OTHER INDUSTRIAL DEVELOPMENT POLICIES 161 



in these loans is mainly in tiie favorable interest rate 

 of one percent above the pnme rate. 



In the fiscal year 1980-81, 415 loans were extended 

 under this program to vesselowners on the Pacific 

 coast, of which 238, amounting to $11.8 million, 

 were for the purchase or construction of vessels. At 

 the end of March of this year, some $68 million in 

 guaranteed loans was outstanding, of which about 80 

 percent were held by vesselowners on the Pacific 

 coast.' 



The Department can be called on to honour the 

 guarantees if fishermen default on their loans. In 

 recent years claims have ranged from $200 to $400 

 thousand annually, and recoveries on the claims 

 paid have been low. TTie number of loans in default 

 has apparently increased sharply in recent months 

 because of high interest rates and other economic 

 conditions. Calls on the Department's guarantees 

 can be expected to rise in consequence. 



v) The Federal Business Development Bank has a pro- 

 gram of loans to provide fishermen with working 

 capital and with capital for purchasing boats and 

 equipment. In July of this year, 1 16 loans were out- 

 standing to the west coast fishing industry, amount- 

 ing to $4 million, of which $450 thousand was 

 authorized during the last fiscal year." To the extent 

 that borrowers are given credit they might not other- 

 wise obtain or that the interest rates charged are 

 lower than they would otherwise have to pay, this 

 loan program encourages investment in the fishery. 



vi) The Small Business Development Bond program, 

 extended last November to include unincorporated 

 businesses, provides assistance to businesses in 

 financial diflficulty. Under this program, the banks 

 can convert from $10 to $500 thousand of fisher- 

 men's debt into Small Business Development Bond.s, 

 for which the interest charged is only 2 to 4 percent 

 above half the bank prime rate. Interest paid by 

 bondholders is not deductible from income for tax 

 purposes. About 500 fishermen on the Pacific coast 

 are currently included in this program, holding 

 bonds amounting to about $70 million." Because eli- 

 gibility for these bonds is limited to those who are in 

 serious financial difficulty, they do not encourage 

 new entrants into the fishing industry, but they sus- 

 tain some who could not otherwise continue. 



In addition to these programs, there are special assist- 

 ance programs for Indians (described in Chapter 12) and 

 a wide variety of other federal and provincial support 

 programs directed toward manpower training, process- 

 ing, technology development and insurance. Since many 

 of these have a well-defined and defensible social pur- 

 pose, they are beyond the scope of my concern here. 



which focuses on programs that stimulate general expan- 

 sion of the already overexpanded fishing fleets. 



It is not possible to quantify the impact of all these 

 subsidies; some are part of national programs that do not 

 isolate fishing vessels on the Pacific coast, and the effect 

 of many is indirect. But the direction of their impact is 

 clear. They encourage vessel construction and expansion 

 of fishing capacity, thereby aggravating the complicated 

 problems of controlling fleets. They are a wasteful use of 

 taxpayers' money that is urgently needed to deal with 

 other fisheries management problems described in this 

 report. They should therefore be abolished without fur- 

 ther delay. 



3. General subsidies in the form of tax credits, acceler- 

 ated depreciation allowances subsidies to shipbuilders 

 and loan guarantees should be ininiediateh termi- 

 nated insofar as they apply to fishing >essels used on 

 the Pacific coast. 



In Chapter 9 I recommended that no more commercial 

 fishing licences should be issued for newly constructed 

 vessels for the time being; this will forestall some of the 

 impact of these subsidies. But many of them apply to 

 vessel improvements as well, and some of them support 

 acquisitions of secondhand vessels. Now, while few new 

 vessels are being built, is the appropriate time to abolish 

 subsidy arrangements that threaten to frustrate future 

 gains from fleet rationalization and improved economic 

 conditions. 



UNEMPLOYMENT INSURANCE 



Although fishermen are not employees in the usual 

 sen.se, and are not normally paid a wage, they are never- 

 theless covered by the unemployment insurance system. 

 This is a result of a special amendment to the Unemploy- 

 ment Insurance Act in 1956, 



. . .providing for the extension of the act to 

 persons engaged in fishing notwithstanding 

 that they are not employees of other persons, 

 and for including as an employer of a fisher- 

 man any person with whom the fisherman 

 enters into contractual or other commercial 

 relationship. . . .'" 



Thus, for purposes of unemployment insurance, a 

 fisherman is considered an employee of whomever buys 

 his fish, and the buyer must pay the employer's share of 

 the contribution to the unemployment insurance fund. 



The unemployment insurance provisions for fishermen 

 are complicated and controversial, and were the subject 

 of much criticism at this Commission's hearings. But the 

 insurance scheme is a national one and raises fundamen- 

 tal issues of social policy that go well beyond the scope of 

 this inquiry. It would be inappropriate for me to propose 



