15 December 2014

Province increased CETA demands after crucial agreement #nlpoli

Almost a year after reaching an understanding with the federal government on a joint federal-provincial fisheries fund related to the European trade talks, the provincial government tried to alter the deal radically.

Documents released by the provincial government in 2013 and 2014 show that the federal and provincial governments agreed in June 2013 to  fund a cost-shared (70% federal and 30% provincial) “transition program” of up to $400 million that would address “industry development and renewal as well as worker displacement.” 

But in May 2014,  provincial fisheries minister Keith Hutchings changed the provincial demands.

Hutchings wrote to Rob Moore, the federal minister for the Atlantic Canada Opportunities Agency and the federal minister responsible for finalising the 2013 agreement with the provincial government.

Rather than provide up to $400 million to deal with European trade, Hutchings and the provincial government now wanted a new open-ended commitment for subsidies to the fishing industry.

“Consideration should also be given,” wrote Hutchings “to the merits of establishing legacy funding for certain program elements.” Legacy funding is policy-wonk code for extending the commitments beyond the time scale originally expected. Hutchings explained the introduction of the new demand by noting that “rationalization” in the fishing industry outside of CETA would mean that the federal government would “need to provide separate funding for such an initiative”  anyway.

The new provincial demand was the time-worn provincial idea of getting the federal government to pay for provincial projects, in this case subsidies to the fishing industry. It was also a return to the laundry-list of demands unrelated to the trade deal that the federal government had rejected in 2013.  The provincial government had also abandoned the approach, supposedly in June 2013.

Despite the fact that the federal government had never endorsed the “five pillars” concept the province unilaterally announced in late 2013, Hutchings included three elements in his May 2014 letter:  innovation, research, and marketing.  In Hutching’s new version of things, they would not be limited to the European trade deal alone.

In Hutching’s revamped version, the fisheries fund would “reflect provincial priorities,” code for a pot of cash doled out solely by the provincially government. Hutchings stated that the provincial government expected the federal government would hand over its share of the cash within three years of the final European trade deal but the provincial government would hand out the cash over a period of up to 10 years.

Implicitly,  the federal cash share wouldn’t end after three years, of course, since Hutchings proposed to include under the new fund unidentified existing programs as “legacy-funding.”expended at the provincial discretion until it was gone. Hutchings also said that the new money would be in addition to – not in place of – any existing subsidies and funding.

Lastly, and without any sense of irony,  Hutchings proposed that the provincial fishing industry needed compensation resulting from a recovery of groundfish stocks, particularly cod.  Hutchings noted there noted that there were sings of cod recovery. If that panned out, Hutchings claimed there would be problems with the “short-term viability” of some sectors of the current industry. The “Fisheries Innovation Fund will need to be flexible and forward-looking, and nimble enough to support such transformations.”   In other words,  if the cod came back,  the provincial government expected Ottawa to pay.   

Original Deal still alive

After a meeting on Friday evening to find an agreement with the federal government, Premier Paul Davis told reporters  that he cannot trust Prime Minister Stephen Harper.  Davis accused Harper of “reneging “ on the agreement for a fisheries fund.  What’s clear now, though, is that the federal government has been consistent all along in its position, while Davis and his colleagues have tried to change the deal.

For it’s part the Prime Minister’s Office issued a written statement following the meeting.  "The Minimum Processing Requirements fund was always intended to compensate hard-working Newfoundlanders and Labradorians for demonstrable losses as a result of the removal of these requirements,”  the statement said.  “It was never intended to be a blank cheque.”

That phrase  - blank cheque – didn’t make any sense in the public understanding that the whole fund was only supposed to cost up to $400 million.  Hutchings’ May 14 letter now explains it.  The PMO’s statement said that “federal funds have already been allocated for this purpose.We look forward to receiving specific proposals from the Government of Newfoundland and Labrador.”   The original deal reached in June 2013  isn’t dead, in other words.

The Much-Ploughed Patch 

The only political question left now is how far Davis and the provincial Conservatives are push their campaign to distract attention from their internal problems and financial mess with a phoney war with Harper and the federal Conservatives.

So far,  Davis has trodden the much-ploughed patch.  Davis recited the stock lines about Harper on Friday – can’t trust him – but they are likely to ring hollow coming from a Premier whose administration has a reputation for excessive secrecy.  Federal members of parliament and senators are unlikely to rush to Davis’ side on this one since he quite obviously hasn’t told people the whole story.

Of course, some people – including some media outlets – responded to the shop-worn talking points with equally familiar comments.  VOCM found former Conservative member of parliament Bill Casey.  Others turned up a short blog post by Carlton University professor Saul Schwartz that confirmed Davis’ claim: 

Based on the public record, therefore, it would seem that the federal government is indeed reneging on its promise to create a cost-shared fund (albeit one of “up to” $400 million) that can be used to build a “fishery for the future”.

Schwartz obviously hadn’t read the documents released by the provincial government or followed the public comments by the federal and provincial government officials.

Converting Principles to Other People’s Money

The provincial government documents from 2013 and 2014 give a good overview of what happened even if there are some glaring gaps in the provincial disclosure.

In a letter to the federal government on May 24, 2013, fisheries minister Keith Hutchings presented the federal government with the provincial government’s position on the trade talks and the issue of minimum processing requirements. 

Hutchings said the  proposed deal between Ottawa and St. John’s was 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 “compensation” included:

  • renewal of a quota for private sector fish processor Oceans Choice International 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.

An e-mail from lead provincial fisheries negotiator Alistair O’Reilly to fisheries union president Earle McCurdy said that the province’s position contained the following core elements.

The provincial government wanted an immediate elimination of all European tariffs important to Newfoundland and Labrador, “with no end-use restrictions.”   That would include any restrictions on on minimum processing requirements of European fish in European waters.

The provincial government would eliminate minimum processing requirements on fish landed in Newfoundland and Labrador seven years after the CETA deal came into force.

The provincial government also wanted “explicit assurances” from the federal government that allowing over-the-side and wharf-side sales to Europeans would not result in unfair competition from what O’Reilly described as “subsidized EU fishing vessels.”

Lastly, the provincial government wanted guarantees that relaxation of MPRs would not be taken as a precedent in other trade talks.

Federal trade minister Ed Fast replied to Hutchings in a telephone conversation on May 25.  He rejected any discussion of issues unrelated to CETA.  The federal government would work to eliminate the tariff obstructions of greatest concern to the provincial government.  In exchange, the provincial government would exempt Europeans from the minimum processing requirements. (Hutchings to Fast May 27.)

Fast’s reply on May 28 emphasised the value to the provincial fishing industry of removing the European tariffs.  At the start of the agreement,  95% of European protectionist tariffs would disappear.  The remaining five percent would vanish on a schedule of three, five, and lastly, seven years.  The non-CETA issues were not up for discussion, but, the federal government would back a package of CETA-related measures with the provincial government.

Fast wrote to Hutchings:


Fast’s description is clear.  There would be a fund of up to $400 million for “workers who experience job displacement as a result of the time-limited carve-out of MPRs [minimum processing requirements] for fish and seafood exports destined for the EU.”  The same financial assistance, and presumably the same fund, would also be available to any other province affected by the trade deal.

Hutchings replied on May 29.  He restated the provincial position from a letter in April.  He also rejected the connection of tariffs and MPRs, which Hutchings insisted were different, the one from the other.  Undermining the provincial government’s public claims of the significance of MPRs for the provincial fishing industry, Hutchings confirmed that the provincial government actually approved 90% of the requests for exemptions from MPR requirements. 

he provincial government was prepared to reduce the MPR exemption for the EU from seven years after implementation of the trade deal to five years,  according to Hutchings. Other than that, Hutchings stuck to the provincial demands for extensive subsidies to the fishing industry and on search and rescue.

Fast’s reply on May 30 rejected again any linkage to non-CETA matters.  He also repeated the federal offer of a fund of up to $400 million.


On May 30,  Hutchings reply on 30 May accepted the federal position, but insisted the the fisheries fund be focused on transition and renewal without additional descriptions. Over the next two days,  the federal and provincial government wrangled about fine details. This included a provincial contribution to the cost-shared fisheries fund. 

On June 01,  Ed Fast wrote to Keith Hutchings agreeing to include industry development and renewal in the proposed federal-provincial fund.  He did not define what that meant.  Hutchings replied that day agreeing to the same fund using much the same wording.  Hutchings didn’t define what development and renewal meant.

Provincial Documents Show Mysterious Gaps

The provincial government unilaterally announced the fisheries fund in October 2013.  The description of the fund in the announcement is considerably broader than anything in the correspondence released by the provincial government. 

There are also noticeable blank spots in the document piles released.  One of them is between the June correspondence and the October announcement.  Another is between October and the May from the middle of the year. A third blank spot is between May and October 2014. 

That’s when several ministers in the provincial cabinet simultaneously complained about supposed changes to the agreement coming from the federal government side.  They start the letters, interestingly enough, by referring to situations that jeopardise the relations between the federal and provincial government.

The language is extreme, given the ongoing talks, and seems to overplay the provincial position much as Kathy Dunderdale did in 2013.  Dunderdale tried – unsuccessfully – to start a racket with the federal government over supposed breaches of confidence within the Canadian negotiating team and the provinces.  The whole thing came to nothing.

The most recent twist in the provincial position may come to nothing as well, given that the source of the current dispute is a unilateral provincial effort to rework the deal into something beyond anything previously contemplated, let alone agreed to by either party in 2013.