as through the working group. But the bottom line is when a fishery declines, there will have to be changes, if the decline is significant.

The other thing I should mention is, subject of course to directions in any federal budget that may come along, the department as of now is not contemplating any increases in the revenue targets that were established. So there's no surprise hanging out there that is expected to come forward and hit the industry from an access fee point of view.

I should mention a couple of other things with respect to the Department of Fisheries and Oceans.

The coast guard is also part of our responsibilities. I did not come prepared today to discuss fees in relation to our marine sector activities. We're prepared to come back to the committee to have that discussion, if the committee wishes. But I should mention that ship safety is not part of DFO; it's part of Transport Canada and did not move over with the coast guard. As part of the marine activities, it might be something the committee wishes to entertain, if they want to go forward.

My colleague from the Auditor General has some very wise words in his presentation, and it's something I'd like to draw everybody back to, something I take quite seriously.

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I'm going to read from paragraph 13 of his presentation:

Industry tends to question whether departments have done everything necessary to reduce or eliminate costs, arguing that cost reduction and/or avoidance should always precede any attempts to cost recover. Departments may feel that industry is reluctant to accept reduced services or to provide suggestions on how costs can be reduced in the timeframes necessary to deal with impending budget cutbacks. Both parties need to interact in good faith and work together constructively to find solutions that recognize each other's needs.

In all, that to me is the best advice the department can take back from the presentations that were made.

There's one other thing I'd like to mention. I won't get into the specifics on inspection fees, but for those of you who may not be aware, there was a discussion at another standing committee on this issue of cost recovery with respect to another area of the federal government. That standing committee made some fairly direct recommendations back to the government. I have a copy of the letter here, if the committee or anyone else wishes to look at it.

The Chairman: Yes, we fully intend to do that, Cheryl. Are you finished?

Ms Fraser: I am. Thank you very much.

The Chairman: Before we proceed, we have a motion in front of the members to cover the costs of bringing people in this morning. It's moved by Harry Verran that the committee adopt the budget in the amount of $22,408.20.

Do we have a seconder for the motion?

Mr. O'Brien (Labrador): I second the motion.

Motion agreed to

The Chairman: Mr. Misener, do you want to lead us off in our discussion? We have a little over an hour, so we should be able to have a pretty good discussion before we conclude.

Mr. Misener: Thank you, Mr. Chairman. I'd like to direct my question to Cheryl Fraser.

Has any analysis been done on the impact of all of the user fees, and if so, can you share the results with us?

Ms Fraser: Thank you very much for the question.

Let me first respond by saying an impact analysis has just been completed for the marine sector, and the results will be coming forward shortly for that side of our responsibilities.

As for the fish side, the access fee at present is clearly the largest fee being imposed on the industry. Having said that, we're aware of the impacts the fee was intended to generate. We understand it's around 3% of gross. We're looking forward to hearing back from the working group on any advice they may have and how we may wish to address this further.

But currently I would look at the access fee as the key fee with respect to the fishing side of the business.

The Chairman: So there is no study yet.

Our next questioner is Harold Culbert, MP.

Mr. Culbert: Thank you very much, Chair.

First of all, I must say I've found this scenario of a round table extremely useful and I want to congratulate all of the presenters who made presentations to us here this morning. In many cases they were in agreement with each other, in agreement with comments I've previously heard in my jurisdiction, and I suspect similar to others.

I want to start with the general overview that I seem to be hearing this morning. Industry is in general agreement with the philosophy of cost recovery based on services provided and the payment of a fair percentage or share of the costs associated with those required services.

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The questions then become: What are the required services of the fishing communities, fishing associations and the fishers themselves? What are the required services of the department? Who pays what percentage of the costs associated with both?

I have to admit that when I look at this particular report brought forward, there is some accuracy in what we're being told this morning, because this talks about DFO revenue initiatives from the fisheries sector, not about the costs associated with the sector and the revenue initiatives associated with that.

So I would like to get this out on the floor. I don't want to repeat what has already been said - very eloquently, I must say - by the presenters this morning, but I want to aim a few questions at the department, through Ms Fraser.

One, who is working in the department to bring about the new philosophy, the philosophy included in Bill C-62, for example, which is before the House, the philosophy I just mentioned, that the DFO is operating in a fashion to bring about what is the true cost of those services required by the fishery? Then, what is the true cost of the services required by the department, and who pays what percentage of the same?

On the other hand, I want to be assured that the DFO is not operating in the same fashion that perhaps it always has - in other words, to control the fishery rather than working in partnership with the fishing communities, the fishing associations and the fishers.

Finally, the philosophy in my region of Scotia Fundy seems to be - and someone mentioned it a few moments ago in their presentation - a philosophy to force or to push the little guy from the fishery and to place it all in the hands of a few large fishers or fishing bodies that would make it less cumbersome for the DFO to negotiate or to operate with.

I would direct those questions at the DFO officials here, Mr. Chair, if I might.

The Chairman: Ms Fraser.

Ms Fraser: I'll start off by mentioning that within the department, when we talk about cumulative impact I should indicate that we also look at the $450 million target we have to meet. This is not the cumulative impact of the fee; it's the cumulative impact of service as well.

There was a significant discussion around how to best meet that $450 million target set out in the 1994 budget and how core mandates on the fish side with respect to conservation can be met. An advisory committee was established during the process of program review. As well, the department did meet the six program review tests set out by Treasury Board.

In summary, there was significant discussion on the impact of that $450 million. The impact is tough. We know that. We're seeing it. There are numerous letters in that regard as well.

I also think there's a general acceptance of cost recovery, but there are questions or concerns about how it's being done and perhaps the relationship between the $450 million budget target and cost recovery. I accept that. The issue is next steps, and the issue will be, in a variety of areas, working very closely with the industry on the next steps.

You raised the Fisheries Act as an example. Fisheries management agreements, or ``partnering'', as we tend to call them under the Fisheries Act as it is before the House right now - it's not through second reading yet - set out a framework of how partnering in fisheries management agreements could occur with the department. That's a subject for another discussion, but coupled with that will be the necessity to work very closely with those who'll be involved in those fisheries management agreements in order to work out the details of how they will be enacted. There is no underlying agenda to wipe out the little fisher in favour of the big fisher, either through the amendments to the act or the partnership arrangements, through the cost-recovery mechanisms that are being introduced, or the access used.

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With respect to actual direct and indirect costs, Don, you may wish to add a bit.

Mr. Donald Dickson (Director General, Finance and Administration Directorate, Department of Fisheries and Oceans): Perhaps I can just indicate where we are with respect to financial information and the systems to gather that information. Again, some of you will be aware that with the merger with the coast guard, the department has gone through a restructuring of how we present our accounts. Also, we're putting in place a new financial system that will serve the needs of the managers within the department, while gathering the kinds of information that we eventually can use for more thorough cost accounting.

Getting that structure and its systems in place is the first step. The cost accounting will then be the next thing that is developed with fisheries management officials and people in the industry, for example, in order to see what cost breakdowns they need, what types of allocations are appropriate in terms of allocating costs to different activities within the department.

We don't have a firm time line on completing all of that activity as of yet. Our priority is still to get the basic systems in place, but it's certainly one of the things we'll be working on in the next twelve months.

The Chairman: Thank you, Mr. Dickson.

Harold, do you have a final word?

Mr. Culbert: Finally, Mr. Chair, I want to make sure I understand correctly that it is the philosophy and policy of the department to bring forward a structure that would show the services required by the fishers, the services required by DFO, the costs, and who should pay what percentage of both. Is that part of the analysis that you speak of?

Mr. Dickson: Certainly, we want to have a better ability to match costs with service. For example, in part III of the estimates and the report on plans and priorities that will be tabled later, there is a matching of costs to business lines. It's a matter of working that from a very high level of detail down to more specific levels of detail. Will we, for example, be able to cost fully individual support to individual fisheries? We're not there yet, and I can't say definitively that we will have that nailed down, but that's certainly the direction we're moving in.

Mr. Culbert: Thank you, Mr. Chair.

The Chairman: Ron Bulmer.

Mr. Bulmer: I actually wanted to direct a comment more to Mr. Miller in terms of the broad policy that oversees cost recovery.

You made a comment about the idea of the costing of services reducing the demand for services in the pure marketplace. That's absolutely true, and the point I want to make is that this is a very highly regulated industry. As you've heard from many of the comments here today, the problem is that the person who decides on the service also decides on the necessity of the service, and costs the service. He then tells the person who is the recipient of it which ones he'll pay for. That's one of the issues that I've heard come up, and it's probably what the gentleman was aiming at.

This is not a pure demand-for-service kind of situation. Somebody inside the department has decided that things like observers and dockside monitors - items quoted here so often - are needed for conservation, they will cost $375 a day, and you shall pay for them.

What we've been arguing with Treasury Board all along through this thing is not the need to usurp ministerial authority - in the end the Minister of Fisheries and Oceans has to make those really tough judgment calls - but the need for a process whereby there's an opportunity for third-party input. Ninety percent of the time these things are going to get solved through good, open, frank consultations, but for those issues where that can't be, we would like to see a process whereby a third party hears the two sides of the argument, one side from DFO in terms of the service, the cost, why it should be charged out and at what level, and the other side, from the recipient of the cost, as to why he doesn't need the service and why it isn't contributing. As somebody said on some of these issues, having $60,000 of a $100,000 program eaten up by observers on a sentinel fishery doesn't make logical sense.

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If the sides can't come to an agreement, we think there should be a third party who hears the argument and puts in a general report to the ultimate decision-maker, the minister. The minister can then get on with using his authority to decide on the allocating of costs. We've argued that this is what should be in your new policy guidelines for cost recovery, not just for this department but for red meat, for pesticides - you name it.

The Acting Chairman (Mr. O'Brien): Mr. Belliveau.

Mr. M. Belliveau: We have a new chairman. Congratulations.

The Acting Chairman (Mr. O'Brien): Thank you very much. I appreciate it.

Mr. M. Belliveau: I have a couple of perhaps marginal points - I'm not sure - to pick up on what some of the speakers said. I think the points Earle made with respect to the type of industry we are in are very important and I regret not having said them myself.

In particular, we have to recognize that when we are talking about fishermen or fishers we are talking about the primary producer sector. In my judgment, it creates and generates an economy that no other sector in Atlantic Canada can. I want to underscore that.

The second comment that I picked up on is with reference to Ron Bulmer referring to CIDA cutbacks in purchases of mackerel, mainly, and maybe herring and other things. They've cut back from $28 million to $6 million. I have no idea as to whether that's good or bad, but I want to make a comment about CIDA and CIDA involvement in the fisheries.

Our organization, like some of the others around the table, recently associated with the Canadian Council for Professional Fish Harvesters. We've made a very minor overture to CIDA with respect to some assistance in establishing our professional relations with some other fishermen's organizations across the world. CIDA said that's impossible because there's no money. I have a hard time swallowing that. Everybody knows that CIDA functions on a $1.5 billion or $2 billion budget, and in my experience, they do virtually nothing in the fisheries with the non-governmental organizations or the fishermen's organizations. They do virtually zero, to my knowledge, and to come back with an answer like that is not acceptable. I'd just like to put that on the government record.

That's the kind of stuff we're running into all the time. You cannot ask the Government of Canada for any new type of program. The government says it's impossible because there's no money. So it doesn't matter what it is, how creative it is, how much value it adds to the community or anything else, it's not possible because there's no more money. And that's one of the downsides of the whole philosophy of cost recovery.

The third overall comment I want to make is with respect to our industry itself, to the difficulties of not only managing the industry...sometimes there's a whole philosophy out there of people being quite happy to talk to one another about how bad the government is, how bad the DFO is, how bad the state they're in is and so on. They're making DFO accountable but they're not making themselves very accountable.

The other day I had a situation that was, I suppose, extremely striking. There was a gentleman across the table from us at a particular meeting who made - I don't want to go into the details unless I'm forced to - a comment about a government economic study. He was very dissatisfied with the study because it didn't reflect his costs as a fisherman of operating in a fishery that presumably was fairly lucrative. He had just bought a $1.4 million boat to prosecute a fishery that lasts for five to six weeks in a year.

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To me, it was a completely irrational investment - unless I've made a mistake somewhere. A lot of this critique of government waste and so on ought to be directed at the private sector as well. We're seeing more and more of this type of completely irrational investment. We're being asked to accept this as somehow being the right thing whereas government expenditures are the wrong thing.

I'm getting a little worked up here, so I'll quit.

The Chairman: Okay. John Angel.

Mr. Angel: The point I wanted to cover was covered by Ron, actually, but I think I'll pick it up again. It didn't really generate any response, and I think it's important.

I too was struck by Mike's example of the sentinel fishery and the $60,000 in observer costs. That's the point I was trying to make earlier. The first step should be sitting down with the industry to determine what is the best way to do the deal. Instead of sitting down with Mike's fishermen, saying, ``We're going to conduct this sentinel fishery; what's the best way to get the data and the most appropriate way and how can we best control it?'' and so on, the decision probably was, ``We have to have observers, and it's going to cost $60,000''.

That's the very thing I'm talking about and the very thing I think Ron is trying to get at. The first step has to be a rapprochement between government and industry to determine how we can best do the job. We can help. We don't have to incur $60,000 in those costs. The industry can help.

I'm going to cite an example that people around the table have heard me cite before. Ours is a factory-freezer trawler fleet. The product is packaged when it comes ashore. Some of it is on pallets and shrink-wrapped, ready to go to market. The inspectors come to sample the product. They go into the hold and tear boxes and pallets apart. They tear off the shrink-wrap and so on. It costs a lot of money to the industry in the lost product. First, we think they take too much, and second, it disrupts the unloading process. They have to pack the boxes again, shrink-wrap the pallets again, and so on and so forth.

We have 100% observer coverage on our boats, for which we pay. It would be a very simple process for the observer, during the processing - the vessel is at sea for 20 or 60 days - to take samples on a daily basis, label them and put them in the freezer in the hold. We have volunteered to construct a locked cage in the hold where only he or she would have access. At the end of the trip the inspector comes aboard, grabs his samples and away he goes, thus avoiding all the disruption at the unloading process.

I have been singularly unsuccessful at getting any discussion generated on that. It may be a bad idea, but nobody has really sat down and said, look, John, your idea is kind of crazy because of this, that or the other thing. There's a complete lack of discussion on it.

That's the type of thing I'm talking about. The first step should be, what is the most cost-effective way to get those samples? We can help. I think that's the point Ron was trying to make. I'd like to get some discussion on that.

As Ron says, when all the cards are held by the guy sending out the invoice, it's kind of tough to accept.

The Chairman: I'll entertain responses to these statements before we go to another question. I don't want these things to be lost if there's a response out there that should be made.

David.

Mr. Rideout: It's interesting, but in a previous life spent with DFO I'd heard about the issue raised by Mr. Angel, but I haven't since taking on this position. I certainly will look into that right away.

I was hoping there would be some discussions, actually, on a quality management program for the shrimp fleet. I think those discussions were going to start and to resolve, we hope, some of the issues. If it hasn't started, I'll ensure that it does.

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For me, one of the key points is to ensure that we maintain the integrity of the sampling of the product. I believe the samples are necessary for certification purposes. Foreign governments look to a particular type of approach, but I'm sure we can take a look at this situation and find a way to resolve it.

The Chairman: Thank you. Mr. Wells.

Mr. Wells (South Shore): Thank you, Mr. Chairman.

My first comment is for Mr. Rideout, but I'm going to make a few statements before I ask him to comment. Then, with a question or two for Cheryl, of course I want to ask some questions of the Treasury Board.

At the end, Mr. Rideout, perhaps you could comment on some of the issues raised by Mr. Morrow, because you're mainly in that sector and there has been no response yet to the concerns he raised. I think some of them perhaps aren't new to you, but this is an opportunity to publicly address those issues.

Mrs. Fraser, on the issue of cumulative impact, I think your answer was that no cumulative impact study has been done. You mentioned that access or licensing fees were the major component, but through the work done by the round table that I hold on a regular basis - of which Mr. Newell and Mr. Belliveau both are members - we've identified fourteen separate fees or increases in mainly federal programs, although there are some provincial. We've shown individual enterprises that have increases from $31,000 to $196,000 - a 520% increase. We've seen small, independent, multi-species fishers - and this is information that Mr. Newell has provided us with - who were paying $685 in 1994, and in 1996 they were paying over $13,000. And we're not just talking about access fees, we're talking about such things as dockside monitoring, the association dues and, of course, workers' compensation. We recognize that's provincial, but it's still a cost and it goes into the viability of the enterprise.

I need to know from both Treasury Board and DFO if there is in fact a recognition that we have a problem. Or is it simply a case of saying that you have to raise your $50 million, you don't really concern yourselves too much with other departments, and you're not looking at the international competitiveness of the enterprise? I think we have to know that there is a recognition of the problem before we can proceed, but to date I have not heard anyone say they recognize that we have a problem here. I think we need that.

In Mr. Angel's presentation, he made reference to Treasury Board guidelines, and he concluded that those guidelines weren't followed. I'd ask Mr. Miller if he'd comment on pages 8 and 9 of the guidelines in particular, because they talk about looking at the impact of the fees on the user. Is the Treasury Board satisfied that the impact of the fees on the user has been taken into account? Is the Treasury Board concerned only with one fee, or is it concerned with the fourteen that have been identified by the round table that I chair? Are you concerned with your own guidelines that say programs should not be compromised, nor should there be undue hardship caused for the users? I think what we're hearing today is that there has been undue hardship. So from your own guidelines, I'd like you to comment on Mr. Angel's assertion that your guidelines haven't been followed in this whole process.

I'd like someone from DFO to react to the comment made by most speakers that even though we have user pay, we don't have user say, despite the fact that's part of the whole process that we're supposed to be following. If they pay, they're supposed to have a say.

I have one last question that perhaps Cheryl may comment on. I'm looking at your deck. You talked about the amount that you've actually collected - $28-some million - while projecting $31.2 million next year. You also said there's no contemplation of any further increases in fees. So can we assume your $50 million target is now $31.2 million, based on what you said, and talk about $31.2 million as the maximum level?

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I'll get some answers and I may have other questions.

The Chairman: We'll start with David. Do you want to tackle the first series of questions?

Mr. Miller: Thank you, Mr. Chairman. I'd be happy to try, because this is a very important process we're going through. It gets down to some interesting implications we've heard, with the program review and the kinds of changes it forced on virtually all federal departments. I may have some examples that move into agriculture, just so I won't demonstrate my lack of understanding of some of the fishery issues.

A combination of events are coming forward here that make it extremely difficult for us as a Treasury Board Secretariat, or ministers of the Treasury Board, to understand the implications on a particular industry or group, for example. I'll use an agriculture example where this was brought forward by its associations as well.

Someone from the fresh fruits and vegetables group was concerned about the impact when in fact there was a significant difference between two farms, when one farm produced seed potatoes or exported to the United States and the farm next to it produced broccoli that was consumed in Ontario where the product was grown. We're not in a position to understand the implications of that. We have to get the industry, the associations and individuals to talk to the departments so you can assess it from that point of view, because there is such a diverse impact, even on a producer group or an industry, and it's difficult for us to assess. We are obviously very concerned that we understand the cumulative impact of these kinds of things.

We have a detailed listing, which I mentioned in my opening remarks, that identifies probably 200 to 300 different types of charges that are imposed by the federal government. It covers a very broad spectrum of services and fees, and we have no idea about assessing it from the other direction. That's why that initial consultation is so important in getting a department to understand and realize what's happening in our industry.

It may not be federal. It may be provincial or even local-level imposition of charges and fees that is causing the real problem. We would expect departments to act responsibly, obviously. They're more concerned about the client base than anyone else, and would do what they could.

I think it's also important to stress what was said about program review and the implications for departments in their overall funding. For 1995-96 and hopefully for 1996-97, with two months left, it will be the first time in over 14 years that departments have had funding levels that weren't disrupted through short-term reductions or in-year freezes of expenditure authority.

We have provided departments with what I hope will be reasonably stable planning levels that now go to 2000. Without commenting on what will be in the upcoming budget, those levels should provide the basis for working with client groups and industries to understand exactly where those programs will evolve. Hopefully, there won't be any surprises.

That was all due to the implications of having a program review exercise that covered a great number of years and provided a stable base for departmental planning. So departments can make the adjustments, deal with anomalies, deal with short-term issues and allow industry to adjust, or adjust their own programs to market conditions.

We are obviously interested in trying to resolve particular issues, but we certainly feel the primary relationship has to be between industry and the Department of Fisheries and Oceans. They're the ones that understand what's going on the best. It would be a very dangerous situation if all of a sudden any third party leapt in and tried to arbitrate that. Both sides would probably be equally upset with the implications that might come out of that. It's not something the Treasury Board ministers have said they wouldn't do. In fact, they expect they do have a role there, but it's certainly not one that would come up on a regular basis. Otherwise you won't be able to operate under those conditions.

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So we are concerned about the cumulative impact. It's very difficult for us to assess it, but we certainly expect industry and departments to work together in identifying that and to bring forward anomalies or identify the implications. We are concerned about how departments carry forward those principles and any implications industry may have that they are not following those general principles. They are very basic consultation, understanding what kinds of services you're receiving for what you are paying.

I hope after the meeting of the group that is helping us to come up with these new principles next week I'll be going forward to the Treasury Board to have those approved. There should not be any surprise. Most of them are common sense in terms of relationships and negotiations and understanding what is going on with the industry.

Mr. Wells: I don't think my question was answered. The question I want to know is whether or not your own principles were followed in the imposition of these fees.

Mr. Miller: I apologize for not answering that directly, in a way.

The principles were there. The dilemma we had was that was with the introduction of a whole of series of things going on in the same fiscal year. The timeframe was very short and it required departments to react to the implications of that 1994 budget. They would have started the process, but during 1994-95 or 1995-96 we were building up towards something and there was lots of room for negotiation and lots of time to get an understanding there. So although the targets might have been established for a multi-year period, the methods that departments would use in order to achieve those targets was not cast in concrete. The expectation was at that point they would go out and have their discussions with industry, in recognition that there was an ultimate target, but it would be very much up to those discussions to determine how that was achieved.

In this case, without commenting to all the groups here...we've had a few years of discussion on how this will come about. We hope we'll have some ability to adjust those in the light of individual anomalies or other dilemmas.

The Chairman: I want to go on to the next series of questions.

Ms Fraser: I have two on my list, but three responses. One was the cumulative impact. The other was reassurance about what we're looking at in fee levels.

On the cumulative impact, I have to go back and restate that as a department we did look at the cumulative impact from a departmental point of view of delivery of services - the $450 million cut. There is a recognition that we have not necessarily looked at all the impacts on industry that have come along at the same time as the imposition of access fees. I don't deny that.

The next step I have to indicate, though, is that I would be less than honest to this committee if I did not mention that there will be certain services in the future such that there will be a charge for the cost of doing business and the department can no longer offer certain services, and those might be associated with such things as emerging fisheries or particular services that may be in response to particular fisheries management issues. I don't know off the top of my head, but I would be less than honest if I didn't indicate that there will be a cost of doing business associated with certain services the department will provide in the future. It won't be everything, but there will be certain things. It will be up to us to discuss those certain things and decide how or whether they need to be offered and what the consequences of not entering into particular arrangements will be. That's fair.

On the actual licence fee, David was quite right. It was done to the best of the ability of the government of the time, recognizing that the targets were there. Now is the time to do the fine-tuning and get it ready for the future. The first step in that is the receipt of the report of the working group. Then the minister will have to decide to what do as the next step, upon receiving that working group report.

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In the normal course of doing business I also have to look to my Treasury Board colleagues to sometimes arbitrate between us and other departments. That's done generally through the regulatory process in providing advice to ministers when regulatory decisions are made.

As much as I may see an impact that may be imposed on the fishing industry, or a particular segment of the industry - from, say, Environment Canada or Health Canada or the Department of Transport - I often don't have the levers to make the change and have to depend on Treasury Board and the cabinet process to have that discussion. I raise that simply as a point of information.

On the actual licence fees, the deck notes that the licence fee schedule is expected commercially to generate $28.6 million this year and $31.2 million next year, which, with respect to commercial licence fees, is expected to be the upper limit. We don't expect to be further than $40.5 million total, the balance of which, between $31 million and $40.5 million, is recreational fishing. That's the B.C. recreational fishing sector.

We expect between $8.8 million and $10 million in revenue over time of the B.C. sport-fishing sector with the fees put in place last year. Those fees are down this year in B.C. to around $6.9 million.

So the short answer to your question is, yes, we expect that to be the target commercially.

The Chairman: Mr. Angel.

Mr. Angel: In response to Mr. Miller, we talked about cumulative impacts. Who is doing it? Mr. Miller says Treasury Board is not, if I understand him correctly. Does every department have a general licence to go out and charge fees, and no central agency in the Government of Canada is responsible? What is the process? Is there anybody turning their mind to this?

Mr. Miller: Those are two separate questions. Yes, there are a lot of people concerned about the cumulative impact. That's the first part of it. I have been tasked with trying to resolve that. The difficulty is assessing how that cumulative impact deals with an individual sector, industry, individual producer or fisher, or whatever it happens to be. It's extremely difficult for us to look at 20 million Canadians and figure out exactly what the impact is on each of them.

So we have to rely, as a first warning - I'm sorry?

Mr. Angel: It's your system. You guys started it. Surely you can't say, look, we're going to implement these fees, and gee, it's really difficult to assess the impact. That's just not acceptable.

Mr. Miller: First of all, we have the broad principles associated with the system, and we expect departments to agree with that, but in most cases it was the departments that realized the areas where it would make sense to have cost recovery or user fees as opposed to the obvious alternative, which is to decrease services.

Then we're faced with a situation of individual choices. If you're a fisherman buying a new boat, maybe there are fees associated with that as opposed to when one is using older equipment. Individual decisions go on that we simply cannot assess.

That does not mean we are going to ignore the issue. It simply means we need the industry to be able to tell us what cumulative impact there is from across federal departments, what the departments of health or agriculture and agri-food are doing to a particular sector that is also in the fishing business.

So it's those types of anomalous things that we need to be able to identify and deal with. It's something we're starting now. Certainly I'm not capable of saying to this committee that we're in a position to identify and deal with all of them.

The Chairman: Do you want to comment on what's been said?

Mr. Morrow: Brian Giroux, Sterling Belliveau and I all mentioned the concern about bleeding the profitable parts of the fishery and fish processing that remain to cover the overhead costs of a bureaucracy that extends across the country. I'm wondering about your feeling on the mechanisms, or the evolution of mechanisms, that allow the industry to review your fees, to review the costs associated with providing those services and, as John Angel said, in some cases to rethink the service altogether and start from point zero.

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Mr. Rideout: Let me first of all start by saying that I have no problem sharing information on how we do our work and on where and how we set our priorities. I've started that process with a group in Nova Scotia, and we're now in the process of gathering information in response to some eleven or twelve questions that have been raised in regard to finances. I think the meeting's scheduled for two weeks from now, or thereabouts, and I'm now rethinking whether or not I shouldn't actually personally get involved in this. In any case, if you don't mind, Mr. Chairman, there are a few things that I'd like to note.

One thing is that of the moneys we're recovering under fish inspection. They represent about 0.2% of the value of imported fish products, and about 0.8% of the value of domestically produced fish products. What we have tried to do is find as equitable a system as possible for the introduction of fees. What I'm concerned about is the view that because an area is a high-producing area, we would view it differently than any other area. In doing comparisons, you had mentioned the central and Arctic region. The central and Arctic region is a major importing region for fish products coming into Canada. I would suggest that it is a major producer of revenue under the cost-recovery regime for imports, although it clearly won't be as significant as Nova Scotia in terms of the domestic industry.

One of the problems that I face as a manager is, for example, comparing regions. I get questioned about why we have resources in Newfoundland when there's nothing there, there are no fish. Well, of course there are fish. Furthermore, in all our industry across the country, from west to east to north, we have a very innovative industry. As has come out today, it is accessing resources from wherever to ensure that it can continue to operate. We need to be responsive to that.

We're seeing many new demands, particularly on the import side, but also for the export of new and innovative products. We have to be able to respond to ensure not only the health and safety but the marketability of those products.

So it's quite important in terms of doing these assessments and providing the data. It's provided in a context of the impacts across the country, not just within the local area. That's why I feel that maybe I need to get involved in this directly. It's a very serious issue, and it's significant for the entire country.

There is one other issue that I think is important. We have begun a very extensive consultative process. First of all, the process with this committee - the communiqué system that we send out in the Canada Gazette - worked very effectively, I thought, in terms of the fish inspection fees, because the minister made some significant changes to the proposed fee structure in light of the 51 briefs that were received by the department.

Further to that, I've gone across the country with the directors of inspection to speak to the industry in all areas. I've done that once, and I've started again. I was in B.C. a couple of weeks ago to look at the import cost-recovery regime because it needs to be revised. We're looking at how we can do that, and we have a communiqué out on that now. I've been talking to industry about this process. I'm getting some positive feedback, and I'm looking to reinstitute another series of national consultations in May and June of this year in order to take a look at where problems exist and at how we can adjust.

So we're doing our level best to be responsive. Processes like this are very helpful in terms of getting new ideas and new approaches, but in terms of delivery of our program, it's an open book. I have no concerns whatsoever about sharing the information, but I do have concerns about the impacts of decisions in one area and how they may affect an altogether different area, different fishery, or different processing sector in the country. I have to be cognizant of that, and hopefully the industry will be as well.

Thank you, Mr. Chair.

The Chairman: Thank you, David.

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Chris and Brian, did you have comments on this topic or a different topic?

Mr. Giroux: Just a clarification. What I got from that last exchange is that nobody is really looking out for the total impact here. DFO is relying on Treasury Board and Treasury Board doesn't really have a system that can go in and look at individual scenarios without relying on the departments involved. So I would ask for some sort of commitment, if possible.

Even if you look at the list of fees we're dealing with here, almost all of them are being dealt with by DFO. There must be a way to analyse within a department the cumulative impact of these things: observer costs, management implementation, and, as we talked about earlier, the different fields. The majority of the ones that are impacting on us are coming from one department, not a number of departments. There are a number of departments we can certainly make you aware of, and there must be some kind of mechanism where you can at least accept those other fees as being part of our financial equation.

I guess what I'm asking for is some kind of commitment at least to pull it together internally so we can have a frank discussion on how we can treat people equitably and how we can recognize that some of these fees are just too high. Then we can set a process in place to try to get some mechanism we can review and adjust.

I know of nothing in the world that stays exactly static. Even rocks turn to dust over time. We have to be responsive here or else we're just not going to be viable as an industry in the long term, especially with the way things are implemented now. If it takes two years to get adjustments.... In some markets two years is an incredibly long time. Things can go up and down again in a matter of months. It's an incredibly long time. We have to have some mechanism to adjust here or else we're just not going to be able to.... By the time we get around to being able to analyse it, substantive things have happened and the whole world has passed us by.

The Chairman: Cheryl, would you respond to that?

Ms Fraser: Mr. Chairman, as Mr. Giroux has indicated, yes, there are certain responsibilities within DFO that we can commit to looking at. One of the things I should indicate in doing so, though, is that the licence fee or the access fee is based on a different principle from our cost-recovery mechanism. As long as we do that openly and keep that in mind, we're prepared to look at the impact of both, by all means.

As much we would be pleased to pass on any information the industry may wish to give us about other departments, I will have to rely on passing those views to other departments and to the Treasury Board for response and, quite frankly, some impact analysis. Within DFO we just do not have the capability to do the impact analysis in some of the other fields. But by all means we would be prepared to take that information and pass it on accordingly.

Brian, the other thing I should indicate is that we are collectively going to have to have an awful lot of discussion from here on in on the fee schedule and how we fine-tune it for the long term. I recognize your point about changes in the fishery and how we deal with them. Maybe it's through rebates. Maybe it's through planning. I don't know at this point. It's something we're all going to have to discuss collectively and figure out how to do for the future.

The Chairman: Mrs. Wayne.

Mrs. Wayne: I have a couple of questions, Mr. Chairman. First of all, I'm glad to see an angel is at the table here. I hope the angel is looking after us.

I want to say I find it very difficult to understand why we're going to do national consultation now. What happened to the national consultation that should have taken place with these men around this table before you set those fees? You can see it's had a terrible negative effect on the human dimension.

How many people from Revenue Canada and those at the table, Mr. Chairman, have been involved with the fishing industry? Were you involved, or are you all accountants and lawyers? I say that respectfully, but are any of you involved with the fishing industry? Is that your background, fishing? I don't see anybody saying yes to me, so I assume no is the answer.

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But, Mr. Chairman, when Revenue Canada says they really have no way to monitor the impact, all you have to do is listen to Sterling Belliveau and to Mr. Ronnie Newell here, who will tell that you must be able to monitor how many more people from Newfoundland have had to go on welfare because of what has happened in the fishing industry. And when you're talking about the licences and the costs and what's stirring them...how many, when he's talking about his family?

This is the type of thing, and they tried to tell us when we were over in Nova Scotia. These boys were trying to tell us that this is what's going to happen to us. But if you don't understand the fishing industry and the impact of it on the human dimension, I'm really concerned.

I would like to know, Mr. Chairman, in this new group that's going to help you come up with new principles in the industry...and the impact of the fee on the user...how many people from the industry are sitting on that committee.

The Chairman: Mr. Rideout.

Mr. Rideout: Mr. Chairman, I want to respond to at least two points. First, while Ms Fraser and I are not fisherpeople per se, we are from Atlantic Canada and we do have a feel for some of the concerns of Atlantic Canadians. Second, with respect to consultations, the consultations I was referring to are not the beginning. They're a continuing process.

Mrs. Wayne: But is anyone listening?

Mr. Rideout: I think we've been fairly responsive to the concerns of the industry. I know our minister certainly was. He received 51 briefs on the cost recovery for fish inspection and made some significant changes. He wanted to see the changes made as a result of those briefs.

We've had the import industry in Canada speak to us about fish import cost recovery and we've had to propose some significant changes. We're now waiting for industry's response, which has been quite positive so far. We've received numerous letters in response to a communiqué we sent out a few weeks ago. We're doing our level best to communicate to the industry and to hear the concerns of the industry and respond to them.

Mrs. Wayne: On the committee that you've established, are they fishermen in the fishing industry, Mike Murphy and the rest of them?

Mr. Rideout: In terms of our fish inspection, we have several industry committees, and yes, they are not necessarily fisherpeople, but they are from the industry. They're processors and quality control managers and that sort of thing.

The Chairman: Cheryl.

Ms Fraser: With respect to licence fees, I believe the consultation process prior to introduction of the access fees was extensive as well, and I say that from the point of view of...I won't deny that there was a target when we went out with that consultation. But I would say that following pre-publication and the initial consultation, significant decisions on changes to the regulations were made by the minister of the day, decisions that accounted for a reduction in the target of close to $10 million.

I'd like to say something with respect to the working group chaired by Mike Murphy. Mr. Murphy is here in the room. Mr. Murphy is a DFO employee. He is with our economics group in Moncton, New Brunswick, but he was there to facilitate the discussion of that working group. The rest of the working group was from the industry. The members were from the commercial fishing industry, such as the Fisheries Council of B.C. and FANL, and Atlantic inshore and Atlantic offshore. We'd be pleased to provide the names of those representatives of that group if the committee so chooses.

The Chairman: Mr. O'Brien.

Mr. O'Brien: Thank you, Mr. Chairman.

I've heard so much discussion here this morning and previously that I'm finding it difficult to know where to start, but I want to commend Mr. Newell and Mr. Belliveau. Your comments, Mr. Newell, reminded me of my riding in Labrador.

As well, I certainly want to twig the comment from Mr. Culbert, my colleague, relative to the little guy.

I just happen to feel that the process of the Department of Fisheries and Oceans relative to not only cost recovery of licensing or access fees or whatever, but to some degree generally.... The academic card is played out a lot more than the practical card, and I would like to see the department get a little more practical rather than being academic. I would like to see the department streamline its bureaucracy. If it's difficult for us at this table to understand, appreciate and put into perspective the whole issue of cost recovery for today - it could be any issue, for that matter - can you imagine how the rank and file of the fisherpersons back on the boats, on the wharves, or anywhere in this country could put it into relative terms?

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If we're in over our heads, we certainly drove them right into the ground - or the water. That's a major concern they have. I think we need to get down to the basics. We need to streamline and establish some common sense.

To my Treasury Board officials, I think I would agree with Mrs. Wayne that we need to get some common sense here about fisheries relative to this policy or that policy.

There are a couple of other points I want to make very quickly before I move on. I was thinking, as Mr. Angel spoke, that I need an angel in Labrador too, Elsie, believe me - a guardian angel. We need it desperately.

Labrador, whether federally, provincially or whatever, is a great haven of resources. The Government of Canada generally - not any particular party - and the Government of Newfoundland have a great extraction policy. My friend down there in the corner, Mr. Angel, is part of that. I don't blame him; it's part of the Government of Canada policy.

When I think about the Canadian Association of Prawn Producers and the three and a half licences in Labrador, the two in the eastern Arctic, the one in northern Quebec and the rest from all over, I would ask a simple question. This is not meant to be derogatory, because I believe I'm a good Canadian and I believe I'm a Canadian first, but I think being a Canadian works both ways. I would ask anybody around this table how many Labrador fishermen are fishing off the coast of New Brunswick, Nova Scotia or B.C., or whether any B.C. people are fishing off the Atlantic coast. Then put that into perspective with what I have to face as a member of Parliament, and I would ask any of you how many are fishing off Labrador.

Just to take that one step further, Labrador has two extremities of life. It has the very richest in Canada, and within ten miles the very poorest. We only have 500 plant workers - Mr. McCurdy can attest to some of what I'm taking about. We have Black Tickle which gave itself big-time to Atlantic Canada. Every part of Atlantic Canada prospered because of Black Tickle.

These people are now ready to die. A head of cabbage in Black Tickle costs $8. Forty-odd of the people in the community of just over 300 are on welfare. The rest are going off TAGS this spring. It has one of the largest plants in Atlantic Canada and it doesn't have one single fish coming in, thanks to the policies of the Government of Canada and the Department of Fisheries and Oceans. I am a government member but I have to stand for my people.

It's the same thing in Hopedale, Labrador, and Charlottetown. We're dying to hang onto the few snow crab we have in Mary's Harbour and so on.

These are realities, folks. I can go on and on. I'm fighting tooth and nail like you wouldn't believe right now to get just a few turbot in order to open a couple of plants, even part-time.

In the total Labrador fishery - and I'll get to cost recovery, too, if you'll give me a minute or two - we have 250 tonnes of turbot, with 160 sixty tonnes to Torngat fisheries, 92 tonnes to the Labrador Inuit Development Corporation, zero to the shrimp company along the Labrador coast. Mr. Barry in Corner Brook - this is your department, this is my department, this is the government I'm part of - it gives 1,900 tonnes to Mr. Barry. The list goes on and on.

What do I do? I have to stand up. I have to fight for the people I represent, but I just want balance and fairness. I'm not asking for anybody to be thrown out of the fishery, but give us half a chance.

John asked me earlier how many people are in Labrador. There are only 30,000 people in Labrador, with 40% in Labrador West in the mining sector, 37% in Happy Valley-Goose Bay with low-level flying, and just 23% on the coast - 5,000 or 6,000 people. They are dying like flies and being driven away to Fort McMurray, Alberta and God knows where.

We have a problem. The point I'm making to you is that in addition to the problem that the plentiful resources in Labrador are not being fairly distributed, the department's policy on cost recovery is driving the little guy straight out of business.

There's the guy who has a small boat in Charlottetown, Labrador, who's dying to upgrade to a bigger boat. It's just unbelievable what these excess fees are doing to us. We have no income. We have no fish to catch. We have no quota. We're not allowed into it. But at the same time, press away at the fees, and ``we'll get them down eventually''.

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I heard you say, Ms Fraser, that wasn't the policy. It sure as hell seems to be.

I could go on, but I think I've made my point. The point is, let's establish some fairness. Let's look at regional concerns. Let's consider adjacency. Give people who are only few in number a fairer chance. A few shrimp may still be left over for Mr. Angel.

One other point I want to make - and Mr. McCurdy can attest to this point as well - is that the access fees to shrimp and the northern shrimp are not equal. This man here, Mr. Angel, is the executive director for the Canadian prawn association. He represents the private sector, for the most part. I represent three and a half licences in Labrador owned by the people of Labrador. The shrimp company is owned by 900 fishermen and has non-redeemable shares. They can't take anything back as dividends. It's the same thing for the Torngat Fish Producers Coop and for the Labrador Inuit Development Corporation.

My point to you is very simple. If you want to have access fees with a reasonable perspective for the industry, so be it. But the only development fund we have in Labrador - the only fund we have for the fisheries - is the moneys that are the profits made by those three and a half shrimp licences. The money goes back into helping people to develop their plant and so on. Those access fees are practically driving my people right out of the business.

So I say to the Government of Canada and to the officials and to Treasury Board, maybe you should have two policies, one for where it's people driven and one for the other factors. I tell you, in this case I would like to see that six-digit figure for a licence for the shrimp company reduced to some reasonable fee to allow more money to go back into the communities to help them develop the fishery along the Labrador coast.

The Chairman: Ms Fraser.

Ms Fraser: I would like to respond to three points Mr. O'Brien has raised. The first point is about streamlining of the department. I would just like to remind the committee that with that $450 million reduction in budget a considerable streamlining is under way and is occurring. I think this is something that will come up when we come before you to discuss our estimates for the year, but I would like to indicate that as a department we have moved from 12 regions down to 5. We've reduced our facilities enormously. For example, about 450 facilities will be either integrated or closed within the next 4 years, out of our total of 1,100.

About human resources, we've taken a 30% reduction in Ottawa and approximately 23% in the regions. That reduction is in the order of 2,600 to 2,700 individuals over that four-year period. So there is a very strong attempt at bringing the department down and streamlining and directing its core mandate.

The second point was about resource levels: turbot, the groundfish situation.... You mentioned crab and shrimp. We would be very pleased to come before the committee with a presentation or to answer any questions specific to the resource situation. We would be more than pleased to do it.

About access fees for shrimp, this was an issue that was raised during the development of the access fee schedule. If it is still considered a very significant issue, we would be more than pleased to look at the issue again and discuss it with those who need to be involved in the discussion.

The Chairman: Mr. Bernier.

[Translation]

Mr. Bernier: I'm going to try to be brief so that our guests can have as much time possible to answer. First of all, I must say that our friend, Mr. O'Brien, seems to be swept along by the winds of separatism sweeping over Labrador. I'm glad to see an MP fighting for his region.

[English]

Mr. O'Brien: He's going from the west to the east there.

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[Translation]

Mr. Bernier: I have to tell the people from Fisheries and Oceans Canada and from Treasury Board that they really shouldn't be talking about government revenue this morning when we have witnesses at the table. They've told us that the fishing industry is going through a crisis, and I would just like to say that I really admire the fishers' representatives. I think the government officials are kind of like doctors who are supposed to fix broken arms and legs. Listening to them is like hearing the doctor talk about his income as he stands over the operating table.

Some fishers talked about certain directions that are being taken. They have told you that you've started cost recovery and that you should declare a moratorium on it, because some things need to be discussed.

Mr. Belliveau said, and this is always taboo, that we should talk about what is happening in the other fisheries and of the economic studies. He wanted to talk about crab fishing.

Personally, I would like to get to the heart of the matter. You should start preparing the terrain, because I doubt that the Minister will have the courage to do so. When will the department deal with the real problem concerning the future of the fisheries? You have a to call a spade a spade.

During the moratorium on groundfish fishing, people were saying that when the fishery will resume we would have to have a multi-species fishery. When are we going to start talking about this? If we have to buy back crab permits, we will buy them back. If there are other resources to buy back, we will do so.

Cost recovery is perhaps not what the fishers need. We would perhaps have to prepare another type of fishery and then see what costs the industry could bear.

In my opinion, we are putting the cart before the horse. I'm willing to believe that, as civil servants, as those who carry out the programs, you are obligated to follow what Mr. Paul Martin, the Minister of Finance, says. He says that there is an increase in costs, but the industry is telling us this morning: that's enough, don't buy anymore because the barn is full.

People are saying just about the same thing using perhaps different words and using different numbers. Mr. Bulmer provided us with a document where he was discussing the impact of everything that has so far been imposed. Mr. McCurdy tells us that we have to think also about the fisherman, the individual.

We know that the program will end in May of 1998. We also know how the employment insurance program has imposed a certain amount of rigidity. The accumulation of all this means that people in the Maritimes will be severely affected. The State will send less money to the region and Fisheries and Oceans Canada is withdrawing from the area. How do you explain this to people? How can we hope that the economic environment will be able to revive itself?

I'm not going to go any further on this this morning. I will have the opportunity to tell Mr. Mifflin how I feel about the issue. I find that the representatives of the fishers have stated their concerns in a very peaceful fashion. I have already seen Mr. Belliveau much more angry. I have seen Mr. Haché be much more virulent, as well as Mr. Bulmer. People are going to have to recover their pride and tell us where they want to go. Otherwise, the people in the department will continue to send you the bill because the deficit has yet to be erased.

You have to tell us the objectives that the industry must reach in your opinion, and then adjustments can be made. If you do not stick together, they're going to come at you one on one next time around. Someone said "There is only a sectoral viewpoint". I think you should take advantage of that. You even have organizations such as the Canadian Council on Fisheries. You have forums at which you can discuss these issues together. Use them.

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When are we going to see a redesign of the fisheries industry? Ms Fraser, the answer will perhaps be a difficult one, but you should ask the question of the Minister.

There is a crisis. We know that to come out of this crisis, we will end up with too many fishermen. We also have to discuss multi-species fisheries. We have to deal with this problem once and for all before we're faced with a great deal of problems at the end of the program in May of 1998. Thank you.

[English]

The Chairman: Ms Fraser and then Mr. McCurdy.

[Translation]

Ms Fraser: Thank you for your question, Mr. Bernier.

[English]

You raised three particular points I would like to respond to. The first one is with respect to the fishery itself, the redesign of the fishery and the whole question of where the future of the fishery is going. Again, that is a subject we would be more than pleased to come back and have a comprehensive discussion about at this committee.

I have a couple of points. First, we have introduced in the House of Commons a new fisheries bill aimed at providing the basis for doing that redesign. Second, a new licensing policy has been put in place by the Department of Fisheries and Oceans, announced by the minister last year. There has been a capacity reduction program under the TAGS initiative aimed at making the industry on the east coast more viable when the industry reopens.

So, yes, there are a number of things under way. A number of things still have to be done. The new legislation will offer us an opportunity to work very closely with the industry to ensure that things are done in a proper way for the industry.

The second issue is with respect to TAGS. I believe this committee was briefed on the TAGS situation prior to recess. Again, this is a program managed by our colleague department, Human Resources Development. We'd be pleased, as would they, to come forward and discuss the issue further with respect to the future of TAGS.

With respect to cost recovery, I'd like to indicate once again that the licence fees were based on the gross landed value of the product at the time. Licence fees represent, on average, about 3% of the total landed value of the fishery. Recognize that there has to be some fine-tuning. Recognize that fees were introduced by Fisheries. The bottom line, though, is that fees were put into place on a scale commensurate with those earnings received from the fishery.

Those fisheries that are currently closed, such as groundfish in Newfoundland, are paying $30 to maintain their privilege of access to that particular fishery. Fisheries that earn in the order of $100,000 annually in gross landed income are paying considerably more. But the formula was based on the recognition that there was a different value earned from various fisheries around Atlantic Canada and the Pacific coast.

The Chairman: Thank you. Mr. McCurdy.

Mr. McCurdy: Thank you, Mr. Chairman.

I would like to ask a question - and the answer to it will form the basis of what I'll go on to say - of Ms Fraser, if I may.

Could you confirm - I've heard a lot about this in recent months - whether or not a dockside monitoring program is being planned or contemplated for non-quota-based fisheries such as lobster?

Ms Fraser: At this meeting, I honestly can't, but I'd be pleased to take the question back. I don't have the information at hand.

Mr. McCurdy: No one with you does.

Ideally, I suppose, if you're really to have full enforcement - and you'd have a police officer every mile on the Trans-Canada Highway too - you'd have an observer on every boat and a monitor to monitor every landing. There's no question we'd have better enforcement and reporting than we now have, but that's a costly proposition.

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If we went to the department and said we would like the department to fund an observer program aboard all fishing vessels in Canada, I think I can predict the answer. I think the department would say we're sorry, we can't afford it.

We have the same problem in industry. A lot of these things are being passed along and we can't afford them. Just as the department can reach into their pocket only for the amount of money they are given through the estimates...and a lot of those are costs that are going to be there no matter what you do. They are fixed costs and there's nothing anyone can do about it. Therefore the discretionary part of the budget is getting very limited. People who operate in the fishery have exactly the same problem. We can't afford a lot of these things.

If anyone is out there working on a dockside monitoring program in a fishery where the tally of fish landed is not relevant to the management, tell them to stop, because we can't afford it. We don't need it. You don't need it. It's busy work. They have to give it up. What sense is there...?

We have to have the same rules applying. We have to be able to afford it when we reach into our pockets, just as the department has a limit on what it can afford to fund.

The Chairman: Roderick McLellan.

Mr. McLellan: Something hasn't been asked, and I think it should be brought up before an important committee such as this. We've been looking at licensing fees and access fees put on fishermen for the purpose of making the department smaller and so on. My question would be to our friend at Treasury Board. Are we proceeding through society like this? Is there a bankers' fee? Is there a proctologists' fee? Are all Canadians involved in this exercise? Or has this industry really been given special treatment?

Mr. Miller: I was asked that question earlier, when we appeared before the agriculture committee on the same issue. Their concern was that all the principles and everything worked, they were very comfortable with it, as long as we applied it to the social sector and not the other sectors.

I would suggest that no, there is no isolation here. There is no attempt to do anything other than to recover a portion of the costs. If you go back to our fundamental principle of what we are trying to do with the policy, it's to recognize that an economic benefit is associated with certain services or certain licensing arrangements and Canadians in general shouldn't pay for that.

Again, I'll use agriculture as an example. Meat inspection is a public good. There are safety issues. But for the industry it's a trade issue. It has allowed them access to foreign markets. Since my daughter happens to be a vegetarian, why should she pay for that function from her general practice? It should be put into the process. Let the market determine how those costs are absorbed or passed on to the ultimate customer.

Mr. McLellan: Then maybe Treasury Board should be run by the bankers' fee, because you allow them a charter and it's a special privilege that isn't available. I didn't make $80 billion last year. They did. Maybe the same principles should apply, to be fair.

Mr. Miller: In fact there's an institution that looks after the banking and insurance industry and it's paid 100% from that industry. It covers bankruptcies and the insurance implications. In a way, although we can't get at the banks' profits directly, they certainly cover their own industry and the costs associated with it.

The Chairman: Stan.

Mr. Dromisky: I promise you, Mr. Chairman, there will be no political speeches. I will go right to the point.

The Chairman: Please ask the question.

Mr. Dromisky: I'll ask just one. It may have been answered when I was called out of the room. I think some of the information has already been gleaned.

In determining the actual user fees, how far do the government nets extend as a sweep through the total area of costs? Which specific costs are retained to be added to the catch of costs, which will determine the user fees, and which are thrown overboard?

Mr. Dickson: Again, we're perhaps talking about two different situations. From what you've described, I think what you're talking about is a case where the charges are built up based on the costs. You would like to know what costs would go into determining the charges.

Mr. Dromisky: That's right, and how far they go.

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Mr. Dickson: Generally what we try to do is identify those costs referred to as ``attributable'' and ``non-attributable''. So in terms of costing out a particular service, we would look to identify the direct costs and whether those can be attributed to a particular client group or a group of users.

Mr. Dromisky: I understand that. I had a similar experience with one of the other ministries, which really upset me. They use the very same type of terminology you are using.

In terms of the total costs of operating the Department of Fisheries and Oceans, whether it be, for instance, the lease on the government buildings you occupy in Ottawa, the minister's chauffeur and his limousine, or everything else included in that ministry, how far do you really, truly go in these so-called attributed costs? It's all connected.

Mr. Dickson: Again, if you think generally about what the department does, some things are done to provide direct support to a group of clients. Other things may be done in the public interest - developing overall policy, for example.

If you start with those two types of activities, then in theory all of the costs of the department could be assigned to one of those two categories. If you're talking about a direct service where you can relate it to a client, then you would look at the full costs of providing that service. This would include, for example, a share of the accommodation cost to house the staff that provide that service, a share of the overhead cost - for example, the cost of running the financial system and providing staffing and personnel support - and a portion of the salary for the deputy minister and the minister.

Mr. Dromisky: Okay, thank you.

The Chairman: Mr. Cummins.

Mr. Cummins: I'll be very brief, given the hour.

Ronnie Newell mentioned in his talk the cost to his community of these licence fees. I know Chris Day did a study for his gear type that shows the cumulative effect of these cost increases and fee increases. If anybody who has the same type of documentation Chris has would make it available to the committee, I think it would be very helpful.

I hope you will do that, Chris, with the documentation you have.

Earlier Earle McCurdy mentioned that you can't let revenue goals dictate what would otherwise be unacceptable public policy. I think the issue here - and it's a critical one - is that the 30% downsizing of the DFO budget is, in my view, a figure that was just pulled out of a hat. It had nothing to do with the reality and the obligations, both constitutional and moral, of the department to manage the resource for all Canadians. I find that disturbing.

When the whole notion of de-staffing lighthouses was nixed by the minister of the day, the department kept that issue alive and eventually, it seems, got its way. I wonder if there's any concern within the department - amongst the hired help, not the politicians - about the size of this downsizing and to what extent the discontent has been made known to the minister.

Ms Fraser: I have two points in response. First, if there are studies out there that I, as the individual within DFO accountable for the access fee material, should be aware of, then by all means do ensure that I know about it.

Second, with respect to your question about bureaucrats in DFO being concerned about downsizing, I take my instructions from the government and from my minister. I've been asked through the l994 federal budget to downsize, and that's what I will do. But in so doing, we've been discussing that downsizing with our client group to ensure that the priority services are provided in the way our clients feel is needed.

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Mr. Cummins: Very quickly, then, the downsizing is there, the budget has been cut, and from the documentation you've provided, further downsizing is in the offing. I suspect, then, that the intention is to offload some of the costs of operating - and even of maintaining the current operations - onto the harvesters and processors.

Ms Fraser: With respect to our cost-recovery targets, I believe that most of the information is already available. There is nothing new planned for next year. The four-year targets were built into our budget last year, and I believe that information is available, Mr. Cummins. We could go through it. It was in our main estimates last year.

The Chairman: Chris, do you have a question?

Mr. Day: It's a very brief one.

I want to take up something that Mr. Wells first raised here. It was a comment that you yourself made about user pay, user say. Practically every single industry representative here does not feel that he or she has a say, so I ask you, what is the department going to do in order to give industry a say? We understand the pay part. We understand what we have to do there. Tell us how you're going to provide the say.

Ms Fraser: If I may, I'll speak with respect to licence fees, Mr. Chairman.

With respect to licence fees, my next step in the process is to hear what the advice of that working group is for the department. That advice will be considered. We will seek direction of the minister on that advice and then we'll be back to discuss that advice with those in the industry to see where we go from here in refining and fine-tuning the licence fee approach.

Mr. Rideout: In terms of fish inspection, we're trying to establish a series of committees across the country. I think they are all operational now. As well, we're looking at an annual major consultation on issues to get industry feedback on problems.

Earlier I cited the example of the import inspection program. We certainly got notification from industry that there were some problems. We put an industry group together to look at solutions and I think we're well on the way to a positive solution to that problem. That's how I'd like to operate.

Ms Fraser: With respect to other cost-recovery initiatives such as dockside monitoring, I'll take the comments that I heard today back to DFO. It's very clear that there has to be additional discussion as we go down the various lines of ``the fishery of the future'', if I can use that phrase that's become popular. We'll see where it takes us from there. It's a joint look at where we go from here. DFO will depend on the advice from the industry.

The Chairman: We have Mr. Verran, Mr. Kearney, Mr. Sterling Belliveau, Mr. Mike Belliveau and Ron Bulmer to go yet, and we only have ten minutes.

Harry, could you make your presentation brief?

Mr. Verran: Thank you, Mr. Chairman.

Thank you to all of you who are here today from the fishing communities and from the departments.

Mr. Chairman, I want to say to DFO that Cheryl and the rest of the DFO members here should realize that Mr. Morrow stated it right when he said processor increases only benefit the competitors and foreign companies. I think that is something that is too easily passed over. Not enough real thought is put into the position that those people who process in Atlantic Canada and Nova Scotia are faced with, especially in southern Nova Scotia.

I've heard the name Angel beat around here quite a bit today, and, Mr. Chairman, I don't want to throw a bucket of water on your party, but without zeroing in on any personalities from the department or from other departments that might be responsible for DFO and for the fishery in Atlantic Canada, I can honestly tell you - I'm not being obnoxious, I'm just telling it the way it is, and I know that Cheryl and others have probably heard it before and they know what people think - that fishers from the area of Nova Scotia that I represent and fishers I've talked to from other places don't think we're sitting with angels. They think we're sitting down here and talking to a group of people from DFO and from other departments that have some input into DFO; we're really talking to the devil and not to an angel.

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I say that with respect to the personalities that are at this table today, and there's no reflection on any one personality here.

I would like to ask Cheryl, Chairman, when the projections for the fish processing plants will be out. When are they contemplating to make an official statement on that?

The Chairman: Could you repeat the question?

Mr. Verran: What is the date by which you feel you will be able to inform the fish processors of the projections for the following year or the next couple of years?

I have another question, Mr. Chairman. What is DFO's policy on cost recovery where it concerns net or gross earnings? Is the department looking at making adjustments in net or gross earnings?

I want to say in closing, Mr. Chairman, that I believe Ronnie Newell stated quite adequately that fees are backfiring on our coastal communities. I personally really don't see how the people in DFO, who are so in tune with Ottawa...and not to believe for a moment that there are specific times when visits are made to Atlantic Canada, and probably the west coast - I'm concerned with Atlantic Canada and the riding I represent right now - by officials and by Cheryl herself.... But I really don't feel the people from DFO who are here so much of the time can really visualize, can really see, can really understand, what is happening in our coastal communities in the fish processing plants, with the fishermen of the different sectors, and what the ramifications of some of these policies are on the people in our coastal communities.

The policy of DFO, when the downturn is on, still appears to me to be one to get rid of or start out in some of our sectors.... I would suggest very strongly, Mr. Chairman, that DFO and the minister, the deputy minister, and everyone else involved, take a serious look. If that thought is in their minds at all, they had better take a step back and take a look around and, instead, try to move in with a policy and a system that will be beneficial to these small fishing sectors. If there's any thought at all there, as was stated at the table this morning, don't starve them out. Give them a chance to leave with respect and dignity and buy them out.

Ms Fraser: I'm going to start from the back and work to the front, Mr. Chairman.

I repeat, on corporate concentration and moving this small individual fisher out of the business with these policies of cost recovery, that is not the intention. Rather, with the fishery of the future we're moving towards a fishery that is economically viable and profitable and that adheres to conservation.

About the eyes and ears of the department, I admit that sitting in Ottawa, although I am from Atlantic Canada, I don't necessarily understand or appreciate all the things that go on in communities in Atlantic Canada or in British Columbia. I have to admit I'm spending more of my time these days in B.C. than in Atlantic Canada.

But that having been said, we are a highly decentralized department. Our regional directors general are very senior people and report directly to the deputy. The deputy, as I do and my other colleagues do, depends on the RDGs and their staff to be the ears and eyes of the department and to give us the information we need in order to do the job we have to do in headquarters. We depend on the RDGs to manage the regions, to make decisions, and to work directly with the communities and fishers involved.

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On net versus gross, if the working group - and my indication is it probably won't - comes forward and asks us to do some more work on net versus gross, we would be more than pleased to do it. It does get down to a fairness question, and it comes back to whether everyone will agree to the definition of what net landings or net income may be. That has been a question I think both Revenue Canada and HRD have been debating for quite some time. But we would be pleased to look at it if we can advance that agenda item at all.

About projections for processing companies, I have to admit I have a question about your question. Is that for resource projections or for the fee projections?

Mr. Verran: Fee projections.

Ms Fraser: My good colleague....

Mr. Rideout: The fees are not projected to increase in the coming years, certainly not into the year 2000. I think that point was made by the Office of Food Inspection Systems when it was reviewing Bill C-60 with the Standing Committee on Agriculture: that if there were to be fee increases, there wouldn't be any until after the year 2000.

The Chairman: John.

Mr. Kearney: Thank you, Mr. Chairman.

One thing that continues to baffle me about my system of government is a situation in a context like this where Cheryl Fraser says she takes her instructions from the minister and we have what appear to be members of the government elected by the people asking a government official to take messages back to the minister for them.

I'm saying that because what I really want to ask is this question, which has been touched on only peripherally here. We've talked a lot about the impact on this industry of what has happened so far and what we're going to do about it. Perhaps what is more important is Ms Fraser's statement that there will be a cost for services from DFO in the future, but maybe not for all. I think the important thing is ``maybe'' not for all - perhaps for all.

The real question for this committee and for us in the fishing industry is whether a decision has been made by the Government of Canada to move to a system similar to what exists in New Zealand, where in fact industry pays for all administration, all management, all science, except for a very small portion considered to be related to some public interest or recreational factors. It's a question that is perhaps to me the most important and the one my fishermen want to know, in terms of where we are right now. Is this the slim edge of the wedge or has a decision been made by the Government of Canada that this industry will be paying all costs at some time in the near future? I would like to know that, and I think we need to know it right away.

Ms Fraser: The budget of the Department of Fisheries and Oceans, when program review began, started at $1.4 billion. As I indicated, that budget is to be reduced by approximately $450 million over four years. As part of that reduction, we're looking at on the order of between $80 million and $150 million in cost-recovery fees, of which a good portion will be from marine services fees under the coast guard. I believe approximately $40 million had been previously booked under the marine services fee portion of the coast guard.

In answer to your question, John, it's not the intention currently - it's not the intention - to have full cost recovery of the services in the Department of Fisheries and Oceans borne on the back of the industry. But about what I said earlier, some services may not be considered part of the core mandate in support of conservation and management of the fishery where we will have to come to an agreement with industry on the cost-recovery view.

Mr. Kearney: Thank you.

The Chairman: Ron and Mike.

Mr. S. Belliveau: Ms Fraser, I would like you to clarify for me some of the comments you made earlier.

Talking about the licence fees, you mentioned that now is the time to do some fine-tuning. Another point you made was that it may be done through rebates.

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With that in mind, the point I made earlier was that some of the fishermen who are holding the same package of licences in different sectors - and I showed that point very clearly - could be paying different fees. We all mentioned we need fairness in licence fees for access to the resource. Do you see that as a serious problem?

Second, many of these presentations have been put forward to the working committee over the last year or so. Its report was due December 1, 1996. Is that delay going to continue? We've been very impatiently waiting for a reply here. Could you comment on that?

Ms Fraser: I'm afraid Mr. Belliveau and I have different points of view on the holding of licences as packages. The principle that was used in the development of the licence fee was based on the value or the earnings accrued from the licence, and people earn different incomes in Atlantic Canada based on their packages. So a lobster licence in one area of Atlantic Canada may contribute to gross landings in the order of $100,000 or higher, and in another area of Atlantic Canada it could be $15,000.

I recognize there are anomalies within the various pieces of a particular fishery, but they were broadly based on the average landed value for each fishery. So we have to differ on that point of view.

Second, on the delay in the working group, unfortunately there were some start-up problems, there's no doubt about that. But the working group has met and I understand it has a draft report. We're waiting for one member's final comment on that draft report before it's submitted to the minister. I'm told by the chairman it may come as early as today or tomorrow, so the working group report may be in to the minister before the end of the week. But it is in the hands of the working group to make that decision.

The Chairman: Thank you. Mr. Belliveau.

Mr. S. Belliveau: I just want to make this very clear because it's very important to me. I was talking about a package where fishermen holding similar licences - for groundfish, shrimp, crab, or whatever - with each earning $100,000 in each area in Canada can pay two totally different prices. Your rebuttal was about one licence holder, which is totally different. I'm talking about fishermen who go out and harvest, for example, $100,000 of resources regardless of whether it's five species or one species. My point is that each fisherman is harvesting resources with the same dollar value.

Ms Fraser: I appreciate your point. The unfortunate part is that the fee schedule was developed based on the individual fishery.

In Atlantic Canada, on average, 80% of the licence holders with packages of two to three licences are paying total fees of around $400 to $500. There are anomalies beyond that and within that. It's probable that some of those anomalies will come to the fore once the one-year introduction is up. But the anomalies are based on the landed value from the individual fisheries that make up that package. That was the formula that was used.

The Chairman: Okay, Ron.

Mr. Bulmer: I want to be sure before we're finished that we get the shoe on the right foot here. Let me just give you the example on the import side that's been mentioned. It had to raise $2.4 million. The current program was putting small importers out of business, just horrendously.

Mr. Rideout sat down, and through a series of meetings we have totally revamped that program. It's out for discussion, but I think it will go to the minister and make everybody happy. But it's going to raise $2.4 million.

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Let's not forget here that it was the political process that said to the department, you will raise X and you will cut Y, and you will not even have flexibility between those: cut more and raise less, raise more and cut less, or whatever. It was given two hard numbers. Mrs. Fraser said she has to do what the minister tells her.

There is no sense in this committee sitting here and beating on the department or on Treasury Board. If they take one dollar off the licence for lobster for Mr. Belliveau, they have to give it to the guy in shrimp, because they have to raise the money.

So I challenge the committee, as you have other meetings and think about the make-up of the department, the budgets, and how much X and how much Y, to keep this meeting in consideration. No official can sit in this chair and change either X or Y. He can only move it around. He can only take the pain from one guy and add it to somebody else. It is the political process where the shoe must also pinch as you think about this.

Ms Fraser: One point of clarification. Ron was quite right that targets are set. In some cases, as with the fee schedule, targets were set through the budgetary process of the government, and we had to be mindful of them.

The other issue is that with fees, I just want to remind people around the table, with the pre-publication of regulations we were aiming at $50 million. The impact of that $50 million came back to us with the responses following pre-publication, and that was reduced significantly. As I indicated earlier, we're now down to $38.6 million. The balance has been absorbed through cuts elsewhere in the department. There has been flexibility. So although the number is carved in stone, the results we have received back have allowed us to work with our central agencies in determining the flexibility that is better for the introduction of the fees.

It's just a clarification that while there was the budget direction, there was also the flexibility we did bring to the table based on the comments we did hear from the industry after pre-publication.

The Chairman: To conclude, Mr. Belliveau.

Mr. M. Belliveau: Mr. Chairman, I'll be as quick as possible. It's a shame. The meeting is starting to warm up and we have to close it off. Some stuff has come up in the the last two or three comments and it's bang-on.

John Kearney's comments.... I picked up the same thing from Ms Fraser. It's one thing to be nice here and take new licence fees - and we took them; we swallowed them. But that's marginal compared with the stuff we're faced with in this whole cost-recovery program.

There's no other word to call it. It's a rationalization program. It will put people out of work. It's going to put fishermen out of work, and it's going to put their crews out of work, and it's going to put plants out of work. There's no other way to describe this thing.

While I'm at it, I want to add that I was in New Zealand in the 1980s. We travelled around for ten days, looking at their programs. We had a hard time finding an inshore fisherman, I will tell you. That was the result of their type of approach. We had a hard time finding an inshore fisherman. Some were out smoking pot and sailing boats because they had been bought out of the fishery and so on. The inshore fishery was hard to find.

Things are coming at us that we didn't discuss today. In some instances unemployment insurance premiums for fishermen are going to be three- and fourfold this year over last year. Here the Minister of Finance is telling us in the House that it is going to go down 5¢, from $3 to $2.95 per hundred. Well, it's not for the fishermen, and people should investigate that. We're going to pay more in premiums for UI this year than these fees.

So let's not get distracted. It's not just licence fees, it's the whole cost-recovery program. If I were one of the MPs here, I would move a motion that we have a moratorium on this cost-recovery program. Enough is enough is enough.

The Chairman: Thank you. Those are fitting last words, I believe. From what Mr. McCurdy and Michael have just said, the message I'm getting from the meeting is to call a truce before we go any further and see what impact fee structures or UI fees or whatever have been.

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This is the beginning of a process for us. We've received enough material from you people today to have meetings on for the rest of the year, really, and to further investigate. We will continue our investigation into the impact of cost recovery.

I want to thank you for coming from all across the country today - and for missing your dinner and so on. We've learned a lot from you. I hope you've learned a lot from each other. I hope we'll see you in the future.

Have a good day, and thanks again for coming.

The meeting is adjourned.

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