Canadian Subsidies to the Sealing Industry Via NY Transfer News * All the News That Doesn't Fit THE GALLON ENVIRONMENT LETTER 506 Victoria Ave., Montreal, Quebec H3Y 2R5 Ph. (514) 369-0230, Fax (514) 369-3282 Email ggallon@pcstarnet.com Vol. 5, No. 24, June 15, 2001 SPECIAL REPORT: ECONOMICS AND SUBSIDIES RELATED TO THE CANADIAN SEAL INDUSTRY The Canadian Institute for Business and the Environment (CIBE) completed a study entitled, "The Economics of the Canadian Sealing Industry". It explores the economics of the sealing industry in Newfoundland & Labrador, and the Gaspe Region of Quebec. The report, conducted with the financial support of the International Fund for Animal Welfare (IFAW), provides one of the most complete overviews of the subsidies and expenditures, as well as income, generated by commercial seal harvesting and seal products in Canada. While comprehensive, this study it is not complete. Much of the information sought for this report was not made available by the federal and provincial governments. CIBE found in its research that a number of government documents related to the economics of the Canadian seal industry existed, but were not provided. Particularly the governments of Newfoundland & Labrador and Quebec virtually refused every request for information submitted by IFAW. We had to use Canada's Access to Information Act and the Privacy Act obtain from the federal government the financial information that was otherwise not made public. Even then, much of the information provided by the federal government was heavily "blacked out." Lines, even paragraphs and pages were whited out. Our study found that the federal and provincial governments have taken extraordinary measures to prop up the sealing industry. In spite of that the sealing industry has not been able to generate sufficient revenues to stand on its own in a free enterprise society. Our study found that without substantial taxpayer subsidies it would shrink to a small cottage economy for the local people. A free copy of the report, "The Economics of the Canadian Sealing Industry," is downloadable from the website http://www.canadasealhunt.ca/news/news_releases.stm# . For additional information contact, Rebecca Aldworth IFAW, 1 Nicholas Street, Suite 1100, Ottawa K1N 7B7, Ph. (514) 937-9797, email ifaw@qc.aibn.com . ANNUAL SEAL REVENUES REPRESENTS ONLY 1% OF NEWFOUNDLAND'S FISHERIES INDUSTRY In 1999, the landed value of fish in Newfoundland & Labrador was $580.7 million. The added value of processing and production of the fish exceeded $1 billion. At its height the landed value of the seal industry was $7.5 million and the added value of the annual seal hunt was about $12 million. The $12 million represents 1.1% of the total fisheries income for Newfoundland & Labrador. From an additional perspective, the estimated $12 million in processed seal industry income in 1997 represented less than 0.03 per cent of Newfoundland's Gross Domestic Product (GDP). The revenue generated by the Atlantic seal industry generates about 0.01% of Newfoundland and Labrador's Gross Domestic Product. The sealing industry is insignificant when it comes to affecting the direction of the Newfoundland & Labrador economy. In fact, it is small and getting smaller as an economic force and as significant employer of people. The CIBE study found that redirecting federal and provincial support from the seal industry to other growing sectors in Atlantic Canada will result in greater economic development and employment. Visit the Newfoundland & Labrador 2001 economy review at the website http://www.gov.nf.ca/Budget2001/economy/default.htm . Also visit the Newfoundland & Labrador's Ministry of Fisheries and Aquaculture website at http://www.gov.nf.ca/fishaq/ . GOVERNMENT SUBSIDIES TO THE SEALING INDUSTRY TOTAL $20,504,962 Our initial studies reveal that over the six year period 1995 to 2000, the federal and provincial governments (Newfoundland & Labrador and Quebec) provided at least $20,504,962 in taxpayers' financial support to the Canadian Atlantic seal industry. This represents, an average of $3.42 million per year in government subsidies to support an industry that averaged only $5.0 million a year in landed value to the sealers. This study tracked federal and provincial government subsidies for the sealing industry for the six-year period, 1995 - 2001. We have been able to confirm 43 subsidies provided to the sealing industry. Federally, the subsidies were provided through a number of agencies and programs including the Atlantic Canada Opportunities Agency (ACOA), Human Resources Development Canada (HRDC) primarily through its Jobs Transition Fund (JTF), and through the Department of Fisheries and Oceans (DFO). The federal funding has been partially matched by funds from Newfoundland & Labrador and Quebec. Our study was unable to obtain detailed numbers from the Provinces, as they were more protective with their subsidies information than the federal government. The federal subsidies information we did obtain was from often heavily edited documents that had much of the information blanked out. The scatterings of information we did find about the provincial grants came from the federal documents. The costs and subsidies incurred by the governments on behalf of the sealing industry can be broken down into four areas: - soft loans to companies and cooperatives to pay for seal hunting and processing equipment - soft loans to companies and cooperatives to pay for marketing and sales of seal products such as skins, furs, penises, oil - direct buying of carcasses through meat price support subsidies to the processing plants - grants to seal business associations such as the Canadian Sealers Association (CSA) and the Seal Industry Development Council (SIDC) to promote industry interests and host fur and skin shows - costs incurred to monitor seal herd movements for the hunt, fly helicopter and plane missions for rescue and ensuring that anti-sealers stay away from the hunt, etc. On this last point, the subsidies include federal Department of Fisheries and Ocean's costs associated with monitoring, directly assisting and regulating the seal hunt. The assistance includes keeping conservationists away from the sealers during the time of harvest. It includes ship and ice-breaking assistance. Visit the ACOA website at http://www.acoa.ca/ . NUMBER OF HARP SEALS HARVESTED AND LANDED VALUES Below is a five-year snapshot of the number of seals harvested and landed values they brought to the sealers themselves: Year No. of Harp Seals Landed Value 1996 242,717 $5.6 million 1997 264,204 7.5 million 1998 282,070 5.7 million 1999 230,220 4.8 million 2000 91,602 1.8 million THE 2000 SEAL HUNT ECONOMIC COLLAPSE, ONLY 91,602 HARP SEALS HARVESTED In 1998, landed values for seals was $.5.7 million with 282,070 harp seals harvested. In, 1999, with 244,552 harp seals harvested the landed value dropped to below $5.0 million. However, in 2000, the seal hunt collapsed. Only 91,602 harp seals were harvested. Reasons include the fact that the government' three-year meat subsidy had ended. Markets for seal products in Asia and Russia softened. Viagra, as a sexual assistant, replaced the seal penis in Asia as an "aphrodisiac". As a result, the sealers refused to go out and kill seals. What did this mean for the landed and processed value for the sealing industry in Atlantic Canada for the year 2000? It is interesting to note that the Department of Fisheries and Oceans, in its Atlantic Canada Seal Management Plan for 2001 it stated that, "with the reduction in prices for many seal products and reduced landings, the sealing industry estimated landed value for 2000 was in the order of $6 million. The total landed value of the 1999 seal hunt was less than the 1998 value of $7.5 million." This is a quite optimistic financial estimate. But it is not supported by the historic economics. While one could agree that the 244,552 seals harvested in 1999 generated about $4.8 million in landed value, one cannot say that the harvest of 91,602 harp seals in 2000 would generate $6.0 million in landed value. The catch in 2000 is 63 per cent less than the 244,522 seals harvested in 1999. The prices for pelts and penises were lower in 2000 than in 1999. Thus the land value of seals in 2000 would be much closer to $1.8 million than $6.0 million. Go to the Department and Fisheries and Oceans website on seals at http://www.dfo-mpo.gc.ca/seal-phoque/main/index.htm . BRIEF HISTORY OF THE CANADIAN SEAL HUNT In the nineteenth century large scale commercial harvesting of seals began in earnest in Newfoundland. Landed catches between 1803 and 1816 averaged about 117,000 animals per year. The golden age of the Canadian seal industry was between 1811 and 1862. During this period more than 18.3 million seals were taken by the Newfoundland and Quebec sealers, an average of 400,000 seals per year. In many years, the landed catches exceeded 500,000 seals, with the greatest catches occurring in 1831 with 680,000 landed, 1832 with 740,000 landed and in 1844 with 686,000 harvested. Most of the seals killed were white coated pups, with a number of older seals taken. The primary products from the seals at the time was fur, leather, and blubber oil. The year 1857 saw both the greatest number of ships and the greatest number of men involved in the economic activity of the seal hunt. There were 370 boats carried 13,600 men up and down the Atlantic Coast in 1857. They landed 500,000 seals bringing the workers an income of 425,000 British Pounds sterling. This was virtually repeated again in 1858, when more than 12,000 men landed another 500,000 seals. During the mid-1800's, the seal industry was one of the largest industry sectors in Newfoundland & Labrador, often referred to as the "Golden Age of Sealing". The seal industry would continue to be a primary employer in Newfoundland and Labrador for decades to come. The average catch of seals in the 1860's was 320,000 increasing to 430,000 per year during the 1870's. Catches between 1950 and 1959 averaged about 312,000 seals per year, reaching a high of 430,000 in 1951. In more recent times, the seal harvest has been an up and down affair averaging 180,000 in the 1970s, down to an average of 100,000 in the 1980s, and jumping back up to over 240,000 in 1996 and after. From 1983 to 1995, the average annual harp seal harvest was 51,000 despite a TAC of 186,000 animals. See the DFO Seal Management Plan at the website http://www.ncr.dfo.ca/COMMUNIC/seals/eng/sealeng.htm . Also see the work of the International Marine Mammal Association Inc., at http://www.imma.org/ . $750,000 IN SUBSIDIES PROVIDED TO EACH OF THE SEALING INDUSTRY ASSOCIATIONS Substantial subsidies have been provided to associations assisting the sealing industry. The three main sealing support associations are the Canadian Sealers Association (CSA) and its spin-off Sealing Industry Development Council (SIDC), Magdalen Islands Association, and Quebec North Shore Group each have received more than $750,000 in subsidies. The salaries of their executives are paid with government subsidies. The Canadian Sealers Association (CSA) was formed in 1982. Based in Atlantic Canada, it was designed to speak on behalf of sealers primarily in Newfoundland, the Quebec North Shore and the Magdalen Islands. Its primary focus was to develop an educational and public awareness campaign to counter act the animal rights groups. The CSA states that it represents more than 6,000 sealers who are professional fishers, licensed by the government of Canada. CSA designed and help create the Seal Industry Development Council (SIDC), which was created June 5, 1998. The mission of the Seal Industry Development Council is to work to position the sealing industry in such a way as to be comparable to any other industry which uses animals for the benefit of humans. The Council plans to accomplish this through public education, generic market research and initiatives, the identification of trade and market impediments and the development and implementation of strategies to overcome any impediment to the success of the industry. The Seal Industry Development Council (SIDC) was created with funding of $195,000 over two years from the Canada - Newfoundland Development Agreement. The funding, from the federal portion was provided through ACOA, supported "research into seal harvesting methods, training and education, public relations, product development and identification of new markets". The SIDC is headed by the Canadian Sealers Association's Executive Director, Tina Fagan. Visit their website at http://www.sealers.nf.ca/ . SUBSIDIES TO THE SEAL INDUSTRY PRIVATE SECTOR A number of subsidies were provided to private sector companies opening up and expanding seal product industries in Atlantic Canada. The private companies in Canada primarily involved in the sealing industry as of the end of 1998, include: - AGILM Association Gaspesienne des Industries du Loup Marin, Quebec - Atlantic Marine Products Ltd., Catalina, NF (Barry Group) - Carino Co. Ltd., South Dildo, NF - Crimson Tide Fisheries, Dover Bonavista Bay, NF - Caboto Seafoods Ltd., Baie Verte - Fogo Island Coop Society, NF - Harbour Seafoods, Rocy Harbour, NF - J.W. Hiscock Sons (Gateway Maritime Inc., Brigus, NF - Les Lavages Industriels, Vigneau Inc., Quebec - Northeast Coast Sealers Coop Society Ltd. - Petley Fisheries Inc. - Terra Nova Fishery Co. Ltd., Clarenville, NF (Barry Group) By far the largest amount, over $9.0 million, was paid in soft loans and grants to a handful of companies to help them get up and running. One of these companies is Carino Co Ltd., located in South Dildo, Newfoundland. It is controlled and operated by the Norwegian company, G.C. Rieber & Co. It was provided by ACOA with $179,000 in 1997 to expand its seal skin brine curing processing equipment so that Carino could send the pelts to the Rieber plant in Norway for final tanning and fur preparation. THE BARRY GROUP IS THE LARGEST RECEIVER OF FEDERAL SUBSIDIES The majority of the subsidies however appear to have gone to the Barry Group of companies run by Bill and Jim Barry. Led by Atlantic Marine Products Inc., in Catalina, Newfoundland, the Barry Group appears to control Seafreez Foods Inc., Crimson Tide Fisheries, Terra Nova Fishery Co. Ltd., in Clarenville, and the Burgeo fish plant. Between 1995 and 2000, the Barry Group of companies received eight loans and grants from the federal government for sealing totalling an estimated $2,738,011. This represents about 30 percent of the $9 million provided to the private sector for seal products processing. Several hundreds of thousands of dollars more were provided to the Barry Group companies in the form of seal meat subsidies over the three years 1996 to 1999. The Barry Group is run by brothers Bill and Jim Barry. The Barry Group headquarters are based in Corner Brook, Newfoundland. The Barry Group is joined by David Middleton, who holds a minority ownership position; as well, Karl Sullivan, a company director. The Barry Group owns approximately 90 percent of Atlantic Marine Products Co. Inc., 50 per cent of Terra Nova Fishery Co. Ltd., and Crimson Tide Fishery. The Barry Group in 1996 took over the management of Terra Nova Fishery Co. Ltd. The Barry Group succeeded in becoming one of the largest seal processing companies in Canada. It took over Seafreez Foods Inc., which in turn had taken over the S.W. Mifflin Co. facilities in Catalina and turned it into Atlantic Marine Products (AMP Co.). AMP now includes three seal processing divisions, including seal skin curing, seal oil (industrial and human Omega 3) production, and a seal tannery, with an estimated production capacity of 150,000 seals per year. The Barry Group's Terra Nova Fishery Co. Ltd., plant in Clarenville, had been the second largest processor of seal skins. It is reported to have processed 60 per cent of the 1997 seal harvest. Cosmas Ho, President of Terra Nova Fishery Co. Ltd., reported that one of its primary customers in 1997 was Shanghai Fisheries in China. It is estimated that these Barry Group companies also received almost half of the $4,543,000 in meat subsidies provided by the federal and Newfoundland governments. Assuming the amount of meat subsidies provided to the Barry Group companies is $2,200,000, the total provided from governments to the Barry Group of companies between 1994 and 2000 was $4,428,511. SUBSIDIES REPAYMENT DEFAULTS: TERRA NOVA FISHERY CO. LTD., AND NORTHWEST SEALERS COOP Large low-interest soft loans have been provided and not repaid by some of the large seal processing operations. For example, Terra Nova Fishery Co. Ltd. seal processing plant in Clarenville received two loans, No. 610-4029335-1, under a Fisheries Adjustment Program (FAP) for 65% of the project, $439,400 starting May 1, 1994 to July 31, 1996. The total expected investment was $1.646 million. In the Spring of 1994, the federal government confirmed a large subsidy of $1,088,700. This included a grant of $434,000 through the Fisheries Adjustment Program (FAP) and the federal Atlantic Canada Opportunities Agency (ACOA) provided unsecured short term "Action" loans totaling $654,3000 to assist with working capital requirements. The plant was to process seal skins, meat, and penises. It was also to process fat into both industrial oil, and into Omega 3 oil for capsule supplements. The Omega 3 oil was to be shipped to China and further processed by Shanghai General Fisheries Ltd., put into capsules and marketed in the Far East. Terra Nova Fishery Co. Ltd., was to receive oil processing machinery from Shanghai General Fisheries Ltd. Fisheries, which according to documents supplied for the subsidy application, was to supply technical assistance in the development of the Omega-3 oil refining process. The action loan was interest free and due to be repaid in full on December 31, 1994. The Terra Nova Fishery Co. Ltd., seal plant lost money due to a number of problems and miscalculations and ACOA deferred repayment to May 31, 1995, after the new sealing season. Since Terra Nova Fishery Co. Ltd., was still unable to pay anything on the loan, repayment was again deferred. Eventually a new agreement was signed to provide for repayment of the $654,300 in five equal installments of $130,860 starting on March 31, 1997. But on March 31, 1997, Terra Nova Fishery Co. Ltd., was still unable to pay. The loan was again extended in April, this time with interest due at 8% per annum. By May 6, 1997, however, ACOA officials concluded that, "The company is insolvent and is going to make an informal settlement offer ....". In December 1997, ACOA accepted a settlement offer of $240,000 from Terra Nova Fishery Co. Ltd., and released the company from the remainder of the debt. When the Terra Nova Fishery Co. Ltd., plant in Catalina failed, its facilities were taken over by Seafreez Foods Inc., also called Atlantic Marine Products. Once Atlantic Marine had taken over a virtually bankrupt Terra Nova Fishery at a very low subsidized price, it applied for additional subsidies from the federal and provincial governments to keep the money-losing facility alive in Clarenville. A second loan, No. 600-4029690-1 was approval for two contributions of $434,400 from FAP and $654,300 from ACOA approved in April 1997 for a total of $1,088,700. ACOA provided another loan subsidy of $401,240 to the Atlantic Marine Products January 21, 1998 for the Terra Nova Fishery Co. Ltd. facilities. SEAL MEAT SUBSIDIES TOTALED $4,728,000 The federal and provincial governments agreed in 1996 to provide subsidies to purchase seal meat. Seal meat is generally strong in taste and undesirable to humans. There has never been a strong market for seal meat. The only large market was grinding seal meat for silage as a feedstock for caged animals in fox farms that have sprung up in Atlantic Canada. The decision to provide a subsidy to purchase meat was made as a measure to provide additional monies to the pockets of fishermen that had lost their jobs when the cod fishery had collapsed. Many of these fishermen derived additional income in the winter during the seal hunt. The governments decided to provide the subsidies to the companies that agreed to purchase and process seal meat. The companies, in turn, would pay an inflated price to the sealers who sell seal meat to the companies. The total seal meat subsidies provided by the federal and provincial governments for the three year period 1996 yo 198 inclusive is estimated at $4,068,000: - DFO Seal Meat Subsidy $2,585,000 - Newfoundland & Labrador 2,143,000 TOTAL $4,728,000 This number is larger, however, we were unable to obtain the Newfoundland & Labrador meat subsidies for 1998 and 1999, nor were we able to obtain the meat subsidy numbers for Quebec. The meat subsidies were scheduled to end in the year 2000. Most of the meat was ground and processes into animal food and sold to the local fox farms in the Atlantic Region for a price ranging from eight to fifteen cents per pound. GOVERNMENT COSTS ASSOCIATED WITH THE SEAL HARVEST ESTIMATED AT $6,666,000 In addition to the direct subsidies, there are indirect government costs incurred in support of the seal industry. It involves the use of the Department of Fisheries and Oceans (DFO) and Coast Guard equipment and officers to physically assist, monitor, and enforce the rules of the seal hunt. Each year the two departments have to mobilize to provide support during the short hunting season. The study was able to obtain costs from DFO internal memos for specific years. We have multiplied the costs by six years for the period 1994 to 1999. The total estimated costs of DFO and Coast Guard services in Newfoundland hunt and the Quebec hunt, as a subsidy to the sealing industry, are $6,666,000. This includes $5,106,000 over six years for the Newfoundland hunt and $1,560,000 for the Quebec seal hunt. The cost of government involvement in the seal hunt is substantial. From internal memos within the Department of Fisheries and Oceans (DFO), we were provided a glimpse of some of the yearly costs incurred by the federal government. The federal costs included: - mobilizing officers to enforce seal harvesting laws, guidelines and - sundry rules - tracking and analyzing the harvesting impacts an seal populations - providing transportation in support of the seal hunt including - helicopters and ocean vessels (including ice breakers) - providing weather reports, seal locating spotter planes and other - economic support - providing marketing opportunities and lobbying governments outside Canada - to take seal products For example, the federal Department of Fisheries and Oceans deploys up to 100 enforcement officers seasonally to enforce regulations governing the annual seal harvest. Officers monitor harvest activities using fixed-wing aircraft. As well Canadian Coast Guard Vessels and helicopters are frequently on or in the ice assisting the sealers. When necessary, additional resources are redirected from other fisheries. THE CANADIAN SEALING INDUSTRY IS ESTIMATED TO GENERATE ONLY 50 FULL PERSON YEARS OF EMPLOYMENT Aggregated into full yearly employment, the sealing industry only results in a total employment of about 50 person years. The actual employment impacts of the seal hunt are minimal compared to the other resource sectors and the new emerging sectors of information technology and high-tech operations. Today, employment in the seal industry is generally much lower than what is reported. There are two causes for this. The first is that many more licenses for seal hunting are issued than those who actually go out on the ice to hunt. Those who report on just the licenses issued as those who actually go out and hunt seals overstate the employment. For example, the Atlantic Premiers reported in 1998, for example, that sealing in Atlantic Canada, primarily Newfoundland and Labrador employed 4,200 people (3,900 fishermen and 300 plant workers). However, the majority of the fishermen or hunters were those that had taken out licenses, not those that were a full time part of the seasonal hunt. Many fewer actually hunted seals. Dr. Clive Southey an economist at Guelph University, in a study completed in 1997, found that while 8,403 commercial and 1,031 personal seal hunting licenses were issued in 1996, only about 600 people actually participated in the hunt. Secondly, many of those 600 who actually hunted, did so for several days or for just a week. This does not constitutes full annual, or even seasonal employment, for 3,900 seal hunters. As it is, Dr. Southey found that the average duration of employment on sealing ships was estimated at four weeks. In the 1800's and the early 1900's, for several months of each year, the Canadian sealing industry was a major employer in Newfoundland & Labrador. It provided an additional income for off-season fishermen who couldn't fish during the winter, but who could go out on the ice and harvest seals. This all changed with the over-harvesting and the collapse of the sealing industry in the mid-1980s, and with the decisions by consumers in Europe and the United States to stop buying seal products such as furs and skins. The combination of reduced seal numbers, reduced markets, and with the development of new economic diversity in Atlantic Canada, there has been a substantial shift in employment away from sealing and into other sectors. Employment in the seal industry is seasonal for both the hunters and the seal products processors who work to process seal oil, tan skins, and prepare seal fur. The usual length of employment ranges from one to three months for most workers. The season employment in the seal industry does not provide sustained work, but rather provides an incremental income to those that have seasonal work in other areas such as fisheries. SALES OF SEAL MEAT Carcasses and seal meat generally have low market values. The meat has a strong unfamiliar taste, and while it is consumed in small amounts locally, large national and international markets have not matured. The most successful use of the meat to date has been to grind it and prepare it as animal feed, primarily to mink and fox farms. The government subsidies for carcasses and meat propped up the prices for the three years the subsidies were paid to companies to take the products. The federal government noted that, "in 1999, there was virtually no market for seal meat . Sealers in many areas did not land carcasses in 1998 because of low prices for meat" (Source: Atlantic Seal Hunt - 2000 Management Plan, DFO). The market for meat was has been weak 1998 to present. It has been affected by Asian currency difficulties and the inability of China and other Asian nations to purchase luxury items such as seal skin and fur products. The 1998 seal meat purchase government subsidies to sealers for an adult (bedlamer) seal carcass was $3.12 and $1.66 for a juvenile (beater) carcass. 76,247 carcasses were in the subsidy invoices, of those 7,259 were adults and 68,988 were juveniles. The seal meat is primarily ground up and sold as animal food to the Atlantic fox growing farms. The grinding was done in Indian Bay at a provincial government meat grinder facility. The ground meat was sold at prices apparently ranging from about 7 cents to 15 cents per pound. THE MARKET FOR SEAL OIL There are at least two primary commercial uses for seal oil, one as an industrial grade oil and the other as a potential food additive/ pharmaceutical health food refined to Omega 3 oil. There has been a strong promotion by the Canadian Sealers' Association (CSA) related to potential use of seal blubber for the production of Omega 3 oil. The three Omegas within the oil are EPA (Eicosapentaenoic acid), DPA (Docosapentaenoic acid), and DHA (Docosahexaenoic acid). Seal oil has been promoted in capsule form, as a prime source of Omega 3 fatty acids. The Omega 3 seal oil enters a market already crowded with Omega 3 oils from sources such as fish oil and ces as flax seed and grape seed oil. There were exports to that country of 2,074 tonnes in the period 1991- 1997, representing over three quarters of the Canadian seal oil exports by weight. Carino was said to have sold all of its 1996 seal oil to Hiscock in Newfoundland, which believed that they had customers in Taiwan, Japan and Korea. Canada exported in 1996 -97 close to 233,000 pounds of highly refined oil to China for Omega 3 production and encapsulation. China likely exports capsules to other south east Asian countries including Japan. The high quality seal oil from Newfoundland was sold in 1997 to China at an average price of $3.26 per pound ($7,176 per tonne). Industrial seal oil sold to Norway at 26 cents per pound. In Newfoundland, J.W. Hiscock Ltd. was working in association with Gateway Marine Inc. to produce seal oil capsules, skin cream and other cosmetic products for North America. RANCID INDUSTRY-GRADE SEAL OIL SOLD FOR OMEGA 3 OIL FOR HUMAN CONSUMPTION? It appears that Carino Ltd., may have sold old, poorly-processed seal oil to CanOmega for human consumption as Omega 3 capsule oil in March of 2000. This is according to an internet memo dated March 24, 2000 from Paul Lawrence to what appears to be an email address "ONTARIOEM1.leamfia.riccil". Paul Lawrence wrote: "Please be advised that Carino Ltd., is not registered with CFIA (Canadian Food Inspection Agency) for the production of seal oil. Carino has informed CanOmega that the seal oil that it processes is not been processed for human consumption. Carino processed the seal oil for industrial use. The premises are not considered to meet requirements for a processor of food for human consumption, nor is the seal oil processing designed to process human food. Under the above note scenario no certification under the provisions of the Fish inspection regulations will be grant to Carino." Carino Ltd., informed the Canadian Food Inspection Agency (CFIA), under the direction of the Minister of Agriculture and Agri-Food, that they sold seal oil to CanOmega Industries, Ltd., North York, Ontario. CanOmega in turn forwarded the seal oil to Ocean Nutrition in Mugrave, Nova Scotia, which refined the oil and forwarded it to Acucap Ltd., in Windsor, Ontario. Acucap placed the tainted refined seal oil into capsules. AcuCap approached CFIA through the former Health Canada inspectors and requested that CFIA certify the seal oil capsules. Paul Lawrence forwarded an inspection report of Carino's seal oil in an internet memo dated April 3, 2000. The CFIA enclosed memo from J.E. Mercer, Inspection Manager, Eastern District, CFIA, sent a memo to Louise Caron, Inspector, Iles-de-la-Madeleine, File No. 5000-9-3-5. Stating that: "A sensory inspection only was conducted... All six samples were rancid. Sample #5 also had a decomposed odor. None of the samples had the color of refined seal oil (which is clear with a slight yellow cast, however all samples were clear with the exception of Sample #6 which was cloudy. If these samples were presented to us as representing one lot, we would fail the lot." VIAGRA HAS KILLED MARKET FOR SEAL PENISES AS APHRODISIACS DFO reported that a market exists for a limited number of various seal organs, but prices have dropped from about $70 to $100 in earlier years to about $15 to $20 per unit in 1998, with a mark-up for processors of less than 20 per cent. As a result of declining prices, seal organs accounted for less than 5 per cent of the total landed and processed values of the 1997 hunt. Values have not been estimated for the 1998 hunt, but it appears that only about 20,000 organs may have been sold to processors. In 1996, for example the recorded sale of seal organs accounted for about $940,000 (source Canadian Against the Commercial Seal Hunt (CATCSH)). All data sources agree that by 1996, penises were a smaller item in the sealer income stream (under 10%) than pelts, and meat subsidies, even though in 1993, the penises were probably the sealers' main income source. It appears that official DFO statistics don't take into account the "grey market" in penises it under estimates the volume of penises sold. In 1996, for instance, only 2,559 penises were said to be landed for a sealer value of about $177,000. But DFO officials stated that penis sales in 1996 were not 2,559 but were closer to 30,000 penises, providing a $470,000 income to the sealers. Most penises are sold to Hong Kong, Taiwan, and Japan. The primary demand for penises is for its supposed aphrodisiac powers believed by people in the Asia region. Seal penises sold for $10 small, $15 for mid-size and $20 for large size throughout the mid-1990's. A reasonable guess would be that the value of the penises purchased was roughly 5% of the sealers' total landed value. But there clearly was penis snatching. This means that sealers were killing many older seals for their penises and throwing them into the ocean. Then they would bring juvenile and young seal pelts from seals that don't have developed (large) penises. They would pass off the large penis as coming from the smaller seals, when they didn't. And they would just out and out declare that they had harvested more penises than they did seals. For example, one Newfoundland sealer reported to authorities that he sold 37 $20 penises and 16 $15 penises but had sold only four old harp pelts. Another sealer had no old harp pelts and only 36 bedlamer pelts (from young seals that barely have developed large penises), yet he reported that he sold 207 large penises for $20 each, for a total penis income of $4,140. Another sealer sold 250 penises, of which 172 were large. However, he reported selling only 51 old harp pelts and 149 bedlamer pelts. One other had 201 penises, of which 115 were large, but sold only 38 harps and 214 bedlamers....It looks as though a majority of the penises purchased were in fact the product of deliberate penis hunts in which pelts and carcasses were left on the ice. Visit the Viagra website at http://www.viagra.com/ THE POTENTIAL GROWTH FOR THE SEAL PRODUCTS MARKET IS LIMITED If the markets for seal furs and other products opened up in Europe and in the United States, tremendous growth would take place in the Canadian seal industry. It is important therefore to assess the potential for these markets to open up. Our research shows that it is unlikely that the consumers and voters will allow the governments in Europe and the United States to lift their bans on consuming seal skins (in Europe whitecoats and bluebacks) and other seal products. While the Canadian government may make valiant efforts to lift the trade bans on these products, they appear to be unlikely to succeed. Various polls taken of the voting public in Europe and North America show a strong aversion to opening the seal skin market. Additionally, there has been a strong public awakening demonstrated at the World Trade Organization (WTO) meeting in Seattle, that has brought a certain amount of caution towards trade liberalization that would involve loosening environment and labour laws. It is probably not going to happen soon, thus placing the potential for growth in the seal market at the low end. FREE TRADE AND THE U.S. MARINE MAMMAL PROTECTION ACT (MMPA) One of the primary reasons for the low demand for Canadian seals on the international market is the decision by some nations in Europe, and the United States in particular, not to accept seal fur and other seal products into their markets. Under the United States' Marine Mammal Protection Act (MMPA), for example, the U.S. has banned the importation of seal products from any sealing nation because of the conservation and humane concerns of its citizen's related to seal harvesting. This has had a significant impact on Canadian seal markets. It has virtually reduced the demand for seal products in the U.S. to zero. In response, Canada's House of Commons' Standing Committee on Fisheries and Oceans issued a report in June 1999, with a number of recommendation, one of which was to call for Canada to challenge the United States' ban on seal products imports under the MMPA. The Committee reported that, "the MMPA may contravene the General Agreement on Tariffs and Trade (GATT)" under the World Trade Organization (WTO). Specifically, the Committee recommended that Canada: - through the Department of Fisheries and Oceans and the Department of Foreign Affairs and International Trade, must immediately commit itself to the goal of removing the trade barriers within the MMPA - must seriously consider seeking a review under GATT of the prohibition on the importation of Canadian seal products into the United States - undertake an immediate examination of the U.S. MMPA to ensure that it complies with the provisions of both the WTO and NAFTA with respect to Canadian seal products. The Canadian Sealers Association (CSA) called on Canada's Environment Minister, Hon. David Anderson to also intervene in the United States on behalf of Canada to reduce the non tariff trade barrier established by the U.S. Marine Mammal Protection Act (MMPA). If Canada were able to reverse the MMPA under the free trade guidelines, the CSA reports that the market for seal products would grow considerably. The Department of Fisheries and Oceans has formally asked what action the U.S. government is contemplating to bring the MMPA into conformity with international obligations so that harp seal furs and animal products can be sold into the U.S. The federal government has options under the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) to press for the U.S. to stop what Canada would term "non-tariff trade barriers" put up to stop the trade in seal parts and products. CONTINUED SEALING COULD HAVE A NEGATIVE IMPACT ON THE TOURIST INDUSTRY IN ATLANTIC CANADA Often it is the same people that come to Canada as tourists to enjoy the natural settings, that are also sensitive to the killing of animals for their fur and other body parts. This is not an emotional statement related to this report. Rather, it is a fact. One could say it is unreasonable and irrational of the people in regions like Europe and the United States to feel this way about trapping and hunting wild fur animals for commercial purposes. One might even be right. However, since it is a fact, we must be aware of it rather than be blind to it. The economic question must asked, how much tourism has been lost already due to some foreign tourists' concerns? And, how much tourism in the future will be lost due to the concerns about excessive sealing and sealing practices? To understand the economic phenomena better, professional surveys would have to be conducted. Surveys could be taken of those who are tourists in Newfoundland. Also surveys could be taken generally amongst the traveling public in the United States and Europe. This may give some understanding of those who are affected and who adjusted or will adjust their vacation plans to other areas because of concern about sealing. There is the possibility that with the reduction or elimination of massive commercial seal hunts, large organisations like the International Fund for Animal Welfare, the Wilderness Society, and others would help promote additional tourism into Newfoundland. SUMMARY It is understood that a dynamic, changing economy is a healthy economy. Without change, stagnation can set in and an economy can falter. Industry sectors that flourished for decades can be overtaken by the new industry sectors. Our analysis found that the seal industry sector played an important role in supporting the growth and development of Atlantic communities throughout Newfoundland & Labrador and the coastal communities of Quebec. But with the changing consumer preferences and the measures taken in Europe and the United States to protect seal stocks, the sealing industry worldwide has fallen into a slump. At the same time, new economic sectors have risen within the Atlantic economy which have spurred economic growth and employment. RECOMMENDATIONS Based on our observations of the seal industry sector, from an economic point of view, we make the following recommendations. These recommendations are designed to assist Newfoundland & Labrador and Atlantic Quebec strengthen their economy and expand employment: 1. the provincial and federal governments should continue the process of reducing and eliminating subsidies to the seal industry sector. 2. the governments and the seal industry sector should provide full and accurate information regarding the seal economy including government subsidies and costs related to the monitoring the seal hunt. 3. the governments and industry sectors should support training and re-education programs for those who wish to diversify their job opportunities in a growing economy. 4. continue to support diversification of Newfoundland economy into new growth areas including information technology, high tech, tourism and crafts, environment industries; further, promote St. John's as one of the best cities in the world to establish new businesses, as found by the KPMG study. There are opportunities here to further promote the establishment of high-tech and information technology facilities in the region. 5. maintain strong conservation efforts to protect the long-term economic viability of the Atlantic fishery, including cod, capelin, crab and lobsters. Prevent excessive Total Allowable Catches (TACs) in the early years for various fish and marine mammals from severely reducing the species; recognize the economic long term benefits of establishing fisheries limits for sustainability; and, coordinate fishing limits with other nations which fish just outside the 200 mile economic zone on the Atlantic Coast. 6. work on expanding local community development and the involvement and training of men and women to step into the new jobs that are developing at the regional and community level within Atlantic Canada. 7. expand the tourism-based economy in Newfoundland & Labrador at coastal Quebec paying particular attention to the attractions of nature's rugged coastline, unique topography, and natural beauty. Many regions within Canada, and particularly in Newfoundland have been left in a natural state compared to other regions of the world. As a result, the demand from urbanized and wildlands-challenged regions of the world such as Europe, the Northeastern United States and Japan, will be seeking tourism in regions that have their natural beauty and wildlife intact. 8. support the expansion of environmental technologies and the development of renewable energy such as wind in order to help Canada meet its commitment to the Kyoto Protocol requiring reduction of greenhouse gas emissions. Canada and Newfoundland could generate a competitive advantage in the $400 billion a year international environmental market. 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