10 December 2013

Converting principles to other people’s money #nlpoli

When Premier Kathy Dunderdale spoke to a St. John’s Board of Trade last May,  she claimed the federal government had tried to tie the federal loan guarantee on Muskrat Falls to the European free trade talks.

There’s no evidence that her claim is true, at least based on the selected documents Dunderdale released last week in the House of Assembly on the negotiations.

The documents actually show something else.

Dunderdale delivered her luncheon speech on Monday, May 27.

What Dunderdale knew at that point was that three days earlier, the provincial government had offered to give up its insistence on complete protection for minimum fish processing requirements to tie a string of issues, including a license renewal for Ocean Choice International. 

Industry minister Keith Hutchings sent a formal version of the letter to his federal counterpart the same day as Dunderdale’s speech. The federal government received a draft version of the letter on May 24.

All principle converts to other people’s cash

In the letter, Hutchings described the proposed side deal between Ottawa and St. John’s as a “combination of protection and compensation” for the provincial government in exchange for abandoning what Hutchings described as the “only policy instrument” the province had to guarantee processing jobs in the fishery.

The approach is consistent with the Conservative philosophy that all principles convert to cash

The only question is the price.  In 2005,  the Conservative settled a dispute with Ottawa that resolved down – ultimately – to the difference in the price of a barrel of oil used to calculate the single federal transfer.

It is also consistent with the long-standing government policy of writing “begging letters” to Ottawa.

The “compensation” included:

  • renewal of a quota for OCI in 2016 for another nine years,
  • $400 million of new federal money to pay for port construction,  research on fisheries and fishing technology,  new product development and marketing, and fishing sector “adjustment”,
  • federal transfer of its Hibernia shares to Nalcor,
  • new helicopters, fixed-wing aircraft, and trained personnel for search and rescue in Newfoundland and Labrador,
  • federal money for private-sector search and rescue,
  • re-opening of the marine rescue sub-centre, and,
  • action on a “new governance model” for the offshore regulatory board.

By the June 2, the federal government agreed to provide $280 million  fund for industry transition fund with the provincial government putting in $120 million. They also agreed to consult the province on over-the-side sales of fish to European companies.

The federal government flatly rejected the other issues since they were not connected to the trade deal. 

Two Different Stories

In the series of appeals Nalcor filed with the Quebec energy regulator in 2007, the provincial government made a series of claims and statements that were not true.

The same is true in the trade talks “dispute” that took place, curiously enough, in same month Corporate Research Associates was in the field for its quarterly omnibus poll.

The provincial government claims appear designed to create the impression the provincial government was resolutely defending provincial interests.  There are several notable discrepancies between what the Premier said and what actually happened.

Take this further example (via CBC): 

"We responded last night to that, there's movement on both sides," said Dunderdale, who was in Grand Falls-Windsor on Friday.

As we now know, the provincial government abandoned entirely its position by May 31.  Within two days of Dunderdale’s comments the provincial government has settled for $280 million and an agreement for consultation on over-the-side sales.

There are other examples. 

After her speech at the Board of Trade, Kathy Dunderdale told reporters that, as CBC reported it: “she might consider the request if the local industry and province can benefit from it. But so far, she said her advisors have told her it makes little sense for Newfoundland and Labrador's fishing industry.”

Her advisors evidently didn’t include the local fishing industry.  By the time Dunderdale spoke to the Board of Trade,  her chief of staff and industry deputy minister Alastair O’Reilly, had heard from the Fisheries Council of Canada,  the Association of Seafood Processors and the Fish, Food, and Allied Workers, each of which encouraged the provincial government to abandon its insistence on minimum processing requirements.

Incidentally, we know know why cabinet moved O’Reilly from fisheries to industry in early May.

The documents that Dunderdale released included letters and e-mails from all three organizations.  As the Fisheries Council chair Patrick McGuinness noted on May 16,  when policies such as minimum processing requirements “render production uneconomic, the harvesting of the fishery is reduced or abandoned resulting in loss [sic] income for harvesters.”

Note that by Dunderdale’s account, the provincial government was aware in November 2012 that minimum processing requirements were a key issue.  The provincial government also knew,  as trade minister Keith Hutchings acknowledged on Monday in the House of Assembly, that most provinces with a fishing industry did not use minimum processing requirements. 

What’s more, Dunderdale told the House on Monday that the provincial government “understood that there would be little to no impact on workers” in Newfoundland and Labrador from the loss of minimum processing requirements.

For all that, what Dunderdale said publicly and what was actually happening were two different things. 

The Failed Gambit

The May 24 letter has all the hallmarks of a desperate last minute effort.  The provincial government appears to have understood the issues well:  the fact the provincial government participated in the the talks showed an interest in helping to shape the final deal.  its earlier position had been to leave the province’s interests to others to defend.

At the same time, though, the provincial government must have appreciated that the other parties understood the provincial government’s real position very well.  After all, if two ministers could say different things about the government’s position at the same time, others likely knew the provincial government’s true position after several years of detailed talks.

In that respect, the demand for compensation can also be seen as confirmation that a position that was carved in stone only a few days earlier was actually made of sand. The provincial government’s indignation in letters to the fisheries council, the prime minister and the federal trade minister about supposed leaks of confidential information ring hollow given the rapid and dramatic change of position represented by the May 24 letter.

As a failed gambit,  the May 24 letter resembles the flag stunt of the 2004 confrontation with the federal government.  The federal government position solidified in late 2004 to the point where the provincial government apparently could not achieve anything more than substantive than an offer made in October 2004.  Danny Williams gained headlines when he removed Canadian flags from provincial government buildings.

But as provincial government polling showed, the public across Canada was highly critical of the move.  And in Newfoundland and Labrador,  a nearly unanimous endorsement of the provincial position on four of the poll’s five questions shattered on the flag question.  As fast as the government pollster finished its work, Danny Williams suddenly and unexpectedly restored the flags without having achieved his publicly-stated objective.  Within two weeks, the provincial government settled for far less than it had originally stated.


As much as the trade talks dispute looks similar to previous  Conservative behaviour or policies, there is one curious aspect to the May 24 letter:  three of the elements are not provincial government initiatives.

The SAR element came entirely out of the Burton Winters tragedy.  The marine rescue sub-centre is an issue pushed by the provincial Liberals. The offshore safety agency is one pushed by the unions representing offshore workers. 

The provincial government bought into all three but never redefined them in ways that favoured the Premier and her colleagues.  Indeed, the Premier has done nothing but display her political impotence by championing an issue she ought to know she cannot win (SAR) or that actually isn’t needed  (a separate safety agency) even if it was legally possible without jeopardizing other aspects of the 1985 Atlantic Accord. 

By including the ridiculous marine rescue sub-centre issue in the proposal, the provincial government just confirmed for the federal government that the list of side deals was a joke. Essentially, the letter reduced the provincial government’s “legitimate aspirations” to helping Merv Wiseman get his back his job.

As it is, the federal government didn’t have to find a job for Merv.  The provincial government agreed to the European trade deal for $280 million that they could announce on October 29, as one of the last letters in the pile noted.  They did announce the $400 million as a new era for the fishery.

CRA was back in the field in November.



Wednesday:  Kathy’s Christmas Present

Thursday:  How much is that Muskrat now?

Friday:    Friday Foursome

Monday:  The Conservatives’ Policy Vision