Maybe it was the headline on John Ivison’s opinion piece in the National Post that threw them off.
Spat over $400M N.L. fund could make federal government look bad to European trade partners
Provincial Conservatives, their patronage clients, and their paid staffers were all over Twitter all weekend tweeting touting the support in Ivison’s piece for their fight with the federal Conservatives over a federal cheque for $280 million.
Pay up feds, says Ivison, and end this dispute because it looks bad.
The problem for the Conservatives is that if you read the whole Ivison column, this is not a great endorse of the provincial Conservatives’ desperate political ploy. It offers sensible advice in that both sides need to get this dispute settled now, but Ivison gets there based on all sorts of half-baked ideas. That much of it shows the extent to which observers both at home and outside the province don’t really understand what’s going on here.
And if you follow the piece through to the end, you see just exactly how bad a position Paul Davis and his crowd really are.
MPRs are a bad idea
One of the big ideas at the heart of this dispute is something called minimum processing requirements. Regular readers know that they are conditions the provincial government attaches to any fish processer in the province. Under the terms of the license, a processer must do a minimum amount of work on the fish in the province, rather than sell it raw. MPRs only apply to companies licensed to buy fish in the province and it only applies to fish that lands in the province.
Under the European trade deal, the provincial government would agree to stop those restrictions that only hamper processors in Newfoundland and Labrador. In exchange, the Europeans are getting rid of almost every single levy they have in place today. Those European restrictions have hindered the fishing industry in the province for decades. Getting rid of them is a big deal.
Ivison notes early on in the piece that the provincial government’s MPR “policy is protectionist and shields inefficiency.” MPRs always were bad social and economic policy. The provincial government should have gotten rid of them years ago. Successive governments have kept some kind of processing restrictions in place because they thought that it was better politically to get some people in the province enough work to qualify for employment insurance than to let the industry develop into a lucrative, sustainable one.
You won’t see the provincial Conservatives talk about that aspect of MPRs, if for no other reason than it undermines their claim that they deserve compensation for getting rid of them. The provincial government cut the deal in June 2013 on the claim that it was compensation for the damage that will follow the loss of MPRs. Everyone involved knows it is foolishness but, if that’s what it takes to get a larger deal, then they were obviously prepared to go along with it.
Ivison also says that the MPR policy “has guaranteed jobs in areas of rural Newfoundland.” Maybe it did once up upon a time, but not any more. The fishing industry is highly competitive globally and has been for a couple of decades. There are way too many plants processing fish and the methods they use remain costly and uncompetitive. There is not much money around to improve the way the industry does business largely because of bad policies like MPRs. The industry has been heavily dependent on government subsidies for decades. At one point in the 1980s, both the federal and provincial governments put dollar-for-dollar as much of a subsidy into the fishery as the value of all the fish landed that year.
Policy by Toque
We know that MPRs are costly to the industry from the package of documents released by the provincial government. In the package, the provincial fisheries minister admits that they have approved 90% of the requests for exemptions from the minimum processing policy. What has happened in some cases is that companies have shipped exempt fish to China, processed it there, and used the profits to help cover the costs of the fish they have had to process under MPRs.
FPI was a big, integrated fishing company. That means it had everything from catching to selling fish products in one big chain. That helped to keep costs down and, on the marketing side, it helped to get local product into big markets.
Well, for some reason, the provincial government took a hate for FPI and set about to systematically persecute the company and eventually destroy it.
Cabinet ministers including the premier and Tom Rideout, left, (not exactly as illustrated), publicly attacked the company and, not surprisingly, the company’s share prices dropped. They started prosecuting the company for shipping fish out of the province for processing even though they knew all the issues involved.
The prosecution of the company appears to have been politically driven: documents presented in court show how many times the prosecution went to cabinet for discussion. Prosecutions of any kind under the law typically don’t go to cabinet for discussion, ever.
Eventually, the company folded. The most lucrative assets – the brands and the foreign marketing bits – went with the guys who had a big interest in FPI. They were not in the province. All the other bits went to smaller companies in the province. One in particular has powerful provincial and federal Conservative connections.
Eventually, the principal beneficiary of the government’s political action against FPI applied for and received the same exemption to export the same fish that FPI had been prosecuted over. The reason the government and the company gave for the exemption was that they could not process the fish profitably under the MPR. The money they made would help pay for other parts of the company that were not as profitable.
Provincial Government kills Fisheries Reform Agreement
We also can see evidence of the backwardness of the government’s policy from a series of articles by Ashley Fitzpatrick that appeared in the Telegram just before Christmas.
In the past four years, the fisheries workforce has dropped by 25%. Two of the key fisheries - shrimp and crab – are facing supply shortages and can look forward to restrictions on the amount fishermen can land. That’s interesting, incidentally, since one of the species the could profit from an end to MPRs is shrimp. If you’ve got less product to get to market making more out of each pound would be good. Unfortunately, the current MPR for shrimp forces processors to produce only large blocks of cooked and peeled shrimp, regardless of what the market demands.
Anyway, the report that gave those figures was an update to a study done for the provincial government as they started to develop a fishing industry renewal scheme for the province. After a couple of years of talks, the provincial government, the FFAW and the fish processors actually managed to come up with agreement among the fishing interests on the need to restructure the industry.
The memorandum of understanding or MOU as it was known called for dramatic changes to the provincial fishing industry. As CBC reported in February 2011, the report “by the Steering Committee for Fishing Industry Memorandum of Understanding (MOU) was released by the province, and proposes a restructuring that would include:
- 30-80 per cent reduction in inshore fleets. Biggest reductions along northeast coast and southern Labrador,
- Up to 50 per cent reduction in near shore fleets. Biggest reductions along northeast coast and southern Labrador.
- 30% reduction in crab and shrimp plants (by volume).
- $450-million cost to achieve the cuts.”
Note that figure at the bottom.
By the fall, things were different. The election was over and the provincial Conservatives tossed the whole thing out the window. Clyde Jackman, the minister at the time, said he didn’t like the report because it called for lots of cuts but said nothing about the future.
One of the big problems – likely the real problem for the provincial government – was that the whole thing had a price tag of almost $500 million. The whole thing should have included the federal government since the feds have a big role in the fishery. They also have deep pockets to help pay for things.
Well, as federal fish minister Gail Shea said at the time, it “probably would have been a good idea to have us at the table. But we can't change that now. We have not been asked for anything.”
The provincial government had a deal with the fish processors and the FFAW, but when faced with the bill, decided the MOU was no good. So they killed it because – while they had billions for a ridiculous hydro project in Labrador that made no economic sense – they couldn’t find a few hundred million to turn the fishery in a modern industry.
Light bulbs and such
Some of you might be noticing the glow from a light-bulb taking shape over your head about now. $450 million for fisheries renewal in 2011. A deal in 2013 for $400 million for the European trade deal.
Now there’s a coincidence.
One key element that everyone has missed is the May 2014 letter from Keith Hutchings to Rob Moore, the federal minister now responsible for the June 2013 deal. It’s a crucial letter for many reasons, not the least of which because it explodes the provincial government’s talking points for the fairy tales they are.
In the fall of 2013, the provincial government spent $5,000 to announce what they called a Fisheries Innovation Fund to be jointly funded by the provincial and federal governments. Everyone noticed at the time that the federal government wasn’t there. Very odd thing, that. Some people have tied the announcement to the by-election that fall. As it seems, there was more going on.
The provincial and federal governments hadn’t nailed down the details of anything at that point, a fact the provincial government knew when it held the announcement. The talks about details didn’t start until the following January.
The magnitude of what the provincial government was trying to do did become truly apparent until May 2014. In a letter to his federal counterpart, Hutchings described a federal-provincial fund that had very little to do with the European trade deal, ultimately.
In the May 2014 letter, as SRBP described it in December, Hutchings laid out the “provincial government’s interest in a redefined version of the CETA agreement that would include the European deal as well as “other market opportunities worldwide.”
The new fund would have to “reflect provincial priorities”, code for a fund directed by the provincial government. The wider agreement would also have to be flexible enough to apply to new circumstances. Hutchings used the example of cod. If current trends continued, Hutchings argued, cod recovery would mean short-term problems for fishing interests and those problems would require compensation. That’s code for new money. Hutchings also talked about the possibility that existing federal programs would have to come under the innovation fund umbrella.
There’s no coincidence here. The provincial government is trying to turn a simple agreement in 2013 into something much larger. Ultimately, what the provincial government is fighting over looks to be more like the giant fund they themselves rejected in 2011 rather than a simple European trade deal pile of cash.
People have wondered why the federal government media lines keep referring to a blank cheque, as in they didn’t agree to a blank cheque. That doesn’t makes sense if the agreement is for $280 million in federal cash. What those confused people miss is what is right in front of their face: the provincial government doesn;t want $280 million. They want more.
A lot more
The problem for the provincial government is not that there isn’t the money for the original deal. Their problem is that that they don’t have the agreement they promised some people. The other problem is that they don;t control the money there is. The federal government wants to limit the project to the European trade deal, as agreed in 2013.
Ivison said that the provincial government is concerned that the money won’t show up until 2020. He got the date right but he got the open and closed bit screwed up. The May 2014 letter makes plain the provincial government is worried the money will stop before 2020. This bigger, costlier Fisheries Innovation Fund that the provincial government wants would start soon and go on for upwards of a decade. They don’t like the federal proposal that would get the cash out there now and be done. There’s no compensation for cod recovery, among other things, if the fund money is limited to the European trade deal and it’s out there within three years.
Right Answer. Lots of Wrong.
Ivison is right when he says the current dispute makes Canadians look bad in the eyes of the Europeans. He’s also right, by the way, in the bit that the local Conservatives likely didn’t get to, down at the bottom of his piece. If the provincial government carries out its threat and keeps MPRs, the only people to get shagged will be the fishing industry in Newfoundland and Labrador.
Other than that, it’s pretty clear Ivison is missing a few details that are important. He relies on a little bit of information and fills in the rest with comments that seemed more designed to make it appear like he knows something than actually offer insight.
For example, consider this line:
What is clear is the Davis government is following in the honourable tradition of Newfoundland premiers Brian Peckford, Roger Grimes and Danny Williams who have taken a big stick to their federal counterparts.
Yes, friends, Paul Davis, the man who has never betrayed he actually knows anything beyond the vague and carefully scripted talking points someone hands him will go to Europe and destroy the trade deal based on what is – fairly transparently – a ploy, a sham, a charade, a scam.
The Europeans know, if nothing else, that if Davis persists, the only ones to get frigged are Davis and his fellow Newfoundlanders and Labradorians. They will get some compensation cash from Ottawa and everyone – Europeans and every other Canadian except Davis; crowd – will make billions in freer trade.
But Davis wields a big stick, Ivison tells us just like … wait for it… Roger Grimes.
Don’t spit your coffee.
But Roger Grimes is no savage political attack dog.
You do have to forgive Ivison for lots of his comments and all the signs he doesn’t really have a clue what is really going on. Heck, reporters and politicians in Newfoundland and Labrador haven’t got a feckin’ clue about what this dispute really involves. They keep talking about European trade deal money and a promise not kept and other such rubbish.
We can only shake our heads and laugh, though, as Ivison thinks he somehow managed to solve the issue. He called the federal minister responsible for the deal. “In response to the Post‘s inquiries and presumably having gotten a whiff of the impending action,” Ivison scribbled, “Mr. Moore appeared to extend an olive branch.”
Ivison should read the May 2014 letter and then look at Moore’s comments.
When the going gets tough, the tough go shopping
Impending action here would be the trip next week by Premier Paul Davis and cabinet minister Keith Hutchings that he would be going to Europe on a shopping junket on the boulevards of European cities.
Shopping for support.
Shopping for Hermes.
What’s the difference?
Davis might work in the odd meeting with some junior government bureaucrat to see if he can get the Europeans to care that, across the pond, the seal bashing crowd are upset because they can’t get a hand-out from Ottawa. Stephen Harper is clearly frightened of that prospect, Mr. Ivison.
“As we have indicated to the government of Newfoundland and Labrador,” Moore’s people told Ivison, “ we remain open to a transition initiative that addresses compensation to displaced workers, research and development and innovation.”
Yes, olive branch. Moore described the deal reached in 2013, of course, which the federal government wants to honour but which the provincial government isn’t interested in any more.
But that is a breakthrough achieved by a National Post columnist only in the same world where Roger Grimes is a political attack dog.
In the world the rest of us live in, this story will drag on and on. The federal government can provide its $230 million to provincial fishing interests to help them get ready for the European trade deal. The provincial government can continue to stonewall. The provincial Conservatives might be able to carry this issue into the fall election but, as it seems, they will go down in flames leaving behind potentially as small a pile of political DNA in their wake as Kim Campbell.
Once Davis and Hutchings are out of the picture, the problem goes away. A future administration will quietly settle this little fracas and get on with the job of developing a better fisheries policy. Well, at least one hopes that will happen. A better fisheries policy removed from the hands of the incompetent politicians and bureaucrats remains a wish that lives despite the experience of administration after administration. Odds are that the next administration, regardless of what party it comes from, will merely repeat the same mistakes as its predecessors. But still some of us hope for something different.
The current dispute will go away not because Davis and Hutchings will be gone from power but because everyone involved knows that their position is stupid, that it is unwinnable. The federal government knows it. The Europeans know it. The fish processors know it. Surely even Davis and Hutchings know that what they have been saying and the truth are not even on the same continent, let alone in the same room. They know theirs is a desperate ploy that cannot succeed.
That is why they are going to Europe to make it look like they are doing something.