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I'hc cornpciis.itiDH pavnioiits rciiuiicil m cacli ol the 

 three cases (.an also be eslmiated. In the tirst case, Ihev 

 would be zero. I he other cases re(.|iiire assumptions 

 aK>ul licence \alues; ti>r illustrative purposes we niiiiht 

 assume that salmon licences are valued at an average oC 

 $50 thousand. ri>e-hemng seine licences $65 thousand 

 and gillnet licences $17.5 thousand, ami that these will 

 decline at a stead> rate to zero when they expire m IW2. 

 To purchase and retire half the licensed capacity in the 

 first year would thus require $132 niillii>n in compensa- 

 tion payments, and tor the middle case the compensation 

 payments would be spread over the iO-year transitional 

 periixi and have a present value of $50 million. So even 

 allowing for rea.sonable compensation, the financial 

 benefits of reducing the fleet are substantial. 



The prospects of this scheme from the government's 

 narrower financial viewpoint can be summarized as fol- 

 lows. Its direct financial contributions consist of an initial 

 grant of funds already collected from the commencal 

 fishery for this purpose, and additional funds to be col- 

 lected mainly from the fishing industry. On the revenue 

 side, the proposed roe-hennng royalties and half the 

 salmon royalties will initially amount to roughly $7.5 mil- 

 lion annually, and without allowing for any increa.se in 

 landings, real prices, or royalty rates, this has a dis- 

 counted (at 15 percent) present worth of $50 million. The 

 half of salmon royalties directed to enhancement is addi- 

 tional. 



Further revenues will accrue in the form of annual pay- 

 ments in respect of the bonuses bid at licence auctions, 

 and in the long run this can be expected to yield the 

 largest revenues. The target fleet's net return is estimated 

 at $80 million annually, and as long as the auctions are 

 competitive the largest part of this can be expected to 

 eventually be reflected in bonus payments. But because 

 of the lags involved in this scheme (throughout the subse- 

 quent decade some licensees will hold licences acquired 

 during the transitional period and before the target fleet 

 is reached) the full amount will not be realized in annual 

 payments until the nineteenth year. If we assume these 

 payments will rise steadily from the first year to $80 mil- 

 lion in the nineteenth year, they have a present worth 

 (discounted at 15 percent) of $158 million. I exclude reve- 

 nues from fishing vessel licence fees because I have sug- 

 gested that they should cover no more than administra- 

 tive costs. 



The government's financial participation in this pro- 

 gram should be viewed in the light of my complementary 

 proposals in Chapter 13 to abolish subsidies and tax con- 

 cessions, which have recently amounted to several mil- 

 lions of dollars annually, and the government's liabilities 

 in loan guarantees. 



Vi-sst'l Disposal 



I have emphasized that the board should concentrate 

 on retiring fishing privileges, not vessels. But i( it (inds it 

 expedient to acquire vessels, it should be free to dispose 

 of them whenever they will bring the best price, in Pacific 

 fisheries or el.sewhere, and to recycle the receipts for addi- 

 tional withdrawals of licences. I am advised that a num- 

 ber of developing countries (among which are those that 

 Canada accords priority fi)r economic aid)'' have 

 expressed a considerable interest in west coast fishing 

 vessels. I therefore recommend that - 



23. The Canadian goveninK'nfs foreign assistance agen- 

 cies should carefully examine (»p|M)rtunities f<ir dispos- 

 ing of surplus ves.sels in ways that would coniplenK>nt 

 this fleet-reduction program. 



VESSEL REPLACEMENT POLICY 



A fleet-reduction program will have a lasting effect 

 only if the remaining fleet can be prevented from expand- 

 ing its capacity. As already explained, under the restric- 

 tive licensing of the salmon fleet the number of vessels 

 has declined, but the remaining vessels are larger, more 

 powerful, more expensive and much more efficient in 

 terms of catching capacity. In effect, much of the pro- 

 jected benefit from past licence limitation and buy-back 

 activities has been dissipated through vessel replacement. 

 Obviously, the existing restrictions on replacement are 

 seriously deficient as means of preventing expansion of 

 fishing capacity. 



In my Preliminary Report I recommended, as an 

 interim measure to discourage further investments in new 

 vessels, that replacement rules for salmon vessels be 

 made more stringent by reducing the eligible size of a 

 replacement vessel from 100 percent to 80 percent of the 

 length and tonnage of the vessel being replaced. This pro- 

 posal has been criticized: it has been argued that, among 

 other things, such a rule would impinge unfairly on own- 

 ers of small vessels, because a 20 percent reduction in 

 some small vessels would leave them unseaworthy, unsafe 

 and inefficient. 



Concern focuses on replacements of old vessels with 

 newly constructed, more powerful vessels. In the context 

 of the fleet-reduction program proposed above, which 

 will leave large numbers of used vessels on the market, 

 this problem can best be solved by prohibiting additional, 

 newly constructed vessels from entering these fisheries for 

 the time being. I therefore propose the following: 



24. No new vessels, except those already under construc- 

 tion at the time this report is released, should be eligi- 

 ble for any commercial fishing licence during the 10- 

 year transitional period. Exceptions might be neces- 

 sary for new fisheries or unusual ventures, but not for 

 any of the developed fisheries. 



