Ii: RAIIONM l/INCi III! SAI VION ANI> RdrHFRRINO FISIirRirS 



Bill these as.scssmcnls have still not heen made. I he 

 oplmul fleet is undoubtedly a great deal smaller than the 

 existing fleet; and certainly a reduced fleet could not only 

 harvest the available stocks more efliciently in an eco- 

 nomic sense, but would also lend itself to more orderly 

 harvesting m the interests of resource management and 

 conservation. As the fleet is reduced, some of the present 

 restnctions thai reduce the efticiency of gear and vessels 

 can be rela.\ed, and more meaningful analyses of desir- 

 able shifts in fleet structure can be made. 



VOLUNT.\RY RETIREMENT 

 AND COMPENSATION 



The arrangements outlined above provide for a smaller 

 target fleet to be regulated under a much more satisfac- 

 tory licensing system after the 10-year transitional period. 

 But it does not provide for any reduction in the fleet's 

 excess capacity for a decade. We need to supplement 

 these arrangements with a means of withdrawing licences 

 during this transitional period, for three reasons. First, 

 without such provisions, a large number of fishermen and 

 vesselowners will be dislocated all at once in 1993; sec- 

 ond, the government has some obligation to licensees 

 whose fishing privileges will be terminated, even though 

 they are given 10 years' notice; third and most impor- 

 tantly, the fishing industry and the Canadian people can- 

 not aflford to postpone for 10 years the substantial 

 benefits of fleet rationalization. 



The latter deserves emphasis. Increased escapements 

 are needed to rebuild many stocks, and this will be 

 difficult without some reduction in the overexpanded 

 fleets. And the economic gain from fleet reduction is 

 costly to postpone, as a simple calculation can illustrate. 

 The landed value of salmon and roe-herring in recent 

 years has fluctuated between $150 million and $200 mil- 

 lion. It is not unrealistic to assume that half the fleet 

 could take the catch at half the cost. So if we assume that 

 the fleet is breaking even at its present size, a fleet half 

 that size could realize a net gain of $75 to $100 million 

 annually. For purposes of illustration, with a 15 percent 

 discount rate the present value of $80 million accruing 

 each year beginning now is more than $530 million. This 

 indicates the potential economic advantage of a reduced 

 fleet. 



This calculation of economic gains is obviously over- 

 simplified, but more sophisticated computations indicate 

 returns in the same order of magnitude. (Much depends 

 on assumptions about future catches and prices; no 

 change in either is embodied in the above estimate.) It is 

 an impressive sum, and it reflects the enormous waste 

 that has beon allowed to develop in these fisheries, as I 

 have repeatedly emphasized. 



1 o rcali/c this gain involves no real economic cost in 

 terms of demands on new labour or capital, tht)ugh it 

 does require compensating those who would be called 

 upon to retire their labour and capital from the fishery in 

 the short run. However, as I point out below, even the 

 required compensation falls far short of the gains. 



The earlier the fleet is reduced, the greater the gains 

 will be. If the $80 million annual gain is postponed for 10 

 years, its present value falls from $530 million to about a 

 quarter of this figure. (An analogy is the difference in the 

 value of a bond or annuity which begins to yield interest 

 in perpetuity beginning immediately in one case and one 

 which yields nothing for the first 10 years in the other 

 case.) 



Fleet reduction should be hastened for several other 

 reasons, the most urgent being — 



i) The critical need to reduce catches in order to 

 increase wild stocks for at least a couple of salmon 

 cycles; to do this without reducing the fleet will be 

 difficult. 



ii) The need to improve management of the fishing pro- 

 cess and the regulation of stocks and yields, which 

 will be facilitated by more manageable fleets. 



iii) The need to improve the returns to fishing to accom- 

 modate the imposition of royalties on landings. 



iv) The need to improve the economics of fishing in the 

 face of softening international markets for fish and 

 rising operating costs in fishing. 



v) The liability of the government in guaranteed loans 

 to fishermen. As I point out in Chapter 13, the 

 Department guarantees loans from banks to fisher- 

 men. Some $50 million in such loans to west coast 

 fishermen are outstanding at present. I am advised 

 that, at the time of writing this report, about a third 

 of these loans are in default, and hence the guaran- 

 tees could be called upon. So the government is 

 threatened with the prospect of having to honour 

 these guarantees to lenders with uncertain prospects 

 of recovering much of them even if vessels were 

 seized. Yet the financing problem as well as the 

 long-term problem of excess fleet capacity, could be 

 alleviated if the funds were used instead to retire 

 licensed fishing units. 



vi) The current opportunity, afforded by the depressed 

 state of the fisheries, to reduce the fleet at relatively 

 low cost while at the same time providing an alterna- 

 tive to bankruptcy for many licensees. 



A reduction in the fleets would accommodate all of 

 these needs. If, on the other hand, nothing is done to 

 reduce excess capacity and prevent it from expanding, I 

 see little promise for the future of the fishing industry. 



