Category Archives: Newfoundland and Labrador

With CETA comes needed regulatory reform

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(Photo: Wikimedia)

Editor’s note: we welcome Ed Hollett to the Straight Talk blog. Ed has been hired as AIMS Senior Fellow based in St. John’s, and will be a regular contributor to this space.

 

By Ed Hollett, AIMS Senior Fellow

In 2012, the fishing industry in Newfoundland and Labrador sold about $119 million worth of fish and other seafood to the European market. The provincial fishing industry was worth about $1 billion that year. Both of those numbers are dwarfed in comparison with the $25 billion European fisheries market.

Newfoundland and Labrador’s share of that big market was so small because of European tariffs. They added 25 percent to the cost of direct fish imports from Canada and up to 20 percent on shellfish.

The Comprehensive Economic and Trade Agreement (CETA) will eliminate those tariffs. This is the principal value of the European trade agreement to the fishing industry throughout Atlantic Canada.

The agreement gives the Canadian industry fair access to a lucrative market. CETA brings opportunity, including the chance to improve the fishing industry.

The cost of social engineering

For Newfoundland and Labrador, CETA will also mean the elimination of Minimum Processing Requirements, or MPRs. It will also increase pressure to eliminate other restrictions that have kept the fishery from developing into a modern, prosperous enterprise for everyone involved.

MPRs set minimum levels of processing that must be done on every species before product can be shipped to market. They are designed solely to keep work in fish plants in rural Newfoundland and Labrador. They have worked very well, in that respect. In 2015, there were twice as many workers processing fish in Newfoundland and Labrador compared to Nova Scotia. But the catch is a great disparity in earnings between workers in these provinces

The value of fish landings has generally been higher in Nova Scotia (2016: $1.6 billion) than Newfoundland and Labrador (2016: $1.4 billion). With MPRs, more plant workers in Newfoundland and Labrador have to share a similar- or smaller-sized pie of earnings. A 2008 study by the Department of Fisheries and Oceans demonstrated the impact of policies like MPRs. Plant workers in Newfoundland and Labrador earned about half as much as their Nova Scotia counterparts and about one-third less than the regional average for plant workers. Self-employed fish harvesters were actually in a worse position in comparison to their Nova Scotia counterparts or the regional average.

NL1(Source: DFO)

By mandating an oversupply of labour, MPRs artificially suppress wages. This helps to explain the difference between the earnings of processing workers in Nova Scotia and Newfoundland and Labrador.

More importantly for economic growth, MPRs told processors what to produce regardless of what customers were looking for and regardless of the value of the final product in the market. Processing restrictions hindered processors from finding ways to process landings for species such as yellowtail flounder that couldn’t be processed economically in Newfoundland and Labrador. The same restrictions also forced the provincial government to spend money prosecuting companies for trying to meet market demand or issuing exemption after exemption to the unworkable processing rules.

The problem of harmful restrictions is not confined to Newfoundland and Labrador. In 2015, for instance, federal license restrictions prevented New Brunswick crab harvesters from selling their catch to a company in Newfoundland and Labrador, even though the company was offering a better price than New Brunswick plants.

CETA brings Atlantic Canadians access to a new market for their fish and other products and services. It also brings the opportunity to get rid of ideas that simply don’t work any more, if they ever worked at all.

 

Examination of public sector in Western Canada remains necessary

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By Marco Navarro-Génie, President and CEO

The paper AIMS published last week with the Frontier Centre for Public Policy looked again at public sector workers in Canadian provinces, excluding the federal public service.  The new work placed an emphasis on Western Provinces;  the first one focused on the Atlantic region.

The type of reaction to the “Western” data paper in the Winnipeg Free Press caught my attention.  David Camfield, an associate professor of labour studies and sociology at the University of Manitoba was quick to dismiss the paper as a kind of fake news.  He charged that the paper was looking for troubles where there are none, and suggested the authors of the study thought the public sector workers are unimportant.  None of those comments had evidentiary bases in the paper.

Camfield did introduce substance to his criticism by addressing the issue of scales, which dictates that smaller provinces (in population) tend to be at a disadvantage.  This is true to some extent, and the observation is valid. But the critique is less effective because the measure we use (number of public servants per one thousand people) goes some distance to account for scale.

The data, in addition, show that other smaller provinces with similar profiles have fewer public sector workers per thousand residents than Manitoba.  The worst case in Atlantic Canada, Newfoundland and Labrador, has half the population of Manitoba. Newfoundland’s population is extended over a very large territory, yet Newfoundland has 101 public sector workers per thousand versus the 111 in Manitoba.

Manitoba is more densely populated (Newfoundland and Labrador has 1.31 inhabitants per square kilometer; Manitoba has 2.03).  Should it take 10 more public servants per thousand paid by provincial residents to deliver services in Manitoba than it does in Newfoundland and Labrador?

Manitobans ought to ask why it is that their provincial and municipal governments need so many public servants. 111 public servants per thousand drawing pay from the provincial taxpayer in Manitoba represent 28 more per thousand than the national average, or 34 per cent more over all.  Manitobans need to ask if the services they receive are 34 per cent better than those of the average Canadian. Are they 34 per cent better than in New Brunswick?

New Brunswick offers an instructive comparison with Manitoba.  While Manitoba has a notable French-speaking population (4 per cent), New Brunswick (and its relatively-high rural population) is officially bilingual (and 32 per cent francophone). It offers many public services in French, significantly increasing their delivery costs and often duplicating them.  Yet, New Brunswick is below the national average with 81 civil servants per thousand.

Our call for a thorough examination of the public sector’s size in Manitoba and Saskatchewan remains necessary.

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NL Should Lift Beer Restrictions

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Editors note: what follows is an opinion piece written by recent AIMS Intern Leo Plumer. This piece was originally written for NALCEF, and is reprinted here with permission. Leo is a founding director of the organization, which can be found at http://www.nalcef.com

 

By Leo Plumer, AIMS Intern

I like my local beer, and it’s hard to avoid discussing the ubiquitous Labatt- and Molson-owned brands like India, Blue Star and Dominion. Why do these two macrobreweries dominate our corner stores to begin with? Do people simply prefer making the trek to the Liquor Store to get imported brands? Unlikely.

In fact, regulation stipulates that only locally-brewed beer may be sold in corner stores. This is at the chopping block in interprovincial trade talks, and it’s got its beneficiaries justifiably worried. More than 100 people work at Labatt and Molson breweries in St. John’s, and their representatives have voiced opposition to lifting the provision. Their livelihoods depend on the big brewers keeping production in the province, and they fear that retail liberalization may lead to painful job cuts.

Let’s deconstruct why this may happen. This legislation exists to incentivize out-of-province brewers to produce locally – ostensibly creating local jobs – by securing them an inflated share of the local market. The fear is that, without this special protection, it would no longer be worth it for the macros to keep production in-province on efficiency grounds.

From an economic perspective, regulations that allow private firms to be shielded from competition are a classic example of “rent-seeking.” There’s a strong incentive to lobby for this kind of legislation: rather than competing in the rough and tumble of the marketplace, it is often easier to get the government to intervene for you. It should be clear that this, in theory, is a bad thing. Instead of helping new entrepreneurs, it concentrates power in the most influential companies. Instead of innovating or bringing in new products at lower prices, it increases prices and promotes stagnation. Firms can, instead of creating wealth, extract wealth from their artificial market share. It benefits them at the expense of everyone else.

Public policy should be made in the long-run public interest, and unfortunately these provisions run counter to that notion. With recent economic mismanagement in mind, NL must change course in its thinking. While it may seem prudent to do anything to protect existing local jobs, this reasoning can quickly get out of hand. Should we restrict, say, the sale of Coca-Cola to protect locally-bottled Pepsi products? NL needs to be working on integrating with the national – moreover global – economy. We should be gearing policy towards improving competitiveness and finding our niche in a constantly growing marketplace, and restricting consumers’ access to goods and businesses’ ability to provide them works against this. Another way to think about it: if you need special protections to stay in business here, perhaps those resources could have been put into ventures that can stand on their own two feet.

Less abstractly, liberalizing the beer trade will result in lower prices for consumers – NL has some of the highest in Canada. This may mean more demand for retailers, or induce some to open business selling specialty beer. Importantly, it also allows consumers much more variety and convenience.

On the producer’s side, it’s not entirely obvious that the Big Two will close down simply because they’ll have more competition. After all, a large portion of their production consists of brands unique to the local market. More plausibly, there may be some downsizing. On the other hand, craft beer is poised to boom in NL, and opening up consumer selection would only further cultivate demand. If macros contract, while homegrown brewers expand, we may yet see net job gains. Many other jurisdictions across North America lack our retail restrictions, yet thousands of independent breweries blossom.

Repealing these regulations would be a small step, but in the right direction. If we allow bad ideas to aggregate, over time we will feel their effects as a drag on badly needed dynamism and growth. For the record, I won’t say no to a cold Black Horse, no matter where it’s brewed.