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1997 October Report of the Auditor General of Canada

Main Points

14.2 To address this situation, the federal government implemented income support and adjustment programs to help those dependent on the fishery and also undertook specific initiatives designed to improve fisheries resource management and bring industry capacity into line with the size of the groundfish resource. The government will have spent over $3 billion of new and reallocated program funds this decade. While some progress has been made, many of the critical problems related to the fishery remain, particularly the excess capacity to catch fish, and the number of people relying on the fishery and associated income support programs remains high.

14.3 Managing the seasonal and labour-intensive Atlantic groundfish fishery on a sustainable basis is extremely challenging. Decision makers face the imprecision inherent in determining the status of fish stocks as well as pressure from fishers, plant workers and industry to maintain access to and income from the fishery, access to employment insurance during the off-season, and access to alternative forms of government support in times of crises.

14.4 Although Fisheries and Oceans Canada has stated principles for a fishery of the future, measurable indicators to assess progress are required. While progress has been made in reducing the number of groundfish licences, excess harvesting capacity in terms of an ability to kill fish remains. The Department needs to further its efforts to identify the extent of the contribution of environmental and other factors to the decline of the groundfish. In addition, fisheries management practices need to be further improved to better manage the risks and uncertainty inherent in managing the fishery as a sustainable resource. A precautionary approach to conservation must be the priority and unsustainable fishing practices need to be addressed.

14.5 The Department has stated that its mandate is conservation of the fishery resource base and that this is implied in current legislation. Nevertheless, we found no clearly stated national policy for sustainable fisheries. In addition, performance indicators need to be further developed and planning and performance reporting processes need to be better integrated.

14.6 The deep cultural attachment to the groundfish fishery has been reinforced by several decades of government subsidies. This has resulted in substantial pressure on government to maintain the status quo; that is, to use the fish as a basis for providing income support. Successive governments have provided increasing income support for the people living in the remote coastal communities in Atlantic Canada. This reaction to social pressures has not resulted in an economically viable fishery. In fact, the absence of the fishery has revealed, more clearly than ever before, the substantial reliance on income support by a significant portion of the Atlantic fishing industry. This reliance makes dealing with already complex problems of overcapacity and fisheries management more difficult.

14.7 With the future of groundfish uncertain, the problems remain critical. In our view, the Department, in conjunction with the government, needs to take further steps to implement the principle that "conservation is the paramount priority", as well as to continue to pursue efforts to ensure that resource management decisions reflect the principle that "harvesting capacity must match the available resource base." At the same time, the government must deal with difficult socio-economic decisions about the future of those whom the fishery cannot support, if fisheries management is to ensure an ecologically and economically sustainable fishery.

Introduction

14.9 Groundfish, at a harvestable age, are associated with the ocean bottom for the most part. Examples include cod, haddock, pollock, halibut and various flatfish. Groundfish constitute one of the three major Atlantic Canadian commercial catches. The others include shellfish such as shrimp and lobster, and pelagics such as herring and mackerel. While the 1990s saw a decline in groundfish landings, shellfish fisheries experienced significant growth and pelagic fisheries remained stable.

14.10 The decline of groundfish stocks was dramatic. From domestic and foreign annual total catches of 2,000,000 tons in the 1960s, groundfish landings fell to approximately 120,000 tons a year after the collapse. Historically, groundfish had represented two thirds of the entire Atlantic catch tonnage and 40 percent of its landed value. In certain years prior to the collapse, the 600,000 tons of groundfish landed annually by the Canadian fleet had a value of $350 million and supported over 40,000 fishers and plant workers in hundreds of communities in eastern Canada. They also generated spin-off benefits to other workers in those communities.

14.11 The labour-intensive and predominantly seasonal work provided tens of thousands of Atlantic Canadians income from fishing-related activities and qualified many for unemployment insurance payments during the off-season. Many Atlantic Canadians living in areas without alternative sources of employment faced losing both of those sources of income under progressive moratoria on groundfish, beginning in 1992. Their stark situation contrasted with a smaller number of their neighbours in the more thriving shellfish industry, where high landings and prices fuelled prosperity.

14.12 The social and economic impacts of the moratoria would likely have been much greater had it not been for government intervention through a number of programs. The federal government launched a series of reviews, implemented income support and adjustment programs and undertook initiatives designed to bring the industry's capacity into line with the size of the groundfish resource. In the end, these programs will have cost Canadian taxpayers over $3 billion during the 1990s. The most recent of these programs, The Atlantic Groundfish Strategy, is providing $1.9 billion to address income support and adjustment ($1,748 million), rationalization of capacity ($97 million) and economic development ($50 million). The Strategy is a joint program of Human Resources Development Canada, Fisheries and Oceans Canada, the Atlantic Canada Opportunities Agency and the Federal Office of Regional Development - Quebec.

Focus of the audit

14.14 Chapter 15 reports on progress of the fisheries management practices in dealing with the fundamental problems of the Atlantic fishery. Both chapters 15 and 16 report on whether income support, capacity rationalization and adjustment programs administered by Fisheries and Oceans Canada and Human Resources Development Canada have contributed to the achievement of both fisheries management objectives and The Atlantic Groundfish Strategy objectives. Chapter 16 also reports on whether an effective accountability regime for The Atlantic Groundfish Strategy has been established.

14.15 Further details are provided in About the Audit at the end of the chapter.

Observations and Recommendations

14.17 In 1994, Fisheries and Oceans Canada reported that Atlantic Canada had more than 25,000 registered fishing vessels and about 58,000 registered fishers, about 45,000 of whom were active in the various Atlantic fisheries ( Exhibit 14.2 ). In 1996, Atlantic Canada had 832 federally registered fish processing plants, 741 of which were active.

14.18 The groundfish industry has played a significant role in the economies of the four Atlantic provinces and Quebec ( Exhibit 14.3 ). In Newfoundland, for example, the groundfish catch in 1990 represented about 62 percent of the total catch's landed value; historically, the groundfish industry provided about 16 percent of Newfoundland's employment. By comparison, in Nova Scotia, groundfish represented approximately 40 percent of the landed value and about six percent of employment. Quebec and the other Atlantic provinces are involved in the groundfish industry to a more limited extent. In 1997, there were 13,061 groundfish licences in Atlantic Canada. This figure includes 2,626 non-reissuable licences that are planned to be eliminated over time.

Collapse of the Atlantic Groundfish Industry

14.20 The Minister of Fisheries and Oceans closed the northern cod fishery in July 1992. It became clear that key biological indicators were declining rapidly and that the biomass of many groundfish stocks was at the lowest level ever observed. Not only were the stocks declining, but the individual fish were growing more slowly: for example, in four management zones, the weight of individual cod at age seven had decreased significantly between 1977 and 1993. The Fisheries Resource Conservation Council was set up by the Minister of Fisheries and Oceans to provide advice on fishing levels under these conditions. The Council first reviewed the status of groundfish stocks in 1993. It concluded that fishing of many of the groundfish stocks should be stopped to allow them to rebuild.

Impact of the groundfish moratoria

14.22 Groundfish workers constitute a largely rural and isolated population; the communities where they live offer few alternative sources of employment and rates of unemployment are high. Even if the communities had alternative employment opportunities, many of those involved in the groundfish industry have low levels of education ( Exhibit 14.4 ) and lack experience outside the fishery. Furthermore, many own homes, have strong community ties and strongly believe that the groundfish will return.

14.23 Income from unemployment insurance has provided a significant and increasing portion of fisher income over the years. In 1981, for example, for every dollar they earned in the fishery, self-employed fishers received 43 cents in unemployment insurance benefits; by 1990, this had risen to 81 cents. For plant workers, the increase was from 33 cents to 57 cents. ( Exhibit 14.5 )

14.24 The potential impact of the groundfish moratoria was greatest in Newfoundland, the province with the largest groundfish industry. Reliance on unemployment insurance payments was also highest there; by 1990, self-employed fishers were receiving $1.60 in unemployment insurance benefits for every dollar earned in the fishery, up from 96 cents in 1981.

14.25 The combination of income from the fishery and income from unemployment insurance has proved to be more attractive than other alternatives, whether local or distant, and has allowed many Atlantic coastal communities to maintain their population.

14.26 Without groundfish industry employment, however, many workers have been unable to find enough work to qualify for employment insurance (formerly unemployment insurance). The income support provided by The Atlantic Groundfish Strategy is nearing an end, the fish have not yet returned in sufficient quantity to sustain the industry, and many areas affected by the groundfish collapse still offer few other employment opportunities.

Causes of the Atlantic groundfish decline

14.28 The increase in fish harvesting over time is shown in Exhibit 14.6 . This exhibit demonstrates fishing levels much higher than the Department's conservation standard. In many groundfish stocks such as cod, fishing at the conservation standard means catching about 2 out of every 10 fish available in a year, and leaving the remainder to reproduce and support a profitable fishery in future years.

14.29 Departmental officials have identified three factors in the overharvesting of groundfish stocks: the fishing levels were set above conservation standards, fishers caught more than they were allocated and certain fishers used unsustainable fishing practices.

14.30 Total fishing levels set above conservation standards. The Minister of Fisheries and Oceans sets out in annual plans the total allowable catch for fish stocks under management, and divides that total among user groups to ensure an orderly and equitable harvest. On occasion, these levels were set higher than the Department's conservation standard for fishing mortality.

14.31 The Department's science function prepares an assessment of the status of groundfish stocks on an annual basis. Prior to 1993, these assessments were subject to peer review by scientists on the Canadian Atlantic Fisheries Scientific Advisory Committee; since 1993, the science function provides these estimates to the Fisheries Resource Conservation Council, which then recommends target fishing levels to the Minister.

14.32 Given the difficulty arising from variability in marine environmental factors and sampling variation, these assessments reflect a lack of precision. It became apparent in 1986 to departmental scientists and external reviewers that a continuing pattern of overestimation of groundfish stocks resulted in a fishing level for northern cod stocks at least double the Department's conservation standard.

14.33 Assessing fish populations is a very challenging endeavour for scientists in Canada as well as other countries. Assessment problems resulted from assumptions in the sequential population analysis prediction model used for many groundfish stocks; these reflected an incomplete understanding of the biology of stocks and suffered from limitations in the data. The Department's science function based its population assessments primarily on data collected from research survey cruises and on commercial fishery landing statistics. There was a time lag between the survey and the period for which assessments were made.

14.34 In the period prior to the groundfish collapse, although the research surveys indicated that some stocks were declining, the data on offshore commercial fishing showed no such decline. Data on commercial fishing operations reflected the results of selective fishing by experienced captains with increasingly sophisticated electronics and gear, in areas of high fish concentrations. In addition, the information on stocks is also inaccurate, due to underreporting, misreporting or additional fishing mortality caused by unsustainable fishing practices, as discussed below.

14.35 The total allowable catch is the total tonnage of a particular fish stock allowed to be caught in a given year. In the years before the groundfish decline, the Minister reviewed scientific recommendations but, by convention, set the total allowable catch under decision rules that provided flexibility. One of these rules provided that the total allowable catch could be halfway between the current fishing mortality level and the target fishing mortality level for the next year. This flexibility served to moderate the socio-economic impact of year-to-year changes in the total allowable catch on a fishing industry with excess capacity; however, it proved to have negative impacts on declining stocks.

14.36 Fishers caught more fish than allocated. Pressure on fish stocks was also due in part to the fishers catching more fish than the amounts allocated to them; for example, haddock landings for 1991 and 1992 were nearly double the total allowable catch. Occasionally, fisheries managers did not close fisheries until some time after the quota had been met, because they did not have available timely data on catches against quotas. Fishing by foreign fleets in the Northwest Atlantic Fishing Organization regulatory area immediately adjacent to the Canadian 200-mile limit was much higher than the Organization's conservation standard ( Exhibit 14.7 ). "The Report on the Task Force on Incomes and Adjustment in the Atlantic Fishery" noted foreign overfishing of straddling stocks as a factor in the decline of cod stocks. Since that time, the Department has been actively advancing international conservation to protect groundfish stocks and reduce foreign overfishing.

14.37 Unsustainable fishing practices. According to Fisheries and Oceans Canada, unsustainable fishing practices also contributed to the groundfish collapse. Those practices include unrecorded landings, misrecorded landings, dumping of bycatch and highgrading.

• Unrecorded landings can occur because of the desire of fish harvesters to maximize their return in a competitive fishery and because of limitations and weaknesses in monitoring and recording actual landings.
• Fishers sometimes misrecord landings, reporting fish caught in a closed fishing area as having been caught in an open area.
• Bycatch includes species not targeted by fishers or allowed by single species quotas. For example, fishers might catch halibut as a bycatch in a cod fishery. A certain amount of bycatch is allowed by quotas; excess bycatch is often illegally discarded.
• Highgrading involves discarding fish to make room for more valuable fish that bring a better economic return or for which there is a need at the processing plant. For example, weekly summaries of highgrading by several offshore draggers in the 1980s involved dumping hundreds of tons of fish.

14.38 These unsustainable fishing practices have an impact on estimates of fish mortality. Discards and unrecorded landings are generally not reflected in scientists' data on removals by the commercial fishery; misrecorded landings distort the accuracy of stock assessments. The extent of this imprecision is not easily quantifiable, in part due to lack of data.

14.39 Environmental conditions and predator-prey relations. Fisheries and Oceans Canada has indicated that natural mortality may have increased due to predator-prey relations. It emphasized that environmental conditions also contributed to the groundfish collapse in certain areas. This is supported by departmental studies showing the poor physiological condition of the groundfish and other stocks as well as the continued decline of the groundfish stocks after fisheries had been closed. The period of the groundfish decline coincided with Atlantic waters becoming colder. The Department believes that colder waters had a negative impact on groundfish stocks, and has conducted research on this topic. The period of groundfish decline also saw substantial continued growth in seal populations as the government restricted the fur trade in response to international pressure. Seals consume groundfish as well as capelin, a groundfish food source. The Department has also conducted research on this topic. While ongoing research focusses on partitioning the causes of the collapse of northern cod, there has been no overall departmental statement on the relative extent to which the collapse of groundfish stocks can be attributed to the respective factors.

14.40 Fisheries and Oceans Canada should pursue the identification of the most likely relative contribution of the various factors related to the collapse of groundfish stocks and provide assurance to Parliament that initiatives to deal with this problem address the most probable causes.

Department's response: In recent years, the Department's scientists have undertaken, in collaboration with scientists from various universities, a number of research projects under the Department's Strategic Research Priority Fund to evaluate the relative contribution of various factors in the collapse of groundfish stocks. A scientific workshop to review the results of these projects is planned for March 1998.

Overcapacity - A Fundamental and Long-standing Problem

14.42 According to a now-public 1970 Cabinet memorandum, the Canadian fishing industry even then had an overcapacity both in people and equipment. It was overcapitalized by a ratio of more than 2:1, and it was estimated that Canada's commercial catch in 1970 could be harvested by 40 percent of the boats, half as much gear and half the number of fishers.

14.43 At that time, the federal government realized that a deliberate policy of rationalizing the fishery would create challenges, including the relocation of tens of thousands of people, the sale of thousands of vessels and the phasing out of hundreds of small communities. Because alternative employment was generally unavailable locally, many families would have to be moved and retrained. The government decided that rationalization of the fishery would proceed only as quickly as acceptable alternatives became available. In fact, instead of rationalization the next decade saw expansion.

14.44 The extension of fisheries jurisdiction to 200 miles in January 1977 gave Canada control over the fishery resources off the east and west coasts. Foreign fishing was reduced within the Canadian zone and the allocations available to domestic fleets were increased. Canadian industry reacted by increasing its capacity by investing in larger, more powerful boats with greater technological capabilities. For example, gross registered tonnage increased by 150 percent between 1980 and 1989 ( Exhibit 14.9 ). Competition in the fishery meant that a fisher had to have greater and greater capacity to guarantee a share of the groundfish resource. With larger boats came higher debts.

14.45 In the early 1980s, the major firms found themselves in debt and on the verge of collapse, given their rapid expansion of capacity; their debt-to-equity ratio was 9:1. The economic recession, coupled with high interest rates and low prices, caused a financial crisis in the industry. Largely through government intervention, the industry was refinanced and restructured. Overcapitalization and high debts can lead to unsustainable harvesting practices aimed at maximizing the fishers' return on their effort.

14.46 Many people were attracted to the small boat inshore fishery by the easy access granted under past licensing policies and by the lure of government support programs that augmented their limited income from fishing. The period from 1980 to 1991 saw a growth of 31 percent in the number of individuals employed in Atlantic fish processing jobs; during the same period, the available fishery resource declined by 2.5 percent. The discrepancy was particularly notable in Newfoundland, where the number of people in the fish processing sector increased by 50 percent while the available fish stocks declined by 18 percent ( Exhibit 14.10 ). As the resource declined, dependence on the support programs increased; in certain sectors of the fishery there was a total reliance on support because of the complete collapse of the resource.

14.47 The Minister appointed The Scotia-Fundy Groundfish Task Force (Haché) in July 1989, in response to groundfish quota reductions on the Scotian Shelf. The Task Force reported that haddock stocks had been exploited at two to four times the target levels since 1984. The Report concluded that excessive harvesting capacity was a major obstacle to a turnaround in the fishery, and that overcapacity and overinvestment had to be reduced as quickly as possible.

14.48 Given the increasing catch failures in the Atlantic groundfish industry, and other long-standing structural problems of the industry, in 1993 the ministers of Fisheries and Oceans and Human Resources Development established the Task Force on Incomes and Adjustment in the Atlantic Fishery. That Task Force also identified overcapacity as a fundamental problem of the groundfish industry.

14.49 It has been widely recognized that the Atlantic fishery has been estimated to have approximately double the capacity needed. This overcapacity contributes to overfishing because fishermen have substantial investments in vessels and fishing gear, and thus have a desire to maximize their return in a competitive fishing environment.

Socio-economic policies contribute to overcapacity

14.51 Unemployment insurance and other initiatives to relieve the socio-economic problems of those in the Atlantic fisheries contributed to overcapacity, since fishery employment even for short periods qualified individuals for unemployment insurance benefits. For example, the period of employment necessary for unemployment insurance varied with the local fishing season; the length of the fishing seasons varied and could be less than 10 weeks.

14.52 Between 1980 and 1991, the number of persons employed in Atlantic fisheries processing increased by a much higher margin than did full-time person-years. This would suggest that by 1991 the average person was working fewer months. The average duration of processing jobs dropped from 8 months in 1980 to 5.5 months in 1991 ( Exhibit 14.10 ).

14.53 Federal and provincial governments have contributed to capacity by providing loans and loan guarantees to build boats and improve fishing technology. For example, federal support for the fishing industry in Canada included funds provided by the Fishing Vessel Assistance Program (until 1986), the Shipbuilding Industry Assistance Program (until 1985) and the Fishing Vessel Insurance Plan (since privatized). Unemployment insurance payments for fishers increased from $20.4 million in 1972-73 to $270.1 million in 1988-89. The Province of Newfoundland provided payments called "bounties" for new inshore fishing vessels. Over the years, the reported number of processing plants with federal registration allowing interprovincial and international sales grew from 641 in 1980 to over 900 in 1988 ( Exhibit 14.11 ), and to 1,063 in 1991; the growth in their number does not capture change in the capacities of individual processing plants.

14.54 The above-noted fundamental problems in the groundfish industry demonstrate that:

• groundfish resources are finite;
• the groundfish industry continues to have fundamental overcapacity; and
• even if the groundfish returned to levels seen in the last decade, the groundfish industry could not provide adequate incomes for the number of people historically dependent on it.

14.56 The capacity of the groundfish harvesting industry is a term that is not easily defined, and on which there is little agreement. The government has focussed on the number of licence holders or the number of people the industry can employ. While these are important components of harvesting capacity, the risk of overfishing due to the ability and need of the industry to catch fish is also a component. This brings in the concepts of capital investment in technology, major improvements in the ability of improved technologies to catch fish and desired levels of income for those participating in the industry.

14.57 Progress has been made in reducing the number of groundfish licences from over 17,000 in 1993 to just over 10,000 "core" licences in 1997 (Chapter 15, Exhibit 15.5 ). Nevertheless, excess harvesting capacity in terms of an ability to kill fish remains.

14.58 Fisheries and Oceans Canada should develop and propose a strategy to government to further reduce overcapacity in the groundfish industry.

Department's response: While significant reduction has been achieved, excess groundfish harvesting capacity remains. Had the budget for rationalization been maintained at $300 million, a larger number of licences would have been retired under The Atlantic Groundfish Strategy. The Department will propose a strategy to achieve further capacity reduction, over time, taking into account the funding available and the prospects regarding alternative economic opportunities for affected fishers.

14.59 Income support issues must be dealt with in their own right. The resource base is not, and has not been, by itself, sufficient to support the number of people and coastal communities that have depended on the fishery in recent history. It must be recognized that managing the fishery on a sustainable development basis would clearly require finding a solution to the unemployment of people who are no longer part of the fishery. In other words, if the fishery is to be managed on a sustainable development basis, ecologically and economically, then another means of addressing the social and cultural issues of coastal communities has to be found.

14.60 To ensure that the fishery is managed on a sustainable development basis, the government should address the social and cultural issues of coastal communities.

Department's response: The Department's objective of conservation is intended to ensure a sustainable fisheries resource that is capable of providing sustainable incomes for harvesters. The Department agrees that the groundfish resource will not be able to provide adequate incomes for the number of people historically dependent on it. Achievement of the Department's objective for a sustainable fishery would be facilitated by the availability of viable alternatives for affected fishers who can no longer rely upon the fishery for their livelihood.

Federal Government Response to the Groundfish Collapse

Income support and adjustment programs

14.63 In 1993, the Office of the Auditor General reported on the Northern Cod Adjustment and Recovery Program, which provided income support and adjustment to those affected by the decline of the northern cod between 1992 and 1994. Chapters 15 and 16 of this Report address the implementation of The Atlantic Groundfish Strategy.

Fisheries Management Framework

14.65 One of the challenges in setting up an enduring framework for management of the Canadian fisheries is dealing with jurisdictional responsibility. While the federal government has responsibility for fish harvesting, provincial governments are responsible for registering fish processing plants for operation. The interests of the two levels of government may not always coincide.

14.66 Another challenge is ensuring that there is a common understanding of "a sustainable resource base" and "sustainable development". "A sustainable resource base" involves conservation of the resources for harvesting purposes. "Sustainable development" includes additional considerations such as social and economic impacts.

14.67 Fisheries resources are used for Aboriginal food, social and ceremonial purposes as well as commercial and recreational purposes. Fisheries and Oceans Canada manages many groundfish stocks in Atlantic Canada. In consultation with clients, it sets total allowable catch limits on these stocks for each fishing zone on the basis of scientific advice developed on each stock's individual dynamics. (Stock dynamics include rates of growth, reproduction and mortality.)

14.68 We assessed whether Atlantic groundfish are managed within a framework of management accountability for sustainable fisheries that responds both to the government's objectives and to the Department's mandate and long-term objectives. We found that the fisheries management framework requires clarification. Fisheries management decisions appear to relate directly or indirectly to a number of different federal government policy objectives. The Department has stated that its mandate is conservation, but other related government objectives include providing economic opportunity, facilitating access to reasonable income and Canadianization of the fishery.

National fisheries policy needs to be developed

14.70 Statements of Canadian commercial fishing policy were advanced in 1970 and 1976. In 1970 the main objective of government fisheries policy was to maximize employment in Canada's commercial fishery. The 1976 Policy of Canada's Commercial Fisheries indicated that in the future fisheries would be regulated in the interest of people. In 1981 the Minister of Fisheries and Oceans published a discussion paper on Canada's Atlantic fisheries policy for the 1980s. This document included as a strategic objective "to maintain fishery resources at levels which will generate the maximum continuing economic and social benefits." The current status of these policy documents is unclear.

14.71 Legislation passed in the 1980s established the objectives of economic viability and maximized employment. The Atlantic Fisheries Restructuring Act adopted as a hierarchical set of policy objectives for the Atlantic fisheries:

• that the Atlantic fishing industry be economically viable on an ongoing basis;
• that employment in the Atlantic fishing industry be maximized, subject to the constraint that those employed receive a reasonable income; and
• that fish on the Atlantic Coast of Canada be harvested and processed by Canadians to the extent that this objective is consistent with the first two objectives and with Canada's international treaty obligations.

14.72 The Fisheries Act provides for regulations to conserve and protect fish. The Fisheries Act was amended in 1985 to include a purpose statement providing for the conservation and protection of fish by means of proper management, and for allocation and control of Canada's seacoast fisheries in order to provide fishers and others with economic and social benefits from the use of fish. However, that purpose statement was repealed in 1987.

14.73 The federal government tabled two new fisheries bills to replace the current Fisheries Act , the most recent of which advanced the precautionary approach to fisheries resource management; neither bill became law. The second bill was tabled in 1996 and had not become law when the 1997 federal election was called.

14.74 The recently passed Oceans Act specifies that the Minister of Fisheries and Oceans shall lead and facilitate the development and implementation of a national strategy for the management of estuarine, coastal and marine ecosystems in Canadian waters based on the principles of sustainable development, integrated management and the precautionary approach. The legislation defines the precautionary approach as "erring on the side of caution."

14.75 While the precautionary approach is inherent in the principles of the United Nations Straddling Stocks agreement ( Exhibit 14.13 ), Canada has not yet ratified this agreement or, likewise, the 1982 Law of the Sea Convention. However, Canada was an active participant in the United Nations Conference on the Environment and Development in 1992 in Rio de Janeiro, Brazil, which advanced the precautionary approach. Canadian scientists are working with scientists from other countries to advance the concept of the precautionary approach.

14.76 Fisheries and Oceans Canada should renew its efforts to have the government clarify fisheries objectives in legislation and develop a national fisheries policy framework.

Department's response: The Department agrees that it would be useful to affirm its objectives in legislation and establish a consolidated national policy framework. In this regard, the bill amending the Fisheries Act that was before the House when the election was called described the purpose of the Act as establishing powers, duties and functions to be exercised to conserve and manage fisheries in the interest of the present and future generations. It endorsed the precautionary principle, and affirmed that conservation of Canada's fisheries and their management on a sustainable basis are central to the economic viability of harvesters and processors and the well-being of communities dependent on fisheries resources.

Departmental policy requires clarification

14.78 Fisheries and Oceans Canada has developed principles to guide fishing industry restructuring and fisheries management renewal that have evolved over time. The first of these principles places a priority on conservation. However, it is not clear how the priority on conservation relates to other objectives for the Atlantic fisheries currently defined in law: economic viability, employment maximization and Canadianization of the fishery (see paragraph 14.70). It is also unclear how the priority on conservation relates to other considerations that have an impact on sustainable development, such as use of the fishery of the future as a means of accessing income support, assuring the long-term viability of coastal communities and maintaining population in remote parts of Canada.

14.79 Fisheries and Oceans Canada and other stakeholders have made progress with respect to the restructuring principles of professionalization of the fishery, multi-species licences and partnership. However, we were unable to find elaboration on two primary restructuring principles, "conservation is the paramount priority" and "capacity must balance with available resources". For example, what does it mean to say that conservation is the paramount priority? What is capacity? At what point does capacity meet the available fishery resource? And when it does, what becomes of excess fishing and processing capacity?

14.80 Fisheries and Oceans Canada should pursue, as a priority, completion of a consolidated policy framework related to sustaining the fisheries resource base.

Department's response: The Department agrees that a consolidated policy framework would be useful in guiding the implementation of the Department's conservation objective in ensuring the sustainability of the fishery resource. A framework will be prepared to elaborate on the policy objectives and principles that have been adopted by the Department and that are referred to in paragraphs 14.97, 14.98, 15.10, 15.11 and 15.12.

Need to integrate planning and performance reporting

14.82 We found that performance expectations were not defined precisely enough for Parliament to know when results have been achieved. The indicators of accomplishment provided were frequently actions that the Department intended to take. The Department has not yet developed measurable indicators related to its key guiding principles.

14.83 Fisheries and Oceans has recognized the need to develop performance indicators and an initiative is under way in this regard. Furthermore, for fisheries management, the Department is in the process of developing an approach to business line performance measures related to the conservation of fish stocks, co-management of the fishery and industry capacity.

14.84 The Department uses an accountability accord in fisheries management to set out goals, deliverables, responsibilities and, on occasion, time frames. Progress on this accord between senior management and the Deputy Minister is reported every six months.

14.85 The Department had a fisheries management business plan for 1996-97 that included:

• one business line objective;
• the six priorities of the Minister of Fisheries and Oceans (October 1995);
• seven target areas for fisheries management;
• a subordinate priority or set of priorities within each of the seven target areas (total of 32 subordinate priorities); and
• subordinate targets for each of the priorities within each target area.

14.87 We found limited use of business plans and performance reports at operational levels of the Department. A strategic planning framework has been developed for fisheries management but a strategic plan has yet to be developed.

14.88 The two headquarters organizations most directly involved in national co-ordination of fisheries management activities did not have business plans; such plans could improve the linkage between overall departmental direction and those who implement and enforce management plans for specific fisheries. There is a strategic plan for the national enforcement organization but not for the national fisheries resource management organization.

14.89 Fisheries and Oceans Canada should establish measurable indicators and performance expectations to assess progress in applying guiding principles and integrate those indicators in its planning, reporting and accountability process that responds to the government model.

Department's response: The Department agrees and will continue the development of performance measures and business plans in line with government guidelines and standards.

Conclusion

14.91 The problems in the fishery are very complex and the common property nature of the resource adds to this complexity. It is not just a case of managing the resource with consideration of ecological and economic sustainability; it also involves considering the social and cultural implications of these decisions. While key groundfish resource allocation and related management decisions are the legislative responsibility of the Minister of Fisheries and Oceans, a solution to the fundamental problems of the fishery involves several departments of the federal government and, indeed, other governments and external parties. Thus, fisheries resource allocation and management decisions have a political dimension.

14.92 Currently, the incentive is for fishers to remain attached to the fishery rather than to leave it. In fact, those involved in the industry may see an advantage to strengthening the attachment where possible, since federal income support or employment insurance benefits remain attractive compared with other social support programs, and few employment alternatives exist. It appears that provincial governments and other organizations may have little reason to encourage people to leave the fishery; in the absence of employment alternatives, the demand on provincial social programs could increase. (see photograph)

14.93 As we have noted in this chapter, a national fisheries policy is lacking. Principles have been stated, but measurable indicators to guide and assess progress need to be developed. The Department needs to integrate these principles in its planning and performance reporting processes. As Chapter 15 points out, while progress has been made toward achieving the principle of matching capacity to the resource base, much more effort is required to reduce harvesting capacity.

14.94 We also note that high numbers of people still rely on the fishery and on associated income support. In the past, this created a demand that could not be sustained by the capacity of the resource base and there is no reason to expect that this will change in the future. The movement of funding for The Atlantic Groundfish Strategy from the adjustment and rationalization components of the program to the income support component served to encourage people to remain attached to the fishery and dependent on federal government support. The original objective of a 50 percent reduction in capacity established under The Atlantic Groundfish Strategy will certainly not be achieved by the anticipated end of the Strategy in 1998.

14.95 After spending over $3 billion of new and reallocated funds to support the industry, including $1.9 billion under The Atlantic Groundfish Strategy, the problems in the groundfish fishery remain. The fisheries management practices need to be further improved to ensure the sustainability of the resource base; dependency continues on the fishery to provide access to federal income support programs; and few employment alternatives exist for people in coastal communities. The problem is compounded by the fact that the majority of the people in these communities have education levels that limit alternative choices of employment.

14.96 In summary, our main audit findings are:

• a national fisheries policy has not yet been put in place;
• further progress is required in dealing with the fundamental problems in the fishery, especially matching capacity to the resource base (see Chapter 15);
• an adequate accountability framework was not established for The Atlantic Groundfish Strategy (see Chapter 16); and
• income support, adjustment and rationalization of capacity provided by programs have not contributed significantly to fisheries objectives or to those of The Atlantic Groundfish Strategy (see Chapters 15 and 16).

14.97 We believe that the government needs to deal with overcapacity. However, we recognize that while the Minister of Fisheries and Oceans has the power to reduce capacity and conserve fish, and the Department has taken a number of initiatives, the Minister and Department cannot solve the sustainable development problem associated with the fishery by themselves. The resource base is not, and has not been, by itself, sufficient to support the number of people and coastal communities that have depended on the fishery in recent decades. It must be recognized that managing the fishery on a sustainable development basis would clearly demonstrate the need to find a solution to the unemployment of people who are no longer part of the fishery. In other words, if the fishery is to be managed on a sustainable development basis, in an ecological and economical manner that reflects stated intentions, then another means of addressing the social and cultural issues of coastal communities has to be found.

14.98 This concern requires urgent attention. It is reasonable to expect that there will be pressure for further income support after the end of funding under The Atlantic Groundfish Strategy, since overcapacity remains and there is little indication that the fish are returning in sufficient numbers to allow the levels of fishing that existed before the moratoria. Even if the groundfish stocks were to return to historical levels, dependency on government income support would continue in some form unless there were to be a substantial reduction of participation in the fishery. The level of income the fishery can provide is limited.

14.99 We are concerned that if further funding is provided primarily for income support, the excess capacity in the industry will still not be addressed. The previous programs have not worked, and there is no reason to believe that this approach will be any more successful if applied again in the future. The impact of not addressing the well-documented fundamental problems of the fishery has been clearly demonstrated in the Atlantic groundfish industry.

About the Audit

Scope

Chapter 15 reports on the implementation of these principles, steps taken to match fishing capacity to the fishery resource and progress toward establishing partnerships with industry. It assesses the extent to which changes to fisheries management practices deal with the fundamental problems in the fishery.

Chapter 16 assesses the degree to which the adjustment components of The Atlantic Groundfish Strategy administered by Human Resources Development Canada and Fisheries and Oceans Canada have adjusted fishers and processors out of the groundfish industry.

Objectives

• whether Atlantic groundfish fisheries are managed within a sustainable framework (Chapter 14);
• whether fisheries management practices for the Atlantic groundfish fishery have resulted in progress in dealing with the fundamental problems in the fishery (Chapter 15);
• whether an effective accountability framework for The Atlantic Groundfish Strategy has been established (Chapter 16); and
• the extent to which the income support, capacity rationalization and adjustment programs administered by Human Resources Development Canada and Fisheries and Oceans Canada have contributed to the achievement of fisheries management objectives and The Atlantic Groundfish Strategy objectives (Chapters 15 and 16).

Criteria (Chapter 14)

We would expect that appropriate implementation strategies and performance expectations for groundfish fishery management objectives would be developed based on adequate information and analysis, to deal with the fundamental problems of the fishery.

We would expect that Fisheries and Oceans would periodically report on the extent to which fisheries management objectives and The Atlantic Groundfish Strategy objectives have been achieved.

Criteria for Chapters 15 and 16 are found in those chapters.

Audit Team

For information, please contact Douglas Timmins, the responsible auditor.