Newfoundland and Labrador announced recently that it would relinquish minimum processing requirements (MPR) on fish and seafood exports to Europe, clearing way for the province to reap the benefits of freer trade.
The Comprehensive Economic and Trade Agreement (CETA) comes into effect in 2014, reducing trade barriers between Canada and the European Union (EU), establishing new market opportunities for Canadian businesses, and affording domestic industry unfettered access to European markets, wherein annual imports average $2.3 trillion. According to the federal government, CETA will boost bilateral trade by 20 per cent, generating an additional $12 billion in annual revenue and creating thousands of jobs across the country.
Freer trade with the EU should be welcomed in Atlantic Canada. In particular, Newfoundland's economy will reap a large portion of these benefits - provided the provincial government adopts policies that reflect the region's comparative advantages.
However, CETA's critics proclaim the agreement undermines the province's economic stability by forcing it to forego MPRs that insulate domestic processors from foreign competition. These regulations mandate that fish and seafood caught in Newfoundland be processed in-province before export, which allegedly shields these jobs from cheaper alternatives overseas.
Former Premier Kathy Dunderdale confirmed the province would relinquish its ability to enforce MPRs on exports to Europe in exchange for tariff-free access to European markets (although they will still apply to exports destined for non-European markets). In addition, Dunderdale announced a $400 million fishery fund intended to mitigate potential short-term economic turbulence resulting from CETA's implementation - 70 per cent of which is federally subsidized.
Newfoundland and Labrador adopted MPRs to offset a dramatic decline in provincial fishing activity that has caused crippling unemployment over the last two decades.
Despite claims that they are the cornerstone of Newfoundland's fishing industry, however, the province's departure from protectionism is a positive development.
These regulations are inefficient and their planned removal is a step forward, especially considering CETA's economic potential.
The EU will also eliminate tariffs on Canadian marine imports, which currently average 8 to 25 per cent and present a significant economic barrier for Canada's export industry. CETA removes these barriers, however, and affords Newfoundland's fishing industry unrestricted access to the largest fish and seafood market in the global economy. Under the terms of the agreement, all EU fish and seafood tariff lines will be duty-free by 2022.
Furthermore, CETA mandates the EU to eliminate end-user restrictions on Canadian imports - a similar concession to St. John's MPR surrender. These restrictions prevent Canadian exporters, including sole-proprietor fishers, from branding, marketing, and selling their products directly to European consumers by requiring EU-affiliated companies to first process marine imports before final sale.
Earle McCurdy, president of the Fish, Food, and Allied Workers Union (FFAW), describes the harmful effects of European protectionism by saying, "[Industry has] been operating in Europe with one hand tied behind its back for a long time. Compared to our principle competitors, we have unfair market barriers they don't have, both in terms of tariffs and end-user requirements that are costing us value and jobs in the province." The terms of CETA will untie the industry's second hand, however, and allow fair competition between firms.
Furthermore, Canadian industry generally has lower energy, labour, and production costs compared to its EU counterparts. In essence, Canada has a substantial comparative advantage against Europe in the first place, not to mention under CETA's framework.
CETA's conditions are beneficial for Atlantic Canada. Relinquishing the MPR, in addition to EU-imposed end-user restrictions, facilitates diversity in the province's fishing industry by allowing fishers to market their product directly to European consumers, encouraging processors to economize by operating doubly as storage facilities, and permitting Newfoundland's export industry to manufacture and brand their product before final sale in Europe.
Moreover, CETA creates an incentive for Ottawa to consider deeper reforms, such as delegating managerial control of inland and coastal fisheries to the provinces or implementing property rights as a means of regulating them.
Looking toward other countries that pursued fisheries reform could also benefit the region. Considering Iceland's success with reform following the collapse of its herring stock in the 1960s, for instance, it is unfortunate that there have not been similar attempts to improve Newfoundland's fishing industry.
In any case, the removal of protectionist barriers under CETA is constructive - freer trade with Europe presents a unique opportunity to rejuvenate Newfoundland's fishing industry. The next step is learning from other countries that have successfully reformed their fisheries management systems to help ensure economic growth and environmental sustainability.
Calgary-based Troy Media (http://www.troymedia.com) online columnist Shaun Fantauzzo is a policy analyst at the Atlantic Institute for Market Studies and the author of Reforming Atlantic Fisheries: Lessons from Iceland. He can be contacted by e-mail at: shaunfantauzzo@aims.ca
