Cablegate: Southwest Nova Scotia Struggles to Diversify Its Economy

This record is a partial extract of the original cable. The full text of the original cable is not available.

091546Z Mar 05

UNCLAS SECTION 01 OF 02 HALIFAX 000059

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV ETRD EFIS CA
SUBJECT: SOUTHWEST NOVA SCOTIA STRUGGLES TO DIVERSIFY ITS ECONOMY

1. During a recent visit to southwestern Nova Scotia, CG met
with fishery, lumber, business and economic development
representatives to discuss current prospects for the region.
The area around Yarmouth, NS, remains heavily dependent on
income from the fishery (approximately 70% according to most
estimates) as well as ferry connections to Maine which bring in
tourist dollars primarily in the summer months. The region is
aggressively courting business and government to add jobs or, in
some cases, fighting hard simply to retain those that now exist.
In many ways Yarmouth and environs are typical of small to
medium sized communities throughout the Atlantic region.

FIRST THE GOOD NEWS

2. From the fishery, recent news has been good. The lobster
fishery and associated businesses were worth approximately C$200
million to the local economy, clams about C$10 million. Stocks
in both cases seem to be doing well and are being harvested at
sustainable levels. The haddock population has unexpectedly
rebounded to such an extent that local fish packers expect
longer seasons and significantly higher harvests over the next
five years. They are now working to re-develop markets for
fresh haddock in the U.S. and elsewhere after a number of lean
years. The fisheries in Maritime Canada and New England are
quite integrated, with products passing in both directions
during the year depending on which areas are open for fishing.
Maine lobsters, for example, are often shipped to Yarmouth for
live storage during the height of the Maine season, then shipped
back to the U.S. during the off-season. Processing and packing
plants in Prince Edward Island buy U.S. and Canadian lobsters
not suitable for live sale and cook and can the meat. This
ready market helps support prices on both sides of the border.
A Canadian firm, Connors Brothers, has invested heavily in
sardine processing facilities in both the Maritimes and Maine,
selling products in North America and Europe.

3. The othe i of good new from the fshery i tha very
inustry epresntaive that CG spoke to said that
implementation of U.S. bioterrorism border controls had gone
smoothly. The industry remains nervous about their extremely
perishable cargo being harmed by border delays, but to a person
the industry reps praised the way the USG had brought in the
controls and said that they were having no problems with "just
in time" deliveries of seafood to distributors, processors and
restaurants in the U.S. Inadequate border infrastructure, in
particular the Calais-St. Stephen bridge, was the biggest source
of delays, they noted, not U.S. border regulations. Fish
packers were particularly grateful for the advice and
accessibility of Embassy CBP representative Eric Couture. CG
noted the Ambassador's support for a new bridge and the
excellent work that the Maine and New Brunswick communities had
done to cooperate on the issue.

THEN THE NOT-SO-GOOD

4. Although the fishery has been relatively strong in recent
years, other aspects of the local economy have not done as well.
The forestry sector continues to shed jobs as a result of the
softwood lumber duties and now the rising Canadian dollar, and
local lumber firms continue to argue that they are being
unfairly penalized for the activities of central and western
Canadian provinces and producers. Most firms in the region are
relatively small and have come under "huge financial stress," as
one industry representative put it. Atlantic Canadian firms buy
the vast majority of their timber at market rates from private
landowners, and in fact find themselves complaining to the
Canadian federal government about unfair competition resulting
from non-market stumpage fee policies on crown land in central
and western Canada.

5. The area is also fighting a trend toward centralizing jobs
and services, something perceived to benefit Halifax at the
expense of other less densely populated areas of the province.
For example, the SW Shore Development Authority is mounting a
major lobbying effort to keep the Royal Canadian Mounted Police
from consolidating its telecommunications operations in Truro,
about 50 miles north of Halifax. The dozen or so jobs that the
RCMP regional telecoms office provides might not seem like much,
but the Yarmouth region is prepared to fight hard to retain
them, enlisting the help of federal MPs and provincial MLAs.
The cancellation of the NHL season was also a blow to the area,
even though it has no NHL team. The New York Islanders had
signed a contract to do their pre-season training in Yarmouth
for three years, and the season's cancellation meant the loss of
hotel, restaurant and ice arena revenues. Air service to
Halifax has been eliminated, further creating a sense of
isolation in the area.

COMMENT

6. The region around Yarmouth is in many ways typical of a
number of small and medium sized communities throughout Atlantic
Canada. Many were and remain heavily dependent economically on
the fishery, an industry which has struggled for years with
declining catches and moratoria on harvesting traditional
species. The growth of the lobster and crab fisheries has
brought the overall value of catches back to relatively high
levels, but has not generated the same levels of employment as
groundfish did. Another traditional source of jobs in parts of
the Atlantic provinces, forestry, has been hurt significantly by
the softwood lumber dispute, and employment in the forest
products sector has suffered as a result. Offshore energy
development in Nova Scotia and Newfoundland has generated jobs,
but the economic benefit of the offshore is felt mainly in the
capitals of Halifax and St. John's, leaving other areas behind.
Like other parts of the region, Nova Scotia's southwest shore is
seeking to attract new businesses to diversify the economy, but
the task has not been an easy one.

HILL

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