US embassy cable - 05HALIFAX59

UNCLAS SECTION 01 OF 02 HALIFAX 000059 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, PGOV, ETRD, EFIS, CA, Nova Scotia 
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